Several media outlets are asking “Where is Jack Ma?” China’s most well-known tech entrepreneur and self-made billionaire has not been seen publicly after a speech he gave at the Bund Summit in Shanghai in October criticizing China’s financial system. CNBC’s David Faber reports that Ma (pictured) is not missing but “laying low” and is purposely remaining less visible after his speech angered the CCP. Radio Free Asia, however, says Ma is definitely under a travel ban and may be “under restrictive measures.” More ominously, Asia Times Financial reports that a CCP mouthpiece has said Jack Ma is now “embracing supervision” at an undisclosed location.
So who is Jack Ma? He is the founder of e-commerce company Alibaba Group. The company’s financial arm, Ant Group, operates the digital payment platform Alipay. Alipay is like PayPal and it’s a treasure house of data on the spending habits and financial information from its more than 1.3 billion users, which gives Ant Group an advantage over lenders and banks. Ant Group was scheduled to open on the Hong Kong and Shanghai Stock Exchange in November. But after Ma’s October speech, Ant Group’s IPO was denied by regulators.
Radio Free Asia reports that regulators were concerned that Ma wanted to circumvent state banks by offering unsecured loans, a claim that comes at a time when President Xi Jinping called for regulations to control debt and financial risk. Economist Law Ka-Chung spoke with Radio Free Asia:
The Chinese Communist Party may feel that the platforms owned by Ant and Ali control the lion’s share of data nationwide, including personal details of nearly everybody, as well as a huge amount of money. “They have access to huge sources of funding, and are powerful enough to negotiate with the regime…
Their handling of Jack Ma isn’t just about an antitrust investigation; it’s about the concern that he could be a threat to CCP rule. It’s not just about economics: he may be seen as a political threat.“Chinese Official Singles Out Jack Ma’s Ant Group Amid Fintech Probe Warning” at Radio Free Asia
Here’s the timeline of events, so far as we know, courtesy Radio Free Asia:
- October 24, 2020: Jack Ma gave a presentation at the Bund Summit in Shanghai in which he criticized China’s risk-adverse regulations on the financial industry, particularly how those applied to financial technology, saying “Chinese finance has no system” and comparing lending practices to a “pawn shop mentality”.
- November 2, 2020: Ma and his partners were summoned to a meeting with the China Securities Regulatory Commission (CSRC) along with other watchdog agencies.
- November 3, 2020: Ant Group’s Initial Public Offering, which was originally approved by regulators, would have been the largest IPO in history at US$37 billion. It was suspended, reportedly at the behest of Xi Jinping himself.
- December, 2020: Regulators announced that Alibaba was undergoing an anti-monopoly probe by the State Administration for Market Regulation (SAMR). Ant Group was told to restructure.
- December 21, 2020: Ma offered to turn over as much of Ant Group’s business to the state as was required.
- December 26, 2020: The deputy governor of People’s Bank of China summoned Ant representatives to a meeting with regulators in Beijing.
- December, 2020: Ma did not appear on the final episode of the business talent show “Africa’s Business Heroes” even though the show was his project. His details were also removed from the show’s website.
- December 31, 2020: The Chinese government’s propaganda department censors information on Alibaba and Jack Ma, telling media outlets to only publish the official statements.
Loyalty to the Party or Else
I have reported here on the unadvertised costs of doing business with China for foreign companies that hope to reach China’s 1.3 billion consumers. But, doing business in China comes with a price too. Loyalty to the party, it seems, is more important than helping China become a world leader in the tech industry. According to Bloomberg News,
The action against Ma sends the latest signal that Beijing feels emboldened to risk international fallout from measures meant to address domestic challenges. Xi has previously defied threats of U.S. sanctions to impose sweeping national security legislation on the former British colony of Hong Kong. Crushing Ant’s IPO risked alienating a plethora of powerful global financiers from Singapore’s sovereign wealth fund to Carlyle.“Xi’s Push Against Jack Ma Sparks New Threat for China Tech” at Bloomberg News (January 6, 2021)
According to the Wall Street Journal, Ma has been hesitant to give Beijing access to Ant Group’s data. A state takeover of Ant Group would justify investors’ fears that China’s free market system and its private business are really controlled by the Chinese Communist Party.
