Strategist on China’s regulation of its technology giant Fintech


China’s recent moves to regulate its tech companies are not necessarily meant to “take the wings” of its entrepreneurs, a strategist told CNBC on Thursday.

When asked if China’s crackdown on its tech companies could be political missteps, Andy Rothman, an investment strategist at Matthews Asia, said it reflects a different approach to regulation than the West.

“They deal with regulatory issues differently than Western governments. Normally, in the early days of a new industry like the development of fintech, a western government would establish a regulatory structure, “he told CNBC’s Street Signs Asia.”

“The Chinese experience instead was telling entrepreneurs, give it a try. And then we’ll step in after we see how it works and how we regulate it,” said Rothman. “And I think they do now.”

China’s tech companies were largely free of regulation as they grew into some of the largest corporations in the world. That changed over the past year when regulators cracked down on them, especially those involved in the financial sector.

“I don’t see this as an attempt to rip the wings of the private sector that has been driving all of the job and wealth creation in the country,” said Rothman, previously head of the Macroeconomics and Domestic Policy of the US Embassy in Beijing.

Beijing’s tightened regulations have hit a number of sectors, including microcredit and what it sees as monopoly practices on internet platforms.

Much of the audit related to Alibaba and its financial technology offshoot, Ant Group, whose massive IPO was pulled by regulators. However, authorities recently gave Ant Group permission to run a consumer finance company, a move that experts say is a positive sign for Ant.

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But it does mean that investors “need to be really careful about valuations,” said Rothman. He stated that this has led him to take a more active approach to investing in China rather than a passive exchange-traded fund approach.

An active approach means selecting individual stocks versus passive investments as a strategy where investors buy an index that broadly tracks the market, such as