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From tech to entertainment – China’s regulatory campaign continues

Beijing’s administrators have long felt frustrated by capitalist excesses as the communist state sought to tread a delicate path between prosperity and fairness – but this year their patience snapped and the lawmakers made their move

China is also reportedly looking at rules to ban internet companies whose data poses potential security risks from listing outside the country. Photo: Reuters

 

China has embarked a widespread, multi-pronged crackdown on a broad range of its industries, as it attempts to curtail capitalism’s impact, leaving startups and decades-old firms now facing a new and uncertain environment.

Here are the sectors that have been, and continue to be, in Beijing’s crosshairs:

 

ENTERTAINMENT 

Authorities told broadcasters on Thursday to shun artists with what they called ‘incorrect political positions and effeminate styles’, to strictly enforce pay caps for actors and guests, as well as to cultivate a “patriotic atmosphere” for the industry.

It marked the expansion of a campaign that has targeted what authorities have described as a “chaotic” celebrity fan culture. Last month, China barred platforms from publishing popularity lists and regulated the sale of fan merchandise in August after a series of controversies involving performers.

 

GAMING COMPANIES

Regulators have slashed the amount of time players under the age of 18 can spend playing online games to an hour of play on Fridays, weekends and holidays, in response to growing concern over gaming addiction, state media said on August 30.

 

SHARING ECONOMY

The State Administration of Market Regulation (SAMR) said on Monday that it would further regulate the sharing economy, a sector that includes companies facilitating ride-sharing, bike-sharing, home sharing and even the pooling of battery packs for phones.

 

TECH COMPANIES EYEING IPOs

China is reportedly framing rules to ban internet companies whose data poses potential security risks from listing outside the country, including in the United States.

The ban is also expected to be imposed on companies involved in issues related to ideology, said a source.

 

Also on AF: China Paper Says US Blocking Tech Takeovers a ‘Red Flag’ for World

 

CLOUD COMPUTING

China is building its own state-backed cloud system – “guo zi yun” – which translates as “state asset cloud”, in a direct threat to tech giants such as Alibaba, Huawei and Tencent Holdings.

The city of Tianjin is said to have asked municipally-controlled companies to migrate their data from private sector operators like Alibaba Group and Tencent Holdings to a state-backed cloud system by next year. 

 

PLATFORM ECONOMY

China is seeking to tighten its oversight of the algorithms that tech companies, including e-commerce firms and social media platforms, use to target users.

The Cyberspace Administration of China said in a statement last week that companies must abide by business ethics and principles of fairness, and should not set up algorithm models that entice users to spend large amounts of money or spend money in a way that may disrupt public order.

In April, the State Administration of Market Regulation imposed a record fine of $2.75 billion on Alibaba for engaging in the practice of “choose one from two”, in which an e-commerce platform bars vendors from selling on rival sites.

The regulator has also imposed fines on smaller companies for other practices related to consumer rights and labour. In May, it fined JD.com 300,000 yuan for promoting false information about its food products. 

The regulator has also ordered food delivery companies to provide better protection for workers.

 

EDUCATION

Beijing has introduced regulations that bar private, for-profit tutoring companies from raising capital overseas.

The rules also say tutoring centres must register as non-profits, may not offer programmes for subjects already taught in public day schools, and ban classes on weekends and holidays.

A competitive higher education system has made tutoring services popular with parents, but the government has sought to reduce the cost of child-rearing in an effort to nudge up a lagging birthrate.

 

ONLINE FINANCE

In November 2020, just days before Ant Group was set to list in what would have been a record share sale, banking regulators issued draft rules calling for tighter control of online lending, in which Ant was a big player.

The regulations set limits on cross-provincial online loans and capped loans to individuals.

The following day, the People’s Bank of China halted Ant Group’s IPO. In April, the regulator called on Ant to separate its payment business from its personal finance business. 

 

RIDE-HAILING

In June, the Cyberspace Administration of China (CAC) told top ride-hailing company Didi Chuxing to stop accepting new users, within days of going public on the New York Stock Exchange.

That knocked about a fifth off the company’s share price.

Analysts and investors say the measures on Didi have more to do with big data and overseas listings by Chinese firms than competitive practices.

The regulator initially cited violations of consumer privacy but later issued a separate set of draft regulations for data-rich Chinese firms to run a security review before listing overseas.

At the time of the CAC investigation, the market regulator forced Didi and other firms to pay fines of 500,000 yuan for failing to report acquisitions of smaller companies. 

 

BITCOIN 

In May, three financial regulators widened curbs on China’s cryptocurrency sector by barring banks and online payment firms from use of cryptocurrency for payment or settlement.

They also barred institutions from providing exchange services between cryptocurrencies and fiat currencies, and prohibited fund managers from investing in cryptocurrencies as assets.

In the following weeks came measures from provincial-level governments curbing bitcoin mining. 

Those curbs triggered a wave of mining shutdowns, with the state-linked Global Times newspaper estimating that 90% of mining operations would shut in the short term.

 

PROPERTY

The housing ministry and seven other regulators have told the property management sector to “improve order”.

With the economy improving after a slump in 2020 due to the coronavirus, authorities have stepped up efforts this year to reduce massive debts by developers such as China Evergrande and curb rampant borrowing in real estate, in the hope of preventing severe social impact from a collapse of home builders, which could swamp banks with non-performing loans.

Other regulatory measures include borrowing caps on developers known as “the three red lines” and caps on property loans by banks.

 

  • Reuters

 

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