1. Business
January 21, 2022

“There will be blood”: China regulators amp up war on Big Tech in fog of confusion

By Giacomo Lee

Regulators in China are reportedly at odds as the government ratchets up control over the country’s tech industry. The news comes as a corruption scandal engulfs Ant Group and a sense of caution prevails over Big Tech investments.

Thursday saw the Communist Party’s discipline watchdog the Central Commission for Discipline Inspection (CCDI) promise to show “no mercy” in the fight against corruption in the Chinese tech industry. Reports emerged the same day that Jack Ma’s Ant Group was implicated in a land corruption scandal connected to party officials.

Moreover, on Wednesday the Cyberspace Administration of China (CAC), China’s internet watchdog, had to debunk widely-reported rumours it had a policy requiring vetting of Big Tech firms’ investment deals.

Reports came earlier in the week of a screenshot circulating on social media of a document stating the nation’s big internet companies would require CAC approval for new investments and fundraising. Investigations from Verdict have not found the image in question, its exact contents or on what platforms it was being shared.

In response to the leak, the CAC issued a statement on its website on the 19th saying it had never issued the document, and that the contents were false.

According to a source cited in the South China Morning Post, the CAC has to seek consent from other regulators in China before issuing new policies.

The same source cited as example the China Securities Regulatory Commission, which “may not like the idea of forcing tech companies to surrender investment decision power.”

“No doubt there will be blood on the walls as the various regulators fight it out but the CAC is the one that will prevail. It is run by guys who have worked closely with Xi for decades,” says Michael Orme, senior analyst at GlobalData and China specialist.

China regulators turn up the heat

Whether the CAC missed a step with its policy, or whether the policy is genuine, the last month has already seen Chinese tech bastions cut back on their investment enterprises. This week saw ByteDance close down its investment arm as part of its company restructuring.

Meanwhile, Tencent recently divested its holdings in Chinese ecommerce platform JD.com and shed some of its stake in Singaporean ecommerce operator Sea. The company put its decisions down to a strategy of cutting investments following growth.

The recent tightening of reins on the Chinese tech industry comes after a 2021 edict from President Xi Jinping to curb the “disorderly expansion of capital” in China, as recently repeated in a January think piece from the ruler.

Repetition may drive home an order, but it seems some companies may not have got the message. As reports broke of Ant Group’s alleged involvement in a land corruption scandal, the CCDI promised to not hold back in the fight against corruption in a communique carried by news agency and state mouthpiece Xinhua.

The CCDI promised authorities to “show no mercy to those who engage in political gangs, small circles and vested interests within the party” and “cut the link between power and capital”, warning of further investigation into corruption in state-owned enterprises and the financial industry.

It was reported that Shanghai Yunxin Venture Capital Management Co, a unit of Ant Group, bought two plots of land in Hangzhou at a discount in 2019 after taking stakes in mobile payment businesses owned by the younger brother of the former party secretary of the tech hub. The businesses were named in a show aired by state broadcaster CCTV on Wednesday.

According to GlobalData’s payments sector scorecard, Ant Group is among the top five payment companies in the world, with regulation being its main weakness.

Ant Group is yet to comment on the allegations.