China's crackdown on its biggest companies With market-trembling new rules and investigations, Beijing's crackdown on its most prominent companies has seeped into nearly every aspect of modern life, wiping billions of dollars from Chinese and Hong Kong-listed stocks and bamboozling investment sages. From after-school tutoring to music streaming apps, and shopping to bike-sharing, stellar firms have been hit as Beijing tightens the leash on corporations, citing national security and antitrust concerns. Whether motivated by the control reflexes of the Communist Party or to avoid market contortions hurting the pockets and safety of the Chinese public, few expect this to be the end of the crackdown. Here are some of the sectors caught in regulators' jaws so far.
Employers in China's booming food delivery sector, a lunchtime lifeline for millions of office workers, must now enforce minimum salary levels and "relax delivery time limits". Meituan and rival Alibaba-owned Ele.me have come under fire in recent months after local media exposed the dangerous routes taken by drivers on tight delivery deadlines. Hong Kong-listed Meituan's stocks had already taken a beating in April when regulators launched an antitrust probe of its lifestyle super-app, which also allows users to book entertainment, health and leisure services.
The government said the industry, worth $260 billion in 2018 according to consultancy and research firm L.E.K. Consulting, had been "hijacked by capital". The founders of New Oriental and Gaotu Techedu almost instantly lost their billionaire statuses after the rules were announced. Their fortunes were built by capitalising on China's hyper-competitive education system where parents try to give their children any advantage they can afford.
The company had gone ahead with its debut despite pushback from Chinese authorities concerned that a listing could place Didi's user data in foreign hands. Beijing eventually sent officials from seven government departments to the firm for on-site cybersecurity investigations. The company, whose stock has fallen around 40 percent since its Wall Street listing, could face a multibillion dollar fine or suspension of certain operations as a punishment, Bloomberg reported last week.
China banned crypto trading in 2019 and multiple provinces have ordered energy-intensive crypto-mining outfits to shut down in recent months, citing concerns about spiking power consumption. Analysts say China fears cryptocurrency transactions could aid illicit investment and threaten government controls on capital outflows. The crackdown also allows China room to introduce its own digital currency, which can be monitored by the central government.
A planned $35 billion listing by its fintech arm Ant Financial was scrapped by authorities late last year, with Ant ordered to jettison its financial services and return to its roots as an online payment platform.
Tencent's entertainment empire faced a new setback on Saturday after the State Administration for Market Regulation ruled that the company must give up its exclusive rights deals with music labels after violating antitrust laws. Meanwhile, TikTok parent Bytedance, Tencent and dozens of other private companies were summoned by regulators in April and urged to "heed the warning" of Alibaba.
This could have a chilling effect on future listings by Chinese companies as they think twice about attracting Beijing's wrath. That also sweeps in all manner of start-ups in China's vast consumer market. Bike-sharing platform Hello Inc said it would scrap a planned Nasdaq IPO in a regulatory filing Wednesday, shortly after the popular Pinterest-like app Xiaohongshu put similar plans on hold. Still, it appears officials have been spooked by the reaction to their latest moves. On Wednesday regulators called top bankers in for a last-minute meeting to soothe fears about the crackdown, according to Bloomberg News. The move came after several local media outlets on Wednesday night republished commentary from the official Xinhua news agency that declared "the foundation for China's capital market development is still solid". Shares in badly hit tech and tuition firms rallied Thursday, while Hong Kong and mainland markets both surged after taking a beating at the start of the week. tjx/apj/rbu/gle/dan/mtp |
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