Strict industrial regulations pave the way for China’s long-term development

In recent months China’s rollout of a series of strict regulations on tech companies, especially online education platforms, has aroused market concern at home and abroad. Naspers, Tencent’s largest shareholder, lost tens of billions of its value as a result.

The truth is, the world has never been so connected. A butterfly beats its wings in China and somewhere else in the world may experience a hurricane. On the other hand, some Western media negatively interpreted the latest regulations as a crackdown on tech companies by the Chinese government, triggering panic selling by global investors to avoid uncertainties.

The motivation for strengthening industrial regulations can be elaborated on in three dimensions. The first is to improve the legal system for market supervision. During my stay in SA I have been impressed by its advanced legal system, which offers approaches for solving various disputes.

In 1998, led by the ANC, the National Assembly passed the Competition Act, which aims to break industrial monopolies and specify industrial behaviours. This act has provided valuable reference for China to formulate its own antitrust laws and regulations.

The legislative practices of industrial regulation in developed countries were even earlier and more common. The well-known Sherman Antitrust Act was enacted in the US as early as 1890. In the case of China, legislation on industrial regulation commenced late but made rapid progress.

The first antitrust law of China was passed in 2007. However, the Chinese government has optimised legislative procedures and accelerated processes since then to comprehensively advance law-based governance and build a modern legal system for market regulation that is adapted to the new development pattern.

In 2021 alone, China’s State Administration for Market Regulation is drafting six laws and regulations and formulating or revising 61 departmental regulations, including those against monopoly and unfair competition and to hold every company accountable. No industry is a “land beyond law”.

The second dimension is to promote social fairness and justice. The Chinese government has always put the people first, promoted social fairness and justice, and enhanced people’s sense of happiness, fulfilment and security. The regulation of online education platforms is a perfect example. With the outbreak of the Covid-19 pandemic, the online education market ballooned overnight and became an attractive destination for hot money.

Scrambling for customers, some greedy online education platforms resorted to illegal acts, such as fearmongering, false advertising and misleading pricing. This phenomenon has seriously alienated the nature of education as public welfare, damaged its normal ecology, and violated the basic principle that “education offers the greatest fairness”.

Strict regulations were introduced to correct the problems causing people pain, to safeguard the legitimate rights and interests of parents and children, who widely welcomed them. Inspired by the regulations, an increasing number of Chinese enterprises have realised the importance of promoting social fairness and justice. In four months, Tencent has twice announced a total investment of over $15bn in the “specialised plan for common prosperity” to raise the income of the poor, improve the primary medical-care system, and promote the balanced development of education and other aspects of people’s livelihoods.

The third dimension is to enhance the overall competitiveness of Chinese enterprises. Enterprises are the main participants in economic activities, shouldering the natural responsibilities of compliance management, job creation, economic impetus, technology innovation and social contribution. As China continues to open up, strict industrial regulation has promoted a better environment for fair competition to many thriving Chinese companies, such as Alibaba, Huawei and Tencent, and strengthened their capability of withstanding risks and challenges in overseas markets.

Regulations won’t defeat good companies. Consistent pressure from antitrust regulations never slowed tech titans such as Apple, Microsoft and Google. Apple and Microsoft’s market values exceeded $2-trillion in the past year, and as far as Chinese tech companies affected by the latest regulations are concerned, their share prices have already rebounded. To date Tencent’s share price has risen 12.3% from the lowest point of HK$412.20 to HK$463, which is encouraging for Naspers investors.

In the first half of this year China’s economy performed brilliantly against a backdrop of severe and complicated international situations. China’s semi-annual GDP exceeded 53-trillion RMB, up 12.7% year-on-year, and its semi-annual volume of imports and exports reached a record high of 18.07-trillion RMB. As of July 31, there were 4,416 listed companies in the A-share market, with 293 newly listed ones, up 74.4% year-on-year.

Meanwhile, China has been SA's largest trading partner for 12 consecutive years. From January to May, the bilateral trade volume between China and SA reached $20.52bn, up 65.6% year-on-year, showing strong recovery momentum and growth potential.

It can be said that the fundamentals of China's continued improvement in its economy have not changed. The pace of China's reform and opening up remains firm, the foundation for the development of China's capital market remains solid, and the Western media’s assumption of a crackdown on Chinese tech companies has been proved untrue.

Before starting my diplomatic career I was an entrepreneur. Entrepreneurs are optimists by nature, and I can’t agree more with Madiba’s wisdom: “Part of being optimistic is keeping one’s head pointed towards the sun, one’s feet moving forward”. It will be regrettable to miss China’s high-quality development opportunities merely because of misreading the latest regulations.

As I am strongly convinced, under the leadership of Xi Jinping as the core of the Chinese Communist Party central committee, China will overcome all difficulties and obstacles, act on the new development philosophy and accelerate the establishment of the new development paradigm to drive innovative, co-ordinated, green, open and shared development, forge towards the centenary goal of building a strong modernised socialist country in all respects, and realise the dream of the great rejuvenation of the Chinese nation.

• The author is Chinese consul general based in Johannesburg.