Regulatory tightening explained: A strategic policy shift and the outlook for China’s private sector

What should investors make of the flurry of regulatory tightening that China has implemented since the second half of 2020? How do the measures fit into China’s central strategy as it seeks to strengthen its domestic sector and embarks on long-term strategic competition with the US?

A change in reform tactics

The economic recovery from the Covid-19 shock has given China’s leadership an opportunity to tackle structural problems by tightening regulatory oversight which favours the development of ‘hard tech’ hardware and components over ‘soft tech’ (e-commerce) expansion. This marks a shift in Beijing’s approach that had focused on consumption-driven growth.

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