Beijing Indicates Two-Year Internet Restrictions May Be Concluding

A top Chinese official has announced that investigations into the financial businesses of several internet companies have been completed, signalling an end to a two-year regulatory crackdown on China's homegrown technology giants. This is good news for the companies involved, which have been struggling under the weight of the crackdown.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, told state media that the government had concluded a campaign to "rectify the financial businesses of 14 platform companies." Mr. Guo added that officials would look to provide more support to tech companies and work toward making supervision of the tech sector more predictable going forward.

Ant Group Co., a financial-technology giant, said over the weekend that Chinese billionaire Jack Ma would cede control of the company. Ant is one-third owned by Alibaba Group Holding Ltd.

Since Chinese regulators forced it to scrap a blockbuster initial public offering in November 2020, Ant Group has been overhauling its operations. Ant Group operates the popular mobile-payments platform Alipay.

Since late 2020, China has been cracking down on its previously fast-growing and freewheeling internet sector, ensnaring companies such as Alibaba, Meituan and Didi Global Inc. This regulatory crackdown has led to hefty fines on Chinese technology titans and erased more than $1 trillion in market value from China’s largest publicly listed tech firms.

The Hang Seng Tech index, which comprises Chinese internet giants such as Alibaba, Tencent Holdings Ltd., and Baidu Inc., rose 3.2% in Hong Kong on Monday.

Alibaba's stock surged 8.7% on Monday, continuing its strong rebound from a multiyear low in October 2022. Shares of China's biggest e-commerce provider are up 80% from their October lows, but remain only about a third of their record high set just before Ant's canceled IPO. At its peak, Alibaba's market capitalization neared $900 billion.

Mr. Guo, who is in charge of China's banking and insurance activities, said that the goal is for regulators to "encourage platform enterprises to operate in compliance with regulations and play a major role in leading development, creating employment, and international competition." He is the highest-ranking Chinese official to make public comments recently that the government might be ending its crackdown on the tech sector.

Starting in early 2022, regulators began to soften their tone on Beijing-led policies, including its zero tolerance for Covid-19 and its efforts to rein in internet firms. This weighed on China's economic growth and worsened a selloff in Chinese stocks. In March, China's economic czar, Liu He, said during a meeting with other policy makers that regulations should be enforced in a transparent and predictable manner. He specified that any policy that could affect the market should be coordinated with financial regulators first.

Last month, the head of China's top economic-planning body, the National Development and Reform Commission, called for government policies to focus on boosting growth, including instilling private-sector confidence in the real-estate sector.

Government officials have recently started to review policies for the technology and education sectors, and are preparing to conclude investigations against internet companies, according to people familiar with the situation.

Mr. Guo's comments come after authorities relaxed rules in late December to allow domestic gaming companies to bring in imported videogame titles. That follows earlier changes from last April when China's videogame regulator resumed granting publishing licenses for domestic gaming titles after a monthslong freeze. These changes have made it possible for Chinese gamers to have access to a wider range of titles.

On Dec. 30, China’s securities regulator said two Nasdaq-listed online brokers had violated domestic laws by allowing mainland-based customers to trade in stocks listed on foreign exchanges. This announcement sparked a selloff in the American depositary receipts of the companies, Up Fintech Holding Ltd. and Futu Holdings Ltd. However, some market participants said the regulator’s statement indicated its investigation into the two firms was coming to an end. Chinese stocks have broadly risen so far this year, due in part to optimism that the worst is over for the tech sector.