Katsuji Nakazawa is a Tokyo-based senior staff writer and editorial writer at Nikkei. He spent seven years in China as a correspondent and later as China bureau chief. He is the 2014 recipient of the Vaughn-Ueda International Journalist prize for international reporting.
TOKYO -- Chinese e-commerce giant Alibaba Group Holding is in the news again.
On Monday evening, the state-run Xinhua News Agency reported that four government agencies had carried out "joint regulatory talks" with Alibaba affiliate Ant Group. The four were the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange.
One noteworthy aspect is how the questioning was explained.
Xinhua reported that Pan Gongsheng, one of the central bank's deputy governors, answered questions from reporters on behalf of the four departments.
Q: What was the reason financial authorities questioned Ant Group again?
A: The Fifth Plenary Session of the 19th Central Committee of the Chinese Communist Party, the Central Economic Work Conference and the Ninth Meeting of the Central Finance and Economics Committee clearly stated that it is necessary to strengthen anti-monopoly and prevent the disorderly expansion of capital, and effectively prevent risks.
It was the new slogan that the party has been pushing since October -- curbing market monopolies and preventing the disorderly expansion of capital -- and not existing law that was cited first.
The key point here is that Alibaba founder Jack Ma Yun and Ant Group, which Ma controls, are not under fire for any new mistakes. Instead, it is the party leadership's significant shift that is the cause of the questioning.
Past acts that used to be tolerated no longer are.
The latest question session signals that President Xi Jinping is extending the tactics he used in his signature anti-corruption campaign to private companies.
The need to eliminate corruption had always been talked about in the party. But it was usually just that: talk.
Xi was different because he took a decision made by the party and used it as a banner to more strictly enforce existing rules. With those rules, he cracked down on influential political foes, even those in China's highest echelon.
On Saturday, a long-dormant anti-monopoly law was suddenly and strictly applied in the form of a record $2.8 billion fine on Alibaba, equivalent to 4% of Alibaba's domestic sales in 2019.
Ant, Alibaba's financial arm best known for its smartphone-based Alipay electronic payment service, was forced by regulators to delay its dual listing in Shanghai and Hong Kong in early November, sending shock waves through global markets.
During the talks on Monday, the four regulatory bodies told Ant to transfer all financial operations, including the Alipay service, to a new financial holding company to be set up later and to subject them to strict monitoring and supervision by authorities.
This is the third time in less than six months that Chinese regulators have held regulatory talks with Ant executives.
Ma and Ant executives were first questioned early in November, when Ant's plan to raise more than $34 billion in the world's largest initial public offering was blocked at the last minute.
In December, Ant executives were questioned again. What has been unusual is how public each of the announcements has been.
Alibaba Chairman and CEO Daniel Zhang Yong on Monday rejected the idea that the latest penalty would have a "material" negative impact on the company's operations.
But sources suspect some political issues might be involved.
In China, where the party holds all the levers, the act of questioning a company's top executives hints at an unfavorable destiny. Questioned twice, and then a third time?
The $2.8 billion question is why the leadership shifted its stance.
One natural assumption would be the approach of the party's next national congress, in 2022, where Xi is expected to extend his reign.
Thanks to the fierce anti-corruption campaign, now in its eighth year, Xi has cemented his political standing within the party. But he has yet to tighten his grip on the business community.
If Xi were feeling uneasy about the private sector, one trauma could be what happened in Shanghai in the summer of 2015.
A stock market panic sent the benchmark Shanghai Composite Index tumbling 8%. To deal with the emergency, the leadership deployed senior public security officials for price-keeping operations.
A team of investigators led by the then-vice minister for public security (police) entered the building of the China Securities Regulatory Commission in Beijing's financial district and declared a strict joint crackdown on malicious short selling.
The team then flew to Shanghai, China's economic center, and began to investigate individual trading companies and others on suspicion of illegally manipulating stock prices.
The presence of the police signaled that the Xi leadership team detected a whiff of politics behind the whole affair.
That leadership team is now pressing private companies to get off the fence, show the flag and support Xi's political agenda, as it did to party members earlier in the anti-corruption campaign.
Jack Ma has always tried to maintain a certain distance. When he delivered a speech in Shanghai in October, Ma expressed his opposition to financial authorities' policies. He specifically said the country's old financial regulations were a drag on technological innovation.
Ma has had strong connections to China's "princelings," the children of party leaders; "second-generation reds," a smaller group of children whose parents joined the revolution before the 1949 establishment of the People's Republic; and guan er dai, children of government officials.
Xi himself is a second-generation red, being the son of former Vice Premier Xi Zhongxun. Hangzhou, the capital of Zhejiang, where Alibaba is headquartered, is a scenic city where Xi spent many years as the top provincial official.
But there is clearly a gap between Xi and Ma, partly due to their personal connections.
Alibaba's rapid growth was supported by Chinese leaders before Xi took the helm. Ma had particularly strong connections to the "Shanghai faction," a group of people close to former President Jiang Zemin.
The Shanghai faction is also called the "machine-building industry faction." Jiang was originally an engineer for the First Ministry of Machine-Building Industry and at a plant of the FAW Group, a state-owned automaker headquartered in Changchun, Jilin Province.
For years, the Shanghai faction strongly influenced the industrial sphere. But with Xi having rapidly concentrated power, forces that are not close to Xi have had their political influence significantly eroded.
Their economic and financial influence is another matter. Children, grandchildren and other relatives of party elders retain a certain voice, and it is said that people close to princelings have significant Ant shareholdings.
But as Xi aims to extend his reign, he needs to take control of the economic realm, as he has done with the political domain.
Ma sensed the dangerous nature of the Xi era early on and decided to retire from the front line of running Alibaba despite being relatively young. He now appears in public much less frequently than he used to.
There are concerns about Ma's future. "Even if he is safe now," one pundit said, "there is no guarantee that he will remain so in the future."
Many influential business leaders have suddenly been sent to prison over the past eight years. Among them is Wu Xiaohui, the top official of Anbang Insurance Group, a private insurer that grew rapidly into the third-biggest player in China.
Wu was detained shortly before the party's national congress in 2017. He was eventually sentenced to 18 years behind bars. Like Ma, Wu is a Zhejiang-born entrepreneur, one who had remarried the granddaughter of former Chinese supreme leader Deng Xiaoping.
As Wu's case clearly shows, connections to princelings or second-generation reds do not necessarily guarantee safety in the Xi era.