As China cracks down on companies that pursue both finance and technology, Alibaba is unwinding its links to its fintech spinoff Ant Group.
After years of emphasising the groups’ synergy, Beijing’s harsh regulatory crackdown means Ant now stresses its autonomy, to the point that Alibaba might even compete with its one-time sister company.
The problems began with Ant’s proposed $37 billion initial public offering (IPO), which was cancelled at Beijing’s behest in late 2020.
Ant Group and Alibaba are independently seeking new business as the Jack Ma-founded companies navigate China’s devastating regulatory crackdown, sources said.
Alibaba created what would become payments and financial services provider Ant and spun it off in 2011, although it still retains a 33% stake and the two companies have some overlap in leadership.
The companies are trying to recover from a sweeping technology sector clampdown that has sliced hundreds of billions of dollars off their value, shrunk revenue, and led to a record $2.8 billion fine for Alibaba.
The affiliates have started to restrict access to each other’s services, compete for clients and even strike alliances with rivals, said the sources.
Ant declined to comment and Alibaba did not respond to a request for comment.
1.3 Billion Annual Users
Alibaba counts around 1.3 billion annual users across its marketplaces, which generated more than $1.3 trillion in gross merchandise value (GMV) for the year to March 2022.
The e-commerce behemoth also has a suite of other businesses ranging from cloud services, to video streaming to travel bookings.
Ant operates China’s ubiquitous mobile payment app Alipay, which has more than 1 billion users.
With Alibaba’s marketplaces recording more than double the GMV of US peer Amazon for the fiscal 2021 year, the group was once the pride of Chinese innovation.
Ma even boasted the group could become as large as the world’s fifth-biggest economy.
The moves by Ant and Alibaba towards operational separation underscore the new reality in China’s business landscape, as Chinese leader Xi Jinping’s government frowns upon concentration of power in the hands of private sector conglomerates.
Authorities are wary about once-freewheeling “platform economy” companies crowding out smaller rivals and the risks they pose, though there are signs now that the clampdown is being gradually eased.
“Having businesses sprawling in both finance and technology can be deemed as too powerful in China, therefore ‘politically incorrect’,” a Beijing-based fintech executive said.
- Reuters, with additional editing by George Russell