Next up? Chinese regulators eye healthcare, property

With social equality and national security being the main drivers for further regulations, investors are keeping a wary eye on the next possible targets.
Next up? Chinese regulators eye healthcare, property

Investors have traditionally been chasing big Chinese names in prominent sectors for better returns, but these days, this is precisely where the risks lie.

From tech firms Ant Group and Didi to educational players, Chinese authorities are extending their regulatory mandates to major industries across the spectrum. Investors believe that this trend is not going to fade anytime soon, and sectors such as healthcare, property, and online entertainment might see further scrutiny this year.

In the latest development, shares of Tencent and NetEase plunged on Tuesday after Chinese state media branded online gaming platforms as “opium” in a since-deleted article that called for further restrictions on the industry. This move was an ostensible effort by authorities to address addiction and to prevent temptations targeting developing minds.

“So far, we don’t have specific exposure to China assets, but we do have a certain amount invested in the emerging markets,” an investment executive at a US pension funds who declined to be named told AsianInvestor.

“Investing in China is of course essential, given the scale of the market. But western investors are hesitating over political tensions between China and the US, and also the differences in market maturity,” he noted. Instead of focusing on the latest incidents and the big names, he believed that investors should be patient and wait for the country to become more suitable for institutional investors.

ALSO READ: US pensions wary of China focus, despite enthusiasm for Asia

“Social equality, demographics, and national security will likely become the core drivers of further regulations. In particular, large internet names may be under further scrutiny,” David Choa, head of Greater China equities at BNP Paribas Asset Management, told AsianInvestor.

David Choa, BNPP AM

He believes that sectors closely related to gig workers (including express delivery, food delivery, and solo car and truck drivers) as well as companies that provide basic social infrastructure (like healthcare internet platforms, or consumable medical devices and equipment), are likely to be subject to higher risks.

ALSO READ: After Didi and Ant Group, should investors be worried?


Choa noted that the property sector has experienced a tightening cycle over the last nine months, with no end in sight, while the financial markets have simultaneously witnessed corrections in recent months. A number of property developers are therefore finding it a challenge to secure new financing to service their debts.

The country’s second largest property developer, Evergrande, is one such example. The group carries approximately $300 billion in liabilities, including some high-interest US bonds. Around $7.4 billion worth of bonds are maturing next year, starting with $2 billion due to be paid next March, according to Bloomberg data.

A Fitch Ratings report published on July 28 noted that Evergrande has not issued any offshore bonds since early 2020, and its 2025-maturity bonds are trading at around 27% yield. In addition, the developer had only raised Rmb 8.2 billion ($1.3 billion) from domestic bond issuances in April 2021.

The firm’s stock price sank 13% on July 15 after it announced that there would be no special dividend payout. However, the company continues to service its debts and repay its bonds and has no further capital market maturities for the remainder of 2021.


In terms of the healthcare industry, China wants to maintain lower healthcare and drug costs for consumers in order to encourage social equality. Such a specific objective puts some companies more at risk than others, according to Choa.

“Beyond healthcare, we believe that the companies generally able to deliver innovative business models, services, and products will remain relatively immune amid the regulatory crackdown as they will continue to drive the innovation in China and help narrow the gap with the US,” he added.

Victoria Mio,
Fidelity International

Education has become widely known in China as one of the “three big mountains” (alongside housing and healthcare), whose spiralling costs in recent years have become a burden for new parents. As such, education, property, and healthcare stocks have borne the brunt of recent selloffs, noted Victoria Mio, director for Asian equities at Fidelity International.

Regulatory intervention in China is nothing new, and what’s happening in China is being played out globally, as shown by recent regulatory actions against major tech and internet companies in the US and Europe, Mio said in her latest report. 

ALSO READ: Instos still bullish on China despite edtech clampdown

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