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Beijing’s economic approach: does it provide support to Chinese companies or restrict them further?

When the United States imposed sanctions on Huawei and banned American companies from doing business with the Chinese telecom giant for reasons of national security, Chinese state media expected that those sanctions would stimulate the ability of local companies to innovate in technology, but things took a completely different direction.

In its report on the Chinese economic trends in the face of the US sanctions policy, the British “The Economist” magazine believes that the priority in China is not to compete in the field of innovation, but to government measures aimed at controlling commercial activity in the country completely. What raises a lot of concerns.

Fears of foreign investors

On January 9 this year, the Chinese Ministry of Commerce issued a statement responding to the US sanctions, and announced new measures to confront the unjustified laws and restrictions imposed by foreign countries on their companies and their citizens, and the Ministry granted Chinese companies the right to sue foreign and local companies that comply with some sanctions. Foreign.

And last November, authorities suspended the initial public offering of Antigroup, a subsidiary of Alibaba, the largest e-commerce empire in China, two days before shares began trading for the first time in Shanghai and Hong Kong.

In the same month, the State Administration for Market Regulation, created in 2018, issued rules that limit the activity of e-commerce giants, and in December it opened an antitrust investigation against Alibaba, and on January 10, the Political Affairs Committee pledged And legal action in the Communist Party to take the issue of breaking monopoly laws more seriously.

According to the magazine, these measures are part of a broader trend that Beijing is adopting to tighten restrictions on the private sector, which has raised investor concerns, and Alibaba’s shares have fallen by a quarter since last October.

The crackdown on Alibaba will raise fears of foreign investors who benefit from investing in Chinese technology companies (Reuters)

Chinese corporate concerns

Chinese billionaire Jack Ma, one of the most important businessmen in the world and founder of the two companies Alibaba and “Ant group”, has not appeared in public since last October, when he accused major Chinese banks of adopting a “mortgage mentality” that hurt many pioneers. Business.

Jack Ma currently owns only 4.8% of Alibaba, and he resigned from the position of Chairman of the Board of Directors of the company in 2019, but it is believed that he is still in control of the strategic decisions in the organization, and even if he re-emerged soon and showed some degree of cooperation with the authorities, the What happened to him sends alarming signals, according to the magazine.

Like many Chinese technology companies, Alibaba operates according to a legal system that allows foreigners to invest in its assets, and the Chinese authorities have tolerated these arrangements over the past two decades without being completely satisfied with them, but the scene has begun to change recently, as the state administration imposed to regulate Markets last month fined Alibaba and Tencent for failing to obtain the approvals required in previous acquisitions.

According to the Economist, the continued crackdown on Alibaba will raise more concerns and doubts among foreign investors, who have benefited over the past period from investment laws in Chinese technology companies.

Battle for legal influence

Another factor that could lead to further damage to Chinese companies is the battle for legal influence over international trade between Beijing and the United States, the magazine adds.

In 2019, the Chinese Ministry of Commerce became involved in this battle by creating a list of “untrusted entities”, and there were reports at the time of the inclusion of major institutions on this list, including the Hong Kong and Shanghai Banking Services (HSBC), a British bank that played A role in the US investigation of Huawei, but those reports were wrong.

If the ministry insists on activating its procedures this time, this will pose a great dilemma for Western multinational companies in China, either facing fines in the United States for violating sanctions, or they end up in the corridors of Chinese courts, the magazine says.

These measures may be beneficial to a number of Chinese companies, many of which can request compensation from foreign partners, but other companies, such as banks that have branches abroad, which have complied with US sanctions over the past years, will be severely affected.

In this regard, Carrie Lam, chief executive of Hong Kong, says she has a lot of money in her apartment and is unable to deposit it in a bank due to US sanctions.

According to an expert in trade relations from Washington, the rules of the Chinese Ministry of Commerce will fuel disputes more than provide support to Chinese companies.

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