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Chinese Tech Firms Rise as U.S. Peers Cut Back

Plus500 | Thursday 05 January 2023

Could Big Tech on the international scene be in for a shake-up? After a tumultuous 2022, the opening trading days of the new year could be heralding new shifts on the horizon for some of the world’s biggest names in the technological sector, from Amazon to China’s Alibaba.

Chinese Tech Firms Rise

Chinese Tech: Sleeping Dragon Awakens?

As we close in on nearly three years since the opening volleys of the COVID-19 pandemic, it seems that the world’s most populous country has finally been easing up on its controversial ‘zero-COVID’ policy. In the past month, a wide raft of strict infection containment measures have been loosened in China, from the requirement for COVID-19 patients to isolate in government facilities to tight travel restrictions. Given the highly deleterious effect, lockdowns had on the Chinese economy in 2022, these moves on the part of the Communist Party may have come as a source of encouragement to those hoping for China to rejoin the global marketplace in 2023. 

COVID-19 containment may not be the only policy sphere that China’s top decision-makers may be reconsidering in the New Year. Over the past two years, the country’s authorities have implemented what many called a ‘regulatory crackdown’ on China’s domestic technological industry. At the beginning of last year, it was announced that Chinese tech firms seeking to be listed overseas would need to undergo more thorough oversight.

However, it seems that a sea change is underway in the Chinese government’s policies toward the nation’s most successful homegrown Asian tech stocks. Jack Ma, founder of Alibaba (BABA), recently won approval for a massive capital expansion of Ant Group from the government, paving the way for Alibaba’s fintech affiliate to more than double its capital to $2.7 billion. 

This change marks an important shift in Chinese tech policy. Less than two and a half years, the government threw a monkey wrench into Ant’s plans to go public in what had been touted as the biggest IPO in history with an order for the firm to undergo extensive restructuring. Now it seems that the Ma may soon be getting the green light to move toward taking the company public. 

Given that Alibaba owns a stake in Ant, it may therefore come as no surprise that the news encouraged traders to boost Alibaba shares by over 13% yesterday. The possible indications that China may be shifting its focus from strict regulation in tech to boosting economic growth might have also been behind the more than 14% jump in e-commerce giant (JD) shares yesterday as well. Chinese tech seems to be getting off to an encouraging start in 2023, but time will tell whether this momentum can be sustained. 

US Tech Falls: Amazon Cuts Payroll

On the other side of the Pacific, things seem not to be going as well for one of America’s most important tech firms this week. Yesterday, Amazon (AMZN) announced that about 6% of the company’s employees would see their positions eliminated after the firm’s shares dropped by nearly 50% in 2022.

Amazon already announced back in November that a portion of its workforce would have to be laid off in order to reduce overhead, in addition to the implementation of a hiring freeze, but some analysts are positing that continued high inflation in the U.S. may be putting downward pressure on Amazon’s revenues as consumers grow more reluctant to open their pocketbooks. 

With industry peer Meta (META) also having moved to reduce its payroll in recent months following a drop in stock price of more than half over the course of 2022, the macroeconomic big picture for American tech firms seems to be less than rosy. (Source:BBC)

Recent years have seen the global tech industry go on a rollercoaster ride as the shifting winds of the global economy affect decision-making in the public and private sectors alike; which of the world’s most prominent tech firms will come out ahead in the months to come is anyone’s guess.

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