December 5, 2018 / 5:45 AM / 11 days ago

Breakingviews - China hangs corruption sword over tech giants

An employee is seen through a glass wall as she walks past the logo of Youku.com above the reception desk at the company's headquarters in Beijing, December 9, 2010. REUTERS/Soo Hoo Zheyang

HONG KONG (Reuters Breakingviews) - Beijing is hanging a blade over the country’s technology titans. The arrest of a senior Alibaba executive, the head of its video-streaming unit, suggests China’s anti-graft crackdown will not spare its web titans. Companies’ poor disclosure, though, is adding to the problem.

On Tuesday, Jack Ma’s $410 billion e-commerce group said Yang Weidong had been arrested the previous day. Details are still scarce, but Alibaba says the Youku president, who until last month was in charge of the company’s wider digital media and entertainment business, was under investigation for “alleged acceptance of improper payments”. Alibaba says it is cooperating with police.

A number of private sector tycoons, nicknamed “big crocodiles”, have found themselves ensnared in President Xi Jinping’s anti-corruption drive. Recent high-profile cases include bosses of financial conglomerate Tomorrow Holdings, whisked out of his luxurious Hong Kong residence in a wheelchair, and of oil trader CEFC, as well as Wu Xiaohu, the former chairman of the now state-controlled Anbang Insurance Group. But until Yang’s arrest this week, big names in technology had largely been spared.

The change adds more unpriceable risk to the sector, where increasing state control over the internet has already proved costly. Unpredictable censors are punishing video and news sharing apps, including ones from Bytedance, the $75 billion mega-unicorn, for “vulgar” content. Pony Ma’s gaming empire, Tencent, has shed nearly $100 billion in market value since regulators have stopped approving new video games in April, without any official explanation.

Opacity, though, hardly helps. A spokeswoman for Alibaba’s Digital Media and Entertainment business said at first that the now-replaced Youku president was “understood to be assisting Mainland authorities with an investigation”, before the company clarified in a regulatory filing that he had in fact been detained. Newly-listed Meituan Dianping, the takeaway-to-taxis app, said earlier this week too that it had, among other moves, dismissed a senior executive in its core food delivery business. That was part of an internal anti-corruption probe that began in February. Keeping investors in the dark won’t provide shelter from Beijing’s wrath.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below