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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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California Announces New Deal with Tech to Fund Journalism, AI Research

A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, US, December 14, 2017. REUTERS/Brendan McDermid/File Photo Purchase Licensing Rights
A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, US, December 14, 2017. REUTERS/Brendan McDermid/File Photo Purchase Licensing Rights
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California Announces New Deal with Tech to Fund Journalism, AI Research

A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, US, December 14, 2017. REUTERS/Brendan McDermid/File Photo Purchase Licensing Rights
A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, US, December 14, 2017. REUTERS/Brendan McDermid/File Photo Purchase Licensing Rights

California will be the first US state to direct millions of dollars from taxpayer money and tech companies to help pay for journalism and AI research under a new deal announced Wednesday.

Under the first-in-the-nation agreement, the state and tech companies would collectively pay roughly $250 million over five years to support According to The AP, California-based news organization and create an AI research program. The initiatives are set to kick in in 2025 with $100 million the first year, and the majority of the money would go to news organizations, said Democratic Assemblymember Buffy Wicks, who brokered the deal.

“This agreement represents a major breakthrough in ensuring the survival of newsrooms and bolstering local journalism across California — leveraging substantial tech industry resources without imposing new taxes on Californians,” Gov. Gavin Newsom said in a statement. “The deal not only provides funding to support hundreds of new journalists but helps rebuild a robust and dynamic California press corps for years to come, reinforcing the vital role of journalism in our democracy.”

Wicks' office didn't immediately answer questions about specifics on how much funding would come from the state, which news organizations would be eligible and how much money would go to the AI research program.

The deal effectively marks the end of a yearlong fight between tech giants and lawmakers over Wicks' proposal to require companies like Google, Facebook and Microsoft to pay a certain percentage of advertising revenue to media companies for linking to their content.

The bill, modelled after a legislation in Canada aiming at providing financial help to local news organizations, faced intense backlash from the tech industry, which launched ads over the summer to attack the bill. Google also tried to pressure lawmakers to drop the bill by temporarily removing news websites from some people's search results in April.

“This partnership represents a cross-sector commitment to supporting a free and vibrant press, empowering local news outlets up and down the state to continue in their essential work," Wicks said in a statement. “This is just the beginning.”

California has tried different ways to stop the loss of journalism jobs, which have been disappearing rapidly as legacy media companies have struggled to profit in the digital age. More than 2,500 newspapers have closed in the US since 2005, according to Northwestern University’s Medill School of Journalism. California has lost more than 100 news organizations in the past decade, according to Wicks' office.

The Wednesday agreement is supported by California News Publishers Association, which represents more than 700 news organizations, Google’s corporate parent Alphabet and OpenAI. But journalists, including those in Media Guild of the West, slammed the deal and said it would hurt California news organizations.

State Sen. Steve Glazer, who authored a bill to provide news organizations a tax credit for hiring full-time journalists, said the agreement “seriously undercuts our work toward a long term solution to rescue independent journalism.”

State Senate President Pro Tempore Mike McGuire also said the deal doesn't go far enough to address the dire situation in California.

“Newsrooms have been hollowed out across this state while tech platforms have seen multi-billion dollar profits,” he said in a statement. “We have concerns that this proposal lacks sufficient funding for newspapers and local media, and doesn’t fully address the inequities facing the industry.”