HONG KONG -- Taobao Taiwan, a local affiliate of Chinese internet shopping leader Alibaba Group Holding, has shut down its online platform under regulatory pressure.
The move comes amid heightened scrutiny of Chinese investments in Taiwan with cross-strait political tensions running high. Local companies who were supporting Tencent Holdings' WeTV streaming service and that of rival iQiyi, backed by Baidu, were ordered in August to halt such cooperation.
The same month, the Investment Commission under Taiwan's Ministry of Economic Affairs concluded that Alibaba was effectively exercising control of Taobao Taiwan despite a denial of its involvement by nominal British owner Claddagh Venture Investment. The regulator said Alibaba had sought to hide its participation by routing its investment through various overseas entities.
It ordered Claddagh to re-register as a China-backed business or cease operation within six months. Taiwanese law subjects any company with more than 30% Chinese ownership to strict controls.
In an online statement on Thursday citing "multiple uncertainties in the market," Claddagh said it had "made a painful decision" to stop taking new orders on the Taiwan Taobao platform and to close related operations including logistics and its e-wallet service by the end of December.
"We respect the decision by Claddagh," said an Alibaba spokesperson, noting that Taiwanese can still place orders via Taobao's main Chinese portal. "Alibaba businesses are operating as normal in the Taiwan market and we will continue to serve local consumers."
She added that while Alibaba had a licensing agreement with Claddagh, it was not involved in the daily operations of Taobao Taiwan.
Claddagh established a Taiwanese subsidiary with 100,000 New Taiwan dollars ($3,720) in capital in July 2019. Shortly thereafter, it boosted the unit's funding to NT$20.1 million and launched the local Taobao platform.
Authorities, suspicious of Alibaba's possible involvement, launched an investigation, citing concerns that Taiwanese customers personal data might be taken to China.