BEIJING (Parliament Politics Magazine): The Chinese IT giant’s enormous coffers and adaptability are considered as critical to surviving the coming year.
Alibaba has had a difficult 14 months. The Chinese tech behemoth has struggled since regulators abruptly halted the first public offering of its financial technology unit Ant Group.
Its market valuation has decreased to $358 billion from $846 billion on the eve of the Ant IPO in October 2020. Slowing Chinese economy, increased competition and the regulatory travails are the reason for such a stark decline.Â
With such a challenging environment expected to continue into the New Year, Alibaba, which has been dubbed “China’s Amazon,” faces a potentially difficult 2022 – despite analysts praising the company’s massive coffers and ability of adapting to the vast Chinese market favourably.
The Ant deal was expected to raise $34 billion with a dual offering in Shanghai and Hong Kong. That would have made it the largest IPO in history.
Instead, the deal has been put on hold indefinitely while Ant tries to meet a plethora of new regulatory criteria as part of Beijing’s Big Internet crackdown, which aims to limit tech companies’ market clout, improve consumer safety, and reestablish the Communist Party’s position in China’s private economy.
Beijing has humbled tech powerhouses that once seemed untouchable under Xi Jinping’s rule, China’s most powerful leader since Chairman Mao Zedong.
Indeed, Alibaba founder Jack Ma was so confident in his company’s standing that China’s financial regulators were publicly criticised by him in a now-infamous speech in Shanghai in October 2020, warning them that ” “the game in the future is about innovation, not just regulatory skills”.
“Apart from Ma’s Shanghai speech, Alibaba became the poster boy for the government crackdown because of its scale and wealth,” Daniel Tu, founder and managing director of Hong Kong-based wealth management advisory Active Creation Capital, told Al Jazeera. In essence, the company and other major tech platforms of China became a danger to the authority of the government.
 A record $2.8 billion antitrust fine was paid by Alibaba in September after regulators discovered it had abused its market position, although the sum was insignificant for a corporation with annual revenue of more than $100 billion. Changes to its business model that are required will have far-reaching repercussions. Ant Group’s once-profitable loan business will suffer as a result of the restructuring, as will its powerful data gathering skills.
According to Winston Ma, managing partner and co-founder of venture capital company CloudTree Ventures, the tightening rules in China indicate the end of an age of so-called ‘wild growth’ of Chinese internet companies. The new regulatory structure meant that China’s internet behemoths would be scrutinised more closely, and their business models might change.
Alibaba announced a reorganisation plan in December that will break its primary e-commerce business into global and domestic entities.
An industry analyst at Taipei’s semi-government Marketing & Consulting Institute (MIC), Yannie Liao said that through the reorganisation, Alibaba would have the capability to identify clearly domestic the demand to proficiently expand sales in China via its China Digital Business Unit while broadening e-commerce and logistics businesses abroad via the Overseas Digital Business Unit.Â
Alibaba has long been China’s largest online commerce marketplace, owing to the success of its two e-commerce sites, Taobao and TMall.
However, according to research company eMarketer, its share of China’s e-commerce sector has slowly declined from 78 percent in 2015 to a projected 51 percent in 2021. The majority of this drop occurred before China’s Big Tech crackdown, owing to increased competition and shifting customer behaviours. Alibaba’s e-commerce operation is predominantly search-based, which is less popular among younger Chinese consumers than live streaming or other interactive shopping methods.
Simultaneously, China’s economy is weakening, and consumer habits are changing to reflect this. The rash spending that characterised China’s boom years in the late 2000s and early 2010s is coming to an end. The Chinese economy’s growth expectation is only 5% this year, compared to 8.1 percent in 2021, according to Deutsche Bank.
