Alibaba’s breakup heralds new era of opportunities in China for investors

March 29 2023

The break-up of Alibaba, the Chinese mega-conglomerate, heralds the start of a wave of “enormous opportunities” in China for global investors, according to the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.

Nigel Green of deVere Group is speaking out after the Jack Ma-founded business empire said on Tuesday it is planning to split into six units and explore fundraisings or listings for most of them.

Alibaba is a multinational technology conglomerate that operates various e-commerce, retail, and technology businesses, including online marketplaces, payment systems, cloud computing services, and digital media and entertainment platforms.

The deVere CEO says: “This overhaul is the biggest restructuring in Alibaba Group’s 24-year history.

“It is hugely significant, not only because it’s an organisation that has huge influence over the world’s second largest economy, but because we also expect it to represent the end of Beijing-led regulatory crackdowns on various sectors, including tech.”

China has been a magnet for foreign investment for decades as it typically offered buoyant returns and growth potential. But in the last couple of years, there have been a slew of investors shunning the country.

Investors are claiming a myriad of reasons for pulling out. 

“One of the main reasons has been Beijing’s unpredictable, full-throttle regulatory crackdowns,” notes Nigel Green.

“One of the most notable regulatory crackdowns in recent years has been on the tech industry. In 2021, the Chinese government introduced new regulations that targeted major tech companies, including Alibaba and Tencent. These regulations included restrictions on monopolistic practices, data privacy, and foreign investment in the sector.

“This led many global investors becoming extra cautious about investing in Chinese tech companies, as they feared additional regulatory blitzes and uncertainty. In turn, this led to a decline in the value of some Chinese tech stocks and a decrease in foreign investment in the sector.

“In addition, the government also introduced new tough regulations in other sectors, such as education and real estate, which again triggered panic and uncertainty for investors because the regulatory attacks were perceived by many as highlighting the Chinese government’s increasing push for control of private enterprise.”

The news of the splitting-up of Alibaba will be welcomed by investors, says the deVere CEO, because it shows Beijing is “cooling its corporate crackdowns” and because the restructuring provides more protections.
“Any new regulations will now likely not impact the whole organisation, rather the individual division that that regulation covers.”

He continues: “This is a landmark moment. We expect it to herald the start of a wave of enormous opportunities in China for global investors as other tech titans, and major organisations in other sectors, make similar moves as Beijing appears to be becoming more pro-private enterprise.

“The timing is also bullish for investors as the world’s second largest economy re-opens after years of draconian lockdowns due to Covid. Also because China is transitioning from an export economy to a consumption one that, ultimately, will be more sustainable.” 

He concludes: “Alibaba’s break-up will reignite interest and, therefore, capital inflows from global investors seeking to build long-term wealth.”