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Crackdown on monopolistic practices of tech companies

China recently cracked down on the monopolistic practice of tech companies.

It caused the stock prices of the tech companies to drop sharply.

It started with Alibaba and moved to other large tech companies.

Some investors were disappointed to see the value of their stocks fall sharply. The criticized the China government for taking this anti-market actions.

The large tech companies operating in e-commerce, music streaming and other industries with large customer base have implemented monopolistic practices.

For example, Alibaba imposed restriction on its partners to offer their products only on one platform. If they wish to use the platforms operated by Alibaba, such as Taobao or TMall, they are not allowed to offer the products on the platforms managed by their competitors.

It seems that the music streaming service operated by Tencent and the food delivery platform service operated by Meituan have similar restrictions.

These restrictions restrict competition and allow the big platforms to have strong monopolistic power over their partners and the customers.

There is an anti-monopoly law in existence that disallowed these restrictions. They were not strongly enforced in the past. The recent change was the strong enforcement of the law and the imposition of large fines for infringement.

The law, and its enforcement, will be good for the country. It will disallow the big platforms to make excessive profit from their monopolistic practices.

It will allow the small companies, that rely on the platforms to market their products, to benefit from the opening up of the market and to distribute their products on several platforms.

The stock prices of the big tech companies have corrected to reflect that their future profits will be more moderate, by reducing the margins that they can extract from the monopolistic practices.

After the price correction, these stocks remain attractive investments as they will benefit from the future growth of their revenue and profits.

 

Tan Kin Lian

 

 

 

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READER COMMENTS BELOW

13 Responses to “Crackdown on monopolistic practices of tech companies”

  • Google's fault:

    Much of online business suffer from the greed of search engines such as Google. In the past, Google will show many small companies. If you search for, e.g., shoes, many small companies will show up in Google. Now, small companies are “obliterated” by these greedy search engines. As a result, small companies have to list themselves under the big companies to survive.

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  • Good for consumer:

    Recent crackdown in China is good for Consumers…also good for small SMEs and competition.
    Singapore should do the same..start with GRAB…

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  • macro:

    Tuition, alcohol, KTV, gaming…

    All the latest fun happening in China, ain’t you want to talk about it and encourage SG to do the same too?

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  • oxygen:

    @ TKL

    YOUR MOST PIOUS LEARNED CONCLUDING POSTULATE below sounds to me like an er*ction sadly gone flaccid needing battery recharge.

    TKL:After the price correction, these stocks remain attractive investments as they will benefit from the future growth of their revenue and profits

    Chinese shares are notorious for accounting irregularities, fouled up corporate governance and scant disclosure rules, and now HIGHLY ELEVATED POLITICAL of risks volatility.

    How do you know XJP ELEPHANT has stopped his flatulence implosion on Chinese tech stocks to be advocating your positive evaluation of this doubtful escalated risk here?

    I know you are entitled to your investment views on Chinese tech stock here, but it is NARROWLY BIAS BROADCASTING oblivious to all other overwhelming toxic risks enclosed within them but you ignored in this writing.

    SHALLOW PANDERING! Even more shallow than your high profile Hong Lim Park prayer chanting on Hyflux risks advisory to defeated naive peasants.

    SAD!

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  • maths idiot:

    A sensible one from Mr Tan. But your article on the crash of Bitcoin and cryptos is still a piece of shit

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  • nitrogen:

    ntuc is monopolistic.

    so also all the companies under temasick.

    so also all the S$m appointments pap dish out to clan members.

    all monopolies can be corrected. ALL of them. including those under pap.

    in fact, it is very easy to correct for anything pap. JUST vote PSP WP and all the pap wrongs monopolies thefts are corrected.

    very easy. and voting PSP WP is always the right thing to do.

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  • Are youbigger than Emperor Xi?:

    Nobody knew until last month that ­Joseph Chung-Hsin Tsai — better known as Joe Tsai — was the “mystery buyer” who dropped $157 million this spring on two massive condos at 220 Central Park South, the most expensive apartment building in the country.

    So far, keeping a relatively low profile and understanding international office politics has worked out well for Tsai, said to be worth at least $12 billion. The 57-year-old is the co-founder of Alibaba (China’s version of Amazon), the owner of the Brooklyn Nets and a friend of the Chinese Communist Party.

    The same can’t be said for Jack Ma, his flamboyant onetime partner and the creative genius behind Alibaba. Ma has barely been seen in public for the past 10 months. His wings have been clipped, possibly permanently, by officials after Ma publicly dissed his country’s banking system last fall. He is reportedly being “re-educated” by the Chinese Communist Party.

    His high life came to a halt when he gave a now-infamous speech at a 2020 conference, calling out China’s state-owned banks and regulators for being backward. Among other things, Ma slammed their “pawnshop mentality.”

    “Today’s financial system is the legacy of the Industrial Age,” Ma said. “We must set up a new one for the next generation and young people.” …..

    https://nypost.com/2021/08/14/alibabas-joe-tsai-gets-to-party-but-china-punishes-jack-ma/

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  • My_Father_Is_PAP:

    By mid 2022, most foreign bank will be out of HK.

    Anyone still think there is any market for stock listed in HK?

    May be China people can ownselves play ownselves?

    Culture revolution 2.0 already up and running.

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  • xoxo:

    Anti-competition monopolies like many of the giant tech firms must be punished for consumers’ interests.

    In our small country,even GLCs engage in anti-competitive conduct.
    Many GLCs are bad business role model$.

    Pui!

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  • PAP mandate strong:

    How about a piece on crackdown of China entertainers.

    E.g. Zheng Shuang.

    Then Kris Wu. Unconfirm Rumors of our JJ implicated ???

    Now Huo Zun.

    Very juicy.

    吃海狗丸壯陽, 一日三炮 , …

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  • Cultural Revolution 2.0:

    My_Father_Is_PAP: By mid 2022, most foreign bank will be out of HK.
    Anyone still think there is any market for stock listed in HK?
    May be China people can ownselves play ownselves?
    Culture revolution 2.0 already up and running.

    Seems to me that it’s going to happen. Have full control of these huge corporation to prevent outflow of funds (also to consolidate power within the party), slowing get rid of all “foreign influences” including English education, gaming, KTV songs selection (probably only red songs will be allowed), etc. Restrict overseas travel on the pretext of pandemic (to prevent outflow of people and leaking of sensitive truthful news to outside world).

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  • oxygen:

    @ TKL

    MORE CANING FROM XJP on Chinese tech stocks, reported in CNBC today.

    oxygen: How do you know XJP ELEPHANT has stopped his flatulence implosion on Chinese tech stocks to be advocating your positive evaluation of this doubtful escalated risk here?

    China seeks to tighten rules on unfair internet competition, sending tech shares lower

    https://www.cnbc.com/2021/08/17/china-tech-regulation-draft-rules-ban-unfair-internet-competition-tencent-alibaba-slide.html

    Your much-adored tech stocks are enjoying more fun. My take is that there are more to come – XJP is a wild political animal, he bites without warning.

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  • oxygen:

    @ TKL,

    YOU SEEMS A BIT SLOW in backing Chinese tech stock before they fell of the cliff.

    BUT YOU GOT FRIENDLY COMPANY on this jackpot strike, according to a Bloomberg source.

    Temasek bet on Chinese tech companies just before share collapse.

    https://sg.yahoo.com/news/temasek-bet-on-chinese-tech-companies-just-before-share-collapse-021414649.html

    THE SELLERS MUST BE VERY HAPPY.

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