HONG KONG – China spent the better part of two years reining in the country’s most powerful private technology companies, including Alibaba Group Holding, Tencent Holdings and Didi Global, along with their ultra-rich founders.

Now President Xi Jinping’s government has sent its clearest signals yet that it is ready to lift the restrictions, with caveats, unshackling a trillion-dollar sector to again help drive the world’s No. 2 economy, just when it is most needed. 

1. What’s the evidence for an easing?

Regulators imposed a US$1 billion (S$1.3 billion) fine on the Mr Jack Ma-backed Ant Group in July, ending an investigation into the financial technology giant that began in 2020.

That probe was seen as the starting point in the government’s campaign to bring the nation’s most influential tech companies and billionaire entrepreneurs to heel.

The regulators also gave their blessing to Ant’s business model – albeit a significantly downsized one – and broadcast the government’s intention to enlist the tech industry in its broader ambition to counter United States’ efforts to hamper its development by blocking access to state-of-the-art US technology.

Days later, the nation’s most important decision-making bodies published a manifesto calling for a revival of the private sector, which immediately drew endorsements from Tencent’s billionaire co-founder Pony Ma and peer Lei Jun.

It remains to be seen whether Beijing follows up with concrete policies, which would be the real catalyst for activity across the tech sphere.

The Chinese regulators met with global investors on Friday to hear out and address their lingering concerns, stepping up the government’s effort to boost market confidence as the country’s economic recovery loses steam. 

There have been other moves: 

• Regulators resumed issuing video game licences to Tencent and NetEase, another online giant, in 2022 after a long freeze. In 2023, they allowed ride-hailing leader Didi to bring in new users for the first time since its apps were banned from app stores in 2021, after it listed in New York without permission from Beijing.
• In March, Alibaba announced a break-up into six separate and mostly independent pieces, including a plan to relinquish control of a US$11 billion cloud business once considered a pillar of its future growth. That split was also regarded as allowing its individual businesses to pursue separate, new initiatives, while fulfilling Beijing’s goal of cutting its most powerful private enterprises down to size.

2. So can China’s Big Tech run wild again?

Probably not. Maintaining social stability and an iron grip on the economy is a signature goal of the ruling Communist Party, and that is unlikely to change soon.

Analysts and investors say regulators have successfully – if brutally – reasserted their oversight power, and diminished the swagger – and societal influence – of tech billionaires.

Much of Beijing’s concern centres around the hundreds of millions of users that remain reliant on Alibaba for shopping, Tencent for social media and lifestyle and Ant for payments and finance.

All that activity produces vast amounts of data that help reinforce the platforms.

Beijing has asserted control over it all and made clear that any new initiatives must align with its priorities.

That means fewer live-streaming apps and more research into cutting-edge technologies, from artificial intelligence (AI) to cloud computing and advanced semiconductors.

It is no coincidence that every major Chinese tech company from Baidu to Tencent have announced efforts to create an AI model to rival (or surpass) OpenAI’s seminal ChatGPT – a business as well as a political imperative given the potentially transformative nature of the technology. 

3. Where are the red lines?

There are quite a few. There is a persistent caution against wild investment and the cut-throat competitive excesses that characterised much of the industry prior to 2021, from ride-hailing to meal delivery and e-commerce.

Regulators have also made pre-emptive moves to put guardrails in place for the latest technologies, ranging from deepfakes to generative AI which, in some cases, are among the world’s first.

The Cyberspace Administration now mandates a data security review for all major companies seeking overseas listings.

More broadly, the Xi administration blames widening social disparities in part on the Internet boom, particularly in the pandemic era, and is moving to address any public discontent that could threaten its authority.

That led to the “common prosperity” programme, which has faded from public view but still guides the activities of many of the sector’s leaders, who pledged to treat their workers better and donate billions of dollars to charity.

As a corollary, any attempts to hoard wealth and sabotage rivals – such as through undercutting prices or coercing merchants into exclusive deals, a key aspect of the 2021 antitrust investigations – remain off-limits. 

4. Will they ever regain pre-crackdown heights?

That seems unlikely. Before 2020, Beijing’s hands-off approach to the technology sector minted billionaires and giant companies at a breathtaking pace.

Alibaba, Tencent and Ant had a combined market capitalisation of nearly US$2 trillion that year – easily surpassing state-owned behemoths like Industrial & Commercial Bank of China as the country’s most valuable companies.

Ant and its part-owner Alibaba is a case in point.

The two companies alone are estimated to have shed more than US$800 billion of value between them since 2020. 

5. Who’s making moves?

During the crackdown, companies including ByteDance’s TikTok, Shein Group and Tencent began expanding abroad in pursuit of less-encumbered growth opportunities, adapting their tried-and-true strategies to global markets.

Some have run into roadblocks, however, in places like the US and India that have stepped up scrutiny of Chinese-owned services on national security grounds.

Alibaba’s historic split is set to energise competition in areas such as the cloud, online commerce and logistics. And tech initial public offerings are back: The government’s July policy document mentioned support for listings, deals and overseas expansion for private companies.

That paves the way for a number of long-awaited market debuts apart from Ant’s, including ByteDance, and a Hong Kong listing for Didi, which was forced off the main New York bourse by Chinese regulators.

To start, though, the listings are more focused on priority sectors that the Xi administration favours.

AI specialist Megvii Technology is among the industry names seeking to tap public capital. 

6. What about the billionaires?

Some, like Mr Pony Ma and Xiaomi Corp’s chairman Lei Jun, have publicly championed Beijing’s new stance.

Mr Jack Ma, who gave up controlling rights of Ant in 2023, is expected to remain out of the spotlight.

His fellow billionaires – many of whom, including ByteDance’s Mr Zhang Yiming and PDD Holdings co-founder Colin Huang, have also stepped back from active roles – are likely to remain circumspect as well, at least in public. BLOOMBERG