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Beijing Orders Alibaba To Dump Media Assets That Rival China's Propaganda Machine

Tyler Durden's Photo
by Tyler Durden
Monday, Mar 15, 2021 - 07:30 PM

Beijing is reviving its crackdown on the country's biggest tech firms, reminding the world that the CCP is still focused on neutralizing any and all threats to its control of the Chinese economy and its people. Even after amending China's official ideology to include entrepreneurs among the protected classes represented by the CCP (in addition to workers, farmers and soldiers), Beijing, with President Xi at its center, has apparently decided that Chinese tech firms won't follow the American model after all. Instead, their growth and competitive capabilities will be curtailed for the sake of stability at home.

After Tencent was censured and strict new requirements weren officailly imposed on Alibaba-owned Ant Group that will prevent the company from growing, the Wall Street Journal reports that next up on Beijing's to-do list is to force Alibaba to dump its array of media outlets. Presumably, Beijing sees these outlets as an unwelcome competitor to Beijing's own propaganda machine.

Alibaba's media portfolio includes ownership of the South China Morning Post, Hong Kong's most widely read English-language newspaper, which has an audience far outside of Hong Kong. The paper often struggled with its coverage of the unrest in Hong Kong, occasionally adopting the language of the CCP (like referring to the demonstrators as "rioters") while still managing to rankle Beijing with its detailed coverage of the demonstrations.

According to WSJ, the CCP has been "discussing" whether to force the divestitures since early this year. Chinese regulators have been "reviewing" a list of media assets owned by Hangzhou-based Alibaba, which earns most of its money via an online retail business. Officials were appalled at how expensive Alibaba's media interests have become. Now, Beijing is asking Alibaba to devise a plan to "curtail" its  media holdings.

Now, just imagine if President Trump tried to force Amazon to sell the Washington Post.

In a statement delivered to WSJ, Alibaba said it's merely a passive investor in these media companies, and doesn't exercise any sway over editorial direction.

"The purpose of our investments in these companies is to provide technology support for their business upgrade and drive commercial synergies with our core commerce businesses. We do not intervene or get involved in the companies’ day-to-day operations or editorial decisions," the statement said.

Here's a roundup of Alibaba's media holdings courtesy of WSJ:

  • Alibaba owns 100% of the South China Morning Post, Hong Kong’s premier English newspaper.
  • Alibaba owns nearly 37% of Yicai Media Group, one of China’s most influential news outlets.
  • Alibaba owns about 30% of Weibo, a Twitter-like social media platform. Its stake is valued at more than $3.5 billion.
  • Alibaba owns 6.7% of Bilibili, a video platform that is popular among younger Chinese people. Its stake is worth nearly $2.6 billion.
  • Ant owns 16.2% of 36kr, a U.S.-listed digital media outlet focused on technology. Its stake is worth $25 million.
  • Alibaba owns 5% of Mango Excellent Media, a subsidiary of government-run Hunan TV. Its stake is worth about $819 million.
  • Alibaba owns nearly 5.3% of Focus Media, China’s largest offline advertising network. Its stake is worth nearly $1.2 billion.
  • Ant owned a 5.62% stake in Caixin Media, one of China’s most respected news sources. It sold its interest in 2019.

Shares of BABA were down on the news.

But Alibaba has a track record of interference that seems to contradict this statement. Alibaba, which owns a stake in Chinese social media giant Weibo, once made a slew of Weibo posts about a senior Alibaba executive having an extramarital affair disappear, according to WSJ. Back in June, China's internet watchdog publicly reprimanded Weibo for "interference with online communication" and asked the company to "rectify the situation."

A few months later, Xu Lin, a vice-director of the Party’s central propaganda department, said during a November public forum that China must "resolutely prohibit dilution of the party’s leadership in the name of [media] convergence, resolutely guard against risks of capital manipulating public opinion." Though he didn't cite Alibaba by name, the implication was clear.

This isn't Beijing's first swipe against Alibaba - far from it. Following founder Jack Ma's disappearing act, Antitrust regulators are preparing to levy a record fine in excess of $975MM over "anticompetitive practices" mentioned above. An even bigger question looking ahead is whether Alibaba will also be forced to divest its entertainment assets, holdings which are even larger than its news offerings, and which include the Hong Kong-listed Alibaba Pictures Group. Per WSJ, CCP members bristle at the notion that Alibaba has used its media and entertainment holdings to influence government policy.

While this is a routine occurrence in the US, trying to manipulate the CCP is verboten in China.

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