A record £2 billion fine against Alibaba for monopolistic behaviour and the uncertain fate of Ant Group have attracted worldwide attention toward China’s anti-trust policies, writes Torsten Weller. Here’s the background.
In early April Chinese tech juggernaut Alibaba was dealt a regulatory double whammy. On 10 April, China’s market regulator, the State Administration of Market Regulation (SAMR), fined the company a record-breaking RMB 18.2 billion (£2 billion) for ‘serious anti-trust violations.’ The fine was equivalent to 4% of Alibaba’s revenue in 2019.
Two days later, the People’s Bank of China (PBOC) – China’s central bank – also ordered Ant Group to separate its lending business from its mobile payment platform Alipay. The PBOC further asked the company to apply for a credit reporting certificate. The resulting restructuring will probably reduce Ant to a payment services platform, depriving it of its lucrative digital finance business which last year contributed nearly two-thirds of its revenue.
The Western media has portrayed Alibaba’s woes mostly as a dramatic clash of egos at the top of Chinese politics and business. Both the Financial Times and The Wall Street Journal have published pieces attributing the recent crackdown to the conflict between Alibaba founder Jack Ma’s pugnacious personality and Chinese leader Xi Jinping’s focus on loyalty.
Yet while personal animosities might have played a role in recent developments, they provide an incomplete explanation for the regulatory activism that has been underway for some time regarding China’s major tech companies. More dangerously, this narrative of warring egos suggests that political connections, and not regulatory compliance, remain the most important factor in deciding a company’s fortunes in China.
A more accurate picture instead points towards the importance of an evolving regulatory environment in which an increasingly modern legal framework, a more efficient bureaucracy and political concerns over the health of the Chinese economy, are all contributing to a far more active policing of China’s major tech companies.
The dramatic halt to Ant Group’s IPO last year and the prolonged disappearance of Alibaba’s founder Jack Ma from public life has put the Chinese tech giant firmly into the global spotlight. It is therefore hardly surprising that the recent regulatory moves against Alibaba and Ant have been seen as part of a large-scale clampdown on Ma’s business empire, and more specifically, as politically motivated retribution against an outspoken critic of the current state of Chinese business regulations.
This perception has been further fuelled by Jack Ma’s defiant speech at last year’s Bund Finance Summit, in which he called China’s bank regulators ‘a club of old men’, and Xi Jinping’s praise for Zhang Jian, a patriotic entrepreneur of the late Qing era.
A closer look at these events suggests that pressure for government action has been a long time in the making. As Caixin, a business weekly, reported earlier this year, Chinese anti-trust regulators have in recent times grown increasingly wary of the dominance of the country’s tech giants – and not just Alibaba.