Is Alibaba’s Status a Warning to China’s Giants?

BusinessIs Alibaba's Status a Warning to China's Giants?

Is Alibaba’s Status a Warning to China’s Giants?

Alibaba is in hot waters. Last week, Chinese giant confirmed that Beijing fined it $2.8 billion by Chinese regulators, justifying it abused its market position for years.
According to experts, this is a strong signal to any tech giant willing to shift into a liberal mindset. “No one can be more powerful than the Party”, described as such by the BBC.
Indeed, the communist party has made it impossible for citizens to live a day without using at least one app designed or approved by Beijing. From payment methods, to social life, Beijing has an eye everywhere.
A threat that might push some of the companies to leave the country, or at least force them to follow very strict rules. 

Alibaba, a pride turned to shame

Direct international competitor to the American Amazon, Alibaba, one of the biggest B2C and B2B online marketplace for all sorts of goods, was the pride of China. 
Until three months ago, when Jack Ma, its CEO, disappeared from the public eye. In November 2020, “Ma addressed an assembly of high-profile figures with a controversial speech that criticised the Chinese financial system.”, reports the BBC.
He said that the government was working on a “pawn-shop mentality”. He was not seen for three months, some rumors spread he was not even alive.  

Read on Alvexo: Alibaba: The e-commerce Giant in Turmoil

6 months after, Alibaba is fined

Three months after Jack Ma reappeared in the public eye, the company confirmed that it was heavily fined. $8.2 billion for “abusing its market position”, according to the government.
While Alibaba has 800 million users for China, only, other companies have been summoned by the party. According to the BBC more than 34 companies have received a reminder “let Alibaba be a lesson to you”.
The government gave a month to the companies to “self-reflect”, hoping for them to make public apologies.

The Party above all

All in all, the Alibaba fine seems to have one goal: give a tough lesson to any other CEOs who would like to express public criticism towards the Chinese unique communist party.
On April 12th, Alibaba initiated the process by sharing a public statement vowing a radical change in its mindset. On April 21st, the share was down 5% at $230.
The above content is considered to be market commentary information and shall not be perceived as independent investment research or investment advice.