Regulatory policies targeting the platform economy and tutoring firms not a crackdown: Xinhua
Published: Jul 29, 2021 12:41 AM
One-on-one online education Photo: VCG

One-on-one online education Photo: VCG

The Chinese economy remains steady, its reform and opening-up pledge continues unchanged and its capital markets are still intact, Xinhua said in a late-night editorial on Wednesday with the objective of  restoring market calm following recent stock swings after tougher regulations made investors jittery.

The economy has seen a steady improvement momentum in the first half of the year instilling confidence in capital markets, read Xinhua's editorial, noting that regulatory polices targeting the platform economy, education and tutoring, among other sectors actually aim at the country's long-term development. 

The editorial addressed market anxiety over these regulatory efforts which have been reflected in the stock market. 

Coincidentally, shortly prior to Xinhua's publication, a Bloomberg report revealed that China's securities regulator convened major investment banks in a virtual meeting on Wednesday night in a bid to diffuse market fears about the regulatory toughening on the private education industry.

"Some bankers left with the message that the education sector policies were targeted and not intended to hurt companies in other industries," according to Bloomberg, citing unidentified people familiar with the matter.

The securities regulator has yet to comment on the report.

The regulatory moves targeting the platform economy or after-school tutoring, were aimed at fostering a healthy development of the industries. According to Xinhua, the measures are designed to safeguard cybersecurity and social wellbeing and are not a crackdown. On the contrary, they aim for economic and social development over the long term.

The message from Xinhua had an instant soothing effect with China A50 and Hang Seng Index futures briefly rising by 3 percent.

Chinese mainland shares remained mostly lower on Wednesday with the benchmark Shanghai index continuing a losing streak this week after the  policy shift induced investor mood swings. 

The recent downturn is traced back to a plunge in private education stocks on Friday afternoon after reports about an unprecedented government overhaul of after-school tutoring.

The overhaul officially confirmed later, mandates tutoring firms to be registered as non-profit organizations. Curriculum tutoring firms will no longer be allowed to raise capital in stock markets and foreign investment in the sector will be banned.

Chinese education stocks including New Oriental, whether listed on the mainland market, the Hong Kong bourse or US-traded, consequently faced a blood bath.

The plunge leaked into the broader market in the first two days of the week, with mainland stocks and the Hong Kong market posting losses across the board.

As some of the recent regulatory policies involve overseas listed companies, there is a concern about whether there will be any change in the policy for Chinese companies going overseas for listing in the future. or the pace of China's capital market opening to the outside world will slow down, according to Xinhua's editorial.

In this sense, the Chinese securities regulator mentioned it is open to let companies choose where to go public and supports them in making choices based on their own development needs, Xinhua said.

The policy of reform and opening-up will not change and the development direction of China's socialist market economy will remain the same, it added.