Once again, Alibaba faces a challenge, as purchases of the Ant Group’s Alipay digital wallet could be prohibited in the US under Donald Trump’s order, which will take effect within 45 days.
US President Donald Trump signed an order banning purchases with eight Chinese payment apps: Ant Group’s Alipay, QQ Wallet and WeChat Pay from Tencent, CamScanner, SHAREit, Tencent QQ, Vmate and WPS Office.
Trump’s directive will come into force within 45 days of the takeover of Joe Biden, who will determine whether to apply this strategy.
Trump’s decision is aligned with a campaign aimed at curbing the dominance of China’s major tech giants and preserving U.S. national security. Senior officials have said that they think it will help deter the illicit processing and storing of American data in China.
Trump’s effort to prohibit purchases in the US by Chinese apps WeChat and TikTok has been effectively blocked by the federal court on the grounds of freedom of speech. The most likely explanation, though, was the deal to purchase TikTok by Oracle (ORCL) and Walmart (WMT) before the court ruling.
It is unclear if the ban would extend only to Alipay purchases outside the US and if, for example, Starbucks (SBUX) will be able to encourage customers to pay with WeChat Pay at their coffee shops in China.
Although the number of Alipay users in the United States is relatively small, but can pay using the Chinese app in many tourist places in the United States that Chinese consumers visit and where they make purchases. As of October 2019, Alipay had over 1.2 billion users worldwide.
In 2019, Alipay signed deals with retailers such as pharmacy chain Walgreens, placing the app’s logo in front of millions of U.S. consumers.
“Black Stripe” of the Ant Group
The dangers of banning Alipay exacerbate the current situation of the Ant Group, which has been the target of an antitrust probe by the Chinese government and, according to media reports, could be compelled to sell part of its stock portfolio.
Chinese regulators are also considering requiring fintech to exchange customer info, according to the Wall Street Journal article on Tuesday.
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Alibaba (BABA) holds 33 percent of the shares of the Ant Group, while the shares of the Chinese Internet giant had fallen by 26.7 percent (from 2 November to the close of trade on Monday) following the suspension of the Ant Group IPO by the stock exchanges due to an investigation.
However, Alibaba’s stock grew 5.5 percent on Tuesday after CNBC refuted the alleged absence of Alibaba founder Jack Ma and overturned NYSE’s decision to delete China’s three largest telecommunications firms after contacting the US Treasury.
Following the announcement of Trump’s ban on Alipay purchases in the US, the price of Alibaba dropped 3.4% after the close of trade on Tuesday which resulted in a drop of -5.32% to $227.61 in the Wednesday session.
According to media reports, Alibaba aims to collect $5 billion to $8 billion by selling bonds with a maturity of 10 years.