China tech sector may see ‘less surprises’ on regulation: S&P report

SHANGHAI, CHINA – MAY 10: A visitor takes pictures of the Ehang 216 electric vertical takeoff and landing (VTOL) autonomous aerial vehicle (AAV) during the China Brand Expo 2023 at the Shanghai World Expo Exhibition and Convention Center on May 10, 2023. in Shanghai, China. (Photo by Yin Liqin/China News Service/VCG via Getty Images)

Yin Liqin | China News Service | Getty Images

The worst may be over for China’s internet sector, S&P Global Ratings said in a new report, but that doesn’t mean Chinese authorities won’t introduce more regulatory measures.

“If anything, we expect more regulatory action in the foreseeable future, especially around data security and content audits. But the scope for surprises should be significantly reduced, and they shouldn’t lead to major operational disruptions like they did in 2021. challenges,” said S&P Global Ratings, in Report.

“China’s Internet Industry Has Emerged from Regulatory Restructuring. Policymakers Are Signaling Support, and Significant Legal Reforms or Sweeping Actions Appear to Be Complete,” titled “China’s Internet Regulation: Fewer Surprises, Not Zero.” accident,” the report said.

“The period of big surprises is likely to be in the rearview mirror. But the changes made will not be undone.”

Social media companies may also need to invest more in content moderation to ensure they do not run into regulatory problems, the credit rating agency said.

China’s crackdown on big tech companies begins in 2020, which sees the government impose new regulations on technology.Ant Financial’s financial institutions alibababeen pursuing $37 billion initial public offering at the time, was forced to suspend listing a few days ago its launch.

Other tech giants such as Tencent, Meituan, baidu, Jingdong, Didi Chuxing Nor was it spared.China launch detector Including improper antitrust, antitrust and consumer protection measures, etc.

Read more about tech and encryption from CNBC Pro

“In our view, companies will adapt their business practices to comply with stricter enforcement of anti-competitive rules. Many regulatory actions have targeted such conduct,” S&P said.According to reports, Tencent Was fined and ordered to give up exclusive music authorization In July 2021, China Music Group was acquired in 2016.

“As a result, large internet companies are likely to reduce M&A activity, especially among potential competitors and innovative start-ups that could one day disrupt their markets,” S&P said.

To ensure their operations are not disrupted by stricter enforcement of antitrust laws, Chinese tech companies will need to “invest in their core businesses and, optionally, in new businesses,” the U.S. credit rating agency said.

But the worst is over, several analysts also said.

Alibaba’s spin-off Splitting its business into six separate divisions, each with the ability to raise external funding and seek a listing, is seen by analysts as China’s Scrutiny of domestic tech firms may be eased.

S&P said there could be “additional benefits” of addressing some of the government’s concerns by loosening controls on certain business units.

“The regulatory headwinds we’ve had over the past two years … are now turning from headwinds to tailwinds,” George Efstathopoulos, portfolio manager at Fidelity International, said on CNBC’s “Street Signs Asia” on March 29.

Alibaba's breakup is about extracting value and government exerting control over tech: B Capital

Chinese leaders also Committed to supporting the “healthy” development of the industry The public listing of technology companies during the Chinese People’s Political Consultative Conference in May last year.

“Negative regulation has unexpectedly decreased since then,” S&P noted.

“We maintain that the Chinese government is seeking to strike a balance between growth, social stability and security,” the rating agency said in its report.

After a months-long freeze, China’s gaming regulator restarted online game approvals in April 2022, including titles belonging to Tencent and NetEase. Regulators suspended licenses for online games in August 2021, which state media called “spiritual opiates” that harm the mental growth of minors.

Source link

Leave a Comment