The news: Chinese President Xi Jinping said Beijing’s antitrust campaign, designed to “prevent the irrational expansion of capital” and address “barbarous growth” in China’s technology sector, is yielding results, per the South China Morning Post. 

How we got here: China produces billionaires faster than any other country, but there is widening public dissatisfaction with the resulting income disparity.

• In March, Xi stressed the need to regulate ”platform companies,” or online services, to maintain social stability.
• Chinese regulators have targeted various tech giants since late 2020. The barrage of regulations has confounded investors, who are left guessing where Chinese regulators will strike next.
• Xi said this week the Communist Party must do more to “guide and supervise” the country’s businesses with clear rules, effective regulations, and greater policy transparency.
• In response, China revealed plans on Tuesday to tighten oversight of ecommerce giants Alibaba and Pinduduo as well regarding alleged intellectual property violations, ostensibly to curb the sale of counterfeit goods on their online platforms.

Why it’s worth watching: Beijing’s intensifying crackdown on Big Tech companies erased $1 trillion in value from Chinese stocks this year alone. Continued regulatory tightening could stifle expansion into foreign markets—as evidenced by the fallout following Chinese ride-sharing service Didi Chuxing’s US IPO this summer.

• Roughly $22 billion of Didi’s market value was wiped out in July after Chinese regulators removed its apps from app stores, citing data collection violations.
• Chinese regulators also derailed the IPO plans of finance leader Ant Group in November last year.

What’s next? China’s monolithic technology companies have thrived and expanded mostly because they were left unregulated. The sudden wave of government scrutiny could force changes to how China’s Big Tech companies conduct their business going forward. This could lead to some innovation stagnation, as well as a cautious outlook from investors and overseas partners.