China pauses regulations on Big Tech to kick-start economy

The news: China’s top internet regulator has plans to meet this week with China’s tech giants—most of whom have been dealing with monthslong regulations—as a means to circumvent the rapidly deteriorating economy.

What this means: A sudden pause on Big Tech regulation in China could buoy the economy in the wake of pandemic-related factory closures, per The Wall Street Journal.

How we got here:

  • Manufacturing in China sank to a five-month low in March as the worst coronavirus outbreak since 2020 gripped the country.
  • China’s key manufacturing hubs in Shanghai, Fuhong, Pudong, Changchun, Jilin, and Kunshan have been locked down for a month due to Omicron surges.
  • There is a lot of uncertainty concerning coronavirus outbreaks in China, which are likely to prolong factory closures indefinitely due to stringent zero-COVID lockdown strategies.
  • The Cyberspace Administration of China is set to meet tech giants including Tencent and Meituan, ostensibly to loosen regulations, allowing the companies to generate profits.
  • China’s Politburo said on Friday that coronavirus spikes and uncertainty stemming from the Ukraine crisis have increased risks and challenges facing the economy, according to state broadcaster China Central Television.

What’s next? Alibaba and other Chinese technology stocks jumped by double-digit percentages on the news of easing regulatory restrictions, per Bloomberg.

  • Investors in Chinese stocks might see short-term opportunities to invest during a period of government cooperation.
  • The outlook is still cautious, however, since it seems big tech regulation can be switched on or off at the Chinese government’s whim.