Matters:
The CPPCC National Committee took "promoting the sustained and healthy development of the digital economy" as one of the important negotiation topics this year, and made suggestions through a special consultation meeting on May 17. Liu He, member of the Political Bureau of the CPC Central Committee and vice premier of the State Council, and Wang Yang, member of the Standing Committee of the Political Bureau of the CPC Central Committee and chairman of the CPPCC National Committee, attended and spoke. Robin Lee, Ding Lei, Zhou Hongyi and other Internet entrepreneurs attended the meeting.
Guoxin Internet view: reviewing the policies of various sections of the Internet industry, we find that the policies have strong continuity. Since the beginning of 2022, the policies of the Internet sector have continued to pick up, and market sentiment is expected to repair: combined with the meeting of the Political Bureau of the CPC Central Committee on April 29, we believe that the regulation or recovery of the Internet industry will be guided by "supporting healthy development" in the future. At present, the valuation of high-quality Internet leading companies is at a low level: recommend Netease, which has solid performance support and will soon launch the big products Diablo: immortality and Harry Potter international service; Recommend Tencent holdings, a high-quality leader with high-quality business model, strong barriers and low valuation; And meituan and Kwai, which have low valuation and high upward flexibility.
Comments:
Positive signals revealed at the special consultation meeting of the CPPCC National Committee
The symposium will take a more positive attitude towards the digital economy. Wang Yang, chairman of the Chinese people's Political Consultative Conference, stressed the need to constantly strengthen, optimize and expand the digital economy, so as to better serve and integrate it into the new development pattern and promote high-quality development; Vice Premier Liu he pointed out that we should support the sustained and healthy development of platform economy and private economy, handle the relationship between the government and the market, and support digital enterprises to be listed in capital markets outside China. The members put forward a number of consensus suggestions: ① give full play to the advantages of the new national system and the super large-scale market, strengthen the tackling of key core technologies, and firmly grasp the autonomy of developing the digital economy in their own hands; ② We should promote the deep integration of the digital economy and the real economy, guide the digital transformation of small and medium-sized enterprises, fully tap the development potential of the industrial Internet, and promote the new generation of information technology to endow wisdom to equipment, assign value to enterprises and empower industries; ③ Clarify the rights of data ownership, use right, operation right and income right, and stimulate the innovation vitality of enterprises on the basis of ensuring the security of national network and data; ④ We should encourage international cooperation in the digital economy and actively participate in the process of global digital governance.
This meeting has higher specifications and is of different significance from the past. According to the comments of the Beijing News, this is the first special discussion organized by the CPPCC National Committee between the central leaders and the executives of digital technology enterprises. It is usually held at the CPPCC annual consultation meeting, which is only included in the annual consultation plan. In addition, the meeting is just over two weeks away from the meeting and collective study of the Political Bureau of the CPC Central Committee on the current economic situation and economic work on April 29. The time point also reveals the continuity of the central government's attitude.
The central government's policy has continuity, and this thematic consultation meeting continues to reflect a positive attitude
The symposium continued the positive attitude towards digital economy since January 2022. In January 2022, Xi Jinping General Secretary published an important article in Qiushi magazine, "constantly strengthening, optimizing and expanding China's digital economy"; In February, the 14th five year plan for digital economy development was officially released. On April 2 and 7, Gao Yunlong, vice chairman of the National Committee of the Chinese people's Political Consultative Conference, led a special research group to conduct remote video research and field research discussions in Zhejiang and Beijing respectively. On April 29, the Political Bureau of the CPC Central Committee held a meeting to analyze and study the current economic situation and economic work. The meeting pointed out that we should promote the healthy development of the platform economy, complete the special rectification of the platform economy, implement normalized supervision, and introduce specific measures to support the standardized and healthy development of the platform economy. On the same day, the Political Bureau of the CPC Central Committee conducted a collective study on standardizing and guiding the healthy development of Chinese capital according to law, reiterated its adherence to the "two unwavering" and stressed the positive role of capital as an important factor of production.
Combing the past policy introduction process, we find that the central policy has obvious continuity.
