Investors celebrated over the hope of a positive regulatory environment for private tech companies in China going ahead.
On Wednesday, January 4, stocks of the US-listed Chinese tech companies soared after Chinese officials approved the expanded capital plan for Ant Group. After a major crackdown by Chinese officials on the local tech industry over the last two years, this move confirms some relaxation in the policy.
Chinese Tech Stocks
Investors on Wall Street cheered citing the possibility of a relaxed regulatory environment in China. Citing regulatory concerns, the Ant Group has pulled back its plans for an IPO. But as part of its new plans, the Chinese officials have allowed the Ant Group to double its capital.
Shares of US-listed Chinese companies such as Alibaba, JD.com, Baidu, NetEase, and Trip.com jumped anywhere between 8-15%. Investors see this development as a big positive for the broader Chinese tech industry. Note that all these Chinese stocks listed on the U.S. exchanges are ADR stocks. These are similar to the common stock but represent an indirect form of ownership in the company.
The ARD stock also allows Chinese companies to trade their stock in the US without having to follow accounting regulations.
A softer regulatory stance for tech stocks along with the reversal of zero-Covid policies is seen as a major development by investors. They believe that the Chinese government will be supportive of the growth of the private sector this year. In a note to clients on Wednesday, Fawne Jiang of Benchmark wrote:
“China has struck a notably accommodating tone in recent months, pivoting away from its stringent COVID controls and dialing back its regulations on previously highly depressed sectors (i.e., property). The recent Central Economic Work Conference (CEWC) has set government’s priority for 2023 to revive consumption and support the private sector”.
Lay Offs Rock Chinese Companies
Over the last year, some of the Big Tech companies in the United States have announced major layoffs and the contagion now seems to spread in the Chinese tech sector as well. As per reports, TikTok parent ByteDance is likely to cut off several hundred jobs as part of the company’s plans to streamline its operations.
Sources familiar with the matter said that ByteDance’s enterprise collaboration tool Feishu, has been the hardest hit department.
On the other hand, e-commerce giant Amazon announced on Wednesday that it will be cutting a staggering 18,000 jobs as part of its plans to cut costs. This is nearly 7% of Amazon’s global workforce.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
