China probes Alibaba over monopoly tactics amid mounting scrutiny of Ant Group
China launched an investigation into alleged monopolistic practices at Alibaba and summoned affiliate Ant Group to a high-level meeting over financial regulations, escalating scrutiny over the twin pillars of billionaire Jack Ma’s internet empire.
The State Administration for Market Regulation is investigating Alibaba, the antitrust watchdog said.
Regulators, including the central bank and banking watchdog, will separately summon affiliate Ant to a meeting intended to drive home increasingly stringent financial regulations, which now pose a threat to the growth of the world’s biggest online financial services company.
Ant said on its official WeChat account that it will study and comply with all requirements.
Once hailed as drivers of economic prosperity and symbols of the country’s technological prowess, Alibaba and rivals such as Tencent face mounting pressure from regulators after amassing hundreds of millions of users and gaining influence over virtually every aspect of daily life in China.
Alibaba’s Hong Kong stock slid by as much as 7.7 per cent to a five-month intraday trough on Thursday, while Tencent and internet services company Meituan fell by more than 1 per cent. Shares in SoftBank, Alibaba’s largest shareholder, erased gains to trade as much as 2.7 per cent lower in Tokyo.
Investors are divided over the extent to which Beijing will go after Alibaba – Asia’s largest company after Tencent – and other Chinese companies as Xi Jinping’s government prepares to unveil a raft of new anti-monopoly regulations.
The country’s leaders have said little about how harsh the crackdown will be or why they decided to act now. Draft rules released last month give the government unusually wide powers to rein in technology entrepreneurs such as Mr Ma, who until recently enjoyed an unusual amount of freedom to expand their empires.
“It is clearly an escalation of co-ordinated efforts to rein in Jack Ma’s empire, which symbolised China’s new ‘too-big-tofail’ entities,” said Dong Ximiao, a researcher at the Zhongguancun Internet Finance Institute.
“Chinese authorities want to see a smaller, less dominant and more compliant [company].”
The flamboyant Alibaba co-founder has all but vanished from public view since Ant’s initial public offering was derailed.
The country’s internet ecosystem – long protected from foreign competitors such as Google and Facebook – is dominated by two companies, Alibaba and Tencent, through a labyrinthine network of investment that encompasses the vast majority of the country’s start-ups in arenas from artificial intelligence to digital finance.
Their patronage has also groomed a new generation of titans, including food and travel company Meituan and Didi Chuxing – China’s version of Uber. Those that prosper outside their aura, the largest being TikTok-owner ByteDance, are rare.
The anti-monopoly rules now threaten to upset that status quo with a range of potential outcomes, from a benign scenario of fines to a break-up of industry leaders. Beijing’s agencies now appear to be co-ordinating their efforts – a bad sign for the internet sector.
The People’s Daily newspaper issued a warning on Thursday that fighting alleged monopolies was now a top priority.
“Anti-monopoly has become an urgent issue that concerns all matters,” it said in a commentary coinciding with the probe’s announcement. “Wild growth” in markets needs to be curbed by law, it said.
Last month, after Mr Ma famously attacked Chinese regulators in a public address for lagging the times, market overseers subsequently suspended Ant’s initial public offering – the world’s largest at $35 billion – while the antitrust watchdog threw markets into a tailspin shortly after with its draft legislation.
The chances that Ant will be able to revive its massive stock listing next year are looking increasingly slim as China overhauls rules governing the FinTech industry, which in past years has boomed as an alternative to traditional statebacked lending.
China is said to have separately set up a joint task force to oversee Ant. The group is in regular contact with Ant to collect data and other materials, studying its restructuring as well as drafting other rules for the FinTech industry.
“China has streamlined a lot of the bureaucracy, so it is easier for the different regulatory bodies to work together now,” said Mark Tanner, managing director of Shanghai-based consultancy China Skinny. “Of all the regulatory hurdles, this is the biggest by a long shot.”