China opened an investigation into alleged monopoly practices at Alibaba Group Holding Ltd. and convened subsidiary Ant Group Co. for a high-level meeting on financial regulations to escalate the review of the two pillars of billionaire Jack Ma’s internet empire.

The investigation, announced on Thursday, marks the formal beginning of the Communist Party’s crackdown on the crown jewel of Ma’s sprawling rule, which spans e-commerce to logistics to social media. Pressure on Ma is central to broader efforts to contain an increasingly influential internet sphere: the November draft antimonopoly rules gave the government ample leeway to restrict entrepreneurs who until recently enjoyed unusual freedoms to expand their empire.

Alibaba and competitors like Tencent Holdings Ltd., once hailed as the engine of economic prosperity and a symbol of the country’s technological prowess, are facing increasing pressure from regulators after they have accumulated hundreds of millions of users and affect almost every aspect of daily life in China have won.

“It is clearly an escalation in coordinated efforts to contain Jack Ma’s empire, which symbolizes China’s new ‘too-big-to-fail’ entities,” said Dong Ximiao, a researcher at the Zhongguancun Internet Finance Institute. “The Chinese authorities want a smaller, less dominant and more compliant company.”

The headquarters of Alibaba Group Holding Ltd. in Hangzhou, China. (Qilai Shen / Bloomberg)

The State Administration for Market Regulation is investigating Alibaba, the top antitrust watchdog said in a statement without further details. Regulators, including the central bank and banking regulator, will separately invite subsidiary Ant to a meeting designed to push ahead with increasingly stringent financial regulations that are now threatening the growth of the world’s largest online financial services company. Ant said in a statement on its official WeChat account it will investigate and comply with all requirements.

Ma, the flamboyant co-founder of Alibaba and Ant, has all but disappeared from the public eye since Ant’s IPO last month. In early December, the man most likely identified with the meteoric rise of China Inc. was advised by the government to stay in the country, said a person familiar with the matter.

Ma is not on the verge of personal doom, said those familiar with the situation. His very public reprimand is instead a warning that Beijing has lost patience with the overwhelming power of its technology moguls, who are increasingly perceived as a threat to the political and financial stability that President Xi Jinping values ​​most.

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Alibaba slipped 8 percent in Hong Kong to a five-month low on Thursday. Asia’s largest company after Tencent has led losses among China’s internet leaders since Ant’s IPO was canceled, bringing the total tariff to about $ 200 billion. Tencent and internet services giant Meituan closed more than 2.6 percent lower, while SoftBank Group Corp., Alibaba’s largest shareholder, fell 1.7 percent in Tokyo. Alibaba said in a statement that it will work with regulators on the investigation and that its operations will remain normal.

Investors remain divided over how far Beijing will pursue Alibaba and its compatriots as Beijing prepares for the introduction of the new antimonopoly regime. The country’s leaders have said little about how tough they want to go or why they have chosen to act now.

The country’s internet ecosystem – long protected from competition from Google and Facebook – is dominated by two companies, Alibaba and Tencent, through a labyrinthine investment network that spans the vast majority of the country’s startups in arenas from AI to digital Finances. Their patronage has also spawned a new generation of titans, including food and travel giant Meituan and Didi Chuxing – China’s Uber. Those who thrive outside of their aura, including the biggest TikTok owner, ByteDance Ltd., are rare.

The anti-monopoly rules now threaten to thwart that status quo with a number of possible consequences, from a harmless scenario of fines to the dissolution of industry leaders. Some analysts predict a crackdown will come, but a targeted one. They point to wording in the regulations suggesting a heavy focus on online trading, from enforced exclusivity agreements with traders known as “Pick One of Two” to algorithmic pricing that favors new users. The regulations explicitly warn against selling at a lower cost to weed out rivals.

But Beijing’s diverse agencies seem to be coordinating their efforts – a bad sign for the internet sector.

“There is nothing that the Chinese Communist Party does not control, and anything that seems to be somehow getting out of orbit is being withdrawn very quickly,” said Alex Capri, a Singapore-based research fellow at the Hinrich Foundation.

The campaign against Alibaba and its rivals came into full swing in November after Ma famously attacked Chinese regulators in a public address over time lag. Market regulators then suspended Ant’s IPO – the largest in the world at $ 35 billion – while the anti-monopoly watchdogs soon afterwards brought the markets into a tailspin with their bill.

The People’s Daily, the mouthpiece of the Communist Party, warned on Thursday that the fight against supposed monopolies was now the top priority. “Antimonopoly has become a pressing matter that affects all matters,” said a comment that coincides with the announcement of the investigation. The “wild growth” of the markets must be curbed by law, she added.

The chances of Ant resurrecting its massive public listing next year are diminishing as China overhauls rules for the fintech industry, which has been booming in recent years as an alternative to traditional government-sponsored lending.

China is said to have set up a joint task force to oversee Ant, led by the Financial Stability and Development Committee, a regulator for the financial system, along with various departments of the central bank and other regulators. The group is in regular contact with Ant to collect data and other materials, investigate its restructuring, and develop other rules for the fintech industry.

“China has tightened a lot of red tape so it’s now easier for the various regulators to work together,” said Mark Tanner, general manager of Shanghai-based consultancy China Skinny. “Of all the regulatory hurdles, this is by far the greatest.”

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–With support from Jun Luo, Colum Murphy, Amanda Wang, and John Cheng.

The headquarters of Alibaba Group Holding Ltd. in Hangzhou, China. Photographer: Qilai Shen / Bloomberg