China hints at easing crackdown on tech, but don’t expect policy U-turn

China has shown signs of easing its crackdown on the tech sector, which has wiped billions of dollars in value from its most famous companies.

But analysts say Beijing’s recent positive rhetoric should not be mistaken for a policy reversal.

“I think big tech companies may have a grace period in the next six months,” Linghao Bao, a tech analyst at Trivium China, told CNBC’s “Squawk Box Europe” on Tuesday.

“However, this really isn’t a U-turn on the tech crackdown, and the long-term outlook hasn’t changed. Because Beijing has concluded that letting big tech companies run wild is a bad idea because it creates unfair market competition…wealth will be concentrated at the top , and will start to influence politics,” he said.

“So in the long run, the technological crackdown will indeed continue.”

Since the end of 2020, Beijing unveils stricter regulations its domestic technology arm to control the power of some of its largest companies.

Since late 2020, China has stepped up scrutiny of the tech sector and introduced a slew of new regulations in an attempt to curb the power of its domestic giants. Analysts said that while the crackdown appeared to be showing signs of easing, policy would not be completely reversed.

Kevin Friel | Getty Images News | Getty Images

Regional rules from Antitrust arrive data protection Effective quickly within the past 16 months. These moves caught international investors off guard. sparked a sharp sell-off in stocks domestic giants Tencent arrive Alibaba.

But Beijing has signaled that some scrutiny of the tech sector may ease as its economy faces pressure from a recovery from the coronavirus pandemic and subsequent lockdowns.

In a further sign of easing, Chinese officials met with some of the country’s top tech executives on Tuesday.

After the meeting, Chinese Vice Premier Liu He expressed support Plans for technology sectors and Internet companies to go public.

it is after the Chinese President Xi Jinping In April, he chaired a meeting of the Politburo, the highest decision-making body. The Politburo pledged to support the “healthy” development of the so-called platform economy, which includes internet companies in areas ranging from social media to e-commerce.

Even with some reversal, it may be too late.

Charles Mo

Charles Mok, visiting scholar at Stanford University’s Global Digital Policy Incubator

Despite Beijing’s more subdued tone, experts doubt there will be a dramatic shift in policy.

“I don’t think regulatory action will really stop,” said Charles Mo, a visiting scholar at Stanford University’s Global Digital Policy Incubator. “Ministry remains empowered to enforce all the revised and enhanced regulations.”

“Even if there is some reversal, it may be too late to reverse the damage. For example, even if they allow more overseas listings, investor confidence has been lost and the scrutiny and hostility from foreign markets cannot be reversed.”

Because the regulatory scrutiny is being driven by China’s top political ranks, it’s hard to turn around, Mo said.

“It seems very similar to the collapse they faced under zero Covid-19. You know it’s wrong, but you can’t admit it, it can’t be reversed, you can only talk about it and hope for the best,” Mo said.

Zero Coronavirus is China’s policy to eliminate the coronavirus from the mainland through draconian measures including city-wide lockdowns and mass testing.Economic and financial center Shanghai has been in lockdown since late March. China’s zero Covid-19 policy has weighed on its economy.

Mo added that China’s motivation to tighten regulations has not changed either.

“Much of the ‘tech crackdown’ movement is really rooted in the motivation to strengthen the state’s control over all data in the digital economy and trade, and in the current crisis, the party cannot possibly think that these controls are less important now,” he said.

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