At first, many experts thought that China's government's attacks on the tech sector would be a temporary measure. However, few share this opinion now. The Chinese authorities seem to be poised to finish off the goose that laid golden eggs for a long time.
Beijing deliberately and effectively wiped billions of dollars of value from a group of Big Tech companies. It all started with Jack Ma, the founder of Ant and of e-commerce giant Alibaba. He dared openly criticize the ruling party. Since then the authorities have been tightening their grip more and more, targeting the most valuable companies in the sector, especially those whose loyalty seemed obscure. The government arrested some of the companies' CEOs and imposed multibillion-dollar fines, causing a record drop in the value of Chinese companies and the yuan. The exchange rate of the national currency is falling, approaching the April low.
"There is a widespread rumor in the market that some US funds are aggressively selling assets from Hong Kong and China as the US may restrict investment in these places. The market fears that foreign capital will flow out of the Chinese stock and bond market on a large scale, so sentiment is badly hurt," Li Kunkun, a trader at Guoyuan Securities Co., said.
Starting with the tech sector, Beijing exerted pressure on the educational sector, banning the activities of private educational companies and extracurricular tutoring. After that, three of the largest educational companies in China, whose stocks are traded on the New York Stock Exchange, nosedived by more than $16 billion.
