China’s tech industry faces a problem the size of Ant. An abrupt regulatory halt to the company’s $ 37 billion public offering for sale fintech speaks of Beijing’s waning tolerance for the influence of the network’s titans. Alibaba, Tencent and others have so far avoided the concerns that haunt their Western counterparts, but that could be about to change.
The impressive government intervention in what would have been the world’s largest public offering of shares is alarming to executives and investors alike. Just days before the shares began trading, Ant founder Jack Ma and company executives were summoned to meet with financial watchdogs. The new draft of the rules revealed on the same day also focuses on Ant’s growing online lending activity. The stock sale will likely take place at some point, but could also be reduced depending on the regulatory impact on its business model.
Ant’s weight in online payments, wealth management and credit made it an obvious target for risk management in the financial system. However, the other internet giants established in China should take note. President Xi Jinping’s latest five-year plan, released last week, elevates technological self-reliance to “strategic support” for national development. For Alibaba and Tencent, who have prospered largely unchecked in their respective domains of e-commerce and video games, it’s a sign that they are going to garner more attention.
As with Google and Facebook, the Chinese tech titans are most vulnerable when it comes to competition and data privacy. More than half of the Chinese shop at Alibaba. Tencent’s all-in-one messaging app WeChat has 1.2 billion monthly active users. Its music streaming branch was investigated by competition authorities last year, following the censorship of its games in 2018. Both are now betting on cloud computing and healthcare, which is sure to attract additional scrutiny.
The so-called techlash (reaction against the technological ones) would come at a delicate moment. The pandemic has weakened China’s economic growth and consumption, even as Alibaba and Tencent have prospered. Its Hong Kong-listed shares are up 40% and 64%, respectively, this year. Ma’s group announced dizzying results on Thursday. That kind of performance, and the dominance it reflects, is likely to be of increasing concern to consumers and regulators alike.
The authors are columnists for Reuters Breakingviews. Opinions are yours. The translation, of Carlos Gómez Down, it is the responsibility of Five days