With losses in Chinese tech and education stocks now exceeding $1 trillion since February, the questions reverberating across trading desks from Shanghai to New York are where regulators might strike next and whether markets are properly discounting regulatory risk. Property-management and food-delivery companies were among the biggest losers on Monday after Beijing signalled tighter rules for both sectors.
Beijing’s clampdown on the booming private education industry has shocked even some of the most seasoned China watchers, prompting a rethink of how far Xi Jinping’s Communist Party is willing to go as it tightens its grip on the world’s second-largest economy.
The crash in tutoring stocks that began late last week spread Monday across the tech sector and beyond, after authorities confirmed reports they would ban a swathe of education industry from making profits. It’s the government’s most extreme step yet to rein in private businesses that regulators blame for exacerbating inequality, increasing financial risk and – in the case of some tech titans –- challenging Beijing’s authority.
