Alibaba suffers biggest drop in two months as Chinese regulators renew pressure

Shares of Chinese e-commerce giant Alibaba posted their biggest decline in two months in Hong Kong after China’s market regulator met with representatives of online platforms and demanded tighter product-quality standards, Seeking Alpha reports.

Alibaba shares tumbled 6.1% in Hong Kong on Thursday, their biggest drop since August 24, Bloomberg reports. They continued to slide in U.S. trading. Hong Kong’s Hang Seng Tech Index (HSTECH) also closed 5% lower, its steepest decline since April 2025. The benchmark Hang Seng Index ended the day down 3%, with Alibaba the biggest contributor to the decline, Seeking Alpha notes.

Investors are questioning whether hyperscalers’ massive spending on AI will generate sufficient returns, Bloomberg notes. Against that backdrop, the Hang Seng Tech Index has lost 31% year to date and is close to erasing all its gains since Beijing’s sweeping stimulus package in September 2024.

Alibaba shares came under pressure after China’s State Administration for Market Regulation (SAMR) recently held a special meeting in Beijing. It focused on improving the quality of goods and services on platforms operated by Alibaba, JD.com, and other companies, including PDD Holdings, Xiaohongshu, Kuaishou, ByteDance, and Vipshop.

SAMR stated that these platforms must act as “gatekeepers.” It identified counterfeits, goods that do not match their descriptions, and false advertising as persistent risks, noting that they are particularly prevalent in livestream shopping and quick commerce, the delivery of goods in a matter of minutes, AskTraders reports, citing Chinese news outlet Jiemian News.

The regulator announced no immediate measures or penalties. In AskTraders’ assessment, the meeting signals neither a crackdown on the industry nor an investigation, but serves as a reminder that platforms remain under tight regulatory scrutiny.

“Such ‘reminder’ on quality is not new to the sector, but it feels like never ending,” Steven Leung, executive director at brokerage house UOB Kay Hian, told Bloomberg. “The impact on earnings has been diminishing, but more on the sentiment level.”

Alibaba’s decline on Thursday highlights the regulatory and business challenges facing China’s e-commerce industry, Bloomberg notes. Companies need to sustain growth in their core businesses while increasing spending on AI and other cutting-edge technologies prioritized by Beijing. Also adding to investor caution are rising oil prices amid escalating tensions in the Middle East and the expiration of a 90-day grace period allowing wealthy families to settle taxes on offshore trusts without late-payment surcharges.

“It seems the selloff in Chinese e-commerce, particularly Alibaba, appears to be part of a broader de-risking trend,” said Gerald Gan, chief investment officer at Reed Capital Partners. The concerns mirror those facing U.S. AI stocks, with investors increasingly questioning the scale of AI spending and whether current valuations are justified, he added.

Mainland Chinese investors have sold Hong Kong stocks for a seventh consecutive session, the longest selling streak since July, according to Bloomberg-compiled data. Hao Hong, chief investment officer at hedge fund Lotus Asset Management, attributed the Hang Seng Tech Index’s decline to “indiscriminate selling.” “The HSTECH should be reaching its technical bottom today or, more likely, tomorrow,” Hong told Bloomberg. “This is indiscriminate selling. It must be some quant funds blowing up. The selling is not related to fundamentals, as recent econ data are strong.”