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FACTBOX-From tech to education, China's season of regulatory crackdown

08/27/2021 | 10:42am EDT
Students are seen inside a classroom at a high school in Shanghai

SHANGHAI, Aug 30 (Reuters) - China has launched a multi-pronged crackdown on its tech companies, leaving startups and decades-old firms alike operating in a new, uncertain environment.

Here are sectors that are facing regulatory pressure:

GAMING COMPANIES

Chinese regulators have slashed the amount of time players under the age of 18 can spend on online games to an hour of gameplay on Fridays, weekends and holidays, in response to growing concern over gaming addiction, state media said on Monday.

SHARING ECONOMY

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

TECH COMPANIES EYEING IPOs

China is framing rules to ban internet companies whose data poses potential security risks from listing outside the country, including in the United States, according to a person familiar with the matter.

The ban is also expected to be imposed on companies involved in ideology issues, said the person, declining to be identified as the matter is private.

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 Chinese city of Tianjin has 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, according to a document seen by Reuters.

PLATFORM ECONOMY

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

The Cyberspace Administration of China said in a statement on Friday 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-commere 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 labor.

In May, it fined rival JD.com 300,000 yuan for promoting false information about its food products.

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

CELEBRITY FAN CLUBS

China cracked down on what it described as a "chaotic" celebrity fan culture on Friday, barring platforms from publishing popularity lists and regulating the sale of fan merchandise after a series of controversies involving artists.

EDUCATION

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

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

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

ONLINE FINANCE

In November, shortly before Ant Group Co Ltd was set to list in what would have been a record share sale, China's banking regulators issued draft rules calling for tighter control of online lending, in which Ant was a giant 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 told top ride-hailing company Didi Chuxing to stop accepting new users, within days of going public on the New York Stock Exchange.

That step 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, China's 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 countrywide, with state-linked tabloid Global Times estimating that 90% of mining operations would shut in the short term.

PROPERTY

China's housing ministry and seven other regulators have told the property management sector to "improve order."

With China's economy improving after a slump in 2020 due to the coronavirus, authorities have stepped up efforts to curb rampant borrowing in real estate this year, in hopes of preventing an asset bubble.

Other regulatory measures include borrowing caps on developers known as "the three red lines" and caps on property loans by banks. (Reporting by Josh Horwitz and Brenda Goh Editing by Carmel Crimmins and Mark Potter)


© Reuters 2021
Stocks mentioned in the article
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MEITUAN 3.53% 240.8 End-of-day quote.-18.26%
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