Business

By Caroline Valetkevitch

NEW YORK (Reuters) – U.S. stocks fell on Friday in a broad selloff led by megacaps as U.S. bond yields rose, with the S&P 500 posting losses for the week after four straight weeks of gains.

Amazon.com, Apple and Microsoft all fell and were the biggest drags on the S&P 500 and Nasdaq. Higher rates tend to be a negative for tech and growth stocks, whose valuations rely more heavily on future cash flows.

U.S. Treasury yields rose, with the benchmark 10-year note nearly hitting 3%, after Germany reported record-high increases in monthly producer prices.

Investors have been weighing how aggressive the Federal Reserve may need to be as it raises interest rates to battle inflation.

Richmond Federal Reserve President Thomas Barkin said on Friday that U.S. central bank officials have “a lot of time still” before they need to decide how large an interest rate increase to approve at their Sept. 20-21 policy meeting.

“The rise in rates around the globe and tough talk from central bankers are being used as an excuse to push stocks lower in very light volume on an August Friday session,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The Dow Jones Industrial Average fell 292.3 points, or 0.86%, to 33,706.74, the S&P 500 lost 55.26 points, or 1.29%, to 4,228.48 and the Nasdaq Composite dropped 260.13 points, or 2.01%, to 12,705.22.

All three major indexes registered losses for the week. The S&P 500 fell about 1.2% and the Nasdaq slid 2.6% in their first weekly declines after four weeks of gains. The Dow lost about 0.2% for the week.

After notching its worst first half since 1970, the S&P 500 has bounced some 16% from its mid-June low, fueled by stronger-than-expected corporate earnings and hopes the economy can avoid a recession even as the Fed hikes rates.

Friday’s monthly options expiration should also make way for greater near-term stock market moves as options positions expire, said Brent Kochuba, founder of options-focused financial insights company SpotGamma.

The U.S. central bank needs to keep raising borrowing costs to tame decades-high inflation, a string of U.S. central bank officials said on Thursday, even as they debated how fast and how high to lift them.

The Fed has raised its benchmark overnight interest rate by 225 basis points since March to fight inflation at a four decade-high.

Focus next week may be on Fed Chair Jerome Powell’s speech on the economic outlook at the annual global central bankers’ conference in Jackson Hole, Wyoming.

Meme stock Bed Bath & Beyond Inc plunged 40.5% as billionaire investor Ryan Cohen exited the struggling home goods retailer by selling his stake.

The S&P banking index fell 2.1% after recent gains.

Shares of Deere & Co ended slightly higher, even after it lowered its full-year profit outlook and said it has sold out of large tractors as it grapples with parts shortages and high costs.

Volume on U.S. exchanges was last at 10.01 billion shares in one of the lowest volume days of the year.

Declining issues outnumbered advancing ones on the NYSE by a 6.06-to-1 ratio; on Nasdaq, a 3.59-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 29 new lows; the Nasdaq Composite recorded 43 new highs and 93 new lows.

(Reporting by Caroline Valetkevitch, additional reporting by Saqib Iqbal Ahmed in New York, Editing by Shounak Dasgupta, Arun Koyyur and Deepa Babington)

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By David Lawder

WASHINGTON (Reuters) – As a political messaging war rages over $80 billion in new Internal Revenue Service funding, a U.S. Treasury official is pushing back on an informal estimate that the money could cause Americans earning less than $400,000 to pay as much as $20 billion more in taxes over a decade.

Republicans have seized on the Congressional Budget Office (CBO) estimate, claiming Democratic President Joe Biden’s recently enacted, sweeping tax, drugs and climate law would break his pledge not to increase taxes on middle-class Americans.

Republicans are also claiming the funding will unleash an 87,000-strong “army” of new IRS agents on American households, despite the Treasury’s plans to focus the bulk of IRS hiring on offsetting a wave of retirements and improving customer service and information technology.

When the bill, formally known as the Inflation Reduction Act, was being debated in the Senate, Republican Senator Mike Crapo introduced an amendment to prohibit any use of funds to audit Americans with taxable incomes below $400,000.

Responding to a request from Crapo, the CBO found that the proposed amendment would reduce revenues by $20 billion over a decade if it was enacted, his office said. A spokesperson for the CBO confirmed the figure.

The amendment was rejected on a party-line vote.

Asked about the claims about middle-class taxes, Natasha Sarin, Treasury Department counselor for tax policy and administration, told Reuters this week that the CBO estimate assumed a threshold of $400,000 in reported taxable income before any audits, which would exclude the middle class.

