China's live-streaming industry is next in Beijing's regulatory sights. Image: Facebook

Chinese technology giants that provide live-streaming services are being urged by regulators to take the initiative to prevent e-commerce influencers from misleading consumers and evading taxes.

The Cyberspace Administration of China (CAC), the State Taxation Administration (STA) and the State Administration for Market Supervision (SAMR) issued a document on Wednesday to stiffen regulations on the live-streaming industry, which recorded 37% year-on-year sales growth to 1.32 trillion yuan (US$208 billion) in 2021.

The new curbs came after China Central TV (CCTV) said in its annual program about consumer rights on March 15 that many e-commerce anchors, or so-called social media influencers, had misled consumers and created fake traffic to boost sales.

The new restrictions are expected to hit internet platforms including TikTok, Kuaishou, Alibaba and Tencent – all of which have faced regulatory clampdowns beginning in late 2020. Since Alibaba’s Ant Group was banned from listing in the United States in November 2020, Beijing has launched a series of measures to curb technology giants.

Last July, the CAC removed the app of Didi Global, a Chinese ride-hailing company, from local phones and accused the company of illegally collecting users’ personal data.

The SAMR later said food delivery companies should take steps to ensure their deliverers make at least the local minimum wage, reduce their workloads and strengthen traffic safety education.

Last November, the SAMR fined Alibaba, Tencent, Baidu and other companies for violating China’s antitrust law. It listed 43 separate violations, with some offenses dating back as far as 2012, and fined the companies 500,000 yuan for each case.

On January 5 this year, it fined Alibaba, Tencent, and Bilibili Inc 500,000 yuan for each of the 13 merger deals they failed to report to authorities in advance in 2015. During the past year, Chinese technology stocks have declined 50% to 70% due to regulatory crackdowns and their impact on company profitability and potential future earnings.

On March 15, the Hang Seng Index fell to a six-year low as technology and property stocks dropped by more than 10% in a massive sell-off. Although the index rebounded on March 16 after Chinese Vice-Premier Liu He said the central government would actively prioritize policies favorable to markets, Beijing’s crackdown on Big Tech is not over yet.

Live-streaming is under new regulatory scrutiny in China. Image: CGTN

Liu said in a meeting of the financial stability and development committee under China’s State Council on March 16 that relevant departments should improve established plans to govern the platform economy and steadily complete “rectification work” on large platform companies as soon as possible through standard, transparent and predictable regulation.

On Wednesday, the CAC, the STA and the SAMR said live streamers and platforms should compete fairly and fulfill their legal obligations to pay taxes.

“Live-streaming has played an important role in recent years in promoting flexible employment,” the regulators said. “At the same time, there are problems such as poor management by live-streaming platforms, irregular commercial marketing behavior, tax evasion, which impede the industry’s healthy development and damage social fairness and justice.”

The regulators said some e-commerce anchors created fake traffic and gave tips to themselves in order to make netizens believe that they were popular. They also said some other social media influencers hid their income for tax evasion purposes. The regulators said internet platforms would be punished if they overcharged on their online shops and through their e-commerce anchors.

Shares of Hong Kong-listed Kuaishou Technology, the second-largest short video platform in China, closed down 6.2% at HK$73.6 (US$9.4) on Wednesday on news of the new regulations. Prior to this, the company said it looked forward to turning a quarterly profit this year. On Thursday, Kuaishou’s shares rose 0.82% to HK$74.2.

Tencent fell 1.68% to HK$374 while Alibaba dipped 1.58% to HK$112 on Thursday. ByteDance, which operates China’s largest short video platform TikTok, has remained privately owned since it scrapped its listing plan in the United States last summer.

TikTok, known as Douyin in China, said Monday it had recently banned or suspended 209 live-streaming accounts that misled consumers with fake transactions and comments. It said some e-commerce anchors promoted some shops that they did not actually visit.

The ultra-popular Chinese video-sharing app TikTok is driving up revenues profits at parent company ByteDance. Credit: Handout

On March 15, CCTV in its annual “315 Gala” show, which usually highlights consumer rights abuses in China, openly criticized the fraudulent practices in the country’s live-streaming sector.

Using an online jade shop as an example, it said the anchor, the supplier and the products were all fake. It said the anchor showed high-quality Myanmar jade to the audience but the supplier actually shipped cheap Guatemalan jade to buyers.

Live-streaming-related tax evasion is now also under new regulatory scrutiny. Last December, female singer Huang Wei, commonly known by her online stage name “Viya”, was fined 1.34 billion yuan for evading about 700 million yuan of taxes over the past few years.

All her social media accounts have since been banned. Dubbed as China’s “queen of live- streaming,” she reportedly sold 3 billion yuan worth of products through her programs on the Double 11, China’s biggest shopping festival, on November 11, 2019.

Zhang Lianqi, a vice president of the Chinese Tax Institute, told the China Securities Journal that some internet celebrities used agencies to collect their personal income and evade taxes. Zhang said taxation departments should also educate e-commerce anchors that they should report their income.

According to the China Internet Network Information Center, the number of viewers of live-streaming shows in China hit 637 million people last year, compared with 344 million in 2016. Live-streaming sales grew 37% to 1.32 trillion yuan last year from 2020. 

Read: Lay-offs at Chinese tech giants to vary by sectors

Follow Jeff Pao on Twitter at @jeffpao