Monday, June 5, 2023

Crackdown on Jack Ma’s empire accelerates despite reappearance

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Jack Ma is back. The re-emergence of the Chinese billionaire in a video after a three-month absence, he reassured worried investors about his plight and sparked a rally in shares of Alibaba, the e-commerce group he founded.

The relief from her reappearance this week was shortlived, however. Hours later, the People’s Bank of China proposed new anti-monopoly rules that will primarily harm Alibaba’s payment subsidiary, Group of ants. On Thursday, Alibaba shares traded in Hong Kong fell almost 3%.

Mr. Ma had not been seen publicly since October 24 when he critical Chinese financial regulators at a forum in Shanghai. Ten days later, authorities canceled Ant’s $ 37 billion debut, which would have been the largest in the world.

In addition to causing Alibaba’s stock to sell off, the episode robbed Mr. Ma of his status as China’s richest man. His net worth fell more than 10% to $ 54.5 billion, according to Bloomberg data.

While his brief reappearance on Wednesday suggests that Mr. Ma does not face legal danger himself – or at least not yet -, the new central bank rules remind investors that the regulatory assault on his two companies headlights continues.

“It showed that life is normal [for Mr Ma] but not business as usual, ”said Rupert Hoogewerf, whose Hurun Report chronicles the rise of China’s billionaire class for more than 20 years. Friends of Mr. Ma added that he spent time in southern China’s Hainan Island Province, while he was also seen in Hangzhou, where Ant and Alibaba are based.

The draft rules released by the PBoC, which have yet to be enacted, make it clear that regulators are now targeting Ant’s basic Alipay payment service as a monopoly that may need to be broken. The central bank had previously suggested that it might be happy if Ant “goes back to its roots” as a payment provider, while putting its fast-growing lending business in a low-key position. new waiting vehicle it would face tighter oversight.

The Chinese market regulator has launched a anti-monopoly investigation in Alibaba on Dec. 24 which is expected to focus on the group’s relationship with merchants using its e-commerce platforms, but he didn’t say Ant was also in his sights.

Under the new PBoC rules, it can advise the State Administration of Market Regulation to dismantle any “non-bank payment company” that controls more than half the market – or two with market share. combined by more than 67%. The latter provision suggests that Internet group Tencent’s WeChat Pay, China’s second-largest payment service after Alipay, could also be targeted.

Chinese antitrust experts said it was highly unusual for the PBoC to include anti-monopoly provisions in its rules and that Wednesday’s development was a clear warning to Ant and Tencent. Alipay and WeChat Pay are estimated to control around 55% and 40% of mobile payments sector, respectively, according to Shanghai-based consulting firm iResearch.

The PBoC “is entering someone else’s territory to declare what a monopoly is – this indicates that it is strengthening its control,” said Angela Zhang, antitrust expert and head of the Chinese Law Center at the University of Hong Kong. “Ant and Tencent both have strong positions in the payments market – I imagine they will be very nervous about this.”

A Chinese antitrust lawyer, who asked not to be identified, added that the new rules “indicate Ant could be torn apart.”

Chinese third-party mobile payments market

The tone of Mr. Ma’s comments in Wednesday’s video appeared much more humble than his last public appearance in October. The clip focused on his charitable foundation’s support for rural education, fitting in perfectly with President Xi Jinping’s long-running campaign to eradicate poverty in the world’s most populous country.

“My colleagues and I have studied and reflected, and we have become more determined to devote ourselves to education and public welfare,” he said in the video posted on a media controlled by the government of the province where Alibaba is based.

When he criticized Chinese regulators nearly three months ago, Mr. Ma insisted he was speaking as “a non-professional with no official title.” The founder of Alibaba, who turns 57 this year, officially retired in 2019.

But he later contradicted a speech given at the same forum by Wang Qishan, the powerful vice president and the former anti-corruption czar, who emphasized the importance of financial stability over innovation. Mr. Ma not only preached the opposite, but made it clear that he felt a personal duty to do so.

“People like me have an inescapable responsibility to look to the future,” Ma told the crowd of regulators. “We have reached a crucial stage. . . tomorrow’s race will be a race for innovation, not for regulatory capabilities. “

A senior executive at one of China’s largest state lenders said financial institutions, such as payment processor China UnionPay, would benefit from the crackdown on Ant and Tencent. “It’s a boon for our credit card business,” he said, noting that the share of credit cards in the overall payments market in China was increasing. “We expect the trend to continue this year.”

But the executive added that the PBoC should exercise caution as it puts Mr. Ma’s empire on its feet. “Ant and Tencent’s payment services have become a daily necessity for the Chinese public,” he said.


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