Alibaba Group founder Jack Ma has angered Beijing authorities, making the business empire a key target for consolidation. The Wall Street Journal reported today that Chinese authorities are considering issuing record-breaking fines to force Alibaba to distance itself from Jack Ma.
The company’s founder, Jack Ma, has been in hot water with Beijing authorities. (Photo taken from the microblogging of rural teacher advocate Jack Ma)
The company’s main business is to provide a platform for the development of the company. But after he criticized China’s financial regulatory system at a conference in Shanghai last October, Alibaba began to have a hard Time, and plans to list Ant Group, a related company that runs the third-party payment platform Alipay, were also called off.
The report said Chinese authorities see Ant Group as a risk to the financial system and are determined to make a major overhaul, and the changes Ant has been forced to make will have a serious impact on its growth prospects.
In contrast to Ant Group, Alibaba is expected to be lifted high and put down low. Officials with a grasp of Beijing’s top thinking say authorities don’t want to bring down a tech giant that is a household name in China and familiar to international investors, provided Alibaba draws a clear line with the outspoken and high-profile Jack Ma and moves closer to the Chinese Communist Party line.
China’s antitrust authorities are considering imposing a record fine on Alibaba, surpassing the $975 million (about NT$27.4 billion) fined to U.S. semiconductor major Qualcomm in 2015 for anti-competitive behavior, the newspaper said, citing people familiar with the matter.
According to sources, Alibaba will also be required to stop the “two-for-one” practice, which the authorities determined punishes merchants who also sell products on the same platform, such as Jingdong. The authorities are also considering whether to require Alibaba to divest some of its assets that are not related to its online retail business. These consolidation measures would require approval from China’s top leadership.
Alibaba now faces a dual challenge: to correct the authorities’ allegations of anti-competitive behavior and to follow the Chinese government’s political goals, the report said. The pressure from Beijing authorities reflects the leadership’s strong-arm approach to the economy, which threatens to undermine the spirit of innovation and competition that has driven China’s growth for decades.
Alibaba is considered the pride of China, with businesses in online retail, entertainment, media and Cloud Computing that demonstrate technological innovation critical to the Chinese economy. The authorities are considering consolidation measures that won’t bring down the large conglomerate, in contrast to the treatment of Ant Group, which is seen as a disruptor and a threat to China’s financial stability.
Alibaba’s net profit for the last fiscal year was nearly $20 billion, and paying the fine was like spending money to solve a problem. Some Alibaba executives said even the sky-high fine would be a temporary relief amid regulatory uncertainties that have hit the company and demoralized employees.
Alibaba’s market value has evaporated by a quarter to more than $200 billion since Jack Ma angered Beijing authorities.
Alibaba and other online giants have a huge amount of data and money at their disposal, affecting all aspects of Chinese people’s lives and becoming a national security issue. The Wall Street Journal previously reported that Xi Jinping, the Communist Party’s general secretary, personally ordered the suspension of Ant’s initial public offerings (IPOs) in Shanghai and Hong Kong and was upset that several well-connected politicians and businesspeople would make a lot of money from Ant’s IPO.
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