Shortcuts / 21 January 2021
The Disappearance of Alibaba’s Jack Ma
As the founder and former boss of Chinese e-commerce giant Alibaba, Jack Ma is one of the most powerful people in the world. Which means he’s drawn the eye of the Chinese government, with the planned launch of Ma’s financial services giant Ant Group on the Shanghai and Hong Kong stock exchanges was cancelled last year after Ma criticised them. In this episode of Squiz Shortcuts, we take a look at Jack Ma himself, his rise and success, what it means to run a business venture in Communist China and the reasons a usually very public character is thought be laying low.
Who is Jack Ma?
He was born in 1964 as Ma Yun in the Chinese city of Hangzhou to a poor family. He picked up the nickname ‘Jack’ after becoming pen pals with a foreigner who couldn’t pronounce his Chinese name. He was rejected for over 30 jobs ranging from the police force to KFC before he picked up work as an English lecturer, before starting his first business, a translation company.
How did Alibaba come about?
The seeds for Alibaba were sown in 1995 when Ma travelled to the US, where he was introduced to the internet. He saw its massive potential, particularly in China where it was still relatively unknown, and started his second company, China Pages – which created websites for local businesses. It wasn’t to be, with the company falling out of favour with the Chinese government. But it planted the seed for Ma’s next – and most successful – online venture: Alibaba.
What is Alibaba?
It’s China’s answer to the likes of eBay or Amazon. It was started by by Ma and a group his friends in 1999 to provide an e-commerce platform for Chinese merchants to sell to buyers around the world. It soon became the world’s largest B2B e-commerce marketplace – expanding into other businesses including cloud computing, video streaming, movie production, healthcare, sports, retail and news media – and in 2014 debuted on the New York Stock Exchange with the world’s then-largest initial public offering valued at US$25 billion. That IPO made Ma the richest person in China at the time – his wealth now sits at about US60 billion.
What about Ant Group?
It was founded the same year as Alibaba’s massive IPO debut. 2014, It’s an affiliate of Alibaba which operates Alipay, which is the world’s largest online payment platform. It was set up as a payment service for customers checking out on Alibaba’s online marketplaces, but it’s used more widely now by around 1 billion people in China. And it’s expanded to provide services including personal credit, loans, investment and insurance. Ma owns a controlling stake in Ant Group. This business success gave Ma superstar status in China and the rest of the world. He starred in a kung fu short film, he loved to perform on stage at company conferences in outlandish costumes. But all this means the Chinese government watches him very closely…
How do private businesses operate in China?
While it has long followed the basic tenets of Communism, with most areas of life controlled by the state, from the 1990s it emerged as an economic superpower, led largely by the success of private business. This has been a source of tension within the CCP – or Chinese Communist Party. Part of the Party’s DNA is the strong rejection of many Western ideas – but on the other hand it’s benefiting from the riches sown by a market economy.
But private businesses in China operate very differently to how they do in the Western world, with high levels of regulation and government intervention there. Most small and medium size private enterprises in China have close links with local governments, and nearly all of the largest Chinese companies are state owned – the exceptions including Alibaba, Tencent, Bytedance and Huawei – but they still have close ties to government and the CCP. Because they operate across the globe, and some are listed on various stock exchanges – which means the public can become shareholders – these multinationals tend to enjoy a greater degree of freedom than their state-owned counterparts, and this has been a major bugbear for the CCP.
What happened with President Xi Jinping came to power?
Since he came to power in 2012, the Chinese government has really shifted its policy on private business. In 2012, private business accounted for about half of all investment in China and three-quarters of it’s economic output, but since then the state has gained more control over the country’s economy. This means that for most Chinese firms, the Communist Party must be consulted before making any major business decisions, and the Party has recently released a new set of guidelines that Chinese businesses are obligated to follow, which include prioritising the values of the CCP. And recent reports suggest that the Chinese government is in the process of drafting new anti-monopoly guidelines – another sign that the government pushing for further control of business in China. And and party leaders have pledged to increase their influence over emerging entrepreneurs, too.
What happened in the lead up to Jack Ma’s disappearance?
Before his last public appearance last October, reports say sentiment about Jack Ma in China was already souring. It’s hard to say whether this is a widespread thing across the community given government control over China’s media, but there’s a few examples where Chinese media has labelled Ma a “villain,” an “evil capitalist” and even a “bloodsucking ghost”.
The reason public opinion may have turned against him is tied to the growing divide in China between rich and poor. There’s a group of extremely wealthy Chinese who have done well in recent times as the economy grows. And that’s seeded a growing divide and resentment – particularly among young people who face limited job prospects and high living costs – and those from lower socioeconomic groups. And it’s that resentment that the CCP has tapped into through the country’s media.
When did Jack Ma disappear?
He was last seen at a financial conference in Shanghai last October, which was attended by a number of top Chinese officials. There, Ma made a speech criticising the Chinese government for being too risk averse at the expense of innovation.
What happened since then?
It seemed that Ma’s speech was the final straw for the CCP. In November, China’s market watchdog suspended Ant’s planned US$37 billion IPO on the Shanghai and Hong Kong stock exchanges, which was set to be the biggest float ever. China said it was concerned about Ant’s adherence to online lending regulations. That’s their line but by all accounts it was more likely to be the government’s pay back for Ma’s criticism of them.
The government has also been coming down pretty hard on Alibaba and its affiliates. For one, it’s since opened an antitrust investigation into the company. they claim that the massive amounts of personal credit information Ant has been collecting gives it an unfair competitive advantage over other institutions. The effect was immediate – with the announcement shaving billions of dollars off Alibaba’s value, analysts say.
What is China’s motive in all this?
It’s thought that the CCP wants Alibaba to provide this lucrative personal credit information to a broader, nationwide credit reporting system, which would effectively be controlled by the government and state run banks. There’s arguments for and against doing that, but sceptics say it’s a proxy for Beijing dismantling Ant’s entire business model to take control of the sector.
It’s all part of a larger crackdown on big tech companies in China. Late last year, Beijing proposed significant changes to its Anti-Monopoly Law that would reduce the market power of tech giants including Alibaba and Ant. One way they could make the market more competitive is to allow the likes of Google to operate there, but they can’t given the country’s great firewall, which prevents the public from accessing Western sites like Google.
So where is Jack Ma?
Well there’s a few theories going around. His disappearance has seen some speculate whether Ma has been detained by Chinese authorities, with government mouthpiece The People’s Daily reporting that Ma is now ‘embracing supervision’ at an undisclosed location. But it has since deleted any articles mentioning him on their website.
While disappearances aren’t that uncommon in China for those who have gotten on the government’s bad side, it’s generally believed that Jack Ma is deliberately lying low until it all blows over. And there’s a sense from the reporting that he’s gotten the message that he’s gotten a bit big for his boots and is staying out of view after embarrassing the powers that be. Weight has been given to this theory with recent reports that he’s was spotted at a school earlier in January. But whatever has happened, it’s certainly served as a reminder to businesses in China that no one’s immune from government influence.
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