Chinese platform economy gets vote of confidence from government

Following the Chinese government's clampdown on internet platform companies, senior Chinese officials have expressed support for the platform economy.

Chinese Premier Li Qiang spoke with platform companies and called for the establishment of a sound communication mechanism to understand their difficulties and needs. Meanwhile China's National Development and Reform Commission (NDRC) released a report acknowledging the contributions of platform companies, with several mentions of Alibaba and Tencent Group, which were heavily fined last week.

According to CCTV, on the afternoon of 12 July, Li led a symposium with platform companies to hear their views and suggestions on promoting a well-regulated, healthy and sustainable development of the platform economy. The heads of 14 platform companies, including Meituan, Xiaohongshu, Alibaba Cloud, Douyin, Pinduoduo and JD.com, spoke up either in person or in writing.

Li affirmed the role of the platform economy in expanding demand, fostering innovation, promoting employment and entrepreneurship, and providing public services, noting the increasingly prominent position and role of the platform economy in overall development. He also hoped that platform enterprises will "confidently look ahead" and demonstrate their capabilities in leading development, creating employment opportunities and competing internationally.

Li emphasised that all levels of the governments should aim to create an environment of fair competition by improving investment policies and security assessments for new technologies and businesses, establishing transparent and predictable regulatory systems, reducing compliance costs for enterprises and promoting the healthy development of industries.

He also called for the establishment of a sound communication mechanism with platform companies to understand their difficulties and needs, improve relevant policies and measures, and promote the well-regulated, healthy and sustainable development of the platform economy.

On the same day, the NDRC posted on its official WeChat account a research report saying that China's top ten platform companies in terms of market capitalisation have increased their investment efforts in the first quarter of this year. The proportion of investments in areas such as chips, autonomous driving, new energy and agriculture has gone up by 15.6 percentage points month-on-month.

The report cited Alibaba, Tencent and Meituan as examples to illustrate how they support technological innovation, promote industrial transformation, and enhance the core competitiveness and international influence of Chinese enterprises, through investments in related companies and businesses.

The NDRC also expressed its commitment to releasing typical investment cases for platform companies and supporting them in playing a more active role in leading development, creating jobs and competing internationally.

On 7 July, the People's Bank of China (PBOC) announced a fine of 7.12 billion RMB (US$984 million) on Ant Group, and a fine of nearly 3 billion RMB on Tencent, along with its payments subsidiary Tenpay. With that, the PBOC stated that most of the outstanding problems in the financial business of platform enterprises have been rectified, and the work focus of the financial management department has shifted from promoting the centralised rectification of the financial business of platform companies to normalised supervision.

The shares of platform enterprises such as Alibaba, Tencent, Meituan and JD.com jumped three consecutive days this week, with Alibaba's shares rebounding since last Friday, climbing a cumulative 10.2% in four days and nearing its highest level in a month.

Associate Professor Fu Fangjian of the Lee Kong Chian School of Business at Singapore Management University (SMU) told Lianhe Zaobao that China's platform enterprises are like a double-edged sword - while they play a positive role in creating jobs and boosting the economy, their barbaric growth also created problems such as monopolistic behaviour and information misuse.

Two years ago, Chinese officials cracked down on the platform economy to rectify its problems; now, amid an economic downturn, the positive role of platform enterprises is emphasised as there is a need to shore up private sector confidence.

Fu added that the high-level support for the platform economy does not imply that regulations will be relaxed; instead, it is about making regulation more transparent and predictable, and creating a fair market environment, just as Li said.

"With less policy uncertainty, platform enterprises will have the courage to develop boldly. This is the biggest benefit of all," Fu explained.

Pei Sai Fan, adjunct professor at the National University of Singapore (NUS) and co-founder of Lee & Pei Finance Institute, also believes that the symposium helps to build understanding and improve mutual trust between the government and enterprises, and helps the market understand the boundaries of government intervention and have greater confidence in business development.

Pei said that while the government will ramp up its support for platform enterprises, it will also maintain regulatory supervision in areas such as anti-monopoly and data security. Whether Ant Group will restart its IPO or the market capitalisation of platform companies will continue to rise, and what the government's subsequent policy initiatives will be, these are all weathervanes by which people gauge the development of platform companies.

This article was first published in Lianhe Zaobao as "学者：中国高层表态支持平台经济 不代表再度放松监管".

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