At China’s annual 618 shopping festival, domestic e-commerce giants including JD.com rack up billions of dollars in sales on their platforms. The 2022 edition comes against a background of slowing economic growth in China and sluggish consumer spending.
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Regulations for China’s tech sector aren’t relaxing, they’re just getting more “rational,” a chief executive of e-commerce company JD.com told CNBC.
Over the past 16 months, Beijing has introduced sweeping regulations for the internet industry, a move that has helped wipe billions of dollars in value from China’s internet sector.
But a resurgence of Covid in China, accompanied by lockdowns in much of the country, has hurt economic growth. The government is looking for ways to revive the economy and there are signs that the crackdown on tech companies is easing.
JD Retail CEO Xin Lijun told CNBC in an interview that aired Friday that regulations are not necessarily easing, but are becoming more stable.
“In fact, every country follows the same path in developing a particular area, including China and the US, which is to encourage innovation and provide a loose environment in the early stages, then implement moderate regulation when the sector develops to a certain level,” said Xin.
“The Chinese tech sector or internet sector is going through this process. So I wouldn’t say regulation [is] loosen. I would say regulation [it] is carried out in a more rational way.”
China’s technical crackdown came quickly and vigorously in areas from antitrust to data protection and seemed to have taken investors by surprise with the speed with which it was being implemented. But more recently, the regulatory action seems to be less intense.
“Current regulations are gradually getting back on track. It is normal that there can be unexpected negative effects when imposing regulation on a new sector. But as regulations become more stable, the general development will [of the internet sector] and the market will be more stable.”
JD.com has largely escaped major regulatory action, unlike its rival Alibaba, which was hit by a $2.8 billion antitrust fine last year.
Last month, Chinese Vice Premier Liu He pledged support for the technology sector and plans for Internet companies to go public, as a sign of potentially more supportive policies.
Shopping festival clouded by Covid
Xin spoke to CNBC ahead of the 618 shopping festival that takes place on June 18 every year. In recent years, however, 618 has tended to stretch for several days prior to the day.
It’s usually a multi-day period of deep discounts during which the Chinese e-commerce giants JD.com, Alibaba and Pinduoduo bring in billions of dollars in sales on their platforms.
But this year’s edition comes against the backdrop of the Covid resurgence in China that has led to lockdowns in major cities, especially the financial powerhouse of Shanghai. Economists predict a slowdown in the Chinese economy this year as consumer spending remains under pressure.
In May, retail sales fell 6.7% year-on-year, although less than expected.
Xin said the pandemic resurgence and China’s Covid policies have hit merchants with brick and mortar stores as they have had to close or suspend their operations. Some of JD’s logistics activities were also suspended.
The Chinese consumer has also been affected, and Xin said it was seen ahead of this year’s 618 sales period.
“Some slowdown in Chinese economic growth also affects Chinese consumers’ willingness or confidence to consume,” Xin told CNBC. “Of course we are optimistic about the Chinese economy in the long term, but it will be under pressure in the short term.”
The CEO of JD’s largest business segment said he is optimistic about the Chinese economy in the second half of this year.
“The government has implemented massive policies together with companies and I think these measures should have an effect in the second and third quarters. I think the Chinese economy will improve in the second half and show a better performance next year,” Xin said. to CNBC.
He also said that JD has taken some measures to help traders in 618, such as lowering fees on the platform as the economy slows.