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On Saturday, China published new rules which asked firms in the education technology sector that teach school curriculum to convert into non-profit entities. They are also forbidden from raising capital and selling shares to the public.
This is a sector where Chinese companies had raised close to $16 billion in 2020 alone. It boasted of big names as investors from Alibaba to Tencent and Tiger Global to Temasek.
While no reason was given for the move, it shouldn’t come as much of a surprise, too. China has been cracking down on its technology sector for many months now. Some say this was triggered by Jack Ma, the founder of Alibaba group, when he said last year regulators stifled innovation. After that, Ma disappeared from public eye for some time. His group company Ant Financial’s new share sale, touted to be the biggest IPO in the world, was called off as the regulator tightened rules for fintech firms.
More recently, the Chinese authorities went after Didi, the ride-hailing firm, alleging that it had misused customer data and citing national security regulations.
One way of looking at this is that President Xi Jinping and the Chinese communist party are sending a message to celebrated entrepreneurs to show them who’s the boss. Regulations in the technology sector in China are also a fairly new phenomenon except for making it tough for foreign companies to operate there.
[Aside: Do check out a new weekly column The Eastern Window which will throw light on happenings in China and the Far East, and what they mean for India.]
The other way to look at this is as part of an ongoing fight between Big Tech and governments across many jurisdictions and many issues ranging from data privacy to national security to anti-trust. It is happening in the US and the EU. It is also happening in India with the Union government taking on social media giants and the Reserve Bank of India expressing discomfort about Big Tech in finance.
Speaking of tech companies, what happens after Zomato’s blockbuster listing? Our research team has a take here.
They have also written the following notes full of investment insights:
Yes Bank Q1: On the right track, but the road to recovery too long
Stellar Q1 show to hasten re-rating of ICICI Bank stock
ITC: Higher dividend yield to guard valuation on the downside
Havells or Polycab: Which one to choose?
Mahindra CIE poised to outperform industry growth
JSW Steel: EBITDA looks to have peaked for the near term, volume growth likely
Federal Bank — Making all the right moves
Indian Energy Exchange continues to deliver volume-led growth
What else are we reading today?
Can ITC’s cigarette business strength help improve valuations?
Monsoon Watch 2021 | Rains improve, kharif sowing gathers pace
July Flash PMIs: Supply disruption is behind both inflation and growth scare
Insurance arms of ICICI and HDFC look past COVID-19
Will the Fed give any clues on its timeline for slowing bond purchases? (Republished from the FT)
What growing mangoes in Italy tells us about climate change and the future of food (Republished from the FT)
Picks from our Technical Analysts: ITC
, Lal Path Labs
and Axis Bank (These are published every trading day before markets open and can be read on the app)