Shares of Alibaba dove in Hong Kong Thursday, extending a slide that now sums to more than 25% since late October.
Beijing, in keeping with implicit and explicit promises to crack down on tech companies deemed to have accumulated too much power, is investigating the company for monopolistic practices. At the same time, the PBoC wants to chat with Ant Group, presumably about China’s efforts to step up regulation of an increasingly unruly fintech space.
Apparently, Jack Ma was “advised” by Beijing to remain in China earlier this month. This situation seems to become more perilous for Ma by the week. His mistake — his Icarus moment, if you will — came on October 24 when, during an address at a summit in Shanghai, he decided to launch into a critique of regulatory standards which he blamed for stifling growth and innovation. Ma accused Chinese banks of acting like “pawnshops.”
Within two weeks, Ant’s planned dual-listing in Shanghai and Hong Kong was iced by Beijing. It would have been the largest IPO in history. Now, with China embarking on what certainly sounds like a sprawling, multi-agency effort to rein in big tech and simultaneously revamp the regulatory framework around the fintech industry, Ant’s IPO seems unlikely to see the light of day in 2021.
While it wouldn’t be accurate to attribute the entirety of the anti-monopoly push and attendant regulatory overhaul to Ma’s October speech, his remarks most assuredly accelerated the process.
“While Ma might not have realized the impact his words would have, people close to him had been baffled to learn in advance about the tone of the speech he planned to deliver,” Reuters said last month, citing a pair of sources close to Ma who “suggested the 56-year-old soften his remarks as some of China’s most senior financial regulators were due to attend.”
Ma refused, citing free speech, apparently forgetting what country he was in.
The rest, as they say, is history. Or, actually, history in the making, because this saga is ongoing.
“China is said to have separately set up a joint task force to oversee Ant, led by the Financial Stability and Development Committee, along with various departments of the central bank and other regulators,” Bloomberg reminded readers on Thursday, noting that “the group is in regular contact with Ant to collect data and other materials.”
For its part, Ant reiterated that it would “strictly” comply with, and conform to, any new regulations. The company said it did indeed receive an invitation from regulators on Thursday. No effort will be spared when it comes to compliance, Ant promised.
As for whether the anti-monopoly probe is a threat to Alibaba, the simple answer is “yes.” It is, after all, an “investigation” conducted by Beijing which is under no kind of obligation to be even-handed or otherwise impartial.
Raymond James said Thursday that the probe isn’t a surprise, but noted that it’s “difficult at this time to quantify the potential revenue impact.”
Alibaba issued a statement saying it will cooperate. As though they have a choice in the matter.
Nobody knows how aggressive Beijing plans to be going forward, but the move to ice Ant’s IPO and the fact that Ma has scarcely said a word since then, suggests that while promoting Chinese tech is a priority for the Party, there is no tolerance for perceived disobedience.
As one senior fellow and lecturer in the Business School at the National University of Singapore told Bloomberg Thursday, “there is nothing that [the] Chinese Communist Party doesn’t control.”
In the event a company, sector, or personality appears to be “gyrating out of its orbit,” that rogue element will swiftly find itself succumbing to the Party’s gravitational pull, he added.
Jack Ma, it would seem, has discovered that his wings were made of wax. And Xi is a star that burns very hot at high altitudes.