By late February the Hang Seng Tech index had sunk to roughly 5,100 points, more than 23% below its October peak and more than 53% below its 2021 highs. That decline has become a talking point across China’s investment community: while tech-heavy markets in Japan and South Korea are staging impressive rallies, Hong Kong’s marquee technology gauge has lurched sideways and then down.
Investors point to many culprits — a stronger yuan, tighter global liquidity and sector rotation among them — but one narrative has gained particular traction: the rise of ByteDance. The privately held company, whose Douyin short-video app commands extraordinary user attention in China, is increasingly seen as siphoning advertising budgets, time and strategic opportunities away from the listed giants that underpin the Hang Seng Tech index.
ByteDance’s footprint is already vast. The company’s Douyin is projected to generate roughly 901.2 billion RMB in revenue in 2025, with advertising income alone at approximately 420 billion RMB, while daily active users reportedly exceed 850 million and monthly users top one billion. Those numbers dwarf the advertising take of many incumbent platforms; Tencent’s cumulative ad revenue for the first three quarters of 2025 is projected to be a fraction of Douyin’s annual haul.
The competitive threat is not confined to advertising. ByteDance has expanded aggressively into commerce, local services and AI. Goldman Sachs estimated ByteDance’s domestic e-commerce GMV last year at around 5.2 trillion RMB, comparable with China’s largest listed players and a clear sign that the company is contesting the whole consumer internet stack.
The technical leap that rattled markets in February was Seedance 2.0, ByteDance’s video-generation model released on Feb 12. The tool quickly captured attention for its director-level control and audio-visual sync, and the market reaction was immediate: a tentative rebound in Hang Seng Tech evaporated, and some stocks reversed sharply. Public relations ripostes from ByteDance executives — who dismissed suggestions that the company was deliberately targeting listed rivals — did little to calm traders who see the company as an existential competitor.
Hardware and system-level integration have intensified the threat. ByteDance’s cooperation with a handset maker to ship an AI-enabled phone with system-level automation permissions alarmed other platform owners. Several mainstream apps, including dominant payment and super-app players, promptly restricted access on that device, citing security and business-model risks. The episode underscored how ByteDance’s combination of attention, algorithms and platform control could bypass entrenched commercial “walled gardens.”
Crucially for markets, ByteDance remains private. That mismatch — a non-listed firm that captures a growing share of national data, advertising dollars and consumer attention while listed incumbents stagnate — has become a source of visible anxiety for Chinese investors. Some jokes and trading strategies about “shorting Hang Seng Tech because ByteDance won’t IPO” reflect a deeper worry: where does the market capture the value created by a company that is not available to public shareholders?
Listing ByteDance would not be straightforward. The company’s international footprint, the geopolitics of data and the complexity of its shareholder register complicate any path to a Hong Kong or Shanghai float. VIE structures, the presence of significant foreign institutional investors and ongoing data-security sensitivities tied to TikTok’s overseas business create regulatory and political friction. Those frictions are why many investors view ByteDance as a structural wildcard for the composition and valuation of Chinese tech indices.
The immediate market consequence is clear: an index that cannot readily absorb a new dominant private champion risks lagging its global peers. Over the medium term, however, markets have options — either a new giant lists and resets valuations, or incumbents adapt, consolidate or shrink. For now, the Hang Seng Tech’s weakness reflects both macro pressures and a strategic squeeze from a private titan that Chinese public markets cannot (yet) own.