China’s antitrust crusade against tech sector signals new policy direction

Name: China kicks off antitrust probes into Alibaba over alleged monopolistic practices
Uploaded: 2021-01-04T14:00:20.000Z
Duration: 1 min 26 s
Description: China kicks off antitrust probes into Alibaba over alleged monopolistic practices

While it’s clear from the Central Economic Work Conference there would be no sudden turn in overall policy, the antitrust measures underline Beijing’s bottom line of preventing systemic risk, and signal it is learning from past market routs to achieve smoother market development

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A motorist travels past an Alibaba Group office building in Shanghai on December 24. China’s shift towards antitrust measures against Alibaba’s Ant Group and other tech giants could signal the start of painful deleveraging for some of the country’s most successful firms. Photo: Bloomberg

Hao Zhou

Published: 10:00pm, 4 Jan 2021Updated: 9:38am, 5 Jan 2021

As a centrally planned economy, China prefers an organised, top-down approach when delivering the tone of its policies. Hence, to gauge the policy direction in the world’s second-biggest economy, the market tends to pay special attention to a few high-level policy meetings which are normally scheduled at the end of the year.

Among these meetings, the Central Economic Work Conference is widely seen as the most important event for China watchers. The 2020 session confirmed a general policy shift, which indicates a policy normalisation in the coming year. Moreover, there was a clear policy surprise as Beijing vowed antitrust efforts with a particular focus on the technology sector.

Chinese policymakers confirmed that overall policy would be gradually neutralised in the coming year, as Beijing said it would not make a “sudden turn” in overall policy. In general, this is in line with the consensus views and suggests that a policy tapering can be expected against a backdrop of steady post-pandemic recovery.

In the meantime, Chinese authorities emphasised the importance of technology innovation, food and energy security and financial stability. As Beijing has shifted its long-term strategy to a “dual circulation” approach with more emphasis on domestic development, it makes sense for China to eye long-term growth potential via adding more investment into critical economic sectors.

However, the market should be somewhat surprised by the mention of antitrust measures. In particular, the conference said China would prevent the disorderly expansion of capital. A few days after the conference, Chinese financial regulators summoned Ant Group, which reflects a policy change towards the rapidly expanding technology giants in China.

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China kicks off antitrust probes into Alibaba over alleged monopolistic practices

The People’s Bank of China (PBOC) posted a statement on December 27. It laid out Ant’s issues including poor corporate governance, defiance of regulatory demands, illegal regulatory arbitrage, using its market advantage to squeeze out competitors and harming consumers’ legal interests.