The shares of Chinese eCommerce giant Alibaba Group surged at the start of the week following the news that Beijing finalized the scrutiny over Alibaba’s financial arm Ant Group.
The decision by the People’s Bank of China to fine Ant Group $985 million came in response to the company violating various regulations related to consumer protection and anti-money laundering requirements.
The fine is one of the highest against a Chinese internet company. However, it’s especially important as markets believe the fine concludes the years-long investigation and restructuring of Ant Group following a canceled $37 billion initial public offering (IPO) in 2020.
On Friday, Chinese authorities confirmed that the most concerning issues were resolved, prompting Ant Group’s plans to go public to start circulating in the media again. At the same time, the decision hinted China’s scrutiny over the domestic tech sector is finally over.
Meanwhile, Chinese authorities fined Tencent's online payment platform Tenpay $414.88 million for committing violations related to customer data management.
Several Chinese tech giants faced government scrutiny in recent years.
Ant Group’s major shareholder Alibaba was hit with a $2.8 billion antitrust fine in 2021, and food delivery giant Meituan was fined about $475 million for violating anti-monopoly regulations shortly after. A year later, ride-hailing giant Didi was penalized around $1.1 billion for violating data security regulations.
The stocks of Chinese tech conglomerate Tencent Holdings also registered gains in Hong Kong on Monday as part of a broader market rally.
Alibaba’s Recent Restructuring Signals a Fresh Start for the Sector
Alibaba Group has recently announced a major restructuring plan to see the Chinese internet giant split its global and domestic eCommerce businesses into two separate units over the next 18 months. The restructuring is aimed at increasing agility and unlocking shareholder value.
Alibaba will also set up six business units dedicated to cloud computing, commerce, local services, logistics, digital commerce, and media.
Cloud computing and Cainiao smart logistics, the two units that Zhang said would be listing soon, seem ready to go out on their own, as both have already been serving many third-party customers and have sound business models.
Each corporation will have its own CEO and board of directors.
From the perspective of employees, the restructuring may create new growth opportunities. However, this remains uncertain since Alibaba's cloud unit already confirmed in May it plans to lay off around 1,000 staff before its planned IPO which should come within a year.
The restructuring will likely bring significant benefits to Alibaba despite organizational challenges, according to Nikkei Asia.
Improved focus and increased flexibility may lead to more efficient decision-making and resource allocation, while the creation of more specialized business groups may help Alibaba tap new markets and opportunities.