Xi Jinping dumps coal in Alibaba’s stocking

Xi Jinping: Considering the fact that coronavirus originated in China, Xi Jinping, the Chinese President, has been under considerable pressure to answer uncomfortable questions about the pandemic. But in China itself, reports suggest that the administration has been able to bring the spread of the virus under control using strict and authoritarian measures, which critics have said are anti-democratic in nature. Through this all, the Japan Center for Economic Research has said that China's economy is on its way to maintaining a positive year-on-year GDP growth rate.

Government grinches have spoiled Alibaba’s Christmas. Investors wiped about 9%, equivalent to $60 billion, off the e-commerce giant’s market value in Hong Kong morning trade after Beijing launched a formal probe into its suspected monopolistic behaviour. A posse of financial regulators are looking further into payment affiliate Ant too.

Charismatic Jack Ma, a self-made champion of small business and innovation, is popular in China, and his cult-like following may have become a political liability to the companies he founded even though he no longer has a role on the board of directors. Some concluded that the crackdown on Ant, which forced it to shelve what was expected to be a record-setting initial public offering, was prompted by Ma’s public jeremiad in October against excessive regulation of financial technology companies. Ma is the effective controlling shareholder of Ant.

Officials certainly seem to have it out for Alibaba and Ant, but that’s probably as much about their market influence as anything else. Alipay, Ant’s mobile wallet, shares control of domestic mobile payments with Tencent. And Ant runs one of the country’s most popular money market funds. Alibaba’s Taobao and Tmall online marketplaces have been slowly ceding share as rivals like Pinduoduo and JD.com gain traction, but over half of the country’s e-commerce sales still go through its websites. There are valid concerns that these advantages could be abused.

The State Administration for Market Regulation said it was concerned by Alibaba’s “pick one of two” policy, referring to the practice of demanding sellers sell exclusively through Alibaba’s platforms. This tactic is hardly unique to Alibaba but making an example of the market leader would send a loud message. Hong Kong-listed shares in Alibaba’s rivals fell too.

New guidelines on fines suggest docking as much as 10% off the offender’s revenue. If SAMR applied that equation to the group’s total sales last fiscal year, it could cost a manageable $8 billion. The Christmas Eve morning selloff deducted far more than that from the company’s market value, albeit on an odd trading day. That suggests investors believe the assault on the empire Jack Ma built, which has expanded into artificial intelligence, cloud computing and digital media, is just getting started.