Antitrust crackdown on China’s tech sector could lead to greater competition, S&P says

Name: Why China is tightening control over cybersecurity
Uploaded: 2021-08-03T06:00:05.000Z
Duration: 7 min 30 s
Description: Why China is tightening control over cybersecurity

Inquiries could open the door for greater investment spending, organic growth among Chinese internet companies, credit rating agency says

Beijing is likely seeking to balance security and social stability with growth and innovation

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Tencent was among a dozen Chinese giants summoned by the Ministry of Industry and Information Technology’s cybersecurity bureau last week on how to comply with the country’s new data security law. Photo: AP Photo

Chad Bray

Published: 2:00pm, 3 Aug 2021Updated: 11:30pm, 3 Aug 2021

Competition is likely to intensify among Chinese internet companies, such as Big Tech firms Alibaba Group Holding, JD.com and Tencent Holdings, as Beijing places greater scrutiny on mergers, overseas listings and anticompetitive behaviour in the technology sector, according to S&P Global Ratings.

An ongoing crackdown on the sector, particularly antitrust inquiries, are a “tail risk” for the industry in China, but could open the door for additional investment spending as companies seek to grow organically, the credit rating agency said.

Practices that are perceived to give companies unfair advantages or the ability to grow through acquisitions could be limited by regulators as they try to level the playing field in the industry, S&P said.

“For Chinese internet companies, the government is likely seeking to balance security and social stability considerations with growth and innovation,” it said in a presentation.

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Why China is tightening control over cybersecurity

Beijing has increased its scrutiny and undertaken a broad crackdown on the industry since it abruptly shelved the planned dual listings of Ant Group, the operator of the ubiquitous Alipay app, in November. That has included a record US$2.8 billion fine against Alibaba, the owner of the Post, in April for anticompetitive behaviour.