China’s Alibaba Group to split into 6 business units

It said it had become necessary after the government intervention put a brake on Alibaba’s growth and caused a sharp fall in market capitalisation.


Chinese e-commerce giant Alibaba on Tuesday announced that it would split into six smaller business units.

The split will include online trading, media and cloud services and turn the 220 billion dollars company into a tech holding company,

In an unusual move in China, each unit will have its own executive board and be able to seek outside capital and a stock exchange listing.

The step came two years after the government acted to curb the tech company’s activities.

Alibaba founder, Jack Ma, had fallen out of favour, media reports said.

A planned listing of the Ant Group fintech company, owned by the group, was cancelled and cartel proceedings opened.

However, there have been indications recently that Beijing has softened its approach to technology companies.

Jack Ma was this week seen in public in China for the first time in more than a year.

Alibaba stressed that it was proceeding with a planned cost-cutting programme, in spite of the split.

It said it had become necessary after the government intervention put a brake on Alibaba’s growth and caused a sharp fall in market capitalisation.

Meanwhile, the domestic retail unit in China is to remain fully owned by Alibaba.

Shares listed in the United States rose 9 percent on the news in early trading.

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The market was the best litmus test, Alibaba chief executive Daniel Zhang said in a staff email.

The restructuring will allow all units to react more quickly to market changes.

Daniel is to continue to head the group and the cloud unit.

Analysts saw the split as an indication that Alibaba could seek fresh investment on capital markets.

They also saw signs that artificial intelligence, AI technologies, are to play a larger role.

Founded in 1999 by Billionaire entrepreneur Jack Ma and a group of friends, Alibaba last year reported a net profit of 46.8 billion yuan (US$6.8 billion), up 69% from the previous year, on revenue of 247.7 billion yuan ($35.9 billion)

When Ma criticized Chinese regulators in 2020 for impeding innovation, they abruptly canceled the IPO of the company’s Ant Group fintech business, the first move in a broader crackdown on the country’s powerful technology sector.

It would be recalled that in 2021, Alibaba was fined $2.8 billion by Chinese regulators for anti-competitive tactics, as it tightens control over fast-growing tech industries. Alibaba was reportedly fined for abusing its dominant position to limit competition by retailers that use its platforms, hindering the free circulation of goods.

Based on the evidence gathered, m China’s State Administration for Market Regulation (SAMR) concluded that Alibaba implemented a scheme coercing traders to sell exclusively on its platform, to the detriment of actual and potential competitors, sellers, consumers, and the economy as a whole.

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The penalty imposed, equivalent to 4 percent of the company’s 2019 turnover in China, is the heftiest ever for a contravention of the Anti-Monopoly Law (AML).

Beijing was reportedly worried about the dominance of the country’s biggest internet companies including Alibaba at a time when the industry was expanding into finance, health services, and other sensitive areas. The Chinese government, therefore, disclosed the year as anti-monopoly enforcement, especially in tech industries.

Also, in the same year (2021), as part of a larger anti-monopoly crackdown,  China fined tech giants, including Alibaba Group and Tencent Holdings, for not reporting 43 acquisitions over the past eight years.

The State Administration for Market Regulation said the companies “failed to declare the illegal implementation of the operating concentration.” The acquisitions involved are assets in the areas of technology, medical technology, and mapping.