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China isn’t done with Alibaba’s Jack Ma yet as they now try to pull down Alibaba Media

Ever since Jack Ma's controversial statements struck the ch aord of the Communist party, the ANT IPO, Alibaba's properties ha

China halted a blockbuster initial public offering of financial technology giant Ant Group on November 2, two days before its scheduled debut on the Hong Kong and Shanghai stock exchanges. With investors committing to the I.P.O., which would have been worth around 3.6 trillion yuan, Ant was on top to reach about 34.5 billion dollars. The market’s trust in China’s digital society’s future was demonstrated by the fact that a single digital financial firm was about to collect 3.6 trillion yuan with relative ease. Simultaneously, the need for Beijing to be tough on those who criticize the government was stressed. Also, the incident appears to reflect the Chinese government’s stance on digital giants (1).

Alipay, Ant’s most well-known app, started as Alibaba’s shopping site. It kept the buyers’ payments in place until they got their purchases. It was crucial to Alibaba’s growth because it made online shopping safer for customers. In China, it is now more commonly used than cash or credit cards. The business was founded in 2011 and has since undergone many rebrandings, including Ant Financial and Ant Group. Alibaba said at the time that regulatory changes in China prompted the transition. The spin-off firm, which has grown to include other financial services such as insurance, asset management, and consumer loans, has attracted a significant stake from Jack Ma.

Jack Ma has amassed a media portfolio in China that matches Jeff Bezos’ in the United States over the years. However, Ma’s media empire is now in China’s government’s crosshairs, worried about the billionaire’s rising media clout. As per statements provided by The Wall Street Journal and Bloomberg, citing sources, Chinese authorities have ordered Alibaba to sell some of its media properties due to increasing concerns about its influence over public sentiment in the region. Alibaba’s media acquisitions came under fire when the company announced the South China Morning Post-purchase, and a Hong Kong-based English-language newspaper was founded 118 years ago.

In mainland China, Alibaba’s prominent media holdings include 36Kr, a New York-listed technology news portal backed by Alibaba’s fintech affiliate Ant Group, and state-owned Shanghai Media Group, a strategic agreement with Alibaba. Critics also challenged Alibaba’s ownership of the South China Morning Post, a well-known Asian newspaper. To ease concerns, Jack Ma has vowed to uphold the news organization’s editorial independence. Alibaba often stresses the potential for digital cooperation with publications in other media deals. It vowed, for example, to use its data and cloud storage skills to assist the Shanghai Media Group, a powerful financial media company (2).

Alibaba has also invested heavily in digital networking start-ups such as Weibo, China’s Twitter counterpart, and Bilibili, a popular video platform among Chinese youths backed by Alibaba’s arch-rival Tencent. Concerns rose after Weibo appeared to delete a slew of posts last June regarding an Alibaba executive’s extramarital affair. China’s top internet regulator promptly reprimanded Weibo for “interfering with online communication order” without citing a specific event. The Chinese government has already begun a series of crackdowns on the internet economy’s full strength.

Why is hate vice-versa?

The Communist Party’s official mouthpiece broadcast a stern message to Jack Ma. “There’s no such thing as a Ma Yun era; there is only an era with Ma Yun in it…whether it’s Ma Yun, Ma Huateng, Elon Musk, or regular citizens, those who accomplish their best potential would be those who seize the prospects that already prevail within the era,” an online People’s Daily editorial stated. “We believe there will be more great enterprises and entrepreneurs in China as long as entrepreneurs have a clear understanding of the period and celebrate and seize career prospects,” it concluded. The message arrived shortly after Ma stepped down as Alibaba’s chairman in front of thousands of employees. Many interpreted it as a sign of the Communist Party’s increasing concern about Ma’s international fame and the overwhelming influence with his e-commerce and fintech corporations with everything from how China shops to how it needs to spend and can save. Ma was also the first Chinese business person to gain international recognition, almost as an unofficial ambassador for China (3).

Ma, on the other hand, paid the price for his outspokenness. Regulators summoned Ma and top Ant executives in November. Just days before Ant’s shares were to execute trades throughout Hong Kong and Shanghai in an I.P.O. expected to raise 37 billion dollars. The flotation was then halted by the Shanghai Stock Exchange, citing substantive financial regulations that would impact the company’s operations. Although financial regulators have long been concerned about Ant’s power, Ma’s bold speech in October appears to have been the final straw. According to the Wall Street Journal, the criticism eventually reached Chinese President Xi Jinping, who was enraged by the remarks and personally ordered the suspension. Days later, China announced new antitrust rules, slashing Alibaba’s market cap by billions of dollars, and regulatory authorities launched an antitrust investigation further into the company this month (4).

