After losing more than $1 trillion, Beijing appears to be warming to Chinese tech giants

Beijing’s regulatory crackdown on China’s tech sector began in late 2020, wiping more than $1 trillion from the country’s largest companies combined.

There are now signs that the central government is changing its stance on internet titans such as Alibabawhich could prove positive for Chinese tech stocks.

“The regulatory headwinds that we’ve had for the past two years … it’s going from headwinds to tailwinds now,” George Efstathopoulos, portfolio manager at Fidelity International, told CNBC’s Street Signs Asia on Wednesday.

On Tuesday, Alibaba announced a major restructuring aimed at splitting its company into six business units in an initiative “aimed at unlocking shareholder value and boosting market competitiveness.”

In the past two years, China’s government has often railed against the “disorderly capital expansion” of tech companies that have grown into large conglomerates. Part of Alibaba’s announcement noted that these fragmented companies could raise debt capital and even go public, seemingly going in the opposite direction to Beijing’s concerns.

Efstathopoulos said the move could mean the green light from senior echelons of the Chinese government.

“They have top leadership’s blessing for value unlocking and to me that’s fantastic indication that we’re now essentially moving away from regulation which isn’t the problem it was,” Efstathopoulos said.

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