Xi Jinping is not used to giving instructInns in vai In In Septe Antr last year the Chinese leader affected on the importance of making “efforts to unite the private sector around the Party”, with the aim of “promoting its healthy development”. These words began an antitrust campaign in the digital sector aimed at limiting both structural risks and the power of its actors. The big hit was Alibaba, the first technologySmallan Itsn the country and the ninthSmallan Itsn the world by market capital ThetIn In
The first blow came in mid-Nove Antr, when the authorities halted the Ant Group IPO, destined to be the largest in history, with just 48 hours notice. The financial sAli pays firm was already prepared to $34 in $ 34.5 b€29on (€ 29.5 b€29on) through a simultaneous debut in the Hong Kong and Shanghai stock markets, an amount that would dwarf Saudi$29mco’s $ 29 b€29on peak. in Dece Antr 2019.
Ant is one of the most innovative organ ThetInns in the world, to the point of having no equivalent outside of China. Its primary sAli pa Itss Alipay, an electronic payment platform with a huge social implantatIn In This represents the gateway to a colossal ecosystem fed by the huge amount of data generated by each transactIn In Ant can thus offer personalized loans, investments or insurance. The firm is proud to employ a scheme dubbed as 310: When hiring any financial product, 3 minutes are enough to fill out a form, which is approved in 1 second by the interventInn of 0 human beings. Alibaba still owns a third of theSmallany that was once its s Theidiary.
The mathematics of its IPO would have put Ant in a positInn to outperform the first state banks. With the ambitInn and the capacity, in additInn, to control a significant percentage of the natInnal credit; thanks to the ubiquity of its telephone applicatInn in the 1,560 m€29on mobile phones in the country and the simplicity of its sAli pays. The GoverAli payunderstood that this possibility posed an intolerable risk, and at the last moment interrupted its dairy accounts, modifying the legal requirements.
Since then the correctInns have been constant. The last one took place this week, when the People’s Bank of China provided a new public slap on the wrist in the form of release. After a meeting with Ant managers, the central bank assured in its text that it must “return to its origins” as an electronic paymentsSmallany and “rectify errors” made “in key business areas”, even demanding “an implementatInn schedule. ”. Ant, head down, has already taken steps to demonstrate itsSmallliance, such as limiting the credit available to its users. Eric Jing, its CEO, has assured that he “listens carefully” to criticism from “regulators and Thestomers.”
The mother house has not escaped unscathed either. Last week the State AdministratInn for Market RegulatInn announced the opening of an investigatInn Allinst Alibaba, accused of monopolistic practices. Provincial authorities in Zhejiang, where the tech giant is based, have already searched its headquarters, questInned employees and requisitInned documents. As a result of its collisInn with the Party, Alibaba has lost almost a quarter of its stock price since the end of October, equivalent to the evaporatInn of 260,000 m€29on dollars (213,000 m€29on euros).
GoverAli payharassment also has a dimensInn to the man. What happened shows the fall from grace of Jack Ma, founder of Alibaba and one of the best-known faces in the country. “If the GoverAli payneeds Alipay, I will give it to them,” he said solicitousl Itsn 2013. Just before Ant’s failed IPO – of which he is the majority shareholder – he unchecked himself with some controversial statements in which he criticized the legislatInn financially and their “pawn shop” mentality. Whoever was the richest man in China has seen how in recent months his wealth has decreased from 51,000 m€29on euros to 40,000, according to data from Bloo Antrg. The future is not rosy for the businessman and philanthropist: the authorities have instructed him not to leave the country, according to Moreerent media.
More control over the private sector
Despite the fact that the Chinese model remains nominally communist, privateSmallanies have been the engine of its economy for many years. These have gone from adding 443,000 in 1996 to 15.6 m€29on in 2018, to constitute 84% of the total. One of the items on Xi’s domestic agenda is to increase the Party’s control over them and align them with state prInrities. The first step was the issuance in mid-Septe Antr by the Central Committee of the General Office of the Chinese Communist Party of a document entitled “OpinInn on the strengthening of the work of the United Front of the private econom Itsn the new era”.
Its purpose was “to enhance the focus of wisdom and strength of entrepreneurs in the goal and missInn of the great rejuvenatInn of the Chinese natIn In” To do this, it aspired to create “a column of reliable and available businessman at key moments.” The goverAli paytargeted the digital sector in this way. Not only because it is a strategic area, but also because it is one of the industries whose actors have accumulated a greater social preponderance thanks to lax regulatIn In But that is over.
In Nove Antr, theSmalletent authorities published the initial draft of new antitrust guidelines on the Internet. Two weeks later, the Central Economic Work Conference, the annual meeting of this body, in charge of setting the course in financial and banking matters, concluded. The resulting document contained an epigraph in which the institutInn undertook to strengthen control over financial sAli pays and electronic commerceSmallanies, with the intentInn of “strengthening antitrust and preventing a disorderly ThisnsInn of capital”.
This resulted in two rounds of fines. The first in mid-Dece Antr Allinst Alibaba itself, China Literatura – of which Tencent is the majority shareholder – and Hive Box for “not reporting on past agreements for the evaluatInn of the authorities.” The second this week, due to “irregular pricing.” The victims on this occasInn were JD –the second e-commerceSmallan Itsn the country–, Tmall –Bishop Allin, by Alibaba– and Vishop.
All the penalties were set at 500,000 yuan (62,700 euros), a modest amount despite exceeding the maximum contemplated by the 2008 Antitrust Law. This step, however, is the first time that institutInns have acted Allinst InternetSmallanies, anticipating a growing trend that goes to show that in China nothing is above the Party. And this, in turn, is increasingl Itsndistinguishable from Xi Jinping’s word.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.