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A Brief Overview of China’s Regulatory Measures: From Bitcoin to Celebrity Fan Clubs – Nothing Fancy

China has launched a multilateral crackdown on its tech companies, leaving startups and companies that are decades old operating in a new, uncertain environment.

Here are the sectors facing regulatory pressure:

Gaming companies

Chinese regulators have cut the amount of time players under the age of 18 can play online games to an hour of gameplay on Fridays, weekends and holidays in response to growing concerns about gambling addiction, state media reported on Monday.

Tech companies are eyeing IPOs

China is drafting rules to prohibit internet companies with data that pose a potential security risk from listing outside the country, including in the United States, according to a person familiar with the matter.

The ban is also expected to be imposed on companies dealing with ideological issues, the man said, declining to give his name as the case is private.

Cloud computing

China is creating its own government-backed cloud system, “guo zi yun,” which translates to “public asset cloud,” which poses a direct threat to tech giants such as Alibaba, Huawei and Tencent Holdings.

The Chinese city of Tianjin has asked companies controlled by the municipality to migrate their data from private sector operators like Alibaba Group and Tencent Holdings to a government-backed cloud system by next year, according to a document shared by Reuters.

Platform economy

China is seeking to strengthen its oversight of algorithms that technology companies, including e-commerce companies and social media platforms, use to target users.

The Cyberspace Administration of China said on Friday in a statement that companies must adhere to business ethics and principles of fairness and must not create algorithm models that induce users to spend large sums of money or spend money in a manner that could disrupt public order.

In April, Alibaba imposed a record $ 2.75 billion (approximately Rs 20,140 crore) fine on Alibaba for using a “choose one of two” practice where an e-commerce platform prohibits merchants from selling competing sites in April.

The regulator has also imposed fines on smaller companies for other actions related to consumer rights and employment.

In May, she fined her competitor JD.com 300,000 yuan (approximately 34 lakhs) for spreading false information about her food products.

The regulator has also ordered Chinese food delivery companies to provide better protection for workers.

Famous fan clubs

On Friday, China took tough action against what it called “chaotic” celebrity fan culture, banning platforms from posting popularity lists and regulating the sale of fan merchandise after a series of controversies involving artists.

Education

Beijing has introduced rules prohibiting private, commercial tutoring companies from raising capital overseas.

The rules also state that tutoring centers must register as non-profit, cannot offer programs in subjects already taught in public day schools, and prohibit classes on weekends and holidays.

A competitive higher education system has made tutoring extremely popular with parents, but recently the government has been trying to reduce parenting costs in an attempt to push the lagging birth rate.

Internet finance

In November, shortly before Ant Group was listed for the record sale of shares, China’s banking regulators issued draft regulations calling for tighter controls on online lending, in which Ant was a major player.

The rules set limits on online loans between provinces and loans to individuals.

The next day, the People’s Bank of China suspended Ant Group’s IPO. In April, the regulator called on Ant to separate its payments business from its personal finance business.

Greeting ride

In June, China’s Cyberspace Authority ordered leading company Didi Chuxing to stop accepting new users within days of listing on the New York Stock Exchange.

This move lowered the company’s share price by about a fifth.

Analysts and investors say the Didi response has more to do with big data and overseas listings of Chinese firms than with competition practices.

The regulator initially cited consumer privacy violations, but later issued a separate set of draft regulations for Chinese data-rich firms to conduct security checks before listing overseas.

During the CAC investigation, China’s market regulator forced Didi and other firms to pay a fine of 500,000 yuan (approximately 56.6 lakh) for failing to report the acquisition of smaller companies.

Bitcoin

In May, three financial regulators expanded restrictions on China’s cryptocurrency sector, barring banks and online payment companies from using cryptocurrency for payments or settlements.

They also banned institutions from providing exchange services between cryptocurrencies and fiat currencies and banned fund managers from investing in cryptocurrencies as assets.

In the following weeks, provincial governments took action to restrict bitcoin mining. Bitcoin price in India was Rs. 37.3 lakhs as of 08:00 UTC on August 30.

These restrictions have sparked a wave of mining shutdowns across the country: according to the state tabloid Global Times, 90 percent of mines will close in the short term.

Property

China’s Ministry of Housing and seven other regulators have called on the property management sector to “clean up”.

As China’s economy improves after the 2020 recession due to the coronavirus, authorities have stepped up efforts to contain runaway property borrowing this year in hopes of staving off an asset bubble.

Other regulatory measures include limits on loans to developers, known as the “three red lines,” and limits on real estate loans from banks.

© Thomson Reuters 2021





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