Facts: Relations between Alibaba and you began to deteriorate under the glare of China

A picture of the logo of the Ant Group, a subsidiary of Alibaba, at the company’s headquarters in Hangzhou, Zhejiang Province, China, October 29, 2020. REUTERS/Ali Song/File Photo

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BEIJING/SHANGHAI (Reuters) – Ant Group emerged from Alibaba Group Holdings (9988.HK) 11 years ago, but the two companies founded by Jack Ma have continued to cooperate closely and even act as one in some respects. To maximize its competitive advantage.

Since late last year, though, the duo have taken concrete steps to set strict operational limits, according to people familiar with the matter. Read more

Here are details about their common history, and how they have come together over the years:

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Alibaba fears

Ant’s beginnings can be traced back to Alipay, which was launched by Alibaba in 2004 as a payment service intended to address the concerns of Chinese buyers and sellers about transacting online in the country’s then-nascent e-commerce market.

Ma Alipay quit after seven years, despite strong objections from investors including Yahoo, citing the possibility of introducing new rules to ban foreign investment in financial businesses in China.

Alipay then expanded into wealth management and insurance services, incorporating those companies into an entity called Ant Financial. It changed its name back to Ant Group in 2020.

stock deal

After Ant’s separation, the two companies entered into an agreement that made Ant pay 37.5% of its pre-tax profits to Alibaba. That agreement ended in 2019 when Alibaba acquired a 33% stake in Ant, which it still owns.

Ma currently controls Ant, and while he has resigned from executive positions at Alibaba as well as the e-commerce giant’s board of directors, he remains a life member of the Alibaba Partnership, a group of CEOs who have the right to nominate the majority of Alibaba’s board members.

Nine of Alibaba’s 38 current partners are Ant executives, including Ant CEO and President, Eric Jing.

Ant currently has two Alibaba CEOs on its board – Alibaba co-founder Joe Tsai and chief technology officer Cheng Li.

synergy

The two companies have repeatedly talked about their synergies, with Ante saying in a prospectus she submitted to the Hong Kong Stock Exchange in 2020, before withdrawing its listing on the stock market, that “synergy with Alibaba” was one of its main advantages “origin and continued affiliation with Alibaba A source of strength as well as a purpose.”

This has been applied to their apps – for years Alipay has been the main payment option available on Alibaba’s apps, including China’s dominant market app Taobao and food delivery app Ele.me.

Alipay, which has more than one billion users, prominently displays several Alibaba-owned businesses as “widgets” on its default app page.

These synergies have been attractive to potential partners: In 2018, US coffee giant Starbucks (SBUX.O) created China’s first official online delivery service with what it called the “Alibaba ecosystem.”

Certainly such arrangements were not unique to Alibaba and Alipay but were also made by competitors such as Tencent Holdings (0700.HK), who created their own ecosystems with their investing companies, while blocking the services of competitors, in a practice called ” Walled gardens.”

Chinese regulators criticized the practice last year, saying it affected user experience and hurt consumer rights, prompting some of these apps to open up to competitors. For example, Ele.me now accepts WeChat Pay from Tencent as a payment option.

Investments

Alibaba and Ant have also been involved in investing in a number of deals.

In 2016, Alibaba and Ant invested $200 million in Didi Chuxing, now called Didi Global.

Alibaba and Ant in 2021 led a $280 million round of financing into Hello Inc. A bike-sharing startup, Ant previously invested in Hello in 2017 and 2018.

They also previously held stakes in India’s Paytm Ecommerce, the parent entity of Paytm Mall, and together they still own a 29.4% stake in Chinese AI startup Megvii through its subsidiaries.

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(Reporting by Yingzi Yang and Brenda Goh) Editing by Muralikumar Anantharaman

Our Standards: Thomson Reuters Trust Principles.

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