China's recent new policies have caused turbulence in the market. In order to alleviate the financial burden on students and parents, the Chinese government has prohibited off-campus training institutions from making profits. All companies that provide extracurricular tutoring must be transformed into non-profit organizations. As a result, the market value of some of China’s largest listed education companies has fallen sharply, and the market value of the entire industry has evaporated by nearly tens of billions of dollars.
In addition, the Chinese e-commerce giant Alibaba Group was convicted of violating the "Anti-Monopoly Law" and fined nearly 18.3 billion yuan. The State Administration for Market Regulation also issued news that it will further strengthen the supervision of enterprises that abuse their market position and violate monopoly agreements.
These policies and antitrust measures have become important factors affecting the market, causing the market value of China's technology industry to fall by as much as $1 trillion since February 2021. Therefore, the concentration of market positions in the technology sector has dropped significantly, and the current market pricing reflects the impact of the sanctions to a certain extent.
We expect the sanctions will continue, but as the focus of Chinese government's short-term policies shifts to promoting economic growth, we believe that the intensity of sanctions is expected to be reduced. Currently, we have a wait-and-see attitude towards China-related investment assets.
Source:
BlackRock - Taking Stock on China (02 Aug 2021)
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