(Yicai Global) Aug. 4 -- Profit at Chinese e-commerce giant Alibaba Group Holding fell 5 percent in the second quarter amid China’s regulatory clampdown on tech companies and increasing competition. Its shares declined.

Net profit was CNY45.14 billion (USD6.99 billion) in the three months ended June 30, versus CNY47.59 billion a year earlier, according to Hangzhou-based Alibaba’s second-quarter earnings report issued yesterday. Revenue gained 34 percent to CNY205.7 billion (USD31.9 billion).

Chinese regulators handed Alibaba a record USD2.8 billion fine in April for abusing its market position. Alibaba paid half of the penalty in the second quarter, which combined with the decline in earnings, caused its non-GAAP free cash flow to slump 43 percent to USD3.2 billion.

The company will continue to keep an eye on regulatory changes and the impact on its businesses, Daniel Zhang, chairman and chief executive officer, said on an earnings call with investors.

“In the past few months, Chinese regulators have issued rectification requirements against Community Marketplace players selling below cost, which hurts the market integrity and community livelihood,” he said. “We are in the process of studying the regulatory requirements, evaluating the potential impacts on our relevant businesses, and we will respond positively with actions.”

The regulatory crackdown on tech firms also means Alibaba and arch-rival Tencent Holdings are considering opening their closed ecosystems, or “walled gardens,” to each other, according to media reports since last month.

Interconnections between platforms will bring new dividends, Zhang said. Unblocking external links can reduce data traffic and operating costs for merchants and make life more convenient for consumers, he added.

Alibaba’s Hong Kong-listed stock [HKG:9988] ended 0.7 percent lower today at HKD192.10 (USD24.71), after earlier sliding as much as 3.6 percent. In New York yesterday, Alibaba [NYSE: BABA] dropped as much as 4 percent, before ending 1.3 percent down at USD197.38.

The firm’s second-quarter operating profit dropped because Alibaba boosted its investment in some businesses, including local consumer services, Southeast Asian e-commerce player Lazada, second-hand goods trading platform Idle Fish and e-commerce live Taobao Live, it said.

Alibaba also announced that it will increase its share repurchase target to USD15 billion from USD10 billion, making it the largest in the firm’s history. The company has already spent USD3.7 billion buying back shares since April 1.

Editors: Dou Shicong, Futura Costaglione