After last weekend’s regulatory action on Chinese tech behemoths, more trouble appears to be brewing on their horizon.
What Happened: As Chinese President Xi Jinping furthers his “common prosperity” agenda that seeks equitable sharing of wealth, it has emerged that China could impose a “data tax” on platform developers, including big internet companies, the Nikkei reported.
Internet companies should return a portion of the revenues they make out of the personal information they have privy to, former Chongqing mayor Huang Qifan, who also previously served as a Communist Party official on economic policy, reportedly said at an annual financial conference held in late October.
“Platforms that possess large amounts of personal information should return 20%-30% of revenue generated by transactions to the producers of that data,” Huang was quoted as saying.
“It is the state, and not the internet companies, that should own the jurisdiction over the data and the right to trade it,” he reportedly said.
Since Huang is highly regarded for his economic expertise and reportedly still involved in such policies, his remarks on data revenue increase the likelihood of the government contemplating such a move, the Nikkei said.
Why It’s Important: Internet tech companies such as Alibaba Group Holding Limited (NYSE: BABA), Tencent Holdings Limited (Pink: TCEHY) Baidu, Inc. (NASDAQ: BIDU) and JD.com, Inc. (NASDAQ: JD) mint huge money from hawking the massive amount of personal data they collect from their users.
These companies have already taken a huge hit from an extended regulatory crackdown that was set in motion late last year. The Jack Ma-co-founded Alibaba was the first to feel the pinch.
It was in fact comments made by Ma at the same conference last year regarding overregulation that opened the Pandora’s box of sorts.
The domestic tech titans were taken to task for engaging in anticompetitive practices and also misuse of user data.
Antitrust regulators ordered Alibaba to pay fine of $2.87 billion in mid-April. The company’s September quarter results released last week showed the impact of the regulatory crackdown, with the company reporting the first adjusted profit decline in more than five years.
Chinese Tech Stock Price Action: At last check, Alibaba shares were down 2.18% at $137.75.
Tencent shares were slipping 1.98% to $61.95.
JD.com shares were receding 3.42% to $88.42.
Baidu was declining 1.73% to $149.15.
Alibaba co-founder Jack Ma. Benzinga file photo by Dustin Blitchok.
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