Sunday, June 23, 2024

The days of lax rules for China’s tech companies are over: experts

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Shares of Tencent (TCEHY) and NetEase (NTES) tumbled on Friday, December 22, after China imposed new gaming rules to curb consumer spending and engagement. However, these stocks rose in late trading after Chinese authorities approved more than 100 new games. Shehzad Qazi, Managing Director of China Beige Book International, joins Yahoo Finance to discuss China’s new rules.

“Investors need to understand that, generally speaking, the days of loose or no rules for the tech industry in China are completely over,” Kaji said. “The paradigm has changed and we are now entering an era where more rules and regulations are being introduced.”

“It’s a much more uncertain and unpredictable environment, but one thing is certain: we will not go back to business as usual like before 2020,” Kazi added.

For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.

video transcript

Josh Lipton: Investors in Chinese video game companies such as Tencent and NetEase were hit hard on Friday with news of new draft rules aimed at reining in time and spending on games. But today, they’re getting a bit of a reprieve, as Chinese authorities have approved over 100 new games. For more information on this interaction, please join us today to meet Mr. Shehzad Kazi, his Director Managing Beige His Book International in China.

Mr. Shehzad, nice to meet you. Please elaborate on this here and help me understand. So Chinese authorities have now approved over 100 new video games, and of course that’s after hearing about the new draft regulations that hit companies like Tencent and NetEase hard. So, Shehzad, what do you think about this? Are Chinese authorities supporting the video game industry, against it, or somewhere in between?

Shehzad Qazi: Well, let me start by saying that over the last few years, various China watchers have appeared on TV shows saying that the Chinese government is getting more realistic and that the tech crackdown is over. There is no end to this. . And over the past two years, they have been proven wrong time and time again. Investors need to understand that the days of loose or no rules in the technology industry, and China in general, are well and truly over. We are now entering an era where paradigms are changing and more rules and regulations are being introduced.

It may not be as harsh as it initially appeared against Alibaba and other companies. And now we’re seeing things like draft rules being introduced, and at the same time we’re also seeing other game companies and other games being licensed out. It’s a much more uncertain and unpredictable environment. But one thing is for sure: we’re not going back to business as usual like it was before 2020.

Julie Hyman: Well, Shehzad, you said it was uncertain and unpredictable. So if you’re an investor in any of these companies, what do you think from that perspective, like do these rules have any degree of predictability and how do they impact those companies? Do you want to do this?

Shehzad Qazi: Frankly, it’s very impossible to predict. Because, frankly, unless you’re inside the head of the highest leadership of the Communist Party, you don’t know what’s going to happen. I think that’s why so many people misread what the regulatory environment is. Or, frankly, they were just guessing and the changes could be made. The first rule going forward is that we are essentially investing in companies that are either completely ungoverned from a regulatory perspective or have very limited governance in place today. Or is it a sector? And secondly, how does this fit in with the broader social infrastructure laid down by the Communist Party? Anything that is seen as a threat to social control, anything that challenges the Party’s power, or anything that might push young people into areas that the Party considers unproductive, you are in a dangerous place. You better think about your risks. Accordingly.

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