China’s Big Tech companies are expected to receive much-needed policy relief to help bolster the country’s economic recovery efforts, according to analysts, after Beijing last week pledged its strongest support for the sector’s growth.
Analysts, however, indicated that more concrete action is needed by China’s Big Tech firms because of mixed signals from Beijing, following a series of crackdowns that have disrupted the industry and wiped out tens of billions of dollars from the value of many companies.
While the positive messages from this year’s Central Economic Work Conference “are as encouraging as those from the CEWC a year ago … markets may not take these statements at face value after the economy was hammered by zero-Covid [policy] and some of the sectors dominated by private ownership, such as off-campus tutoring and real estate, were inhibited by regulations”, according to a report by researchers at Japanese financial services firm Nomura.
Nomura’s view is shared by Beijing-based e-commerce consultancy Dolphin’s founder and chief analyst Li Chengdong, who said “vocal support is just too abstract” because the industry needs to see concrete policies rolled out in support of Big Tech companies’ growth.
“[Growth of platform enterprises] depends on demand, without which expansion and innovation will be difficult,” Li said.
Beijing’s zero-Covid-19 policy has hammered consumption across the country, leaving local governments’ finances stretched thin by the burden of maintaining the hardline coronavirus controls.
In a 22,000-character strategic report, jointly published last week by the central leadership of the Chinese Communist Party and the State Council, the government unveiled a grand plan to expand domestic consumer demand for the next 13 years.
The plan involves pushing forward the development of online entertainment and healthcare, as well as support for autonomous driving and autonomous delivery services. Support will also be provided to live-streaming e-commerce and the sharing economy, encompassing transport, accommodation and travel.
China’s top-tier internet companies are forecast to see strong revenue growth as part of the post-Covid-19 consumption recovery, according to analysts at Kaiyan Securities in Xian, capital of northwest Shaanxi province. These include those firms involved in video gaming, online advertising, e-commerce and on-demand local services.
Food delivery giant Meituan, for example, is expected to benefit from the shift in government policy, according to analysts from Soochow Securities.
Once the internet platform companies create more jobs and drive stable salary growth, the government should give them opportunities to grow in new areas, ING’s Pang said.