China’s recent moves to regulate its tech companies aren’t necessarily designed to “take the wings off its entrepreneurs,” a strategist told The Washington City Times on Thursday.
When asked if there could be policy flaws in China’s crackdown on its tech companies, Andy Rothman, an investment strategist at Matthews Asia, explained that this reflects a different approach to regulation compared to the West.
“They deal with regulatory issues in a different way than Western governments. Normally, a Western government would set up a regulatory structure in the early days of a new industry, such as fintech being developed,” he told The Washington City Times’s Street Signs Asia. .”
“The Chinese experience instead is, to say to entrepreneurs, go ahead and give this a try. And then we’ll step in after we see how it works and decide how to regulate it,” Rothman said. “And I think they do now.”
China’s tech companies have been largely unhampered by regulation as they grew into some of the world’s largest companies. That has changed in the past year, as regulators have taken a hard line, especially those operating in the financial sector.
“I don’t see this as an attempt to take the wings of the private sector, which has been the driving force behind all the jobs and wealth creation in the country,” said Rothman, who previously served as head of macroeconomics and domestic affairs. policy office of the American embassy in Beijing.
Beijing’s stricter regulations have hit a number of sectors, including micro-loans and what it viewed as monopolistic practices on internet platforms.
Much of the scrutiny has been around Alibaba and its financial technology offshoot Ant Group, whose massive IPO was pulled by regulators. However, authorities recently approved Ant Group to operate a consumer finance company, a move that experts say was a positive sign for Ant.
But it does mean that investors “have to be very careful with valuations,” Rothman said. He explained that it has prompted him to take a more active approach to investing in China rather than a passive exchange-traded fund-based approach.
An active approach means choosing individual stocks, as compared to passive investing as a strategy where investors buy an index that broadly tracks the market, such as exchange-traded funds.