China tech moguls see $108 billion of wealth evaporate in 2021

The country's 10 richest tech tycoons lost US$80 billion (S$108 billion) in combined net worth in 2021. PHOTO: REUTERS

HONG KONG (BLOOMBERG) - It's been a record year for China's Internet moguls, but not in the way most would have hoped.

The country's 10 richest tech tycoons lost US$80 billion (S$108 billion) in combined net worth this year, according to the Bloomberg Billionaires Index, amid widescale crackdowns by Chinese regulators. The drop represents almost a quarter of their total wealth and is the largest one-year decline since 2012, when the index started tracking the world's richest people.

Pinduoduo founder Colin Huang lost the most this year - US$42.9 billion, or two-thirds of his fortune - as shares of the e-commerce platform plunged nearly 70 per cent. Alibaba Group Holding's Jack Ma, who has been keeping a low-profile since the authorities clamped down on his sprawling business empire, has seen his wealth cut by about US$13 billion.

Few people better embody this year's wealth roller coaster than Didi Global founder Cheng Wei.

In the weeks before Didi's US listing in June, investors snapped up stakes in secondary market trades, pushing the ride-hailing giant's valuation to US$95 billion and sending the value of founder Mr Cheng's stake to US$6.7 billion.

The euphoria was short-lived. Didi's shares have plummeted more than 60 per cent since Chinese officials announced an investigation and asked it to delist from the New York Stock Exchange, leaving Mr Cheng's fortune at US$1.7 billion.

Increased antitrust scrutiny from Chinese regulators has become increasingly common since the surprising halt of Ant Group's initial public offering last year. Tech companies including Alibaba, Tencent Holdings, Meituan and Pinduoduo have seen their once lofty valuations trimmed after being fined for reasons ranging from monopolistic practices to disrupting market orders to under-reporting deals.

'Best days'

China is also paying more attention to the so-called variable interest entity structure - a loophole long used by the country's technology industry to get past some government restrictions and raise capital from foreign investors. Uncertainty prevails even after China unveiled sweeping regulations governing overseas share sales by the country's firms, threatening to amp up scrutiny over initial public offerings (IPOs) abroad that had proceeded virtually unchecked for two decades.

At the same time, the United States Securities and Exchange Commission this month announced its final plan for a new law that mandates Chinese companies open their books to US scrutiny or risk being kicked off the New York Stock Exchange and Nasdaq within three years. That could mean hundreds of Chinese companies delisting from the US markets and relisting in Hong Kong or mainland China.

"The best days for China's tech sector are behind us for now," said Professor Chen Zhiwu, director of the Asia Global Institute at the University of Hong Kong. "Without access to American capital markets, the history of China's tech sector would have been very different."

ByteDance founder Zhang Yiming is a rare Chinese Internet tycoon to see his fortune grow this year, gaining US$19.5 billion based on a valuation in a SoftBank Group filing this year. That is partly due to his keeping the parent of TikTok a closely held company, insulated from the swings of market turbulence. But Mr Zhang has also strived to keep a low profile during the regulatory crackdowns. In May, he announced he was stepping down as chief executive and then quit the board last month.

Many tech executives have made similar moves. The co-founder of livestreaming app Kuaishou Technology Su Hua ceded the CEO role in November only nine months after the company's IPO in Hong Kong. In September, named a new president, saying that chairman Richard Liu will focus on long-term strategies.

Charitable Donations

Even with the loss in personal wealth, some Chinese tech billionaires have upped their philanthropy in response to Chinese President Xi Jinping's admonitions for "common prosperity" to address social inequality. Xiaomi's Lei Jun donated stakes worth US$2.2 billion and Meituan's Wang Xing donated US$2.3 billion to charity, which has partly contributed to their dented fortunes.

Through the end of August, Chinese billionaires had donated at least US$5 billion to charity this year, 20 per cent more than total national giving the previous year, according to data compiled by Bloomberg News.

With iconic tech billionaires like Mr Ma receding from public prominence, the industry needs to reshape its core strategy for new growth in the future, Prof Chen said.

"I think good days will return at some point after some soul searching and reassessment of what drove the golden days of the past two decades," Prof Chen said.

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