But central planning will divert businesses from certain areas of investment
Watching Chinese The technology sector has been an interesting exercise in the last week. The Chinese government has taken on individual companies (Tencent, Metuan) and involved entire industries, such as Adtech, in a comprehensive effort to transform the country’s techno-land landscape.
The sum of the economic losses is easy to understand. For example, the Nasdaq Golden Dragon China Index, which tracks U.S.-listed companies doing business in China, fell from a 52-week set high earlier this year to 10,672.37 yesterday from 20,893.02. If you want to get the full details of the financial catastrophe, you can also find the on-shore and off-the-shelf deals of various shore technology companies.
It is common among critics and analysts to draw a straight line between the latest news from last year’s blocked Ant-Ant IPO, courtesy of Chinese entrepreneur Jack Mani and the latest news from the Chinese Communist Party (CCP) regulatory bodies. That’s fair. Things are changing in China, and the regulatory landscape of tech work in the country will not come from here.
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We explored a bit of that moment, noting last week that Adtech investment in the country could slow down if the government goes along with its plan to force tutoring companies to become unprofitable. The government then did so, and more, forming tutoring companies, going public, raising external capital from foreign sources and so much more. It was comprehensive. Natasha Mascarenhas has read a lot about this here.
So, is there bad news for startups? After all, if Adtech investments can withstand regulatory change, what about other tech-influenced areas of business?
Somewhat easier to make a negative case. The positive case is more interesting. Some market observers are arguing that taking some of China’s largest technology companies could clear more room for small companies in the country to snatch a piece of the business.