Sci-Tech

Alibaba in trouble: Jack Ma’s dangerous power struggle with the Politburo in Beijing – the economy

In the end, it took a television casting show for the world public to learn about the problems of one of the largest Internet companies. Alibaba, Amazon’s Chinese counterpart, has been in trouble for months. But it wasn’t until founder and owner Jack Ma showed up on his own TV show, “Africas Business Heroes,” and was replaced on the jury that the world wondered: Where did Jack Ma go?

Because there is still no sign of the richest man in China. Ma, who otherwise never avoids any camera, has not been shown to the public for months. No longer Tweeting, no longer appearing in public. The Bloomberg news agency states that the Chinese authorities forbade him to leave the country. Other sources say he is even being held.

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Only one thing seems clear: the rapid rise of private Alibaba in a communist state needs to be regulated. Jack Ma’s group became too strong for the party leadership. Not only Ma should feel the consequences.

Ma created public pressure

The power struggle to regulate large Internet companies in China has been hot for a long time. “In the past, the authorities have tried to regulate Alibaba more strictly,” said Kristin Shi-Kupfer, a professor of sinology at the University of Trier. “But the company was able to avert this through informal agreements and certainly also compromises with the party’s leadership.”

Ma, who gave up her operating business at the end of 2019, didn’t care. “He often – even publicly – put pressure. For example, he repeatedly criticized what he considered to be the hidden structures of the state financial system or regulatory authorities,” Shi-Kupfer said. He said the importance of Alibaba as China’s engine and face was too important for the authorities to escalate.

Alibaba services are an integral part of the daily life of most Chinese. REUTERS / Thomas Peter / File Photo

At the beginning of November, it was clear that it was over. At the time, Ma Ant Financial, Alibab’s financial arm, wanted to go public. With projected revenues of around $ 35 billion, this would be the largest IPO of all time. But the Chinese government let him run. One day before its debut on the Shanghai Stock Exchange, the stock exchange announced that the “regulatory environment” had changed. The IPO had to be canceled; Ma was summoned by the authorities.

Authorities are investigating the suspicion of a monopoly

International confidence in China’s financial sector seemed clearly less important to the government than sending a clear signal to Internet companies. And the party continues this course. At the end of December, the Chinese authorities announced that they had opened an investigation into Alibaba for possible violations of competition law. The Chinese group is suspected of “monopoly practices”.

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In fact, Alibaba is very important in everyday life in China, especially in the financial sector. “The company has built its own ecosystem and is present in many central areas of the economy, especially in digital services,” explains Shi-Kupfer. The core is the Alipay payment service under the auspices of Ant Financial. According to Alibaba, more than 700 million people use the service every month, which allows them to pay for purchases using their smartphones.

This method of payment is very common in China, even beggars have notes with QR codes so that they can accept donations digitally. The service transfers more than € 14.4 trillion a year. In addition, Ant Financial lends to households and smaller companies, offers asset management and insurance – and goes far into the state-controlled financial sector. The authorities are also likely to be irritated that Tencent and Baidu technology companies have also grown in the sector.

Ma as a model for entire sections of the population

The rise of Alibaba has long been considered a shining example in the People’s Republic. “Like Alibaba, Jack Ma has always been a model for the business success of many Chinese,” says Shi-Kupfer. “From a former English teacher to a multibillionaire – the story of Ma is part of the ‘Chinese dream’ and has found many imitators in the following years due to the meteoric rise of no less than a few companies in the digital economy.” “Beijing has more or less accepted that Alibaba has set up its own administrative structures, for example according to the hearing, with its own customs clearance at Hangzhou headquarters.”

But at some point Mao’s power grew too much. According to experts, Alibaba’s very aggressive investment and expansionist behavior in recent years has caused a clouding among some businessmen and economic observers – but especially in the political elite. Ma also went his own way in dialogue with the United States. “There should have been personal agreements in the individual conversation between him and Donald Trump,” says Shi-Kupfer. “The Chinese government will certainly watch Trump’s actions very closely, given what he might reveal.”

At least as innovative as Amazon

From a business point of view, Alibaba does not have to avoid international comparisons. Annual sales before the corona crisis were around US $ 72 billion, well below US competitors Amazon ($ 280 billion). But when it comes to online shopping, Alibaba is more inventive.

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Here, shopping is more like an element of leisure that can compete with Netflix. “Instead of watching your favorite series online, you also enjoy shopping for a while,” wrote Björn Ognibeni, a Chinese expert at the end of last year, in the “Handelsblatt”. Alibaba achieves this by not scrolling through dull product lists, as is the case in Western online stores, but instead by presenting articles with videos, background information, or small games. It also offers small retailers the opportunity to sell their products live.

Part of the shopping experience is that many orders in big cities are not only delivered on the same day, but within minutes – preferably also by drone. Alibaba is also active in the grocery store. In October 2020, most of China’s leading supermarket chain was raised for a good three billion euros.

The external impact of current events is devastating. According to insiders, the outgoing US government is even considering including the Alibaba blacklist in the list of companies that are allegedly controlled by the Chinese military. According to Reuters, Alibaba now wants to issue a US dollar bond to test how investors are currently assessing the situation in Alibaba. As for the share, it is very necessary: ​​since the end of October, it has lost almost 30 percent of its value.

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