How U.S. Investors Will Respond To China’s Fine On Alibaba

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For the first time, under new antitrust laws, Chinese authorities have fined Alibaba. The company was fined 500 thousand yuan (just over $76 thousand) by the market regulator for the fact that the company did not provide timely information on the intimate supermarket chain deal in which Alibaba brought the stake to control more than 3 years ago. The authorities have therefore suggested that Internet platforms are not an exception to antitrust rules.

Details on the tightening of IT regulations emerged last month when a draft version of the specifications, including mergers and acquisitions of other companies, was published by the Chinese authorities. The new legislation was not enforced until Monday. However, the size of the fine against Alibaba and the lawsuit concerned the formal side of the matter as the company did not inform Antimonopoly on time, leads to the conclusion that no significant problems are anticipated for the IT industry giants. There were no prior deals subject to scrutiny. The authorities are merely demanding that companies be notified more regularly of their actions related to market share growth.

The authorities also fine China Literature, an e-book spinoff of Tencent, to remain failed in reporting its past acquisition deals to be cleared from the regulator. For the first time China has fined companies incorporating market concentration breaches as “variable interest entities” in the cases of Alibaba and China Literature. Among Chinese internet companies, the VIE corporate structure is common because it enables them to function as domestic entities operated by foreign firms. However because it encourages corporations to find regulatory loopholes, the system has been highly criticized.

Following the news of the fine, Alibaba’s shares dropped by 3.22%. Stock price of the business are now at a monthly low, but they sustain a trend towards medium-and long-term growth technically. The current amount of just under $260 is very interesting to purchase. It is unlikely to drop below $250, but the growth potential for the coming months is more than 30 percent.

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