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SOFTENING

China is easing its big tech crackdown amid a wounded economy

A trader works during the IPO for Chinese ride-hailing company Didi Global Inc on the New York Stock Exchange (NYSE) floor in New York City, U.S., June 30, 2021.
REUTERS/Brendan McDermid
A positive sign?
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China’s crackdown on big tech at one point erased billions of dollars of value from some of the country’s most prominent companies. Now, as the country faces an increasingly grim economic outlook, regulators are hinting that they may ease their scrutiny of the sector.

Regulators may loosen their grip on Chinese ride-hailing giant Didi Chuxing, allowing the company to start accepting new user registrations again and let its main apps back on the country’s app stores as early as this week, according to the Wall Street Journal. Shortly after the company’s IPO in June last year, China’s cyber watchdog began investigating the company’s cybersecurity; Beijing, worried that the large troves of data held by its tech giants could become a national security risk, had tightened its oversight of Chinese firms’ overseas listings. Around the same time they announced their probe into Didi, regulators barred the company from adding new users and removed 26 related ride-hailing apps from app stores, citing the ongoing investigation and the firm’s alleged violations of regulations in collecting and using personal information. It is unclear how this situation could affect Didi’s US delisting plan, for which the company obtained approval from shareholders last month as part of its plan to resolve the cybersecurity probe.

A softened attitude beyond Didi

In addition to Didi,  two other US-listed tech firms—truck-hailing firm Full Track Alliance and online recruitment company Kanzhun—that have also been probed could also see the regulators finish their investigations and lift a ban on them adding new users, said the journal. However, the three firms could still face financial penalties.

“This is apparently a positive signal, not only for Didi but also for all overseas-listed Chinese shares and Chinese internet companies,” said Xia Hailong, a lawyer with Shanghai Shenlun law firm. The recent regulatory climate in China has softened considerably compared to previous years, when the authorities’ focus was to prevent the “disorderly expansion of capital,” he told Quartz, citing a term used by Beijing often to describe the growing monopoly power of big Chinese corporations.

China’s softened attitude toward big tech comes as it is grappling with an economy wounded deeply by its stringent zero-covid policy. The repeated mass lockdowns pursued under this strategy has led to expectations from analysts at institutions such as the Rhodium Group, an independent research organization, of sharp contractions of the Chinese economy, which makes it unlikely that it will reach the government’s 5.5% annual GDP growth target for 2022. China’s top economics official Liu He last month pledged the government’s support for the healthy and continuous development of the private and “platform economy,” a reference to internet firms, and said the country supports digital companies to list on domestic and foreign exchanges.

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