Beijing’s Antitrust Probes an Effort to Rein In Private Sector, Analysts Say

December 28, 2020 Updated: December 28, 2020

Chinese financial regulators are stepping up their scrutiny of technology companies, ordering an antitrust investigation of Alibaba and requesting that Ant Group rectify its businesses and comply with regulatory requirements.

The regime also issued new “antitrust reports” on Dec. 25, detailing the number of investigations that were begun by authorities in 2019, including on foreign joint ventures and Chinese private companies, and the penalty fees imposed on them.

Analysts believe Beijing is focusing its efforts on major corporations because it needs to seize capital, as China’s economy continues its downward trend and government coffers dry up.

Antitrust Crackdown

The State Administration for Market Regulation’s annual report on “China’s anti-monopoly law enforcement,” showed that in 2019, authorities initiated 103 monopoly cases and closed 46 cases. Companies were fined a total of 320 million yuan (about $49 million).

The report also mentioned that investigations into many well-known multinational companies with operations in China will be pushed forward, including Samsung (South Korea), Hynix (South Korea), Micron (USA), DuPont (USA), and Ericsson (Sweden).

The agency also listed 10 examples of companies that were fined due to their violations of “anti-monopoly laws”: the Sino-U.S. joint venture Chang’an Ford Automobile Co. was fined 162.8 million yuan (about $25 million) in June 2019; Japan-owned Toyota Motor (China) Investment Co. was fined more than 87.61 million yuan (about $13 million) in December 2019; and the U.S.-owned East Man (China) Investment Management Co. was fined more than 24.37 million yuan (about $3.7 million) in April 2019.

Chinese tech companies, such as Alibaba Investment Co. and Tencent’s holding subsidiary China Reading Group were also fined 500,000 yuan ($76,000).

Ma’s Empire Feeling the Crunch

Both Alibaba, which specializes in e-commerce, and Ant Group, which owns China’s largest digital payment platform, Alipay, were founded by Jack Ma.

On Dec. 27, China’s central bank said it also found anti-competitive activities at Ant Group and told the firm to overhaul its lending and other consumer finance operations. Ant Group said in a statement that it would fully comply with regulations.

Authorities have been closing in on the two companies since earlier this year.

On Nov. 3, the Shanghai Stock Exchange suspended Ant Group’s planned public listing after regulators held talks with four senior company executives, including Ma.

Four days after Alibaba Investment was fined, authorities accused Alipay of being a platform for “illegal finance activities,” and the firm stopped offering online deposit products.

Since September, authorities issued several regulations and guidances targeting fintech firms, noting that the finance sector’s “barbaric growth” had to be reined in.

Analysis

China experts believe that the “antitrust” crackdown is an excuse for authorities to force companies into coughing up money.

“The regime takes money from the big companies, plunders private capital, and confiscates their money to fill the Chinese Communist Party’s (CCP) treasury,” Feng Chongyi, professor and an expert on China issues at the University of Technology Sydney, said in an interview. He noted that China’s economic downturn amid the pandemic may have prompted authorities to act quickly this year.

Frank Xie Tian, professor of business at the University of South Carolina–Aiken, similarly said, “These technology and finance giants after being used by the CCP, and now the CCP is beginning to drain them out and take their capital for the state as much as possible.”

The antitrust investigation is consistent with Beijing’s strategy in recent years to further restrict private enterprises and bring them under the control of the CCP, China commentator Tang Jingyuan noted.

Amid a growing list of U.S. sanctions on Chinese firms, the Chinese regime is struggling financially and perhaps considering seizing part of Alibaba or Ant Group’s assets to alleviate economic woes, Tang added.

He also noted that Ma hadn’t publicly declared himself to be an ally of CCP leader Xi Jinping, so he runs the political risk of upsetting authorities.

Alex Wu, Mary Hong, and Annie Wu contributed to this report.