Beijing: Chinese tech giants are beginning to dislike the ‘common prosperity’ goals of the Chinese Communist Party (CCP), President Xi Jinping’s push to redistribute wealth in China.
Fabien Baussart, writing in The Times of Israel, said that the policy directive from President Xi is ending the domination of fintech heavyweights that began with Jack Ma’s Ant.
Ant Group’s Alipay, the digital payments app with over a billion users, is being broken up. This is the second blow to Ma after the attempted public listing of Ant, Alipay’s parent company, worth USD 37 billion, was quashed last November.
Now, Alipay’s “treasure trove” of consumer data is to be handed over to a partly state-owned credit-scoring firm. Its profit-making consumer lending arm may be excluded from any future IPO. A separate platform for the app’s profitable lending operation would be created under the plan, said Baussart.
To add insult to injury, Ant has been asked to undertake sweeping changes in its business model, “including restructuring itself into a financial holding firm”.
The Chinese regulators are also planning to break up Alipay. The regulatory measures, coincidentally, are hitting Jack Ma’s companies after Ma criticised Chinese regulators last October, saying they were stifling innovation, reported The Times of Israel.
That made the regulators target Alibaba and in April, it was hit with a USD 2.8 billion fine over monopoly concerns.
While the choice of Ma’s companies may be on account of his critical statement, the action is part of the CCP’s move to tighten its control over big businesses in China, said Baussart.
Among the unicorns to have faced the wrath of the Chinese regulators recently are Tencent, Alibaba, Ant Group, Byte Dance and Didi Chuxing. Having seen the fate of Alibaba and Ant, most of these companies have overnight shed their high profiles and tried their best to restructure themselves to avoid the regulator’s axe.
From rising private tuitions to the gaming industry, which wiped out USD 1 trillion in the market value of China’s four largest tech companies, the party has been undermining private enterprise systematically in the name of preserving Chinese culture and ensuring economic equality.
The regulators are simultaneously also targeting the internet giants at present on competition and privacy and cryptocurrency issues.
President Xi’s ‘common prosperity’ goal is being flayed by the big businesses on the ground that it defies the logic of China becoming an economic superpower in the last two decades that was completely based on a public-private sector partnership.
Financial markets across the world, led by Wall Street, are hurriedly discussing the development in China, wondering how it would affect them and the investors.
They all agree that as the Chinese government’s sudden distrust of its private sector grows, the entire tech sector is at risk of crumbling down in the country and with it the dreams of the startup unicorns that made China what it is today.
There are genuine fears in China’s tech sector that the crackdown has to do with tighter control of consumer and government data and reassertion of the government’s authority over the private sector while humbling the growing numbers of tech billionaires.
If this continues, private investment in the sector may dry up and the government will have to fund it itself, said Baussart.