Alibaba’s Share Rise Despite Record $2.8 Billion Fine in China

Alibaba share price increased on Monday after Chinese regulators imposed a record fine of $2.8 billion (18.23 billion Yuan).  The share price of the company soared by about 6.51 percent even after the record fine for its monopolistic policies. 

After the imposition of the antitrust fine, the Chinese tech giant had done what many in the West would not expect of large tech companies like Google or Facebook. The company thanked the regulators. 

In an open letter, the company stated that it would not have achieved growth targets if it were not for the sound government rules and services. The statement shows how odd the crackdown of the big tech company has been in China as compared to the US. 

Relief Among Alibaba Investors 

Experts say that the crackdown on the tech giant is extraordinary. The probe into the landmark antitrust case wrapped up in just four months. In the US and Europe, investigations regarding antitrust activities generally take years.

Investors were relieved with the quick decision that lifted uncertainty regarding the fate of the company. The $2.8 billion fine was less severe as it was just 4 percent of the domestic revenue of the company. 

The fine imposed on Jack Ma’s tech company was nearly three times more than the previous record fine of $1 billion imposed in 2015 on the US chipmaker, Qualcomm Inc. But it was much less than the maximum fine of 10 percent of gross revenue as per Chinese law. 

After news of the anti-regulatory fine started to make headway, the shares of the company increased by about 5.5 percent in Hong Kong on Monday this week. 

The co-founder and vice-chairman of the company Joseph Tsai stated, “We are happy to get the matter behind us”. According to the executive of the tech giant the regulatory actions were taken to ensure fair competition in the tech sector. 

Alibaba will have to pay a fine and also carry out certain ‘rectifications’ such as not forcing merchants to choose the Alibaba eCommerce platform. The company has pledged to enforce the rules ordered by the Chinese regulatory body. In return, the regulators will not force radical changes in the e-commerce strategy of the company. 

According to Tsai, the regulators are in fact affirming the company’s business model that he believes is beneficial for the innovation and growth of the economy. 

He had stated that the company was not aware of any other investigations other than the probe about the investment and acquisitions of the tech giant. 

Will the $2.8 Billion Absolve Alibaba of Its Sins?

Daniel Zhang, the current CEO of Alibaba, had declared that the company is ready to move forward. Moreover, the People’s Daily, which is considered the mouthpiece of the Chinese Communist Party assured tech companies that the government was not attempting to stifle the tech sector. 

Investors are relieved that the Hangzhou-based e-commerce firm that is considered as the Amazon of China is not forced to divest or break up their assets. The penalty for the antitrust activities will not significantly affect the business model of the company moving forwards. 

Alibaba share price increased on Monday after Chinese regulators imposed a record fine of $2.8 billion (18.23 billion Yuan).  The share price of the company soared by about 6.51 percent even after the record fine for its monopolistic policies. 

After the imposition of the antitrust fine, the Chinese tech giant had done what many in the West would not expect of large tech companies like Google or Facebook. The company thanked the regulators. 

In an open letter, the company stated that it would not have achieved growth targets if it were not for the sound government rules and services. The statement shows how odd the crackdown of the big tech company has been in China as compared to the US. 

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