1) education: on March 6, 2021, General Secretary Xi visited members of the medical and health circles and education circles who participated in the fourth session of the 13th CPPCC National Committee, and participated in the joint group meeting, emphasizing the need to "fully implement the party's education policy, adhere to the socialist school running direction, adhere to the principle of public welfare in education, and strive to build a high-quality and balanced basic public education service system", At the same time, "we should pay close attention to the prominent problems strongly reflected by the masses and the acts that infringe on the interests of the masses under the banner of education, and resolutely change them in place and thoroughly". On March 9, Wang Huan, President of Shijia Hutong, proposed to General Secretary Xi at the joint group meeting that "advertisements for out of school training are flying all over the sky, creating anxiety and selling anxiety". General Secretary Xi responded: "training chaos can be said to be a stubborn malaria and chronic disease that is difficult to control". On May 21, 2021, General Secretary Xi presided over the 19th meeting of the Central Committee for comprehensively deepening reform, deliberated and adopted the opinions on further reducing the homework burden and after-school training burden of students in the stage of compulsory education. On July 24, 2021, the general office of the CPC Central Committee and the general office of the State Council issued the opinions on further reducing the burden of students' homework and after-school training in the stage of compulsory education, requiring all regions and departments to earnestly implement it in combination with reality. On July 30, 2021, the general office of the Ministry of Education issued the notice on further clarifying the scope of discipline and non discipline of out of school training in the stage of compulsory education, clarifying the scope of discipline and non discipline of out of school training in the stage of compulsory education.
2) protection of minors: on March 9, 2021, Wang Huan, President of Shijia Hutong, proposed to General Secretary Xi at the joint group meeting of the medical and health circles and education circles of the CPPCC National Committee: "students' addiction to online games has aroused social concern", and General Secretary Xi responded: "it is not only the problem of addiction to online games, there are many filthy things on the Internet, and minors' psychological development is immature and vulnerable to adverse effects". On June 1, 2021, the newly revised law of the people's Republic of China on the protection of minors came into force, stipulating that "no webcast shall be opened under the age of 16" and "the platform shall restrict minors' online consumption and reward". On August 30, 2021, the State Press and Publication Administration issued the notice on further strict management to effectively prevent minors from indulging in online games, strictly limiting the time for providing online game services to minors. On May 7, 2022, the central civilization office, the Ministry of culture and tourism, the State Administration of radio and television and the state Internet Information Office jointly issued the opinions on standardizing online live broadcasting reward and strengthening the protection of minors, explicitly prohibiting minors from participating in live broadcasting reward and strictly controlling minors from engaging in anchor broadcasting.
3) antitrust field of platform Economy: on January 2, 2020, the State Administration of Market Supervision issued the revised draft of the antitrust law (Draft for public comments), which added provisions on the determination of the market dominant position of Internet operators, and increased the upper limit of punishment for illegal acts to 10% of the sales of the previous year. On December 24, 2020, the State Administration of Market Supervision announced that according to the report and in accordance with the anti-monopoly law, Alibaba Group Holdings Co., Ltd. filed an investigation into the abuse of market dominance in the online retail platform service market in China. On February 7, 2021, the antimonopoly Commission of the State Council formulated and issued the antimonopoly guidelines of the antimonopoly Commission of the State Council in the field of platform economy. On April 10, 2021, the State Administration of market supervision made a decision on administrative punishment according to law, ordering Alibaba group to stop its illegal acts and impose a fine of 4% of its domestic sales of 455712 billion yuan in 2019, totaling 18.228 billion yuan.
On October 8, 2021, the General Administration of market supervision made an administrative punishment decision on the "one out of two" monopoly case of meituan according to law, ordered meituan to stop its illegal acts, returned the exclusive cooperation deposit of 1.289 billion yuan in full, and imposed a fine of 3% of its domestic sales of 114748 billion yuan in 2020, totaling 3.442 billion yuan.
4) business concentration: in October 2020, the State Administration of Market Supervision issued the Interim Provisions on the examination of business concentration. On December 14, 2020, the State Administration of Market Supervision issued a decision on administrative punishment for "Alibaba's investment in the acquisition of Yintai commercial equity", "Yuewen group's acquisition of Xinli media equity" and "Fengchao network's acquisition of Zhongyou Zhidi equity". Since then, the State Administration of market supervision has successively punished many cases of illegal concentration of business operators. In July 2021, the State Administration of market supervision banned the merger of tiger teeth and Betta according to law.
The stock price of the Internet sector is greatly affected by policy uncertainty and sentiment, and the frequent warm wind is conducive to the repair of sentiment
Previously, the share price performance of the Internet sector was relatively negative:
Netease: the performance is least affected by the policy, but the brilliant performance is not fully reflected in the stock price. Since September 2021, several trump products launched by NetEase have version numbers, so the performance and stock price are relatively least affected; Driven by forever and Harry Potter: Magical awakening, game revenue increased by 22% year-on-year in the second half of 2021. Driven by strong performance, Netease's share price performed well from September to November 2021. However, due to the impact of the macro environment and stricter policies, the stock price entered a period of shock. We believe that this is not commensurate with the performance and the subsequent strong product line.
