Chinese Tech Shares Fall As Beijing Begins Industry Clampdown

Chinese tech giants including Alibaba and Tencent tumbled for a second day Wednesday after Beijing’s market regulator put out draft antitrust rules that signaled a looming crackdown on high-flying internet giants.

Rules published on Tuesday outlined plans to prevent “monopolistic behavior” among internet companies, a shift from a previously more hands-off approach to antitrust issues.

The timing of the announcement also raised eyebrows, coming on the eve of China’s mammoth Singles’ Day, the world’s biggest shopping festival, which is propelled by Alibaba.

Shares in the e-commerce titan dropped 9.8 percent in Hong Kong — just a week after regulators halted an enormous IPO for the group’s financial arm — while tech rival Tencent slipped more than seven percent.

Meanwhile, online shopping platform JD.com plunged more than nine percent, smartphone maker Xiaomi dived more than eight percent and food delivery firm Meituan was 9.7 percent lower.

The losses followed massive drops for the firms on Tuesday.

Dave Wang, portfolio manager at Nuvest Capital told AFP the authorities’ move marks an “inflection point” for the sector.

“The dominance of the big players may have reached a point that is making authorities feel uncomfortable,” he said.

“They are looking to reduce this dominance or at least keep it in check.”

The guidelines, put out by the State Administration for Market Regulation, take specific aim at internet platforms and issues such as exclusivity clauses that hinder competition.

China’s antitrust watchdog is also targeting acts constituting an “abuse of dominant market positions” that could squeeze out smaller rivals — including unfair pricing, restricting transactions without justifiable reason, or pushing different prices and conditions on customers based on their buying habits.

The move to force business partners to “pick one of two”, therefore selling exclusively on one platform, is explicitly cited as a monopolistic practice as well.

China’s tech firms are known to have captive ecosystems. Alibaba’s Taobao platform, for example, supports payments via its own Alipay rather than Tencent’s WeChat Pay.

Beijing has moved to clip the wings of its fast-growing online platforms, most recently halting a planned record-smashing $34 billion IPO of Ant Group — Alibaba’s financial arm.

But Supun Walpola, equity analyst at LightStream Research, noted that even if the new rules affect companies’ current operations, it does not “drastically” hit their core business models.

“For instance, given its scale and penetration, I see no reason why Alibaba cannot be successful even without practices like data collaboration, price discrimination or exclusivity clauses,” he said

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