China signals support for Big Tech, indicating crackdown is nearing an end

China’s leadership headed by President Xi Jinping has asked that the country’s Big Tech firms play a full role in leading economic growth, creating jobs and engaging in international competition, in the strongest signal yet that a two-year period of intense scrutiny is almost over.

China’s “platform enterprises”, which means large internet firms such as Alibaba Group Holding and Tencent Holdings, will be supported to “fully display their capabilities” in bolstering economic growth, job creation and international competition, according to a readout by Chinese state television after the conclusion of a two-day Central Economic Work Conference in Beijing on Friday.

Alibaba owns the South China Morning Post.

The closed-door annual meeting convened by the Central Committee of the Communist Party sets the tone and draft policy guidelines for the world’s second-largest economy.

In the 2020 economic work conference, Beijing pledged to prevent the “disorderly expansion of capital” and the past two years has seen an unprecedented regulatory crackdown on the country’s technology firms, ranging from content, data security to mergers and acquisition activity. The action has seen billions of dollars knocked off the market value of leading tech firms, the postponement of several big IPOs and rising job cuts.

Hefty fines were also levied on Alibaba and delivery services giant Meituan for abuse of their dominant market positions.

Although Beijing softened its stance slightly in 2021, it maintained that the government must play a leading role in setting the red and green lights for capital markets activity to prevent “barbaric growth”. Tencent, for example, has scaled down its investment portfolios in other internet firms in the past year, lessening its overall influence.

In the published summary of the meeting on Friday, China’s leadership reiterated that it will support the “digital economy” and it will improve its “normalised regulatory” performance.

The summary, which can be seen as laying the foundations for specific policies in 2023, is largely free from mention of restrictions and the overall tone is supportive of the industry’s expansion and vital role in the economy.

It can be seen as part of Beijing’s new policy mix, that is pivoting towards growth amid several economic headwinds, including supply chain disruption as a result of Covid-19 and a property market downturn. Beijing has signalled recently that it will also relax controls on real estate developers and encourage property investment.

The message on Big Tech is in line with a policy document published this week that talked about stimulating domestic demand for the next 13 years. This state document devoted many paragraphs to “new types of consumption” and pledged “support for platform companies and the online education sector”. South China Morning Post