The Chinese government has come down hard on the tech sector resulting in a massive drop in China’s tech stocks. It started with new regulations to address anti-competitive practices by some of the world’s biggest tech firms. Last Friday the country introduced new rules regarding the use of personal data and privacy. The government says that the mishandling of personal data can be a threat to national security and hence these new rules are necessary. A year ago China’s tech sector operated with little to no regulation, in a spectacular reversal as these new rules come into effect, China will now have one of the strictest tech regulatory frameworks of any major economy in the world.
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The result of this crackdown has been felt around the world as stocks for the affected companies have been plummeting. Listed below are the three companies that have arguably suffered the most from heightened regulations:
Alibaba Shares Drop 31% on the NYSE
9 months ago, Alibaba’s co-founder Jack Ma got on the wrong side of Chinese regulators when a made an open speech criticizing the countries financial regulators and banking system. Since then he has disappeared from public life. There have been few sightings of Jack Ma over the past few months along with some bizarre reports that at least confirm that the man is still alive. The new regulations hit Ma’s Ant Group hard. The Ant Group, an affiliate of Alibaba canceled its public offering. Shares for Alibaba have been dropping steadily since new regulations were put into place. Currently, Alibaba’s shares are 31% lower on the New York Stock Exchange as compared to the previous year. It’s a similar story on Hong Kong’s stock exchange where the shares have dropped 32%. This drop has essentially wiped out $180 billion in Alibaba’s market value.
JD.com drops 29% in 2021
JD.com aka Jingdong is one of China’s largest online retailers and one of the biggest tech companies in the world. As investor concern over China’s crackdown has grown, the company’s share price has been dropping. Currently, the shares for JD.com have dropped by 29% in 2021 alone. This downward trend is expected to continue.
Tencent Loses $170 Billion in Market Value
Perhaps the biggest loser due to China’s crackdown is internet giant Tencent. Once a stock market darling, Tencent lost a staggering $170 billion in market value as of July 2021. For those unfamiliar, Tencent is the world’s largest video game publisher. It has stakes in both Fortnite and PubG, two of the world's biggest battle royal style games. The company also has a 10% stake in Universal Music, the home for major global artists like Taylor Swift and Lady Gaga.
Recently China has been putting in more effort to alleviate public fears about its crackdown. However, most tech companies believe that more regulations will be on their way. Only time will tell what the final impact on some of the world's largest tech companies will be. The Chinese government may also end up setting a precedent for how other governments can address their own woes with tech giants.
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