China indicates relaxation of the tech pressure in an effort to boost the economy.

(Reuters) – BEIJING – On Friday, China hinted an easing of its grip on the once-freewheeling digital industry as President Xi Jinping sought to support the economy in the face of growth-sapping COVID-19 lockdowns, sending shares of online giants soaring.

In a meeting presided over by Xi, China’s powerful Politburo said it will increase policy support for the world’s second-largest economy, including its so-called “platform economy,” fueling investor hopes that the worst of an unprecedented, multi-pronged crackdown that began in late 2020 may be over.

According to two individuals familiar with the situation, China’s senior leaders will convene a symposium early next month with a number of internet businesses, which is anticipated to be led by Xi. According to one report, food delivery company Meituan (3690.HK) was among those invited.
The sources declined to be identified because of confidentiality concerns.

The South China Morning Post, which broke the news of the impending conference, stated that tech behemoths Alibaba Group Holding (9988.HK), Tencent Holdings (0700.HK), and TikTok owner ByteDance were also invited.

According to one source, authorities are attempting to reassure corporate leaders about the existing regulatory climate and encourage them to continue developing their businesses.

The Hang Seng Tech index (.HSTECH) gained 10% on the day, its best since Vice Premier Liu He promised policy assistance six weeks ago. Alibaba and JD.com (9618.HK) both increased by 16 percent, as did Meituan, while Tencent increased by 11 percent.

On Friday afternoon, depository receipts of Alibaba, JD.com, Meituan, and Tencent trading in US markets were up 7.8 percent, 7.5 percent, 13.4 percent, and 4.8 percent, respectively.

“The Chinese government, like the United States and other governments, has been attempting to catch up in regulating a technology sector that has grown at an incredible rate over the last decade,” said Kevin Carter, CIO of EMQQ Global, which created the Emerging Market Internet & Ecommerce ETF (EMQQ.P), which is composed of roughly half China equity tech securities.

“This meeting may indicate that the administration believes it has caught up,” he added.

According to Jason Pride, chief investment officer of private wealth at Glenmede, the market’s reaction indicated a notion that Beijing, which had taken moves to rein in what it perceived as excessive earnings at China’s major internet businesses, was easing off on the level of pressure it was putting.

Beijing has attempted to rein in a variety of businesses as part of a campaign to crack down on anti-monopoly restrictions and data privacy standards, among other things, as well as bridge a developing income disparity that undermined the legitimacy of Communist Party leadership under a “shared prosperity” programme.

However, crackdowns on e-commerce, private education, and the property sector have exacted an economic toll, and China has eased some of the policies since the beginning of the year to assist an economy grappling with severe COVID-19 lockdowns.

Separately, sources said on Friday that Chinese and US authorities were negotiating operational aspects of an audit agreement that Beijing aims to finalise this year, the latest attempt to avoid Chinese businesses from being removed from US exchanges.

The initiative by the US Securities and Exchange Commission to identify Chinese corporations that are likely to be delisted from Future York for failing to fulfil auditing criteria has prompted more fund managers to sell their shares and darkened the likelihood of new listings.

Earlier on Friday, the Politburo, China’s governing Communist Party’s highest decision-making body, committed to “complete the unique rectification of the platform economy,” without specifying a timetable, and to implement steps to assist its development.

Beijing has set a 5.5 percent GDP target for this year, which private economists say would be tough to meet without major help, as COVID-19 lockdowns and other severe restrictions to combat the epidemic disrupt companies and supply networks.

China relaxed a nine-month restriction on gaming licences earlier this month, in part to mitigate the economic impact of the prohibition.

China said in January that it will reduce subsidies for electric vehicles and plug-in hybrids by 30 percent in 2022 and eliminate them totally by the end of the year.

However, with auto sales in April down due to lockdowns, China’s state planner announced this week that it was meeting with industry to discuss government assistance for those vehicles, indicating a more favourable posture.

According to the state-run Xinhua news agency, the Politburo announced during its meeting on Friday that it will help COVID-affected industries and small businesses, speed infrastructure building, and stabilise transport, logistics, and supply chains.

According to Gary Ng, senior economist at Natixis in Hong Kong, the Politburo meeting “is a positive indicator that the government aims to prioritise growth above a lot of other short-term goals such as deleveraging or other regulatory adjustments.”

Ng believes that anti-trust regulations that have squeezing the platform economy, as well as a crackdown on the real estate industry, will return in the end.

“However, given of the pressure on growth and the zero COVID policy, there will need to be a trade-off between deleveraging and crackdowns vs growth, which is why the market is a bit more hopeful in the short term,” he added.

China’s benchmark stock index increased by more than 2%.

Fears that lockdowns might do catastrophic harm to China’s economy and disrupt a global recovery have weighed heavily on markets in the last two weeks, just as many nations are recovering from pandemic-related slumps.