Beijing appears to relax scrutiny of giants like Alibaba

Beijing’s regulatory crackdown on the Chinese tech sector began in late 2020, wiping off more than a combined $1 trillion from the country’s biggest companies.

There are now signs that the central government is softening its stance towards internet titans like Alibaba, in a move that could prove positive for Chinese tech stocks.

“The regulatory headwinds that we had in the past two years … that’s now becoming from a headwind to a tailwind,” George Efstathopoulos, portfolio manager at Fidelity International, told CNBC’s “Street Signs Asia” on Wednesday.

On Tuesday, Alibaba announced a major reorganization, looking to split its company into six business units, in an initiative “designed to unlock shareholder value and foster market competitiveness.”

Over the past two years, China’s government has often railed against the “disorderly expansion of capital” of tech firms that have grown into large conglomerates. Part of Alibaba’s announcement noted that these splintered businesses could raise outside capital and even go public, seemingly heading in a contrary direction to Beijing’s concerns.

Efstathopoulos said that the move could indicate a green light from the upper echelons of the Chinese government.

“You have senior leadership blessing for unlocking value, and, to me, that is a fantastic indication where we are now essentially moving from regulation not being the issue that it was,” Efstathopoulos said.

Alibaba’s restructure isn’t the only sign that Beijing could be easing up its scrutiny of the tech sector. Jack Ma, the founder of Alibaba, returned to public view in China for the first time in months.

Some credit Ma with sparking the start of the tech crackdown in October 2020, when the billionaire made comments that appeared critical of China’s financial regulator. A few days later, Ant Group, the financial technology affiliate of Alibaba that was controlled by Ma, was forced to scrap its massive Hong Kong and Shanghai dual listing, after regulators said it did not meet the requirements to go public.

Following this, the Chinese government doled out huge antitrust fines to Alibaba and food delivery giant Meituan, introducing a slew of regulation in areas from data protection to the way in which companies can use algorithms.

Ma’s reappearance in Hangzhou, where Alibaba is headquartered, has been read as another sign of Beijing’s more positive view toward the tech sector and entrepreneurs.

“Jack just didn’t show up in Hangzhou because he was…