China’s biggest internet companies got that way with at least tacit support from the government. Now recent events have raised doubts about where those giants stand: the last-minute suspension of a stock offering by billionaire Jack Ma’s sprawling Ant due to regulatory pressure; and the introduction of an antitrust policy seemingly designed to rein in the most powerful, including Alibaba (Ant’s major backer) and Tencent, operator of the WeChat super-app.

Regulators have fired their opening salvos — opening an investigation into alleged monopolistic conduct at Alibaba and ordering Ant to refocus on its roots as a digital-payments provider — and then turned their sights on Tencent. All that has left investors worried about what’s next for China’s Big Tech players and if the unusual leeway enjoyed by entrepreneurs like Ma might be coming to an end.

1. What happened?

Years of loose regulatory oversight in China helped Ant become a fintech giant, with businesses spanning payments, banking, wealth management and insurance. But just ahead of what was to be a $35 billion mega-listing in Shanghai and Hong Kong, Chinese authorities slapped new rules on the consumer-lending industry, in which Ant is the biggest player. That led to an indefinite suspension of Ant’s Nov. 5 initial public offering.

The following week regulators proposed new rules intended to curb monopolistic practices across its internet landscape, spooking investors and wiping $290 billion off the value of market leaders including Tencent and Alibaba over two days. The rules were finalized in just three months, underscoring the urgency of the campaign.

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Tencent may have become the next target for increased supervision, with regulators said to be considering requiring the social media giant to establish a financial holding company to contain its banking, insurance and payments services.

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2. Why the assault now?

We don’t know exactly. As is almost always the case, the country’s leaders have said little about their intentions, apart from protecting consumers and maintaining financial stability by mitigating risks.

Some analysts and investors say they think regulators are merely reasserting their oversight power, not looking for drastic changes. Others think they may have grown frustrated with the swagger of tech billionaires and want to teach them a lesson by breaking up their companies even if it means short-term pain for the economy and markets.

What is known is that at a conference in October, Ma blasted China’s financial system as outdated and complained that regulators were shortsighted. He was summoned to Beijing for a rare joint meeting with the country’s top financial officials. The new regulations soon followed. The Wall Street Journal reported Nov. 12 that President Xi Jinping was furious at Ma’s speech and personally made the decision to halt the IPO.

3. Why is Jack Ma being singled out?

The charismatic impresario behind two of the country’s largest corporations, Ant and Alibaba, Ma is arguably the one person most closely identified with the meteoric rise of China’s internet sector. Long a regular on the global conference circuit, the flamboyant billionaire all but vanished from public view after Ant’s IPO got derailed and, according to a person familiar with the matter, was advised by the government to stay in the country. Ma resurfaced in mid-January, propelling Alibaba’s market value $58 billion higher. While his appearance dispelled some of the more dire speculation around the fate of his empire, questions remain over Beijing’s broader campaign to rein in the tech giants. Tencent founder Pony Ma (no relation) — a delegate to the country’s top lawmaking body — has been far less vocal than his globe-trotting compatriot and in March appeared personally during a gathering in Beijing to submit draft law proposals on preserving nature.

4. Is this a big change for China?

The government has played an important role in developing the tech sector, aided by a massive consumer market. In manufacturing, it intervened directly many times to reach the point where much of the world’s technology is made in China, even if it’s not always by Chinese companies. The central metropolis Zhengzhou, dubbed by locals as iPhone City, wouldn’t have become Apple Inc.’s biggest production base without government incentives. While less active in software and services, China facilitated their development by effectively creating its own version of the internet that’s blocked off from the rest of the world by what’s known as the Great Firewall. In the absence of Facebook Inc. or Twitter Inc., Tencent’s WeChat and Sina Corp.’s Weibo have flourished as social networks. Once Alphabet Inc.’s Google pulled out, Baidu Inc. extended its dominance of desktop search.

5. And the internet?

Early movers Alibaba and Tencent grew massively and came to dominate the entire ecosystem. Together with Ant they had a combined market capitalization of nearly $2 trillion in early November — easily surpassing state-owned behemoths like Bank of China Ltd. as the country’s most valuable companies. Their networks of investments encompass the vast majority of Chinese start-ups in arenas from artificial intelligence (SenseTime, Megvii) to fresh vegetables (Meicai) and digital finance (Ant Group). Their patronage helped groom a new generation including food and travel giant Meituan and Didi Chuxing — China’s Uber. Rare are those that prosper outside their aura, the largest being TikTok-owner ByteDance Ltd.

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6. Will Ant, or other companies, be broken up?

Not Ant, it seems. Ant and Chinese regulators have agreed on a restructuring plan that will turn it into a financial holding company, making it subject to capital requirements similar to those for banks, Bloomberg reported Feb. 4. The plan calls for putting all of Ant’s businesses into the holding company. The central bank had earlier stressed it was important Ant “understand the necessity of overhauling its business.” Authorities also had berated Ant for what they said was subpar corporate governance and disdain toward regulatory requirements. It’s unclear how the antitrust investigation of Alibaba will unfold, and regulators are still in the early stages of examining Tencent and others. Overall, authorities in Beijing are expected to tread cautiously, looking to rein in the growing clout of the tech giants without undermining some of the country’s biggest corporate success stories.

7. What are the legal issues?

The roughly 20 pages of new, vaguely worded, anti-monopoly edicts establish a framework for curbing potentially anti-competitive behavior such as forced exclusivity deals, algorithm-based prices favoring new users or below-cost pricing to eliminate competitors. In that sense it echoes concerns raised by regulators worldwide who are investigating whether Facebook, Google and other internet giants are leveraging their dominance to squash competition, or abusing user data. Consumers in China in recent years also have protested against the gradual erosion of their privacy via technology from facial recognition to big data analysis.

8. Has this happened before?

Yes, to an extent. China has a tradition of cracking down in fits and starts, or making examples of high-profile companies. Tencent, for instance, became a target of a campaign to combat gaming addiction among children in 2018. While its shares took a hit, they eventually recovered to hit new highs. Alibaba has done the same after running afoul of authorities on everything from unfairly squeezing merchants to turning a blind eye to fakes. Since early 2017, Beijing has embarked on a campaign to defuse risks in China’s $53 trillion financial system — including targeting areas of online finance. But the present scrutiny is shaping up to become one of the largest concerted actions against private enterprise in decades. New measures proposed by China on Jan. 20 to curb market concentration in its online payments market could slash Ant’s valuation by roughly two-thirds to just over $100 billion, according to Bloomberg Intelligence.

9. Is the internet being singled out?

China’s private sector has maintained a delicate relationship with the Communist Party for decades, and has only recently been recognized as central to the nation’s future (Jack Ma was confirmed as a Communist Party member in 2018). While Xi’s government has been steadily tightening its grip on the world’s second-largest economy, it had taken a relatively hands-off approach toward the internet, e-commerce and digital-finance spheres. That could be changing as Big Tech amasses ever more influence and power through the data and loyal patronage of hundreds of millions of consumers.

10. What’s about VIEs?

Embedded in the rules is a reference to the need for official approval for mergers and acquisitions involving Variable Interest Entities, which have been used by some tech giants to sell shares overseas. Chinese law restricts foreign investment in internet companies (along with banking, mining and private education). The exotic VIE structure — pioneered by Sina and its investment bankers during a 2000 IPO —magically turns a Chinese company into a foreign one with shares that overseas investors can buy. But it has never been formally endorsed by Beijing, leaving investors perennially nervous about their bets unwinding overnight. Alibaba, Tencent and ByteDance have already been penalized for sidestepping Beijing in their past deals under the VIE model.