Alibaba has spent years courting global investors, assuring them that the company is distinct from the Chinese Communist Party. For the most part, the CCP has left Alibaba alone, but over the last year Xi Jinping has increased the CCP’s control over technology companies and seems to be leading China in a direction similar to the Soviet Union’s failed state-controlled economy.
CCP general secretary Xi Jinping unveiled plans at the end of October to move China to a state-controlled, “circular” economy based on domestic demand, and away from the export-based model that has fueled rapid growth since 1979, when late supreme leader Deng Xiaoping ushered in four decades of market-based economic policy.
“Analysts have said there is a widespread expectation that Xi will move to change the current system of property ownership.“Chinese Official Singles Out Jack Ma’s Ant Group Amid Fintech Probe Warning” at Radio Free Asia (January 8, 2021)
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…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.Charlie Campbell, “Where Is Alibaba Founder Jack Ma? What the Saga of One of the World’s Richest Men Reveals About China Under Xi Jinping” at TIME (January 4, 2021)
Asia Times Financial reports that Pan Gongsheng, a deputy governor of People’s Bank of China, summoned Ant representatives to a meeting with regulators in Beijing in December to inform them as to what Ant Group needed to rectify with respect to providing illegal credit, insurance, and wealth management. Micro-lending in high-risk loans circumvents rules set out by bank regulators. Alibaba was not required to break up Ant Group, but it will need to create a separate holding company.
Economist Law Ka-chung thinks Beijing is likely moving against Ant and Alibaba because they have become too powerful:
The Chinese Communist Party may feel that the platforms owned by Ant and Ali control the lion’s share of data nationwide, including personal details of nearly everybody, as well as a huge amount of money,” Law told RFA.
They have access to huge sources of funding, and are powerful enough to negotiate with the regime…Their handling of Jack Ma isn’t just about an antitrust investigation; it’s also about the concern that he could be a threat to CCP rule…Politics trumps everything, as far as the CCP is concerned; it has always been their top consideration.“Chinese Official Singles Out Jack Ma’s Ant Group Amid Fintech Probe Warning” at Radio Free Asia
What Did Jack Ma Say That Disappeared Him?
Jack Ma (Ma Yun) was once the darling of the CCP, a shining example of China’s modern entrepreneurs. From humble beginnings, he rose to become the richest man in China. However, Ma’s criticism of China’s financial system and its regulators went too far for the CCP. He had retired in October to focus on philanthropy. In September, the CCP had just published new guidelines for its “united front work in the private sector,” which seems to imply more governmental micromanaging of private businesses.
At the Bund Summit, Ma’s call for greater risks and an overhaul of China’s financial system ran counter to these new guidelines, which called for a more cautious approach because “risks and challenges have increased significantly.”
The Bund Summit, which describes itself as “an open, pragmatic and internationally influential financial high-end communication platform.” According to an English translation of Ma’s speech in Hong Kong’s Apple Daily, he was self-deprecating and deferential to Xi Jinping, while also proposing reforms to China’s financial system and changing regulations to promote innovation. This seems in line with the summit’s stated purpose of dialogue and China’s commitment to “deepening reforms, opening up wider, and promoting international cooperation in multiple areas.”
Ma has served in the UN’s High-Level Panel on Digital Cooperation and as working advocate of the UN’s panel of Sustainable Development Goals, giving him a global perspective on the financial economy. In his speech, Ma suggested that China not look at what Europe and America have achieved and fill in where China has gaps, because Europe has an older, complex financial system that restricts innovation. China’s financial system, Ma says, is like those of young developing countries. The solution is digital finance, which Ant Group is poised to provide.
In the speech, Ma goes on to criticize regulations as stifling innovation, which is typical tech entrepreneur talk, “I have noticed another phenomenon. While many regulatory departments around the world have become risk-free themselves, the whole economy—as well as society as a whole—has become risky. The race tomorrow will be a race of innovation, not regulatory capabilities. Today all countries are vying to be the most ruthless regulator, and all developments are empty talk.”
Among possibly sensitive points in his speech, Ma argued that China should have a credit system based data rather than assets and collateral, which he termed a “pawn shop mentality.” Data-driven lending advantages Ant Group, which can use Alipay data. Notably, Ma has been reluctant to share that consumer data with Beijing.
