Quantitative Easing

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Bloomberg

Chinese tech giants spend billions to fuel growth after crackdown

(Bloomberg) – Beijing’s crackdown on its tech giants is fueling notable phenomenon: It has opened the spending floodgates. China’s biggest internet companies are digging deep into their pockets for new avenues for growth as Beijing slashes its most lucrative business from fintech to e-commerce. Tencent Holdings Ltd., Alibaba Group Holding Ltd. and Meituan have all warned investors in recent weeks that they are ready to open their coffers to expand into areas such as cloud computing, autonomous driving and artificial intelligence. The coming flood promises to transform the Internet landscape by funneling capital into fundamental technologies and infrastructure – not coincidentally priority areas for the Communist Party. accustomed to sacrificing profits. The food delivery giant sank into the red in the December quarter and warned of further losses as founder Wang Xing increased spending on logistics networks and chain capacity. supply to strengthen its new online grocery ambitions. In April, it raised a record $ 10 billion to develop advanced solutions such as autonomous delivery vehicles and robotics, days before the Chinese monopoly watchdog unveiled an investigation into the company for alleged violations of antitrust laws. is expected to release its March quarter results on Friday. Revenue is expected to reach 35.7 billion yuan ($ 5.6 billion), rebounding from pandemic lows of last year, while the net loss is expected to more than double from the December quarter at 5 , 2 billion yuan, according to estimates. tech giants aren’t really something they have a choice over, ”said He Qi, fund manager at Huatai Pinebridge Fund Management. “The purpose of the antitrust campaign is actually to drive these behemoths out of their comfort zone, where they are now simply seeking rent from their undisputed position in their respective businesses.” The spending flood comes after the antitrust months. campaign wiped out hundreds of billions of dollars from the nation’s biggest tech companies. After missing the initial public offering from fintech giant Ant Group Co. and launching an investigation into subsidiary Alibaba last year, regulators have since introduced new rules governing competition, fintech and data collection. Authorities are also reportedly considering setting up a joint venture to oversee the massive amounts of user data collected by private companies, and these efforts are likely to limit the ability of the once freewheeling internet industry to crush competition, either by buying promising startups either by cutting back on rivals through tactics such as forced exclusivity or predatory pricing. In April, the antitrust watchdog imposed a record fine of $ 2.8 billion on Alibaba and ordered its 34 largest tech companies to pledge to comply with the regulations. his investigation into Meituan for alleged abuses, including forced exclusivity deals known as “pick one out of two,” The same charge against Alibaba. The Chinese food delivery giant has also been accused of exploiting workers, while its community trade arm has been fined for excessive subsidies. Wang’s publication of a millennia-old poem, considered by some as a veiled criticism of Beijing, added to the nervousness. Meituan has lost nearly 40% of its market value, or more than $ 130 billion, since its peak in February. On Thursday, the stock fell more than 3% in Hong Kong trading. Online giants have responded to the antitrust push by pledging to channel future profits into new initiatives. Jack Ma’s flagship e-commerce firm said earlier this month it would invest “any extra profits” in technology as well as areas such as community commerce in an attempt to get past the antitrust investigation. In the case of Tencent, it has promised to invest a larger portion of the profits in areas such as the cloud and short videos, and even allocated billions of dollars for so-called “social value” – a sop. clear to Beijing. The Chinese government and internet companies are fully aware of this, “said Shawn Yang, analyst at research firm Blue Lotus Capital. Even before the antitrust crackdown began in earnest last November, the tech giants have increased their investment. , although in areas such as community trade. Alibaba challenger Pinduoduo Inc. raised $ 6.1 billion in November to expand its online grocery and agricultural products business. On Wednesday, executives reiterated their intention to invest “heavily” in areas such as logistics infrastructure and technology, after reporting that quarterly sales had more than tripled. a market forecast to hit $ 19 billion this year. Read more: Alibaba, Meituan Chase $ 14 billion Group-Buyers Arena “We’re getting to the point where space is getting crowded”, Jason Hsu, Founder and CEO of Rayliant Global Advisors said in a recent interview with Bloomberg Television. “Everyone is moving in roughly the same direction whether you are Meituan, Pinduoduo, Alibaba or Tencent. You all envision the same space. In March, Premier Li Keqiang identified key areas in which to achieve “major breakthroughs in basic technologies,” including high-end semiconductors, computer processors and cloud computing – areas in which American companies now dominate. Beijing leaders also pledged to boost research into artificial intelligence and faster fifth-generation networks. “People’s Daily, a spokesperson for the Communist Party, said in a December comment. $ 10 billion raised last month in drone technology. “The Chinese government expects the national internet giants to play a greater role in helping the country achieve technological self-sufficiency,” said Shen Meng, director of boutique investment bank Chanson & Co. ., based in Beijing. “After all, advancing fundamental technologies requires massive capital and manpower. In a country that still lacks a mature venture capital investment ecosystem, large, deep-pocketed techs are better placed than startups to lead this breakthrough. (Updates with Meituan shares in eighth paragraph, Pinduoduo comments on investment in 12th paragraph) More stories like Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP



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