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 fine, Ant Group, its fintech affiliate, has committed to a sweeping set of reforms to how the company does business to appease Beijing.
The central bank, the People’s Bank of China, said on Monday (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 firms 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, which at the time was tipped to be the largest ever IPO, raising $37bn, after pressure from authorities.
It is believed that Ant Group drew the ire of authorities after Jack 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.
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.
Alibaba’s massive $2.8bn fine was levied over the weekend by the 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.
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. On Monday, Alibaba’s shares, which trade in both New York and Hong Kong, were up over 6pc respectively.
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 Jack 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.
The post China brings the hammer down on Alibaba and Ant Group appeared first on Silicon Republic.
Jonathan Keane 2021-04-12 13:28:08
The post China brings the hammer down on Alibaba and Ant Group appeared first on Market World.