Following the attack on Bant, the Chinese government is plotting on Alibaba’s media

Regulatory pressure on Alibaba is mounting and now the Chinese government is urging the technology giant to part with its media holdings due to its growing influence on public opinion in the country, according to reports in the Wall Street Journal.

Over the years, Alibaba has accumulated a respectable portfolio of media, both traditional and innovative. Among other things, she owns the Twitter-like social network Weibo, the popular video platform among young Bilibili, government-related digital newspapers, and even the oldest and leading Hong Kong-based South China Morning Post (SCMP) publisher. According to reports, Beijing was surprised by the extent to which Alibaba’s media activity has reached, and the fear is of its potential impact on public opinion. In light of this, the administration has ordered the company to significantly reduce its holdings, although it is still unclear which assets it will be forced to sell.

In a statement, Alibaba claims that these are passive holdings, and therefore there is no fear of its impact on the media agenda. “The purpose of our investments in these companies is to provide technological support for upgrading their business and drive commercial synergies with our core business. We do not interfere or be involved in the day-to-day operations of the companies or in the editorial decisions,” she noted.

An affair with a familiar model

This is the latest in a series of frictions between Beijing and Alibaba. The shadow began to darken last spring, when the company and its founder Jack Ma were still in the status of government darlings and objects of admiration in China. Relations ran aground when in April 2020 Weibo cleared its network of references to a possible affair between a well-known Chinese model, signed at an agency that is partly owned by Alibaba, and a young partner in Alibaba, who also served as its e-commerce platform manager, Taubo and Tmall. The removal of the mentions took place after his partner warned the model in a public post, to stay away from him. An investigation, the findings of which were leaked to the media, determined that the senior official “incorrectly addressed his family problems.” Although he was fired, the case caught the attention of regulators, who began to wonder about the depth of Alibaba’s senior influence on other, seemingly unrelated, parts of the holding company. Tmall and Taubau account for more than 50% of China’s online retail market.

Last October, Alibaba was caught in a regulatory storm after many years in which the government allowed technology companies in China to grow unhindered. The trigger apparently revolved around Ma, who is one of China’s richest. In November, the Alibaba Group’s fintech giant IPO giant was canceled, shortly after it publicly visited Chinese banks and likened their behavior to pawnshops with a minimum risk obsession. The very next day, Ma was summoned to a meeting with government representatives, after which it was immediately announced that four regulatory authorities would begin investigating the company’s activities. Ma went underground and the IPO, which was expected to raise $ 34.5 billion at a value of $ 280 billion, was postponed for at least six months. In December, Annette received a “correction plan” from the regulator that included stricter regulations for its operations as a lender, which are expected to dramatically impact its revenues. As a result, Alibaba’s share has plunged 28% since October.

Beijing was not content with that. The regulator in charge of market regulation (SAMR) has imposed fines of up to 500,000 yuan on Alibaba’s acquisition deals, during what is considered one of the most significant antitrust actions taken in the country. In January, the administration issued a series of warnings and further guidelines aimed at digital payment companies. Last week, it was reported that Alibaba was expected to face another fine of more than $ 975 million, for allegedly conducting an anti-competitive business practice on the digital trading platform. This is a record fine when it comes to antitrust in China.

Centralization was welcomed

The ecosystem of Internet companies in China is dominated by a handful of giant companies, including Alibaba, Tencent, Baidu and JD.com. In recent years, these have been supervised by the government, which wrote the antitrust laws in the country only in 2008 and directed them mainly at foreign companies. Meanwhile, this group has created a complex investment network through which it controls every corner of the digital economy in the country – from payment and instant messaging apps, through travel and micro-loan sharing to telemedicine, insurance and online commerce. Alibaba alone has 780 million active users in China – more than half the population.

In the past year, Beijing has watched European lawmakers work hard to regulate the activities of technology giants in their territory, while at the same time seeing U.S. lawmakers lose control of their giants. In this spirit, China has begun regulatory action to ensure local companies comply with rules and regulations. The Communist Party’s strategy: Among other things, the administration has begun to take steps to prevent them from using metadata to discriminate against customers. This week, Chinese President Xi Jinping called for increased supervision of Internet companies, the abolition of monopolies and the promotion of fair competition. A system that defines ownership of personal data collected online.

This is a sharp policy change from what has been seen in recent years as a governmental affection for the empowerment of individual companies. Centralization that was welcomed because it also served the needs of the centralized regime, with the huge information supply channels that these corporations created and at the same time establishing China as a global technological power. But among the needs of the state is also the desire to attract foreign investment, and this needs a regulation that will ensure a minimum of a competitive business environment. At least in this part, China is already picking fruit. According to data presented in January by the United Nations Conference on Trade and Development (UNCTAD), China – for the first time in history and while ousting the US – was the world’s leading new foreign investment destination.

Fortunately for the Chinese regulator, the lack of liberties allows the party to bend citizens and private businesses to its desires and goals. In these respects, antitrust legislation and its implementation is much easier and faster than in the West. No wonder, then, that Beijing is not content with Alibaba.

In recent days, Tencent, one of China’s largest technology companies, has also been targeted by the Beijing administration. The company owns the popular instant messaging service WeChat which also includes the WePay payment platform. Knowing that Tencent, like Alibaba, would likely be required to separate from core operations a significant portion of its financial business, sent its stock to a two-day free dive in which it shed $ 65 billion of its market capitalization.