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Beijing's Regulatory Crackdown Wipes $1.1 trln off Chinese Big Tech

The Chinese national flag is seen in Beijing, China. Credit: Reuters File Photo
The Chinese national flag is seen in Beijing, China. Credit: Reuters File Photo
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Beijing's Regulatory Crackdown Wipes $1.1 trln off Chinese Big Tech

The Chinese national flag is seen in Beijing, China. Credit: Reuters File Photo
The Chinese national flag is seen in Beijing, China. Credit: Reuters File Photo

China's major tech companies have shed more than $1 trillion in value -equivalent to the entire Dutch economy - since the government's regulatory crackdown on the sector began more than two years ago, according to Refinitiv data.
Investors are now hoping the strict rules that have stymied growth since late 2020 will start to ease, after the People's Bank of China (PBOC) indicated a change in direction could be under way.
The central bank said on Friday most of the main problems for platform companies' financial businesses had been rectified, and regulators would shift their focus to the industry as a whole rather than specific companies.
The state planner on Wednesday praised Tencent Holdings, the world's largest video game company, and e-commerce titan Alibaba Group, for their contributions to China's tech innovation, in another sign that authorities are warming to the technology sector once more.
Analysts pinpoint the shelving of Alibaba affiliate Ant Group's $37 billion initial public offering (IPO) in November 2020 as the start of a sweeping regulatory crackdown on mainland China's tech firms, which had grown rapidly in size and influence.
Since then, roughly $1.1 trillion has been wiped from the market capitalisation of the Hong Kong-listed stock of Alibaba Group, Tencent, Chinese food delivery giant Meituan , search engine provider Baidu Inc and e-commerce site JD.com.
Share prices for the five companies have plunged between 40.4% and 71% during that time.
Technology stocks in Hong Kong have rallied 4.1% since Monday as investors bank on an easing regulatory environment to boost earnings, but some analysts have sounded a note of caution.
"Mega-cap tech companies will allocate increasingly large amounts of capital expenditure towards developing generative AI technologies and products in a hostile external environment, potentially impacting profitability," said Redmond Wong, Saxo Markets strategist in Hong Kong.
Steven Leung, UOB Kay Hian sales director, said current valuations would last "until we see more supporting policies from authorities".

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Microsoft Pledges to Protect European Operations, Unveils Data Center Expansion

A Microsoft logo is pictured on a store in the Manhattan borough of New York City, New York, US, January 25, 2021. (Reuters)
A Microsoft logo is pictured on a store in the Manhattan borough of New York City, New York, US, January 25, 2021. (Reuters)
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Microsoft Pledges to Protect European Operations, Unveils Data Center Expansion

A Microsoft logo is pictured on a store in the Manhattan borough of New York City, New York, US, January 25, 2021. (Reuters)
A Microsoft logo is pictured on a store in the Manhattan borough of New York City, New York, US, January 25, 2021. (Reuters)

Microsoft pledged Wednesday to fight any US government order to halt data center operations in Europe as it sought to soothe concerns among European customers that trans-Atlantic tensions would lead to service disruptions.

The company's president, Brad Smith, said it's not something that officials are talking about in Washington, D.C. but it is a “real concern” for Microsoft's customers across Europe, which include governments.

President Donald Trump has stoked tensions between the US and Europe with his tariff-fueled trade war, and alarmed European leaders with policy changes, including pausing intelligence sharing with Ukraine, that throw into doubt his administration's commitment to the trans-Atlantic relationship, The AP news reported.

Smith, speaking at an event in Brussels, tried to allay concerns as he announced that the company was expanding data center operations across Europe.

“What we want Europeans to know is that they can count on us,” he said in a speech.

“In the unlikely event we are ever ordered by any government anywhere in the world to suspend or cease cloud operations in Europe, we are committing that Microsoft will promptly and vigorously contest such a measure using all legal avenues available, including by pursuing litigation in court,” Smith wrote in a Wednesday blog post.

He noted that Microsoft has experience fighting lawsuits from the previous Trump administration as well as from former President Barack Obama’s administration.

“If we ever find ourselves losing we will put in place business continuity arrangements” that include storing computer code in Switzerland that European partners can access, he said.

Microsoft is making five digital commitments to Europe, including increasing its data center capacity by 40 in 16 countries over the next two years, Smith said. The expansion will cost tens of billions of dollars annually. Smith declined to be more specific about the cost when asked by reporters.

The expansion comes amid calls for Europe to assert tech and data sovereignty by weaning itself off reliance from big US cloud data service providers, including Microsoft, Amazon and, to a lesser extent, Google.

“Given recent geopolitical volatility, we recognize that European governments likely will consider additional options,” and Microsoft is committed to collaborating with European companies, Smith said.