Chinese Tech Giants Struggling [Infographic]

Stock market losses of U.S. tech companies have made headlines recently as the likes of Meta, Amazon
or Alphabet wiped out billions in just a few days at the end of October. But the tech rout is not just limited to Nasdaq companies over on Wall Street. Chinese tech giants have found themselves in a similar downwards spin—and the situation has been going on for longer.

As markets are struggling in the face of inflation and the global energy crisis, they are compounding the effects of the Chinese regulatory crackdown on tech. Since 2021, the country’s administration has been introducing regulation to the tech industry which has represented a mix of security and ideological concerns. While Alibaba’s Alipay received scrutiny for giving out large amounts of unsecured loans and was forced to restructure its business, game developers like Tencent and Baidu
have been told to get in line with Chinese state ideology instead of imitating Western as well as Korean or Japanese video game styles, CNBC reports. China’s societal concerns about gaming also become apparent in last year’s law aiming to limit video gaming to three hours a week for those under the age of 18.

As a result of the mounting scrutiny, some of the biggest Chinese tech players have taken serious hits to their market caps since the beginning of last year. Alibaba Group—whose co-founder Jack Ma became the face of the crackdown in 2021 and has been laying low ever since—lost almost 70 percent of the market cap it had in January 2021. Today, the e-commerce and financial services group is still worth $210 billion, the second-biggest among the Chinese tech giants.

Losses also mounted for online search and artificial intelligence company Baidu, which is 60 percent less valuable now then it was close to two years ago. It is one of the smaller players considering market cap in China, which now stands at just below $33 billion. Online shopping platform Pinduoduo and digital behemoth Tencent still more than halved their market caps in the respective time period. At a stock market value of more than $370 billion, Tencent remains the largest player.

Food delivery in the crosshairs

Food delivery platforms have an innocuous-sounding business concept, but they too haven’t been exempt from the Chinese tech crackdown. The biggest of the bunch in China, Meituan, has become too large and powerful in the eyes of Chinese leadership since it was able to continuously rack up its commission fees, taking an increasingly bigger slice of the food service industry’s income. The company lost around 47 percent of its market cap since January of 2021, a big amount but still less than some other players.

The rapid expansion of the internet economy in China led to very powerful players controlling markets almost singlehandedly. While this can be a problem if companies exploit their near-monopolies or become “too big too fail”, Chinese leadership has also used the tech crackdown to promote its ideas of societal good, including encouraging traditional childhood ideals and fostering what it calls common prosperity goals, like fair wages and competitive prices.

Charted by Statista

Source link

We will be happy to hear your thoughts

Leave a reply