The unending crackdown in China is leaving investors uneasy. Despite the tension between China government and technology companies, Alibaba managed to survive through.
Tech firms versus China
The rivalry between big, private tech firms and Chinese authorities is still unending. The anti-monopoly rule against online platforms will be one of the country’s focuses in 2021. This rule was first introduced by President Xi Jinping last December. Accordingly, CNN noted that Alibaba has undergone an antitrust investigation by regulators on Christmas Eve.
This issue started over Beijing’s concern on the clout tech firms have over the financial industry and other sensitive areas. With how much access such firms have these days, the country is trying to minimize the possibility of privacy infringement. Though, it seems that the new regulation might hurt these tech companies along the way.
Alibaba shares slid, but still projected growth in revenue
Alibaba and its affiliate, Ant Group, have been struggling since even before the anti-monopoly rule dropped. Following the postponement of Ant Group’s IPO, CNN reported that Alibaba suffered a drop in shares last November. Afterwards, Ant Group was told to overhaul its online financial businesses. At that time, authorities argued that Ant Group was “edging out rivels from the market place, harming consumer rights and taking advantage of regulatory loopholes for its own profit,” CNN quotes.
All these problems led to a 17% drop from its October’s peak in Alibaba’s New York-listed shares. Along with this, Alibaba lost over $140 billion of its market capitalization. Though, CNN reported today that Alibaba still managed to record a 37% surge in revenue for the quarter ended December, in comparison to the previous year. This number alone has surpassed analysts’ predictions. Alibaba most probably benefitted through the increasing demand and needs in online shopping led by the coronavirus pandemic.
This sparks debate on Alibaba’s future. Some analysts are confident that Alibaba will thrive through the crackdown in China. Quoted from CNN, Martin Chorzempa of Peterson Institute for International Economics said, it is unlikely that Chinese authorities would “kill the goose that lays the golden eggs”.
Doug Fuller, an associate professor at the City University of Hong Kong, on the other hand, said that “it is clear that [Beijing] is going to narrow the scope of managerial independence through regulation and informal ‘guidance’ to the [Alibaba] conglomerate,” CNN quotes.