The Chinese government’s newly launched antitrust probe into Alibaba is probably warranted. The e-commerce giant undoubtedly has a dominant market share and engages in monopolistic practices, such as forcing merchants to make the company their exclusive online distributor or be delisted from its platforms.
However, other Chinese e-commerce companies have the same rule, and there are worse monopolists in China than Alibaba. So, why is Alibaba being targeted?
One of Alibaba’s apparent offenses is the expansion of financial services offered by its affiliate — financial-technology giant Ant Group, which owns Alipay. Beyond being the world’s most popular payment app, with 730 million monthly users, Alipay allows people to invest, purchase insurance and secure loans on its platform.
In October last year, Ant Group was poised to launch a record-setting US$34 billion initial public offering (IPO). However, it was abruptly halted by Chinese authorities, in what was portrayed as a prudent attempt to limit the company’s exorbitant market power. The decision to block the IPO reportedly came directly from Chinese President Xi Jinping (習近平).
Now it appears that Xi’s government wants Ant Group to abandon financial services altogether and confine itself to payment processing.
Chinese regulators have provided a litany of justifications for this decision, but the real reason did not make the list: Payment processing is a low-margin business, and no Chinese state-owned bank bothers with it. Financial services, by contrast, are highly lucrative — and the territory of state-owned enterprises (SOE).
If the Chinese Communist Party (CCP) was genuinely committed to breaking up monopolies and oligopolies that are stifling market competition, it would put those incumbents in its sights.
After all, SOEs such as China Mobile, China National Petroleum Corp, State Grid Corp of China, and the Industrial and Commercial Bank of China — the world’s largest bank by assets — dominate China’s economic landscape to a far greater extent than Alibaba.
Yet far from launching anti-monopoly investigations into SOEs, the Chinese government has recently been pursuing SOE “mega-mergers,” boosting their market power even further.
The reason is simple: When SOEs succeed, the CCP benefits, economically and politically.
As Xi made clear in April last year, SOEs are “important material and political foundations” for so-called socialism with Chinese characteristics, and he plans to make them “strong, better, and bigger.”
Allowing private firms to erode SOEs’ market share would undermine this objective, not only by naturally weakening the regime’s control over critical economic sectors, but also by opening the way for successful private firms to challenge the CCP.
Alibaba — cofounded by Jack Ma (馬雲), one of China’s wealthiest people — is one of the most successful (and innovative) of all. In Xi’s eyes, it thus represents a threat to the CCP’s political monopoly and the regime that represents it.
To be sure, China’s tycoons have made extraordinary efforts to curry favor with or demonstrate their loyalty to the Xi regime.
Ma, for one, is a member of the CCP. In 2013, he called the 1989 Tiananmen Square Massacre of peaceful demonstrators the “correct decision.”
However, as the antitrust investigation into Alibaba shows, China’s private-sector elites will never be genuine regime insiders. For the CCP, they are merely temporary custodians of wealth that rightfully belongs to the party.
Ma’s critics might regard the unfolding investigation as comeuppance for his past statements or business practices, but Chinese regulators are unlikely to stop at Alibaba: China’s entire private sector has a target on its back.
This has serious implications for China’s future economic prosperity — and for the CCP itself.
For all their flaws, private firms are the most dynamic players in the Chinese economy. If the CCP cracks down on them, while leaving SOEs alone, private-sector confidence would dwindle, and the economy would become less productive, innovative and efficient. GDP growth would falter, and the legitimacy of the one-party regime — which has long rested on the promise of prosperity — would deteriorate.
Xi and his colleagues are probably right that, by strengthening the regime’s grip on the economy, reining in the private sector would bolster the CCP’s political security in the short term.
However, in the longer term, the biggest casualty of China’s “antitrust” crackdown might well be the one monopoly it is meant to protect: the CCP’s lock on political power.
Pei Minxin is a professor of government at Claremont McKenna College and a non-resident senior fellow at the German Marshall Fund of the United States.
Copyright: Project Syndicate
A failure by the Chinese Communist Party (CCP) to respond to Israel’s brilliant 12-day (June 12-23) bombing and special operations war against Iran, topped by US President Donald Trump’s ordering the June 21 bombing of Iranian deep underground nuclear weapons fuel processing sites, has been noted by some as demonstrating a profound lack of resolve, even “impotence,” by China. However, this would be a dangerous underestimation of CCP ambitions and its broader and more profound military response to the Trump Administration — a challenge that includes an acceleration of its strategies to assist nuclear proxy states, and developing a wide array
Eating at a breakfast shop the other day, I turned to an old man sitting at the table next to mine. “Hey, did you hear that the Legislative Yuan passed a bill to give everyone NT$10,000 [US$340]?” I said, pointing to a newspaper headline. The old man cursed, then said: “Yeah, the Chinese Nationalist Party [KMT] canceled the NT$100 billion subsidy for Taiwan Power Co and announced they would give everyone NT$10,000 instead. “Nice. Now they are saying that if electricity prices go up, we can just use that cash to pay for it,” he said. “I have no time for drivel like
Twenty-four Chinese Nationalist Party (KMT) lawmakers are facing recall votes on Saturday, prompting nearly all KMT officials and lawmakers to rally their supporters over the past weekend, urging them to vote “no” in a bid to retain their seats and preserve the KMT’s majority in the Legislative Yuan. The Democratic Progressive Party (DPP), which had largely kept its distance from the civic recall campaigns, earlier this month instructed its officials and staff to support the recall groups in a final push to protect the nation. The justification for the recalls has increasingly been framed as a “resistance” movement against China and
Chinese Minister of Foreign Affairs Wang Yi (王毅) reportedly told the EU’s top diplomat that China does not want Russia to lose in Ukraine, because the US could shift its focus to countering Beijing. Wang made the comment while meeting with EU High Representative for Foreign Affairs and Security Policy Kaja Kallas on July 2 at the 13th China-EU High-Level Strategic Dialogue in Brussels, the South China Morning Post and CNN reported. Although contrary to China’s claim of neutrality in the Russia-Ukraine conflict, such a frank remark suggests Beijing might prefer a protracted war to keep the US from focusing on
RSS