Hebei anti-monopoly drive signals how Chinese firms meant to act

The State Administration of Anti-Monopoly Regulation ("SAMR") has been emboldened and provided with greater funding in the wake of launching a range of investigations and ultimately fines for Alibaba, Tencent and other tech giants.

Today it provided the latest signal as to where regulators will focus next. The central regulator republished the Hebei provincial guidelines for the next step of the anti-monopoly campaign. Yesterday, this regulation was published at the local (Hebei) level: http://www.gov.cn/xinwen/2021-05/06/content_5604811.htm; this afternoon it was republished by the central SAMR agency.

Central government republication of a local government regulation tells the machine how it should react. It acts as a sign of central approval of the line taken by the local government.

There are a number of points in the Hebei regulation: a focus on keeping prices down through inspecting public utilities providers and through inspecting intermediaries. SAMR in this way is not acting so much as an anti-monopoly regulator as more an all-purpose government regulator, designed to make sure everyone does what the centre says.

SAMR for example is now supposed to "maintain safety", including a focus on food quality and drug safety. It is also to "implement a number of projects that directly benefit the people, solve a number of disputes and contradictions that harm the interests of the people, and establish a number of long-term mechanisms to do practical things for the people." Neither of these things have anything to do with anti-monopoly.

Republication of this signal by the central government in this way seems more a signal to the nation as to what they want rather than a cracking down on local industry. Hebei has history with food safety problems (a famous milk scandal occurred there in the previous administration), and has some pharmaceutical companies.  But local pharma companies Shijiazhuang Pharma (HK:1093) and Shineway Pharma (HKG: 2877) saw no appreciable difference in their share price today. And if the government were to focus on cracking down on local business they are far more likely to go after steel mills, many of whom were recently ordered to cut production to improve Hebei's appalling air quality. Yet no mention was made of steel production, nor environmental quality.

In other words, this has little to do with monopolies nor Hebei, and more to do with signalling to Chinese firms what the central government wants and how they are supposed to behave.

As for the tech giants: there was only one mention of "platform economy" and several mentions of acting for the people. Alibaba, Tencent, Meituan and others are likely to follow with actions to show the government that they are listening.