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Alibaba shares are underneath anti-trust scrutiny after announcement

The Chinese government opened an investigation into the online trading giant for "suspected monopoly behavior". After that, the company's value fell 9% and lost more than $ 100 billion.

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December
29, 2020

5 min read

This article has been translated from our Spanish edition using AI technologies. Errors can occur due to this process.

This story originally appeared on Alto Nivel

The state administration for market regulation (SAMR) announced in a statement that it is investigating the Alibaba Group on "suspected monopoly behavior". This caused the stock of China's largest online trading platform to crash, the value of which fell more than $ 100 billion.

The secret Chinese government has not released details of the antitrust investigation against the company founded by Jack Ma. They are only known to be related to their "choose one of two" policy. It can be said that forcing merchants to only sell on Alibaba is an exclusivity agreement to ensure they don't sell on other competing platforms like Tencent.

The announcement of the investigation caused the e-commerce giant's shares to fall sharply. This Monday, Alibaba fell 9% on the Hong Kong Stock Exchange, its lowest level since last June. The sharp drops in the last two sessions mean the company lost $ 116 billion.

China against monopolies

The People's Daily, the newspaper of the ruling Communist Party in China, notes that the investigation into Alibaba "is an important measure for our country to strengthen antitrust oversight in the internet sector and promote healthy long-term development of the digital economy." .

"If the monopoly is tolerated and companies are allowed to expand in a disorderly and barbaric way, the industry will not develop in a healthy and sustainable way," added the same media.

https://t.co/sonWyBhs7e faced Covid-related disruptions among its customers in 2020 and used this as an opportunity to help # SMBs become more agile when doing business around the world. pic.twitter.com/GLDhKDjzjn

– Alibaba Group (@AlibabaGroup) December 23, 2020

Special sources mention that People's Bank of China announced that "the financial regulators will soon meet with Ant Group," Alibaba's finance department and parent company of Alipay, the online payments department. The aim is to guide the company "to implement financial supervision and fair competition and to protect the legitimate rights and interests of consumers".

In a brief statement, the Ant Group confirmed that it had received the draft. "We will seriously investigate and strictly comply with all regulatory requirements and make every effort to comply with all related work," the company said.

In early November, the government led by Xi Jinping thwarted the Ant Group's IPO at the last minute. The IPO would be $ 34.5 billion, one of the highest in history.

In addition, Alibaba was fined around $ 75,000 last week for failing to report an acquisition, according to the New York Times.

Why is Alibaba targeted by the Chinese government?

Several analysts point out that the Alibaba investigation, the obstacles to the Ant Group and the fine were the result of a speech given by Jack Ma. Last October, the now retired company founder sharply criticized the Chinese financial system. at a forum in Shanghai.

I am honored to work with HRH The Duke of Cambridge @KensingtonRoyal and other leading global companies and organizations to support @EarthshotPrize and address the environmental issues we all face. Together we can protect our planet from climate change! https://t.co/0ax1imIZMC pic.twitter.com/EN6yissNGI

– Jack Ma (@JackMa) October 10, 2020

He, too, a philanthropist, said the operating model of his country's banks is like a pawnshop. He criticized that preventing systemic financial risk had led them to get lost, and believed that the Basel Accords on banking supervision were out of date.

"There is certainly an escalation of coordinated efforts aimed at obstructing Jack Ma's rule and symbolizing the new Chinese entities that are too big to fail," said Dong Ximiao, an analyst of the Zhongguancun Institute of Internet Finance ( the "Silicon Valley of Beijing"). quoted by the Bloomberg agency.

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