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Chinese tech stocks are experiencing a surge in value following indications from top government officials that they will shift their approach from restricting these companies’ influence to supporting their growth and strengthening China’s global position.
Premier Li Qiang voiced his support for senior tech executives in a meeting held in Beijing on Wednesday, while the country’s state planning agency commended groups like Tencent and Meituan for their contributions to China’s semiconductor efforts.
This official outreach comes after the conclusion of the regulatory campaign against Jack Ma’s Ant Group, which received a nearly $1 billion fine last week. The central bank stated that financial platform operators, including Ant and Tencent, have resolved most of their outstanding issues.
The apparent end to the crackdown on major tech groups has caused the New York-listed shares of Ant’s sister company Alibaba to rise by 12% in the past week. Additionally, the Hang Seng Tech index has increased by nearly 9% since Monday. However, Alibaba shares remain 70% lower compared to when Beijing canceled Ant’s highly anticipated public debut in 2020, and have only grown by 3% since the beginning of the year.
Beijing’s shifting regulatory stance is occurring amidst a slowdown in China’s economic growth. Various official data indicates a general deceleration in the country. There is also a growing recognition that cracking down on domestic tech groups has harmed China’s technological competitiveness with the United States.
During the meeting, Li, China’s second-in-command, urged tech executives to “strive to enhance their international competitiveness and have the courage to compete on a global level.”
Executives from companies like ByteDance (owner of TikTok), Meituan, and Alibaba Cloud were present at the meeting, according to state media. Li stated that the government will establish regularized regulations and called on all levels of government to create a more favorable market environment.
Li said, “Officials should reduce compliance costs and promote the healthy development of the industry. The platform economy holds great potential in our journey towards building a modern socialist country.”
China’s state planning agency has recognized Tencent and Meituan for their support of semiconductor start-ups at the center of the tech battle with the US.
The National Development and Reform Commission stated that Enflame Tech, based in Shanghai and backed by Tencent, has developed chips used in large-scale artificial intelligence server clusters. Similarly, Meituan-backed Rong Semiconductor is advancing chip manufacturing. The agency described both companies as important emerging players in the semiconductor industry.
Robin Zhu, an analyst at Bernstein, views China’s official support as a significant moment for investors who have chosen to look past numerous similar announcements over the past year. However, Zhu cautioned that the regulatory changes will not benefit all Chinese tech companies equally. He believes that investors will increasingly need to be selective when choosing stocks due to the divergent outlooks across the sector.
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