A month after the Communist regime in China cracked down on the media assets of Alibaba, it has now directed Alibaba’s affiliate company Ant Group to take away control from its founder Jack Ma, reported Reuters. The business tycoon had attracted the ire of the Chinese government in October last year after he went on a tirade against China’s current banking system, its financial regulatory structure and the challenges posed by it to Ant Group.
The Ant Group is is an affiliate company of the Alibaba Group, which operates China’s largest digital payment platform Alipay. The group has stakes in Indian companies Paytm and Zomato, apart from several companies across the world.
The Chinese regulators have directed the Ant Group to find options to sell Jack Ma’s stake in the company so as to seize control from him. They have hinted to the financial technology giant that doing so will improve their ties with the Communist regime and avoid the scrutiny of their businesses. Reuters reported that the People’s Bank of China (PBOC) and Insurance Regulatory Commission (CBIRC) had held meetings with Jack Ma and the Ant Group separately between January and March this year.
During the talks, the possibility of Jack Ma’s exit from the Ant Group was discussed. Earlier, Wall Street Journal reported that the business tycoon had offered parts of the company to the Chinese government in November last year. However, Ant Group has denied all such claims in a statement. It said, “Divestment of Mr. Ma’s stake in Ant Group has never been the subject of discussions with anyone.”
Disinvestment options offered to Jack Ma will be reviewed by the Chinese regime
Citing sources, Reuters reported that Jack Ma was told by Chinese regulators that he could only sell his stake to existing investors within the Ant group and not to any external party. Moreover, he was directed to not sell his stake to an individual/entity close to him. Jack Ma was also given the option to choose a Chinese investor affiliated with the Communist Party of China (CCP). Nevertheless, every such decision will be reviewed by the Chinese government.
Reuters emphasised that all three sources, who had highlighted the disinvestment of Jack Ma’s stakes, were consistent in ‘terms of the timeline’ of events. However, the Chinese government and its subsidiaries have refused to comment on the matter.
Influence held by Jack Ma over Ant Group
It must be mentioned that even though Jack Ma has exited from corporate positions in the company, he still holds significant control and influence over Ant Group and Alibaba. Despite holding a 10% stake in Ant Group, he controls the company through its related entities. Through Hangzhou Yunbo Investment Consulting Co., Ltd, Jack Ma has control over two other entities with a 50.5% stake in Ant Group. Interestingly, Yunbo can decide on matters pertaining to Ant Group and exercise the combined voting rights of 3 entities. Jack Ma holds about 34% equity interest in Hangzhou Yunbo Investment Consulting Co., Ltd.
China worried about Alibaba’s media clout as it threatens CCP propaganda
It is believed that Alibaba has used its influence in the media to ‘reshape’ government legislation to favour its businesses. In May 2020, several social media posts on Chinese micro-blogging platform Weibo, accusing Alibaba executive of an extra-marital affair was removed. In a probe by internet watchdog Cyberspace Administration of China (CAC), it alleged that Alibaba used ‘capital to manipulate public opinion.’
Alibaba has contributed around $100 million in advertising revenue on Weibo in 2019. CAC had lashed out at the micro-blogging platform for interfering in online communication. Without naming Alibaba, the Communist Party of China leader Xu Lin said that China will “resolutely prohibit dilution of the party’s leadership in the name of (media) convergence, resolutely guard against risks of capital manipulating public opinion.”
Not just Alibaba, several Chinese tech giants such as Tencent Holdings Ltd. and Bytedance Ltd. hold significant assets in the media. However, the Chinese regime has not made it clear whether the other tech companies will face the same wrath like that of Alibaba. Experts believe that giving aways its media assets would not affect Alibaba in a negative manner but will instead improve ties with the Communist regime by dismissing its insecurities. It will also help them in deterring future crackdown by the CCP, as it continues to tighten the restrictions on media.