Energy & Resources

Digging deeper

State-backed Minmetals now an antitrust target


Wen Jiabao: geologist by training

Ten years after retiring as Chinese Premier, Wen Jiabao made an unexpected return to the spotlight this month after penning a short series of articles for the Macau Herald, a little-known weekly.

In one of the pieces, the 78 year-old paid tribute to his mother, who died last December, telling a rather brutal story of how she beat him after he came home with a penny he had picked up from the street.

“From that incident I knew that I must not take what isn’t mine, not even one cent… I kept this [lesson] for decades, without breaking the principle once,” he wrote.

Political analysts were soon decoding the tale for subliminal criticism of the current government, especially of President Xi Jinping, China’s paramount leader. They did the same for Wen’s recollections of his humble roots, inferring that he must hold a dimmer view of Xi’s ‘princeling’ background as the son of a former leader.

Mentions of “retirement” from Wen were even interpreted as a veiled rebuke of Xi’s extended tenure as president.

Claims that Wen was sending a political message are still conjecture, although censors did little to dispel the rumours with its move to restrict the readership of Wen’s articles by disabling the ability to forward them on the Chinese internet. Amazingly not even former prime ministers are immune to the censor’s attentions, it seems.

Wen’s look back made no reference to his early career as a geologist or a later role at the ministry of mineral resources. But a well known company from one of his former industries ­– the mining and metallurgy heavyweight China Minmetals – did make the headlines last week too after being caught up in the government’s ongoing antitrust crackdown.

The focus of the investigation was a little unexpected. Minmetals Development said in a statement to the Shanghai stock exchange that it had received a notice from the State Administration for Market Regulation (SAMR) about an investigation into Longteng Digital, an e-commerce venture it set up with internet major Alibaba in 2015.

The SOE insisted that, according to its “preliminary understanding”, the arrangement had not violated anti-monopoly laws. Nonetheless it would “actively cooperate” with investigators, it promised.

Longteng has been dubbed the Wuage, or ‘The Fifth Prince’ in Chinese, which is a pun on how Minmetals and Alibaba combined to create a market leader. The idea was to create a trading platform for the steel sector by pairing the political reach of China’s biggest state-owned metal trader with Alibaba’s expertise in online marketplaces and Big Data.

Financial details for Longteng are hard to come by, although Xinhua reported in September 2018 that the B2B platform had already become the leading marketplace for steel-trading, with more than 180,000 members.

In late 2019 Alibaba sold its 44% stake in Longteng to a third-party company linked to Hong Kong-listed trading firm E-Commodities, news website 36Kr noted. But the Fifth Prince was still said to be blessed with a “royal pedigree” after aligning itself with policy goals to improve efficiencies in the iron and steel industry (a sector that has long struggled with overcapacity).

Perhaps that’s why onlookers have been surprised by the news that Minmetals and its online marketplace have been dragged into the antitrust campaign.

The investigation follows a $2.75 billion fine imposed this month on Alibaba for monopolistic behaviour, with SAMR looking into allegations of similar behaviour at fast-growing ‘everything’ app Meituan (see this week’s “Internet and Tech”).

The move against Minmetals signals how the antitrust campaign is widening across different online marketplaces and platforms. But it also raises interesting questions about how the investigation might spill over into a broader review of what regulators describe as “concentration of business undertakings” in other sectors, including industries in which state-owned enterprises are the more dominant players.

That would be an interesting twist for an economy that shows a stubborn attachment to the attractions of state capitalism.

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