China economy czar vows support for tech firms after crackdown

BEIJING (Bloomberg): China's top economic official gave an unusual public show of support for digital platform companies Tuesday (May 17), suggesting Beijing may be ready to let up on a year-long clampdown on technology giants as it battles a slowing economy.

The government will support the development of digital economy companies and their public listings, Vice Premier Liu He, who is President Xi Jinping's most senior economic aide, said after a symposium with the heads of some of the nation's largest private firms. Baidu Inc. founder Robin Li, Qihoo 360 Technology Co.'s Zhou Hongyu and NetEase Inc chief William Ding were among the tech luminaries spotted at the forum, according to a video posted online.

Liu's remarks reported by state media were short on detail but signal further easing of the regulatory risk for China's technology behemoths including Baidu and Tencent Holdings Ltd., as investors await clues on whether a rout in their shares is near an end. The Hang Seng Tech Index rallied as much as 6% Tuesday on optimism the meeting would affirm Beijing's intention to dial back some of its restrictions.

The meeting between Liu and tech company representatives was facilitated by the Chinese People's Political Consultative Conference, an advisory body that includes some executives among its members. The relationship between government and markets “should be handled well," Liu was reported as saying.

Beijing has made stability its core priority in a year plagued by geopolitical uncertainty and the heavy economic impact of coronavirus outbreaks — particularly as its top officials prepare for a key leadership transition toward the end of 2022 where Xi is expected to ensure a third term as party chief.

Beijing is enlisting the technology industry — the biggest growth driver of the past decade — to revitalize an economy struggling with rolling urban lockdowns hitting consumption and causing supply-chain bottlenecks.

China's economic activity collapsed last month, with industrial output and consumer spending sliding to the worst levels since the pandemic began and economists warning that recovery is not in sight.

The latest comments may inject much-needed confidence in the capital markets, where more than US$1 trillion of the combined value of Tencent and Alibaba Group Holding Ltd was at one point wiped out after Beijing began a broad regulatory campaign aimed at the sector in late 2020. Investor sentiment has swung wildly in recent weeks amid debates over the possible easing of the crackdown.

Liu vowed in March to stabilise battered financial markets, promising to ease a regulatory onslaught that started with the dramatic cancellation of Ant Group Co.'s record IPO before snowballing into an assault on every corner of China's technosphere.

Investors remain wary as they weigh a mixed bag of developments, which have included a restart of gaming approvals and also the deepening of a campaign to rein in the little-understood algorithms that internet companies employ to serve content and gather data. The Hang Seng Tech Index has rallied 23% from a three-year low hit in mid-March.

Signs of a turnaround in the tech sector may be already underway.

On Monday, JPMorgan Chase & Co analysts upgraded a number of tech firms including Alibaba and Tencent to overweight from underweight just two months after deeming the sector “uninvestable".