The Communist party-led China has started tightening its grip over the biggest companies like Alibaba, Tencent Holdings in the country. The Chinese regulators on Thursday announced an anti-monopoly investigation by Alibaba Group. It is being seen as the ruling Communist Party’s efforts to control fast-growing tech industries.
The Chinese President Xi Jinping led govt in China is concerned about competitors such as Alibaba and Tencent Holding. Alibaba is the world’s biggest e-commerce company by sales volume. At the same time, Tencent Holding is Asia’s most valuable tech company. Tencent Holding also operates the popular WeChat messaging service.
It is to be noted that Beijing is trying to reduce financial risks, whereas private sector companies are continuously expanding into online banking. Regulators seem to be especially concerned about the financial risks.
According to the reports, the Communist Party seeks anti-monopoly enforcement, especially in tech industries, in the next year. Regulators have started to tighten the reins by suspending the stock market debut of an online finance platform affiliated with Alibaba. The regulators also summoned industry executives to warn them against trying to suppress competition.
Francis Lun, CEO of Geo Securities Ltd, said that “The era of free growth and ultra-high growth is really over. The government will decide what you can do in China.”
According to the Thursday’s announcement, the State Administration of Market Regulation is looking into Alibaba’s policy of “choose one of two,.” The policy requires business partners to avoid dealing with their competitors.
The regulators say that the proposed rules issued in November would ban exclusive contracts, subsidies, and other tactics and hurt competition.
The Communist Party’s newspaper said regarding the Alibaba probe that Reports of platform monopoly problems are increasing by the day and anti-monopoly has become an urgent issue.”
Interestingly, internet companies in the United States face similar scrutiny. Legislators and regulators look at whether Facebook, Google, and other companies improperly hamper competition in advertising and other areas.
Jack Ma set up Alibaba in 1999. The Company operates retail, business-to-business, and consumer-to-consumer platforms. The company has the business of financial services, film production, and other fields.
Jack Ma is China’s richest entrepreneur. He is one of its most important business people worldwide. He has a net worth of $59 billion. The ruling party of China praises him. However, the recent regulatory hurdles have hurt him.
The Chinese regulators jolted the business world by suspending the stock market debut of Ant Group in November. Ant group is a former Alibaba subsidiary that is the world’s biggest online finance platform.
As per the reports, Ma complained at a business conference in October about the regulators. Ma said that regulators failed to keep up with industry development and were blocking opportunities. People related to the market say Chinese leaders might have focused on Ant because of that complainant of Ma.
Alibaba’s CEO later tried to repair relations with regulators. He praised regulators in a speech in a possible effort but could help his companies.
To be noted that Ma stepped down from Alibaba as chairman in 2019. Still, he is one of its biggest shareholders.
According to government data, China has the world’s biggest population of internet users at 940 million. A large number of people use e-commerce and other online services. It gives internet companies influence in retailing, entertainment, and other industries.
Alibaba and a company spun off by Tencent Holding Ltd. were fined for failing to apply for official approval before proceeding with some acquisitions this month.
It is to note that the crackdown on companies follows a boom for internet industries after the lockdown in China. Millions of Chinese families were ordered to stay home during efforts to contain the coronavirus. For staying home, people switched to shopping and working online.
Alibaba said revenue rose 30% over a year earlier in the three months ending in September to 155.1 billion yuan ($23.4 billion).