Tencent: the regulatory risks in the field of games and finance have depressed the performance of share prices.
1) game Supervision: on March 6, 2021, at the joint group meeting of the medical and health education circles of the CPPCC National Committee, a member mentioned that the current problems such as "students addicted to online games" have aroused great concern of students' parents and the society. On August 23, the State Press and Publication Administration issued the notice on further strict management to effectively prevent minors from indulging in online games, which strengthened the regulatory requirements for the prevention of minors from indulging; At the same time, the distribution of version number is also suspended, and the reason is not clear.
2) payment and financial supervision: since September 2020, the central bank, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and other departments have made public statements one after another to bring qualified Internet companies into financial supervision and establish financial holding companies according to law. However, no detailed implementation regulations have been issued yet. In terms of payment: on January 20, 2021, the central bank, together with relevant departments, studied and drafted the regulations on non bank payment institutions (Draft for comments), referring to the anti-monopoly supervision of non bank payment institutions; On June 18, the executive meeting of the State Council proposed to take fee reduction measures such as reducing the handling fee of online payment merchants by 10% to help small and micro enterprises and individual industrial and commercial households reduce costs.
Meituan's regulatory pressure is mainly concentrated in the field of takeout, including antitrust, proportion and rider protection.
1) antitrust: in April 2021, the State Administration of market supervision filed an investigation into meituan's abuse of market dominance in the delivery platform service market, and made an administrative punishment decision in October, ordering meituan to stop the illegal act and impose a fine of 3% of China's domestic sales in 2020, amounting to 3.442 billion yuan.
2) rider protection: in July 2021, the Ministry of human resources and social security, the Supreme People's court and other eight departments issued the guiding opinions on safeguarding the labor security rights and interests of workers in the new form of employment, and put forward a number of guiding opinions, such as clarifying the responsibility of protecting the rights and interests of workers and making up for the shortcomings of protecting the rights and interests of workers. In the same month, the State Administration of market supervision, the national development and Reform Commission and other seven departments jointly issued the guiding opinions on implementing the responsibility of online catering platform and effectively safeguarding the rights and interests of takeout waiters, which put forward all-round requirements for protecting the legitimate rights and interests of takeout waiters. The market is worried that the increase of rider protection requirements will increase rider costs and reduce the gross profit margin of takeout business.
3) the issue of proportion: in the guidance issued by the Ministry of human resources and social security and other 8 departments, it is also mentioned to urge enterprises to formulate and revise the system and rules of proportion, and fully listen to the opinions and suggestions of trade unions or labor representatives. On February 18, 2022, 14 departments including the national development and Reform Commission issued several policies on promoting the recovery and development of difficult industries in the service industry. For the catering industry, the policy proposed to guide Internet platform enterprises such as takeout to further reduce the service fee standard of catering merchants and reduce the operating costs of relevant catering enterprises. The market believes that the profitability prospect of takeout business is uncertain, which affects the realization rate.
Overall, since 2021, the share price of Internet sector has been greatly affected by policy uncertainty and sentiment. Combined with the meeting of the Political Bureau of the CPC Central Committee on April 29 and this special consultation meeting, we believe that the bottom of the policy of the Internet industry has been realized. In the future, it will be guided by "supporting healthy development", and the new tone will be conducive to the repair of mood and fundamentals.
Investment suggestion: recommend Netease, Tencent, meituan and Kwai, the Internet leaders with low valuation and previously greatly affected by policies
Policy margins pick up and market sentiment is expected to repair: combined with the meeting of the Political Bureau of the CPC Central Committee on April 29, we believe that the regulation or recovery of the Internet industry will be guided by "supporting healthy development" in the future. At present, the valuation of high-quality Internet leading companies is at a low level: recommend Netease, which has solid performance support and will soon launch the big products Diablo: immortality and Harry Potter international service; Recommend Tencent holdings, a high-quality leader with high-quality business model, strong barriers and low valuation; And meituan and Kwai, which have low valuation and high upward flexibility.
Risk tips
Policy risk; Affected by the epidemic, the short-term realization of advertising and e-commerce related businesses is less than expected; The risk that the performance of the new game is not as expected; Risk of deterioration of competition pattern in short video industry.