The coordinated attacks on Alibaba are a clean reminder of the Communist Party’s evolving preferences in the face of a relatively slow Chinese economy and a more complex regulatory environment, with heightened scrutiny of Chinese technology companies from the United States to Europe. It’s clear that Beijing’s increased focus on trying to prevent systemic financial risks and reducing the nation’s rising debt levels, which has already sabotaged some other eccentric and powerful tycoons, now needs to extend to the country’s tech leaders. They were originally allowed to develop in a comparatively more pleasant environment before Xi assumed power in 2012 and his regime’s early days as poster boys for China’s global marketplace.

Making A.N.T. Corporation the target

An online backlash against Ant’s major micro-lending product, Huabei, occurred shortly before its planned public offering. Users on the internet claimed that one of Huabei’s adverts, in which a construction worker used the money he had borrowed on the platform to celebrate his daughter’s birthday, advocated consumerism to deceive working-class people into taking on excessive debt. Regulators are most concerned about Ant’s credit business, the company’s largest revenue source. The proposed rules for online lenders, which were released two days before the flotation was abolished, require lenders to provide at least 30 percent of the loans they facilitate.

Regulators are concerned about the amount of financial risk accumulated in the system as online lenders follow one set of rules while traditional banks follow another. However, their efforts to mitigate that risk may backfire by frightening foreign investors when regulators worldwide are already taking measures that could make it more difficult for Chinese companies to raise funds abroad. “Does Ant expose banks to too much risk? Yes, indeed. Is there a need for oversight? Yes,” says the voice. “However, could the regulators have handled the situation more effectively? Yes, I agree. Pulling the plug at the last minute exemplifies how risky and unpredictable doing business in China is.” (5).

When Saudi Aramco, the state-run oil giant, went public last year, the I.P.O. would have brought in more money. Ant would have raised funds on the other side of the world from New York, which has long been the preferred listing location for Chinese tech companies. Ant is at the crossroads of two industries: finance and technology, both under intense scrutiny worldwide. However, by launching a last-minute torpedo against Ant and Jack Ma, Alibaba’s controlling shareholder and celebrity founder, the authorities made it clear that international bragging rights were less important than ensuring private companies knew where they stood concerning the state.

Ant filed for an I.P.O. in August, nearly ten years after it was spun out of Alibaba. Every month, more than 730 million people use Ant’s Alipay app. In addition to being a payment method, it has developed into a major gateway for personal credit, loans, savings, and insurance. Ant’s journey to this point, however, was long and winding, with several run-ins with regulators. More safeguards were also being implemented. In September, China’s banking and insurance regulator discussed new regulations for online lenders. On November 1, 2020, tighter oversight of financial holding firms was set to take effect. After that, whatever happened became history (6).

Targeting the media

Alibaba has become a lightning rod in China’s anti-big tech crackdown after founder Jack Ma, one of the country’s most well-known, outspoken, and wealthy entrepreneurs, gave a blunt speech last year attacking national regulators, which reportedly angered President Xi Jinping. Following the remarks, Chinese regulators suspended the 34 billion dollars stock market floatation of Alibaba’s online payments subsidiary Ant Group, which would have become the world’s largest share offering. Ma vanished for three months from public view. Last week, it was announced that regulators plan to slap Alibaba with a record fine of more than 975 million dollars for anti-competitive practices (7).

China’s protectionist business regime, which has barred international companies such as Google and Netflix from operating in the country, has enabled a group of homegrown conglomerates to prosper as the country seeks to create the next generation of global tech champions to challenge Silicon Valley. With Alibaba’s media empire expanding to purchase SCMP, Hong Kong’s premier (8) English-language newspaper, in 2016, and owning stakes in social network Weibo, video streaming service Youku, and Yicai Media Group, one of the country’s most powerful news outlets, Beijing has struggled to retain leverage over their activities and wider impact. Despite the passing of the domestic security law last year, Beijing has increased its pressure on Hong Kong’s media. The law’s ambiguous wording, which criminalizes acts of treason, secession, international conspiracy, and terrorism, has stifled press freedom. The Chinese government has not said if Alibaba, which controls a larger share of the country’s e-commerce market than Amazon does in the United States, has been ordered to sell all of its media properties or only a portion of its stock.