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Alibaba, its founder Jack Ma, and Chinese tech companies seem to have amassed too much influence for the Communist Party's liking. (Nikkei montage/Reuters and Getty Images)
China up close

Analysis: Xi sees Alibaba and Tencent as rising threats to power

Politburo goes on crusade against 'disorderly expansion of capital'

KATSUJI NAKAZAWA, Nikkei senior staff writer | China

Katsuji Nakazawa is a Tokyo-based senior staff writer and editorial writer at Nikkei. He has 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 -- December has always been an important month in China. It is when the country, which has yet to fully shed its planned economy traditions, usually decides how to steer the ship the following year.

At this politically busy time, there was a noteworthy development at the Zhongnanhai area of central Beijing, where the Chinese Communist Party and state government are headquartered.

President Xi Jinping, who doubles as party general secretary, presided over two meetings on Dec. 11. One was a meeting of the Politburo, the party's decision-making body comprised of the 25 most senior officials who move Chinese politics; the other was a group study session for the same members.

The Politburo meeting called for "strengthened antitrust efforts and the prevention of disorderly expansion of capital."

At the study session, Xi stressed the need for "national security," "political security" and "the security of state power and the political system."

One source familiar with China's politics and economy explained that the two messages go hand in hand. "Put them together and you will have an accurate understanding of the political meaning."

Zhongnanhai at night. The area of Beijing is considered to be China's political nerve center. (Photo by Akira Kodaka) 

The Politburo holds a meeting roughly once a month in Zhongnanhai. Politburo study sessions, held to coincide with Politburo meetings, are where the leaders learn about the political issues of the time and form a consensus on them. It is a system unique to China and, for an observer, offers a valuable method to gauge what is on the top leader's mind.

This was the first known case that "strengthened antitrust efforts" and "preventing the disorderly expansion of capital" was discussed at the Politburo.

There is no doubt that the key phrases will be high on the agenda at the party's upcoming Central Economic Work Conference, an important annual meeting to discuss the direction of next year's economic policies.

This year's Central Economic Work Conference is particularly important because 2021 is the first year of the next Five-Year Plan and will set the tone for Xi's policies during that period.

Although no names were mentioned, one target is unquestionably Alibaba Group Holding and its founder, Jack Ma.

Alibaba has made significant contributions to the Chinese economy and the party; Ma himself is a party member. But it increasingly looks like the twilight of the e-commerce giant's empire is looming.

Early last month, Alibaba's Ant Group financial arm was abruptly forced to delay initial public offerings in Shanghai and Hong Kong.

Alibaba Group Holding founder Jack Ma has been on thin ice with party leaders since early last month, when Ant Group was abruptly forced to delay IPOs in Shanghai and Hong Kong.   © AP

On Monday, three days after the Politburo meeting, Chinese authorities fined Alibaba and a subsidiary of Tencent, the tech giant behind the popular WeChat messaging app, for allegedly failing to declare past acquisition deals under antitrust laws.

The State Administration for Market Regulation fined Alibaba 500,000 yuan ($76,500) for increasing its stake in department store chain Intime Retail Group in 2017 "without prior notifications to the administration."

E-books publisher China Literature, spun off by Tencent, was charged the same maximum penalty.

"Although the amount of fines is relatively low, the penalties are expected to send a signal of tougher antimonopoly supervision in the internet sector and act as a deterrent," according to an official from the agency, according to Xinhua News Agency.

Furthermore, the use of the strong expression, "prevention of the disorderly expansion of capital," hints at new rules on the way.

What is it about Alibaba that scares the leadership?

Through its affiliated companies, Alibaba has invested in a major microblog, a social media platform that includes video sharing and streaming services, plus newspaper groups, including the Hong Kong-based South China Morning Post. Alibaba's influence has grown so strong that it is called "a media empire."

The ability to block information that is unfavorable to itself, if it ever wanted to, is reminiscent of the powers held by the party's Publicity Department, which plays the role of controlling Chinese public opinion, and the office of the party's Central Commission for Cybersecurity and Informatization.

Through its affiliated companies, Alibaba's influence has grown so strong that it is called "a media empire." (Photo courtesy of South China Morning Post) 

The public organs have been alarmed by Alibaba's growing influence. If they let the company go unchecked, their own control could be eroded.

This forms the "national security" aspect of the Alibaba issue.

"Preventing the disorderly expansion of capital," meanwhile, smacks of enmity toward the private sector.

In China, there has been a long-running debate over how private companies should be treated in the socialist market economy.

"Leftists will jump for joy if they hear the expression 'prevention of the disorderly expansion of capital,'" one source said, pointing to the wing of the party that attaches importance to socialist traditions and state-owned enterprises.

Xi himself has called for state-owned enterprises to be "stronger and bigger." Indeed, there has also been a sharp rise in acquisitions of private companies by state-owned companies.

The term "political security" is somewhat unique to China and has often appeared in the Xi Jinping era; it is an explicit call for preserving the current power structure.   © Kyodo

At the Politburo study session, Xi emphasized the importance of national security.

China needs a "holistic approach to national security," the leader said, calling for a national security angle to plans for economic and social development.

"Top priority should be given to political security to safeguard the security of state power and the political system," he added.

National security is used here in the same way it is used all around the world.

The term "political security" is more unique to China. It has often appeared in the Xi Jinping era.

Political security is said to describe a situation in which political actors are not encroached upon nor face threats due to domestic or international factors. It is a concept unique to China, where the party comes before the state.

The security of the "political system" is a further explicit call for preserving the current power structure.

China has no democratic mechanism for its people to choose an administration. The current political system, which Xi is calling to safeguard, is one under which there are no longer any term limits on China's president, the party's general secretary or the Central Military Commission's chairman. Xi holds all three posts.

The message suggests a further concentration of power in his hands and deviation from the traditional collective leadership system.

In protecting national security, political security and regime security, Xi takes center stage.

Riot police officers make their presence felt as anti-national security law protesters march during the anniversary of Hong Kong's handover to China from Britain, on July 1, in Hong Kong.    © Reuters

The Politburo gatherings on Dec. 11 apparently reflect a sense of crisis among party officials who feel uneasy about the future.

They fear that without the prevention of disorderly capital expansion through the strengthening of economic management and the party's full guidance provided to private companies, one-party rule could be shaken, eventually resulting in the Xi regime being put at risk.

In retrospect, national security has been consistently advocated in the past year, such as when China bypassed Hong Kong's own legislature and introduced the Hong Kong national security law.

This is based on the logic that national security related to Hong Kong will directly lead to the eventual political and regime security of mainland China.

There is no end to Xi's battle for national, political and regime security.

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