Positive Signs of Regulatory Crackdowns' End for China's Big Tech
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More hints pointing towards the end of regulatory crackdowns for China’s Big Tech
In addition, Chinese Premier Li Qiang held a meeting yesterday, 12 July with senior management executives from China’s leading technology companies such as Alibaba Group, Meituan, ByteDance, and Xiaohongshu Technology to discuss how the business operations of the technology sector can help to promote growth in the current lacklustre internal demand environment seen in China.
During the meeting, Premier Li urged local governments to provide more support to these technology firms, labelling them as the “trailblazers of the era” and in turn, urged these technology firms to support the real economy through innovation. He added that the government will create a fair environment and reduce compliance costs in order to promote the sound development of the platform economy.
Hence, yesterday’s Premier Li meeting has solidified China’s top policymakers’ current stance since last Friday of a more hands-off approach towards China’s Big Tech especially in the e-commerce, fintech, and platform sectors, and an indication the prior three-year of stringent regulatory crackdowns on their business operations have ended.
A weak external environment may still put downside pressure on China’s growth
This latest rhetoric from the top man of China’s State Council is likely to boost positive animal spirits in the short-term at least. From a medium-term perspective, the external environment also needs to be taken into consideration when global interest rates are likely to stay at a higher level for at least till the second half of 2024 given the latest hawkish monetary policy guidance from major developed countries’ central banks, the Fed, ECB, and BoE.
Therefore, a higher cost of global funding environment is likely to be persistent throughout 2023 and stretch into early 2024 which may continue to put downside pressure on China’s economic growth which is evident in the latest exports data for June which has continued to contract deeper to -12.4% year-on-year from -7.5% recorded in May, its steepest drop since February 2020 and came in below expectations of -9.5%.
Hence, the current momentum-driven rally seen in the China Big Tech equities and Hang Seng benchmark stock indices may not oscillate in a smooth trajectory path.
