Singapore state investor Temasek is temporarily halting new investment in Chinese tech firms, in view of the uncertainties over Beijing’s crackdown on the tech sector, according to its top executive.

Temasek is waiting to see how China defines the rules governing the ways its tech players can operate before making any fresh bets on the country’s digital players, its Chief Investment Strategist Rohit Sipahimalani said in an interview with Nikkei Asia.

“We will probably wait to deploy more capital till we have a little bit more regulatory clarity in that space,” he was quoted as saying on Monday. “I would expect in the next few months you will have regulatory clarity, and that will shape some winners and losers out there.”

Nikkei Asia reported that Temasek has raised its Chinese stakes over the years. In 2020, its exposure to China surpassed that of its home country for the first time, the Japanese media quoted figures released by the state investor earlier.

According to its July performance report, however, Temasek’s exposure to China by underlying assets has dropped 2 percentage points to 27 percent of its total. Singapore’s share, meanwhile, was unchanged at 24 percent.

Sipahimalani’s statement came amid Beijing’s ongoing crackdown on big tech. The regulatory crackdown has had an impact on many tech companies, wiping hundreds of billions off the market capitalizations of some of its largest tech firms, unnerving many investors in Chinese tech firms.

Last week, Japan tech investor Softbank reported a net loss of $3.5 billion in the second quarter of 2021. Depressed valuations in SoftBank’s China portfolio amid a regulatory crackdown continued to drag on its performance, Reuters reported. Its largest asset, Chinese e-commerce firm Alibaba, fell by around a third in the three months to September.

Temasek has backed China-based e-commerce giants Alibaba Group and Tencent Holdings, FinTech giant Ant Group and ride-hailing firm Didi Global, among others. Alibaba, Tencent, Ant Group, and Didi Global have come under “Beijing’s regulatory microscope,” Nikkei Asia’s report added.

Sipahimalani noted that the Chinese government wants to address issues like the monopoly power of big tech platforms, including issues related to direct data privacy as well as income inequality.

“It’s just that in China, the way it is being executed has been a little more blunt and quick, and that is why it has created a lot of shocks out there,” he was quoted as saying.

Sipahimalani has also raised the example of Didi to illustrate the uncertainty around how Beijing intends to ensure data privacy on the country’s tech platforms.

“Today the concern investors have is no one knows what is it that the company needs to do to comply. So, therefore, it is difficult to know whether they will be able to, will not, or what the impact on the company will be — so then it becomes difficult to invest,” he told Nikkei Asia.

Once it is known what is expected of the tech platforms, it will be possible to assess the impact on businesses like Didi, and thus determine the merits of investing in a particular company, Sipahimalani said.

Temasek is looking specifically for clarity on China’s antimonopoly stance — how authorities will define a monopoly and what restrictions will be placed on companies to satisfy Beijing’s regulatory benchmark.

TechNode reported early this month that China’s top market regulator has introduced a draft rating system for Chinese internet companies in a bid to define their services and corresponding responsibilities. The country continues to beef up efforts to regulate the internet industry by setting up an oversight framework for its technology sector.

The proposed rating system follows numerous penalties this year for offenses ranging from monopolistic practices to data breaches.

China’s antitrust crackdowns this year have punished such super platforms as Tencent, Alibaba, and Meituan, according to TechNode.

Despite Beijing’s clampdown, however, Sipahimalani said China will “remain a focus” for Temasek. He cited areas like medical technology, biotech, electric vehicles, and renewable energy as high growth spaces in China that Temasek will continue to look at.

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