ionigeria.com Nigerian Newspaper
While it has grown into the dominant player in Chinese online shopping — now raking in $50 billion a year in revenues — Alibaba in the last decade has steadily encroached on China’s tightly controlled financial sector through its Ant Group spin-off. Ant Group, a $16 billion-a-year business, has been chipping away at powerful state banks’ market share and unnerving regulators with investment and lending products that have become so popular that Ant sometimes acts as a lender to distressed government banks — not the other way around.
The companies amount to a vast, loosely linked conglomerate under the control of the billionaire Jack Ma, China’s richest man, that could challenge the state itself. In October, Ma ruffled feathers by telling a technology conference that Chinese financial regulators stifle innovation and that big state banks operate like “pawnshops.”
On Thursday, the state fought back. China’s State Administration for Market Regulation said it would look into complaints from online merchants about Alibaba’s demands for exclusivity deals. In a simultaneous announcement, banking regulators said they were summoning Ant Group executives for discussions about competitive practices and consumer protection.
Alibaba and Ant swiftly announced they would cooperate fully with the government. “We will seriously study and strictly comply with all regulatory requirements and commit full efforts to fulfill all related work,” Ant Group said in a statement.
Beijing’s moves reflect a genuine concern about the concentration of power held by the companies. This month, Guo Shuqing, chairman of China’s Banking Regulatory Commission, didn’t name Ant but warned explicitly that a few Internet-based financial technology services were adopting a “winner-takes-all” market approach and becoming “too big to fail,” posing risks to the entire Chinese economy. Consumers, abetted by smartphone-based lending schemes, were also borrowing too easily and spending too much, Guo said.
In November, regulators announced a draft version of stricter anti-monopoly laws targeting Internet companies, while the Communist Party Politburo said this month the country needed to prevent “disorderly capital expansion.”
Last month, regulators shocked investors when they nixed Ant’s historic $34 billion initial public offering at the eleventh hour, offering the first hints that trouble was brewing for Ma.
But the crackdown also aligns with the ideological outlook of Chinese leader Xi Jinping, a committed Marxist-Leninist who has advocated firmer Communist Party control over every aspect Chinese society and has doubled down on support for state companies, sometimes at the expense of the private sector.
Private-sector conglomerates like Anbang Insurance and the HNA Group have been forced to sell off overseas assets, while high-flying Internet companies like Tencent, the Alibaba competitor and developer of WeChat, have encountered regulatory trouble when they expand into new areas like music streaming and credit reporting.
Xi personally ordered regulators to examine Ant, the Wall Street Journal reported this month.
Alibaba shares in Hong Kong plummeted nearly 8 percent. The company also trades on the New York Stock Exchange.
