Xi Jinping Targets Big Tech
China’s anti-graft agencies possibly targeting Ant, watching Tencent
By: Toh Han Shih
As the year begins, China’s nine-year-old anti-corruption campaign is not slackening, instead turning to new targets that President Xi Jinping has identified as a threat to the nation’s economic and financial security – likely fintech companies Wechat Pay and Alipay.
The two together command more than 90 percent of the mainland Chinese online payment market, putting one or both of them in the crosshairs. Ant Group, the gigantic fintech company controlled by billionaire Jack Ma that owns Alipay, is a possible target, while anti-corruption watchdogs are scrutinizing Tencent Holdings, the e-commerce giant that owns Wechat Pay.
Jack Ma and Pony Ma, the co-founder and chairman of Tencent who is not related to Jack Ma, represent a new breed of Chinese capitalists whom Xi views as a threat, a China watcher told Asia Sentinel.
“Xi is afraid of entrepreneurs’ threat to the CCP (Chinese Communist Party). This new generation of capitalists is of such size that they threaten the CCP power base,” said the China watcher who declined to be named.
Ant’s listing, which would have been the world’s biggest initial public offering, was aborted in November 2020 in Hong Kong and Shanghai, to the consternation of global markets. Jack Ma, who had openly criticized the Chinese banking system for its inefficiency, mysteriously disappeared for three months, reappearing chastened in January 2021. It has been widely reported that the formerly flamboyant entrepreneur had angered Xi with his criticism. He has maintained a low profile ever since.
If Ant had been listed in Hong Kong and Shanghai, its market capitalization could have exceeded US$300 billion. Ant’s parent Alibaba Group has a market cap of HK$2.73 trillion (US$350 billion) on the Hong Kong Stock Exchange, while Tencent, which is also listed in Hong Kong, has a market capital valued at HK$4.56 trillion (US$586 billion).
Xi explicitly said Big Tech was a threat in an article he wrote in Qiushi, the leading theoretical journal of the CCP, on January 15. In that article, he said, “In its rapid growth, some unhealthy and irregular areas and trends have arisen in our nation’s digital economy, these problems not only hurt the healthy development of our nation’s digital economy, but violate laws and regulations, constituting a threat to the nation’s economic and financial security, which must be resolutely rectified and handled.”
In a communique released on January 20, the Central Commission for Discipline Inspection (CCDI), a Chinese anti-corruption agency, said it would spend much effort investigating “the disorderly expansion of capital, corruption behind the monopolistic (fintech) platforms and cut off the bonds of collusion between power and capital.” That could only refer to Alipay and Wechat Pay, since they jointly dominate nearly the entire mainland Chinese online payment market.
In its communique, the CCDI said it was considering creating a blacklist of people who gave bribes. That means company executives and businessmen who bribe officials might be in greater trouble. Hitherto, China’s anti-corruption campaign primarily punished officials who took bribes, while the bribe givers were a secondary target.
Although the anti-corruption campaign is nine years old, the website of China’s two anti-corruption agencies, the CCDI and the National Supervisory Commission (NSC), said in a statement on January 21 that corruption remains the biggest threat to the CCP’s hold on power.
Xi is trying to gain a third term later this year, breaking the two-term limit for Chinese presidents laid down by former Chinese leader Deng Xiaoping. Factions in the corridors of power in Beijing are believed to oppose Xi’s attempts to prolong his presidency.
The CCDI’s communique admitted the existence of internal opposition to Xi, by vowing not to be “soft” in going after those involved in political factions within the party.
The anti-graft campaign “is a useful way for Xi to take down the opposition. That is part of the reason for the renewed anti-corruption campaign,” said the China watcher.
Through a recent documentary series on Chinese state television CCTV, the Chinese government hinted that Ant Group is a possible target of the anti-graft crackdown. The fifth episode of this five-part television series named “Zero tolerance (for corruption)” was broadcast on January 19 and cited the case of Zhou Jiangyong, the former party secretary of Hangzhou, the capital of Zhejiang, where Ant and Alibaba are headquartered. On August 21 last year, the website of China’s anti-corruption agencies announced Zhou was under investigation.
The documentary alleged Zhou Jiangyong, when he was Hangzhou party secretary, used his position to help his businessman younger brother, the similarly-named Zhou Jianyong, gain business. Both brothers took “huge amounts of bribes,” the documentary alleged. “Those company bosses were willing to pay huge sums to partner Zhou Jianyong, with the aim of climbing up through Zhou Jiangyong.”
The documentary featured both brothers confessing their crimes, indicating both have been under detention. Former party secretary Zhou confessed to using his position to benefit his brother’s businesses. In particular, Zhou confessed to using his position as an official to enable a company where his businessman brother was a major shareholder to win contracts in the Hangzhou subway system. The businessman Zhou Jianyong, his hair whitened by stress, confessed his partners invested unreasonably large sums of money in companies which he controlled.
The documentary didn’t name any company or partner involved in Zhou Jianyong’s dubious business activities. However, China Economic Weekly, a state-owned business magazine, published a long investigative article on August 26, 2021, which painted the business partnership between the businessman Zhou Jianyong and Ant in a negative light. The article disclosed Ant indirectly owned 14.28 percent of a company that Zhou co-founded in 2017. The article also described in detail the investment in the Hangzhou subway system as mentioned in the television documentary, pointing out the deal was due to party secretary Zhou.
Given that China Economic Weekly is a state-owned magazine and the strict censorship in mainland China, such investigative journalism could not have been published unless the government authorized it. Thus, the January 19 broadcast of the documentary implicated Ant, even though the documentary did not name the company.
China’s two anti-corruption agencies mentioned Tencent frequently in an article on their website on September 11, 2021, headlined “In-depth focus; establishing a traffic light against the expansion of capital.” The article quoted Zhang Gong, the head of the State Administration for Market Regulation (SAMR), saying the SAMR had set up a “traffic light” to check the “unbridled expansion” of monopolistic fintech platforms. Although the article didn’t accuse Tencent of corruption, it mentioned the concern 17 times, indicating the anti-graft watchdogs are eyeing it.
On January 19, nine ministries and government agencies, including the National Development Reform Commission and Cyberspace Administration of China, published a list of suggestions on the regulation of fintech platforms. The suggestions include stricter supervision of fintech platforms to prevent them from abusing their market dominance.
“Xi wants his control to reach every sector and every social strata,” said the China watcher.
Tencent and Ant declined to comment.
Toh Han Shih is chief analyst of Headland Intelligence, a Hong Kong risk consulting firm.