Hello everyone, this is Cissy from Hong Kong.
Chinese New Year is just days away, and I am very excited because we will have three public holidays here next week, which will allow me to spend more time with my cat and read more.
I’m ready for a short vacation, and I think most Chinese technology companies were hoping for one, too — at least until Wednesday evening.
Over the past two weeks, these companies have received quite a few positive signals from regulators, and many news headlines have been hailing Beijing’s tech crackdown as “officially” over. Some of my friends who work at leading Chinese tech companies are not really convinced, though, and they are adopting a “wait and see” approach.
As I was drafting this newsletter, state media announced that China will soon launch a state-owned ride-hailing platform in response to “disorderly expansion and data security problems” in the sector. The report was soon interpreted as a clear sign that Beijing is continuing to exert control over the booming tech sector, despite what some overconfident investors may want to believe.
Even if Beijing has “officially” stopped cracking down on tech, the state’s increasing influence within the private sector is growing in other ways, as we have seen this week.
Not so fast …
As two of the most prominent targets of Beijing’s tech crackdown, Tencent Holdings and Alibaba Group Holding have been among those most buoyed by hopes of an easing. Shares of both companies recently hit six-month highs.
There are indeed a few things to celebrate for the duo, writes Nikkei Asia’s Cissy Zhou. Tencent has received long-awaited licenses for its imported video game titles, while Alibaba affiliate Ant Group got the green light for its consumer lending unit to raise more money. In a more high-profile move, the Chinese Communist Party boss of Zhejiang province even visited Alibaba’s headquarters in Hangzhou, the provincial capital, pledging “unswerving” support to the e-commerce conglomerate that has been hit hard by Beijing’s tech crackdown.
But skeptics say Beijing’s softer tone does not mean a return to an earlier era of a freer, faster-growing tech sector. Instead, the tech crackdown is now taking a back seat to reviving the economy, after China’s draconian, three-year-long zero-COVID strategy took a toll on economic growth.
Even UBS, which hailed the short-term easing, says Beijing’s grip over the tech sector will only tighten in the long run, as regulations will always try to catch up with innovation. The investment bank also expects more regulations to come for China’s short video platforms and the live streaming sector, as content is always a sensitive subject in China.
A new kind of control
The Chinese Communist Party is swapping sanctions on tech giants for seats on their boards as a sagging economy forces a rethink in Beijing on how best to exert control over the country’s massive internet titans.
China has moved to take “golden shares” in the local units of Alibaba and Tencent, and a slew of other internet groups, write the Financial Times’ Ryan McMorrow, Qianer Liu and Cheng Leng.
The stakes, usually involving a 1% holding and a board seat, provide the party a mechanism to remain deeply involved in their businesses, particularly the content they broadcast to millions of Chinese people.
E-commerce giant Alibaba brought an entity connected to China’s feared internet regulator into its shareholding structure earlier this month. People involved said the regulator took the stake to tighten control over its streaming video unit Youku and web browser UCWeb.
The specifics of the government’s plan to take golden shares in Tencent remain under discussion, but will involve a stake in one of the group’s main China operating subsidiaries, separate sources told the FT.
Company documents for TikTok owner ByteDance show how the stakes work. After a fund tied to the internet regulator took a stake in its main Chinese unit in 2021, a party official joined the company board. He was given the right to appoint the group’s chief censor and chair a “content safety committee” within the ByteDance unit.
Cloud competing
Southeast Asia has been a battleground for Chinese tech giants for years, particularly in e-commerce, logistics and social media networks. Now, a new area of competition has emerged: cloud computing.
Huawei Technologies and Alibaba are both rushing to build data centers in Southeast Asia, aiming to capture shares of a cloud market that has grown red-hot amid a pandemic-induced shift toward digitalization, write Nikkei’s Takashi Kawakami, Risa Kawaba, and Kosuke Inoue.
Huawei, which has data centers in Indonesia, Thailand and Singapore, has pledged to invest $300 million to develop cloud infrastructure in Indonesia over the next five years. Alibaba built its first data center in Thailand last year and says it will spend $1 billion to expand its data centers operations to a comparable scale as its core online retail business.
The duo are looking to gain market share through lower prices, but they will have to contend with U.S. rivals who arrived first. Amazon, Microsoft and Google together control approximately 70% of the region’s cloud computing market. Meanwhile, tensions between the U.S. and China could make it harder for Chinese players to attract customers.
Cleaning up coal?
Japan’s decadelong attempt to prove coal can be made “clean” is drawing to an end, but its accomplishments face a murky future as much of the world wants to phase out coal completely to avoid climate catastrophe, writes Nikkei Asia’s Sayumi Take.
Situated on a small island in western Japan’s Hiroshima prefecture and backed by 49 billion yen ($384 million) of public funding, a 118,000-sq.-meter project aims to make burning coal less environmentally damaging. The project is scheduled to be completed in March.
Japan, which sources about one-third of its power from coal, sees the project as key to its policy of safely achieving energy security as well as economic and environmental efficiency. In 2020, Japan committed to phasing out inefficient plants by around 2030, but did not join over 40 countries in signing a pledge in 2021 to exit coal power.
Japan has hinted at wanting to export clean coal technologies to developing countries in Asia, which have young coal plants and are expected to face difficulty phasing them out. But questions remain, including whether clean coal power will be competitive against renewables and other, more conventional eco-friendly energy sources.
Source: asia nikkei