Has Beijing signaled an ease to the tech crackdown?

Investors are scrambling to buy shares of Chinese companies after Beijing gave a slight nod to the private sector with a political meeting to encourage the markets. This happened today, following a turbulent few days for Chinese stocks and shares of Chinese companies listed in the U.S.

Here’s a breakdown of events:

Chinese stock markets began dropping on Monday as investors fled, spooked by the Russian invasion of Ukraine, rising COVID numbers in China, and renewed regulatory rumbles in Beijing against tech firms, especially Tencent.

  • The Shanghai Composite Index plunged almost 5% on Tuesday, the biggest fall since a little over two years ago, while Hong Kong’s Hang Seng China Enterprises Index sank 6.6%.

But earlier today, in reaction, the Financial Stability and Development Committee of the State Council held a meeting that signaled government support for markets and “almost instantly…turned the Chinese mainland stock markets into positive ground.”

  • The Hang Seng Tech Index surged 20%, its best day since July 2020. Shares in tech giant Alibaba also soared 27%, while Tencent jumped a record 23%.
  • Beijing should “complete the rectification work on large platform companies as soon as possible” through “standard, transparent, and predictable regulation,” state-backed Xinhua reports.
  • The comments came from Liú Hè 刘鹤, a vice premier of the State Council and close economic advisor to General Secretary Xí Jìnpíng 习近平, a strong signal to some that Xi has backed the pledge.

The pledge follows the Chinese Communist Party’s renewed focus on stability at the recently concluded “Two Sessions,” the biggest annual political gathering of the year.

  • At the meetings, the Party set an ambitious 5.5% growth target for 2022. This signaled “an intent to stabilize an economy facing fierce pressures from a property slump and new risks from the Russia-Ukraine war,” per Bloomberg.
  • Wāng Yáng 汪洋, the chairman of the Chinese People’s Political Consultative Conference (CPPCC) and number four in the Party hierarchy, said that China will stick to its reform and opening-up policies, while guiding the basic economic system that strives for the “common development of various forms of ownership,” per the South China Morning Post.

However, the newfound optimism is shadowed by conflicting politics on tech regulation, as some predict pushback from national security officials over data security concerns and online content.

Author: Nadya Yeh, SupChina

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