China’s internet sector has been one of the talking points of the year after a series of regulatory actions. Some of the key themes for the internet sector globally are set out in the report, as follows:
Heading into the end of the year, the report says, the focus is likely to be on the following:
China in focus
In light of recent regulatory tightening related to concerns about monopoly market power, data/user security and the protection of minors in gaming and workers in the gig economy, along with new “common prosperity” initiatives, China’s internet industry is likely to enter a new normal of slower but healthier top-line and profit growth.
Given the size and influence of China’s internet industry, it perhaps was to be expected that the government would step in to regulate any market behaviors deemed to be anti-competitive or potentially harmful to society or the national interest.
Some consequences of the anti-monopoly action are set out as follows:
Political agendas could transform into legislation or administrative action directed at the internet sector around the presidential election in March next year. Such news flow could disappoint those who believe the Korean government is broadly supportive of the internet and fintech industries.
Potential risks globally
The report points to some potential downside risks for the global internet sector too. These include on-going regulation and potential new rules and guidelines, geo-political risks and U.S./China tensions, delays of US IPO activities and uncertainty of future ADR listing status, intensified cross-border competition, and on-going disruption from Covid-19 variants.
Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.