(BFM Bourse) – Pressed to fight against the risk of a fall in activity, the Chinese authorities provided support for the digital economy on Friday – raising hopes of a reconciliation with this sector, which has been under regulatory pressure since end of 2020.
While Shanghai, the economic capital of the country, has been paralyzed since the beginning of April by a resurgence of Covid, the government is stepping up its actions to try to support the economy.
The communist regime thus sent a reassuring signal to powerful companies in the internet sector, which it had placed in its crosshairs since the end of 2020 – with in particular the blocking of IPOs abroad or fines for abuse of dominant position.
During a meeting of its Political Bureau (politburo), the Chinese Communist Party raised the hope of reconciliation with this important part of the world’s second largest economy. According to a report by the New China agency, during the meeting, chaired by number one Xi Jinping, the CP considered it “necessary to promote healthy development of the digital economy” and “to complete its rectification”.
“The anti-monopoly reforms may be over,” said economist Zhiwei Zhang of asset manager Pinpoint Asset Management.
The politburo, this body of 25 members which holds the reality of power in China, also pleaded to “respond to the concerns of the markets in due time”.
Threats to growth
It was enough to make the titles of the major groups in the sector soar on the Hong Kong Stock Exchange: Alibaba and JD.com, giants of online commerce, both rose by more than 15%, while Tencent, owner of WeChat, took 11%.
The Hang Seng index ended up more than 4% on Friday. The Shanghai Stock Exchange gained 2.41% and that of Shenzhen, more exposed to technology stocks, 3.89%.
Beijing has also reaffirmed its economic objectives, despite the resurgence of the epidemic which raises fears that the growth objective of 5.5% of GDP this year will not be achieved.
“The key message is the change in political priority: in recent weeks it has been about eradicating the outbreaks of Omicron. Now the objective is to achieve a balance between the health imperative and the economic growth,” said Zhiwei Zhang.
The zero Covid strategy is increasingly challenged by the business community, which is alarmed by the threats that repeated lockdowns pose to transport, supply chains and the workforce. “The government has become aware of the risk of seeing supply chains leave China,” said the analyst, for whom this policy could be relaxed on the side of business travel.
Loss of credibility with international manufacturers
Since the spring of 2020, China has reduced international entries to a bare minimum, and travelers entering the country are subject to a long quarantine.
“China is losing its credibility as the best place in the world to get supplies,” warned the president of the European Union Chamber of Commerce in China, the German Jörg Wuttke. Many companies are reviewing their supply chains, he said in an interview with the Swiss site The Market. Jörg Wuttke describes it as tragic “the impasse in which the president has put his country” with zero Covid and predicts that growth will not exceed 4% this year.
Chinese leaders also called on Friday for a “healthy” development of the real estate sector, another pillar of the national economy subject to regulatory tightening at a time when it is experiencing serious difficulties. Real estate developer Evergrande has been struggling for months on the verge of bankruptcy, with a slate estimated at 260 billion euros.
Beijing has already announced this week “all-out” efforts to revive infrastructure, at the risk of multiplying unnecessary projects and increasing the indebtedness of local authorities. But these projects will not be enough to quickly revive activity, warn some economists.
(With AFP)
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