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Chinese Regime Wants to Take Over Much of the Alibaba Empire

Alibaba, Ant Group, El American, régimen chino

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Technology giant and global sales leader Alibaba Group, is in serious trouble. According to a Wall Street Journal exclusive, the company founded by Jack Ma – China’s richest businessman – has the Chinese state’s eye on it through the Ant Group Company.

“Beijing is trying to reduce Jack Ma’s technology and financial empire and potentially take a greater stake in his businesses, according to Chinese officials and government advisors familiar with the issue,” the article says, “as regulators focus on the billionaire in a campaign to strengthen oversight of an increasingly influential technology sphere,” it continues.

For a long time, Alibaba and the regime were “hand in hand,” not bothering each other, and sometimes even collaborating. In fact, recently great indignation and controversy arose because Alibaba showed on one of its websites how its Artificial Intelligence was being used to discriminate against the Uyghurs.

But the good relationship between the Communist regime and Jack Ma’s technological empire has been changing.

According to the news portal Infobae, the Chinese regime “established a roadmap, under which they ordered fintech Ant to drastically change its business model and return to its roots as a provider of payment services, a strict rectification of its loan, insurance and wealth management services”. This situation came just weeks after authorities frustrated the last-minute floating of Ant Group stock.

A furious Chinese regime due to Alibaba’s criticism

According to the WSJ, the obstacle that Xi Jinping’s regime put in the way of Ant’s stock market listing came after tensions reached their peak in late October, when Jack Ma openly criticized Jinping’s risk control initiative, while criticizing state regulators for stifling business innovation.

Before Ma’s speech, Jinping had barely paid attention to Ant’s planned IPO, according to a WSJ interviewee. “Thanks to Ma himself, the IPO got on Xi’s radar,” the source said.

Regulators, led by the Central Bank, ordered Ant to “form a separate financial holding company that would be subject to the kind of capital requirements applied to banks. That, as can be expected, opens windows for “large state-owned banks or other government-controlled entities to buy the company to help strengthen its capital base,” according to information received by the WSJ from Chinese officials and advisors.

China’s national pension fund, the China Development Bank and China International Capital Corp. -China’s national pension fund, the China Development Bank, and China International Capital Corp., the country’s largest state-owned investment bank, are already investors in Ant Group, so it is not new that the Chinese regime wants to meddle in Alibaba’s business. But the interference may increase and, little by little, Jinping’s management could have at its disposal a whole network of data and information handled by the company.

Fintech Ant and its e-commerce subsidiary, Alibaba Group Holding Ltd., are the companies with which tycoon Ma has helped define China’s new economy, being a great ally of the regime on an economic level.

Jack Ma, Alibaba, chinese regime
Jack Ma, founder of Ant Group, founder and CEO of the Chinese e-commerce company Alibaba Group (EFE)

“It is difficult to overestimate the role that Mr. Ma’s companies have played in China’s economy. Ant and Alibaba together have enabled hundreds of millions of Chinese consumers and businesses to make a purchase, deposit money, execute an investment or take out a loan with a stroke of a thumb,” says the WSJ.

Jack Ma’s businesses range from payment services, online retailing, cloud computing, wealth management and lending. At the same time, “Alibaba faces an antitrust investigation that could also lead to a review of its business and the sale of assets.

In addition, Group Ant’s intention is to incorporate wealth management, consumer lending, insurance, payments and MYbank, an online bank of which Ant is the largest shareholder, into the holding company’s operations. But, under the new firm’s structure, “Ant’s businesses would probably be subject to more capital restrictions, which could limit its ability to provide more credit and expand at the pace of recent years,” reads Infobae.

According to The Wall Street Journal, “officials are particularly concerned about how Ant is using the data leveraged by its Alipay payment application to encourage banks to work with the company in making consumer and small business loans. This is because Ant, according to information from regime officials, only finances a fraction of the loans, and the bulk of the funds come from the banks, leaving them with the credit risks.

But Xi Jinping’s regime has a problem: it needs to find a balance between minimizing the expansion of Ma’s businesses and, at the same time, it needs to be seen as having a sensible roadmap on its part, because it does not want to be seen as a regime that limits business innovation.

Jack Ma was deeply affected

On the other hand, no matter how “slowly” the Chinese regime wants to advance its intention to take over much of Alibaba’s empire, the reality is that the simple fact that the Chinese Communist Party has taken away Jack Ma’s support is enough to affect the billionaire’s finances.

“Jack Ma has been greatly affected from losing the sympathy of the regime. His net worth peaked at $61.7 billion, but has since declined by more than $12 billion, according to the Bloomberg Billionaire Index. As a result, Ma, 56, fell to 25th place on the list of the world’s richest people,” reported Infobae.

In another corner of the ring, Alibaba is not the only technology company that is struggling. According to the WSJ, “the days of laissez-faire are over. In recent months, authorities have committed to tighten regulation over an Internet sector that is growing in size and impact. While some other companies are also under scrutiny, including popular social media application operator WeChat, Tencent Holdings Ltd. and messaging company Didi Chuxing Technology Co. regulators are now focusing their attention on Mr. Ma and his companies.”

The actions of the Chinese regime show that their intentions are indeed in line with regulating or controlling the technology and Internet sector of their country’s companies. An area that grew incredibly during 2020 from demand for internet purchases due to the pandemic.

But it remains to be seen to what extent intentions are being translated into action. The main thing for the Chinese regime is to avoid the perception that it is dealing a major blow to entrepreneurship, just when the private sector is seen to be losing ground to state-owned companies.

At the same time, Chinese authorities are concerned about how international investors will react at a time when there are reasonable doubts about the regime’s commitment to market reforms. There is also encouragement for Chinese companies – like Alibaba – to compete with their American counterparts.

The Chinese regime finds itself at a giant crossroads: either letting Jack Ma and other technological empires continue to grow to the point of threatening its own financial power or telling the market they are an overreaching state that does not allow business to flow freely.

Emmanuel Alejandro Rondón is a journalist at El American specializing in the areas of American politics and media analysis // Emmanuel Alejandro Rondón es periodista de El American especializado en las áreas de política americana y análisis de medios de comunicación.

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