China’s internet firms saw a decline in revenue last year, the first-ever drop in nearly ten years, according to Chinese Communist Party (CCP) data.
Data released on Jan. 31 by China’s Ministry of Industry and Information Technology (MIIT) showed that in 2022, total business revenues of Internet and related services firms, with annual operating revenues of over 20 million yuan ($3 million) in size, declined 1.1 percent from 2021 to 1.46 trillion yuan ($220 billion) and the revenue growth rate dropped by 10 percentage points.
Compared with the data from previous years, the total business revenue of Chinese internet companies showed negative growth for the first time since 2013.
The top five regions, Beijing, Shanghai, two coastal provinces Guangdong and Zhejiang, and Tianjin, made up 85.6 percent of the total internet revenue in China.
Except for Beijing and Shanghai, other regions saw declines of varying degrees in internet revenue: Guangdong and Zhejiang fell by 6.8 percent and 2.1 percent, respectively; Tianjin plunged as much as 38.1 percent; central Henan Province and southwestern Yunnan Province plummeted more than 50 percent.
In terms of online living services, which cover housing, finance, automobile, car rentals, and travel, saw a 17.5 percent fall in operating revenues.
Despite the usual distortion of official data in reporting economic figures, it partly reveals that China’s internet industry was heading for a “cold winter” in 2022.
Internet Industry Stagnates
The year 2022 began with a flurry of employee layoffs from internet giants such as Tencent, China’s most influential internet company, Baidu, China’s largest search engine, Didi, vehicle-hailing app developer, Jingdong, e-shopping platform, and Meituan, multifunctional e-consuming service platform.In an interim report for 2022, Tencent Holdings said its operating revenue fell 1 percent year-over-year, gross profit dropped 8 percent, and operating profit plunged 38 percent as of June 30, 2022, reporting a 53 percent drop in earnings for the period.
Online advertising revenue fell 18 percent year-on-year to 18.6 billion yuan ($2.8 billion) in the second quarter of 2022, “reflecting significantly weaker demand in the internet services, education and finance sectors,” Tencent’s report said.
This sweeping downturn in the internet sector came after the authorities ramped up network supervision.
On Feb. 7, 2022, the Ministry of Transportation and Communications and seven other departments jointly issued a notice on implementing cross-departmental and cross-regional oversight of ride-hailing platform companies found to be “illegal and non-compliant.”
A few months later, on July 21 that year, the Cyberspace Administration (CAC) punished Didi with a 8.026 billion yuan fine (approximately $1.2 billion) and confiscated Didi’s chairman Cheng Wei and president Liu Qing 1 million yuan (approximately $150,000) each as a result of “cybersecurity audit” on Didi.
Didi was not alone, Chinese regime regulators also launched a nationwide raid in 2022 to revamp the entire network system. According to CCP mouthpiece media Xinhua, in 2022, the CAC investigated more than eight thousand website platforms and took down hundreds of mobile applications. In addition, the office, in conjunction with the telecommunications authority, shut down 25,233 websites in 2022.
