Is Beijing punishing China’s internet-technology titans because they are too large and too powerful or because tech firms are abusing their market power? Following the dramatic fall from grace of billionaire Jack Ma and his fintech brainchild, Ant Group, that question has become an existential one for current and prospective Chinese internet entrepreneurs—and the economy as a whole.
The answer, as is often the case with “rectification campaigns” targeting alleged economic malpractice in China, appears to be a little of both. China’s internet-platform titans like Alibaba and Meituan have long engaged in anticompetitive practices like er xuan yi , meaning “choose one out of two,” which force merchants to sell exclusively on one platform. And their fintech lending operations clearly have an element of moral hazard, with companies like Ant making hefty returns from originating loans without taking on much risk. On the other hand, Mr. Ma’s direct, highly public swipes at financial de-risking, one of President Xi Jinping’s key initiatives, probably couldn’t go unanswered in China’s current political environment. And the antitrust push is conspicuously silent on some of the biggest rent-seekers of all: China’s large state-owned banks, which now stand to benefit from fintech firms’ clipped wings.