In India, young entrepreneurs often look at the country’s regulations as a hurdle. But China’s increasing clampdown on its successful tech startups is a constant reminder that we’re still better off. In the past 1 year, several regulatory overhauls by the Chinese Government have reminded its tech entrepreneurs who’s the real boss.
The latest overhaul being in the private education space of China, as late in July'21, its government released new regulations banning Edtech companies that teach school curriculums from making any profits, raising foreign capital or going public.
Zoom Out: Global investors from Singapore’s Temasek to US’s Tiger Global Management have poured in huge amounts of capital in the Edtech space of China. The big question is that if the government can turn a lucrative tech space like Edtech (valued at over $100 Billion) non-profitable overnight, then are the investments made in China even safe? Since the country does not have a free economy, meaning the government can overhaul any sector at its will, is the country even worth investing in?
How bad is it? Tencent Holdings Ltd. a technology giant in China and a recent victim of the authority’s clamp down over data security concerns, lost $170 Bn in market cap in the month of July alone. Bloomberg reported that it’s the fastest evaporation of shareholder wealth recorded worldwide. The Chinese tech companies, taken together, wiped off their entire market gains of 2021 in just 4 days! That’s how bad.
While we’re here: Last year, the regulators stopped the IPO of Ant Financials (the Fintech behemoth founded by Jack Ma) just before it was about to go live over concerns of its group structure. In June this year the Chinese regulators pulled off the app of Didi Chuxing (China’s ride hailing app) from the app store only 2 days after it listed its shares in US stock exchange, alleging the company of illegally collecting personal data of users.
So, we ask, was Jack Ma wrong to say that “Chinese regulators stifle innovation”?
This article is a part of the July'21 edition of our Startup Newsletter. Here's the complete publication: