Already considerable, the Chinese Internet sector continues to grow at lightning speed. Chinese officials say the market now has about a billion users, more than three times the population of the United States. Of these 1 billion users, 31% live in rural areas. The number of people shopping online is 782 million and teleworking affects about 346 million people.
Despite these impressive figures, 2021 was a year that Chinese investors want to forget as soon as possible. Over the past 12 months, stricter regulations have caused panic among investors and cost billions of dollars in value to the country’s Internet giants.
While measures taken by the Chinese Communist Party have shocked the business community and shaken foreign investors, President Xi remains imperceptible. After all, the Party’s motives seem quite noble: to pay homage to the country’s history of socialism, to correct economic inequalities, and to address concerns about consumer rights, data privacy, and over-indebtedness.
The volatility period began on November 2, 2020, when Jack Ma’s Ant Group IPO was canceled during the night. Valued at $ 37 billion, it was the largest IPO in history. Investors and the business community were unaware that this was just the beginning of a campaign of mass repression.
Technology has not been the only sector surprised: finance, gaming, private education and entertainment have all been in the spotlight of the authorities. The rules introduced in July have turned China’s tutoring industry upside down by $ 120 billion and increased scrutiny of the country’s vast food delivery industry.
Meituan sales platform, Tencent holding company, Pinduoduo agriculture-focused technology platform and other technology companies have also faced investigations or fines for alleged anti-competitive conduct. IPOs in the United States Despite concerns from Chinese authorities, Didi’s shared travel app has been banned from app stores and announced plans to withdraw from the New York Stock Exchange.
Chinese real estate giant Evergrande has also fallen victim to the new rules introduced to control the amount of real estate developers have. After failing to pay interest, the company saw its share price plummet and officially defaulted on its debt, with a liability of about $ 300 billion. The consequences could trigger a credit crunch that could hamper business in all areas for some time.
While much of this balance sheet looks pessimistic, it actually offers a great opportunity for long-term investors. In 2022, the valuation of world-class Chinese companies will be extremely low.
China is likely to continue playing the regulatory card for some time, further destabilizing markets by imposing corporate repression, but long-term investors will come out on top.
In total, the revenue of China’s Internet economy was estimated at 905 billion US dollars in 2020, a growth of 15% compared to 2019, and the growth forecast is 25% in 2021 and an additional 15% in 2022.
The online certificate from China Swissquote is aimed at Internet players in China who will benefit from a booming market that is estimated to be worth more than US $ 900 billion by 2020 and is expected to grow an additional 15% annually in 2022.