Last Thursday’s simultaneous announcements of investigations by different authorities on Alibaba and Ant Group have caused Alibaba share price to slide more than 13%. While many pundits seem to believe the doomsday scenario for Jack Ma, we cautioned that the whole initiative was probably aimed at teaching a lesson, and how Alibaba would respond to this would probably be quite important in determining the next courses of action.

Understanding the context

And as usual, to figure out how things work in China, it is important to understand the context, and also pick up signs in carefully calibrated official messages.

Below are a few happenings over this weekend which might offer some clues – to read them effectively, note a few things:

  1. Senior government regulators do not get interviewed randomly, especially when they are not named and the interviews are published by state-owned media outlets – these ‘interviews’ are staged as a way to send a message;
  2. As we mentioned in our previous analysis, how Alibaba and Ant approached this is crucially important in determining how the investigations will go – this actually happens not just in China;
  3. Please pick up the signs and signals in these pieces.

1 – Interview with Zhejiang Provincial Administration for Market Regulation

An interview with the “relevant responsible person” of Administration for Market Regulation of Zhejiang Province, where Alibaba is headquartered, was published on Saturday by Zhejiang Daily (a government affiliated media group).

In the interview, the ‘journalist’ asked about the antitrust investigation on Alibaba Group. And the ‘relevant responsible person’ answered:

“On 24 December, State Administration for Market Regulation investigators visited Alibaba Group Holdings for investigation. The investigators interviewed people in charge at Alibaba Group as well as its relevant departments. They retrieved relevant evidence as well.

Alibaba Group Holdings has been proactively cooperating with the investigators. They have responded to the questions of the investigators seriously, and furnished relevant documents promptly, and overall very receptive to the investigation. The whole process went smoothly, and the on the ground investigation was completed on the same day.

The ‘relevant responsible person’ also expressed that Zhejiang has 310 internet based transaction platforms and more than 9 million online shops. Transaction amount has exceeded CNY 7 trillion (US$1.07 trillion), or 70% of China’s total volume.

The ‘relevant responsible person’ stressed that an investigation has been launched against Alibaba Group, it does not mean “our country has changed the stance of encouraging and supporting internet platforms”.

“We believe Alibaba Group will strengthen its compliance, and grow in a healthy and compliant way.”

2 – Interview with Central Bank Deputy Governor 

On Sunday 27 December, a media interview with Pan Gongsheng, Deputy Governor of People’s Bank of China (PBoC) was published. Mr Pan explained about the joint regulatory interview on Ant Group, conducted on 26 December.

Pan said that the main objective of the interview was to “guide Ant Group to follow the relevant spirit of the Community Party Central Committee and the State Council”. Ant Group needed to “use market and legal principles to implement compliance, fair competition and protection of consumer rights.”

The problems of Ant Group highlighted in the interview include: lack of corporate governance, lack of rule of law, lack of respect of regulatory requirements, and existence of non-compliant profiteering activities; using market position to harm competitors; infringement of consumers’ legal rights etc.

Specific requirements on Ant Group, raised by regulators during the interview, include:

  1. Return to its payment core, increase transparency of transactions, and forbid unfair competitive practices;
  2. Operate its credit scoring business in a licensed and compliant way, protect consumer data privacy;
  3. Establish financial holding company, ensure capital adequacy, and comply on rules about related-party transactions;
  4. Strengthen corporate governance, and strictly restructure credit, insurance, wealth management businesses according to regulatory requirements;
  5. Operate securities and fund management business in a fully compliant way, strengthen governance of securities business, operate securitisation of assets in a compliant way.

Pan also expressed that in future, financial regulators’ policy direction will follow these principles:

  1. Resolutely break monopoly, and correct improper competitive tactics, ensure market order and fairness;
  2. Insist that all financial activities are regulated, ensure all financial services licensed, and impose ‘zero tolerance’ to illegal and non-compliant activities;
  3. Protect property rights, and promote entrepreneurship, motivate market players and creativity, strengthen Chinese fintech companies’ global competitiveness;

3 – A public announcement by Ant Group

Good that they have published an English version too 😉

“On Dec. 26, 2020, financial regulators held a meeting with Ant Group. Under the regulators’ guidance, Ant Group will establish a rectification working group and fully implement requirements raised at the meeting to bring into line the operation and development of our financial-related businesses.

Ant Group will comply strictly with regulatory requirements, focusing on serving the real economy and the people as the core of our business. We will firmly uphold market-driven and law-based principles, and work to improve our corporate governance, review relevant businesses and processes, and enhance awareness of and ability to comply with relevant laws and regulations. We will enlarge the scope and magnitude of opening up for win-win collaboration, review and rectify our work in consumer rights protection, and comprehensively improve our business compliance and sense of social responsibility. Ant Group will make its rectification plan and working timetable in a timely manner and seek regulators’ guidance in the process.

While fully ensuring business compliance, Ant Group will also enhance our risk management and control, and ensure continuity and quality of our services. In the process of rectification, we will adhere to the principles of not placing additional costs on consumers and partners such as financial institutions, and maintaining the consumer experience as well as risk control standards and requirements.

We appreciate financial regulators’ guidance and help. The rectification is an opportunity for Ant Group to strengthen the foundation for our business to grow with full compliance, and to continue focusing on innovating for social good and serving small businesses. We will further develop technology to continuously improve the efficiency and inclusiveness of financial services, strengthen our global competitiveness and contribute to the new development paradigm of “dual circulation” under the preconditions of serving the real economy and complying with financial regulation.”

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].


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Prior to Momentum Works, Yorlin was in the financial sector in SIngapore and Hong Kong for 10 years - working with the Monetary Authority of Singapore, AXA and HSBC. She feels that corporate knowledge are undervalued in the start-up ecosystem and want to change this. At Momentum Works, she manages operations, overseeing joint venture operations with partners from all over the world. She always makes time to speak to people as you never know what’s the next game changer in the fickle world of fintech, e-commerce or mobile internet. In her free time, you can find her being the slave to her 5 cats.