China kicked off an investigation into alleged monopolistic practices at Alibaba Group Holding and summoned affiliate Ant Group Co. to a high-level meeting over financial regulations, escalating scrutiny over the twin pillars of billionaire Jack Ma's internet empire.
The probe marks the formal start of the Communist Party's crackdown on the crown jewel of Ma's sprawling dominion, spanning everything from e-commerce to logistics and social media. The pressure on Ma is central to a broader effort to rein in an increasingly influential internet sphere.
Draft anti-monopoly rules released November gave the government unusually wide latitude to rein in entrepreneurs like Ma who until recently enjoyed unusual freedom to expand their realms.
Less of high-flying ways
Once hailed as drivers of economic prosperity and symbols of the country's technological prowess, Alibaba and rivals like Tencent Holdings Ltd. face increasing pressure from regulators after amassing hundreds of millions of users and gaining influence over almost every aspect of daily life in China.
"It's clearly an escalation of coordinated efforts to rein in Jack Ma's empire, which symbolized China's new 'too-big-to-fail' entities," said Dong Ximiao, a researcher at Zhongguancun Internet Finance Institute. "Chinese authorities want to see a smaller, less dominant and more compliant firm."
The State Administration for Market Regulation is investigating Alibaba, the top antitrust watchdog said in a statement. Regulators including the central bank and banking watchdog will separately summon affiliate Ant to a meeting intended to drive home increasingly stringent financial regulations, which now pose a threat to the growth of the world's biggest online financial services firm.
Ant said in a statement on its official WeChat account it will study and comply with all requirements.
Ma, the flamboyant co-founder of Alibaba and Ant, has all but vanished from public view since Ant's initial public offering got derailed last month. As of early December, the man most closely identified with the meteoric rise of China Inc. was advised by the government to stay in the country, a person familiar with the matter has said.
Ma isn't on the verge of a personal downfall, those familiar with the situation have said. His very public rebuke is instead a warning Beijing has lost patience with the outsize power of its technology moguls, increasingly perceived as a threat to the political and financial stability President Xi Jinping prizes most.
Alibaba slid as much as 8.9 per cent in Hong Kong to a five-month intra-day trough Thursday. Asia's largest corporation after Tencent has led losses among China's internet sector leaders since Ant's IPO got yanked in November, taking the overall toll to more than $100 billion.
Tencent slid more than 2 per cent and internet services giant Meituan declined more than 4 per cent, while SoftBank Group Corp., Alibaba's largest shareholder, sank as much as 2.9 per cent in Tokyo. Alibaba said in a statement it will cooperate with regulators in their investigation, and that its operations remain normal.