August 9, 2021: Beijing’s recent regulatory crackdown is a “wakeup call” for China’s corporate giants, which should not assume they are untouchable, says Charles Li, former Hong Kong Exchange, and Clearing CEO.

Still, he said the latest regulatory reforms to affect Hong Kong’s markets in the longer term are unexpected.

China has stepped up its scrutiny into few Chinese tech giants and imposed restrictions on sectors like education in the past few weeks, which surprised investors and businesses and triggered a market sell-off.

Companies need to be used to the speed of reforms, Li said, who is now the founder of investment platform Micro Connect to CNBC.

“Because you can’t take for granted that when your company is powerful enough, nobody will be able to touch them,” said Li. “It is something that probably is a little bit of an awakening and wake up call,” Li added.

In the last months, China has clamped down from anti-monopoly practices to cybersecurity and made the rules even tighter on data security.

Regulators have made their hold on domestic tech giants for much of the last year, from the suspension of Ant Group’s $34.5 billion listings to Alibaba’s $2.8 billion antitrust fine and a cybersecurity probe into ride-hailing firm Didi.

In recent weeks, tech and education stocks have sold off as the country increased regulatory oversight further.

Li said that the regulatory model of China is different from the U.S., which has an advantage for the Asian giant.

“When the U.S. government wanted to crack down on monopoly, it could take a lot of time and decades because of the institutional checks and balances,” he said.

“China’s model is slightly different, and other people think it’s a lot different,” Li said.

Li is not alone in pointing out the differences in China’s regulatory system.

Although, Li doesn’t think that China’s crackdown will hurt Hong Kong markets in the long run.

“This swing amid fairness and equity and efficiency is a very healthy self-regulatory move that will allow us not to be excessive and allow the society and the economy to move in greater harmony,” he said.