On a night that was supposed to be serene, the stock market bore witness to chaos as Alibaba's shares plummeted by a staggering 10% right at the opening bell in the U.SmarketUnfortunately, this was just the beginning of a downward spiral, with the stock falling as much as 17% during the day, leading to a market capitalization loss of a whopping $120 billionAlthough the loss moderated slightly by the end of the day, it still finished down by 13%, marking the largest single-day decline since the company went publicBy the closing bell, Alibaba’s shares settled at $222, resulting in a market valuation of $600 billion—an eye-watering decrease of $90 billion compared to the previous dayThis figure highlights a staggering drop of $260 billion from the high of $860 billion recorded in October.

The catalyst for this unusual volatility was linked to regulatory scrutiny over Alibaba's business practices, specifically allegations of monopolistic behavior

On December 24th, China's State Administration for Market Regulation (SAMR) announced that it had initiated an investigation into Alibaba Group Holding Limited for its alleged involvement in "choose one from two" practices that infringe upon anti-monopoly lawsThe immediate backlash was evident; shares of Alibaba plummeted in Hong Kong's market as well, closing down 8.13% and resulting in a loss of 43 billion HKD in market value.

When we compare the ferocity of the market's response with Alibaba's own reactions, we can see an intriguing contrastIn response to the investigation, Alibaba took a notably calm stance, affirming its commitment to cooperate with regulatory agencies and assuring stakeholders that its business operations were running smoothlyThis composed response seemed somewhat at odds with the market's turbulence, emphasizing the uncertainty and volatility pervading investor sentiment.

Adding more layers to this narrative, it’s crucial to consider the sequence of events leading up to this moment

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Just prior to the SAMR's announcement, the Ant Group, a financial arm of Alibaba, was summoned for talks concerning its business operationsThis follows a string of significant disruptions, including the removal of bank deposit products from its platform and a fine imposed on Alibaba for failing to legally declare its acquisition of shares in a commercial entity, which violated anti-monopoly regulationsThese actions all contributed to an overarching sense of instability surrounding Alibaba over the past couple of months.

The year 2023 has proven to be particularly tumultuous for Alibaba, possibly representing one of its most challenging phases to dateThe first ten months saw a period of prosperity, with stock prices reaching new heights, culminating in an apex just before the Ant Group’s initial public offering (IPO). However, like any classic tale of ambition, the highs brought with them inevitable lows.

At the heart of the Ant Group’s operations lies a lending business that, despite having a registered capital of less than $40 billion, boasts a staggering loan balance of approximately $3 trillion—$1.7 trillion of which is consumer loans, while $400 billion is allocated for micro-business loans

The reinforcing question that arises is: what is the real leverage at play here, and how substantial are the risks entailed within such a model?

Recently, Ant Group implemented restrictions on the usage limits of its "Huabei" service, which allows young consumers to purchase items on creditThis policy appears to be a strategic response to ongoing concerns over rampant consumerism, particularly among younger demographics susceptible to incurring debt that exceeds their financial meansWith the specter of overwhelming debt looming over many young people, this struggle undoubtedly hampers their best years, placing considerable strain on the entire financial ecosystem.

Thus, there is a pressing need for extensive reforms!

Internet giants such as Alibaba possess substantial financial resources, data, and talent, granting them significant market influenceWhen operating within fair competition, their growth benefits the overall economy

However, the moment they exploit this dominance for monopolistic practices—engaging in tactics such as "choose one from two," utilizing big data for competitive advantages, or selling below cost—it constitutes an unethical form of competitionTo put it simply, this approach reflects a strategy to wrest a bigger slice of the existing market "cake," rather than expanding the pie itself.

Not long ago, these Internet behemoths invested heavily in community group-buying initiatives, often engaging in fierce price wars through substantial subsidiesSuch aggressive strategies present traditional vendors with an insurmountable challengeThe impact on grassroots commerce is severe; basic living staples, often referred to as the proverbial "vegetable basket," should remain firmly in the hands of local communitiesShifting the balance in this manner is too risky to be tolerated.

While applauding temporarily low prices, consumers may remain blissfully unaware of the long-term consequences lurking beneath this tempting facade

Once local vendors are cut out of the market, choices will dwindle dramaticallyThe ties to local produce and closer markets are critical; unlike clothing, which can be purchased from remote locations via online platforms, food needs proximityThe capital markets fundamentally aim for profit, and once dominance is achieved, the initial costs covered by subsidies will invariably be reclaimed through price hikes.

Employment remains a cornerstone of social stability, particularly at the grassroots level where it is deeply intertwined with societal peaceA formula that involves subsidies to facilitate community group purchases does little to enhance efficiencyInstead, it fosters a climate of cutthroat competition that escalates unemployment and insecurity.

Internet giants, equipped with vast financial capabilities, should not resort to downscaled competitive tactics that prioritize disruption