China’s months-long regulatory assault on a slew of private enterprises has rattled both newcomers and long-established businesses, ushering in a new, uncertain era.
On August 17, the State Administration for Market Regulation (SAMR), the country’s top antitrust regulator, released comprehensive draught regulations controlling internet competition, as the cabinet amended guidelines for operators of information infrastructure, which analysts say are aimed at data-rich companies.
Here are some of the industries that are experiencing more stringent regulations:
Traditional e-commerce has been a major focus, with Alibaba receiving a record punishment of US$2.75 billion (RM11.65 billion) in April for its “choose one from two” feature, which prevents merchants from selling on other sites.
Fines were also levied against smaller businesses for violations of consumer rights and labor laws. JD.com, a competitor, was fined 300,000 yuan (RM196,156) in May for providing misleading information about food goods.
The regulator demanded improved protection for food delivery employees in late July. The proposed regulations, which were released on Tuesday, are likely to have an impact on the industry by prohibiting the use of data or algorithms to hijack traffic or influence user decision, as well as reining in false reviews and exaggerated public metrics.
Social media and gaming
Regulators have yet to specifically target gaming and social media businesses, but harsh criticism from state media on topics ranging from celebrity viewing to video game addiction has resulted in large share sell-offs or company reforms.
After the People’s Daily newspaper, which is sponsored by the ruling Chinese Communist Party, criticized celebrity hype on social media last month, Weibo Corp, which runs a Twitter-like site, removed a rating tool.
The Economic Information Daily referred to online gaming as “spiritual opium” in August, sparking a storm that knocked US$60 billion (RM254.19 billion) off the market capitalization of industry leader Tencent Holdings. Tencent later imposed restrictions on minors’ access to Honor Of Kings, its most popular game.
After laws were enacted, last month prohibiting private, for-profit tutoring organizations from raising funds outside of the United States, among other restrictions, publicly-traded tutoring companies suffered significant sell-offs.
According to Reuters, social media firm ByteDance lay off workers in its education division, while online tutoring provider VIPKid halted foreign classes.
In November, just days before Ant Group Co Ltd was scheduled to make a record share sale, banks authorities proposed stricter limits on online lending, where the business was a major player.
They also limited cross-provincial internet loans and imposed limitations on individual loans. The central bank delayed Ant Group’s initial public offering the next day, and the regulator ordered the separation of its payment and personal finance operations in April.
The Chinese Cyberspace Administration instructed leading ride-hailing firm Didi Chuxing to halt admitting new customers in June, just days after it floated on the New York Stock Exchange, a move that slashed the company’s share price by nearly a fifth.
According to analysts and investors, the Didi initiatives have more to do with big data and Chinese companies’ foreign listings than with competitive tactics. Before listing overseas, data-rich Chinese companies were required to conduct a security examination, according to draught guidelines.
Three financial regulators tightened cryptocurrency restrictions in May, prohibiting banks and internet businesses from using bitcoin for payment or settlement, as well as exchanging it for fiat currencies and prohibiting fund managers from investing.
Provincial governments’ subsequent bans on bitcoin mining triggered a wave of closures, with the state-linked tabloid Global Times predicting a 90 percent short-term closure rate.
The housing ministry and seven regulators took aim at the property management industry in July with a notice that slashed the CSI 300 Real Estate sub-index by more than a tenth.
Authorities tightened restrictions on real estate financing this year to avert an asset bubble, establishing limitations for developers and banks as the economy rebounds from its 2020 coronavirus downturn.
So, what’s next?
Investors are keeping a tight eye on healthcare after the State Council, or cabinet called for reduced drug costs and changes in June.
A data security legislation that requires risk assessments and reporting to authorities, as well as a law to safeguard the personal information that controls the storage of user data, will be on the horizon for IT companies.