Amid Chinese tech crackdown, Alibaba and Tencent look to cooperate with each other

on Jul 14, 2021
  • Alibaba & Tencent are considering making their services available for each other.
  • Eased restrictions could mean a ton of convenience for consumers.
  • Angela Zhang says Tencent/Alibaba rivalry is root of anticompetition in China.

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China’s crackdown on tech giants listed on the U.S. stock markets is bringing arch rivals together. On Wednesday, The Wall Street Journal said Tencent Holdings Ltd (HKG: 0700) and Alibaba Group Holding Ltd (NYSE: BABA) were separately considering plans to make their services available to each other.

“If this trend continues, it sets us up for a brave new world of forced cracks in walled gardens,” said Agency China’s Michael Norris.

Eased restrictions could add convenience for consumers

If restrictions are eased, it could mean a ton of convenience for consumers. For example, customers who shop at Alibaba’s eCommerce marketplaces can’t, as of now, use Tencent’s WeChat Pay to make the payment. Such restrictions, however, could be lifted if the two online giants choose to work together, the WSJ report said.

“Tencent could make it easier to share Alibaba eCommerce listings on its WeChat messaging app, or allow selected Alibaba services to access WeChat users via so-called mini-programs,” the report added.

On the other hand, Alibaba’s online payment platform, Alipay, is not available to customers of Tencent’s investee companies like either. WeChat Pay and Alipay together handle up to 95% of mobile payments in China.

Both Alibaba and Tencent are yet to make an official comment on the news.

Tencent/Alibaba rivalry is the root of anticompetition in China

According to the University of Hong Kong professor Angela Zhang, the division in China’s consumer internet dominated by Alibaba and Tencent is the root of anticompetition.

“Startups have no choice but to join either the Alibaba or Tencent camp, because the two control the so-called super apps that serve as gateways to vast amounts of users. Without addressing these problems, the competitive landscape in China’s tech industry will not be fundamentally changed.”

China’s crackdown has recently been focused on the vehicle for hire company, DiDi Global Inc. However, the regulator also imposed a $2.8 billion penalty on Alibaba in April for engaging in “er xuan yi (choose one out of two)” – an anti-competition practice that pushes vendors to sell exclusively on one single platform.