The clash between Jack Ma and the Chinese government has had severe financial consequences for his companies, Ant Group Co. and Alibaba Group Holding Ltd. After nearly three years, Chinese authorities announced the conclusion of their probe into Ant, imposing a hefty fine of almost $1 billion. This investigation stemmed from Ma’s criticism of Beijing’s financial sector regulation in 2020, which led to the cancellation of Ant’s highly anticipated and record-breaking initial public offering.
However, the financial implications go beyond the fine. The crackdown has significantly eroded confidence in China’s private sector, exacerbating weaknesses in consumer spending, the housing market, exports, and infrastructure investment. Ant has been forced to restructure its business model, retreating from sensitive sectors and reducing competition with state-backed banks. Its valuation, initially estimated at around $315 billion during the IPO, has plummeted to approximately $78.5 billion.
Ant proposed a share buyback of up to 7.6% of its shares to alleviate the burden on investors affected by the ongoing regulatory crackdown. Alibaba, on the other hand, has also suffered from the Chinese government’s scrutiny. As part of a broader crackdown on leading internet platforms, Alibaba announced earlier this year that it would divide into six significant businesses. Despite an 8% surge in shares following the conclusion of the Ant probe, Alibaba’s market value remains at $234 billion, a staggering $620 billion drop from its peak in 2020.
While the companies have accepted their punishments, the repercussions are significant. Kendra Schaefer, a partner at Beijing-based consultancy Trivium China, states, “The companies have done their mea culpa, and the punishments are over—at least for this series of issues.” However, the immense loss of over $850 billion in value for Ma’s properties reflects the arduous task of rebuilding trust with international investors. Economic growth in China has slowed, and the nation’s priorities have shifted, leaving corporate profits under pressure and necessitating a focus on social stability and national security.
Rebuilding support within the private sector is crucial for China’s economic revival. Nevertheless, the lasting effects of this clash are far-reaching, and it remains to be seen how China will address these challenges in the future.