The House That Jack Ma Built Is China's Own Creation
(Bloomberg Opinion) - Should Chinese regulators take over Alibaba Group Holding Ltd. by Jack Ma as a monopoly, they should contact Beijing directly for an explanation of how this was done.
On Thursday, China announced an investigation into suspected monopoly practices at the Hangzhou-based e-commerce giant. Ant Group Co. is also in the crosshairs, as the central bank and the bank guard will separately invite Ma's fintech subsidiary to a meeting. The rapid response in its share price, with Alibaba falling as much as 7.9% in Hong Kong trading, shows that investors are taking these two probes seriously.
And yet, Alibaba's 20-year rise to supremacy is due in large part to government policies that protected and pampered the now booming Internet sector. Under the guise of national security, successive leaders have introduced censorship, restrictions on foreign property and other restrictions that exclude competition from overseas.
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Companies like Baidu Inc., Alibaba, and Tencent Holdings Ltd. - collectively known as BAT - have been hailed for years as examples of China's innovation and modernization. Not taking anything away from the founders, who had built incredible businesses from the ground up, but not having to deal with Microsoft Corp., Google, Amazon.com Inc. and Facebook Inc., gave them a protective shield. Meanwhile, an atmosphere of indulgence during their nascent stages of development helped make these companies the giants they would later become. Beijing allowed and encouraged this.
But now the Alibaba empire is too big and China wants to cut off its wings. The move is not unexpected. Ant's IPO in November, which would have been the largest in the world, was halted at the last minute and weeks after a speech by Ma in Shanghai criticizing regulators. It is likely that other companies will face similar scrutiny.
Beijing is trying to better regulate and control the development of the platform economy, wrote China's mouthpiece, the People's Daily, shortly after the probes were announced, referring to the structure in which companies offer multiple services through the same app or website. This move does not reflect a change in attitudes towards supporting and promoting the sector, the paper wrote, but fighting monopolies has become an urgent problem as resources continue to flow up.
It is tempting to compare this with similar actions in the US and Europe, where all the big names are now overshadowed by antitrust investigations. The differences are enormous. The US regulators can only wish they had the power to ban names like Google, Facebook and Amazon. But the laissez-faire structure there means that the best Washington can do is wait for a company to grow big enough to be labeled a monopoly and then step in to stifle or break it open .
In China, the strong arm of government is everywhere - both explicitly and implicitly - and executives are forced to draw the fine line between being close to officials and being close. Mainland corporations have become the country's greatest cheerleaders, and at times their worst bad guys.
Whether Alibaba is officially committed to monopoly practices may be irrelevant. The mere prospect of being contained is enough to compel leaders to act and repent. According to the Wall Street Journal, Ma himself had already offered to hand over Ant discs to Beijing in a peace offer before the IPO. Compare this to Mark Zuckerberg's calm defiance in the face of questioning by Congress.
In the end, a peace offer may not be enough. Beijing helped found China's internet companies and will alone decide what to do with them.
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist on technology. He previously worked for Bloomberg News in the technology sector.
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