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China Crackdown Intensify, Changes to Tech Companies & Education Sector to Non-Profit with Share Prices Dropping 40% to 80% 

30th July 2021 | Hong Kong

China crackdown on the economy and companies intensify over the last week with new regulations on the education and technology sectors, causing Edtech sectors stocks to drop 40% to 80%.  Education companies (New Oriental Education -67%, Gaotu Techedu -78% since 23/7/21) are required to re-register as non-profit for selected programs and stopped from raising capital and going abroad.  Technology companies such as Meituan, Alibaba, JD.com and Didi are ordered to raise minimum salary levels and reduce load on delivery timing.  Tencent have also been ordered to cancel its exclusive music rights within 30 days and have also suspended its WeChat signup.  In recent times, China has increased scrutiny on China technology companies on monopolistic behaviours, security & data privacy, capital-raising practices, cryptocurrencies and operations of financial institutions, strengthening regulations, preventing excessive marketing approaches such as using soft pornography involving children & minor to drive usage of platforms and to tackle anti-competitive behaviours.  (Edtech ~ Education Technology companies)

“ China Crackdown Intensify, Changes to Tech Companies & Education Sector to Non-Profit with Share Prices Dropping 40% to 80% “

 



2021 Data Release
2020 List of Private Banks in Hong Kong
2020 List of Private Banks in Singapore
2020 Top 10 Largest Family Office
2020 Top 10 Largest Multi-Family Offices
2020 Report: Hong Kong Private Banks & Asset Mgmt - $4.49 Trillion
2020 Report: Singapore Asset Mgmt - $3.48 Trillion AUM


China Crackdown on Education, Technology Sector

Shanghai City 2
Shanghai, China

For education sector, China requires private tutoring companies to re-register as non-profit for selected programs and stopped from raising capital and going abroad, causing share prices of education technology companies (EdTech) to immediately drop 50% to 80% with Archegos targeted founder of Gaotu Techedu (-78%) losing $15 billion of personal fortune since collapse of Archegos family office.  Education listed companies are severely impacted such as New Oriental Education (-67%).  TAL Education (-70%), Koolearn (-41%) and with education start-ups Yuanfudao, Zuoyebang and Huohua Siwei will lose private equity and venture capital funding and seek new direction.  (Stock price since announcement on education sector on 22/7/21).

Tencent (-10% since announcement) had also been ordered to cancel its exclusive music rights within 30 days and have also suspended its WeChat signup.  Regulators disallow merger between Huya and Douyu, 2 of China’s two largest video game live-streaming sites, that would have given Tencent majority control. 

China’s E-commerce tech companies such as Meituan, Alibaba, JD.com and Didi have also been ordered to raise minimum salary levels and reduce load on delivery timing.  

In July 2021, China internet regulators have imposed fines on China tech giants Alibaba’s Taobao, Tencent’s QQ, Kuaishou, Weibo and Little Red Book for spreading content including soft pornography involving children & minor to drive traffic and promote the hype of “net celebrity children”.  The Chinese technology companies fined and ordered by Cyberspace Administration of China to remove the offending accounts are the most influential platforms with the largest user base in China.  Alibaba market capitalization is at $560 billion, Tencent is at $660 billion and Kuaishou is at $69 billion (USD, 23/7/21).

 

China Crackdown Intensify: Stock Market, Capital Raising, Cryptocurrencies, Cybersecurity 

Ant Group 4
Ant Group, leading online financial services in China

China has increased scrutiny on China technology companies on monopolistic behaviours, security & data privacy, capital-raising practices, cryptocurrencies and operations of financial institutions, strengthening regulations, preventing excessive marketing approaches such as using soft pornography involving children & minor to drive usage of platforms and to tackle anti-competitive behaviours.

In November 2020, Alibaba’s Ant Financial Group $300 billion IPO was halted by China’s regulator and just after Didi Global IPO.

In May 2021,  China’s financial market regulator China Securities Regulatory Commission (CSRC) issued an official statement, warning of “zero tolerance” against market manipulation of stock prices, including artificially supporting or inflating stock prices.  Market manipulation practices includes “pump-and-dump” schemes, where syndicates work with companies to push up their stock prices, attracting retail investors and thereafter dumping the shares, leading to sharp decline, swings in share prices and losses for retail investors.

In June 2021, Chinese authorities instructed app stores to disallow new users from downloading Didi’s app in China (4th July 2021), causing the share price to decline 14% (9/7/21) a few days after IPO and with Didi Global facing a potential class action lawsuit for misleading investors (9th July 2021).

In July 2021, China authorities began a crackdown on cryptocurrencies including Bitcoin and banning digital tokens in financial transactions, issuing warning to financial institutions and businesses not to directly or indirectly provide virtual currency-related services to customers, and consumers to not to participate in the hype of virtual currency (Bitcoin, Cryptocurrency etc).  In Hong Kong, regulators are seeking to ban cryptocurrencies for retail investors and allowing only professional investors to invest.

In July 2021, China increased scrutiny and oversight on Chinese companies seeking foreign listing (IPO) and technology companies, requiring Chinese companies to seek approval for foreign IPO and to undergo cybersecurity review.  Chinese companies with more than 1 million users must apply for cybersecurity approval as the data and personal information could be exploited by foreign governments.  

 

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