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.
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