China has its campaign to control the great technology empire, controlled by Jack Ma, the co-founder of Alibaba and one of the richest people in the country.
Authorities in Beijing, which ordered an investigation into allegations of ‘monopolistic practices’ by Mom’s online retail giant on Christmas Eve, have now ordered its financial technology company Ant Group to reduce its operations.
Pan Gongsheng, a deputy governor of the Chinese central bank, said Ant’s corporate governance was “not healthy” and ordered him to return to his origins as a payment service provider.
Pan, who convened Ant representatives on Saturday after a meeting with regulators in Beijing, said Ant should “correct illegal credit, insurance and wealth management financial activities. Mile divisions offering the services are the fastest growing and most profitable operations of the business, analysts said.
Ant Group said in a statement that it would set up a “correction working group” and “fully implement requirements” sought by the regulator.
“We will increase the scope and scope of the win-win collaboration, review and rectify our work on the protection of consumer rights, and significantly improve our compliance with business and social responsibility,” the company said. “Ant will draw up its correction plan and work schedule in a timely manner and seek the guidance of regulators in the process.”
The latest salvo in Beijing’s fight against Ma – who was considered China’s biggest contemporary entrepreneur until he started speaking out against strict regulations – traded 8% of the value of Alibaba’s share price in Hong Kong on Monday.
Alibaba’s shares have lost more than a quarter of their value since October 24, when Ma accused financial regulators and state-owned banks of operating a “pawn shop” mentality at a high-level summit in Shanghai.
Chinese Communist Party officials hit back, accusing Ma’s company of violating several regulations and intervening to defray Ant Group’s $ 37 billion (£ 27 billion) flotation just two days before trading in Shanghai and Hong Kong would begin.
The fight against Ma’s business operations has wiped out more than $ 10 billion (£ 7.4 billion) from his fortune, putting him at number two on the list of the richest people in China, with an estimated $ 49 billion. The richest person in China is now Pony Ma (no relationship), the chairman and CEO of the rival technology firm Tencent.
Zhang Zihua, chief investment officer of Beijing’s asset manager Yunyi Asset, says investors are worried that Beijing’s campaign against Ma’s companies could continue, even if they implement all the necessary changes. “The antitrust investigation into Alibaba has yet to specify the fines, which worries investors a lot,” he said.
Li Chengdong, a technology analyst in Beijing, said the action against Ant also weighs heavily on other Chinese technology companies. “The new regulations are hurting major Internet platforms, so Tencent and other technology companies are also seeing their share prices fall,” Li said. “Alibaba is now the target of regulators, so the response is stronger.”
On Christmas Eve, China’s state market watchdog said it was investigating Alibaba Group Holdings Ltd over ‘alleged monopolistic practices’.
An editorial in the People’s Daily Chinese mouthpiece says that efforts to prevent monopolism and competition are a requirement to improve the socialist system of market economy and promote high-quality development.
“This investigation does not mean that the country’s attitude towards the encouragement and support of the platform economy has changed.”
Analysts and policymakers said Beijing’s actions against Ma’s companies were likely to be fueled by the blunt speech he gave at the Bund summit in Shanghai on October 24, criticizing the urgent regulation and state domination of the banking industry.
“We should not use the way to run a train station to regulate an airport,” Ma said, according to a transcript. “We can not regulate the future by yesterday’s means.
“It is impossible for the pawn shop mentality to support the financial demand of global development over the next 30 years,” said Ma, who started Alibaba in a one-bedroom apartment in China 21 years ago. “We need to leverage our technological capabilities today and build a big data-based credit system to get rid of the pawn shop mentality.”
Mom spoke with senior officials such as Wang Qishan, a former security guard, and Chinese leader Xi Jinping’s right-hand man; Yi Gang, the governor of China’s central bank; and Zou Jiayi, Deputy Minister at the Ministry of Finance. Mom’s comments went viral on Chinese social media and are seen as a direct attack on government officials.
In November, Ant Group was preparing for what would be the largest initial public offering in the world when it was suddenly closed by Beijing, 48 hours before trading in Shanghai and Hong Kong would begin. Prior to the suspension, investors valued Ant at $ 316 billion (£ 234 billion), more than the valuations of China’s largest banks and those of the US and UK.
At the time, the blame was attributed to “changes to the financial technology regulatory environment and other important issues”, but analysts interpreted the intervention as a warning to Ma.
“The party has once again reminded all private entrepreneurs that no matter how rich and successful you are, it can pull the rug out from under your feet at any time,” wrote Bill Bishop, author of the China-focused newsletter Sinocism.