China's big tech 'rectification' continuesCity talk | AGENCE FRANCE-PRESSE 20 Apr 2021
A record fine, public penitence from a tech giant and a "who's who' of digital firms warned to "rectify" their ambitions within a month - state regulators are showing no one is bigger than Beijing in Xi Jinping's China.
Alibaba absorbed the massive US$2.78 billion (HK$21.6 billion) penalty from the market watchdog this month after a months-long investigation found the e-commerce titan had been abusing its dominant market position.
Analysts say the chastening was part of Beijing's plan to force a diet on tech giants - from Alibaba to Tencent to Baidu - who have grown fat on the data and personal finances of China's public.
After being hit with China's biggest ever corporate fine - the equivalent of 4 percent of annual sales - Alibaba said it would "fully comply" and drop an exclusivity clause to allow merchants to also sell goods on rival platforms.
Vice chair Joe Tsai thanked the State Administration for Market Regulation for "good guidance on some of the specific issues under the anti-monopoly law."
Alibaba, which started as an e-commerce platform, spun out fintech colossus Ant Group, China's biggest online payments firm, leaving regulators struggling to keep up with a marketplace making and meeting new digital lifestyles.
It hit choppy waters after cofounder Jack Ma Yun publicly criticized Chinese regulators in October over their warnings about the expansion of Ant.
In response, regulators pulled Ant's planned record-busting US$35-billion IPO and ordered a restructure of the company, decoupling the "inappropriate links" to other financial products.
It is now being forced to transform into a financial holding company under the oversight of the central bank, welding it to banking rules.
Ant must pivot to values "serving the real economy and the masses," state mouthpiece the Global Times said, citing regulators.
The restructure "is designed to level the playing field between Ant and other fintech," says Angela Zhang, a law academic at the University of Hong Kong.
"Ant's major competitive advantage lies in the troves of data it obtained through Alipay," she adds, citing the ubiquitous online payments platform.
Zhang said too that the restructure will challenge Ant's ability to creep deeper into lending, insurance and investment.
The message to companies reaching too high, too fast is clear, says Nicolas Bahmanyar, a Beijing-based data and tech consultant. "If in a group some activities are not totally legal expect the whole group to be impacted.
"For international companies this is really something to take in consideration: all your eggs are in the same basket when it comes to dealing with the regulator."
Alibaba may have dodged a bullet with a swift fine it can afford to pay instead of a prolonged, sapping probe "that puts off investors and profitability in the long term," says Larry Ong, an analyst at the SinoInsider consultancy.
But the monopolies regulator was only just getting started.
On Tuesday it said 34 tech companies - including Baidu, Tencent and ByteDance, the owner of TikTok - had been summoned and urged to "heed the warning" provided by Alibaba's woes.
The firms have been given one month to undergo "complete rectification" - a rigorous self-assessment to ensure they are not in breach of monopoly laws, a statement by the State Administration for Market Regulation said.
They must also ensure they are not doing anything that "harms the interests of operators and consumers," the statement added, urging companies to give "priority to national interests."
Those interests reflect the core concerns of all-powerful leader Xi, say analysts.
"Beijing is looking to rein in the monopolistic power, financial clout and de facto societal control of 'too-big-to-fail' private technology companies to stop them from foisting immense financial and political risks on to the regime," Ong says.
The regulatory squeeze on fintech has left analysts speculating on who could be next for a slapdown.
Gaming giant turned digital payments portal Tencent, food delivery leader Meituan and China's largest retailer JD.com were also among those summoned on Tuesday for a ticking off.
Meituan was swift to pledge to "consciously maintain market order" and work closely with the regulators.
But investors continued to buy Chinese fintech stocks.