Taobao locks horns with regulator

In response to Tuesday's open letter, the watchdog posted a white paper report on Wednesday morning, saying the online shopping site had failed to clean up its business in five areas.

These include having a flawed rating system for vendors, a low threshold for opening up on-site business, and allowing merchants to operate without business licenses, according to the regulator.

The report had been withheld until now to avoid disrupting Alibaba's US stock market debut in September. It was later removed from the main page of the administration's website.

Alibaba said it has made plenty of efforts to crack down on counterfeit goods.

The company said it spent more than 1 billion yuan ($160 million) from January 2013 to November last year on guaranteeing consumers' rights and tackling fake goods.

However, Neil Flynn, head equity analyst at Chineseinvestors.com, said consumer-to-consumer sites such as Taobao have more fake products available than business-to-consumer platforms, simply because of the nature of the business.

Flynn said Taobao had to criticize the report because reputation is very important for online retailers.

But he also said the government needs to put pressure on e-commerce firms to rid the industry of fake products, because the authorities are attracting foreign brands to sell their goods in China.

"When fakes are sold alongside authentic products, it is a legal issue and it will dissuade brands from investing in China," Flynn said.

In a survey conducted by Internet portal Sina, 48.2 percent of respondents voted to support Taobao, saying the quality check conducted by the administration had flaws. However, 40.3 percent backed the administration, saying it is important to crack down on counterfeit and suspect goods. The survey had drawn 13,427 respondents by 6:45 pm on Tuesday.

Alibaba's shares closed at $102.94 on Tuesday, down by 1.01 percent from the previous day.

Wang Zhuoqiong contributed to this story.