Alibaba Split May Ease Regime’s Crackdown on China’s Big Tech

Alibaba stock swung upward Tuesday by 14% as the e-commerce giant announced plans to split itself into six independent pieces. This prompted much talk about unlocking the value of its divisions.

But the fragmentation accomplishes something else, too: It stands to remove a lot of the heat the company, and other Chinese tech titans, have gotten from the Beijing regime.

The decision to slice up Alibaba Group Holdings is certain to curtail its impact on the Chinese economy. So it could be viewed as a capitulation to Beijing. “It is one step in the direction with China’s policy to reduce the monopolistic nature of the tech giants,” said Marvin Chen, an analyst with Bloomberg Intelligence.

The government in recent years has cracked down on private technology companies, hitting them with a bunch of new regulations. In 2021, Alibaba was fined $2.6 billion as the result of an antitrust probe. This appeared to be part of President Xi Jinping consolidating his power by diminishing the impact of private enterprise on China’s economy.

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Perhaps by no coincidence, Jack Ma, the co-founder and former chief of Alibaba, reappeared in China this week after his retreat from public life in 2020. At that time, he had criticized the government’s increasing pressure on non-state-owned enterprises. The Financial Times reported that he had mostly been living in Tokyo.

Lately, as China emerges from its pandemic lockdown, prospects for the nation’s economic rebound have improved, and Xi’s administration has begun to speak positively of the private sector again.

For investors, the six-way Alibaba split likely will produce separate public stock offerings that could do very well. The last couple of years have been difficult for Alibaba amid its problems with officialdom and China’s economic growth flagging. The firm’s stock had dropped two-thirds since its October 2020 peak.

The six units are: cloud computing; Chinese e-commerce; global e-commerce; digital mapping and food delivery; logistics; and media and entertainment.

Alibaba is listed on the New York Stock Exchange and the Hong Kong Stock Exchange.

China’s Ping An Insurance’s responsible investment priorities are aligned with the Chinese government’s green transition policy, CIO Benjamin Deng said recently.

“ESG in China is coherent,” Deng said at Insurance Asset Risk’s Asia 2023 Virtual Conference. “We follow the national policies toward net zero, and so we don’t have to fight our own battles to do better things.”

Deng said China-based insurance companies are able to make green investments with regulatory support, such as a 10% discount for the credit risk factor in green bonds under the China-Risk-Oriented Solvency System.

A 10% discount is given to the credit risk factor for green bonds invested by insurers as a way to help align them with national strategies toward carbon peaking and net-zero. C-ROSS II, intended to support small and medium-sized insurers and technology insurers, provides a 10% discount to the insurance risk factor for auto insurance businesses when their previous year’s premium income is less than 2 billion yuan ($290.4 million) and a 10% discount to the insurance risk factor for professional technology insurers. It also gives a 10% discount to the longevity risk factor to reflect supervisory encouragement to pension insurance products.

“All these things are helping in the same direction for us to invest in socially responsible and green target projects,” Deng said.

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Ping An announced it has established annual growth targets for its green investments of at least 20%; at least 70% for green insurance premiums; and no less than 20% for green credit balance. Deng said the company is looking to meet all of the overall targets by 2025, with green investments and green credit of RMB400 billion and total green insurance premiums of RMB250 billion.

As of the end of September, Ping An’s green investment and financing totaled approximately RMB319.8 billion, while its green banking business amounted to RMB184.2 billion. Premium income of environmentally sustainable insurance products also totaled approximately RMB110.5 billion during the first three quarters of last year.

Deng said Ping An is investing in green and low-carbon assets, while also cutting back on the proportion of high carbon-emitting assets. He also noted that less than 2% of the company’s estimated RMB7.92 trillion in assets in investment and banking services were related to major high-carbon-emitting sectors, citing the firm’s 2021 Task Force on Climate-Related Financial Disclosures report.

China is the world’s largest emitter of greenhouse gases, releasing 12.7 billion tons of carbon dioxide equivalent in 2019 and a 26% share of global GHG emissions, compared to a 7% share for the 27 countries in the European Union.