Alibaba Shares Drop After Trump Bans Alipay Transactions



Alibaba is facing risk again as transactions from Ant Group’s Alipay digital wallet could be banned in the US by order of Donald Trump, which will take effect in 45 days. Analysts assess the possible consequences.

US President Donald Trump has signed an executive order banning transactions with eight Chinese payment apps: Ant Group’s Alipay, Tencent’s QQ Wallet and WeChat Pay, CamScanner, SHAREit, Tencent QQ, VMate and WPS Office.

The ruling states, “By accessing personal electronic devices such as smartphones, tablets and computers, Chinese software applications can access and collect vast amounts of information from users, including sensitive personal information and private information.” Such data collection “will enable China to track the location of federal employees and contractors and create dossiers of personal information.”

Trump’s executive order will take effect 45 days later, when Joe Biden takes over to decide whether to apply the policy.

The move by Trump’s office is in line with policies against the influence of China’s largest tech companies and protecting US national security. Senior administration officials said they believed it could help stop the illegal collection and storage of American data in China.

“The new executive order is similar but broader than last year’s executive order targeting WeChat and TikTok transactions,” said Nicholas Turner, associate at Steptoe & Johnson LLP in Hong Kong. “It is difficult to predict the final scope of the restrictions and the targets to be targeted. The influence is presumably focused on transactions in the United States, although this is not guaranteed. “

An attempt by the Trump administration to ban transactions in the United States through the Chinese apps WeChat and TikTok has been blocked by a federal court mainly on the basis of free speech. However, the more likely reason was the agreement to buy TikTok between Oracle (ORCL) and Walmart (WMT) prior to the court decision.

It is unclear if the ban will only apply to Alipay transactions outside the US and whether, for example, Starbucks (SBUX) will be able to allow customers to pay with WeChat Pay at its coffee shops in China.

Although the number of AliPay users in the US is relatively small, it is possible to pay with the Chinese app at many of the US travel destinations that Chinese consumers visit and shop. As of October 2019, AliPay had over 1.2 billion users worldwide.

In 2019, Alipay signed deals with retailers such as Walgreens, placing the app logo in front of millions of U.S. consumers.

“Black stripe” Ant Group

The risks of AliPay’s ban worsen the current position of Ant Group, which has been subject to antitrust investigations by the Chinese government and, according to media reports, may be forced to sell part of its stock portfolio.

Chinese regulators are also considering asking the fintech firm to share consumer data, according to a Wall Street Journal report on Tuesday.

Alibaba (BABA) owns 33% of Ant Group, and shares in the Chinese internet giant plummeted 26.7% (November 2 through Monday close) amid stock exchanges suspending Ant Group’s IPO due to an investigation.

However, Alibaba shares surged 5.5% on Tuesday after CNBC denied the possible disappearance of Alibaba founder Jack Ma and canceled the NYSE’s decision to delist China’s three largest telecoms after consulting the US Treasury.

Following the announcement of Trump’s ban on Alipay transactions in the United States, Alibaba shares fell 3.4% after trading closed on Tuesday.

Alibaba plans to raise $ 5 billion to $ 8 billion by selling a 10-year bond, according to media reports.

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