China’s tech and e-commerce giant Alibaba announces major restructure

Briefly: The Chinese tech and retail supergiant Alibaba announced on Tuesday it will break its empire into six distinct and independently-run units: China e-commerce, international e-commerce, cloud computing, local services, logistics, and digital media / entertainment.

Each unit will have its own CEO and board, plus flexibility to raise its own capital.

The restructure ‘coincided’ with the surprise reappearance of Alibaba’s co-founder Jack Ma. Forgive those sassy ‘air quotes’, but these details are rarely ‘coincidental’ in China: Mr Ma mostly disappeared from the public eye after he criticised Chinese regulators in 2020.

Authorities went on to fine Alibaba $2.8B for anti-competitive practices and suspended Ma’s record-setting IPO. And it presaged a broader Chinese crackdown on Big Tech to rein in the sector’s relative power. It was all a stark reminder of who runs the show in China, and it spooked global investors.

Intrigue’s take: Tuesday’s announcement was reportedly crafted in close ‘consultation’ (sorry) with China’s authorities:

  • It achieves Beijing’s aim of diluting the power of Big Tech
  • It does that in a way that’s good for Alibaba (its shares have soared)
  • And it calms anxious foreign investors by hinting that China’s crackdown on Big Tech might be reaching an end

This announcement is also a reminder that China is still the type of place where regulators can break up one of the world’s largest companies at a moment’s notice. When things go as planned, there’s a temptation to see China’s regulators as omniscient. But history tells us they put their pants on one leg at a time, just like the rest of us.

Also worth noting:

  • Alibaba’s US share price on 23 October 2020 (the day before Ma’s controversial speech) was $309; two years later, it was $63.
  • Chinese President Xi Jinping signalled an intention to boost private enterprise during his Two Sessions Speech earlier this month.
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