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. However, experts believe that while Alibaba itself appears to be out of the negative picture, the political risk for China’s private companies has arrived and entrepreneurs are like birds of a feather.
Alibaba, which was fined a whopping 18 billion yuan by Chinese 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 Hong Kong shares 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 “Red Capitalism,” pointed out 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 overhauled, Alibaba founder Jack Ma was forced to stop enrolling in Hangzhou’s Lakeside University, a “highly retaliatory but unreasonable” move that represents a tightening of the Communist Party’s grip on large technology companies in the future.
Hoy points out that the anti-monopoly red lines drawn by Chinese regulators may seem clear, such as no more competitive practices like second-choice or cookery practices, but they are actually 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.
According to Huang Qiyuan, president of Landor Asia, the crackdown on Lakeside University, if true, means that the CCP is taking political revenge on 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 This may be one of the reasons why companies such as Jingdong in the first quarter of this year have withdrawn their plans to list on the mainland because the political atmosphere is not right and the listing review is tightening, and instead they are waiting and watching. 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 Chinese officials for the third time yesterday on the 12th, and the financial management department proposed five key points for rectification, including the requirement for 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, etc.
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 monopoly of information, 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 illegal 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).
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