China’s Alibaba Group to split into 6 business units

Chinese e-commerce giant Alibaba on Tuesday announced that it would split into six smaller business units.

The split will include online trading, media and cloud services and turn the $220 billion company into a tech holding company.

In an unusual move in China, each unit will have its own executive board and be able to seek outside capital and a stock exchange listing.

The step came two years after the government acted to curb the tech company’s activities.

Alibaba founder, Jack Ma, had fallen out of favour, media reports said.

A planned listing of the Ant Group fintech company, owned by the group, was cancelled and cartel proceedings opened.

However, there have been indications recently that Beijing has softened its approach to technology companies.

Jack Ma was this week seen in public in China for the first time in more than a year.

Alibaba stressed that it was proceeding with a planned cost-cutting programme, in spite of the split.

It said it had become necessary after the government intervention put a brake on Alibaba’s growth and caused a sharp fall in market capitalisation.

Meanwhile, the domestic retail unit in China is to remain fully owned by Alibaba.

Shares listed in the United States rose 9 per cent on the news in early trading.

The market was the best litmus test, Alibaba chief executive Daniel Zhang said in a staff email.

The restructuring will allow all units to react more quickly to market changes.

Daniel is to continue to head the group and the cloud unit.

Analysts saw the split as an indication that Alibaba could seek fresh investment on capital markets.

They also saw signs that artificial intelligence, AI technologies, are to play a larger role.

The Star