Xi Jinping is rewriting the rules for how China’s economy works. Expect two big shifts in 2022 WorldAhead
government stepped up its fierce attack against the country’s technology companies in the spring and summer of 2021, business leaders, analysts and investors found themselves repeatedly asking: when will it stop? More than $1trn was wiped off the collective market capitalisation of some of the world’s largest internet groups, such as Tencent, a gaming and social-media giant, and Alibaba, China’s e-commerce powerhouse. Entire business models—online tutoring, for example—were laid waste.
As the new year dawns, vast swathes of China’s economy have been hit by the regulatory crackdown. Xi Jinping, China’s president, is rewriting the rules for how the economy works, and how the data that companies collect is treated. That has meant striking down some of the country’s most prominent tycoons, such as Jack Ma, the founder of Alibaba, and forcing other groups, such as DiDi Global, a ride-hailing giant, into submission.
The second shift will be in how Chinese tech groups raise capital. Neither Chinese nor American regulators want Chinese companies to go public in New York. Even initial public offerings in Hong Kong have taken on a new level of risk. Chinese regulators have railed against the “disorderly expansion of capital” by tech firms. A meeting of a key decision-making body on August 30th noted that the initial crackdown had shown signs of success.
Analysts at Morgan Stanley, a bank, call this a “reset” of an entire industry. As Chinese tech firms adjust to the reality of tighter government control, their value to investors will inevitably be lower.This article appeared in the China section of the print edition of The World Ahead 2022 under the headline “From boom to techlash”
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