x

Start investing with a
free Kristal.AI account.

icon

Simple. Secure.

*Error message
search cross

IC Speaks5 Mins Read

Explained: The Chinese crackdown on Big Tech

China crackdown on Big Tech

After several years of strong growth, the Chinese technology sector is facing its biggest challenge: the Chinese government. 

Recently, the government pulled Didi from mobile apps and asked the company not to add any new customers till the end of a cybersecurity enquiry. Didi had a stellar debut on Wall Street recently with an IPO of $4.4 billion. The reason given for the enquiry is that Didi may have collected and used the personal data of Chinese citizens. 

But Didi is not alone. The Chinese government has cracked down on several Big Tech companies. 

It began when China took on e-commerce giant Alibaba. The government canceled Alibaba affiliate Ant Financial’s nearly $40-billion IPO in November last year. Alibaba lost $70 billion in value and founder Jack Ma all but disappeared from public sight. In April, the government hit Alibaba with a $2.8 billion fine for anti-trust violations. 

Recently, the government cracked down on edtech companies. It said private education had been “hijacked by capital” and ordered tutoring companies to become non-profits. The move triggered a massive selloff that erased $1.5 trillion from Chinese stocks. 

What’s the conflict?  

Beijing recently brought in a new data-privacy law for Chinese consumers. This law asks tech firms to secure user consent before collecting information and allow users to withdraw that consent at will.  

The law also says companies should get an official nod before sending Chinese citizens’ data to foreign territories. 

The government asked DiDi to hold off its US IPO pending the enquiry. The company still went ahead with its IPO and is now facing the music. 

The context 

The Chinese government’s crackdown on Big Tech has a consumer, economic policy as well as a political angle, said Asheesh Chanda, Founder and CEO, Kristal.AI. 

The Chinese economy has seen a multi-decade boom after it opened to private capital. This allowed the country to pull millions out of poverty and made the country a global economic powerhouse. But there are signs that the boom has also widened the inequality gap. 

The country today has more billionaires than even the US. In 1978, the top 1% owned 6% of the national income. This went up 14% in 2015 and may be higher now. 

At the same time, President Xi has consolidated his grip on the Chinese political system. In 2018, he abolished the President term limit that would have required him to leave office in 2023. 

Chanda said it is therefore important for the government to exercise more control on businesses, especially the technology industry, which has rapidly gathered clout over the past decade. 

What the crackdown means for investors and the ecosystem 

Chinese tech shares listed on the Shanghai as well as US exchanges have fallen sharply. 

“Markets do not like uncertainty,” Thomas Meichl, Head of Advisory at Kristal.AI, said in a recent investor call. “As a result, we have seen correction in several Chinese tech names.” 

Meichl added that as of now, investing in Chinese tech shares could be akin to catching a falling knife. “But when the government clampdown is over – it is difficult to say when – there will be a buying opportunity,” he said. 

Kristal.AI’s investment committee is of the view that in the near term, the Chinese crackdown is as much about optics as it is about bringing about real change. 

“It is not going to be easy for governments to tame technology companies,” said Himanshu Gupta, COO at Kristal.AI. “We saw this in the aftermath of the 2008 crisis as well. Some of the too-big-to-fail regulation ended up creating up more barriers to entry. This further entrenched the position of the existing banks.” 

Centralised planning makes a comeback 

The past 50 years have seen open-market economies outperform socialist or communist economies where centralized planning simply did not have the bandwidth to drive positive change and innovation. 

China, too, benefited immensely as it opened its economy and its markets to the West. 

But as an article by the historian Yuval Noah Harari indicates, the rise of technology could help bring back the central planning model. 

“Given 20th-century technology, it was inefficient to concentrate too much information and power in one place. Nobody had the ability to process all available information fast enough and make the right decisions. This is one reason the Soviet Union made far worse decisions than the United States,” he writes. 

However, artificial intelligence allows centralized systems to process vast amounts of information. 

“In fact, it might make centralized systems far more efficient than diffuse systems, because machine learning works better when the machine has more information to analyze,” Harai adds. 

Late last year, Xi declared that 2021 would mark the beginning of a “new development phase”. One that would focus on “national security” and “common prosperity.” 

As a Wall Street Journal article summarized: President Xi wants control of big data and artificial intelligence. He will use this to correct the planning errors of the past and micromanage the Chinese economy. 

How successful he will be remains to be seen. 

 

Disclaimer

This blog article has not been reviewed by the MAS. It is prepared solely for information purposes and does not constitute an offer or solicitation for the purchase or sale of units in the funds. This does not constitute any form of investment advice and Kristal Advisors (SG) Pte Ltd does not take into account your personal investment objectives, specific investment goals, specific needs, or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Kristal Advisors (SG) Pte Ltd.

Other stories you might like

cross
Change your country to India?

