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Chinese companies take action upon regulatory heat

China's crackdown continues (Source: Koshiro K / Shutterstock.com)

Outlining tighter regulation of much of its economy, China’s ruling party – the Chinese Communist Party (CCP) – has released a fresh set of antimonopoly actions. Through the plan, China is intensifying its ongoing crackdown on a set of industries with regard to privacy, data management, antitrust, and other issues.

The 10-point plan, which runs to the end of 2025, targets “important fields” such as science and technology, culture and education. According to the authorities the plan is for ‘building a law-based government’ that is ‘envisioned to crystallize the relationship between the government, the markets, and society’.

China also plans to improve legislation around public health by amending the infectious disease law and the ‘frontier health and quarantine law’. Furthermore, regulations dealing with food and medicine, natural resources, industrial safety production, urban governance, transport, would also be targeted under the new laws.

China crackdown continues

The newly drafted rules follow the year-long sweeping crackdown on China’s giants like Alibaba, Tencent, Didi, who have been earlier allowed to prosper under President Xi Jinping. Overall, the Chinese market regulator has dished out 22 fines of half a million yuan each to the country’s big tech firms. Where Alibaba has received six penalty tickets, Tencent received five and Didi two from China’s State Administration for Market Regulation (SAMR).

Beijing’s Ministry of Industry and Information Technology (MIIT) also laid out a new law that requiers personal information and important data collected and generated within China to be stored in the country in accordance with relevant laws and regulations. It also requested Tesla to store all data gathered by its cars locally.

Furthermore, China has also swept in new rules for private tutoring and education firms by introducing new laws that bar them from turning a profit or raising funding on stock markets. In the wake of China’s “unprecedented” regulatory crackdown, Goldman Sachs said its one-year price targets on the listed tutoring stocks would be cut by 78% on average.

According to Fitch Ratings, the government’s list of policy considerations is diverse, but broadly encompasses data privacy, national security, socio-economic considerations, and recognition that regulatory oversight has not kept abreast with the expanding reach and influence of China’s online sector.

Chinese firms take ‘self-correct’ actions

Triggered by the new laws, big fines, and plenty of uncertainty and fear, companies are now focussing to limit or curtail elements of their business that could attract the attention of authorities in Beijing.

One of the latest examples is KE Holdings – China’s largest platform for housing transactions and services – which quietly shut down its VIP services. The Tencent-backed company is under investigation by SAMR for suspected anti-competitive practices, Reuters reported. KE said in a statement that any business adjustments on its part ‘were in compliance with government regulations and aimed at providing better services.’

Last month, Tencent’s WeChat temporarily suspended the registration of new users in China, saying it is ‘upgrading its security technology to align with all relevant laws and regulations.’

Another example of ‘self-correcting actions’ comes from NetEase Music, which announced last month it would not enter into exclusive contracts. This move came after Chinese market regulators restricted Tencent from entering into exclusive music copyright agreements.

On another note, after issues related to Didi and Ant Group’s IPO, Pony.ai, has put on hold plans to go public in the US through its merger. The autonomous driving startup is now concerned that the Chinese regulators could take action if it proceeded with a US stock market debut.