Alibaba’s radical 6-way split: What it means and how it helps China’s government

Alibaba Group, a singular force in China’s tech industry, announced on Tuesday that it’s morphing into a holding company that will contain six separate business units, a breakup that’s radical enough by itself, but also rarely seen in China. The move should offer Alibaba some latitude—six necks for regulators to breathe down instead of one—after a rough past two years, while allowing each new unit to be laser-focused on optimizing operations, then raise money.

Alibaba described this as the “most significant” overhaul in its history. The six new business groups will be:

• cloud
• media
• logistics
• local services
• digital commerce
• e-commerce

Alibaba will hang onto that last unit for itself; e-commerce happens to include Alibaba’s far-and-away top two moneymakers—the online-shopping sites, Taobao and Tmall. But the other five will choose new CEOs and boards, and Alibaba says they can seek their own outside capital and even pursue IPOs “when they are ready.”

CEO Daniel Zhang suggested in a letter to employees that the surprise restructuring marked a milestone for the company: “At 24 years of age, Alibaba is welcoming a new opportunity for growth.”

Immediately after the news broke, analysts started wondering if the split-up could serve as a template for any of Alibaba’s embattled peers. Beijing has spent two years, at President Xi Jinping’s behest, pursuing China’s tech companies like no other industry. The sweeping crackdown has erased an estimated $500 billion of their market value.

In that time, regulators have actively tanked the IPO for Alibaba’s fintech arm, Ant Group. Later, they fined Alibaba a record $2.8 billion for “monopolistic behavior.” Didi—China’s dominant rideshare company—was dealt unprecedented regulatory setbacks of its own after opting to go public against Beijing’s wishes.

Then there was Tencent’s reckoning, which came last April, when WeChat users protested Shanghai’s omicron lockdown. Beijing discovered that WeChat’s censors weren’t deleting posts critical of official COVID-19 policies fast enough. (Since that faux pas, Tencent has been forced to relinquish assets and was told to overhaul its financial business, causing its shares to sink to half of their 2021 value.) In the meantime, the U.S. government has become even more suspicious of these companies’ intentions, a further blow to their stock prices: It has added Tencent and Alibaba platforms to its Notorious Markets for Counterfeiting and Piracy list and, most recently, turned up the heat on TikTok, owned by China’s ByteDance.

Jack Ma reappears

Coincidentally, Alibaba’s restructuring also comes one day after its billionaire founder, Jack Ma, resurfaced. He vanished from the public eye in 2021 after giving a speech in Hong Kong criticizing what he called Beijing’s continued business interference. (It’s been called “the speech that cost Jack Ma $37 billion.”) His subsequent whereabouts were a point of intrigue, conspiracy theories, and paparazzi vigilance. Ma also stepped away from Alibaba and Ant Group during that time. Rumors were he was abandoning tech and venturing into sustainability.

Still, Alibaba has played an absolutely pivotal role in China’s burgeoning tech scene. Alipay is the world’s largest digital-payment platform. Tmall is its third-most-visited website. Buried elsewhere within Alibaba are the fifth-largest AI company, one of the largest VC firms, and Earth’s No. 2 financial services group via Ant Group.

Ma’s return suggests the government may see his rehabilitation as being valuable in restoring confidence in China’s struggling private-business sector. Alibaba is said to have presented its six-unit restructuring plan to Chinese regulators before Tuesday’s announcement, and they reportedly gave “positive feedback.”

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