In its latest regulatory maneuver, China proceeds to aim its regulatory glaze at its Big Tech giants by demanding to end a long-established practice of prohibiting each other’s connection on their sites, a move that could result in catastrophic consequences on its domestic market and China-based companies’ stakes.
Beijing’s move raised the distress level amongst investors and domestic tech companies, such as Baidu AI, Tencent Cloud, Alibaba Cloud, and Huawei Cloud. The country’s internet sector is driven by a bundle of technology companies with the standardized behavior of preventing rivals’ links and services on their platforms.
The Ministry of Industry and Information Technology’s (MIIT) latest news demonstrated Beijing’s tactic to expand its regulatory influence on the tech sector.
Even though China’s regulators have been fortifying their inspection of China’s tech giants in a series of antitrust and internet legislation, domestic tech firms have managed to keep expanding their influence nationally and globally.
At the moment, China’s cloud infrastructure market size reached a whopping $6.6 billion as the cloud sector fixates its attention on digital transformation, artificial intelligence, and smart industries, according to a recent report by Canalys.
However, while the sector exponentially grows, investors are keeping their distance and raising cautions concerning future investment plans as share prices of China’s tech companies dropped between 18 percent and 30 percent in the last six months.
In 2021 Q2, China’s cloud infrastructure market augmented by 54 percent Year-on-Year (YoY) reaching $6.6 billion. This indispensable growth was led by Shenzhen-based media titan Tencent Cloud with a 92 percent growth, the report found.
Despite Tencent taking the lead in influencing the market’s growth, its personal development kept it in third place behind Alibaba Cloud and Huawei Cloud but surpassed Baidu AI Cloud.
China’s tech giants league managed to augment its in-market sovereignty by growing 56 percent in account for an 80 percent total of cloud spending.
Yet even though cloud companies are raising the stakes, China’s regulatory scrutiny has been keeping investors on the edge of their seats in terms of regulatory pressure.
“Chinese tech companies could always rely on their local market, especially when access to lucrative Western markets was blocked. But increasing domestic regulatory pressures over the past nine months have been a frustrating headwind for those companies that have seen their cloud businesses grow significantly over the past years,” said Alex Smith, Vice President of market analyst firm, Canalys.
Earlier in June, authorities passed the Data Security Law that aims to safeguard critical data concerning national security and released a draft of guidelines addressing future regulations on algorithm companies, such as ByteDance, Tencent, Alibaba, Didi, and many more.