Is the crackdown on China’s leading internet behemoths – the ‘platforms’ that offer a range of services like entertainment, payments, shopping and delivery in a single app – finally coming to an end?
The sector certainly reacted positively to a statement from the Politburo last Friday that the government would “promote the healthy development” of the internet economy. China’s top decisionmaking body vowed to continue with the “special rectification of the platform economy”, an effort that has targeted predatory commercial behaviour and lax attitudes towards data privacy from some of the major players. But the announcement was worded in a way that allowed some analysts to conclude that the campaign is nearly finished. There was conciliatory language in the statement too, including a mention of “specific measures” to support the sector.
That was more than enough to trigger hopes that months of regulatory hostility towards the beleaguered sector is coming to a close. Internet stocks jumped giddily, with Alibaba up more than 15% and Tencent gaining over 11%.
The South China Morning Post then reported that the government is planning a symposium with the leading internet companies after the Labour Day holiday, with food delivery giant Meituan, TikTok owner Bytedance, Alibaba and Tencent all said to have been invited. And there was speculation in the Wall Street Journal that policymakers are holding back on new regulations that would limit the time that young people can spend on their phones.
The economic context is that growth has slowed sharply and the government is looking for ways of stabilising the economy. Last week there was a commitment to another huge round of spending on infrastructure projects and the hint of support for the internet firms seems designed to bolster the stock markets, where they have been getting a savage battering.
There is a broader dimension for the economy. A significant proportion of retail sales have moved to platforms operated by Alibaba, Tencent and Meituan. The top internet firms have also been catalysts in the shake-up of inefficient industries and the launch of new business models.
“As a crucial part of the private economy, internet companies have created a large number of jobs and burgeoning entrepreneurship not only produces new jobs but adds fortunes to society,” Li Yi, a senior research fellow at the Internet Research Centre of the Shanghai Academy of Social Sciences, told the Global Times.
Investor anxiety about the sector is still palpable, however, as demonstrated by another crash in the Alibaba share price on Tuesday after reports from state television that a man surnamed Ma at an internet company in Hangzhou had been taken in by the police on allegations of inciting subversion and endangering national security.
Alibaba’s shares immediately plunged more than 9% – losing about $26 billion in market value ¬– on fears that the broadcaster was referring to Ma Yun (or Jack Ma, the founder of Alibaba, which is headquartered in the same city).
“Hangzhou, internet company… Why do I smell Alibaba?” was one of the reader responses to the story online in China.
Alibaba’s shares soon recovered most of the lost ground when the report was updated to clarify that the man in question had a three-character name, making it impossible that he could be the two-character Ma Yun. Yet the frenzied response to the initial news was another sign of how the sector is still regarded as high-risk by investors.
Media-savvy Ma (of Alibaba) has actually been on a mission to stay out of the headlines since he ran into serious trouble with China’s senior political leaders in late 2020 (see WiC517). Most of his peers have been trying to stay out of the limelight as well, the South China Morning Post reported last weekend. Jean Liu, the president of ride-hailing giant Didi, is no longer posting publicly on the microblogging platform Sina Weibo, for instance, while Wang Xing, the founder of Meituan, and Zhang Yiming, the founder and former CEO of TikTok owner Bytedance, have also been hiding their Weibo posts from public view since last year.
Perhaps the prospects are improving for the sector. But many of its biggest names will avoid the public eye until Beijing’s change of heart is confirmed.
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