{"id":230126,"date":"2021-04-12T13:50:47","date_gmt":"2021-04-12T20:50:47","guid":{"rendered":"https:\/\/chinadigitaltimes.net\/?p=230126"},"modified":"2021-04-15T09:41:30","modified_gmt":"2021-04-15T16:41:30","slug":"after-months-of-speculation-regulators-drop-hammer-on-jack-mas-business-empire","status":"publish","type":"post","link":"https:\/\/chinadigitaltimes.net\/2021\/04\/after-months-of-speculation-regulators-drop-hammer-on-jack-mas-business-empire\/","title":{"rendered":"After Months of Speculation, Regulators Drop Hammer on Jack Ma’s Business Empire"},"content":{"rendered":"

Six months after abruptly calling off fintech giant Ant Group’s IPO<\/a> and launching an investigation into Alibaba for antitrust violations<\/a>, Chinese regulators have at last announced their penalties against the two affiliated companies. Over the weekend, the State Administration of Market Regulation (SAMR) announced a record 18.2 billion RMB ($2.8 billion USD) fine on Alibaba for its anticompetitive “two choose one” policy. But as the Wall Street Journal’s Keith Zhai reported, the fine was lower than analysts expected<\/strong><\/a>, in an encouraging sign for investors:<\/p>\n

China\u2019s State Administration for Market Regulation said Saturday in Beijing that Alibaba punished certain merchants who sold goods both on Alibaba and on rival platforms, a practice that it dubbed \u201cer xuan yi\u201d\u2014literally, \u201cchoose one out of two.\u201d<\/p>\n

As part of the penalty, regulators will require that Alibaba carry out a comprehensive revamp of its operations and submit a \u201cself-examination compliance report\u201d within the next three years, they said. The 18.2 billion yuan fine is equivalent to 4% of the company\u2019s domestic annual sales, the regulator added. Under Chinese rules, antitrust fines are capped at 10% of a company\u2019s annual sales.<\/p>\n

[\u2026] The antimonopoly fine levied against Alibaba, which posted $72 billion in revenue for its most recent fiscal year that ended in March 2020, far surpassed previous Chinese regulatory penalties in absolute terms. In 2015, Qualcomm Inc. paid a fine of $975 million, equal to 8% of domestic sales, after a yearlong investigation into alleged violations of China\u2019s antimonopoly law.<\/p>\n

[\u2026] The new clarity on Alibaba\u2019s future should come as a relief to some investors, said [Jeffrey Towson, a former professor at Peking University\u2019s Guanghua School of Management]. \u201cI think the next question is, are they going to move on from Alibaba now to another company?\u201d [Source<\/strong><\/a>]<\/p><\/blockquote>\n

On Monday, Bloomberg News reported that Alibaba said it was unaware of any other probes into the company<\/a> under China’s anti-monopoly law. Also for the Wall Street Journal, Stephanie Yang reported that the positive news sent the company’s stock surging on Monday<\/strong><\/a>, but that lingering uncertainty about the fate of Alibaba’s rivals remains:<\/p>\n

Alibaba shares, which had lost about a quarter of their value since November, jumped as much as 9% in early trading on Monday morning in Hong Kong before easing slightly to stand about 6% higher, in a sign that investors welcomed the clarity over the company\u2019s future after fines were announced.<\/p>\n

However, the antitrust investigation outcome raised concerns among analysts about how the company would retain merchants, particularly in an increasingly competitive e-commerce landscape with rivals including JD.com Inc. and Pinduoduo Inc. [Source<\/strong><\/a>]<\/p><\/blockquote>\n

As analysts have widely expected in recent months<\/a>, more sweeping penalties and required changes were imposed on Ant Group, the fintech giant spun off from Alibaba that is also part of Jack Ma’s sprawling financial empire. On Monday, it was announced that Ant would be required to undertake a major overhaul of its business, The New York Times’ Raymond Zhong reported:<\/strong><\/a><\/p>\n

As part of what both Ant and Chinese officials called a \u201crectification plan,\u201d the company said on Monday that it would apply to become a financial holding company, which would bring closer supervision and requirements that it hold onto more money that it might otherwise lend or put to profitable use.<\/p>\n

Ant said it would also \u201creturn to its payment origins.\u201d Alipay started out nearly two decades ago as a payment service for Alibaba\u2019s shopping platforms. But as Ant has come to offer other financial services within Alipay, the app has become a major vehicle in China for consumer credit and small-business loans as well.<\/p>\n

[\u2026] Beijing had been telegraphing aspects of Ant\u2019s restructuring for months. Chinese officials first said last September that companies owning two or more financial businesses would have to register as financial holding companies and be subject to increased government oversight. In a news briefing at the time, a central bank official named Ant as one of several companies that were likely to have to restructure under the new rules.<\/p>\n

[\u2026] Technology \u201ccannot become an excuse for platform companies to go beyond legal, ethical and other bottom lines,\u201d the article said. \u201cFinancial technology has not changed the riskiness of finance; at bottom, it is still finance. Financial business must be licensed to operate, and financial activity must be completely brought under financial regulation.\u201d [Source<\/strong><\/a>]<\/p><\/blockquote>\n

Swirling intrigue about the fate of Jack Ma’s financial empire has lingered for over half a year now, after the outspoken billionaire went silent after delivering an incendiary speech in October that was shortly followed by the eleventh hour cancellation of Ant’s IPO.<\/p>\n

There is also seemingly public support for penalties on Ma’s businesses. On Chinese social media, young people have criticized<\/a> Ant’s liberal micro-lending and Ma’s unabashed support for the brutal “996” work culture<\/a>. In a further sign that the crackdown on Ant and Alibaba is more than about just business, on Friday, The Financial Times reported that an elite business academy founded by Jack Ma has been forced to suspend new student enrollments<\/strong><\/a>, in the strongest indication that authorities are looking beyond Ma’s businesses to examine his other areas of influence:<\/p>\n

Hupan University, an executive training programme that is reputedly as hard to get into as Harvard, has suspended a first-year class that was set to begin at the end of March, according to people close to the institution. It was unclear when new students would be able to enrol, they added.<\/p>\n

[\u2026] \u201cThe government thinks Hupan has the potential to organise China\u2019s top entrepreneurs to work towards a common goal set by Jack Ma instead of the Communist party,\u201d said a person close to the school. \u201cThat cannot be allowed.\u201d<\/p>\n

[\u2026] Some high-ranking officials in Beijing have begun to view the school as a modern-day version of the Donglin Academy, one person said. The private academy was a powerful 17th century debating ground that spawned like-minded thinkers who eventually influenced politics and weakened the Ming Dynasty government. [Source<\/strong><\/a>]<\/p><\/blockquote>\n

\n

For those unfamiliar with the reference… <\/p>\n

The Donglin Academy was closed, and its leader + literati followers tortured and executed after they fell on the wrong side of palace intrigue and were deemed politically subversive.<\/p>\n

— Carl Minzner (@CarlMinzner) April 9, 2021<\/a><\/p><\/blockquote>\n