Beijing signals support to internet giants as curbs ease

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The Chinese government has vowed to increase its support to internet giants and their online payment units after it ended an 18-month-long regulatory storm against the technology sector last month.

Large payment and fintech platform enterprises should be supported in better serving the real economy and smoothing the “dual circulation” of domestic and international markets, Chinese President Xi Jinping, also general secretary of the Communist Party of China (CPC) Central Committee and chairman of the Central Military Commission, said a a top economic meeting on Wednesday.

Shares of Alibaba Group increased 6.4% to close at HK$108 (US$13.76) while Tencent’s shares rose 1.35% to HK$375 on Thursday. Hang Seng Index, a benchmark of Hong Kong’s stock market, surged 1.26% to 21,273.

However, Beijing also stressed that it was necessary to strengthen its supervision on the internet platform economy. On Thursday, the National Radio and Television Administration and The Ministry of Culture and Tourism jointly released a set of new guidelines to regulate the behavior and performance of web hosts, or so-called internet celebrities, to avoid the spread of incorrect social value.

Chinese internet giants’ shares have lost at least half of their value since the Chinese government started tightening rules for the internet economy sector in late 2020.

The regulatory storm began with the scrapping of Ant Group’s planned $37 billion IPO in the United States in November 2020 and later hit many other internet companies including Tencent, ByteDance and Didi with tougher antitrust, privacy, taxation and labor rules.

Shares of Alibaba Group decreased by about 70% from October 2020 to last month. Shares of Tencent dropped from their historical peak between February 2021 and last month.

The curbs started to ease after Premier Li Keqiang said in a State Council meeting on April 27 that China would promote the development of its platform (internet) economy to create more jobs and revive the overall economy. Li said on May 18 that the central government supported moves by companies in the industry to go public locally or abroad.

Li Daokui, a former advisor to the People’s Bank of China, also said on June 3 that the curbs on the technology sector had basically ended.

In its 26th meeting on Wednesday, the Central Comprehensively Deepening Reforms Commission approved four documents that aim to accelerate the construction of basic systems for data, improve work on administrative divisions, conduct pilot reforms of scientific and technological personnel evaluation and strengthen supervision over major payment platform enterprises.

To safeguard national data security, and protect personal information and commercial secrets, it was important to construct basic systems for data in national development and security and empower the real economy with more efficient data circulation and use, Xi said in the meeting.

China would enhance the centralized and unified leadership of the CPC Central Committee on work regarding administrative divisions, ensure solid overall planning and avert unregulated and disorderly acts, he added.

Xi also highlighted the importance of building an evaluation system for scientific and technological personnel that is oriented toward innovation, capability and contribution. He said the country would improve regulations, strengthen institutional weak links, ensure the security of payment and financial infrastructure and guard against and defuse potential systemic financial risks. 

Li Keqiang, Wang Huning and Han Zheng, members of the standing committee of the politburo of the CPC Central Committee and deputy heads of the central commission for deepening overall reform, also attended the meeting.

The meeting said China had already introduced the Data Security Law and the Personal Information Protection Law and actively explored and promoted the marketization of data elements. It said the country would further promote digitalization to upgrade its industries and improve social governance.

“Our country has the advantages of data scale and application,” said the meeting. “We will accelerate the construction of a digital economy with data as the key production factors and clearly define the ownerships and rights to use and set up a trading system for all the data resources.”

The term “data factors,” which refers to data with economic values, has been frequently used in official statements since the CPC for the first time categorized “data” as a production factor, along with traditional ones including manpower, capital, land, knowledge, knowhow and management, in October 2019.

Last November, China launched the Shanghai Data Exchange in a bid to make breakthroughs in the recognition, pricing, traceability, market access and regulation of big data products.

Earlier this week, some Chinese netizens in Guangdong complained that they were allowed to withdraw only 1,000 yuan (US$149) per day from their bank accounts as a counter to online scams. Some political commentators argued that the government wanted to encourage people to use online payments so it could easily monitor all transactions and financial activities.

Capitalizing on China’s fast-developing digital infrastructure and supportive policies, many industrial companies are increasing the use of digital means to improve their efficiency, Karl Shen, a director at the corporate ratings department at Fitch Ratings (Beijing) Ltd, said in a research report.

Shen said some traditional non-technology companies, such as electronic maker Midea Group and coal miner Yankuang Energy Group, had reduced human involvement and improved efficiency with their digitalization strategies.

He said more and more companies would increase their expenses on digitalization although such spending would remain small relative to their core businesses’ capital expenditures and profit.

Read: Ant IPO revival may signal end of tech clampdown

Read: China hopes to launch data as new asset class

Follow Jeff Pao on Twitter at @jeffpao3

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