- Tram Ho
The government of this country has shown rigor to the tech industry in just a few days. In landmark announcements, Chinese officials asked Alibaba to pay a record fine of $ 2.8 billion for abusing its dominant position in the market, then forcing Ant Group to reform. On April 13, regulators summoned 34 of the nation’s biggest companies from Tencent to ByteDance and warned them “not to touch the ‘red line’.”
The unspoken message to Jack Ma and his peers is that the decade that has facilitated the growth of the stalwart “rivals” of Facebook or Google has come to an end. Gone are the days when “giants” like Alibaba, Ant or Tencent have the ability to squeeze businesses in the same industry with financial resources and huge data warehouses.
Mark Tanner, founder of China Skinny, said: ” As new rules for Ant and a $ 2.8 billion fine for Alibaba are in place, there is a golden age for major tech companies. China is over. Even those businesses that are not targeted will soon have to scale back their expansion and adjust many factors for the new environment . ”
Even companies with less stringent scrutiny – like Tencent or Meituan and Pinduoduo, may see limited growth opportunities.
The present landmark moment has been prepared for many years. Over the past decade, visionary entrepreneurs like Jack Ma and Pony Ma have created multibillion-dollar empires from retail to media. They help improve the quality of the waves of hundreds of millions of people and become a “role model” for the younger generation increasingly rich. However, great opportunities and years of rapid growth have raised concerns about “the winner” and the replacement of the role of state agencies.
Beijing is increasingly concerned as companies like Alibaba and Tencent actively defend their “front lines”. That is when they use a huge data warehouse to force competitors or partners, content publishers to have exclusive agreements.
Their growing influence over every aspect of Chinese lives becomes more apparent. Specifically, many of the 1.3 billion people bought and paid for everything on the company’s platforms, providing massive amounts of data on spending behavior. Among them are Alibaba and Tencent – the “kings” in the industry by investing billions of dollars in hundreds of startups.
All of these factors take place in 2020, when Jack Ma is preparing for an IPO of $ 35 billion Ant and publicly criticizing the regulators. Then, Beijing introduced an unprecedented series of regulations to control fintech and internet companies. Alibaba’s market cap has therefore also lost $ 200 billion since October. The heavy impact of Alibaba after four months of tight scrutiny by officials underscores the company’s fragility to even stricter moves. .
China’s giants from Tencent to Meituan will be the next target, as they are also the dominant players in their respective fields, according to Credit Suisse analysts Kenneth Fong and Ashley. Coin.
Regulators can focus on the rules that once put in place for Meituan on monopoly, especially as they expand from shipping to fast-growing sectors like e-commerce. In addition, Beijing has the ability to investigate Tencent’s gaming field and whether the messaging platform WeChat is unfairly competing.
Shen Meng – Head of investment banking Chanson & Co. ” The period of rapid expansion and growth has passed ,” Beijing said . From now on, the growth of these companies is likely to be tightly controlled by the government. will face the fact that they need to streamline non-core businesses and reduce their influence on industries. take them as ‘examples’ . ”
The financial giant Ant is a prime example. The PBOC said it wants to ” prevent disordered capital expansion ” and ensure all Ant’s financial businesses are run in a single parent company. Jack Ma’s company will face constraints in every major business – from payments and asset management to credit lending. The most profitable business – credit lending, will be limited by registered capital.
Possibly, the penalty for Alibaba is still lighter than for some other big companies. Although $ 2.8 billion was three times higher than Qualcomm’s 2015 penalty, that figure is less than 5 percent of the company’s annual revenue. However, what is much more risky is the threat of strict future actions by the authorities and the impact that will weaken Alibaba.
The threat seems uncertain, but the clearest message Beijing regulators want to convey in the past few days is that there will not be any company with power beyond state agencies. .
The PBOC warned in its previously published draft rule that any non-bank payers with half of the market share of online transactions (or two entities with a total of two thirds of shares) could be. under antitrust investigation. If the monopoly situation is confirmed, the State Council or the Cabinet may impose a variety of penalties, including the dissolution of the legal entity.
This is the last nightmare of an entrepreneur.
” Every company is on the regulator’s side of the line, and it really depends on their own next response. It’s better to proactively fix itself instead of restructuring, ” Shen said . regulatory authority request . ”
Source : Genk