Chinese tech giants look to make business changes in a bid to preempt regulators

GUANGZHOU, China — Chinese technology giants are looking to make changes to their business models and working practices in order to preempt moves by regulators as authorities crackdown on the once free-wheeling sector.

In the past year, regulators have introduced new rules in areas from anti-monopoly for internet companies to data security, targeting large tech firms.

And punishment has come swiftly. Ant Group’s record-breaking initial public offering was pulled by regulators in November, while Alibaba was slapped with a $2.8 billion fine as a result of an anti-monopoly probe.

Ride-hailing giant Didi meanwhile, became the subject of a cybersecurity review days after its massive U.S. IPO. And China’s top cyberspace regulator ordered app stores this month to suspend Didi from being downloaded.

With regulators breathing down tech companies’ necks, corporations have looked to make moves to appease authorities.

Tencent this month has looked to tighten up its patrol of minors playing games. According to Chinese regulations, minors are banned from playing online games between 10 p.m. and 8 a.m. Tencent, one of the biggest gaming companies in the world, said there are cases of kids using adult accounts to play games.

To counter that, the company will require the gamer to do a facial recognition scan on their phone to verify if they are an adult.

Over the past few years, China’s government has been concerned about video game addiction and how it could damage children’s health. In 2018, regulators froze video game approvals in China over concerns of violence in some titles as well as potential addiction and rising cases of myopia. Games in China need to be approved by censors in order to be released and monetized.

Tencent appears to be getting ahead of any further regulatory action with its latest moves.

In February, regulators released anti-monopoly rules for internet platforms. Beijing is concerned about the size and power of China’s technology companies which have grown into some of the world’s largest, broadly unencumbered by regulation.

The focus of the Alibaba probe, which concluded in April and resulted in a $2.8 billion fine, was a practice that forces merchants to choose one of two platforms to sell their goods on.

Alibaba and Tencent have both effectively built up walls around their products. For example users can’t use Tencent’s WeChat Pay service on Alibaba’s Taobao e-commerce site.

But it appears both Tencent and Alibaba could be looking to get ahead of potential further antitrust action.

The Wall Street Journal reported on Wednesday that Alibaba and Tencent are looking to loosen up some of these blocks on each others’ products. This could include allowing WeChat Pay as an option on Alibaba’s shopping services.

“Such measures of self-regulation would be ahead of the regulation curve, as Tencent often is – and Alibaba hasn’t been,” Neil Campling, head of technology, media and telecoms research at Mirabaud Securities Limited, said in a note on Wednesday.

Technology companies are also trying to make changes to the long-standing practice of grueling work hours known as 996.

This refers to employees working from 9 a.m. to 9 p.m, six days a week. Alibaba founder Jack Ma once called the 996 culture a “huge blessing,” but it has faced intense criticism.

On Tuesday, Ling Zhenguo, a member of China’s top political advisory body known as the Chinese People’s Political Consultative Conference, wrote an op-ed in the entity’s official newspaper, apparently criticizing the 996 culture.

The internet economy should put “people at the center” shouldn’t link “every profit made with every hard working minute of employees,” according to a CNBC translation of the Mandarin article.

“We must be clearly aware that it’s in contrast to the market economy with Chinese characteristics to regard people’s legs as wheels and hands as robots,” Ling added, effectively saying that humans should be treated as humans.

Ling’s article highlights how 996 work culture could be targeted next by Beijing.

But technology companies have already begun to tweak their practices.

Last week, TikTok-owner ByteDance said that from Aug. 1, it was ending the practice of “big week, small week.” This is where workers would work every other Sunday and get paid. Short-video app Kuaishou also canceled this policy last month, according to local media.