Business News

China Requires Entertainment and Technology Companies to Adhere to Their Lane

On Wednesday, Chinese regulators issued a flurry of measures stifling the growth of the country’s entertainment and digital behemoths, including Alibaba, Tencent, and Bytedance, the parent company of TikTok.

The directions were issued the same week that the United States escalated its pressure on some of the same Chinese companies, citing security concerns, and a Canadian researcher discovered a number of security weaknesses in the app used by competitors at Beijing’s Winter Olympics.

China’s National Development and Reform Commission (NDRC), the State Administration for Market Regulation, and the Cyberspace Administration of China published joint remarks on how to manage and tame the growth of the “online platform industry.”

The stringent control of digital companies’ operations and investments in the financial industry is one of the most notable of the new policy directives.

One of the NDRC’s judgments stated, “Platform operators shall not utilise data, technology, market, or capital advantages to limit the independent functioning of other platforms and applications.”

This appears to be particularly difficult for Alibaba and Tencent, which have both developed massive online transfer, deposit, and insurance services. These divisions have aided in the transformation of e-commerce in the country as well as the availability of other online services like music and video subscriptions. The companies have been accused of overreach after the government intervened to cancel Alibaba’s Ant Group’s IPO in November 2020.

Not only has the government retaliated by putting Alibaba and Tencent out of business. The Bank of China, the country’s central bank, has established its own electronic currency, the ‘Digital Yuan,’ and was one of the nine organisations that signed the orders on Wednesday.

The restriction on what Beijing refers to as “irrational financial development” affects other entertainment enterprises as well. Bytedance, which controls TikTok and its Chinese version Douyin and is estimated to be the world’s largest unlisted startup firm, is said to have liquidated its strategic investment section and redeployed employees. With Douyin, Bytedance had hoped to enter the e-commerce market.

On Wednesday, the CAC denied issuing a document requiring platform companies to seek permission before making new investments or collecting funds. This could indicate that the recommendations are still in the works. However, it is undeniable that Chinese regulators have exerted significant pressure on platform businesses’ mergers and acquisitions activities during the past 18 months.

Aside from the Ant Group debacle, regulators rejected a Tencent-backed merger of two live-streaming companies, DouYu and Huya, last year. China Literature and other entertainment companies have been punished for not properly telling the SAMR about previous arrangements.

Divestments have been the talk of the town in recent weeks, though it’s unclear at what level of government they were ordered.

While speculations have been circulating for over a year that Alibaba may be forced to divide up its vast media empire, there has been no evidence of this until recently. The company then sold a minority position in Mango TV, a state-owned streaming platform, at a loss less than a year after purchasing it.

Tencent announced in late December that it would reduce its holdings in JD.com, a publicly traded e-commerce company in the United States, from 17 percent to 2.3 percent. Tencent will not benefit from the $16 billion in shares that will be given to its stockholders.

Tencent stated earlier this month that it would reduce its holdings in SEA, a Southeast Asian gaming and e-commerce company, from 21.3 percent to 18.7 percent, raising $3 billion in the process. Spokespeople have gone to great lengths to clarify that this is merely a matter of slashing a significant investment and taking a profit. Tencent’s shares in Meituan (retail and commerce), Pinduodo (shopping), and Kuaishou (short video) may also be sold in 2022, according to the financial industry.

Over the last 18 months, Chinese regulators have made it obvious that platform businesses are no longer allowed in industries including consumer finance and education. According to some analysts, Beijing wants them to be stripped down so that they can function as impartial business facilitators. If that is an exaggeration, regulators believe there is still a lot of housekeeping to be done in the firms’ main sectors.

This includes stepping up efforts to prevent children from becoming addicted to video games – regulators have been halting new game approvals since August of last year – as well as limiting aggressive cross-selling within the platforms’ entertainment-lifestyle-commercial ecosystems and reining in celebrities who are deemed to be poor role models. They’ve also been informed they need to do a lot more with regards to data security.

China passed the Personal Information Protection Law in November, which could be the world’s most comprehensive data privacy legislation. This came after the Data Security Act of September 2021 and the Cybersecurity Act of June 2017. According to lawyers, the PIPL imposes new burdens on businesses – LinkedIn and Editorials99 found them too onerous and chose to leave China instead – while also granting the Chinese government access to all data in the nation.

China’s data practises have also alarmed the United States. The Biden administration is reportedly looking into Alibaba’s cloud computing business, according to reports released on Wednesday. Although the company is small in comparison to the market leaders in the United States, American regulators are interested in learning more about how it stores data, personal information, and intellectual property belonging to American clients, as well as whether the Chinese government has access to it.

Tencent and TikTok were added to the list of corporations in the forthcoming anti-trust bill in the United States, Politico reported the same day.

The My2022 app, which is required for all participants at the forthcoming Beijing Winter Olympics, contains multiple security weaknesses, according to Citizen Lab, a Canadian human rights-focused cybersecurity and censorship research organisation. As a result, attacks, surveillance, and spying on personal data transfers are possible.

About the author

mm

Kathy Lewis

Kathy Lewis is an all-around geek who loves learning new stuff every day. With a background in computer science and a passion for writing, she loves writing for almost all the sections of Editorials99.

Add Comment

Click here to post a comment