China kicked off an investigation into alleged monopolistic practices at Alibaba Group Holding and summoned affiliate Ant Group Co. to a high-level meeting over financial regulations, escalating scrutiny over the twin pillars of billionaire Jack Ma’s internet empire.
The probe announced Thursday marks the formal start of the Communist Party’s crackdown on the crown jewel of Ma’s sprawling dominion, spanning everything from e-commerce to logistics and social media. The pressure on Ma is central to a broader effort to rein in an increasingly influential internet sphere: Draft anti-monopoly rules released November gave the government unusually wide latitude to rein in entrepreneurs like Ma who until recently enjoyed unusual freedom to expand their realms.
Once hailed as drivers of economic prosperity and symbols of the country’s technological prowess, Alibaba and rivals like Tencent Holdings face increasing pressure from regulators after amassing hundreds of millions of users and gaining influence over almost every aspect of daily life in China.
“It’s clearly an escalation of coordinated efforts to rein in Jack Ma’s empire, which symbolized China’s new ‘too-big-to-fail’ entities,” said Dong Ximiao, a researcher at Zhongguancun Internet Finance Institute. “Chinese authorities want to see a smaller, less dominant and more compliant firm.”
Ma isn’t on the verge of a personal downfall, those familiar with the situation have said. His very public rebuke is instead a warning Beijing has lost patience with the outsize power of its technology moguls, increasingly perceived as a threat to the political and financial stability President Xi Jinping prizes most.
The country’s internet ecosystem — long protected from competition by the likes of Google and Facebook — is dominated by two companies, Alibaba and Tencent, through a labyrinthine network of investment that encompasses the vast majority of the country’s startups in arenas from AI to digital finance. Their patronage has also groomed a new generation of titans including food and travel giant Meituan and Didi Chuxing — China’s Uber. Those that prosper outside their aura, the largest being TikTok-owner ByteDance Ltd., are rare.
The anti-monopoly rules now threaten to upset that status quo with a range of potential outcomes, from a benign scenario of fines to a break-up of industry leaders. Beijing’s diverse agencies appear to be coordinating their efforts — a bad sign for the internet sector.
“There is nothing that Chinese Communist Party doesn’t control and anything that does appear to be gyrating out of its orbit in any way is going to get pulled back very quickly,” said Alex Capri, a Singapore-based research fellow at the Hinrich Foundation.
The campaign against Alibaba and its peers got into high gear in November, after Ma famously attacked Chinese regulators in a public address for lagging the times. Market overseers subsequently suspended Ant’s IPO — the world’s largest at $35 billion — while the anti-monopoly watchdog threw markets into a tailspin shortly after with its draft legislation.