You’re now visiting Kristal.AI Worldwide.
To explore diverse offerings in Indian and global products, select India as your country.

ind

India

hkg

Hong Kong

sgp

Singapore

global

Other
Accredited Investor Declaration

This is offered only to Accredited and Institutional Investors as defined under the Securities and Futures Act, Chapter 289 of Singapore (“Act”), which broadly comprises of regulated financial Institutions, large corporates, high net worth individuals and sophisticated investors.

An Accredited Investor is an individual
  • Whose net personal assets exceed in value SGD 2 million (or it’s equivalent in a foreign currency) with value of his/her primary residence capped at SGD 1 million, or
  • Whose financial assets (net of any related liabilities) exceed in value SGD 1 million (or it’s equivalent in a foreign currency), or
  • Whose income in the preceding 12 months is not less than SGD 300,000 (or it’s equivalent in a foreign currency)

I agree to opt-in as Accredited Investor and will submit required documentation to confirm the same.

< Back Proceed as Private Wealth

Wealth Management Solutions
Accredited Investor Declaration

This is offered only to Accredited and Institutional Investors as defined under the Securities and Futures Act, Chapter 289 of Singapore (“Act”), which broadly comprises of regulated financial Institutions, large corporates, high net worth individuals and sophisticated investors.

An Accredited Investor is an individual
  • Whose net personal assets exceed in value SGD 2 million (or it’s equivalent in a foreign currency) with value of his/her primary residence capped at SGD 1 million, or
  • Whose financial assets (net of any related liabilities) exceed in value SGD 1 million (or it’s equivalent in a foreign currency), or
  • Whose income in the preceding 12 months is not less than SGD 300,000 (or it’s equivalent in a foreign currency)

I agree to opt-in as Accredited Investor and will submit required documentation to confirm the same.

Proceed as Private Wealth

KRISTAL PRIVATE MARKET

Easy access to high-potential startups and private companies to diversify and enhance your portfolio.

For investors who want to support innovative businesses and be part of their success stories.

*The range of private investment opportunities will be made accessible post signup.

OVERVIEW

Explore and Identify

Select from a range of expertly curated Pre-IPO deals from across the globe

Efficient Execution

Enabling easy exposure as Kristal.AI takes care of the paperwork involved with a private investment

Only the Best

A ready-made collection of unicorn companies who are challenging incumbents and rewriting the rules of their industry

Success Story

Diversify your portfolio and be part of the success story of a dynamic and rapidly growing unicorn

Contact our Relationship Manager
ALTERNATIVE INVESTMENTS

Diversify your portfolio with exclusive Private Equity, Pre-IPO deals, VC Funds & other investments like Bitcoin, Gold, Hedge Funds and many more.

Kristal fractionalizes difficult-to-access deals and opportunities.

View Alternative Investments

OVERVIEW

Instant Access

A wide range of alternative asset classes such as Gold, Bitcoins, Hedge Funds and many more; readily made available

Risk Management

Enables investments in diversified assets hence spreading the risk

Easy Tracking

Enables you to get a consolidated view of investments in all assets at one place, hence facilitating easy monitoring and tracking

Exclusive Deals

Access to exclusive Venture Capitalist, Startup as well as pre-IPO investment opportunities

Low Investment Tickets

Facilitates fractionalization of investments in deals

Contact our Relationship Manager
FUNDS PLATFORM

Professionally managed funds with active investment strategies, screened for you by our investment committee to diversify your portfolio.

Enabling clients to access exclusive investment strategies.

View Funds

OVERVIEW

Access

Provides Access to Professional Fund Managers

Low Investment Tickets

Facilitates fractionalization of investments in funds

Diversity

A wide spectrum of investment strategies ranging from Arbitrage to Credit to Hedge Funds and many more

Fees

No additional costs are charged by Kristal.AI

Exceptional Performance

Funds with an impressive track record and potential for high profitability

Leverage

Benefits from insights of the expert selection and advisory team

Easy Management

No time consuming management of portfolios

Contact our Relationship Manager
TAILOR-MADE PRODUCTS

Customize products based on your market outlook and specific needs across equities, bonds, gold and more.

For investors looking to enhance portfolio yield based on market views.

*The range of Tailor Made Products will be made accessible, post login

OVERVIEW

Enhanced Earnings

Structures with potential to enhance portfolio yield based on market movements

Customization

Product features can be designed to articulate investor views

Fees

A flat and transparent fee structure like nowhere else

One-Click Access

A single feature ‘Ideas’ enables you to access recently launched and trending market opportunities

Contact our Relationship Manager
BUILD YOUR OWN KRISTAL

Can’t find what you are looking for? Create your own exclusive investment strategy with risk management & periodic reporting.

For seasoned investors who prefer to design their own portfolio.

OVERVIEW

Empowered Investing

Enables clients to create their own custom portfolio based on their unique needs

Unlimited Choice

Access to all possible exchange traded assets

Flexible Management

Flexibility in delegating the portfolio management role to us or actively taking up the day to day investment decisions, in your custom Kristal

Custom Fee Structure

A simple, transparent and a customized fee structure

Access to Expertise

Custom performance reporting as well as advisory support

Contact our Relationship Manager