Alibaba, Tencent shares plummet 11% alongside China tech stocks as Xi tightens grip on power
China’s President Xi Jinping speaking at the opening session of the 20th Chinese Communist Party’s Congress at the Great Hall of the People in Beijing on Oct. 16, 2022.
Noel Celis | AFP | Getty Images
Chinese technology stocks tanked Monday after a political reshuffle in the world’s second-largest economy tightened President Xi Jinping’s grip on power with investors fearing this could be a negative for private firms.
Tech giants Alibaba and Tencent closed down more than 11% in Asia; search company Baidu was 12% lower while food delivery firm Meituan tanked more than 14%.
The moves come after Xi paved the way for an unprecedented third term as leader and packed the Politburo standing committee, the core circle of power in the ruling Communist Party of China, with loyalists.
That makes it unlikely that anyone would challenge any “policy mistakes” that Xi makes which could hamper growth of the tech sector, Xin Sun, senior lecturer in Chinese and East Asian business, at King’s College London said.
“Now that the new Politburo standing committee is packed with Xi’s own picks and those in rival factions … were all out, it becomes clear that no other political elite dares to challenge his policy mistakes or even deviate however slightly from his preferred policy agenda, which of course over the past few years has focused on favouring the state sector at the expense of the private one,” Sun told CNBC via email.
“As a result, it is unlikely for these policies to be reversed or corrected, leading to an extremely gloomy economic outlook.”
Under Xi’s leadership, China has implemented a raft of policy that has tightened regulation on the tech sector in areas from data protection to governing the way in which algorithms can be used.
Meanwhile, Xi has stuck to the strict “zero-Covid” policy which has seen cities, including the mega financial hub of Shanghai, locked down this year, even as most of the world has opened their economies.
These two policies have contributed to billions of dollars being wiped of the value of Chinese tech giants and companies including Tencent and Alibaba reporting their slowest growth in history this year.
“Tech stocks have never been the best friend of Xi and it’s clear that the market thinks that purge will continue,” Justin Tang, head of Asian research at United First Partners, told CNBC.
As part of the leadership reshuffle in China, Li Qiang, party secretary of Shanghai is expected to be made premier next year. Li oversaw oversaw the lockdowns and “zero-Covid” approach in Shanghai this year. He has not served as vice-premier marking a break with a long-standing tradition of the Communist Party. Li will replace outgoing Premier Li Keqiang, an official seen as pro-business.
Sun said the new leadership is largely party officials “who had limited to no prior experience or credible record in economic management,” marking another reason investors are concerned about the future.
“A rigid political regime with limited capacity to correct many of its policy mistakes, the lack of capable and experienced economic policymakers, and growing geopolitical risks, all under the leadership of a single person whose track record has proven unfriendly towards the private sector,” Sun said, explaining the negative market sentiment toward China tech stocks.
However, not all analysts are concerned about further regulatory tightening. In the last few months, Beijing has taken less dramatic regulatory action against tech giants, prompting some commentators to suggest a softening stance from the government toward internet companies.
“Some of the policy toward tech stocks has been softened,” Duncan Wrigley, chief China economist at Pantheon Macroeconomics, told CNBC’s “Street Signs Europe.”
“Overall, I think the stance of the leadership and the governments has become on balance more positive over the last year.”
Technology
Amazon was questioned by House China committee over ‘dangerous and unwise’ TikTok partnership
Amazon logo on a brick building exterior, San Francisco, California, August 20, 2024.
Smith Collection | Gado | Archive Photos | Getty Images
Amazon representatives met with the House China committee in recent months to discuss lawmaker concerns over the company’s partnership with TikTok, CNBC confirmed.
A spokesperson for the House Select Committee on the Chinese Communist Party confirmed the meeting, which centered on a shopping deal between Amazon and TikTok announced in August. The agreement allows users of TikTok, owned by China’s ByteDance, to link their account with Amazon and make purchases from the site without leaving TikTok.
“The Select Committee conveyed to Amazon that it is dangerous and unwise for Amazon to partner with TikTok given the grave national security threat the app poses,” the spokesperson said. The parties met in September, according to Bloomberg, which first reported the news.
Representatives from Amazon and TikTok did not immediately respond to CNBC’s request for comment.
TikTok’s future viability in the U.S. is uncertain. In April, President Joe Biden signed a law that requires ByteDance to sell TikTok by Jan. 19. If TikTok fails to cut ties with its parent company, app stores and internet hosting services would be prohibited from offering the app.
President-elect Donald Trump could rescue TikTok from a potential U.S. ban. He promised on the campaign trail that he would “save” TikTok, and said in a March interview with CNBC’s “Squawk Box” that “there’s a lot of good and there’s a lot of bad” with the app.
In his first administration, Trump had tried to implement a TikTok ban. He changed his stance around the time he met with billionaire Jeff Yass. The Republican megadonor’s trading firm, Susquehanna International Group, owns a 15% stake in ByteDance, while Yass has a 7% stake in the company, NBC and CNBC reported in March.
— CNBC’s Jonathan Vanian contributed to this report.
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Former U.S. Army intelligence analyst Chelsea Manning says censorship is still “a dominant threat,” advocating for a more decentralized internet to help better protect individuals online.
Her comments come amid ongoing tension linked to online safety rules, with some tech executives recently seeking to push back over content moderation concerns.
Speaking to CNBC’s Karen Tso at the Web Summit tech conference in Lisbon, Portugal, on Wednesday, Manning said that one way to ensure online privacy could be “decentralized identification,” which gives individuals the ability to control their own data.
“Censorship is a dominant threat. I think that it is a question of who’s doing the censoring, and what the purpose is — and also censorship in the 21st century is more about whether or not you’re boosted through like an algorithm, and how the fine-tuning of that seems to work,” Manning said.
“I think that social media and the monopolies of social media have sort of gotten us used to the fact that certain things that drive engagement will be attractive,” she added.
“One of the ways that we can sort of countervail that is to go back to the more decentralized and distribute the internet of the early ’90s, but make that available to more people.”
Nym Technologies Chief Security Officer Chelsea Manning at a press conference held with Nym Technologies CEO Harry Halpin in the Media Village to present NymVPN during the second day of Web Summit on November 13, 2024 in Lisbon, Portugal.
Horacio Villalobos | Getty Images News | Getty Images
Asked how tech companies could make money in such a scenario, Manning said there would have to be “a better social contract” put in place to determine how information is shared and accessed.
“One of the things about distributed or decentralized identification is that through encryption you’re able to sort of check the box yourself, instead of having to depend on the company to provide you with a check box or an accept here, you’re making that decision from a technical perspective,” Manning said.
‘No longer secrecy versus transparency’
Manning, who works as a security consultant at Nym Technologies, a company that specializes in online privacy and security, was convicted of espionage and other charges at a court-martial in 2013 for leaking a trove of secret military files to online media publisher WikiLeaks.
She was sentenced to 35 years in prison, but was later released in 2017, when former U.S. President Barack Obama commuted her sentence.
Asked to what extent the environment has changed for whistleblowers today, Manning said, “We’re at an interesting time because information is everywhere. We have more information than ever.”
She added, “Countries and governments no longer seem to invest the same amount of time and effort in hiding information and keeping secrets. What countries seem to be doing now is they seem to be spending more time and energy spreading misinformation and disinformation.”
Manning said the challenge for whistleblowers now is to sort through the information to understand what is verifiable and authentic.
“It’s no longer secrecy versus transparency,” she added.
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