CHINA- THERE IS A METHOD IN THE MADNESS

China’s stock markets have tumbled over recently and many Tech driven companies have lost almost 90% of their recent peak prices and continue to erode further.

American investors are asking whether China Inc. is still worth the risk following a widening series of regulatory crackdowns that have wiped some $400 billion off the value of U.S.-listed Chinese companies.

Investors ranging from pension funds to money managers are rethinking their portfolios following China’s decision last week to abruptly disrupt the plans of EDUTECH, FINTECH, TECH AGGREGATORS, ONLINE SHOPS and every other business that is involved in mass user data collections & have plans to list overseas.

Most of their US listed companies have lost between 70 to 90% of their traded price in matter of just seven day and are still to see the bottom.

Earlier regulatory moves had rattled companies like, Alibaba Group Holding Ltd. , its unlisted sister company Ant Group Co.

Didi Global Inc., a ride hailing company, that got listed on 30 June this year is already considering going private again to placate authorities. On June 30, the company raised $4.4 billion in an IPO on the New York Stock Exchange—the largest for a Chinese company since Alibaba in 2014. Two days later, Chinese authorities launched an investigation into the company. Citing -serious violations of laws and regulations in collecting and using personal information, Didi was pulled out from Chinese app stores and barred from registering new users. It crashed almost to nothing.

Other Chinese giants have also been put under scanner by China, like TikTok, We-Chat apps are told to align with all relevant laws and regulations.

In the meantime, China’s Ministry Of Industry and Information Technology announced a six-month campaign to regulate internet companies, particularly practices that disrupt market order, damage consumer rights, or threatens data security.

That followed repeated fines against tech giants including Alibaba, Baidu, and Tencent for violating antitrust laws, and a new plan to restrict overseas listings by Chinese companies.

Clearly, China wants to control the tech companies that have become too big, too powerful, and able to influence consumer market behaviours & Chinese way of life to improve governance, restrain private monopolies & its citizen data control.

Personally, I always doubted the booming Capitalistic streaks of China that was creating almost a billionaire a week and I feel, at least a very little, that I am right again.

In China one merely creates & holds Equity for the Party as a custodian and nothing more. The four pillars to China’s wealth creation is now redefined as Labour, Material, Capital & Technology has one more pillar now is- Data.

Online businesses have grown exponentially over the past two decades, along with their access to a wide range of user data to businesses.

Tencent’s ecosystem alone spans social media, gaming, maps, mobile payments, and investing—with many companies and even some government agencies hosting services within the WeChat app.

The Chinese government sees data as critical to its efforts to become a leader in emerging technologies, especially in AI, which is stated in its most recent Five-Year Plan. The government plans to apply that data to everything from block-chain-based financial services to medical research to the surveillance state.

It also is unwilling to share its data to USA regulators & Auditors through the audit route for the listed companies and is apprehensive that it is giving up too much of information about China through this listing, including a very detailed mapping of Chinese city roads, suburbs and infrastructures.

It would compel now many technology start-ups to go Private from Public, a measure meant to ease the pressure on poorer students and their parents who are compelled to use them with predatory pricing.

China, through a policy initiative, has ensured no foreign collaboration in all App based technology, no child education apps for children below six years & definitely no classes after 9 PM & certainly is a welcome step for world to follow that had burdened students worldwide with tremendous pressure, especially in developing economies.

New guidelines also intend to improve pay and other protections for delivery drivers in all App technology businesses.

Chinese companies, in last about 20 years, on listing on US exchanges learnt from exposure to international reporting standards and US investors have and had a substantial stakes in China’s rise as a global behemoth.

Chinese government now sees listing mostly as risks and vulnerabilities to foreign engagement, a concession and a bet that Xi is unwilling to take.

When China joined the World Trade Organization in 2001, the prevailing view was that China would become more like Western, capitalist countries. To a certain extent, that happened, but the past few years dispelled such notion that China would transform itself to fit the Western world model. On the contrary, nearly the opposite happened.

Chinese leadership is still seeped in socialist contemplation and is not willing to put the needs of the state over the dictates of a free market, Comarade Mao can silently overlook on the Party and State from the large frame above.

In fact, Xi spoke of aligning the tech sector with his goals for national development in 2016 and again in 2018, when he laid out his / Party’s vision to make China as a cyber superpower through indigenous innovation.

 Xi Jinping simply told to the Tech Companies "owners" that who is the Boss.

Chinese bureaucracy is now aligned with Xi’s broader vision to bring private high tech Chinese companies to heel to serve the party's broader mission.

When Jack Ma opened his mouth, ever so little, in a criticising tone- regulators opened an antitrust investigation into Alibaba, resulting in a $2.8 billion fine in April!!!

The Chinese crackdown on its home-grown technology comes amid rising tensions between China and the US, including moves by American officials to push these companies back to China. A US law enacted last year requires foreign companies to delist from American exchanges if they don’t allow their audits to be reviewed by American regulators—which are prohibited under Chinese law.

China simply pre-empted that move by USA at discussion levels, while the financial world watched in horror a seemingly self destructive move. 

China was always monitoring its people through a social framework and state control, now has more decisive means of surveillance and of data crunching to exercise its control of the masses as it wants.

It is clear that a war between the Walls- Wall Street & Great Wall of China has left little room for climbing up or down the Walls in near future.

It has also clearly signalled to the protagonist of Toxic Capitalism that society needs more equality to progress, in education, wealth distribution, quality of life even if it seems abrupt and dictatorial.

Welfarism as a tool to balance a society can never be a sacrificial lamb at the altar of Capitalism. Now, I hope readers can see where I started- There is a method in China's 'madness'.