Factbox: How China's regulatory crackdown has reshaped its tech, property sectors

New Oriental Education & Technology

29/04/2022 15:17

(Updates to add new developments)
    April 29 (Reuters) - China has since late 2020 waged a
multi-pronged crackdown on a broad range of industries, leaving
startups and decades-old firms alike operating in a new,
uncertain environment, and battering their shares.
    On Friday, Beijing signalled an easing of its stance on the
once-freewheeling tech sector as President Xi Jinping seeks to
bolster the economy in the face of growth-sapping COVID-19
lockdowns.  urn:newsml:reuters.com:*:nL2N2WR0UQ
    Here are the sectors that have faced regulatory pressure:
    
    PLATFORM ECONOMY
    The category includes China's tech giants such as Alibaba
Group  9988.HK , Meituan  3690.HK  and Tencent Holdings
 0700.HK  whose e-commerce to social media platforms register
millions of users. 
    China accused them of mistreating users, and has since
published rules tightening oversight of the algorithms they use
to target users, ordered them to open their platforms to each
other, and punished them for false advertising. 
    Monopolistic behaviour by such companies has also been a key
focus. 
    Alibaba and Meituan were fined $2.75 billion and $527
million respectively last year for abusing their dominant market
positions. Tencent was also fined and barred from entering
exclusive music copyright agreements. 
    Regulators have also accused such companies of exploiting
their workers, and have drafted guidelines requiring food
delivery platforms to guarantee minimum pay and rest periods.
        
    GAMING COMPANIES
    Regulators slashed the amount of time those under 18 can
spend playing games online to an hour on Fridays, weekends and
holidays, in response to growing concern over gaming addiction
last year, requiring companies such as Tencent and NetEase to
upgrade their monitoring systems.  urn:newsml:reuters.com:*:nL1N2Q10KB
    They also stopped issuing publishing licenses, which are key
to monetising games, for nine months, dealing a big blow to
gaming firms' revenues and forcing some 14,000 companies related
to the sector out of business over the period.  urn:newsml:reuters.com:*:nL2N2WA0YJ
    While they lifted the freeze earlier this month, scrutiny of
the industry has continued with a recent ban on the live
streaming of unauthorised video games.  urn:newsml:reuters.com:*:nL2N2WD02L
    
    ENTERTAINMENT 
    Broadcasters were told by authorities to shun artists with
what they called incorrect political positions and effeminate
styles, to strictly enforce pay caps for actors and guests, and
to cultivate a "patriotic atmosphere" for the industry.
 urn:newsml:reuters.com:*:nL1N2Q402D
    It marked the expansion of a campaign against what
authorities have described as a "chaotic" celebrity fan culture.
Platforms have been banned from publishing popularity lists and
sales of fan merchandise were regulated in August after a series
of controversies involving performers.  urn:newsml:reuters.com:*:nL1N2PY02L
    
    TECH COMPANIES EYEING IPOs
    Regulators have increased their oversight of Chinese tech
firms seeking to list abroad, requiring platform companies with
data on more than 1 million users to undergo a security review
before listing their shares overseas.
    China's securities watchdog has also proposed extending its 
oversight of offshore listings to Chinese firms with variable
interest entity (VIE) structures. 
    VIEs had mostly been used by companies that list offshore,
primarily in the United States, to skirt Chinese rules
restricting foreign investment in sensitive industries such as
media and telecommunications.
    
    PRIVATE EDUCATION
    Chinese authorities last year banned for-profit tutoring in
subjects on the school curriculum in an effort to ease pressure
on children and parents, leading to a wave of school closures
and layoffs across the private education sector.
    New Oriental  9901.HK , which had been one of China's
largest private education firms, dismissed 60,000 employees and
saw operating income plunge by 80% after the new rules came into
effect, its founder said in January.  urn:newsml:reuters.com:*:nL1N2TQ07E
    
    ONLINE FINANCE
    In November, shortly before Ant Group Co Ltd was set to list
in what would have been a record share sale, banking regulators
issued draft rules calling for tighter control of online
lending, in which Ant was a big player.
    The regulations set limits on cross-provincial online loans
and capped loans to individuals.
    The following day, the People's Bank of China halted Ant
Group's IPO. In April, the regulator called on Ant to separate
its payment business from its personal finance business. 
    
    RIDE-HAILING
    In June 2021, the Cyberspace Administration of China (CAC)
announced a cybersecurity probe into Didi Chuxing  DIDI.N  days
after it debuted on the New York Stock Exchange, barring it from
signing up new users and ordering app stores to remove 25 of its
mobile apps.
    Sources had said that the company had ran afoul of Chinese
regulators by pushing ahead with its $4.4 billion U.S. IPO.
Authorities had urged it to put the listing on hold while they
condudcted a cybersecurity review of its data practices, they
said. 
    Didi, whose shares have fallen by almost 90% since it went
public, said in December it would delist in New York and pursue
a listing in Hong Kong. 
    It has scheduled a shareholders meeting for May 23 to vote
on the plan.  urn:newsml:reuters.com:*:nL2N2WE061
    
    PROPERTY
    Beijing's campaign to reduce high debt levels evolved into a
liquidity crisis last year among some major developers such as
China Evergrande Group  3333.HK , resulting in bond defaults and
shelved projects.
    But since the end of last year, it has taken steps to help
revive the cooling property sector. Those included making it
easier for large and state-owned developers to raise funds,
relaxing rules on escrow accounts for pre-sale funds and
allowing some local governments to cut mortgage rates and
down-payment ratios.
    Analysts have suggested that the regulatory respite for the
sector was likely driven by regulators' concerns about the
knock-on effects on the broader economy.

 (Reporting by Brenda Goh and Josh Horwitz; Editing by Carmel
Crimmins, Mark Potter and Tomasz Janowski)
 ((Josh.Horwitz@thomsonreuters.com; +86 21 20830007;))