Singles Day, as 11/11 is known, is the most capitalist day in Communist China. It's a made-up event designed to spur online sales, much in the mode of Black Friday in the United States. Only far, far bigger.
This year, the Singles Day event occurs against an ominous backdrop. Shares in e-commerce giant Alibaba Group Holding (BABA) , the largest beneficiary of the day, plummeted 9.8% on Wednesday in Hong Kong. Singles Day produced a double-digit loss (rounding up!) after Chinese regulators published draft rules aimed at preventing monopolistic behavior by online operators.
The Hang Seng Tech Index of 30 major tech stocks in Hong Kong, including Alibaba's secondary listing, fell 6.2%, after a 5.2% drop the day before.
Stocks in Hong Kong lost 0.3% as the Beijing and local governments hammered yet another nail into the coffin of democracy. Four pro-democracy lawmakers have been banned with immediate effect from the government, for advocating democracy. But more on that later.
Where was I? Singles Day! Yes! Shopping!
It's a perfectly Chinese event. The Chinese Communist Party would vastly prefer for its citizens to focus on making a profit, and leave all the complicated issues of governance to them. If business is good, life is good, and the Communist Party can say it is keeping its citizens happy.
This year, the sales bonanza is expected once again to outstrip the tally of the previous year. Online sales have excelled in China during the recovery from the coronavirus.
So as the clock ticked over to Wednesday, the clicks began. Alibaba said by noon on Wednesday in China that it had clocked up C¥372.3 billion (US$52.5 billion) in merchandise sales. The full tallies won't be in until tomorrow, but JD.com (JD) said it notched C¥200 billion (US$28.2 billion) in sales within nine minutes of the clock ticking over from midnight.
China's big spenders are not currently really able to travel outside the country. That's thought to bring luxury-goods spending that otherwise would occur in Paris, Dubai and New York online within China. There has also been a wave of "revenge spending" due to pent-up demand created during the coronavirus lockdown. Livestreaming of influencers talking up a wide range of goods has proved very popular, and effective.
There are troubles with the system. Alibaba's payments are mainly processed by Alipay, the e-wallet app that it spun off into Ant Group. Ant is also under pressure after stock exchange officials in Shanghai pulled its world record US$37 billion initial public offering from the stock shelves just hours before the offering was due to take place. Ant was forced to suspend its listing last Tuesday, two days before the November 5 IPO, due to regulators becoming concerned about its rising financial might.
It's hard to imagine that the timing on the anti-monopoly rules is pure coincidence. China's State Administration for Market Regulation issued the draft hours before Singles Day began, saying it wants to prevent online platforms from dominating the market or blocking fair competition.
It is coincidence, however, that the European Union on Tuesday charged Amazon.com (AMZN) with antitrust offenses in Europe, over its handling of the data provided by the 150,000 merchants that do business through its e-commerce site. The E.U. says that Amazon has been using non-public data provided to execute sales, logistics and delivery for the merchants so that it can compete against the very same merchants with its own products.
The new Chinese rules, if they go ahead, would apply both to online marketplaces such as the mass-market Taobao and upscale Tmall sites run by Alibaba, as well as competing e-commerce operators such as JD.com and Pinduoduo (PDD) .
The draft rules would seek to stop e-commerce sites from forcing merchants to pick between, say, Taobao and JD.com, with merchants forced to sign contracts that allow them to sell only on one platform at a time. Tencent and Alibaba have vast corporate empires, often stating that an investor in its network cannot hold shares in its other companies if it also buys shares in the companies of the other "camp."
This was expected to be an issue for the allocation of shares in Ant. Investors in the Tencent family were likely to be excluded from the offering.
China has avoided placing much in the way of restrictive regulation on its home-grown tech companies. It has preferred to ban foreign e-commerce and tech companies from operating inside China, giving local companies the chance to emulate and eventually outdo the scope and scale of international rivals.
But China is now pursuing a "dual circulation" strategy that emphasizes "internal circulation," meaning to enhance domestic demand and to meet that with domestic supply. E-commerce will be a key part of that plan, but it's clear Beijing wants to create a more mature and robust regulatory framework in which for that to happen.
The regulators have requested public comment on the proposed rules. The draft will circulate until November 30.
Heading the same direction as Alibaba in Hong Kong trade, shares in Meituan plunged 9.8%, the Hong Kong secondary of JD.com dropped 9.2%, while Tencent fell 7.4%. The CSI 300 index of the largest stocks in Shanghai and Shenzhen fell 1.0% for the day.
In Hong Kong, the Hang Seng fell 0.3%. You are a brave investor to buy into the Hong Kong market when virtually every day the current government finds another way of bringing the city down. The difference between once-respected Hong Kong, with its separate legal system, currency and markets, is evaporating between it and Communist China.
The removals of the elected members of Hong Kong's congress came minutes after Chinese lawmakers (in Beijing, not Hong Kong) passed legislation allowing local authorities in Hong Kong to bypass the courts, and simply kick out any lawmaker they feel looks sideways at them. They have to justify this by saying that lawmaker is not "patriotic" enough, or is seeking help from "foreign countries or foreign forces," which could be something as simple as a donation from abroad, or chat with a foreign diplomat.
The four lawmakers had filibustered against the current administration to prevent it passing through legislation - virtually their only option to voice their opposition. The administration had already removed several pro-democracy, legally elected lawmakers from their positions in congress, meaning the pro-democracy camp no longer had the one-third representation needed to block legislation. The four had also requested that overseas governments impose sanctions on Hong Kong, which has dispensed with any pretense of playing by the rules agreed at the time of the 1997 handover of the city from Britain.
Hong Kong Chief Executive Carrie Lam gave an address on Wednesday explaining the new system, in which she said anybody who criticizes her administration is not being patriotic. So an opposition lawmaker, by definition, needs to be kicked out. It's a ridiculous situation that makes the rigged, rubber-stamp local government in Hong Kong even more ludicrous.
All the remaining 15 pro-democracy members of the 70-person legislature in Hong Kong have now said they will walk out. They might as well. It is clear that Beijing and the Hong Kong government have stripped any means of the pro-democracy politicians from having any influence whatsoever. That leaves the Hong Kong administration - slapped with U.S. sanctions on four more of its members this week over their violation of human rights in Hong Kong - with unchecked power, just like its equivalent in mainland China.
There is none of the promised "autonomy" for Hong Kong anymore, as it becomes just A.N. Other Chinese city.