China has shown signs of easing its crackdown on technology, which has erased billions of dollars from its most prominent companies.
But analysts say Beijing’s recent positive rhetoric should not be mistaken for a policy violation.
“I think there will probably be a grace period for the big tech companies for the next six months,” Linghao Bao, a technology analyst at Trivia China, told CNBC’s Squawk Box Europe on Tuesday.
“However, this is not really a U-turn in the technology crackdown, the long-term outlook has not changed. Because Beijing has already concluded that allowing big tech companies to run wild is a bad idea. It will start to affect politics, “he said.
“So the technology crackdown is really here to stay in the long run.”
Since the end of 2020, Beijing has tightened controls in its domestic technology sector to curb the power of some of its largest companies.
Since the end of 2020, China has stepped up its scrutiny of the technology sector and introduced a number of new rules that seek to curb the power of its domestic giants. Analysts say that even if the crackdown shows signs of easing, there will be no complete U-turn in policy.
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The rules for protecting data from mistrust have come into effect quickly in the last 16 months The move has alerted international investors and dramatically halted sales of stocks of domestic titans from Tencent to Alibaba.
However, Beijing has indicated that some scrutiny of the technology sector could be easier as its economy faces the resurgence of the Covid and subsequent lockdown pressures.
On Tuesday, Chinese officials met with some of the country’s top technology officials to further signs of easing.
After the meeting, Chinese Vice-Premier Liu Hai pledged support for the technology sector and plans to go public with Internet companies.
After Chinese President Xi Jinping chaired a Politburo meeting in April, a top decision-making body. The Politburo has pledged to support the “healthy” development of the so-called platform economy, which includes Internet companies ranging from social media to e-commerce.
Despite this more soothing tone from Beijing, experts suspect that there will be a huge shift in policy.
Charles Mock, a visiting scholar at Stanford University’s Global Digital Policy Incubator, said: “I do not believe regulatory activity will really stop. Various ministries still have orders to amend and strengthen all regulations.”
“Even if something goes wrong, it may be too late to recoup losses. For example, even if they allow more listings abroad, investors’ confidence is already lost, and verification picks and adversities from overseas markets cannot be reversed.”
Mock says that since regulatory verification is driven by the top of China’s political hierarchy, it will be difficult to make a U-turn.
“It seems to be very similar to the disaster they are facing with zero-covid. You know it’s wrong but you can’t admit it, of course you can’t do the opposite and you can only offer some lip service and hope for the best. Can, “said Dr. Mock.
Zero Covid is China’s policy of eradicating coronavirus from the mainland through strict measures, including city-wide lockdowns and mass testing. The economic and financial powerhouse city of Shanghai has been on lockdown since the end of March. China’s zero-sum policy has weighed heavily on its economy.
Mock added that the motives behind China’s regulatory tightening have not changed.
“Most of the ‘tech crackdown’ campaigns were actually motivated by state control of the digital economy and increasing all data on trade, and in the current crisis the party will feel that these controls are no more. Less important,” he said.