The China tech crackdown continues, According To TechCrunch The Chinese government’s crackdown on its domestic technology industry continues, with Tencent under fresh pressure despite the company’s efforts to follow changing regulatory expectations.
News broke over the weekend that Beijing filed a lawsuit against Tencent “over claims its messaging-app WeChat’s Youth Mode doesn’t suit laws protecting minors,” per the BBC. And NetEase, a serious Chinese technology company, will delay the IPO of its music arm in Hong Kong. Why? Uncertain regulations, per Reuters.
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The latest spate of bad news for China’s technology industry follows a raft of regulatory changes and actions by the nation’s government that have deleted a huge quantity of equity value. After a period of relatively light-touch regulatory oversight, domestic Chinese technology companies have found themselves on defense after the Chinese Communist Party (CCP) came after their market power in antitrust terms — and a few of their business operations from other perspectives. Sectors hit the toughest include fintech and edtech.
Gaming is additionally within the CCP crosshairs.
After state media criticized the gaming industry as providing the digital equivalent of medicine to the nation’s youth last week, shares of companies like Tencent and NetEase fell. Tencent owns Riot Games, makers of the favored League of Legends title. NetEase generated $2.3 billion in gaming revenue out of total revenues of $3.1 billion in its most up-to-date quarter.
NetEase stock traded around $110 per share in late July. It’s now worth around $90 per share after expectations shifted in light of the gaming news, indicating that investors are concerned about its future performance. Tencent’s Hong Kong-listed stock has also fallen, from HK$775.50 to HK$461.60 this morning.
Tencent tried to go off regulatory pressure, announcing changes to how it controls access to its games after the government’s shot across the bow. the trouble doesn’t appear to possess worked. That Tencent is being sued by the govt despite its publicly announced changes implies that its proposed curbs to youth gaming were either insufficient or perhaps moot from the start.