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With 22 pages of vaguely worded edicts, China has cast doubt on the future of its biggest Internet companies and ignited a US$290 billion (S$391 billion) equity sell-off.
Investors are now working out how bad it might get for Alibaba Group Holding, Tencent Holdings and other Chinese Internet giants as President Xi Jinping’s government prepares to roll out a raft of new anti-monopoly regulations.
As is almost always the case, China’s leaders have said little about how harshly they plan to clamp down or why they decided to act now.
But the draft rules released on Tuesday give the government wide latitude to rein in tech entrepreneurs – like Alibaba’s Jack Ma – who until recently enjoyed an unusual amount of freedom to expand their empires across nearly every aspect of Chinese life.
................The anti-monopoly rules now threaten to upset that status quo with a range of potential outcomes, from a benign scenario of fines to a break-up of industry leaders.
While few China watchers claim to know where in that spectrum the authorities will land, most view this week as a turning point.
“The Wild West era of policy arbitrage – taking advantage of weak regulations over the sector – has come to an end,” said securities attorney John Dong of Joint-Win Partners in Shanghai.
Here are some scenarios that analysts and investors are considering:
1. MILD
Optimists say regulators are merely reasserting their right to oversee Internet companies, without trying to initiate drastic change.
Even if the authorities do take action, China has a tradition of cracking down in fits and starts, or making examples out of high-profile companies.
Tencent, for instance, became a prominent target of a campaign to combat gaming addiction among children in 2018. While its shares took a hit, they eventually recovered to all-time highs.
More at https://tinyurI.com/y3u7ggww
Investors are now working out how bad it might get for Alibaba Group Holding, Tencent Holdings and other Chinese Internet giants as President Xi Jinping’s government prepares to roll out a raft of new anti-monopoly regulations.
As is almost always the case, China’s leaders have said little about how harshly they plan to clamp down or why they decided to act now.
But the draft rules released on Tuesday give the government wide latitude to rein in tech entrepreneurs – like Alibaba’s Jack Ma – who until recently enjoyed an unusual amount of freedom to expand their empires across nearly every aspect of Chinese life.
................The anti-monopoly rules now threaten to upset that status quo with a range of potential outcomes, from a benign scenario of fines to a break-up of industry leaders.
While few China watchers claim to know where in that spectrum the authorities will land, most view this week as a turning point.
“The Wild West era of policy arbitrage – taking advantage of weak regulations over the sector – has come to an end,” said securities attorney John Dong of Joint-Win Partners in Shanghai.
Here are some scenarios that analysts and investors are considering:
1. MILD
Optimists say regulators are merely reasserting their right to oversee Internet companies, without trying to initiate drastic change.
Even if the authorities do take action, China has a tradition of cracking down in fits and starts, or making examples out of high-profile companies.
Tencent, for instance, became a prominent target of a campaign to combat gaming addiction among children in 2018. While its shares took a hit, they eventually recovered to all-time highs.
More at https://tinyurI.com/y3u7ggww
