China’s big tech crackdown intensifies with new personal data rules responsible for big Microsoft Exchange hack, US charges

By Julia Horowitz, CNN Business

China’s escalating crackdown on the country’s once-mighty technology sector shows no signs of abating, leaving investors to wonder: Where does the market rout end?

What’s happening: China passed sweeping new rules about the collection and use of personal data on Friday, just days after it proposed major changes to curb anti-competitive behavior by big internet firms. Beijing says the potential mishandling of data poses risks to national security as regulators apply pressure to companies that list overseas.

“Once the privacy law comes into effect in November … China’s regulatory regime for tech will be one of the strictest of any major economy,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “That’s a remarkable shift from just a year or so ago when the opposite was true. ”

The news sent Hong Kong’s Hang Seng down 1.8% as the index officially entered a bear market, having plunged 20% from its recent peak.

The impact of Beijing’s steady tightening of the screws on the country’s tech giants is even more apparent when examining individual companies.

It’s been more than nine months since Alibaba affiliate Ant Group suspended its public offering following a dust-up between China’s regulators and co-founder Jack Ma. Yet the company’s shares continue to get crushed.

Alibaba’s stock in Hong Kong, which shed 2.6% on Friday, has plummeted 32% year-to-date, erasing more than $180 billion in market value.

Shares in New York tell a similar story, having lost 31% this year., another Chinese e-commerce company, saw its stock drop 2% in Hong Kong on Friday. It’s down 29% in 2021.

Consensus is growing that more pain is to come. Pritchard notes “legitimate concerns about the underlying motivations behind the abrupt crackdown and whether it forebodes broader efforts to rein in the private sector and shore up the position of the state.”

Meanwhile, the companies caught in the crossfire have made clear they think the campaign by regulators will only intensify.

Tencent, the Chinese gaming and social media giant, said Wednesday that that “new regulations should be coming” in the near future.

“The regulators are very focused on identifying and rectifying industry misbehavior and also efficient regulations,” Martin Lau, Tencent’s president, told analysts during a conference call. “They emphasize compliance, social responsibility as well as fair and proper behavior.”

Lau noted that the company would try to steer clear of trouble.

“There will be short-term uncertainties and there are a lot of new regulations that will be coming, but we are pretty confident that we can be compliant,” he said.

But that didn’t stop the company’s shares from losing 9.5% this week. Year-to-date, they’re down 25%.

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Kassie Hoffman
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