The investment world is not overly concerned about the recent series of efforts that Beijing has made to step up scrutiny of monopoly practices in China’s Big Tech giants. The country’s heightened antitrust probe is expected to create “a more level play field” for smaller competitors, according to a partner at Pantheon Ventures.
“From an investor’s point of view, the regulation deters the Internet giants from deploying certain aggressive tactics to stymie competition, which helps create a more level play field for smaller competitors to emerge and thrive,” said Jie Gong, a Hong Kong-based partner at UK’s investment firm Pantheon, in an interview with DealStreetAsia.
“In that way, sectors will no longer be controlled by a couple of dominant players at the expense of young contenders.”
Pantheon, with $65.9 billion in total assets under management (AUM) by the end of 2020, invests in private equity, infrastructure & real assets, as well as private debt. The firm has about 360 employees, over 100 of which are investment professionals, across eight offices in New York, San Francisco, London, Hong Kong, Seoul, Bogotá, Tokyo, and Dublin.
An early sign of Beijing’s determination to rein in its Internet giants surfaced in November 2020, when Alibaba’s fintech spinoff Ant Group had its $37-billion initial public offering (IPO) derailed by regulators days before it was due to list.
In the country’s latest antitrust development, the regulator slapped a record fine of 18.2 billion yuan ($2.8 billion) on e-commerce behemoth Alibaba in early April – equivalent to 4% of the firm’s total 2019 revenue – for the firm’s misconduct of forcing merchants to sell exclusively on its platform, a practice known as “picking one from two.”
Meituan, the biggest on-demand delivery service provider in China, is also under the spotlight after the regulator announced on April 26 the initiation of another anti-monopoly investigation into it, while Reuters reported two days after that Tencent would be the next target.
“Personally, I don’t see the recently announced anti-trust regulation and the probe into tech giants’ practices as particularly unexpected or alarming. Tech giants have amassed a great deal of sway in many industries,” said Gong.
“However, current probes into a number of Internet giants in association with the regulation do create some uncertainty about how regulation is interpreted and applied. Prompt completion of the probes with clear-cut conclusions will lift that overhang and provide clarity,” she added.
Jie Gong is a partner at Patheon’s Asia Investment Team, as well as Vice Chairman of the Hong Kong Venture Capital and Private Equity Association (HKVCA). Prior to Patheon Ventures, she was the head of Asia at Morgan Stanley Alternative Investment Partners’ private equity fund of funds group.
Edited excerpts of the interview:-
