The financial press post-mortems of Beijing’s decision to postpone the highly anticipated Ant IPO have been focused largely on the personal animosity between the firm’s founder Jack Ma and China’s President Xi Jinping, and on a more material level on concerns in Beijing over the systemic risks posed by Ant’s fintech activities.
But it would be a big mistake to chalk it up simply to that.
** At a meeting on Wednesday morning of China’s State Council Executive in Zhongnanhai, Beijing, Premier Li Keqiang complained that after more than 20 years of development, the Internet sector, which he characterized as “the new infrastructure of our country in the new era,” had left almost no space for small and medium size companies to survive.
** But more tellingly, Li went on to note that the Internet information infrastructure that should have been in the hands of the state is now in the hands of seven to eight Internet technology giants (NB – our emphasis added), and that these seven to eight Internet technology giants control a large amount of data and market share, and form monopolies to curb fair competition.
** While these firms have on their side “destructive innovation,” once a monopoly is formed, he said, it is bound to suppress innovation. They have the unfair ability to adopt different trading prices based on privacy information, transaction histories, individual preferences and consumption habits that are obtained by their respective platforms’ big data and algorithms. Therefore, the data-based Internet information infrastructure must be firmly controlled by the state, and the status quo of several giants monopolizing the national Internet market must be changed.
To implement that policy directive, the State Administration for Market Regulation released a draft “Guidelines for Anti-Monopoly in the Field of Platform Economy” report on Tuesday.
A senior official in Beijing then went on background to emphasize that these guidelines aim to strengthen the regulation of China’s large online service platforms, and will most certainly have a huge impact on “Internet monopolies” that will not make as much profit in the future as they do now.
The sharp fall in the share prices of these firms after the Draft announcement, which had more than doubled this year, was to be fully expected, he added, predicting that even if they should come under further pressure that need not change the overall upward momentum of the Chinese equity markets.