The investigation, announced on Thursday, marks the formal beginning of the Communist Party’s crackdown on the crown jewel of Ma’s sprawling rule, which spans everything from e-commerce to logistics to social media. Pressure on Ma is central to a broader effort to contain an increasingly influential internet sphere: The draft antimonopoly rules released in November gave the government an unusually large scope to contain entrepreneurs like Ma, who until recently had unusual freedom to to expand their areas.
Once celebrated as a driver of economic prosperity and a symbol of the country’s technological performance, Alibaba Competitors like Tencent Holdings Ltd are facing increasing regulatory pressure after accumulating hundreds of millions of users and influencing almost every aspect of daily life in China.
“It is clearly an escalation in coordinated efforts to contain Jack Ma’s empire, symbolizing China’s new too big to fail” entities, “said Dong Ximiao, a researcher at the Zhongguancun Internet Finance Institute. “The Chinese authorities want a smaller, less dominant and more compliant company.”
The state market regulator is investigating Alibaba, the top antitrust watchdog said in a statement without further details. Regulators like the Central Bank and the Bank Guard will separately invite subsidiary Ant to a meeting to bring home increasingly stringent financial regulations that are now a threat to the growth of the world’s largest online financial services company. Ant said in a statement on its official WeChat account that it will investigate and meet all requirements.
Ma, the flamboyant co-founder of Alibaba and Ant, has all but disappeared from the public eye since Ant’s IPO last month. In early December, the man most closely identified with China Inc’s meteoric rise was advised by the government to stay in the country, said a person familiar with the matter.
Ma is not on the verge of personal doom, those familiar with the situation have said. His very public reprimand is instead a warning that Beijing has lost patience with the overwhelming power of its technology moguls, who are increasingly seen as a threat to the political and financial stability that most rewards President Xi Jinping.
Alibaba even slipped 8.9% Hong Kong to a five-month intraday low on Thursday. Asia’s largest company after Tencent has caused losses to China’s internet leaders since Ant’s public offering in November, bringing the total to over $ 100 billion. Tencent was down more than 2% and internet service giant Meituan was down more than 4%, while SoftBank Group Corp, Alibaba’s largest shareholder, fell 2.9% in Tokyo. Alibaba said in a statement that it will work with regulators on its investigation and that its business will remain normal.
Investors remain divided over the extent to which Beijing will persecute Alibaba and its compatriots as Beijing prepares for the introduction of the new antimonopoly regime. The country’s leaders have said little about how hard they are planning to contain or why they have decided to act now.
The country’s internet ecosystem – long sheltered from competition from Google and Facebook – is dominated by two companies, Alibaba and Tencent, via a labyrinthine investment network that includes the vast majority of the country’s startups in areas from AI to digital finance. Her patronage has also nurtured a new generation of titans, including food and travel giants Meituan and Didi Chuxing – China’s Uber. The ones that thrive outside of their aura, the greatest is the TikTok owner ByteDance Ltd., are rare.
The antimonopoly rules now threaten to disrupt that status quo with a range of potential outcomes, from a harmless scenario of fines to the breakup of industry leaders. Beijing’s various agencies appear to be coordinating their efforts – a bad sign for the internet sector.
“There is nothing that the Chinese Communist Party does not control, and anything that appears to be twisting out of orbit in any way is being withdrawn very quickly,” said Alex Capri, a Singapore-based researcher at the Hinrich Foundation.
The campaign against Alibaba and its colleagues was in full swing in November after Ma attacked Chinese regulators in a public address about time lag. Market regulators then suspended Ant’s IPO – the world’s largest at $ 35 billion – while the anti-monopoly watchdog shook the markets with its draft law shortly thereafter.
The Volkszeitung, the mouthpiece of the Communist Party, warned on Thursday that fighting alleged monopolies was now the top priority. “Antimonopoly has become a pressing matter of all affairs,” said a comment that coincides with the probe’s announcement. The “wild growth” of the markets must be curbed by law, he added.
The chances of Ant resurrecting its massive public listing next year are diminishing as China overhauls rules for the fintech industry, which has been booming in recent years as an alternative to traditional government-sponsored lending.
China is said to have set up a joint task force to oversee Ant separately, led by the Financial Stability and Development Committee, a regulator for the financial system, as well as various departments of the central bank and other regulators. The group is in regular contact with Ant to collect data and other materials, investigate their restructuring, and draft other rules for the fintech industry.
“China has streamlined much of its bureaucracy so that the various regulators can now more easily work together,” said Mark Tanner, general manager of Shanghai-based consultancy China Skinny. “Of all the regulatory hurdles, this is by far the greatest.”