Sarin said those making $400,000 and up include far wealthier people who have hidden their incomes to lower taxable incomes below $400,000, sometimes even to zero — the very people the Treasury is seeking to target for audits.

A significant portion of the $20 billion estimated by CBO would be recouped from wealthier people who are under-reporting their income, she said.

“People are trying to look like they are under $400,000 when actually they are well above it,” said Sarin, who as a University of Pennsylvania law professor did influential research https://www.nber.org/system/files/working_papers/w26475/w26475.pdf on policing tax evasion with former Treasury Secretary Larry Summers.

The CBO has not issued a final cost estimate for the Inflation Reduction Act, which includes the IRS funds along with massive new spending on clean energy and healthcare.

Sarin said the $80 billion in funding to improve enforcement, information technology and taxpayer services would actually spare more middle-class taxpayers reliant on wage income from being targeted with audits. New, modern computer systems would be better able to use data analytics and other tools to more precisely target wealthier Americans for audits, she said.

(Reporting by David Lawder; editing by Jonathan Oatis)

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By David Shepardson

WASHINGTON (Reuters) – The White House is ramping up efforts to tout the $1 trillion bipartisan infrastructure bill and the effort to refurbish roads, bridges and airports and reduce emissions.

U.S. Transportation Secretary Pete Buttigieg will go on a four-day, six-state tour starting Tuesday, visiting Florida, Oklahoma, Minnesota, Ohio, Nevada and New Hampshire to talk up the infrastructure law.

Buttigieg will tout grants approved in the November 2021 infrastructure law including $12 million for the Port of Tampa, $20 million to help complete the Nevada Pacific Parkway connection and expand capacity for dual access to Union Pacific Railroad and Burlington Northern Santa Fe rail lines and $24.5 million reconstruct roadways and pathways connecting to a major amusement park in Ohio.

“We are building a team, we’re getting the money out of the door and we’re telling the story,” said White House Infrastructure Coordinator Mitch Landrieu in a Reuters interview this week.

“This is a transformational bill” Landrieu said, noting it also funds public lands, clean water and electric grid projects.

The administration has funded more than 5,000 projects to date and released around $113 billion. The administration will award billions of dollars in additional grants through the end of 2022, including for electric vehicle charging stations.

“Over the next year or so you will be able to see these things coming out of the ground,” Landrieu said.

He said U.S. agencies are working closely with states and cities on many funding programs. If states are “slow coming in, we got on the phone and called them all. We want to tell you again, ‘We’re trying to get you this money. How can we help?”

On Wednesday, the Commerce Department said all 50 states submitted applications for initial planning awards under the $42.45 billion fund to extend broadband internet to unserved areas. Earlier this month, the administration said all states submitted EV infrastructure deployment plans required under the $5 billion EV charging program.

“We have gotten 100% participation” on these “major structural programs so that the next big thing can happen,” Landrieu said.

This week, the Transportation Department announced $1.66 billion in grants for 1,800 new buses. The 150 awards includes $116 million for New York City to buy 230 battery-electric buses to replace older diesel buses and $280,000 for Fayetteville, North Carolina to buy three light transit vehicles.

Last week, the Transportation Department awarded $2.2 billion in grants to modernize roads, bridges and other projects, including $25 million for California’s High-Speed Rail program.

(Reporting by David Shepardson; editing by Diane Craft)

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BEIJING (Reuters) -A Shanghai court on Friday sentenced Chinese-Canadian billionaire Xiao Jianhua, not seen in public since 2017, to 13 years in jail and fined his Tomorrow Holdings conglomerate 55.03 billion yuan ($8.1 billion), a record in China.

Xiao and Tomorrow Holdings were charged with illegally siphoning away public deposits, betraying the use of entrusted property, and the illegal use of funds and bribery, the Shanghai First Intermediate Court said.

It added the punishment was mitigated because both had admitted their crimes and cooperated in recovering illegal gains and in restoring losses.

China-born Xiao, known to have links to China’s Communist Party elite, was last seen whisked away in a wheelchair from a luxury Hong Kong hotel in the early hours with his head covered, a source close to the tycoon told Reuters at the time.

Xiao and Tomorrow have “severely violated a financial management order” and “hurt state financial security”, the court said, with the tycoon additionally fined 6.5 million yuan for the crimes.

From 2001 to 2021, Xiao and Tomorrow gave shares, real estate, cash and other assets to government officials totalling more than 680 million yuan, to evade financial supervision and seek illegitimate benefits, the court said.

