Sun Sentinel Palm Beach Edition
China’s tech firms uneasy as crackdown on virus relaxes
HONG KONG — A grinding crackdown that wiped billions of dollars of value off Chinese technology companies is easing, but the once-freewheeling industry is bracing for much slower growth ahead.
Analysts say China’s easing of restrictions on companies like e-commerce giant Alibaba and online games company Tencent and talk of support for the private sector reflects Beijing’s decision to refocus on growth after the economy was ravaged by the pandemic and restrictions imposed to fight COVID-19.
But controls on internet content remain firmly in place. And the crackdown has left a “chilling” effect on the industry, potentially slowing innovation, while U.S. restrictions against China’s computer chips industry are hindering progress in developing leading edge technology in 5G and artificial intelligence.
In January, a top official at China’s central bank said in an interview with stateowned media that the crackdown on technology companies was “basically” over, adding that companies would be encouraged to lead economic growth and create more jobs. That came weeks after China dropped stringent entry restrictions and testing and quarantine requirements that were part of its “zero-COVID” strategy meant to quash the virus.
“With the end of the zero-COVID policy, China is returning to prioritizing economic growth, and the technology sector is obviously a critical driver of growth in China and a celebrated source of innovation,” said Gregory Allen, a senior fellow in the Strategic Technologies Program at the U.S. research organization Center for Strategic and International Studies.
Companies like Alibaba and Tencent control everyday apps and services that are used ubiquitously by large swathes of the population — including online payments, messaging, food delivery and e-commerce.
Such companies flourished for two decades with scant regulation before Beijing launched a barrage of anti-monopoly, data security and other restrictions from late 2020, seeking to rein in e-commerce, social media and other companies it viewed as too big and independent.
Signaling an easing, Didi Global — which was ordered to stop new-user registrations in 2021 following accusations that it violated data security rules — recently was allowed to resume taking on new users.
Regulators said e-commerce giant Alibaba’s finance affiliate Ant Group can go ahead with plans to raise $1.5 billion for its consumer finance unit, an important step forward after the government called off a planned IPO two years ago and ordered the firm to restructure.
After slamming online games as “spiritual opium” and enforcing strict controls on screen time for minors, regulators last April begun approving new games following an eightmonth hiatus, with the first foreign titles greenlighted in December.
Stocks of technology companies, including Alibaba and Tencent as well as others such as food delivery company Meituan and search engine and artificial intelligence firm Baidu have seen their stock prices nearly double since they hit rock bottom in late October. The market valuations of these companies, however, are still far from their peak in 2019.
The crackdown’s chilling effects for investors and entrepreneurs will linger, Allen said, since the authorities have shown they’re willing and able to forego growth to impose controls on the industry at any time.
The value of venture capital deals in China plunged 44% to $62.1 billion in the first 10 months of 2022 compared to the same period in 2021, according to research firm Preqin.