China's State Administration for Industry and Commerce (SAIC) has blinked in its war with Alibaba Group Holdings, which it accused of failing to combat the proliferation of counterfeit products on its website.

Xinhua reports that the head of SAIC and Jack Ma, founder of the Chinese ecommerce giant, met on Friday to discuss how they would jointly address the problem of fake goods.

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After the meeting, SAIC issued a statement and backtracked by saying what it issued on Wednesday was not a "white paper" and it had no legal force.

In response to the SAIC clarification, Alibaba said, "The most recent SAIC posting speaks for itself. We feel vindicated."

During the Friday meeting, Ma promised the SAIC that he would actively cooperate with Beijing and allocate more funds to battling counterfeit goods. Previously, Ma said he would create a unit made up of 300 people whose main task would be to go after fake items on its websites, complementing the work of thousands of Alibaba employees in battling fake goods.

SAIC Minister Zhang Mao acknowledged that Alibaba had made good progress in protecting consumer interest. He said the SAIC would seek new models of providing oversight services to e-commerce sites like Alibaba.

Had SAIC not retracted its accusations, Alibaba was at the risk of lawsuits for failure to disclose material information in its September initial public offering in New York that broke records and raised US$25 billion in fresh capital.

Prior to the SAIC backtrack, Alibaba was in a combative mode as Joseph Tsai, its vice chairman, said the "white paper" was a flawed document and threatened to file a formal complaint against the regulator.

The retraction boosted Alibaba's shareprice by 1.4 percent on Friday. The accusations caused two consecutive days of loss in stock value for the ecommerce giant as shares dipped 4.4 percent on Wednesday and another 8.8 percent on Thursday, reports the Wall Street Journal.

TagsJack Ma, Alibaba fake goods