A possible end to tech clampdown in China

Dear friends,

The last couple of years have been crazy, for reasons that we all unfortunately know.

For those, including me, involved in business with China, the current uncertainty is definitely not a good news. Business simply do not thrive in uncertain environments and this crazy lockdown in Shanghai, with potential to be repeated also elsewhere in the country, also do not help.

Most of you will probably remember the aggressive stance that the central government took against tech companies these past two years.

Firstly, Alibaba's founder Jack Ma "vanished" in thin air after giving a controversial speech heavily criticizing the chinese banking system ahead of Ant Group's IPO. Needless to say that some higher ups didn't like the speech and Jack Ma was forced to take a few months off the scenes.

Then, the central government realized that the tech giants such as Tencent have way too much power and implemented some measures to restrain them, such as the Anti Monopoly Law.

However, my guess is that everything circles around the so called "Common Prosperity": a mantra leading the actions of the government in order for the society to be in harmony.

Even if you have never been to China, it's easy to realize that there's a huge development gap between the industrialized and developed coastal areas and the inner rural provinces.

This development gap has forced millions of workers to migrate to big cities to work in factories or in the real estate sector, under pretty hard conditions.

However, according to my personal experience, in recent years the situation has much improved and the conditions in rural areas are way better than before.

Since the outbreak of the pandemic, however, the road to achieve the Common Prosperity met many obstacles.

With President Xi Jinping aiming for an unprecedented third mandate, a gloomy economic outlook and the growing discontent of people and businesses (local and foreign alike), something must be done.

China's Premier Li Keqiang recently stressed the importance of bringing the economy back on track, making many China observers questioning his loyalty to Mr. Xi (let's remember that the two belong to different factions inside the CCP: Mr. Li belongs to the "Tuanpai" which is more leftist and Mr. Xi to the "Princelings").

On Tuesday there has been a meeting between Liu He, China's Vice PM and the most senior economic aide of Xi Jinping, and the heads of some of the biggest chinese digital companies, such as Baidu and Qihoo 360.

During this meeting it looks like that the government is willing to ease the clampdown on the tech giants.

According to Bloomberg:

The Hang Seng Tech Index rallied as much as 6% Tuesday on optimism the meeting would affirm Beijing’s intention to dial back some of its restrictions. Chinese internet stocks?jumped?in US trading after Liu’s comments, taking the Nasdaq Golden Dragon China Index to its highest level in about two weeks.

It's hard to know what this move really means.

Will it be just a temporary policy to bring the economy back on track? Or will it be a permanent situation?

If so, whose ideas are prevailing inside the CCP?

Is there really a power struggle?

I guess that we will have to wait for the next Party Congress to know!

Disclaimer: the source of the above photos is as following

Jack Ma: https://www.bbc.com/news/technology-56448688

Liu He: https://www.bloomberg.com/news/articles/2022-05-17/china-s-liu-signals-further-support-for-tech-sector