China’s Alibaba to Split into Six Units As Beijing Vows to Ease Regulatory Clampdown
- March 29, 2023
- Posted by: Quatro Strategies
- Category: Internet Technology
Chinese e-commerce conglomerate Alibaba Group is planning to split into six units and explore fundraising or listing for most of them, it announced on Tuesday, in a major restructuring as Beijing vows to end regulatory crackdown and support private enterprises. The U.S.-listed shares of the company, which have lost nearly 70% of their value since the curbs were imposed in late 2020, rose more than 14%. Alibaba said this would be the biggest revamp in its 24-year history, which would see it split into six units; Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.
The announcement also came just one day after the company’s founder Ma returned to China after his year-long stay abroad, a move that corresponds with Beijing’s effort to spur growth in the private sector after two years of crackdown.
Analysts believe that the breakup could help ease scrutiny over Alibaba, the sprawling business of which has been the target of regulators for years.
“The original intention and fundamental purpose of this reform is to make our organization more agile, shorten decision making links and respond faster,” Chief Executive Zhang said.
Each business group, Zhang said, had to tackle the rapid changes in the market and each Alibaba employee had to “return to the mindset of an entrepreneur”.
Zhang will continue as chairman and CEO of Alibaba Group, which will follow a holding company management model, and also serve as CEO of Cloud Intelligence Group.
Each of the six businesses will have a CEO as well as a board of directors and will retain the flexibility to raise outside capital and seek an initial public offering, the company said.
The exception would be Taobao Tmall Commerce Group that handles China commerce businesses and will remain a wholly owned unit of Alibaba Group.
The company would “lighten and thin” its middle and back office functions, Zhang said, but did not detail job cuts.
Investors said the split signals the clearing of regulatory worries and allays concerns that Alibaba had lost the potential to grow.
The restructuring is among the biggest corporate moves by a major Chinese tech company in recent years, as the industry cowered under tighter regulatory oversight, causing deals to dry up and dampening risk appetite among businesses.
Lately, authorities have been softening their tone towards the private sector as leaders try to shore up an economy battered by three years of strict COVID-19 curbs.
Companies, however, have been hesitant, privately pointing to a lack of new supportive policies and the new regulatory framework.
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