In a sign that China’s leaders may ease up on the crackdown on technology companies, the Cyberspace Administration of China, the country’s top internet regulator, is set to meet with the country’s tech giants including Tencent and Meituan this week to discuss the regulatory campaign against the sector. Citing people familiar with the matter, the Wall Street Journal is reporting that regulators are looking to hold off on new rules limiting the time that young people spend on mobile apps.
This meeting comes at a time when China’s economic outlook is uncertain due to regulatory uncertainty exacerbated by strict COVID measures. The nation’s tech industry has also faced significant stock selloffs and job layoffs.
“The Chinese government – much like the U.S. and other governments – has been trying to catch up in regulating a technology sector that has grown at an incredible rate over the past decade,” said Kevin T. Carter, founder and CIO of EMQQ Global. “I don’t believe the goal has ever been to cause long-term harm to their internet giants but rather to do what all governments are trying to do. This meeting may signal that the government feels they have caught up.”
Chinese tech stocks rallied on Friday after news of the meeting broke, with the Hang Seng Tech Index rising 10% in Hong Kong, led by such firms as Alibaba Group Holding Ltd. and JD.com Inc.
The Communist Party’s Politburo said that authorities plan to unveil measures that support the healthy and normal development of the platform economy. Bloomberg is quoting Singapore-based Straits Investment Holdings Pte fund manager Manish Bhargava as saying that Politburo’s statements “are very bullish for the market,” adding that the rise in tech stocks “could imply that maybe some kind of a near-term floor is in place.”
“Valuations and growth have been there for quite some time. Investors now need a third leg to stand on,” Carter added. “And that’s positive sentiment. These developments are steps in the right direction.”
This meeting between regulators and China’s biggest tech firms should impact EMQQ Global’s Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ), of which more than half of its assets are weighted towards the country. By focusing on internet and e-commerce in emerging markets, EMQQ looks to capture the growth and innovation happening in some of the largest and fastest-growing populations in the world.
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