China’s tech giants have been subjected to severe scrutiny by its government over the past few months.
The government’s rectification program is aimed to take down unfair competition issues, interoperability and to fine and penalise companies for violations inorder to build a healthy, safe and orderly industry which supports high standards of quality and development.
This regulatory backlash began with Ant Group, the parent company of Jack Ma’s Alibaba Group which was forced to step back from issuing the world’s largest initial public offering just days before the event was to occur. This action subsequently led to its dismantlization. Adding to this the Chinese government went to the extent of levying antitrust fines against Alibaba that was worth billions in double digits.
Over time several other online giants found themselves in similar situations, one of most recent clampdown was on DidiGlobal a Chinese ride hailing company.
A couple of days after the company listed itself on the New York Stock Exchange, Chinese authorities announced an investigation into Didi for national security reasons and have even started imposing fines and penalties on it.
The antitrust regulations have led to imposition of fines and penalties against few of the biggest internet companies such as Tencent Holdings and Baidu for their past dealings as well. Even ByteDance’s leaders were summoned by legislators for questioning.
The beginning of this week has been terrible for several Chinese tech corporations and as a result of this crackdown many witnessed drops in their share prices.
Meituan, China’s online shopping platform saw a decline in its shares by a whopping 15%. Tencent Holdings saw it shares plunging by atleast 7.7% and Jack Ma’s Hong Kong listed Alibaba shares declined over 6%.
Alibaba, Baidu, JD.com and Netease which were listed in the US stock exchange together have dropped over $60 billion of their market value in the past four days. It was reported that Alibaba took the lead with a drop of at least $39 billion as per the Hong Kong market.
China’s regulatory campaign against tech corporations feels more like a crusade to curtail power. The government wants to ensure that power remains within themselves, they don’t want to end up giving political power to big technology firms like those of the western world enjoy.
The government doesn’t want to end up in a situation where their tech giants have the authority to overthrow them by influencing its users, their actions and the environment. This clampdown has potential to hurt its economy on a massive scale which could potentially led to fall in FDI and support of leading nations and venture capitalists.