The Chinese tech sector is already facing a global crusade led by countries like the US and India. And now, it is also battling a bloodbath within China. The Xi Jinping administration, which simply cannot trust anyone, has started looking at tech giants as a threat and is now cracking down on some of the most popular Chinese internet companies. Within two days, the stocks of four Chinese internet giants have lost a combined $255 billion.
Jinping started his purge against internet giants recently by halting Alibaba founder Jack Ma’s Ant Group Co.’s $35 billion IPO in Shanghai and Hong Kong. Jack Ma is a CCP loyalist, who promises to hand over all his businesses to the party if it wants. So, why did China halt the ambitious IPO? Well, Ma tried to speak up against Chinese regulatory hurdles. Jinping didn’t like it and now it seems that he is punishing the entire Chinese tech sector.
Facing backlash in the global market, Chinese internet giants, of course, want to expand themselves within China. Therefore, speaking at a public event, Jack Ma went as far as calling China’s financial regulation outdated and badly suited for upcoming fintech solution companies like Ant Group Co.
A Reuters report seems to suggest that Ma’s remarks against China’s outdated financial regulation were the ignition point that led to Ant facing the ire of regulators. The Ant episode has now taken the shape of a wider crackdown against the Chinese internet majors.
Within China, there is a growing fear that the Xi Jinping administration could go after the biggest of tech companies. Such fears are leading to Chinese tech giants losing hundreds of billions of dollars in their stock market value.
Between Tuesday and Wednesday, Alibaba (BABA) and JD.com (JD) went down more than 10 per cent in Hong Kong trading. While the latest plunge saw Alibaba lose $97 billion in market value, JD.com also lost $26 billion.
Meituan, a Chinese tech giant offering services similar to Groupon and Yelp, and popular gaming company Tencent (TCEHY), have also lost billions of dollars in market value.
The plunge followed notification of draft guidelines by the State Administration for Market Regulations, China’s top market regulator, on Tuesday. The latest guidelines outlined by the top regulator says that it intended to prevent internet monopolies
The draft guidelines themselves came soon after Xi Jinping slammed brakes on the Ant IPO, suggesting that the latest crackdown on Chinese tech majors is just an extension of the Ant IPO episode.
The Chinese Communist Party has since long promoted Chinese tech giants as national champions. But now these national champions are facing global outrage and want to expand themselves within China. They want China to relax its regulatory burden in order to promote its expansion.
And this why the Chinese President feels that these tech majors are a threat to him. He smells a rebellion coming from the tech sector. So, by cracking down on internet companies, Jinping is telling them that he remains the boss. Chinese President’s war with Jack Ma and other tech tycoons is costing China hundreds of billions of dollars.
