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China unveils five-year plan to strengthen control of economy

Chinese politics & policy

China unveils five-year plan to strengthen control of economy

Communist party seeks to extend oversight of important sectors in latest step of regulatory assault

The government of Chinese president Xi Jinping has launched a regulatory crackdown that has wiped billions of dollars off the value of some of the country’s biggest technology companies © AP

China has released a five-year plan to strengthen regulatory control over strategic sectors including technology and healthcare, in Beijing’s latest push to assert Communist party supremacy over the world’s second-largest economy.

The party’s Central Committee and the State Council, or cabinet, jointly released a policy document late on Wednesday that would expand government legislation and build a modern regulatory environment to “meet people’s ever-growing demands for a good life.”

The plan’s release followed a series of regulatory measures that have stunned investors in Chinese business and knocked tens of billions of dollars off the valuations of some of the country’s biggest tech groups.

Beijing appeared to use the release to provide direction on the breadth and duration of its regulatory overhaul, even though the wide-ranging document did not provide a list of specific instructions or measures.

Analysts said the crackdown would intensify.

“Regulatory agencies in China will continue to scrutinise companies in internet and technology-related sectors on a range of issues, such as overseas listings, data security, consumer privacy, anti-competitive practices and merger irregularities,” said Bruce Pang, head of research at China Renaissance, the investment bank.

The wide-ranging document highlighted the “urgent need” for additional legislation to govern the technology and education sectors and resolve antitrust issues essential to improving people’s livelihoods.

Timely research must be done to build legal frameworks for the digital economy, internet finance, artificial intelligence, big data and cloud computing to ensure that “new business models develop in a healthy manner”, the outline added.

But Pang said China’s tech sector would continue to face pressure over a range of socio-economic challenges that Beijing feels must be addressed. “We anticipate short-term disruption to market sentiment and pressure on valuations of offshore-listed Chinese companies in related sectors, amid the risk of a regulatory overhang,” he said.

“Policymakers would like to address and resolve social issues effectively and efficiently to ensure social fairness, justice, equality and national safety as well as preventing risks.”

Various Chinese regulators have unveiled a wide range of rules in recent weeks that seek to place limits on numerous sectors and businesses in the name of protecting national security and social stability.

The Ministry of Industry and Information Technology published a final version of its guidelines for smart cars on Thursday. The rules mandated that companies seeking to export user or vehicle data must first undergo a data security review by regulators. Approval would also be required before upgrading vehicles’ autonomous driving software.

The China Banking and Insurance Regulatory Commission, the banking and insurance regulator, also unveiled a plan to reform the country’s online insurance industry.

Companies and intermediaries in the sector have been ordered to correct a number of concerns including customer data security practices, marketing and fees, according to a notice seen by the Financial Times. The regulator called it a significant political undertaking and said it would step up inspections.

Chinese stock markets were broadly lower on Thursday following the announcement, with the Hang Seng Tech index in Hong Kong falling about 1 per cent.

Thomas Gatley, a Beijing-based analyst at Gavekal Dragonomics, a research group, said the pace and severity of sudden regulatory interventions would probably moderate but Beijing’s campaign would “absolutely not be without its hiccups”.

Gatley said the reforms would fall into two broad categories: control over information and “common prosperity guidelines”, or ways of “looking after middle-class people both in their role as consumers and in their role as workers”.

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