Tech crackdown not aimed at stifling private sector, China says

China’s top regulators defended their market-roiling crackdown on various industries in a meeting with Wall Street executives, while reassuring them the stricter rules are not aimed at stifling technology companies or the private sector.

China Securities Regulatory Commission (CSRC) vice-chair Fang Xinghai said recent actions were to strengthen regulations for companies with consumer-facing platforms, and improve data privacy and national security, according to a person familiar with the talks, who asked to not be identified because the meeting was private.

Fang defended the moves such as those aimed at the education and gaming industries as meant to reduce social anxiety.  

Global investors have been unnerved by the regulatory onslaught from Beijing targeting its biggest technology companies and other industries as well as a push by President Xi Jinping to create “common prosperity”. Billions of dollars in potential profits are at stake for Wall Street, which has been expanding in China as the nation opens its financial markets to investment banks, wealth and money managers. 

The three-hour meeting of the China-US financial roundtable on Thursday included the head of the People’s Bank of China, and executives from Goldman Sachs Group, Citadel and other Wall Street powerhouses, according to people familiar with the talks. The meeting marked the resumption of the roundtable that was first convened in September 2018. 

The increased scrutiny of Chinese companies should not be interpreted as a decoupling from the US or international financial markets, Fang told the participants. Beijing remains committed to technology, he said.

The CSRC did not immediately respond to a faxed inquiry seeking comments.

Offshore markets

Beijing’s regulatory campaign erased $1.5-trillion from Chinese stocks amid a broader sell-off at its most extreme. Hong Kong-listed gaming conglomerate Tencent Holdings last week lost its place among the world’s 10 largest companies by market value, leaving no Chinese stock on the list for the first time since 2017. Shares of Alibaba Group Holding, China’s second-most valuable company after Tencent, have dropped more than 30% this year. 

China’s State Council, the country’s cabinet, said in July that rules for overseas listings will be revised and there will be more regulatory oversight of companies trading in offshore markets.

Chinese policymakers are also considering tougher scrutiny over a legally grey corporate structure that is commonly used by Chinese tech companies to seek offshore listings, with some policy adjustment already under way.

All of those have added to investors’ worries of a deeper financial decoupling between the world’s two largest economies. 

At the meeting, BlackRock CEO Larry Fink noted the need for China to ensure consistency of long-term government policy, including transparency to build trust and confidence, according to people familiar with the matter.

A representative for BlackRock declined to comment.

Fink was also among members of the US delegation who raised the need for China to put in place a financial safety net for its ageing population to ensure they are well looked after economically when they are retired, the people said. According to China’s recent population data, the number of residents aged 60 and above has risen 47% over the past decade to 260-million, more than 18% of its total population. By 2050, it is forecast to nearly double to almost 500-million.

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