China to reportedly pause regulatory crackdown on local tech giants

China to reportedly pause regulatory crackdown on local tech giants

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China is preparing to pause its regulatory crackdown on local tech giants, the Wall Street Journal reported today.

Over the past year, China has rolled out an array of regulatory steps focused on the country’s leading technology companies. The move has affected gig economy players such as food delivery providers, online education firms and others. Regulators have issued multiple antitrust fines as part of the crackdown. 

The Journal today cited multiple sources as saying that China’s internet regulator, the Cyberspace Administration of China, will meet with leading tech firms next week to discuss the regulatory campaign. The development is reportedly believed to be a sign that officials “acknowledge the toll the regulations” have taken. 

As part of the reported move to pause the crackdown, regulators are expected to hold off on new rules designed to limit the amount of time that young people spend on mobile apps. Additionally, Beijing is reportedly considering pushing a number of major tech firms to “offer 1% equity stakes to the state and give the government a direct role in corporate decisions”.

The government has already taken a 1% stake in a number of local tech firms. Those firms include TikTok operator ByteDance Ltd. and Weibo Corp., which operates a popular Twitter-like social network. The plan is “likely to be expanded” to additional tech firms, the Journal reported.

Shares of ByteDance jumped more than 10% at one point today. Several other tech stocks including e-commerce giant Alibaba Group Holding Ltd. are also up in trading. 

In February, several economists told CNBC that they believe the worst of China’s regulatory crackdown is over. Beijing’s new priority is to support economic growth, the experts said. As a result, fewer major regulatory changes are expected to be rolled out, though it’s believed that existing rules will remain in place.

Today’s report that the crackdown on tech giants will be paused comes as Chinese and U.S. regulators are said to be making progress on a cooperation agreement related to Chinese tech firms listed in the U.S.

In March, U.S. regulators indicated that a number of U.S.-listed Chinese stocks could be delisted. The reason is that the affected companies don’t currently adhere to some of the requirements specified in a piece of legislation called the Holding Foreign Companies Accountable Act. A few weeks ago, CNBC reported that Chinese and U.S. regulators are progressing toward a cooperation plan on U.S.-listed Chinese stocks. 

Photo: Unsplash

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