E-commerce platform Taobao Taiwan will stop services on the island by the end of this year after the local government two months ago gave the operator, a British-registered company called Claddagh Venture Investment, an ultimatum to register as Chinese-backed instead of foreign-owned or face closure.
“After careful evaluation, the company has decided to close front-end functions, such as order placement on the Taobao Taiwan platform, starting from 11am today,” according to a notice on the e-commerce’s website in Taiwan on Thursday.
Chinese e-commerce giant Alibaba Group Holding, which runs the popular Taobao platform for global customers including mainland China, the US, Southeast Asia and Taiwan, owns 28.8 per cent of the Claddagh venture, according to company information and data from Taiwan’s Ministry of Economic Affairs.
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Claddagh set up a branch on the island last July and began operating Taobao Taiwan as a marketplace mainly for local merchants. Alibaba’s main Taobao platform – a separate website – is still available for customers there.
“Claddagh has continued to actively communicate [with relevant parties] and explore new development possibilities,” said Claddagh in a statement on Thursday. “However, after careful evaluation … [the company] made a painful decision to officially stop Claddagh’s operations in Taiwan from December 31, 2020.”
“We respect the decision by Claddagh,” Alibaba’s spokeswoman told the Post. “Alibaba businesses are operating as normal in the Taiwan market, and we will continue to serve local consumers with quality products through our Taobao app.”
Other services on the Claddagh-operated Taobao Taiwan platform, such as e-wallet withdrawals, logistics and the customer service centre will continue to operate until the end of the year and then close, the notice said.
The development comes as tensions across the Taiwan Strait worsen, and Chinese tech companies such as ByteDance, which owns short video hit TikTok, and Huawei Technologies face global pushback amid concerns over national security and data privacy.
Taiwan has also banned mainland streaming services from China’s iQiyi and Tencent Holdings, according to an August notice from the island’s Ministry of Economic Affairs.
“This event is a microcosm of the overall global [geopolitical] environment,” said Zhang Fan, co-founder of research firm EqualOcean. “It is likely to impact the confidence of other technology enterprises in mainland China, and reduce their willingness to do businesses in Taiwan in the short term.”
Taobao and Tmall marketplaces are the two key portals of Alibaba’s core China e-commerce business, generating revenue of over 101 billion yuan (US$14.3 billion) in the quarter to end-June. Taobao, which means searching for treasure in Chinese, is China’s largest online shopping platform with over 2 billion products and services listings.
Taiwan treats investment from foreign countries differently to that from mainland China, for which it has more stringent rules. In Taiwan, the “foreign-owned” classification excludes mainland China entities and a company is considered a Chinese investment if a Chinese entity owns more than 30 per cent of its shares or has “effective control” over its operations.
Taiwan’s Ministry of Economic Affairs said in an August statement that in effect, Alibaba had control of Claddagh and this raised information security concerns. Specifically, it said Alibaba could have access to the personal information of consumers, which could be transferred to Alibaba’s servers in mainland China.
Taobao Taiwan promised in Thursday’s notice to delete and stop processing any consumer personal data, in accordance with the requirements of relevant laws.
The Claddagh-run platform was fined T$410,000 (US$13,961) in August by Taiwan’s Ministry of Economic Affairs and given six months to either withdraw its investment or re-register as Chinese-backed in August.
Alibaba owns the South China Morning Post.