Beijing – China has launched an anti-monopoly
investigation into Alibaba, regulators said Thursday, sending the share price
of the e-commerce giant tumbling and intensifying the troubles of its
billionaire founder Jack Ma.
Regulators will also hold “supervisory and guidance” talks with Alibaba’s
gigantic financial services subsidiary Ant Group, state media reported, just
weeks after its record-breaking IPO was halted at the last minute by Beijing.
The continued squeeze on one of China’s most influential companies is the
latest sign that the Communist leadership is ready to deflate the ambitions of
big tech firms in a runaway internet sector, which has made Ma one of China’s
richest people with an estimated $58 billion fortune.
Investigators are probing Alibaba for “suspected monopolistic practices”,
the State Administration for Market Regulation said in a statement.
The probe threatens to impede the growth of Alibaba, a tech juggernaut
which revolutionised the e-commerce landscape of China.
Alibaba shares tumbled 8.6 percent to a five-month low in Hong Kong on the
news.
In a statement, the company said it “will actively cooperate with the
regulators on the investigation”.
Financial services subsidiary Ant Group said it too would cooperate and
“diligently study and strictly comply with regulatory departments’ requests”.
Ant Group made its name via its main product Alipay, the online payments
platform and super-app that is now deeply embedded in China’s economy.
But the company has also expanded into offering loans, credit, investments
and insurance to hundreds of millions of consumers and small businesses,
spurring fear and jealously in a wider banking system geared more for
supporting state policy and large corporations.
Its reach into the daily spend of Chinese has also caused anxiety over the
potential for personal debt to turn sour and toxify the wider economy.
As global demand for the dual Hong Kong-Shanghai listing pushed the IPO
toward record valuations — potentially handing Ma and Ant Group even more
funding, legitimacy and clout — Chinese regulators acted.
The outspoken and charismatic Ma — a former teacher — had previously
lashed out at China’s outdated financial system, calling state-owned banks
“pawn shops” in an October speech that led to him being summoned for
regulatory talks shortly before Ant’s IPO was suspended.
He has edged away from the public limelight since the IPO collapsed.
No one bigger than the Party
Noises from the top of the Chinese Communist Party are ominous for
companies perceived to have outsized ambitions.
Party leaders at last week’s Central Economic Work Conference vowed to
strengthen anti-trust measures and “firmly oppose monopolies” while the
Party’s executive Politburo body has also vowed to crack down on “disorderly
capital expansion”.
“There is an underlying political message, that no company, and no
individual, can grow so big in China to the point where they can potentially
challenge the authority of the CCP,” Richard McGregor, senior fellow for East
Asia at the Lowy Institute in Sydney, told AFP.
This year, Beijing has also implemented new regulations to contain
potential risks in China’s growing online lending industry, as the fintech
arms of internet firms including Alibaba and Tencent have expanded and
consolidated power over the market.
“Undoubtedly, Ant will now become a very different company in structure and
in balance sheet,” said Ryan Manuel, Chief Asia Strategist at Silverhorn
Investment.
“Its regulatory environment will appear more like that of a financial
services provider and less of a tech company. Its growth will slow. Its market
valuation will decrease.”
China’s market regulator in November issued draft antitrust guidelines for
internet platform economies that highlighted examples of anti-competitive
behaviour.
State media have repeatedly called for tighter oversight of these firms,
warning of potential financial instability as a result of their unregulated
rapid growth.
Bad debt in China’s chaotic financial system is a perennial risk, and
regulators launched a crackdown on a growing nationwide credit addiction three
years ago owing to fears of a financial meltdown. (AFP)
