China Proposes New Draft Digital Rules Targeted At Chinese Internet Giants

A set of new rules aimed at clamping down on the market power of the country’s biggest internet companies has been proposed by China.

According to analysts, the proposed regulations indicate the growing unease of the Chinese regulators with the increasing market influence of the digital platforms in the country.

Homegrown tech giants like Alibaba, Ant Group and Tencent, as well as food delivery platform Meituan could be among the tech giants that could be affected by the new rules.

The move by the Chinese regulators also coincides with similar measures to curb the power of internet giants being undertaken in the United States and by the European Union.

Following the release of the proposed regulations, there has been a sharp drop in share price of Chinese tech companies.

The rules were released and tech shares dropped even as record Singles Day sale figures, the annual online sale which is their biggest day of the year, were reported by JD.com and Alibaba.

The new regulations installed concerns among investors with stocks of Alibaba, JD.com, Tencent, Xiaomi and Meituan all dropped with a wipe out of more than $200bn from their combined value.

The Chinese regulator have attempted to, for the first time, to  define anti-competitive behaviour for the tech sector in the 22-page draft by the State Administration for Market Regulation (SAMR).

According to the new regulations, companies would be forbidden from sharing sensitive consumer data, partnering with each other to push out smaller competitors and selling at a loss to drive competitors out of the market.

The new regulations also aim to come down hard on digital platforms that essentially forces businesses to get into exclusive arrangements, an accusation that has been levelled against Alibaba by its merchants and competitors for quite some time now. Also those digital firms that treat customers differently based on their data and spending habits will also be sought to be regulated.

Reviews and feedback from the public on the new regulations will be gathered until the end of the month by the SAMR.

With a combined market share of about three-quarters of Chinese ecommerce, Alibaba and JD.com dominate the online retail market in China. And with 881m mobile monthly active users as of September, Alibaba claims to have more than half of the total population of China as its users. 

Concerns about Alibaba’s affiliate company Ant Group have also been raised by Beijing in a statement separate to the new regulations. The company was forced halt is much hyped and record public listing last week after concerns about increasing power of online lenders and how those affect the broader financial market of the country were raised by Chinese regulators. 

About 1.3 billion users – mostly in China, is boasted of by Ant. It primarily is related to Alipay, the dominant digital payment system of China.

Scrutiny can also be accorded to Tencent, which runs a competing payment system in the country and is the largest gaming company of the world.

(Adapted from BBC.com)



Categories: Creativity, Economy & Finance, Regulations & Legal, Strategy, Sustainability

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