Some companies, concerned about unprecedented regulatory pressure on China’s technology sector, are no longer waiting for official reprimands that may or may not follow.
Instead, eager to pre-empt authorities, they have decided to ‘correct’ themselves, put restrictions on or even walk away from their own businesses.
KE Holdings, China’s largest real estate buyer and seller matching platform, is one such example.
This year, it quietly shut down its VIP services that promised fast turnarounds for real estate sellers in exchange for exclusive offers and featured prominently on the popular Lianjia and Beike apps, two people familiar with the matter said.
The decision to pull the plug on VIP services was not prompted by a regulatory request, but KE, which is currently the subject of an antitrust investigation, had wanted to act “proactively” and “voluntarily,” said the people who refused to be identified. to become. as KE has not disclosed its actions.
“It wasn’t a big company, but it had the potential to become one,” said one of the sources.
KE said in a statement to Reuters that all of its business adjustments “were in compliance with government regulations and aimed at providing better services.”
So-called “self-correction” promises to become a major business trend as the government cracks regulatory norms to promote socialist values and curb what critics have called reckless capitalist expansion. The term is increasingly used by state media and is similar in tone to “self-criticism” – a practice encouraged by the Chinese Communist Party.
The new normal
One of the most high-profile examples is Tencent’s decision this month to introduce new limits on how much time kids spend on Honor of Kings, the most popular video game. That came just hours after the stock was battered by a state media article describing online games as “spiritual opium.”
“Everyone is trying to get a clear picture of the new normal and reset as soon as possible,” said Jeffery Towson, Asia Tech Strategy podcast host and former professor of investment at Peking University. “No one is doing ‘moving fast and breaking things’ anymore. No one is using their market power too aggressively. Everyone is better aligning their strategies with the government’s priorities,” he said.
While Chinese regulators have curtailed a range of sectors from real estate to cryptocurrencies to private counseling, the tech sector has taken some of the toughest measures to date.
Ant Group’s mega listing was disrupted at the 11th hour last year, as regulators ordered newly listed ride-hailing giant Didi Global in July to pull its app from app stores in China.
A slew of antitrust investigations have also been launched, fined, for Alibaba Group, while new guidelines and regulations have been introduced or are in the works.
Other “self-correcting” companies include NetEase Music, which last month announced it would not enter into exclusive contracts, a move that came after Tencent was barred from entering into exclusive music copyright agreements by the Chinese market regulator.
Twitter-like Weibo also pulled an online list ranking celebrities by popularity after a state media report criticized celebrity culture.
“The brutal growth, disorder and greed of Chinese tech companies have created a series of problems,” said Xie Pu, founder of Chinese technology website Techie Crab.
© Thomson Reuters 2021