Putting toothpaste back in the tube – MovieUpdates

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Good news! Goods not talking about crypto, Elon Musk or SaaS multiples today. We’re also not talking about IPOs, global venture capital trends or anything like that. Instead, we’re going to talk about putting toothpaste back in the tube. Sounds like fun? Let’s go.

Chinese technology industry

Since Ant’s IPO was revoked and the Chinese Communist Party went through a wild spell of regulatory action in 2021, you’ve probably heard less about China’s technology. That’s because the companies that tended to make the biggest splash in foreign media were companies like Alibaba, ByteDance, and the like — technology companies that touched many individuals, including those outside the country’s national borders.

The Chinese government decided that such companies had too much influence and so had to be cut back. This has included the beheading of the for-profit edtech sector, social media regulation, the effective curtailment of foreign listings, punitive data reviews, video game caps along with a long hiatus in new titles, new rules regarding algorithms and more.

After a period of relative freedom to innovate, compete and, yes, sometimes act anti-competitive, China’s domestic technology industry entered 2022 in a very different state than it did in 2020. on Chinese tech companies; but the shift to remote working and the like was global, and for our purposes today, we care more about the shifts in the regulatory environments in particular.)

The result of the amalgamation of regulatory action, a full nelson of top-down control, was probably about what you expected. Some recent headlines for flavor:

Those should paint a reasonable picture of market sentiment regarding the crackdown. In more monetary terms, the value of many Chinese technology companies fell sharply. After peaking at over $300 a share in late 2020, Alibaba is worth less than $100 a share today. Didi, who became entangled between the Chinese government and the US markets after his IPO, saw his shares spike at more than $18 a share. Today it is worth less than $2 a share.

Stories began to surface about layoffs and other woes of Chinese tech companies. A few more headlines for context:

Given that this was pretty much what anyone with a heartbeat could have expected from the Chinese government, which is throwing its absolute control like gravity on a roller coaster and wants to quickly recreate one of its main economic engines through autocratic fiat, you are probably not surprised you. And yet it seems that the Chinese government is, at least to some extent!

How do we know? Well, note:

The context here is that while the rest of the world is largely seeking a way out of COVID, the Chinese government is shutting down hundreds of millions of its citizens while pursuing an impossible goal of zero COVID-19 cases. (The government previously touted its success in containing the pandemic as evidence of its superiority; such an attitude makes it difficult to backtrack from the target.) The result of lockdowns and a much-reduced local tech industry is , surprisingly, economic malaise.

Not that the Chinese government will accept that. After signaling that improving U.S. economic growth is a priority, debt-fueled infrastructure spending is back on the table, along with more real estate speculation, and, it seems, some easing of rules the domestic tech market has. have to endure without complaint.

Good luck?

Can the Chinese government put the tech toothpaste back in the tube? We’ll find out, but if I were an investor or founder I wouldn’t build in the country. Sure, it’s a big market, but not one you can count on. More if we get Q2 2022 Chinese venture capital data.

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