It’s been a bad week for American investors in Chinese tech giants. In the past few days shares of Didi, Alibaba, and Tencent have plummeted in price after Chinese regulators began clamping down on what they say are irregularities at the companies. Chinese regulators on Wednesday fined all three tech giants for what they said were anti-monopolistic behaviors over the ways the companies made mergers and acquisitions over the past decade, reports CNN. And on Monday, China ordered the Didi app (the Uber of China) to be pulled from app stores in the country as China’s internet watchdog investigates the company.
Since then, Didi stock has crashed on the Nasdaq, falling over 27% during the past five days. Alibaba and Tencent are also down over 8% and 7% in the same period. And while it’s no surprise that regulators would want to crack down on companies that are allegedly violating anti-monopoly or privacy laws, many China watchers couldn’t help but notice the companies being cracked down on are all listed on American stock exchanges.
Jude Blanchette, Freeman Chair in China Studies at CSIS, told CNBC that China’s moves against its own tech giants could be seen as the government reminding the powerful tech giants who is really in charge—something that became evident after Alibaba founder Jack Ma criticized China’s regulations last October. Shortly after the criticism, Ma disappeared from the public eye for months, and Beijing scuttled Ant Group’s would-be-record-breaking IPO.
“The phrase is, ‘Kill the chicken to scare the monkey,'” Blanchette explained. “With the companies that have come up under scrutiny recently, there is—from Beijing’s perspective—a political ‘sin,’ that the company has transgressed . . . This is the permanent reality, I think, of a newly energized regulatory apparatus in Beijing, which sees the degree of control these tech companies have gained in the market domestically as being untenable.”