In July 2020, nine of the group’s related institutions were seized by Chinese regulators as part of a crackdown on risks posed by financial conglomerates.

Among the nine firms were four insurers – Tianan Property Insurance Co of China, Huaxia Life Insurance Co, Tianan Life Insurance Co and Yi’an P&C Insurance Co – as well as New Times Trust Co and New China Trust Co. The other three were Chengtong Securities, Guosheng Securities and Guosheng Futures.

The court said that from 2004, Xiao and Tomorrow controlled multiple financial institutions and internet financial platforms, including the failed Baoshang Bank, via multiple layers of indirect shareholders and anonymous ownership.

It said Xiao used the illegal gains for the acquisition of financial institutions, securities trading and overseas investment. But it acknowledged his attempts to make amends.

“Xiao Jianhua has taken commendable actions, so he was given a mitigated punishment in accordance with the law,” it said.

Asked about Xiao’s right to consular access as a Canadian citizen at a Friday briefing, Chinese foreign ministry spokesperson Wang Wenbin said Xiao was not entitled to such rights as Chinese law did not recognise dual nationality.

Canada’s foreign ministry said it was aware of media reports about the sentencing, and its officials would monitor the case and press for consular access.

“The lack of transparency in Mr. Xiao’s legal process is very concerning, as is the ongoing lack of consular access, which prevents us from being able to assess his wellbeing,” it said in a statement.

Tomorrow Holdings could not immediately be reached for comment.

($1=6.8056 Chinese yuan renminbi)

(Reporting by Tony Munroe, Ziyi Tang, Ryan Woo, Ellen Zhang, Eduardo Baptista, and Meg Shen; Editing by Stephen Coates and Clarence Fernandez)

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SINGAPORE (Reuters) – China’s coal imports from Russia jumped 14% in July from a year earlier to their highest in at least five years, as China bought discounted coal while Western countries shunned Russian cargoes over its invasion of Ukraine.

China brought in 7.42 million tonnes of coal from Russia last month, data from the General Administration of Customs showed on Saturday. That was the highest monthly figure since comparable statistics began in 2017, up from 6.12 million tonnes in June and 6.49 million tonnes in July 2021.

Western countries were avoiding cargoes from Russia ahead of a European Union ban on Russian coal that came into force on Aug. 11, aimed at reducing the Kremlin’s energy revenue over its February invasion.

The ban has forced Russia to target buyers such as China and India and sell at a steep discount.

Russian thermal coal with a heating value of 5,500 kilocalories (kcal) traded around $150 a tonne on a cost-and-freight basis in late July, while coal of the same quality at Australia’s Newcastle port was assessed at more than $210 a tonne on a free-on-board (FOB) basis.

Some Chinese traders expect more Russian coal to flow into China in the fourth quarter when utilities in northern China build stocks for the winter heating season.

July shipments of Indonesian coal, mostly cheap, low-quality thermal coal with a heating value below 3,800 kcal, were 11.7 million tonnes. That was up 22% from June but down 40% from a year earlier. China has reduced its overall coal imports in recent months amid surging domestic output.

Power plants in southern China have increased tenders to buy Indonesian coal in August as it is cheaper than domestic coal, while demand for coal-fired power generation has been boosted by a record heat wave.

Indonesian thermal coal with a heating value at 3,800 kcal changed hand at about $78 a tonne on a FOB basis last week, which would still below about 690 yuan ($101) for local coal when considering shipping costs.

China’s customs data showed zero coal shipment from Australia in July.

($1 = 6.8091 Chinese yuan renminbi)

(Reporting by Muyu Xu; editing by Richard Pullin and William Mallard)

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(Reuters) – Jackson Hole, Wyoming, is the focal point for markets in the coming week as investors zero in on the Federal Reserve’s annual confab.

Business activity indicators in the euro zone and an inflation gauge in the United States are also on tap, while rate cuts may be looming in China.

Here is a look at the week ahead from Tommy Wilkes and Marc Jones in London, Kevin Buckland in Tokyo, Ira Iosebashvili and Lewis Krauskopf in New York, Riddhima Talwani in New Delhi, Sumanta Sen in Mumbai and Vineet Sachdev in Bengaluru.

1/JACKSON HOLE JAMBOREE

How big will future rate hikes be? How strong is the economy? What about quantitative tightening?

Investors hope the Federal Reserve may shed light on those questions when central banking heavyweights meet on Aug. 25-27 for their annual symposium in Jackson Hole, Wyoming.

