China’s regulatory storm may soon subside for Big Tech firms after Xi Jinping’s right-hand man calls for order, transparency
- Chinese Vice-Premier Liu He called on regulators to adopt a ‘standardised, transparent and predictable’ approach in overseeing the nation’s internet services giants
- His directives represent a subtle warning to regulators to stay on the same page, as Beijing seeks to address economic growth in 2022
More than a year after China’s technology industry was hit by a massive regulatory storm, which upended business expansion plans and wiped trillions of dollars off stock markets from Hong Kong to New York, fears of more crackdowns could soon subside after President Xi Jinping’s top economic aide called for order and transparency in government dealings with Big Tech firms.
Regulators must adopt a “standardised, transparent and predictable” approach in overseeing the nation’s internet services giants and the rectification of online platforms, Chinese Vice-Premier Liu He said on Wednesday when he chaired a meeting of the country’s Financial Stability and Development Committee in Beijing.
Liu also urged regulators to give a heads-up to financial authorities before any new policies get published.
“Relevant departments should actively introduce policies that are favourable to the market” to help promote the industry’s development and global competitiveness, Liu said in an official statement of the meeting’s conclusions.
Liu’s directives, which represent a subtle warning to regulators to stay on the same page, mark the first clear signal from Beijing that another tumultuous year of crackdowns is not on the cards for Big Tech companies in 2022.
“The meeting chaired by Vice-Premier Liu seemed to indicate that the unprecedented law enforcement campaign initiated against Big Tech since late 2020 is coming to an end,” said Angela Zhang, an associate professor of law at the University of Hong Kong and author of the book Chinese Antitrust Exceptionalism: How The Rise of China Challenges Global Regulation.
Regulators such as the Cyberspace Administration of China (CAC), the State Administration for Market Regulation (SAMR) and the Ministry of Industry and Information Technology will be much more cautious in bringing high-profile cases against Big Tech companies, according to Zhang.
Stocks in China and Hong Kong rallied on Wednesday, following Liu’s comments. China’s CSI 300 Index rose more than 4 per cent, while the Hang Seng Index closed up 9.09 per cent. The Hang Seng Tech Index soared more than 22 per cent.
Liu’s statements at the meeting on Wednesday also put the spotlight on both the “lack of coordination among various government agencies” and “lack of communication between the government and the market”, according to Larry Hu, chief China economist at Macquarie Group, in a research note.
“Liu is China’s top economic policymaker, but regulation is much broader than the economic sphere,” Hu wrote. “None of the key players in the regulatory campaign reports to Liu directly” – including the State Anti-Monopoly Bureau, which slapped a record 12.8 billion yuan (US$2.8 billion) fine on Alibaba Group Holding, and the CAC, which has empowered itself as the gatekeeper of Chinese firms’ overseas listings.
China’s prime economic authorities, represented by Liu, as well as bodies like the China Securities Regulatory Commission are proponents of a more measured approach to regulation, according to Kendra Schaefer, a partner and head of tech policy research at Beijing-based consultancy Trivium China.
The other side of the regulatory spectrum is represented by the likes of CAC and SAMR, whose powers and influence have grown dramatically in the last few years, Schaefer said.
“No matter how far back you go in China’s history, these two things – economic growth and national security – have been at odds with each other,” she said. “It’s been a balancing act, and the key issue has always been stability.”
Early in December, a meeting of the Chinese Communist Party’s 25-member Politburo, chaired by Xi, emphasised the country’s drive for technological self-sufficiency and innovation to address economic growth in 2022, shunning any mention of antitrust actions or the “disorderly expansion of capital” that signalled the tech crackdown.
The policy shift comes after regulatory crackdowns have taken a toll on China’s once high-flying technology sector.
In a series of sweeping legislative and regulatory moves last year, Beijing targeted Big Tech companies over monopolistic practices, off-campus tutoring, video games, data and cybersecurity practices and cryptocurrency mining. The string of bad news hammered Chinese stocks and wiped out trillions of dollars from the market value of affected firms. The clampdown also effectively paused the overseas public listing plans of dozens of Chinese firms.
“I think enforcement of existing tech regulations could be more moderate (this year),” said Ernan Cui, China consumer analyst at independent research firm Gavekal Dragonomics. “In general, I don’t expect many new policies on tech regulation to come out this year, but more details on how to enforce regulations that came out last year.”
Cui said there are still “lots of uncertainties on how to implement the new rules related to data security, with things expected to be clear in the second half after more legal reviews”. That process, he added, “could be postponed if Liu’s signal is well digested among regulators”.
Whether Liu’s directives could sway the powerful Chinese ministries and agencies from getting their new policies and regulations fast-tracked to implementation remains to be seen.
There may be “greater synchronisation when it comes to specific actions against the [Big Tech] companies”, said Sandra Marco Colino, an associate professor at the Faculty of Law of the Chinese University of Hong Kong. “The view is likely to be finding a balance between effectiveness and proportionality.”
Macquarie’s Hu said the “intensity of regulatory activities would be much lower [in 2022] than last year”, while Singapore Management University law professor Henry Gao agreed that Liu’s directives will not amount to regulatory relief.
“I do not think this will make much difference in the long run,” Gao said. “Many of the policies have been long in the making and will not be halted just because of Liu’s statements.”
Authors: Yaling Jiang, Tracy Qu, SCMP