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China has stepped up its campaign to control the vast tech empire controlled by Jack Ma, Alibaba’s co-founder and one of the richest people in the country.
Authorities in Beijing, which on Christmas Eve ordered an investigation into allegations of “monopolistic practices” by Ma’s online retail giant, now ordered his fintech company Ant Group to reduce operations.
Pan Gongsheng, a deputy governor of China’s central bank, said Ant’s corporate governance “was not strong” and ordered him to “go back to his roots” as a payment service provider.
Pan, who had convened Ant representatives to a meeting with regulators in Beijing on Saturday, said Ant must “strictly rectify illegal financial credit, insurance and wealth management activities.” Ant divisions that offer those services are the company’s fastest-growing and most profitable operations, analysts said.
In a statement, Ant Group said it would establish a “rectification working group” and “fully implement the requirements” sought by the regulator.
“We will expand the scope and magnitude of openness to mutually beneficial collaboration, review and rectify our work in protecting consumer rights, and comprehensively improve our business compliance and sense of social responsibility,” the company said. “Ant will develop its rectification plan and work schedule in a timely manner and will seek guidance from regulators in the process.”
The latest salvo in Beijing’s battle against Ma, who had been lauded as China’s biggest modern businessman until he began to speak out against strict regulations, wiped out 8% of the value of Alibaba’s share price in trading. from Hong Kong on Monday.
Alibaba shares have lost more than a quarter of their value since October 24, when Ma accused China’s financial regulators and state banks of operating with a “pawn shop” mentality at a high-profile summit. in Shanghai.
Chinese Communist Party officials responded by accusing Ma’s company of violating various regulations and intervened to block Ant Group’s $ 37bn (£ 27bn) float just two days before negotiations began in Shanghai and Hong Kong. Kong.
The crackdown on Ma’s business activities has erased more than $ 10 billion (£ 7.4 billion) from his fortune and placed him in second place on the list of the richest people in China with an estimated $ 49 billion, according to the Bloomberg Billionaires Index. The richest person in China is now Pony Ma (no relative), president and CEO of rival technology company Tencent.
Zhang Zihua, chief investment officer at asset manager Beijing Yunyi Asset, said investors were concerned that Beijing’s campaign against Ma’s companies could continue even if they implemented all the required changes. “Alibaba’s antitrust investigation has yet to specify penalties, which is of great concern to investors,” he said.
Li Chengdong, a Beijing-based tech analyst, said the action against Ant was also hitting other Chinese tech companies hard. “The new regulations are hurting the big Internet platforms, so Tencent and other tech companies are also seeing their share prices go down,” Li said. “Alibaba is now the target of regulators, so the backlash is stronger.”
On Christmas Eve, China’s state market supervision administration said it had ordered an investigation into Alibaba Group Holdings Ltd for “alleged monopolistic practices.”
An editorial in the Chinese state spokesman for the People’s Daily said that efforts to prevent monopoly and anti-competitive practices were “requirements to improve the socialist market economy system and promote high-quality development.
“This research does not mean that the country’s attitude towards stimulating and supporting the platform economy has changed.”
Analysts and policy experts said Beijing’s action against Ma’s companies was likely sparked by the blunt speech he made at the Bund summit in Shanghai on October 24, criticizing the dominant regulation and state dominance of banking.
“We should not use the way of managing a train station to regulate an airport,” Ma said, according to a transcript. “We cannot regulate the future with yesterday’s media.
“It is impossible for the pawn shop mentality to support the financial demands of global development for the next 30 years,” said Ma, who founded Alibaba in a one-bedroom apartment in China 21 years ago. “We must take advantage of our technological capabilities today and build a credit system based on big data, to get rid of the pawn shop mentality.”
Ma spoke alongside senior officials such as Wang Qishan, former security czar and right-hand man to Chinese leader Xi Jinping; Yi Gang, Governor of the Central Bank of China; and Zou Jiayi, Vice Minister of the Ministry of Finance. Ma’s comments went viral on Chinese social media and were seen as a direct attack on government officials.
In November, Ant Group was preparing for what would have been the world’s largest initial public offering when Beijing suddenly shut it down, 48 hours before operations in Shanghai and Hong Kong began. Before the suspension, investors had valued Ant at $ 316bn (£ 234bn), more than the valuations of the largest banks in China and those in the US and UK.
At the time, the disruption was attributed to “changes in the financial technology regulatory environment and other major issues,” but analysts interpreted the intervention as a warning to Ma.
“The party has once again reminded all private entrepreneurs that no matter how wealthy and successful they are, they can pull the rug from under their feet at any time,” wrote Bill Bishop, author of the China-focused newsletter Sinocism.
