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The largest Internet company in China has shut down its investment arm
'Investment,' according to Oxford, is the activity or practice of investing money for profit. Yes, individuals are eager to put their hard-earned money into start-ups, stocks, and businesses for the sake of profit. Profiteering, on the other hand, has been labeled a sin in China by the Xi Jinping government. As a result, even large IT companies like ByteDance Ltd are being compelled to abandon their investment industry in order to reduce their losses and maintain their existence.
Before Jinping, ByteDance reins in its investing activity
Bloomberg on Wednesday reported that ByteDance is downsizing its powerful investment arm to keep Chinese regulators at bay. ByteDance's own venture capital and investment division, which presently invests in potential start-ups, will be disbanded, according to the article. Another investment firm that assists in the funding of small and medium-sized businesses is also experiencing major changes.
This comes as Chinese authorities, particularly the Cyberspace Administration of China (CAC), are said to be working on tougher rules for large investment businesses. Companies with a revenue of more than $1.6 billion or more than 100 million users will be required to get clearance from the CAC before making any investment or raising cash under the new standards. These regulations are being implemented to strengthen the government's hold on major tech companies such as Tencent, Alibaba, and ByteDance.
China's rush of laws is taking a toll on the world's biggest digital companies
The CAC has already made changes to its regulations in order to stifle Chinese businesses' plans to list on foreign exchanges. In addition, the government is taking efforts to discourage local start-ups from soliciting outside funding. Consider these distinct news stories revealing China's desire to sicken its IT behemoths in order to exert greater control over their operations.
What the move may cost China's economy
China intends to stifle its IT companies in order to further President Xi Jinping's "shared prosperity" goal. However, this will have a significant impact on China's thriving start-up culture and the well-being of smaller businesses. It was recently reported by TFI Global that more than 4 million firms had gone missing in China the last year. By comparison, less than 1.5 million new firms opened at the same time.
It was the first time in two decades that the number of micro and small businesses that closed their doors outnumbered the number of new businesses that opened.
Tiny-scale businesses are considered the "backbone" of China's private sector, with approximately 40 million micro and small businesses. Last year, around one-tenth of these businesses went out of business. Small businesses strewn over China's industrial hotspots generate half of the country's tax income, 60% of GDP, and 80% of urban employment. As a result, the CCP regime's rigorous requirements aimed at reining in the major digital behemoths may wind up drying up capital for the country's tiny businesses.
Because, as you can see, Xi Jinping's "shared prosperity campaign" is simply political and has nothing to do with helping China's impoverished. Despite Chinese economic and political crises, Jinping is eyeing a third term in leadership. Jinping intends to put an end to his political adversaries once and for all by cracking down on huge internet companies, which are fundamentally linked to Xi's opposing Shanghai group. However, China's economy may become irreparably harmed as a result of this.