U.S. stocks have screamed higher this summer, despite Fed warnings that expectations of a peak in inflation and a so-called dovish pivot from the central bank may be premature.

Some investors believe Chairman Jerome Powell will push back against the market’s optimism again, reminding investors that there is one more inflation report and another jobs number before the Fed’s September meeting.

Also in demand are further details on the Fed’s reduction of its $9 trillion balance sheet, known as quantitative tightening, which some investors have flagged as a potential risk to market liquidity.

Graphic: Tightening up – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/zdvxozgrjpx/chart.png

2/MORE PMI PAIN?

    Concerns the euro zone economy is hurtling toward recession are building. Flash purchasing managers index survey data should shed some light on how soon that might happen.

    The August numbers, due on Tuesday, may show another month of business activity contraction after S&P Global’s final composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, fell to a 17-month low of 49.9 in July.

    Euro zone businesses are struggling from soaring energy prices and shortages, surging inflation and expectations of higher interest rates. An economic sentiment index for euro zone powerhouse Germany recently showed investor sentiment falling in August as fears grow that the rising cost of living will hit private consumption.

    Tuesday will also include the release of flash PMI numbers for the United States and Britain.

Graphic: Slowing business activity – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lgpdwyglmvo/chart.png

3/CHINA’S LIQUIDITY TRAP   

    More rate cuts loom in China, but analysts and investors doubt they will give any support to an economy ravaged by a property crisis and strangling COVID-19 lockdowns.

    The People’s Bank of China sets the so-called Loan Prime Rate for one-year and five-year borrowing on Monday – the basis for business loans and mortgages, respectively – after recently surprising markets by cutting key bank lending rates.

    The move stoked slowdown fears that sent the yuan sliding to a two-month low.

    The PBOC is prodding banks to lend more, and pouring money into the financial system. But demand to borrow simply is not there, with corporates fretting about the economic outlook and consumers wary with property prices plunging.

Graphic: Demand slump – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/jnvwenrwovw/chart.png

4/PRICE POINTS

    With markets twitching on any inkling that surging inflation has peaked or remains at four-decade highs, the U.S. Federal Reserve’s preferred measure of prices is due on Aug. 26.

    The release of the personal consumption expenditures price index for July comes after another key inflation measure, the consumer price index, was flat on a monthly basis in July, the largest month-on-month deceleration of price increases since 1973, a result that heartened stock investors.

    In the 12 months through June, the PCE price index advanced 6.8%, the largest increase since January 1982.

    With recession fears lingering and investors eager for any clues about the economy’s strength, data on new home sales hits on Tuesday and durable goods on Wednesday.

Has U.S. inflation peaked? – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/klpykwldgpg/chart.png

5/SIX MONTHS OF WAR

Wednesday marks the six-month anniversary of Russia’s invasion of Ukraine, or special military operation as Moscow called it.

Not only has it been a humanitarian tragedy and plunged the world into a new Cold War, it has also been a key driver of mounting recession worries, especially in Europe where a gas crisis looms large.

The region’s gas prices have nearly tripled since June alone. Rationing in powerhouse economies like Germany may well be needed, but the ECB, Bank of England and others are adamant they simply must crush the inflation it is fuelling.

Other highly sensitive markets have proved remarkably elastic. Wheat and corn – of which Ukraine and Russia are both huge suppliers – have swooped right back down, while Moscow’s main source of income, oil, is now selling for less than when the invasion started.

Graphic: Six months of the Ukraine war – https://fingfx.thomsonreuters.com/gfx/mkt/mypmneyobvr/Pasted%20image%201660815413565.png

(Compiled by Lewis Krauskopf in New York; Editing by Matthew Lewis)

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By Karen Brettell

NEW YORK (Reuters) – The U.S. dollar index hit a five-week high and posted its biggest weekly gain since April 2020 on Friday as investors adjusted for the likelihood that the Federal Reserve will keep hiking rates to battle inflation.

The U.S. central bank needs to keep raising borrowing costs to tame decades-high inflation, a string of its officials said on Thursday, even as they debated how fast and how high to lift them.

“They still have their work cut out for them and I don’t think the market was really positioned that way after the July FOMC,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, referring to the Fed’s Federal Open Market Committee meeting. “It’s really all about getting inflation back to target.”

The dollar index rose 0.61% to 108.13, its highest since July 15, while the euro dropped 0.54% to $1.0033, its lowest since the same date.

The greenback gained 0.73% to 136.87 against the Japanese yen, the strongest since July 27. Sterling tumbled 1.03% to $1.1813 and had its biggest weekly drop against the dollar since September 2020.

