Picture credit: WSJ YouTube Channel
Intelligent and driven, Jack Ma co-founded the multinational Alibaba group and amassed himself a fortune which propelled him to become one of the richest and most influential people in China. Mr. Ma has been in numerous conferences and discussions with people like Bill Gates, Elon Musk, and even former president Barack Obama. Now however, he seldom appears in public view. The technology tycoons of China have been recast as a threat to Xi Jinping and the Communist Party, and Mr. Ma had been acting too much like an American entrepreneur.
Mr. Ma had exited from public view after a speech he made in October which criticised Chinese regulators for holding back financial innovation. This invited President Xi Jinping to personally intervene and block the $34 billion initial public offering of Ant Group which is Mr. Ma’s financial technology company. Since then China has been harsh on its private sector, especially technology companies as they grow rapidly, making it difficult for the government to regulate and control them.
Entrepreneurs are expected to keep a low profile, do more to support government enterprises and use a larger share of their company profits on society. “Mr. Ma should have focused on giving back to the party instead of just focusing on his own interests” commented a Beijing official. His defenders on the other hand hold a different view. They believed that Mr. Ma was being punished for chasing innovation, market domination and lobbying for less regulation so it’s easier to make money, ambitions that reflected western ideologies and values.
Challenging the Officials
China was also worried about the level of control they had over businesses. When Mr. Ma was first starting out in 1990, he was fascinated by the internet’s capability and potential. In 1999 when he launched Alibaba as a business-to-business platform, many senior officials were impressed with the technology and concept. However, in 2003 during a meeting with government officials when he unraveled a new platform called “Taobao” which allowed people to sell directly to each other, officials were not onboard with such a concept. “Wait what is this? He’s taking about just people, unregulated, selling things to each other?” recalled Mr. Erisman, author of “Alibaba’s world”. Mr. Ma who sensed unrest amongst the officials quickly dismissed the discussion and sent the officials on a company tour.
As Mr. Ma’s success grew there were fewer people that could stop him from launching new initiatives. Mr. Ma’s “Alipay” was another cause of friction between him and the Chinese government. Alipay was an online payment service which he created to facilitate transactions on Alibaba’s e-commerce platforms. However, it also threatened China’s state-owned banks. “Chinese banks weren’t doing enough to support small businesses” Mr. Ma said, as they were much more focused on state-owned enterprises. In a 2008 conference Mr. Ma even openly challenged Chinese Banks by saying “If banks don’t change, we’ll change the banks”.
Official Chinese regulators grew increasingly wary of the exponentially expanding market power of Alibaba and Ant, Alipay already had almost one billion users. In 2015 China’s market regulators issued a report accusing products sold on Alibaba’s Taobao to be fake. Alibaba threatened to file a formal complaint and Mr. Ma even had a meeting with the head of State Administration for Industry and Commerce (the agency which issued the report) regarding the issue. The report was then removed, which gave the impression that Alibaba was strong enough to challenge the government.
Picture credits: The Guardian Website
Mr. Ma’s deteriorating relationship with the Chinese Government
In September 2015, Mr. Ma was invited to speak at a conference in Seattle which included high profile business leaders along with Chinese and American officials, Mr. Xi was also part of the conference. Each person was allowed three minutes to speak in front of the Chinese president who was in America for a state visit. Everyone stuck to their allocated time slots except Mr. Ma who took an additional seven minutes to talk about what Chinese companies can do to improve U.S – China relations. The president was “certainly not happy” commented a person familiar with Mr. Xi and it was the last time Mr. Ma was invited to speak in front of him.
Another such incident was when Mr. Ma went to meet Donald Trump a week before his inauguration. Chinese officials and diplomats in America only found out about the meeting after it concluded and was all over national news. “Some officials thought that he should have stayed in his own lane, which is being a businessman, not crossing over to sensitive issues” commented Lingling Wei a Wall Street Journal reporter.
Mr. Ma finally pushed too far when he publicly criticized regulators just before Ant’s record breaking initial public offering in the stock market. He started the speech off politely describing himself as “a somewhat retired man… sharing the non-professional views of a non-professional”. He even quoted the Chinese president himself, however then he shifted the focus of his speech and started talking about the need for reform and reconstruction in China’s financial system. He criticized regulators for curbing innovation and even commentated that Chinese banks had a “pawnshop mentality” and said that the banks were still relying on a system of “pledges and collateral”. These comments enraged officials that were listening to the speech.
Within a mere couple of hours after the speech, regulators piled reports against Ant, accusing the company of using digital financial products to encourage excessive borrowing which jeopardized China’s economy. Mr. Xi blocked Ant’s initial public offering and Mr. Ma ultimately took blame for the failure of the IPO. The Alibaba group was then further hit with a $2.8 billion anti-trust penalty imposed by China.
“The government is reminding companies that, at the end of the day, we’re the ones who make the regulations, we’re the ones who issue the licenses,” said Mark Natkin, the founder of Beijing based IT research firm Marbridge Consulting. “And if you forget, then you may find an entire area of your business doesn’t get licensed, or your IPO gets halted, or whatever we need to do just to make sure you know who’s the parent and who’s the child”.
September 08th 2021 | 5:00 PM