In late 2020, the Chinese government began a regulatory crackdown on the country’s tech sector, resulting in more than $1 trillion in combined losses for some of China’s largest companies. However, there are now signs that the government may be softening its stance towards tech giants like Alibaba, which could prove to be positive for Chinese tech stocks.
Over the past two years, the Chinese government has expressed concern about the “disorderly expansion of capital” among tech firms that have grown into large conglomerates. Part of Alibaba’s recent announcement includes restructuring its businesses into smaller units that could raise outside capital and even go public, seemingly heading in a contrary direction to Beijing’s concerns.
Some experts believe that this move by Alibaba could indicate a green light from the upper echelons of the Chinese government, suggesting that the regulatory crackdown may be easing up. Additionally, the recent return of Jack Ma, the founder of Alibaba, to public view in China for the first time in months could be seen as a positive sign for the tech sector.
Ma had been absent from public view following comments he made in October 2020 that appeared critical of China’s financial regulator. Shortly after his remarks, Ant Group, the financial technology affiliate of Alibaba that was controlled by Ma, was forced to scrap its massive Hong Kong and Shanghai dual listing, after regulators said it did not meet the requirements to go public.
While it remains to be seen how this situation will unfold, the recent developments suggest that the Chinese government may be taking a more lenient approach to the tech sector, which could provide a boost to Chinese tech stocks. However, investors should remain cautious and keep a close eye on any further developments or announcements from the government.