Chinese internet rules hurt Tencent, Alibaba

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China’s State Council has made some substantial interventions on internet businesses, and in particular the education sector. The rules for private education companies including a ban on profits, a ban on raising capital or going public with tutoring at weekends and vacation banned for the sector.

The fresh rules have severely impacted China-based internet businesses and there is considerable anxiety that the rules might be extended to other internet sectors.

For example, Tencent (which has South Africa’s Naspers as a major investor), has been told to end its Tencent Music exclusive relationships with key music labels. Directly related to the educational sector are New Oriental (down 40 per cent) and koolearn (down 30 perc ent).

Tencent shares have crashed 37 per cent lower since January while Alibaba shares are down 38 per cent since their October 2020 peak. Tencent has fallen around 10 per cent in two days.


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