China brings the hammer down on Alibaba and Ant Group

12 Apr 2021

Image: © itchaznong/Stock.adobe.com

Days after Alibaba was hit with a $2.8bn fine, fintech giant Ant Group will restructure its business at the behest of regulators.

China’s tech giants are starting to feel the wrath of the country’s regulators more than ever.

Days after Jack Ma’s Alibaba was slapped with a staggering $2.8bn anti-monopoly fine, its fintech affiliate Ant Group has committed to a sweeping set of reforms in terms of how the company does business to appease Beijing.

The central bank, the People’s Bank of China, said today (12 April) that the company – which is a spin-out of Alibaba – would restructure as a financial holding company.

It marks a sea change for China’s largest tech companies, which have been able to grow domestically with few restrictions, allowing China to develop several major businesses that are on par with some of the US giants.

That heady growth hit a stumbling block in November, when Ant Group put the brakes on its IPO after pressure from authorities. At the time it was tipped to be the largest ever IPO, raising $37bn.

It is believed that Ant Group drew the ire of authorities after Ma made critical comments about financial regulators during a speech in October.

With Ant Group restructuring as a financial holding company, it will be subject to much stricter regulatory controls and must hold higher levels of money in reserves – all moves that will ultimately affect its bottom line.

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Ant Group will cut “improper” links between its Alipay mobile payment service and its other lines of business, such as lending and credit cards. It has also committed to reorganising its data protection and security measures.

Large fines

Alibaba’s massive $2.8bn fine was levied over the weekend by China’s State Administration for Market Regulation, which was investigating monopoly practices at the company.

Alibaba is a giant in the e-commerce space and authorities were probing the terms for merchants that sell on the platform. It had taken umbrage with the requirement that merchants can only list goods on one of Alibaba’s two marketplaces at a time and cannot do business on rival platforms.

According to a translation of the ruling, the company “infringes on the businesses of merchants on the platforms and the legitimate rights and interests of consumers”.

In response, the company plans to roll back on some of the requirements that may have inhibited sellers in the past.

But just how impactful the fine will be to Alibaba isn’t clear. Today, Alibaba’s shares, which trade in both New York and Hong Kong, were up more than 6pc.

In its last quarterly earnings report, Alibaba flagged that it was expecting regulators to rule against the company and that preparations were being made to adjust its business practices accordingly to put an end to the probes.

As Ma’s empire deals with Beijing’s demands, many of China’s other tech giants like ByteDance, Tencent and Meituan will be paying close attention.

Jonathan Keane is a freelance business and technology journalist based in Dublin

editorial@siliconrepublic.com