China’s Anti‑trust Campaign: Impact on Growth Should Be Limited

In late 2020, China launched an anti-trust campaign focused mainly on big technology firms, aiming to crack down on what the government views as monopolistic practices. China’s anti-trust regulatory body, the State Administration for Market Regulation (SAMR) issued a set of anti-monopoly guidelines that place renewed pressure on the country’s leading internet services.

Subsequent anti-trust probes bear similarity to initiatives undertaken by international peers to increase regulation over online platforms and tech companies. The actions are also in line with the Chinese government’s emphasis on financial reform and de-risking, as well as its focus on improving service quality and boosting innovation. While we are closely watching the evolution of this campaign, we believe the impact on growth and consumption will likely be limited. We remain positive on China’s consumer sector and tech industry, which are key pillars in China’s dual circulation strategy.

China’s anti-trust actions align with its commitment to de-risk its economy

The digital sector has seen an explosion in growth, largely under-regulated, for more than a decade. Across the globe, competition policies have been changing, with enhanced enforcement for violations. Recent anti-trust and regulatory tightening on China’s tech giants follow this global trend and are in line with the government’s efforts to de-risk its economy.

The recently published 14th Five-Year Plan pledges to increase the GDP share of digital economy-related sectors to 10%, and the pro-competition policies aim to foster healthy development in the tech industry. Key regulatory changes include expanding the coverage of anti-trust laws to the digital economy, tightening restrictions on loans and capital requirements for online lending; prohibiting the sale of bank-issued online deposits on third-party platforms; and strengthening supervisions on payment platforms.

Impact on growth and consumption likely to be marginal

The pandemic has continued to accelerate the transition of business models from offline to online, with China’s online sales persistently outperforming offline sales (18% year-on-year growth for online vs. 4.8% for offline in 2019 and 10% for online vs. -9% for offline in 2020). China’s anti-trust actions are unlikely to hold back this progress, especially since the government remains focused on boosting domestic consumption and the digital economy, key elements in its dual-circulation strategy.