Tencent Holdings Ltd. is another Chinese thriving hi-tech company which has fallen prey to the Big Brother. Following the crackdown on Jack Ma’s Ant Group, an affiliate of Alibaba, the watchdog launched a customary investigation into alleged anticompetitive practices. Tencent first came under scrutiny in 2018 after the hi-tech giant had purchased popular online education platform Yuanfudao. The investigation ended in a modest fine of $77,000 that seemed to settle all differences. Nevertheless, Tencent shares slumped 4.5% in response and the capitalization of this highly valuable company shrank to $810 billion. The whole fuss is as clear as day. The government sends a clear message to market participants. Tencent Holdings Ltd. has been spotted as a new target. In the best-case scenario, the company could be forced to segregate its financial, insurance, and hi-tech divisions into separate businesses so that the government could tighten regulations. The worst-case scenario entails the company’s nationalization.
China is by no means a law-bound state. If the government probes into a private business, it does not make sense for its owner to rely on a fair court ruling, to file a counter-suit, or to challenge the regulator on a fine. If the Party says 'yao', it is not for you to say 'boo'. Not a single institution will dare to contradict. The battle between the authorities and Ant Group exemplifies this principle of the autocratic society. The crackdown on Ant Group, which began in November 2020, scrapped Jack Ma’s plans for the world’s largest IPO at that time. According to well-informed sources, the feud sparked off due to connections between the beneficiaries of the event and political clans in disgrace. However, the canceled IPO has been a minor trouble in this standoff. In February, Ant Group was actually nationalized as the government regulators developed its restructuring plan that would transform the group owning China's main digital payment platform Alipay into a financial holding company.
On top of that, e-commerce giant Alibaba is now facing a humongous fine of over $975 million. The regulator brought a verdict of Alibaba’s anticompetitive behavior.
