As Jack Ma Returns... China's Alibaba Restructures into 6 Independent Groups

Alibaba Group, China's largest e-commerce company, will be reorganized into six independent group corporations. This major organizational restructuring was announced shortly after founder Jack Ma, who had been staying overseas, appeared in China for the first time in about a year. Each of the six independent groups will operate under a CEO responsibility system and pursue initiatives such as initial public offerings (IPOs).

[Image source=Reuters Yonhap News]

On the 28th, Alibaba stated that the six independent groups reorganized under Alibaba Group are the Crowd Intelligence Group, the Taobao Tmall E-commerce Group, the Local Services Group, the Cainiao Smart Logistics Group, the Global Digital Business Group, and the Digital Media & Entertainment Group.

Alibaba explained that this organizational restructuring is part of building a more agile corporate structure. Chairman and CEO Daniel Zhang said, "Alibaba Group will serve as a holding company," adding, "Each of the six groups will have its own CEO who reports to the board of directors and will implement a full responsibility system." This indicates the adoption of a holding company management model. Additionally, the six groups will independently raise funds and seek their own IPOs.

This restructuring is the largest since Alibaba's founding. Bloomberg News commented, "It is rare for Chinese tech companies to transition to a holding company structure," and evaluated that "major business units will be able to operate much more autonomously, laying the groundwork for future spin-offs and IPOs." The outlet also predicted that this is a strong signal that Alibaba is ready to target investors and the IPO market. Chairman Zhang emphasized in a statement, "At 24 years old, Alibaba welcomes new growth opportunities," and added, "The market is the ultimate litmus test."

[Image source=AP Yonhap News]

Notably, this announcement drew more attention as it came shortly after Alibaba founder Jack Ma returned to China after about a year. This has led to assessments that the organizational restructuring was made with the consent of the Chinese government.

Since the recent end of the "with-COVID" policy, China has been focusing on economic recovery and opening up, putting emphasis on private investment and attracting foreign capital. The market interprets Jack Ma's reappearance in China, who was once seen as a symbol of government regulation on companies, as part of the authorities' strategy to project a market-friendly image through Alibaba. However, Alibaba reportedly drew a clear line, stating that this announcement is unrelated to Ma's return to China, according to The Wall Street Journal (WSJ).

Marvin Chen, an analyst at Bloomberg Intelligence, described this as "a step in China's policy to reduce the monopolistic nature of big tech." Gary Dugan, CEO of Global CIO Office, said, "We assume Alibaba's innovative split plan has received the authorities' blessing," adding, "In this case, it appears to be an elegant solution to unlock the internal value constraints of the business."

Meanwhile, ahead of the New York Stock Exchange opening on the same day, Alibaba's stock price was moving at a level more than 10% higher.