A Tale of Disappearing Billionaires and Jail Sentences
Ma is not the first of China’s wealthy elite to disappear since 2013 when Beijing passed a law allowing arbitrary and secret detentions. According to Jennifer Wang at Forbes.com, Ma’s disappearance from public life is part of a larger pattern of what happens to China’s business elite if they anger the CCP.
Wang cites several notable examples over the last few years:
Guo Guangchang, who is sometimes referred to as China’s Warren Buffett, is the founder and chairman of Fosun International. In 2015, he was taken by police at the Shanghai airport and disappeared from the public view for some time. When Guo returned to Fosun, he did not explain his absence. Fashion billionaire Zhou Changjian had a similar experience in 2016.
Ren Zhiquian, who is a Chinese real estate billionaire, went missing in March 2020 after criticizing the Chinese government for how it handled the coronavirus pandemic, referring to Xi Jinping as a “clown.” Ren, a longtime Communist Party member, was expelled from the party. His assets were seized and he was sentenced to 18 years in prison.
Xiao Jianhua, an executive with investment firm Tomorrow Group, was seized by authorities from a Four Seasons Hotel in Hong Kong in 2017. According to Wang, Xiao was well-connected with China’s political elites, coordinating many of their business deals. He has not been seen publicly since 2017. According to Radio Free Asia, political analysts are drawing parallels between Xiao’s disappearance and Ma’s, saying that Ma is likely under strict house arrest and a travel ban.
More recently, Lai Xiaomin, the former chairman of China Huarong Asset Management, was sentenced to death for accepting bribes, promoting corruption, and engaging in bigamy. He had apparently accepted around US$280 million in bribes over ten years. Human Rights Watch, which opposes the death penalty, has said that Lai’s death sentence for financial crimes is intended as an example to other business elites.
The Party Is Everything
In a 2018 interview at the World Economic Forum, Ma presciently observed that the first and second technological revolutions caused World Wars I and II. Now that we are in the third technological revolution, he asked what will happen? He expected a war against disease, against environmental pollution, and against poverty and that technology and cooperation can solve these problems.
Flash forward to his 2020 speech at the Bund Summit in which he says, “We must not underestimate the pandemic. As a force, it has prompted social progress, and as such, it is no less important than the Second World War.”
The pandemic has done much to sully China’s global image, creating tensions that could hamper China’s slowing economy. In response to this as well as increasing national unrest, the CCP has engaged in a global propaganda campaign to rewrite the narrative on China and the coronavirus as well as aggressively pursue China’s goals in the South China Sea. According to TIME:
Yet it’s clear that the CCP under President Xi will not countenance any challenge to its authority. Given a slowing Chinese economy and mounting geopolitical headwinds, Beijing is nervous about systematic financial risks and rising debt. This is no time to be calling, as Ma did, for a loosening of the system. And just as seemingly unassailable titans of real estate, finance and show-biz previously discovered, China’s tech champion is learning that loyalty comes first in Xi’s China. ‘There is no so-called [Ma] era,’ read a recent headline in the CCP mouthpiece People’s Daily, ‘but only an era that has [Ma] in it.’Charlie Campbell, “Where Is Alibaba Founder Jack Ma? What the Saga of One of the World’s Richest Men Reveals About China Under Xi Jinping” at TIME (January 4, 2021)
Erasing Jack Ma’s Existence
Chinese authorities have directed media outlets to only report official statements on Alibaba and Jack Ma. The directive is that media should “not make changes or engage in extended analysis without permission… If any company announcements oppose the official stance, do not publish, do not re-post, do not quote foreign media.”
Ma has also become the target of an online smear campaign in state media outlets, calling him a money-grabbing vampire who exploits the poor. The state-run China Daily newspaper editorialized, re Ma and others that “If you disregard your food and make use of the policy advantages given by the state to do business that is not conducive to economic development and not beneficial to the people’s lives, you will only end up reaping the consequences.”
These actions point to a larger drift toward a state-run economy like that of the former Soviet Union.
Note: The picture of Jack Ma was taken by Ciaran McCrickard at the World Economic Forum in 2018 (CC by 2.0)
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