SHENZHEN, China – At this high-tech center in China, engineers and investors fear that the days of rapid growth may be behind them.
Prominent entrepreneurs who were once practically rock stars are also bowing their heads. Tech executives who have stopped posting on social media and hiding their previous comments include Zhang Eming, founder of TightTock owner BitDance, Jin Liu, president of Chinese ride-hailing giant Didi Chuxing, and Wang Jing, founder of the popular food-delivery app. Meituan.
Alibaba founder Jack Ma has kept his profile so low that he could be arrested.
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China’s technology industry regulator is facing a complex challenge of crackdowns, cowardly lockdowns at home and trade sanctions from abroad. With this concern, investors fear that the growth ceiling may be closer to their head than they previously thought.
“The optimism I hear now is about Vietnam, Indonesia, Singapore,” said Duncan Clark, founder of BDA, a Beijing-based consultancy that has worked with China’s technology industry since the 1990s. “Mobility has shifted from China.”
Nearly a decade ago, China’s Internet sector was flooded with cash as foreign investors scrambled to catch a glimpse of China’s mobile boom. Start-ups have burned through billions of dollars, as Chinese consumers have been heavily subsidized by Venture Capital for convenient and inexpensive ride-hailing, catering and other apps.
In recent weeks, layoffs at major Chinese internet companies have become a trend on social media and have become the focus of local media reports. The discussions were so extensive that the Chinese cyberspace administration last month took the unusual step of publicly commenting on companies’ hiring trends, saying they had met with Tencent, Alibaba, Baidu and others and determined that companies still hired more people overall. They left last summer.
The cyberspace administration said in an online statement that “recent online reports suggest that many large Internet companies are cutting back on large-scale cuts, prompting heated public debate.”
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Martin Lau, president of Tencent, told analysts in March that the company would “streamline” its non-core business, saying industry growth had become “dripping and unhealthy”.
“Over the years, industry participants have focused on zero-sum competition, aggressive marketing, reckless expansion, short-term growth, and corporate advantage, ignoring the most important elements of sustainable growth,” he said.
In Shenzhen, Tencent’s hometown, the local government is paying 10 percent of the company’s electricity bill this month as it seeks to alleviate some of their pain. In a survey of 97 companies conducted by the Shenzhen Venture Capital Association in March, 93 percent of respondents said they were experiencing the economic impact of the epidemic, with some factories reporting losses of several thousand dollars due to production suspensions.
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Some investors have found a moment of concern since November 2020, when Alibaba’s mobile payment affiliate Ant Group was suddenly abruptly canceled by regulators. Its IPO was poised to become the largest in the history of the world.
Ma seems to have angered Beijing’s finance regulators in a free-wheeling speech. Some officials have long felt that the online finance sector has been allowed to expand too much without regulation. Still, industry executives were shocked that Beijing would choose to abandon a blockbuster IPO that would present China as the world’s first-runner in a sophisticated industry.
In the following months there were other signs that control was now predominant over growth. Didi Global, the Chinese equivalent of Uber, has announced plans to drop its activities from the New York Stock Exchange following a Beijing cyber security investigation. Strict rules have been introduced for Internet companies, including a limit of three hours per week for playing video games for children.
One investor, speaking on condition of anonymity, said the most striking measure last year was the ban on online-tutoring for profit, a popular service among parents interested in sending their children to school. The sudden disappearance of a complete, lucrative sector frightens investors and reinforces the notion that China’s rules are volatile.
“It’s somehow gone to zero,” the man said, adding that they had previously invested in successful online-learning start-ups.
The trivial relationship with the West has also weighed on the industry. U.S. sanctions continue to hamper research and development for Huawei’s choice, while a tense political environment hinders the sale of many Chinese companies in Western markets.
As Internet companies grow stronger, so do the regulators. Like Facebook’s verification in the United States, Beijing is also reviewing the role of Internet companies in public life. Last year, China announced new rules on technology companies ‘use of customers’ personal data and facial recognition scans.
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The coronavirus epidemic has added to the challenges facing the industry, with factory production suspended for weeks across the country and workers locked in their homes on short notice.
Richard Yu, head of Huawei’s consumer and auto business, warned in a social media post last month that suspending production in Shanghai until May would have a major impact on the supply chain.
In Shenzhen, daily life has resumed after the Kovid lockdown in March. But the border with Hong Kong, the long gateway for global investors to Shenzhen’s technology companies, remains closed. Workers had to add coronavirus tests to their routine every two to three days to maintain access to offices and public spaces.
“Sustainable economic recovery is facing pressures and challenges,” the Shenzhen Bureau of Statistics said in a report on the city’s economy in the first quarter of late April. The city said retail sales of consumer goods fell 1.6 percent, while imports and exports fell 2.8 percent.
Some observers, including J সভাপতিrgen Wattke, president of the European Union’s Chamber of Commerce in China, say Beijing seems to be easing the regulatory crackdown on the technology industry for the time being, given the country’s economic challenges.
“The economy has been hit hard enough over the last year or so. Our technology in different parts of China had crackdowns and covid, “said the camel.” The opposite is the reason now. “
U reported from Taipei. Seoul’s Lyric Lee and Taipei’s Vik Chiang contributed to this report.