China tech stocks lower as nation issues draft competition rules

Bloomberg2021-08-17

The Hang Seng Tech Index dropped as much as 3%, as China’s market regulator released draft rules banning unfair competition among the nation’s online platform operators.

Baidu Inc. and NetEase Inc. slumped as much as 5% while Tencent Holdings Ltd. and Alibaba Group Holding Ltd. slid more than 4%.

The wide-ranging proposals released Tuesday come after the tech-industry ministry launched a campaign last month aimed at rooting out a raft of problematic behavior.

The draft covers protections for intellectual property and brand reputation as well as a ban against using algorithms or fake reviews to promote goods and services. Alongside expressly prohibited behaviors like forced exclusivity arrangements, companies will also not be permitted to use technical means to interfere with the operations of rival platforms or maliciously render those services incompatible with their own.

The latter could force giants like Tencent and Alibaba Group Holding Ltd. to dismantle their walled-off ecosystems that had prevented users from accessing one company’s services from the other’s platforms. Alibaba Chief Executive Officer Daniel Zhang earlier this month signaled support for the removal of those barriers, saying that he saw “cross-platform openness and connectivity as a positive trend.”

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