1.China’s regulatory tightening is focused on curtailing monopolistic practices, improving social welfare, enhancing national security, improving consumer protection, and reducing financial risks, objectives that have driven regulatory and policy interventions elsewhere in the world.

2.China’s regulatory tightening is largely consistent with the country’s objectives to reduce inequality and achieve sustainable and socially responsible economic growth.

3.China’s regulatory standards are more compatible with those in many developed markets post the regulatory tightening.

4.China’s recent crackdown on the internet sector is not without precedent (in its intent) and follows US anti-trust action against dominant technology companies, starting with AT&T in the 1970s, Microsoft in the 1990s and more recent scrutiny of Google, Facebook, Amazon and Apple. For its part, the European Commission has, over the last two decades, imposed fines in the tens of billions on technology companies and sought remedies in respect of anti-competitive practices.

5.There is little evidence in the recent regulatory interventions that suggest the Chinese government has discarded its broad policy objectives around quality growth and social stability.

6.The size of China’s economy in a global context and the size of its middle class means it is increasingly difficult for investors to overlook China.

7.On a medium term view, China offers investors attractive risk-reward opportunities.

China’s regulatory tightening has led to significant market volatility and elicited widespread commentary in the financial press. Increasingly, investors in Chinese markets have been forced to confront the all-important question: Is China investable?

To adequately answer this question, it is important to consider the current regulatory tightening cycle across three dimensions:

1.The background to the regulatory tightening – was there need for regulatory intervention?

2.Comparisons with other jurisdictions – is China’s regulatory out of kilter with regulation elsewhere in the world?

3.Potential impact of regulation on China’s long-term growth, entrepreneurship, and innovation.

Between 1980 and 2020, China’s achieve real GDP growth of 10.1% CAGR in US$ terms.

However, China’s unprecedented economic growth has come at a cost:

– damage to the environment.

– widening income inequality.

– poor working conditions.

Left unchecked, these are issues that could have eventually led to social instability.