The Fed is seen as having more room to hike rates than central banks of other large economies which are more fragile.

“For the USD to weaken meaningfully, the Fed has to get more concerned about growth than inflation, and we are not there yet,” Bank of America analyst Michalis Rousakis said in a report on Friday.

“Meanwhile, we expect the (European Central Bank) to stop hiking next year on concerns around growth and/or spreads. EUR is also exposed to the much worsened terms of trade and the slowdown in China,” Rousakis said.

The euro was also dented on Friday after Gazprom said the Nord Stream 1 pipeline, which supplies gas from Russia to Europe under the Baltic Sea, will be shut down from Aug. 31 to Sept. 2 for maintenance.

Fed funds futures traders are pricing in a 55% expectation that the Fed will hike rates by 50 basis points in September and a 45% probability of a 75 basis points increase.

U.S. central bank officials have “a lot of time still” before they need to decide how large an interest rate increase to approve at their Sept. 20-21 policy meeting, Richmond Fed President Thomas Barkin said on Friday.

Fed Chair Jerome Powell will update the market on his views at the annual Jackson Hole symposium on Aug. 25-27.

China’s yuan slipped to its lowest since September 2020 at 6.8199 per dollar in onshore trading after the central bank set a much-weakened midpoint guidance, with traders expecting further downside.

In cryptocurrencies, bitcoin fell 8.73% to $21,188. Ether was down 8.34% to $1,693.

“Weakness has seeped into the crypto sphere as speculators retreated from highly risky assets,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

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Currency bid prices at 3:00PM (1900 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 108.1300 107.4900 +0.61% 13.032% +108.2100 +107.4800

Euro/Dollar $1.0033 $1.0087 -0.54% -11.75% +$1.0096 +$1.0033

Dollar/Yen 136.8650 135.8950 +0.73% +18.91% +137.2200 +135.7150

Euro/Yen 137.33 137.06 +0.20% +5.38% +137.9600 +136.9500

Dollar/Swiss 0.9592 0.9570 +0.18% +5.11% +0.9598 +0.9553

Sterling/Dollar $1.1813 $1.1936 -1.03% -12.65% +$1.1936 +$1.1793

Dollar/Canadian 1.2994 1.2945 +0.38% +2.78% +1.3009 +1.2947

Aussie/Dollar $0.6867 $0.6914 -0.67% -5.52% +$0.6919 +$0.6860

Euro/Swiss 0.9622 0.9650 -0.29% -7.20% +0.9669 +0.9613

Euro/Sterling 0.8492 0.8455 +0.44% +1.10% +0.8511 +0.8453

NZ $0.6167 $0.6257 -1.43% -9.89% +$0.6257 +$0.6168

Dollar/Dollar

Dollar/Norway 9.8155 9.6840 +1.37% +11.43% +9.8190 +9.7535

Euro/Norway 9.8478 9.8150 +0.33% -1.65% +9.8690 +9.8205

Dollar/Sweden 10.5967 10.4977 +0.39% +17.51% +10.5992 +10.5007

Euro/Sweden 10.6322 10.5908 +0.39% +3.89% +10.6421 +10.5973

(Additional reporting by Joice Alves in London; Editing by Alexander Smith and Richard Chang)

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NEW YORK (Reuters) – Speculators’ net long positioning on the U.S. dollar rose in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The value of the net long dollar position climbed to $13.37 billion in the week ended Aug. 16, from $12.97 billion the previous week, CFTC data showed.

Euro net shorts, on the other hand, jumped to 42,784 contracts, the largest since February 2020.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Leslie Adler)

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SACRAMENTO, Calif. (AP) — California’s unemployment rate fell to 3.9% in July, the lowest point since 1976 as employers in the the nation’s most populous state continued to defy expectations by adding 84,800 new jobs.

Record-high inflation coupled with a cool-down in the housing market have prompted warnings of an economic slowdown as consumers react to high prices for goods from groceries to gasoline.

But new numbers released Friday by California’s Employment Development Department show its labor market has so far been immune from those issues, as the state has had month-over-month job growth in 17 out of the last 18 months.

Nationwide, unemployment rates dropped in 14 states in July, rose in three states and stayed the same in 33 states, according to the U.S. Bureau of Labor Statistics. California now has a slightly lower unemployment rate than Texas, but is higher than Florida and Alabama — all Republican-led states whose leaders California Democratic Gov. Gavin Newsom has feuded with in recent months.

