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Why Is China Cracking Down on Alibaba?

The Chinese authorities' antitrust action against the e-commerce giant appears arbitrary. The perception that the same business practices are treated in drastically different ways when policy priorities shift will not bolster investor confidence in China’s thriving internet firms.

HONG KONG – Since the Chinese authorities suddenly halted fintech conglomerate Ant Group’s planned initial public offering in autumn 2020, its parent company, e-commerce king Alibaba, has been facing harsh regulatory scrutiny. On Christmas Eve, China’s antitrust authority announced that it was investigating the firm’s exclusive business practices. And Alibaba’s founder, Jack Ma, recently eased concerns regarding his fate by appearing in public for the first time since last October, when he delivered a speech criticizing financial regulation in China.

The mere announcement of the investigation into Alibaba wiped more than $100 billion off the firm’s market value overnight. Given the Chinese government’s huge regulatory power, investors are rightly anxious about Alibaba’s prospects. But the government’s sudden and aggressive move against the firm also reveals much about the regulatory regime’s weaknesses.

To be sure, the Chinese government has legitimate reasons to be vigilant toward the country’s highly concentrated internet sector. By targeting superstar firms like Alibaba, China is following a global regulatory trend, with US and European Union policymakers similarly vowing to impose tougher sanctions against monopolistic internet giants.