Regulations shakeup in China: EdTech companies suffer losses in financial exchange platforms
In the US stock market, lots of Chinese companies are listed. But there is a massive crash. Experts say it’s the biggest one yet since the 2008 financial crisis. The Chinese government took exemplary moves for the tech companies to fall in line and revenue sharing with the government. The Nasdaq Golden Dragon China Index lists the biggest Chinese stocks. Among them, 98 large companies fell short on stock numbers by 15%. The situation dint graduate amongst two trading sessions passed through.
At the moment, stocks fell by 45% which is a loss of billions. In the last five months, $770 billion is lost in the US-listed stocks of China.
As per consequence, tech giants like Tencent suspended WeChat user registration in China. New and relevant laws and regulations are going to be applied. WeChat is one of the largest platforms in China. It is owned by tech giant Tencent. The company covers business in many countries of the world, mostly digital products. The suspension started on Thursday and is hopefully temporary. WeChat has over 1.2 billion active users in the region and the company is hopeful that, after rules and regulations are met with government standards, they will open up registrations again in early August.
For startups and upstart tech companies, it’s not a very big deal. Of course, there will be some business hazards. But large-scale companies, where billions of dollars are involved, financial issues started to occur. There are many people and small companies that depended on this kind of sector and they are facing another challenge in the pandemic times.
The regulation targeted the EdTech sector and the evolvement wants to crack down market with further investigation. Registrations for the US IPOs of sale has come to a standstill by The Securities and Exchange Commission. Alongside, Chines companies set up new guidelines for the regulatory crackdown. $12.8 billion is raised to date by the companies according to Refinitiv.
Last time we saw huge public news as regulators blocked Chinese ride-sharing app Didi from new user registration. Though the company is a huge part of a private transportation system, every little penny counts towards final taxing. Regulators dint stop there, but instead, they are cracking down on more big tech every now and then. Private education companies are now into the regulatory breakdown which is causing numbers to fall in the US public listing and the US stock exchanges. This is proving a point to experts that business from China in stock can be risky.
Though some companies became a lucrative opportunity for investors which dint came to map before the regulations. As it has become more attractive for investors, they are trying to catch a part of these businesses. Asia Times called it a “warning bell” as from June we are experiencing the EdTech sector imposing penalties. The private tutoring sector is a $120 billion business and Beijing unveiled a massive overhaul. The government will be in control of which schools may offer private tutoring and which will be non-profit organisaations. According to new rules “Curriculum subject-tutoring institutions are not allowed to go public for financing.” It also said, “Listing companies should no invest in the institutions, and foreign capital barred from such institutions.”
Food delivery services, music streaming platforms are also on the crackdown radar. China State Administration for Market Regulation (SAMR) issued new sets of rules. It is subjected to employment condition upgrade of people in the sector. SAMR want the employers in delivery with minimum wage salaries and betterment of their life and work.
Tencent shares fell by another 10% within Tuesday in Hong Kong. We’ve seen tech giants tackled with regulatory changers and tax management. Big companies are getting bigger and acquiring small businesses as they see no opportunity to grow or can’t compete. The mindset change is what is targeted here as far as we can understand. Even Chines e-commerce giant Alibaba was fined $2.8 billion. Investigators found they were abusing market position for quite a while. The exact reasons why this motive took place is still unknown. But we guess they want to dominate the EdTech sector and wants everyone to fall in line.