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EVEN before President Xi Jinping met with leading Chinese entrepreneurs on Feb 17, investors began piling into technology shares, betting that a years-long crackdown on the private sector was at an end.

The Hang Seng Tech Index surged in the previous trading session to its highest since February 2022 after reports of the impending meeting. The summit had all the trappings of a national turning point, with state media promoting Xi’s discussion with the likes of Alibaba Group Holding founder Jack Ma, Huawei Technologies’s Ren Zhengfei, Xiaomi chief Lei Jun and Meituan’s Wang Xing.

The gathering is the most forceful sign yet that Beijing will support the private sector after a series of brutal regulatory moves dating back to 2020 that hammered profits, wiped out some businesses and drove entrepreneurs such as Ma out of public view.

What went wrong for Chinese tech firms?

The sector boomed after Alibaba Group Holding’s initial public offering in 2014, when venture capitalists and investors began to see the riches to be made in the world’s most populous country. Founders Ma and Wang became billionaires and celebrities.

Their ostentatious wealth and free-wheeling lifestyle displeased the country’s leadership. In 2020, when Ma took the stage at a Shanghai conference and let loose with a now-infamous tirade against the state financial sector and government watchdogs, it was too much for officials in Beijing.

Regulators stunned Wall Street by shutting down the initial public share offering of Alibaba affiliate Ant Group – the world’s largest market debut at the time – before launching an assault on the rest of Ma’s empire.

A sweeping crackdown ensued, spanning private tutoring, video gaming and financial technology. Companies including Alibaba, Tencent Holdings and Didi Global paid a hefty price one way or another to restore their standing with officials in Beijing. Many ultra-rich company founders stepped out of the spotlight.

Since 2023, Xi’s government has eased off on the campaign and indicated that it still sees the trillion-dollar technology sector as an important part of the country’s economy. Yet the industry is still mired in a slump, struggling to get past single-digit percentage growth rates as the domestic economy slows and consumers turn cautious.

Was Xi’s latest overture to tech executives a surprise?

Not entirely. Over the past few years, the authorities have ended investigations into some companies and lifted various restrictions, without ever proclaiming overtly that the broader crackdown was at an end.

In January 2023, they allowed ride-hailing company Didi to bring in new users for the first time since its apps were banned from app stores in 2021. Later in 2023, regulators wrapped up a three-year investigation of Ant Group by imposing a US$1 billion fine on the company.

In August 2024, the country’s antitrust regulator announced that Alibaba had eradicated alleged monopolistic behaviour. In September, Alibaba declared it would allow its hundreds of millions of shoppers to select rival Tencent’s WeChat Pay at checkout – giving them access to China’s most popular online payments service for the first time. That eliminated one of the last remaining major barriers between competing online ecosystems – a lightning rod for criticism from government agencies over the years.

The Xi meeting on Feb 17 was much more dramatic – and public. State media showed the Chinese president walking into the summit to applause from a row of billionaire founders and entrepreneurs. They gave brief statements and then took notes as Xi gave his remarks.

Why the change of tune?

Beijing needs the private sector more than ever. Big technology companies are perhaps the most reliable growth engine for a country that’s combating prolonged issues including youth unemployment, a stagnant property sector, local government debts and deflation.

Just as important, technology is at the heart of geopolitics. Beijing is clashing with a US government that has been increasingly aggressive in trying to cut China off from advanced technologies, such as semiconductors and artificial intelligence. Xi’s administration has offered its support to companies that are investing in these strategically important sectors.

The push appeared to be paying off by January when DeepSeek, then a little-known Chinese startup, released a new open-source AI model that rivals or outperforms leading US developers on industry benchmarks. The breakthrough came in spite of US restrictions on Chinese access to the most advanced chips.

The same month, China’s No 2 official, Li Qiang, invited entrepreneurs including DeepSeek founder Liang Wenfeng to a closed-door meeting to hear their thoughts on the government’s priorities for this year.

So can China’s Big Tech run wild again?

Probably not. Maintaining social stability and an iron grip on the economy is a signature goal of the ruling Communist Party, and that’s unlikely to change soon.

The government has made clear it will not tolerate a return to the free-wheeling, get-rich-quick days of the past or the “hedonistic” lifestyles of some tech billionaires and their acolytes.

Analysts and investors say regulators have successfully – if brutally – reasserted their oversight power, and diminished the swagger and societal influence of the tech billionaires.

Much of Beijing’s concern centres around the hundreds of millions of users who remain reliant on Alibaba for shopping, Tencent for social media and lifestyle and Ant for payments and finance. All that activity produces vast amounts of data that help reinforce the dominance of these platforms. Beijing has asserted control over it all and made clear that any new initiatives must align with its priorities. That means fewer live-streaming apps and more research into cutting-edge technologies, from artificial intelligence to cloud computing and advanced semiconductors.

Beijing has made clear it sees China’s technological future not in video games and online marketplaces, but in industries that are more pivotal to the geopolitical rivalry with the US.

Alongside DeepSeek, every major Chinese tech company from Baidu to Tencent has been splurging money to develop AI models that can rival the industry leader, OpenAI’s GPT.

Where are the red lines?

There are quite a few. There’s a persistent caution against wild investment and the cut-throat competitive excesses that characterised much of the industry prior to 2021. Regulators have also put guardrails in place for the latest technologies which, in some cases, are among the world’s first. The Cyberspace Administration cited data and national security as its prime reason for investigating Didi and it now mandates a data security review for all major companies seeking overseas listings.

More broadly, Xi’s administration blames widening social disparities in part on the Internet boom, particularly in the pandemic era, and is moving to address any public discontent that could threaten its authority. That led to a “common prosperity” programme that guides the activities of many of the sector’s leaders, who pledged to treat their workers better and donate billions of dollars to charity.

As a corollary, any attempts to hoard wealth and sabotage rivals – such as through undercutting prices or coercing merchants into exclusive deals, a key aspect of antitrust investigations – remain off-limits.

Will the companies regain their pre-crackdown heights?

That seems unlikely. Before 2020, Beijing’s hands-off approach to the technology sector minted billionaires and giant companies at a breathtaking pace, at one point inviting comparisons to Silicon Valley. Alibaba, Tencent and Ant had a combined market capitalisation of nearly US$2 trillion that year – easily surpassing state-owned behemoths such as the Industrial & Commercial Bank of China as the country’s most valuable companies.

Alibaba has shed more than US$500 billion of value since the monopoly crackdown began. Tencent has lost more than US$300 billion since January 2021. Both have bounced back from their 2022 low points but remain far below their earlier peaks. BLOOMBERG