China Moves Towards Nationalization With Probe Into Alibaba

Central government investigators have set up shop at Alibaba, Ant Group and other major tech companies in recent weeks.
2020-12-25
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China Moves Towards Nationalization With Probe Into Alibaba This file photo taken on December 18, 2018 shows Alibaba's co-founder Jack Ma (C) leaving after a celebration meeting marking the 40th anniversary of China's "reform and opening up" policy at the Great Hall of the People in Beijing.
Photo: RFA

The ruling Chinese Communist Party (CCP) has taken further steps to curb e-commerce giant Alibaba with the launch of an antitrust investigation into the tech company headed by tycoon Jack Ma.

"Based on tip-offs received by the State Administration for Market Regulation in recent days, the administration will be investigating Alibaba ... for suspected monopolistic activities," the administration said in a statement on its website.

The statement was reportedly linked to a policy forcing sellers using Alibaba.com to commit to using that platform exclusively, preventing them from also using rival platforms JD.com and Pinduoduo.

Alibaba issued a statement saying it would actively cooperate with the regulatory body, and that company operations would continue as normal.

The news prompted an eight percent fall in the value of the company's shares on the Hong Kong Stock Exchange on Thursday.

The announcement came amid ongoing scrutiny by financial market regulators of Ma's Ant Group, which runs the Alipay payments system.

"Today, Ant Group received a meeting notice from regulators," the company said in a statement on Thursday.

There are indications that the decision to go after Ant and Alibaba is coming from highest echelons of the CCP leadership.

'Anti-monopoly work'

An article in the CCP's official mouthpiece, the People's Daily, touted "anti-monopoly work" as leading to "better development," based on recent calls from the CCP's Politburo.

The Politburo was of the opinion that the government should "strengthen anti-monopoly work and prevent the disorderly expansion of capital," the paper said.

Internet finance industry insider Song Qing said the investigation is part of CCP plans to nationalize both Ant Group and Alibaba.

"There will definitely be an outcome, now that they have started the investigation," Song told RFA. "This is probably coming from the highest levels."

"Just a couple of weeks ago, they set out plans to nationalize Ant Group and Alibaba; the timing was deliberate," Song said. "Those plans all came from the central leadership."

"These nationalizations are definitely happening, and [the antitrust investigation] will likely speed up that process," Song said. "It's also, I think, about making an example of [Ant and Alibaba]."

Central government investigators had already set up camp in Alibaba headquarters by the end of November, according to industry sources.

The company will also be called to follow-up meetings with the People's Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange after regulators slammed the brakes on Alibaba's New York listing in early November.

Investigative teams are also in place at the offices of social media giant Tencent and e-commerce company Meituan.

Healthy development

A Nanjing-based economist surnamed Qian said China's tech companies actually promote economic health and development.

"Tax rates for traditional businesses are too high, and online businesses have lower transaction costs, as well as being more convenient [for the customer]," Qian said. "The internet industry ... is actually a healthy thing for the market economy."

Lin Jiaqi, director of Hong Kong Honghui Asset Management, said he expects that the Alibaba investigation will help the CCP to form future policy towards the country's tech giants.

"I think the central government will keep going with more investigations of other companies," Lin said. "We will see more and more antitrust investigations, and the sanctions for [alleged] monopolies will gradually increase."

State media have been keen to paint the government's targeting of Ma's tech empire as a campaign to subject the nation's super-rich to public scrutiny and regulation.

"They are targeting this huge company ... because they want people to hate the super-rich," commentator Guan Xingwang told RFA.

"They are using this propaganda to justify expanding state control of the economy, and diminishing the power of the private sector," he said. "This is another step towards nationalization."

CCP general secretary Xi Jinping unveiled plans at the end of October to move China to a state-controlled, "circular" economy based on domestic demand, and away from the export-based model that has fueled rapid growth since 1979, when late supreme leader Deng Xiaoping ushered in four decades of market-based economic policy.

Analysts have said there a widespread expectation that Xi will move to change the current system of property ownership.

Reported by Qiao Long for RFA's Mandarin Service. Translated and edited by Luisetta Mudie.

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