China has shown signs of easing repression in the tech sector, which has eliminated billions of dollars worth of its most prominent companies.
However, analysts say Beijing’s recent positive rhetoric should not be misunderstood as a reversal of policy.
“I think the big tech companies will have a grace period for maybe the next six months,” Linghao Bao, a technology analyst at Trivium China, told CNBC’s Squawk Box Europe on Tuesday.
“However, this is not really a turnaround in technology repression, the long-term prospects have not changed yet. “Wealth will be concentrated at the top and will begin to influence politics,” he said.
“So technology repression is really here to stay in the long run.”
Since the end of 2020, Beijing has introduced stricter regulations in its domestic technology sector in an effort to curb the power of some of its largest companies.
Since the end of 2020, China has increased control over the technology sector and introduced a series of new regulations that sought to curb the power of its domestic giants. Analysts say that while there appear to be signs of easing this repression, there will be no complete reversal of the policy.
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The rules in areas from antitrust law to data protection have come into force rapidly in the last 16 months. The moves have captured international investors and sparked a dramatic sell-off in shares of domestic titans from Tencent to Alibaba.
However, Beijing has signaled that control over technology could loosen as its economy faces pressure from Covid revival and subsequent lockdowns.
On Tuesday, Chinese officials met with some of the country’s top tech executives in further signs of relaxation.
Following the meeting, Chinese Vice President Liu He pledged to support the technology sector and plans for public Internet companies.
It comes after Chinese President Xi Jinping chaired a meeting of the Politburo, a top decision-making body, in April. The Politburo pledged to support the “healthy” growth of the platform’s so-called economy, which includes Internet companies in areas ranging from social media to e-commerce.
Despite these more relaxing tones from Beijing, experts doubt there will be a huge change in policy.
“I do not think the regulatory action will really stop. Several ministries are still mandated to enforce all the regulations that have been amended and strengthened,” said Charles Mock, a visiting scholar at Stanford University’s Global Digital Policy Incubator.
“Even if there are some upheavals, it may be too late to reverse the damage. For example, even if they allow more imports abroad, investor confidence has already been lost and control and hostility from the foreign market is also not can be reversed. “
Mok said that because regulatory control is led from the top of China’s political hierarchy, it will be difficult to make a turnaround.
“This seems very similar to the disasters they face with Covid Zero. You know it’s wrong, but you can not admit it, you can not reverse your course and you can only pay a little and hope for the best.” said Mock.
Zero Covid is China’s policy to eradicate the coronavirus from the mainland through harsh measures such as city-wide lockdowns and mass trials. The financial and financial city of Shanghai has been in a lockdown since late March. China’s Covid zero policy has burdened its economy.
Mok added that the motives behind China’s regulatory tightening have not changed either.
“Much of the ‘repression’ campaign has really had its roots in increasing state control of the digital economy and all data in trade, and in the current crisis there is no way the party would believe that these controls are now less important, “he said.