China is preparing to hit pause on its long campaign against technology companies, according to people familiar with the matter, as officials seek to arrest a rapid deterioration in the country’s economic outlook.
China’s top internet regulator is set to meet next week with the country’s embattled tech giants to discuss the regulatory campaign, according to the people, who described the meeting as a sign that officials acknowledge the toll the regulations have had on the private sector at a time when China’s economic outlook is increasingly clouded due to strict Covid measures.
Regulators are planning to hold off on new rules that limit the time that young people spend on mobile apps, according to one of the people, while another person said that Beijing is considering pushing some of its biggest tech companies to offer 1% equity stakes to the state and give the government a direct role in corporate decisions.
The government has already taken such measures in managing internet-content companies such as ByteDance Ltd., the owner of buzzy short-video platform TikTok, and Weibo Corp. WB, +8.71%, operator of the eponymous Twitter-like microblogging platform.
Now, the plan is likely to be expanded to other technology platform operators such as Tencent Holdings Ltd TME, +4.55%. China’s most valuable company, and Meituan 3690, +15.51% which runs one of China’s biggest food-delivery services, this person said.
Representatives from Tencent, Meituan and the CAC didn’t immediately respond to requests for comment. The South China Morning Post reported earlier on next week’s meeting.
Any loosening of regulations for the tech sector would underscore the importance of economic stability for Chinese leader Xi Jinping in a key political year in which he is expected to break with recent precedent and seek a third term in power.
In a Friday meeting of the Politburo, China’s top decision-making body, Mr. Xi and other senior Communist Party officials said they would carry to completion their campaign against internet companies.
But notably, they did so without giving a concrete timeline, while making clear that any oversight would be more standardized to “support the healthy development of the firms”—relatively dovish language that fueled double-digit-percentage jumps in the share prices of Alibaba Group Holding Ltd BABA, +6.94% and other Chinese tech stocks.
More broadly, China’s leadership said in a readout of the meeting that it would step up policy support to meet its target of expanding gross domestic product by about 5.5% this year—a target that most economists think China may miss as the world’s second-largest economy faces rising risks from Covid-19 outbreaks, the war in Ukraine, a property-sector downturn and anemic consumer spending.
China said its economy grew 4.8% in the first three months of the year compared with a year earlier, though economic activity has only cooled since then as the lockdown of Shanghai and other Chinese cities wreaked havoc on supply chains, logistics networks and business operations.