China’s regulatory tightening on various segments of the economy won’t hurt the country’s credibility and ability to attract foreign investments, an economist told CNBC on Friday.
Chinese regulators have in the last few months ramped up scrutiny on some of the country’s largest technology companies — including e-commerce giant Alibaba and ride-hailing app Didi. Beijing’s aims include reining in monopolistic business practices and regulating the collection and use of data.
Beijing said this week in separate announcements that it will be stepping up supervision of overseas-listed Chinese firms and scrutinizing foreign investment more closely.
Not a setback
China’s moves will improve the country’s economic structure, capital markets and governance in the longer term, said Chi Lo, senior economist for Greater China at BNP Paribas Asset Management.
“No, I don’t think it’s a setback. I would even argue that this is an improvement because … it will over the medium, long term improve China’s structure,” Lo told CNBC’s “Squawk Box Asia.”
That is “exactly what international investors like to see if they want to get exposure or increase exposure to China,” he added. “China cannot really stand still and be a developing market all the time. And with economic advancement, regulatory and other improvements have to come in — and I do see this as a step moving forward to improve the Chinese system.”
Lo said financial scandals, such as the accounting fraud in former Nasdaq-listed Luckin Coffee, had previously hurt China’s capital market credibility. So, it’s time to fix such problems that are more widespread in the domestic Chinese market, he added.
On regulations aimed at tech companies, Lo pointed out that China is not the only country reining in the sector. Developed countries such as the U.S. and those in Europe have moved to varying degrees to increase supervision over tech companies too, he said.
