China may be preparing to end its crackdown on big tech

Hong Kong’s Hang Seng index jumped 4%, while the Shanghai Composite rose 2.4%, after Chinese state media reported that the country’s top leaders had pledged to boost the growth.

They also vowed to “promote the healthy development” of the internet economy and “introduce specific measures” to support the sector, the Communist Party’s Politburo said on Friday, according to the official Xinhua news agency. .

The pledge follows a sweeping crackdown on some of the country’s biggest private companies that began in 2020 when the government stalled Ant Group’s plans to go public at the last minute.

Analysts took Friday’s statement as a sign that the government could reverse its dramatic regulatory offensive, which slammed industries ranging from technology and finance to gaming, entertainment and private education.

“In short, today’s Politburo meeting wants to assure the market that the regulatory campaign, which started from the end of 2020, is over,” Macquarie Capital analysts said Friday.

Tech stocks rose sharply in Asia, with the Hang Seng Tech index surging 10% in Hong Kong. Ali Baba (BABA) increased by more than 15%, while Tencent (TCEHY) gained more than 11%.
The Communist Party meeting comes as China’s tough Covid restrictions have hit its stock markets and currency, and investors are growing pessimistic about the impact of the lockdowns on the world’s second-largest economy.

Beijing is shaken

Chinese leaders are clearly concerned about the slowdown. It is at least the second time this week that he has pledged to fix the economy.

At a meeting on Tuesday, President Xi Jinping said the country would embark on an infrastructure spending spree to boost domestic demand and promote growth.

Although markets were bullish on Friday, analysts want to see specific policies defined.

“The economy is struggling, with second-quarter GDP growth likely turning negative year-over-year. A significant shift in macroeconomic policy is needed to turn the economy around,” said Zhiwei Zhang, chairman and Chief Economist at Pinpoint Asset Management.

“We will observe the actions of the government in the coming weeks and update our view accordingly,” he added.

A number of investment banks have lowered their Chinese growth forecasts over the past month. And the International Monetary Fund said last week it expected growth of 4.4% this year, down from a previous forecast of 4.8%, citing risks from Beijing’s strict zero Covid policy. . This is well below the official Chinese forecast of around 5.5%.

— Laura He in Hong Kong and the Beijing office contributed to this report.


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