No, China is not cracking down big tech

Yesterday (10 Nov 2020), China’s State Administration for Market Regulation (SAMR) issued a set of draft regulations entitled “Anti-monopoly guidelines on platform economy (request for comments)“.

That seems to be aimed at the big tech companies, including Alibaba, Tencent and Meituan, in a way similar to what US congress is trying to do with the big tech in their country.

This is how some media have been interpreting it. Analysts are quick to put together some analyses on which companies will be impacted, and how. Some are saying that this is contributing to the market slump of major Chinese tech stocks yesterday (and today).

I am not sure how many of these analysts or journalists have dealt with Chinese regulators themselves, but in Chinese content, it is always more important to interpret the intentions of the regulators, rather than the text, not only because Chinese text can often be more ambiguous (by nature of the language).

Here is how we see it:

1. From draft (request for comment) to implementation to enforcement, there is a huge gap in terms of time and content (of the regulation) – anything can happen inbetween;
2. In China when you do not deliberately challenge the regulations, you will be fine (Although some companies seem not to understand this – that’s their own stupidity);
3. Jack Ma’s incident with Ant’s scrapped IPO was self-inflicted, and has nothing to do with regulators being anti-market economy;
4. The government has no incentive to undermine their global tech champions – as it is always easier to regulate them rather than regulate an informal market;
5. For most tech platforms, it will have no impact whatsoever – Alibaba tried to force sellers and brands to have exclusivity, that did not prevent the rise of Pinduoduo;
6. Many of the monopolistic actions in China are simply not enforceable, as most platforms have smaller power over its participants than one might think

So let’s move on and focus on the business fundamentals.