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Opinion | Game?China’s big crackdown is in really big capital

Where will the axis fall next? Billions of dollars have been lost, many are at stake, and almost all are in Hong Kong or New York offshore listed companies. Can you create a predictable pattern from the whirlwind of this new policy?ask Schrilen.

Does Big Tech in China have a future? This is a question investors are asking after Beijing has launched a series of regulatory crackdowns on domestic consumer tech companies. Where will the axis fall next? Billions of dollars have been lost, many are at stake, and almost all are in Hong Kong or New York offshore listed companies. Can you create a predictable pattern from the whirlwind of this new policy?

Four Pillars of Regulatory Supervision Looks like it exists so you can read about here.. But there were also signs that the crackdown wasn’t surprising at all.

2018, Xi Jinping President expressed discomfort after school tutor industry, commented as follows in a speech. It should not be “profit driven”. Finally the state legislature Formalized his feelings last week. The TAL Education Group and the New Oriental Education & Technology Group have plunged their market value to liquidation levels, especially in this sector.

Or think about what happened now. Video game publishers such as Tencent and NetEase suddenly became bloody on Tuesday after an outlet operated by Xinhua News Agency published an article on how harmful video games are to young people in China.It reflected the latest edict of the state legislature, which clearly stated that schools and parents needed to do so. “Prevent internet addiction“To reduce the burden on students. The government news agency’s” investigative journalism “accused video games of being” mental opium. ” After that, the online link was deleted, but the market was opened. News: Tencent plummeted about 11% before reducing losses. And I learned the lesson. The company soon announced that it would ban in-game purchases for minors under the age of 12 and tighten the play time limit for children.

Government concerns about for-profit education and internet addiction are nothing new. What is surprising is the size, breadth and dedication of the various bureaucracy involved.China It doesn’t seem to care how much money foreign investors have lost, And just getting started Reconciliation sound When the sale spreads to the land market.

That’s a clue as to what China is doing. Beijing has no problem with Big Tech itself. After all, Didi’s ride-hailing app and Meituan’s food delivery network are very convenient for Chinese consumers. Rather, it is the amount of money that has been invested in these companies. The latest crackdowns and warnings target the hot portfolio and venture capital stream that continues to enter the sector Beijing is trying to curb.

Tencent has survived all sorts of storms, from antitrust laws to previous campaigns. Video game addiction,and Employee was suspected of transplanting.. However, liquidity and investment continued to flow, being drawn into its lucrative business. Its core video games and WeChat platform underpin the dollar box, averaging 36% operating profit growth over the last three years.

Investor enthusiasm allowed Tencent to refinance and issue cheap dollar bonds. Therefore, there was more money to invest in the future. Lock your video game supply chain up and down the same as Expansion to venture capital investment.. It was becoming the champion among Chinese tech startups. And Beijing doesn’t like to see any entity, except itself, so powerful.

China may have questioned the ethics of a commercial tutoring company in the past.But that’s what companies do A flood of speculative venture capital

The government has recognized that investors are hijacking the state-dominated education sector with huge capital. And it stopped the liquidity train.

The market-oriented Chicago school, with the help of a nasty bureaucracy, acknowledges that benevolent dictators can be as efficient in social and economic development as an orderly competitive market. increase.

China sees itself as a benevolent authoritarian regime and seeks to maintain an efficient capital market. Now it’s being rethought. In Beijing’s view, hot money is not where the authorities want to go. Indeed, it was in the process of creating competing power centers that could rival the central government.

So what can we read from these tea leaves? Stay away from where hot money goes. Sooner or later, China will curb its enthusiasm and send the sector into a crash landing.

ShuliRen is a Bloomberg columnist. The views expressed are her own.

Opinion | Game?China’s big crackdown is in really big capital

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