(Bloomberg) — Chinese regulators pledged to step up oversight of the country’s livestreaming platforms, a stark warning to an industry that’s come under fire in recent years for tax evasion and content violations.
Companies will be required to work with the authorities on collecting income taxes and deliver regular reports on streamers’ personal information, according new guidelines from government agencies including the antitrust watchdog and Cyberspace Administration of China. It did not name specific companies but the industry is dominated by online giants including Kuaishou Technology, Bilibili Co. and Alibaba Group Holding Ltd.
“It’s quite clear regulators want to ensure that this commerce format isn’t run as a get-rich-quick scheme,” said Michael Norris, Shanghai-based analyst with consultancy firm AgencyChina.
Kuaishou slid 6.2% while Bilibili dropped 2.5%, erasing earlier gains.
Live-streaming shopping has morphed into a $60 billion arena in China, where influencers hawk wares from lipstick to smartphones like a Gen-Z version of the Home Shopping Network. Both e-commerce giants and social media platforms are competing against each other in the new realm, blending entertainment with buying since Covid-19 outbreaks spurred stay-at-home orders two years ago.
But Beijing has cracked down on tax crimes in the sector over the past year, supporting Xi Jinping’s campaign for “common prosperity.” Regulators have penalized some of the country’s most popular online stars for tax evasion. Top among them is Huang Wei, also known as Viya, who streamed on Alibaba platforms and was ordered in December to pay $210 million in back taxes, late fees and fines.
Streaming platforms are required to report to local authorities every six months the personal information of money-making streamers, including their bank accounts and incomes, and the companies have the obligation to withhold and remit individual income tax payments for live-streamers, the notice said.
Beijing launched a sweeping crackdown on the country’s private sector more than a year ago, implementing new regulations on everything from financial services to online education and games. Xi’s administration has prodded the technology industry to put less emphasis on softer internet services, which can be viewed as a social distraction and instead focus on hard-core technologies like semiconductors and artificial intelligence.
This year, authorities have sought to reassure investors and companies that it’s nearing an end of the crackdown, which at one point wiped more than $1 trillion off the market values of Alibaba and Tencent Holdings Ltd. This month, in a meeting of the State Council chaired by Premier Li Keqiang, the government said it would step up policy support for the economy and capital markets.
The latest rules for live streaming appear to be a narrow effort targeted at a troubled sector, rather than a broad reversal of that support.
The Chinese government is considering restrictions on the livestreaming business including daily caps on tipping, Wall Street Journal reported Wednesday, citing unidentified sources. Vice Premier Liu He will make a final decision on the proposed measures, the report said, which encompass more content censorship.
If implemented, those measures come on top of a plethora of restrictions imposed on livestreaming platforms since 2020, including a ban on tipping by minors and encouragement to limit virtual gifting.
“Regulators have issued guidance to place caps on user tips since 2020,” said Norris of AgencyChina. “Any new curbs, especially around the amounts streamers can receive each day, suggests a different policy goal may be at play, such as reducing the potential for livestreams to be used to facilitate lewd content, gambling or money laundering.”
(Updates with share prices in third paragraph)
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