Are Chinese technology firms seeing the light at the end of the tunnel? The answer is a probable yes, based in part on the stock performance of the country’s tech giants so far in 2023. Having endured several years of regulatory oversight, including the restructuring of business processes and pressure to be transparent about how they use customer data, Chinese tech firms are seeing a change of approach from policymakers.
Earlier this month, Guo Shuqing, the party secretary of the People’s Bank of China, said the tech crackdown had drawn to an end and support would be given to help platform companies play a bigger role in job creation. Chinese Premier Li Keqiang, moreover, stated that the central government would provide further support for private enterprises and platform economies by helping them with issues relating to labour and credit funding.
This shift in policy has already had a dramatic impact on the share prices of Chinese-listed tech giants. Alibaba, which has gone through an extensive restructuring exercise since 2020, saw its shares rise by 90% from the market bottom in October 2022. Rival Tencent’s shares rose by 108% during the period.
“These positive developments affirmed our view that domestic tech regulation has pivoted from rectification to normalization, in order to aid China's macro recovery and job creation,” CreditSights says in a commentary. “While compliance costs are likely to remain material for China tech companies with the enactment of various tech regulations in the past two years, we do not expect the sector to see another round of stringent policy controls.”
The firm goes on to explain that the recent shift from the zero-Covid approach will result in stronger retail spending benefiting online sales, including commercial payment and service segments which underpin the industry. In addition, pent-up demand for tourism will support companies such as Meituan, which cater to consumers’ hotel and travel needs.
In contrast, US-headquartered technology firms including Microsoft, Amazon, Meta and Alphabet have recently embarked on their own restructuring plans, introducing job cuts in response to a predicted global economic recession and a slowdown from the technology boom caused by the demand for digital services at the beginning of the pandemic.
Alphabet, the parent company of Google, has shed 6% of its workforce, or 12,000 jobs. Before that, the technology giant had been growing its headcount by 20% per year.
While Chinese technology companies are looking to accelerate growth after years of policy pressure and negative sentiment, their US counterparts are bracing themselves for more uncertainties in 2023.