Alibaba’s e-commerce platform Taobao has begun to wind down its operations in Taiwan after shutting down its front-end on Thursday.

This move comes after the Chinese platform came under scrutiny from the Taiwanese government for allegedly violating investment law. It was given the choice of re-registering the company as ‘China-backed’ or withdrawing from the market by the end of the year.

The moves comes against a background of rising tensions between Taipei and Beijing.

Currently Taobao Taiwan is run by UK-registered Claddagh Venture Investment of which Alibaba owns 28.8 per cent. While the company has deemed itself a foreign-owned identity, Taiwanese authorities see it differently.

In Taiwan, the class of foreign-owned companies excludes those from Mainland China and if a Chinese owner has more than 30 per cent of its shares, it is deemed to be Chinese.

Furthermore, concerns over data security have been raised by Taiwan’s Ministry of Economic Affairs due to Alibaba potentially being able to access the personal information of consumers and data transferred to servers on the mainland. 

Taiwan has been stringently clamping down on Chinese investments as of late after banning Chinese TV streaming services iQiyi and Tencent’s WeTV.

For the time being, the rest of Alibaba’s businesses continue to operate in Taiwan, including e-wallet withdrawals, logistics and a customer-service centre.