China is signaling a reduction in technological repression, but do not expect a reversal of policy

China has shown signs of easing repression against the technology sector, which has wiped out billions of dollars worth of its most famous companies.

But analysts said Beijing’s recent positive rhetoric should not be confused with a reversal of policy.

“I think the big technology companies will have a grace period for maybe the next six months,” Linhao Bao, a technical analyst at Trivium China, told CNBC’s Squawk Box Europe on Tuesday.

“However, this is not really a reversal of technological repression, the long-term prospects have not changed. “Since Beijing has already come to the conclusion that it is a bad idea to let big technology companies run wild because it creates unfair market competition … wealth will be concentrated at the top and begin to influence politics,” he said.

“So technological repression is really here to stay in the long run.”

Since the end of 2020, Beijing has introduced tighter regulation of its domestic technology sector in a bid to seize power from some of its largest companies.

Rules in the areas from antitrust to data protection have come into force quickly in the last 16 months. These moves caught international investors unprepared and caused a dramatic sell-off of shares of local titans from Tencent to Alibaba.

But Beijing has signaled that some of the control over the technology sector could be eased as its economy faces pressure from the Covid revival and subsequent blockades.

On Tuesday, Chinese officials met with some of the country’s top technology leaders for further signs of relief.

After the meeting, Chinese Deputy Prime Minister Liu He promised support for the technology sector and plans to present Internet companies publicly.

This comes after Chinese President Xi Jinping chaired a meeting of the Politburo, the highest decision-making body, in April. The Politburo has promised to support the “healthy” development of the so-called platform economy, which includes Internet companies in areas ranging from social media to e-commerce.

Despite these more reassuring tones than Beijing, experts doubt there will be a huge change in policy.

“I don’t believe regulatory action will really stop. The various ministries still have a mandate to implement all the regulations that have been amended and strengthened,” said Charles Mock, a visiting scientist at Stanford University’s Global Digital Policy Incubator.

“Even if there are some changes, it may be too late to reverse the damage. For example, even if they allow more listing abroad, investor confidence is already lost, and control and hostility from the foreign market cannot be reversed. “

Mock said that because regulatory oversight is led by the top of China’s political hierarchy, it will be difficult to turn around.

“It looks a lot like the crashes they face with zero Covid. You know it’s wrong, but you can’t admit it, you can’t reverse the course, and you can only pay in words and hope for the best, “Mock said.

Zero Covid is China’s policy of eliminating the coronavirus from the continent through austerity measures, including city-wide blocking and mass testing. The economically and financially powerful city of Shanghai has been under blockade since late March. China’s policy of zero Covid weighs on its economy.

Mock added that the motives behind China’s regulatory tightening have not changed either.

“Much of the ‘technological repression’ campaign is indeed rooted in the motivation to increase state control over the digital economy and all trade data, and there is no way in the current crisis for the party to think these controls are less important now,” he said. he.