The Chinese technology sector has been under a relentless storm for several years. The government has cracked down on private tech companies, introducing a slew of regulations and increasing scrutiny of the practices of these tech giants. That has seen conglomerates like Alibaba lose more than $600 billion since 2020. Although in a turn of events, analysts now believe the e-commerce giant could rebound thanks to desperate moves.
Alibaba has just announced the biggest restructuring in its 24-year history. It consists of dividing the company into six.
a division. Each of the six companies (or business groups) will have a chief executive officer and board of directors and will be able to raise outside capital and go public, the company said. It is one of the largest corporate moves in China, as the industry found itself bowing its head in the face of strict state supervision. This turn of the screw has caused Alibaba shares to soar 14% in the US.
The move also comes a day after the founder of Alibaba, Jack Ma, returned home from abroad, something that symbolized precisely this declining spirit of the private sector and the repression that the Asian country is experiencing.
How will it work? Business groups will revolve around their strategic priorities. These are the groups:
Cloud Intelligence Cluster: Will house the company’s cloud and artificial intelligence activities. Alibaba CEO Daniel Zhang will lead this business. Taobao Tmall Commerce Group: Will cover the company’s online shopping platforms, including Taobao and Tmall. Local Services Group: Will cover Alibaba’s Ele.me food delivery service as well as its mapping. Yu Yongfu will be the CEO. Cainiao Smart Logistics: Houses Alibaba’s logistics service. Wan Lin will continue as CEO of this business. Global Digital Commerce Group: Includes Alibaba’s international e-commerce businesses, including AliExpress and Lazada. Jiang Fan will serve as executive director. Digital Media and Entertainment Group: Includes Alibaba’s movie and streaming business. Fan Luyuan will be the executive director of the unit.
Because? According to the company, the move is “designed to unlock shareholder value and foster market competitiveness.” Mainly it comes at a time when the company had struggled to grow in recent quarters.
The main objective is therefore to revitalize this growth. The company sees in the creation of the six businesses a way to be more manageable. “The original intent and fundamental purpose of this reform is to make our organization more agile, shorten decision-making ties, and respond faster,” CEO Daniel Zhang said.
The context. Keep in mind that Alibaba has lost almost 70% of its value since the restrictions were imposed at the end of 2020. Since then, the Chinese government has cracked down on tech companies, limiting their power and tightening regulations. that affect them. In particular, Alibaba’s fintech subsidiary Ant Group was forced by regulators to cancel a million-dollar IPO in November 2020. And in 2021, Alibaba was fined $2.8 billion due to an antitrust investigation.
Now, almost three years later, the conglomerate sees the light at the end of the tunnel. The new shakeup comes at a time when there are signs that Beijing is getting back into tech business as the country wants to regenerate its economy after the departure of Zero Covid policies. Furthermore, the decision could also be partly a consequence of US scrutiny of Chinese tech that has recently raised national security concerns about TikTok and its parent ByteDance.
Image: GTRES
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