China Tightens Grip on Businesses... "Actively Promoting the Construction of a Rule of Law State"

State Council Announces 5-Year Regulatory Blueprint
"Actively Utilize Internet and Big Data as Judicial Tools"
Legislation on Food, Pharmaceuticals, Digital Economy, and Financial Regulations Announced
"Investor Anxiety Grows"... "Resolve Regulatory Uncertainty"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] Recently, Chinese authorities, who have been imposing regulatory drives across various industrial sectors, have announced that they will implement more economic regulations with the goal of "realizing a rule-of-law country." As the stock prices of related companies plummet due to government regulatory pressure, concerns among investors are expected to grow as the authorities release comprehensive regulatory guidelines.

On the 11th (local time), the Central Committee of the Communist Party of China and the State Council distributed the "Implementation Plan for Building a Rule-of-Law Government (2021?2025)," which outlines the blueprint for economic regulations to be carried out over the next five years.

According to the plan, the Chinese government intends to "actively promote" legislation in key areas such as national security, scientific and technological innovation, culture and education, risk prevention, antitrust, and foreign rule of law.

Additionally, it includes provisions to "further strengthen regulatory legislation in fields such as food, pharmaceuticals, public health, natural resources, transportation, financial services, and education."

Moreover, the document states that "through appropriate legislation and the introduction of governance systems in areas such as the digital economy, internet finance, artificial intelligence, big data, and cloud computing, the healthy development of related industries will be promoted."

The guidelines also mention utilizing the internet and big data as tools for judicial authorities and state that "data integration for the establishment of a supervision platform will be realized by the second half of 2022."

Furthermore, the plan aims to enhance the effectiveness of government policy-making processes and ensure transparency in government policies.

The document notes, "As people demand improvements in their quality of life, the importance of building a rule-of-law country has increased," and emphasizes that "from a long-term perspective, it is necessary to promote the construction of a rule-of-law country to move into a new era."

A notable aspect of the newly announced guidelines is the forecasted strengthening of regulations in industrial sectors such as food and pharmaceuticals, which had not been previously mentioned.

Gary Dugan, CEO of Global CIO Office, an asset management firm based in Singapore, said, "The food and pharmaceutical sectors were newly mentioned this time," adding, "Investors are on edge as regulations in these areas are also anticipated."

He continued, "The government's presentation of a five-year regulatory blueprint means that investors should be concerned about regulatory tightening during that period."

Recently, the Chinese government has been imposing regulations on major internet companies such as Alibaba and Tencent, as well as edutech companies.

[Image source=AP Yonhap News]

Last month, the Chinese government ordered all private education companies in the country to convert into non-profit organizations, causing the stock prices of related companies to plummet by more than half.

Additionally, earlier this year, the government imposed the largest-ever antitrust fine of around 3 trillion won on Alibaba Group, the largest e-commerce company, and recently removed the app of Didi Chuxing, the country's largest ride-sharing company, from app stores.

Amid these circumstances, foreign investors who have invested in Chinese companies are reportedly withdrawing their investment funds. The 'KWEB,' an ETF tracking Chinese internet companies traded in the U.S. market, has fallen 34% so far this year.

In an interview with Bloomberg, a China expert said, "It is difficult to grasp the specifics of the Chinese government's regulatory policies based solely on the government guidelines," adding, "What is important is to understand the priorities of the Chinese leadership."

However, there are also positive evaluations that the government has resolved regulatory uncertainties by announcing an official regulatory plan.

Michael Norris, an analyst at Agency China, a consulting firm based in Shanghai, said, "The document released by the State Council this time serves as guidelines to interpret the current regulatory environment," and added, "It is appropriately announced by the government in that it allows for the prediction of upcoming regulatory policies."

This content was produced with the assistance of AI translation services.