China going back to basics

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China going back to basics

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Published Date: 2021-09-13 | Source: INCE|Community | Author: The Finance Ghost

China going back to basics

Naspers and Prosus are down around 15.7% and 8.6% respectively in the past month. It's been a tough pill to swallow for many investors, with the JSE All Share Index down around 7.5% over the same period as other companies have helped to soften the blow on the index.

After years as the market darling, the group famous for its investment in Chinese giant Tencent has become a victim of the tech crackdown by the Chinese Communist Party (CCP). The CCP has decided that this modern world isn't so great for society, putting rules in place to limit the amount of time kids are spending on tech and gaming platforms.

This is social engineering at its finest, which is typical of communist states. If you want to understand more about China's obsession with planning, this article written by The Creative Accountant on thefinanceghost.com is a useful and interesting read.

The CCP's latest move is to limit under-18s to playing games for a maximum of three hours every week at designated times. Happy hour for kids is between 8pm and 9pm from Friday to Sunday. It does seem remarkably like a drinks special!

Other issues that the CCP is upset about include fan clubs and private tutoring schools. Communist governments aren't bothered about collateral damage to businesses like Tencent and EdTech firms in their pursuit of a controlled population.

China is also slowing down approval for all new online games. This looks like bad news for Tencent at first blush, although the counterargument is that the existing games will have less competition in future.

The Chinese government has made it clear that physical wellbeing of its people is a major priority. Chinese tech has been an incredible investment over the past decade. Will wellness or sports-related businesses win over the next decade?

Discovery seems to think so, evidenced by its equity partnership in Ping An Health in China. Investors should keep a close eye on this trend.





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