Jack Ma, word has it, has been advised to stay in China. What does that mean? An impending arrest?
Central bank says Ant Group governance is unsound and tells it to rectify ‘illegal activities’
China has escalated its campaign to rein in the vast tech empire controlled by Jack Ma, the co-founder of Alibaba and one of the country’s richest people.
Authorities in Beijing, who had on Christmas Eve ordered an investigation into allegations of “monopolistic practices” by Ma’s online retail giant, have now ordered his financial technology company Ant Group to scale back its operations.
Pan Gongsheng, a deputy governor of China’s central bank, said Ant’s corporate governance was “not sound” and ordered it to “return to its origins” as a payment services provider.
Pan, who had summoned Ant representatives to a meeting with regulators in Beijing on Saturday, said Ant must “strictly rectify illegal credit, insurance and wealth management financial activities”. Ant divisions offering those services are the business’s fastest-growing and most profitable operations, analysts said.
In a statement, Ant Group said it would establish a “rectification working group” and “fully implement requirements” sought by the regulator.
“We will enlarge the scope and magnitude of opening up for win-win collaboration, review and rectify our work in consumer rights protection, and comprehensively improve our business compliance and sense of social responsibility,” the company said. “Ant will make its rectification plan and working timetable in a timely manner and seek regulators’ guidance in the process.”
The latest salvo in Beijing’s battle against Ma – who had been feted as China’s greatest modern-day entrepreneur until he started speaking out against strict regulations – wiped 8% off the value of Alibaba’s share price in Hong Kong trading on Monday.
The crackdown on Ma’s business activities has wiped more than $10bn (£7.4bn) from his fortune, and knocked him into second place on the list of China’s richest people with an estimated $49bn, according to the Bloomberg billionaires index. The wealthiest person in China is now Pony Ma (no relation), the chairman and chief executive officer of the rival tech firm Tencent.
Zhang Zihua, chief investment officer of the asset manager Beijing Yunyi Asset, said investors were concerned that Beijing’s campaign against Ma’s companies could continue even if they implemented all the changes required. “The antitrust investigation into Alibaba has yet to specify the penalties, which is worrying investors a lot,” he said.
Li Chengdong, a Beijing-based technology analyst, said the action against Ant was also weighing heavily on other Chinese tech companies. “The new regulations are hurting big internet platforms, so Tencent and other tech companies are also seeing their share prices going down,” Li said. “Alibaba now is the target of the regulators so the reaction is stronger.”
On Christmas Eve China’s state market supervision administration said it had ordered an investigation into Alibaba Group Holdings Ltd over “suspected monopolistic practices”.
An editorial in the People’s Daily Chinese state mouthpiece said efforts to prevent monopoly and anti-competitive practices were “requirements for improving the socialist market economy system and promoting high-quality development.
“This investigation does not mean that the country’s attitude towards the encouragement and support of the platform economy has changed.”
While the sudden cancellation of his Ant Group IPO shocked many investors, Ma’s fall from grace had been years in the making.
By Lulu Yilun Chen and Coco Liu
When Jack Ma took to a Shanghai conference stage in October, China’s most famous entrepreneur was on the brink of pulling off an unprecedented $35 billion initial public offering for the finance juggernaut he co-founded two decades earlier. Ant Group Co.’s listing would value the company at more than $300 billion and swell Ma’s own fortune beyond its already blistering $61 billion, cementing his position as the nation’s richest man.
Ma, a co-founder of e-commerce behemoth Alibaba Group Holding Ltd., China’s largest company, told the audience that day at the Bund Summit that he was torn about speaking, but felt this was a “most critical” moment in the development of finance. What followed was a 20-minute roasting of anachronistic government regulation that would suffocate innovation in China. It was a vintage performance by the famously outspoken executive, known for his confident swagger and soaring rhetoric. But this time, like Icarus after he flew too close to the sun, Ma has found himself quickly brought back to earth.
Since September, China’s government has launched a coordinated regulatory crackdown, which in November scuttled the Ant public offering and, together with tough new antitrust rules, triggered about a $140 billion, or 17%, decline in the market value of Ma’s Alibaba.
Meanwhile, the flamboyant Ma has all but vanished from public view. As of early December, with his empire under regulatory scrutiny, the man most closely identified with the meteoric rise of China Inc. was advised by the government to stay in the country, according to a person familiar with the matter.
Once hailed as drivers of economic prosperity and symbols of the country’s technological prowess, the empires built by Ma, Tencent Holdings Ltd.’s chairman, “Pony” Ma Huateng, and other tycoons are now suspect after amassing hundreds of millions of users and gaining influence over almost every aspect of daily life in China. “The [Communist] Party is trying to make it clear that Ma is not bigger than the party,” says Rana Mitter, a professor specializing in Chinese politics at Oxford University. “But they also want to show that China is a good place to do business, and that means that the party needs to show that entrepreneurs can succeed.”
Ma has long cultivated his image as a rebel fighting the system, knocking down walls protecting state-owned enterprises. Time and time again, he emerged from the scuffles stronger. His companies have clashed with a raft of powerful entities—from state-backed giants to industry regulators—many of whom are now homing in on his empire.
“The current clampdown is just the next batch of businesspeople being reminded by the government: ‘You can be rich. You can have a powerful company. But you’ve got to play by our rules,’ ” says Andrew Polk, co-founder and head of economic research at Trivium China, a Beijing-based consulting firm. “For me, it’s less of a surprise that Jack is getting his comeuppance and more of a surprise that it took this long.” —With Zheping Huang, Colum Murphy, Heng Xie, Zheng Li, Jun Luo, John Liu, and Dingmin Zhang
SHANGHAI/HONG KONG (Reuters) -China has launched an antitrust investigation into Alibaba Group and will summon the tech giant’s Ant Group affiliate to meet in coming days, regulators said on Thursday, in the latest blow for Jack Ma’s e-commerce and fintech empire.
The probe is part of an accelerating crackdown on monopolistic behaviour in China’s booming internet space, and the latest setback for Ma, the 56-year-old former school teacher who founded Alibaba and became China’s most famous entrepreneur.
It follows China’s dramatic suspension last month of Ant’s planned $37 billion initial public offering, which had been on track to be the world’s largest, just two days before shares were due to begin trading in Shanghai and Hong Kong.
In a strongly worded editorial, the ruling Communist Party’s People’s Daily said that if “monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won’t develop in a healthy, and sustainable way”.
Shares in Alibaba fell nearly 9% in Hong Kong on Thursday morning.
Regulators have warned Alibaba about the so-called “choosing one from two” practice under which merchants are required to sign exclusive cooperation pacts preventing them from offering products on rival platforms.
The State Administration for Market Regulation (SAMR) said in a statement on Thursday that it had launched a probe into the practice.
Financial regulators will also meet with Alibaba’s Ant Group fintech affiliate in the coming days, according to a separate statement by the People’s Bank of China on Thursday, casting another cloud over a potential revival of the share sale.
The meeting would “guide Ant Group to implement financial supervision, fair competition and protect the legitimate rights and interests of consumers,” the statement said.
Ant said it had received a notice from regulators and would “comply with all regulatory requirements”.
Alibaba said it would cooperate with the investigation and that its operations remained normal.