News from the Big MarketBeijing is steadily carrying out the...

News from the Big Market

Beijing is steadily carrying out the plans it initiated in previous years. Last year we saw Beijing draft a slew of rules that could step up its oversight on cybersecurity, privacy data and more. These rules are being formally passed now and going into effect.

• The powerful Cyberspace Administration passed two regulations, one on cybersecurity reviews and another on algorithmic recommendations, which will go into effect in February and March.
• The first regulation makes sure no Chinese tech company can list overseas without first securing approval from the state, and the second one opens a new era on how algorithms can or should be governed. Watch out, ByteDance, as the long-rumored-to-go-public company may get hit on both fronts.
• The Chinese government also unveiled the expected phase-out plan for the final year of electric vehicles subsidies and passed two regulatory lists that specify the social credit system’s scope and punitive measures.

That’s how we expect things to go in the new year: Beijing will announce more granular restrictions in the same vein as previous ones: antitrust, privacy protection, cross-border data control.

• Yes, the big, abrupt changes in policy made good headlines in 2021, but they don’t mean anything until details come out on how they can be materialized in everyday regulation.
• “I anticipate regulators will contend with more technical issues, such as progressing algorithmic regulation [and] ironing out interoperability standards,” said Michael Norris, head of China Consumer & Tech Research at AgencyChina.
• We already saw this happen at the end of 2021: the November rule drafted by CAC was all about naming existing problems, mending loopholes and coordinating new regs with the old ones.

Consumer internet companies will feel the burn, while hard-tech companies can stay in regulators’ good graces. The phenomenal commercial success of companies such as Alibaba, Tencent, ByteDance and DiDi has impressed the world but also alarmed Beijing. The government will continue to shift its subsidies and favorable policies towards industries like semiconductors and smart manufacturing.

• Analyst Dan Wang wrote in his yearly review letter that Beijing much prefers the German success of cultivating high-level manufacturing talents to the U.S. model of Silicon Valley and Wall Street dominance. “Beijing … is trying to make semiconductors sexy again,” Wang said.
• Partly due to the fading favors, consumer internet companies are not doing well right now, as several of them are reportedly going through big layoffs because of slow growth and uncertain futures.
• It would be interesting to see whether these consumer internet companies will become less appealing in the job market following a winter defined by layoffs. But so far, they still command all the attention from young college graduates.