China’s digital ecosystem: Companies face tightened regulations on multiple fronts

Beijing’s crucial role in shaping China’s technology ecosystem and unveiling new trends and insights impacting the country’s fast-growing internet industry is examined in SCMP’s China Internet Report 2021, which highlights the risks and opportunities for businesses adapting to the shifting market dynamics. 

Why it matters

With more than 1,800 companies raising over US$41.1 billion in 2020, China is a leading market for technological development and investment.  As  Gary Liu, CEO, South China Morning Post, observes: “Given the sheer size of China’s internet sector and its intertwined relationship with the global financial system, evolving regulations and market fundamentals will have significant implications for the entire world.”

Key insights

• Regulations are being tightened on multiple fronts, with sweeping crackdowns since the second half of 2020 that focus on antitrust, fintech, data protection and cryptocurrencies. 
• The road ahead is bumpy for Chinese tech IPOs as companies weigh the risk of removal and strict regulations by listing overseas, or follow others going public domestically. 
• Companies eyeing overseas expansion are increasingly forced to switch their focus to Southeast Asia or downplay their Chinese origins due to growing geopolitical tensions. 
• The evolving demographic of internet users has created the rise of new niche customer segments, with “silver economy” and “sheconomy” as the battlegrounds for businesses chasing growth.
• E-commerce brands are focused on creating private-domain traffic and building direct communication channels with consumers because of rising customer acquisition costs.

Sourced from South China Morning Post

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