While Beijing has wound down sweeping crackdowns on digital platform firms, new elements of regulatory supervision came to bear in the second half of 2022. Although high-level statements emphasized the importance of foreign investment and fair treatment for the private sector, specific policies reinforced state supervision over private companies, especially on the sensitive matter of data security. At a State Council Information Office press conference last November, Wang Song, the information development bureau head of the Cyberspace Administration of China (CAC), said the internet regulator—which led the crackdown on ride-hailing giant Didi in 2021—is responsible for encouraging and supporting what the government terms the healthy development of inter- net platform enterprises. Wang flagged the importance of platform companies for economic growth and society. Taken together, these are clear signs that Beijing is concerned about restoring economic growth—but its willingness to let the market guide the way to eco- nomic recovery is far from certain.
Despite promises by senior Chinese officials to boost foreign investment, the government took steps to strengthen supervision of foreign firms. The China Securities Regulatory Commission (CSRC) revised rules governing publicly offered securities investment funds, requiring the Chinese subsidiaries of foreign-owned fund managers—such as Fidelity and BlackRock—and foreign Chinese joint ventures to create Communist Party cells. While it is difficult to gauge the impact of individual Party cells, for foreign companies their presence raises the specter of having to consult a Party cadre when making company decisions, heightening the risk of government interference.
Though the regulatory crackdown is winding down, the China National Knowledge Infrastructure (CNKI) academic resource database did not escape scrutiny, becoming the subject of both an antitrust and a security investigation. The State Administration for Market Regulation (SAMR) concluded that CNKI, which enjoys a near-monopoly on academic journal access, “abused its dominant market position” by increasing subscription fees and slapped the company with a hefty RMB 87.6 million fine, amounting to 5 percent of its 2021 annual revenue. By comparison, Alibaba and Meituan were only fined 4 percent and 3 percent of their annual revenues, respectively, in previous SAMR investigations. CNKI’s security investigation is potentially more serious, as it addresses the sensitive nature of data access and management. CAC, which carries broad responsibilities for internet and data security, launched a cybersecurity probe into CNKI to “prevent national data security risks, safeguard national security, and protect public interests.” This investigation is ongoing.
Pro-market, business-friendly messages notwithstanding, the government’s commitment to industrial policy is clear. Purchase tax exemptions on new energy vehicles (NEVs) were extended through the end of 2023—the third time such an extension has been granted. Hands-on intervention in 2022 to drive economic recovery in this sector led to twice the number of domestic NEV sales year- on-year, while traditional car sales contracted by 13 percent com- pared to 2021 levels. This comes at a time when the United States, the European Union (EU), and others seek to sustain their own domestic EV industries rather than concede the market to China.
