Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

The Chinese government’s newly launched anti-trust probe into Alibaba is probably warranted. The e-commerce giant undoubtedly has a dominant market share and engages in monopolistic practices, such as forcing merchants to make the company their exclusive online distributor or be delisted from its platforms. But other Chinese e-commerce companies have the same rule, and there are worse monopolists in China than Alibaba. So, why is Alibaba being targeted?

One of Alibaba Group Holding Ltd.’s apparent offenses is the expansion of financial services offered by its affiliate, financial-technology giant Ant Group, which owns Alipay. Beyond being the world’s most popular payment app, with 730 million monthly users, Alipay allows consumers to invest, purchase insurance and secure loans on its platform.

Last October, Ant Group was poised to launch a record-setting US$34-billion initial public offering. But the Chinese authorities abruptly halted it, in what was portrayed as a prudent attempt to limit the company’s exorbitant market power. The decision to block the IPO reportedly came directly from President Xi Jinping.

Story continues below advertisement

Now it appears that Mr. Xi’s government wants Ant Group to abandon financial services altogether and to confine itself to payment processing. Chinese regulators have provided a litany of justifications for this decision. But the real reason didn’t make the list. Payment processing is a low-margin business; no state-owned bank bothers with it. Financial services, by contrast, are highly lucrative – and the territory of state-owned incumbents.

If the Communist Party of China (CPC) were genuinely committed to breaking up monopolies and oligopolies that are stifling market competition, it would put those incumbents in its sights. After all, state-owned enterprises such as China Mobile, China National Petroleum Corporation, the State Grid Corporation of China and the Industrial and Commercial Bank of China (the world’s largest bank by assets) dominate China’s economic landscape to a far greater extent than Alibaba does.

Yet, far from launching anti-monopoly investigations into state-owned enterprises (SOEs), China’s government has recently been pursuing SOE “megamergers,” thereby boosting their market power even further. The reason is simple: when SOEs succeed, the CPC benefits, both economically and politically. As Mr. Xi made clear last April, the SOEs are “important material and political foundations” for so-called socialism with Chinese characteristics, and he plans to make them “strong, better and bigger.”

Allowing private firms to erode SOEs’ market share would undermine this objective, not only by naturally weakening the regime’s control over critical economic sectors, but also by opening the way for successful private companies to challenge the CPC. And Alibaba – co-founded by Jack Ma, one of China’s wealthiest people – is one of the most successful (and innovative) of all. In Mr. Xi’s eyes, it thus represents a threat to the CPC’s political monopoly and the regime that represents it.

To be sure, China’s tycoons have made extraordinary efforts to curry favour with or demonstrate their loyalty to the Xi regime. Mr. Ma, for one, is a member of the CPC. In 2013, he called the 1989 massacre of peaceful demonstrators in Tiananmen Square the “correct decision.” But, as the anti-trust investigation into Alibaba shows, China’s private-sector elites will never be genuine regime insiders. For the CPC, they are merely temporary custodians of wealth that rightfully belongs to the Party.

Mr. Ma’s critics might regard the unfolding investigation as comeuppance for his past statements or business practices. But Chinese regulators are unlikely to stop at Alibaba; China’s entire private sector has a target on its back. This has serious implications for China’s future economic prosperity – and for the CPC itself.

For all their flaws, private firms are the most dynamic players in the Chinese economy. If the CPC cracks down on them, while leaving SOEs alone, private-sector confidence will dwindle, and the economy will become less productive, innovative and efficient. GDP growth will falter. And the legitimacy of the one-party regime – which has long rested on the promise of prosperity – will deteriorate.

Story continues below advertisement

Mr. Xi and his colleagues are probably right that, by strengthening the regime’s grip on the economy, reining in the private sector will bolster the CPC’s political security in the short term. But, in the longer term, the biggest casualty of China’s “anti-trust” crackdown may well be the one monopoly it is meant to protect: the CPC’s lock on political power.

Minxin Pei is Professor of Government at Claremont McKenna College and a non-resident senior fellow at the German Marshall Fund of the United States.

Copyright: Project Syndicate, 2020. www.project-syndicate.org

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies