(June 11): Shares of Alibaba Group Holding Ltd and JD.com Inc slid after Chinese regulators scolded leading e-commerce players for what it called misleading promotions, Beijing’s latest warning against unchecked competition in the vast online arena.
Alibaba shares fell as much as 6.5% Thursday in Hong Kong, the biggest intraday decline in nearly three months. JD.com also dropped almost 6%, the most since November. The stock rout came after the Beijing branch of State Administration for Market Regulation summoned the two, along with PDD Holdings Inc, ByteDance Ltd and Xiaohongshu Technology Co, over what officials said was false advertising during the annual “618” midyear online shopping festival, according to a report by CCTV.
The powerful market watchdog blasted some of the companies for promising tens of billions of yuan in subsidies, according to the CCTV report. Alibaba’s two main marketplaces, Tmall and Taobao, and JD.com failed to provide details of the actual subsidies granted by the company and participating brands, the state media outlet reported.
The name-and-shame campaign marks the latest run-in between Chinese regulators and the country’s e-commerce juggernauts. For months, Beijing has sought to curb a race-to-the-bottom competition that’s embroiled some of the country’s biggest companies in a bruising price war that’s eroding profits.
“The move signifies further tightening of regulatory scrutiny,” said Bloomberg Intelligence analyst Robert Lea.
See also: Alibaba bidding US$1.5 bil for Chinese grocer in Meituan fight — Bloomberg
Alibaba’s shares began weakening even before the CCTV report, extending a losing streak that emerged after Bloomberg News reported that China was preparing to spend around two trillion yuan (US$295 billion or $380 billion) over the next five years building data centres across the country. Investors questioned the company’s ability to benefit from China’s huge data-centre buildout, and worried about pricing pressures in the AI token market.
At the same time, local media reported the departure of the head of Alibaba’s Slack-like Dingtalk app, raising questions over a division that’s considered key to the company’s broader AI strategy.
The main selling pressure however stemmed from the regulatory warning. Fear is growing that the internet giants’ price-slashing campaign could force retailers across the country to incur losses, ultimately weighing on the world’s second largest economy. Consumer prices climbed a smaller-than-expected 1.2% in May, a sign of consumer malaise.
See also: China asks big banks to cut down on interbank lending to ease cash glut — Bloomberg
The market watchdog also called out PDD and the e-commerce platforms of TikTok-owner ByteDance and Xiaohongshu for disingenuous promotions during the annual shopping bonanza, CCTV said.
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