This morning (before Hong Kong market opened), two separate messages rattled the internet sector in China.

In one of them, the four financial regulators in China (People’s Bank of China (PBOC), China Banking & Insurance Regulatory Commission (CBIRC), CSRC and State Administration of Foreign Exchange (SAFE)) announced that they would ‘interview’ Ant Group soon:

In the other one, State Administration for Market Regulation (SAMR) (the agency which just summoned internet giants to announce rules on community groupbuy) said it had, accordingly to ‘complaint received’, launched an investigation of Alibaba Group’s suspected monopolistic practices:

The specific practice quoted in the SAMR announcement was the infamous tactic forcing merchants or brands to choose sides with Taobao/Tmall or its competitor.  They have used that on Pinduoduo and, causing big pain to the competitors as well as the merchants/brands.

Both announcements were ‘one-liners’, which in the context of Chinese official speech has become synonymous as something serious. 

Alibaba’s shares tumbled in Hong Kong during the Christmas Eve half day trading, bringing other big tech stocks down as well, as people suspected Meituan, or Tencent could be the next.

However, the authorities have also been careful not to send an overly negative message to investors – in every piece of communications over the last few weeks, the official tone was always ‘anti-trust’ but ‘encouraging innovation’.

What would lead to a crackdown 

Those who are familiar with Chinese history would know that monopoly was never a problem. In fact, it has always been easier (and less costly) to regulate one player than deal with many.

That said, abuse of your market power was not tolerated. In other words: “you can make your money, as long as you know and respect where the limits are.”

Such abuse could take the form of the following two ways:

  1. Openly challenging the authorities that allowed you to make money in a monopolistic or quasi-monopolistic;
  2. Openly abusing the traditional Confucian moral and ethical values, especially towards the public;

Tactics such as price fixing etc. that might be considered “unfair” would be in the second category; whilst Jack Ma’s speech would be in the first. This Bloomberg article “How China lost patience with Jack Ma, its loudest billionaire” is overall a good summary.

Alibaba’s stance towards the regulatory actions today has been humble and cooperative. This is a good start.

Lessons from a former president 

Maybe they should have listened to the former President of China Jiang Zemin, who famous said, in a furious rant to Hong Kong journalists in 2020: “There is an old saying in China called ‘keep muffled, and make a fortunate‘, I like that very much, it is the best.”

Many Chinese friends of mine thought he lost it 20 years ago, and when they grow older and look back into Jiang’s speech, only now they understand the wisdom within.

But Jack Ma has way passed the age of “too young, too simple, sometimes naive” – he would still need to relearn some of basic skills.


Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].