Ten of California’s 11 industry sectors had job growth in July, led by big gains in computer systems design, advertising, security services and health care. While California makes up 11.7% of the nation’s civilian labor force, the state accounted for 16.1% of all new jobs in the U.S. last month.

That job gain is despite job postings declining in the state and sales of single-family homes — a major driver of California’s economy — slowing 14.4% in July compared to June and down 31.1% from a year ago, according to the California Association of Realtors. California’s housing market reflects an overall slowdown in home sales nationally, which declined in July for the sixth straight month.

“It’s certainly surprising,” former EDD Director Michael Bernick said of California’s job gains. “It goes against all the other economic indicators.”

California lost more than 2.7 million jobs in just two months at the start of the pandemic in 2020, when Newsom issued the nation’s first statewide stay-at-home order that forced many businesses to close.

It has taken more than two years for California to get most of those jobs back. July’s job growth means the state has recovered 97.3% of those pandemic job losses.

The biggest reason for the decline in the unemployment rate is large number of new jobs added in July. But another factor is 23,400 people stopped looking for work in July, reducing the state’s labor force. Some industries are continuing to see a labor shortage, mostly in restaurants and hotels, according to Sung Won Sohn, an economics professor at Loyola Marymount University.

“I think the labor force will go up in the future because people need to earn extra income to beat inflation,” he said. “We are already seeing so-called gig employment rising because some people are holding two or three jobs. The fear of an oncoming recession, if we are not in one already, will cause people to look for work.”

Bernick, now an attorney with the Duane Morris law firm who closely tracks California’s labor market, said he suspects the state is still being propped up by billions of dollars from federal stimulus spending and the state’s budget surplus. The recently passed Inflation Reduction Act in Congress will send more money to the state, lowering some prescription drug costs while helping millions pay their monthly health insurance premiums.

“That is not going to continue forever,” he said.

California’s budget includes $9.5 billion in refunds to about 23 million people, something Newsom touted Friday when boasting about the state’s low unemployment rate.

“We have historic reserves and we’re putting money back in peoples’ pockets as we continue to lead the nation’s economic recovery,” Newsom said in a news release.

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By Martin Quin Pollard and Eduardo Baptista

BEIJING (Reuters) -China’s cyberspace watchdog wants to build an “affectionate” relationship between internet enterprises and the government, a senior official said, the latest verbal assurance to an industry still on edge after a long and bruising regulatory crackdown.

Niu Yibing, vice minister of the Cyberspace Administration of China (CAC), told a news conference on Friday the agency was supportive of the sector’s healthy development and wanted to create a “healthy, get-to-the-top, can-do entrepreneurial atmosphere”.

The CAC was among Chinese regulators which in late 2020 launched an unprecedented crackdown on the country’s technology giants. The campaign upended long-held industry practices, set new rules on how the companies should do business, and roiled markets, shaving billions of dollars in market value off the firms.

While regulators, facing a slowing economy, have not announced new rules this year at the pace they did last year, companies have remained cautious, with many including the likes of giants Alibaba Group and Tencent Holdings cutting back on new investments and laying off thousands of workers.

Among some of the biggest issues that have worried investors include new rules that came into effect in February for Chinese firms with data on more than 1 million users to undergo a security review before listing their shares overseas.

Sun Weimin, head of the regulator’s cybersecurity coordination bureau, said the agency remained supportive of domestic firms seeking overseas listings, and that the review was to ensure that there was no data involved that could be abused by foreign governments.

There is also no final word on the saga of Chinese ride-hailing giant Didi Global, which was the subject of a CAC-led probe that forced the ride-hailing leader to delist from New York within a year of its debut and made foreign investors wary about China’s tech sector.

While Didi was fined $1.2 billion last month for violating data security rules, it is not clear whether or when its apps will be allowed to return to app stores, or whether or when it can resume new user registrations.

Sun said that the CAC was supervising Didi’s rectification work, and that the regulator would continue to work to remove hidden security risks and punish any behaviour that endangered national security or data security.

A Beijing-based tech executive, whose company has previously been fined by regulators over data security issues, told Reuters that CAC’s statement on Didi showed how regulators were still not completely satisfied with the company.

“Didi is different from other Internet companies, the anti-monopoly work against other tech giants has either ended or stabilised, but clearly regulators are treating Didi differently,” the executive said, declining to be named as he is not authorised to speak to media.

(Reporting by Martin Pollard and Eduardo Baptista; Writing by Brenda Goh; Editing by Raju Gopalakrishnan & Shri Navaratnam)

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