year of the Chinese raid: party first, business second | Business and Economy
Beijing’s crackdown on real estate, technology and education has revealed that it sets conditions for private citizens. The Chinese crackdown on private companies in 2021 reduced the market value of China’s largest companies by more than $ 1,000 billion.
A better understanding of Beijing’s economy emerged when authorities stressed the importance of prioritizing “quality” growth that benefits the general public rather than maximizing GDP. “Shared prosperity” targets sectors ranging from real estate and education to technology and entertainment, pushing up the stock prices of well-known companies such as Alibaba Group, Tencent Holdings, Didi Chuxing Technology Co and New Oriental Education and Technology Group. to augment. Slow down the personal influence of corporate giants like Jack Ma and Ponima.
In August 2020, Beijing introduced a âthree red lineâ policy to prevent over-indebtedness by private developers. Because âhomes are made for living, not for speculation,â politicians have sought to cool the booming real estate market over the past decade amid rampant speculative buying. Credit restrictions were cited as the main factor behind the liquidity crunch, leading to the loss of loans by two of China’s largest private real estate developers, Evergrande Group and Kaisa.
The crackdown has made many companies and investors nervous about the future of China’s growth and innovation. “For companies, this means that their job is no longer to make money, but to contribute to social goods,” Tribium China analyst Tray McCarber told Al Jazeera. âWhere businesses are not seen doing this, they will face swift regulatory action. Kyle Jaros, associate professor of global affairs at the University of Notre Dame, told Al Jazeera that the Chinese Communist Party has made it clear that “the party state can dictate the terms to companies, not the inverse “. âIt has meant reducing people like Jack Ma from Alibaba, forcing the private sector to be obedient – like with Pony Ma from Tencent and Lei Jun from Xiaomi – and demonstrating that the party state has the right to define. both technical standards and moral parameters for commercial activity, âJaros said.
New regulations were introduced in October, banning small Chinese towns from building skyscrapers taller than 250 meters. âThe regulatory raid is part of a larger paradigm shift in Beijing’s approach to economic policy and management,â Shezadkaji, executive director of China Beige Book International, told Al Jazeera. âThis includes recognizing that China’s old model of debt-driven, investment-intensive growth is not on the right track. “
âIn my opinion, the banks were looking for excuses to germinate this and give them enough time to start their online business,â Collier said. In February this year, Beijing announced a new antitrust rule for tech companies. This included taking steps to ensure the company was not using algorithms that could encourage overspending or disrupt public order and morals. Alibaba, Tencent and Baidu are one of the tech giants fined for suspected monopoly. In April, regulators fined Alibaba $ 2.8 billion and ordered the reorganization of the Ant Group under the supervision of the Central Bank of China.
In November 2020, Chinese regulators suspended the planned IPO of Jack Ma’s Ant Group for $ 37 billion. Beijing said it ended the largest public offering in history to protect investors, but many analysts believe the public offering of the horse to Chinese financial regulators and state banks triggered the move. Andrew Collier, Founder and CEO of
Orient Capital Research told the New York Times that the suspension could have helped protect the state-owned banks that paid the AntGroup fees.
Beijing has also expressed opposition to tech companies seeking overseas IPOs. In July, days after ride-sharing giant Droplet exited for $ 4.4 billion, a new regulation of 4,444 put companies with data on more than one million users on national security grounds. Government approval must be obtained before appearing on foreign regulatory agencies. In August, Beijing banned people under the age of 18 from playing video games for more than three hours a week to avoid gambling addiction. In September, Beijing banned cryptocurrency transactions and mining. Banks, institutions, and online payment companies have been banned from transacting with cryptocurrencies, and fund managers have been banned from investing in cryptocurrencies as assets.
The Chinese government has also built its own state-backed cloud system, which competes with Alibaba, Huawei and Tencent in the private sector. In Tianjin City, city-controlled companies have been urged to migrate their data from private sector operators to the state-backed cloud. âThe new paradigm prioritizes national security issues, especially data issues, and pays more attention to socio-economic trends such as inequalities that can cause instability and threaten party control. âLight up,â Kaji said.
In July, China announced restrictions on private education aimed at easing pressure on schoolchildren and lowering the cost of private tutoring for parents. Beijing registered the tutoring company as a non-profit organization and ordered it not to allow it to offer courses already taught at the school. Companies are also prohibited from raising funds abroad or attending classes on weekends and holidays. The crackdown brought the $ 120 billion industry to the fore, China’s largest private tutoring firm, New Oriental Education and Technology, dropping the market value of U.S.-listed stocks by $ 7.4 billion. dollars. In August, Beijing ordered broadcasters not to work with artists who represented “mistaken political positions” or “feminine” styles considered unpatriotic. Beijing has also regulated the sale of fan products for controversial artists and banned the publication of popular lists on online platforms.
The desire to “share prosperity” means, in the long run, that China will move from “archetypal old West” capitalism to a more consumer-oriented economy aimed at promoting socialist values. Can mean. The era of unlimited economic expansion may be over, but analysts believe adaptable businesses will thrive. McCarber predicts that while companies that contribute to social interests, such as healthcare and educational institutions, find a very favorable business environment, they are also welcome to help them develop their core technologies. âSuccessful businessmen in China have always understood that they will be successful when their business is linked to a larger political initiative,â McCarber said. âIt’s going to stay that way. Businessmen will move from what Beijing sees as unproductive to areas that Beijing supports, such as environmental protection and advanced manufacturing. “Innovation is” guided by party priorities, “” Mr. Kaji said. âBusinesses will thrive in priority government sectors such as high-tech manufacturing, where China is trying to reduce its dependence on foreign countries,â he said. However, due to the more difficult environment, some companies may postpone their expansion or consider other locations.
“Some companies may decide that a more disciplined regulatory environment and greater pressure to pursue a partisan social and political mission will undermine their profits,” Jaros said. .. “As a result, they can limit the scope of innovation, limit or redirect investments, and in some cases seek more open markets outside of China.” “
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- year of the Chinese raid: party first, business second | Business and Economy
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