China signals an easing of technological repression, but don’t expect a U-turn

China has shown signs of easing from the tech industry crackdown that has written off billions of dollars in value from its major companies.

But analysts said Beijing’s recent positive rhetoric shouldn’t be mistaken for a turnaround.

“I think the big tech companies will have a grace period for perhaps the next six months,” Linghao Bao, a technology analyst at Trivium China, told CNBC’s “Squawk Box Europe” on Tuesday.

“However, this isn’t really a U-turn on tech crackdown, the long-term outlook hasn’t changed yet. Because Beijing has already come to the conclusion that it’s a bad idea to let the big tech companies go wild because it creates unfair competition. market … wealth will concentrate at the top and start to influence politics, “he said.

“So the technological crackdown is really here to last in the long term.”

Since the end of 2020, Beijing has introduced stricter regulation on its national tech sector in an effort to rein in the power of some of its largest companies.

Since late 2020, China has increased its control over the tech sector and introduced a number of new regulations that have sought to curb the power of its national giants. Analysts say that while there appears to be a sign of easing of the repression, there will not be a complete turnaround in politics.

Kevin Frayer | Getty Images News | Getty Images

Rules in areas from antitrust to data protection have gone into effect quickly over the past 16 months. The moves caught international investors off guard and sparked a dramatic share sell-off of domestic titans from Tencent to Alibaba.

But Beijing has signaled that some of its control over the tech sector may ease as its economy faces the pressure of a resurgence of Covid and subsequent lockdowns.

On Tuesday, Chinese officials met with some of the country’s top tech executives for further signs of easing.

after the meeting, Chinese Deputy Prime Minister Liu He promised support for the technology sector and provides for the listing of Internet companies on the stock exchange.

It comes after the Chinese president Xi Jinping in April he chaired a meeting of the Politburo, a leading decision-making body. The Politburo has pledged to support the “healthy” development of the so-called platform economy, which includes Internet companies in areas from social media to e-commerce.

While there are some reversals, it may be too late to reverse the damage.

Carlo Mok

Charles Mok, visiting scholar at Stanford University’s Global Digital Policy Incubator

Despite these more reassuring tones from Beijing, experts doubt there will be a huge change in politics.

“I don’t think regulatory action will really stop. Various ministries still have a mandate to enforce all regulations that have been changed and strengthened,” said Charles Mok, visiting scholar at the Global Digital Policy Incubator at Stanford University.

“Even if there are some reversals, it may be too late to reverse the damage. For example, even if they allow more quotes abroad, investor confidence is already lost and even the control and hostility of the foreign market is not. can be reversed. “

Mok said that because regulatory oversight has been led by the top of the Chinese political hierarchy, it will be difficult to make a U-turn.

“It looks very similar to the debacles they are facing with zero-Covid. You know it’s wrong but you can’t admit it, you can’t reverse it and you can just pay a few words and hope for the best,” Mok said.

Zero Covid is China’s policy of eliminating the coronavirus from the mainland through tough measures, including citywide lockdowns and mass testing. The powerful economic and financial city of Shanghai has been on lockdown since the end of March. China’s zero Covid policy has weighed on its economy.

Mok added that the rationale behind China’s regulatory tightening has also not changed.

“Much of the ‘tech crackdown’ campaign was genuinely rooted in the motivation to increase state control of the digital economy and all data in commerce, and there is no way that, under the current crisis, the party can think. that these controls are now less important, “he said.

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