Alibaba Split May Ease Regime’s Crackdown on China’s Big Tech

The e-commerce breakup into six pieces should shrink its influence on the Chinese economy. And hey, Jack Ma is back.

Alibaba stock swung upward Tuesday by 14% as the e-commerce giant announced plans to split itself into six independent pieces. This prompted much talk about unlocking the value of its divisions.

But the fragmentation accomplishes something else, too: It stands to remove a lot of the heat the company, and other Chinese tech titans, have gotten from the Beijing regime.

The decision to slice up Alibaba Group Holdings is certain to curtail its impact on the Chinese economy. So it could be viewed as a capitulation to Beijing. “It is one step in the direction with China’s policy to reduce the monopolistic nature of the tech giants,” said Marvin Chen, an analyst with Bloomberg Intelligence.

The government in recent years has cracked down on private technology companies, hitting them with a bunch of new regulations. In 2021, Alibaba was fined $2.6 billion as the result of an antitrust probe. This appeared to be part of President Xi Jinping consolidating his power by diminishing the impact of private enterprise on China’s economy.

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Perhaps by no coincidence, Jack Ma, the co-founder and former chief of Alibaba, reappeared in China this week after his retreat from public life in 2020. At that time, he had criticized the government’s increasing pressure on non-state-owned enterprises. The Financial Times reported that he had mostly been living in Tokyo.

Lately, as China emerges from its pandemic lockdown, prospects for the nation’s economic rebound have improved, and Xi’s administration has begun to speak positively of the private sector again.

For investors, the six-way Alibaba split likely will produce separate public stock offerings that could do very well. The last couple of years have been difficult for Alibaba amid its problems with officialdom and China’s economic growth flagging. The firm’s stock had dropped two-thirds since its October 2020 peak.

The six units are: cloud computing; Chinese e-commerce; global e-commerce; digital mapping and food delivery; logistics; and media and entertainment.

Alibaba is listed on the New York Stock Exchange and the Hong Kong Stock Exchange.

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