Beijing Cracks Down on Alibaba Rival Tencent

March 19, 2021
Kevin Larkin

It’s no secret that China has become one of the world’s leaders in exports, as they are able to produce massive quantities of goods for often far cheaper than other countries such as the United States and Japan. Alibaba is an e-commerce company that is able to sell almost any product globally at extremely low prices, whether used for direct consumption or to be resold on an internet site by the use of Instagram and Facebook ads. If you can get past the often long shipping times, usually averaging around 4 weeks, Alibaba can be an extremely useful tool and it is currently for countless companies worldwide. However this past November, Beijing has halted Alibaba’s affiliate Ant Group after the company was unable to meet expectations and properly adapt to changes in the regulatory environment. This was also in an effort to promote new anti monopoly rules, as Alibaba was slowly emerging as a type of monopoly in this market. This hit their stock dramatically with a pretty substantial decrease, seemingly leaving the door open for competitors such as Tencent to take a commanding lead. Now, there have been recent fears that Tencent, an e-commerce fintech also specializing in social media, could face a similar fate.

On Friday March 12th, Tencent received a fine for antitrust issues for past investments in a social media app, and may be subject to restructuring their company just as Ant Group was required to do with Alibaba. This also resulted in a decline in their value, as shares dropped over 7% since the announcement, being an indication that investors are afraid this blow could result in negative, costly reconstruction they don’t want to be around for in the event it turns even more south. This crackdown on fintech giants such as Alibaba and Tencent raises fears at just how far Beijing will go with these enforcements, as their goal seems to be to put pressure on these firms to support the Communist Party’s agenda, according to Quartz. Xi Jinping has also made it clear that this is mainly to prevent “disorderly growth”, so expansion in crackdowns is most likely certain. Regulators have since asked Alibaba to restructure itself into a financial holdings company, which would be a pretty dramatic overhaul for them, but they have reportedly reached an agreement on the matter. The agreement would require them to reach capital requirements similar to that of banks, and could take several months to properly implement.

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