Chinese e-commerce company Alibaba’s stock price rebounded after it was fined an astronomical amount by officials and ordered to rectify the situation, which market participants interpreted as the end of the short-side, according to the Central News Agency. But experts say that while Alibaba itself appears to be out of the picture, the political risk for China’s private companies has arrived, and entrepreneurs are like birds of a feather.
Alibaba, which was fined an astronomical 18 billion yuan by Chinese Communist authorities on Saturday for allegedly violating anti-monopoly laws, saw its shares rise 8 percent on the New York Stock Exchange on Monday, about the same as the Hong Kong stock’s gain earlier in the day, after it released an announcement of its rectification plan. Investors were also pleased that the group’s overall uncertainty had finally come to an end. Hoy, co-author of the book “Red Capitalism,” noted that what investors don’t see clearly is the “political risk” that private companies face in doing business in China. In addition to being fined and corrected, Alibaba founder Jack Ma’s Lakeside University in Hangzhou has been forced to stop enrolling students, a “highly vindictive but unreasonable” move that represents a future in which the Chinese Communist Party will only tighten its grip on large technology companies.
Hoy noted that the anti-monopoly red lines drawn by Chinese regulators may seem clear, such as no more competitive practices like second-choice or cookery, but they are in fact full of arbitrariness. The rules of the business game in China have been shifting with the political climate, and what was seen as a viable development model five years ago is no longer viable at all.
Huang Qiyuan, president of Blue Ocean Asia, believes that the crackdown on Lakeside University, if true, means that the Chinese Communist Party is taking political revenge against Jack Ma, or preventing the expansion of his gang’s power. In the eyes of the Chinese Communist Party, Ma is already a disobedient entrepreneur, not a member of the patriot coalition worthy of support. Huang Qiyuan pointed out that the heavy-handedness of the Chinese Communist Party towards Jack Ma, whether as an exception or as a rule, has cast a shadow on the minds of other Chinese entrepreneurs, who are all like birds of a feather. This may be one of the reasons why companies such as Jingdong have withdrawn their plans to list on the mainland in the first quarter of this year because the political atmosphere is not right and the listing review is tightening. Huang Qiyuan said the Chinese Communist Party cannot sit back and watch private companies become uncontrolled beasts, so the main purpose of fining Alibaba is to “make an example of the monkey” so that other companies such as Tencent and Meituan will be wary.
Alibaba’s Ant Group was interviewed by the Chinese Communist Party for the third time on the 12th of yesterday, and the financial authorities proposed five key points for rectification, including requiring Ant Group to spin off its digital payment business such as Alipay, turn from a technology company to a financial holding company, and subject all its financial business to supervision.
It is reported that Ant Group’s 5 priorities for rectification are roughly as follows: First, correcting unfair competition in the payment business, giving consumers more choices in payment methods, and disconnecting Alipay from financial products such as Hanbao and Debit (Ant’s consumer credit platform) that are improperly connected. Second, break the information monopoly, strictly implement the credit industry regulations requiring the licensed operation of personal credit business in accordance with the law, and follow the principles of lawfulness, minimum and necessary collection and use of personal data. Third, the Ant Group as a whole applies for the establishment of a financial holding company, and all institutions engaged in financial activities are included in the financial holding company to be regulated. And the financial holding company is regulated by the Central Bank of China. Fourth, strictly implement prudential supervision requirements, improve corporate governance, seriously rectify irregular credit, insurance, wealth management and other financial activities, and control high leverage and risk contagion. V. Control the liquidity risk of important fund products, and take the initiative to suppress the balance of BalancePay (a platform for purchasing funds in small amounts).
Recent Comments