BEIJING • China kicked off an investigation into alleged monopolistic practices at Alibaba Group Holding and summoned affiliate Ant Group to a high-level meeting over financial regulations, escalating scrutiny over the twin pillars of billionaire Jack Ma's Internet empire.
The State Administration for Market Regulation is investigating Alibaba, the top antitrust watchdog said in a statement yesterday without further details.
Regulators including the central bank and banking watchdog will separately summon affiliate Ant to a meeting intended to drive home increasingly stringent financial regulations, which now pose a threat to the growth of the world's biggest online financial services firm.
Ant said in a statement on its official WeChat account that it will study and comply with all requirements.
Once hailed as drivers of economic prosperity and symbols of the country's technological prowess, Alibaba and rivals like Tencent Holdings face increasing pressure from regulators after amassing hundreds of millions of users and gaining influence over almost every aspect of daily life in China.
Alibaba's Hong Kong stock slid by as much as 7.7 per cent to a five-month intraday trough, while Tencent and Internet services giant Meituan declined more than 1 per cent. Shares in SoftBank Group, Alibaba's largest shareholder, erased gains to trade as much as 2.7 per cent lower in Tokyo.
Investors are divided over the extent to which Beijing will go after Alibaba - Asia's largest corporation after Tencent - and its compatriots as Chinese President Xi Jinping's government prepares to roll out a raft of anti-monopoly regulations.
The country's leaders have said little about how harshly they plan to clamp down or why they decided to act now.
Draft rules released last month give the government unusually wide latitude to rein in tech entrepreneurs like Mr Ma, who until recently enjoyed an unusual amount of freedom to expand their empires.
"It's clearly an escalation of coordinated efforts to rein in Jack Ma's empire, which symbolised China's new 'too-big-to-fail' entities," said Zhongguancun Internet Finance Institute researcher Dong Ximiao. "The Chinese authorities want to see a smaller, less dominant and more compliant firm."
The flamboyant Alibaba co-founder has all but vanished from public view since Ant's initial public offering (IPO) was derailed.
As of early this month, with his empire under regulatory scrutiny, the man most closely identified with the meteoric rise of China Inc was advised by the government to stay in the country, a source has said. Alibaba representatives were not immediately available for comment.
The country's Internet ecosystem - long protected from competition by the likes of Google and Facebook - is dominated by two companies, Alibaba and Tencent, through a labyrinthine network of investment that encompasses the vast majority of the country's start-ups in arenas from artificial intelligence to digital finance.
Their patronage has also groomed a generation of titans, including food and travel giant Meituan and Didi Chuxing - China's Uber. Those that prosper outside their aura, the largest being TikTok owner ByteDance, are rare.
The anti-monopoly rules now threaten to upset that status quo with a range of potential outcomes, from a benign scenario of fines to a break-up of industry leaders. Beijing's diverse agencies now appear to be coordinating their efforts - a bad sign for the Internet sector.
The campaign against Alibaba and its peers got into high gear last month, after Mr Ma famously attacked Chinese regulators in a public address for lagging behind the times.
Market overseers subsequently suspended Ant's IPO - the world's largest at US$35 billion (S$46.5 billion) - while the anti-monopoly watchdog threw markets into a tailspin shortly after with its draft legislation.
The chances that Ant will be able to revive its massive stock listing next year are looking increasingly slim as China overhauls rules governing the fintech industry.
China is said to have separately set up a joint task force to oversee Ant, led by the Financial Stability and Development Committee, a financial system regulator.
"China has streamlined a lot of the bureaucracy, so it's easier for the different regulatory bodies to work together now," said Mr Mark Tanner, managing director of Shanghai-based consultancy China Skinny.
"Of all the regulatory hurdles, this is the biggest by a long shot."
Key events behind China's investigation into Alibaba Group
China issues rules to regulate financial holding companies, with the central bank saying there was a loophole in regulations for them.
Ant was one of those named.
Ant gets nod from the top securities watchdog to register Shanghai initial public offering (IPO).
At a public event attended by Chinese regulators, Mr Jack Ma says the financial and regulatory system stifled innovation and must be reformed. He also compares the Basel Committee of global banking regulators to "an old man's club".
Ant prices its IPO and secures the backing of strategic investors, including a unit of Temasek.
Mom-and-pop investors bid for a record US$3 trillion (S$4 trillion) worth of shares in Ant's dual listing.
China's Financial Stability and Development Committee flags risks associated with the rapid development of fintech.
Four of China's top financial regulators say they conducted regulatory talks with Ant's top two executives and Mr Ma. Chinese regulators recommend tighter regulations for online micro-lending companies to contain potential financial risks and rising debt levels.
The Shanghai stock exchange suspends Ant's IPO, citing the regulatory talks and a tougher regulatory environment as factors. This prompts Ant to also freeze the Hong Kong leg of its dual listing.
China publishes draft rules aimed at preventing monopolistic behaviour by Internet platforms, a move that will increase scrutiny of e-commerce marketplaces and payment services belonging to the likes of Alibaba.
China's increasing oversight of Internet platforms is both "timely and necessary", Alibaba Group chief executive Daniel Zhang tells the World Internet Conference.
China warns its Internet giants it will not tolerate monopolistic practices and to prepare for greater scrutiny, as it slaps fines and announces probes into deals involving Alibaba and Tencent Holdings.