- Tech giant Tencent warned that China’s regulatory crackdown on internet companies will continue.
- New, tighter regulations have been putting pressure on several key sectors in China.
- Asian tech stocks stumbled on Thursday morning after a series of volatile weeks.
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Tencent warned on its second-quarter earnings call that China’s regulatory crackdown on internet companies will continue, as Asian tech stocks stumbled again after a series of volatile weeks.
“We should expect in the future, in the near future, more regulations should be coming,” Martin Lau, Tencent’s president said on the call. “This should be expected because the regulation has been actually quite loose over an industry like the internet, considering its size and the importance.”
Lau asserted the tightening regulations weren’t an attempt by the Chinese government to squash the industry. Instead, he framed them as a way to identify and correct issues, and to enforce social responsibility and fair behaviour among companies.
“The government does recognize the importance on the economic side and social side of the internet industry and also the contribution of the industry to global competitiveness,” he added, before saying Tencent would be able to comply with the new rules.
According to Lau, a similar tightening of regulations could also hit European and US tech firms soon, and China was simply ahead of the curve.
China has been putting pressure on various key sectors, but especially tech and internet companies, in recent months by introducing and suggesting tighter regulations. Just this week, China’s State Administration for Market Regulation proposed a series of new rules that would clamp down on unfair competition between internet companies.
This came after the country published a five-year plan that named tech innovation, internet finance, education, and other sectors as industries that would see new regulations come into play.
Earlier this month, Tencent stock fell as much as 10% after a state-led media outlet criticised online gaming, describing it as “spiritual opium” and “electronic drugs,” which fueled investors’ fears of tighter regulations.
The developments have led to volatile trading in recent weeks. Alibaba’s Hong Kong-listed shares closed 5.54% lower on Thursday, and its US-listed shares were down 3.74% in pre-market trading on the New York Stock Exchange.
Tencent itself closed 3.44% down in Hong Kong, despite beating market expectations and posting a 29% jump in profit for the second quarter year-on-year to 42.6 billion renminbi ($6.6 billion).