China’s New Regulations on Tech Companies: What’s in It for You?
China’s new regulations on technology companies is affecting different industries. As Bloomberg puts it, “China leaders clearly have a vision for what their country should look like. Risks in the financial system should be controlled. Inequality should be reduced. Beijing’s authority should go unchallenged.” So, as the regulatory tech crackdowns don’t spare even local companies, what’s in it for overseas companies? What are the things you should look for and what to expect in the coming months?
Different approaches to regulations
Regulatory hurdles either be good or bad. But for businesses, this could have a good effect in the long-term because it will spark stability in the market. However, in the short term, it will cause pain as things begin to shake up. Investment strategist Andy Rothman told CNBC that the government’s crackdown on its tech giants wasn’t intended to take their wings off. Still, rather it reflects China’s different approach in dealing with regulatory issues. For example, in the west, the government intervenes by setting up regulatory structures right before a new industry emerges.
Tech giants lost billions due to crackdowns
In China, Rothman said that the leaders approach it differently. They allow companies to explore and do whatever they want and see how things work. And then they intervene in the middle and decide how to regulate things. Most of the crackdowns are in the technology and education sectors. Meituan, the food delivery service app, lost $60 billion of its market value as Beijing implements reforms. The company must ensure that they pay their workers the minimum wage and also provide health care pension. Tencent, one of the biggest tech giants, wasn’t spared as well. The government asked the firm and its affiliates to give up the exclusive streaming music rights with the new reforms. WeChat also stopped accepting new users to register to its service. In a month, Tencent lost $170 billion.
Other industries that will also have new regulations
Another industry affected by the regulatory crackdown is the education sector, as after-school tutoring was barred. Instead of fining education firms, Beijing implemented stringent guidelines, which also affected the companies’ sales. Aside from the technology and education sector, the government is also working on new legislation for other key industries such as national security, tech innovations, fin-tech, artificial intelligence, big data, cloud computing, etc.
China’s New Regulations on Tech Companies: What’s in it for you?
These reforms should not hinder overseas companies from exploring the Chinese market. But rather, you need to be aware of the regulations, so you know how to navigate them to your advantage. The regulations and crackdowns are a way to develop new models and structures that will forge innovation among local companies and foreign ones. In a nutshell, if you are complying, then there’s nothing to worry about. What’s even better, if you work with a local translation agency that is already well-versed in the market and has an army of legal advisors and consultants, you will be in the right direction.