The Chinese authorities appear to have begun reaping the benefits of their crackdown on local businesses. Enhanced control over entrepreneurs has not gone unnoticed, and global investors have started to cut back on their investments in Chinese companies.
SoftBank, the largest international holding group owned by Masayoshi Son, one of the richest people in Japan, announced its intention to reduce its investments in Chinese start-ups due to increased regulatory pressure from Beijing. The company's management decided to take a break for one or two years until the extent of the Chinese government’s scrutiny of the tech sector becomes clear.
"We will remain cautious until we can judge how deep and far the regulations will go… and we hope to actively resume investments when things become clearer," Son said.
Notably, SoftBank is one of the biggest investors in China and is heavily dependent on its market. Thus, e-commerce group Alibaba comprises 39% of the company’s asset value. Chinese startups account for around 23% of Vision Fund's portfolio, SoftBank's tech-focused venture capital fund. However, the Japanese investment conglomerate has now significantly reduced investments in Chinese projects, taking a "wait-and-see stance".
Chinese regulators have recently tightened their oversight of domestic IT giants and entire economic sectors. According to experts, Chinese President Xi Jinping has announced this crackdown in order to boost his popularity among ordinary people and gain confidence amid an escalating conflict with the United States.
