From the file

Chinese Capitalism | Jack Ma’s fintech company Ant Group was set for one of the biggest stock market launches in history. Then China’s ruling party took offence.

slow newscast

Hero of the financial revolution

Hero of the financial revolution

Can the Chinese Communist Party learn to live with Jack Ma?


Basia Cummings: A plan went wrong last week. Really, really, quite badly wrong. It was a plan by one of the world’s richest men to launch what might have been his greatest creation yet. So you might be trying to guess: who was it? Bezos? Musk? Zuckerberg? No.

This creation – a company, actually – could have changed the financial world. And it would have made a huge number of people very rich. But it’s a company that you might not have even heard of – even as it was about to make history.

So I’ll stop with some of the dramatics now. I’m talking about Jack Ma and his company Ant Financial. Jack Ma – the face of Chinese capitalism and the founder of Alibaba, the giant online marketplace that is really matched only in size by Amazon.

So here’s what happened over the last few days. Ant was due to go public. It was to go to IPO – initial public offering – which is when a private company sells shares in the open market.


Basia Cummings: A plan went wrong last week. Really, really, quite badly wrong. It was a plan by one of the world’s richest men to launch what might have been his greatest creation yet. So you might be trying to guess: who was it? Bezos? Musk? Zuckerberg? No.

This creation – a company, actually – could have changed the financial world. And it would have made a huge number of people very rich. But it’s a company that you might not have even heard of – even as it was about to make history.

So I’ll stop with some of the dramatics now. I’m talking about Jack Ma and his company Ant Financial. Jack Ma – the face of Chinese capitalism and the founder of Alibaba, the giant online marketplace that is really matched only in size by Amazon.

So here’s what happened over the last few days. Ant was due to go public. It was to go to IPO – initial public offering – which is when a private company sells shares in the open market.

Ant Financial was projected to raise $35 billion – that would have made it the biggest stock market launch ever, bigger than Facebook, bigger than General Motors, bigger even than Saudi Aramco, Saudi Arabia’s oil company.

So we’re talking gargantuan numbers here. And you can imagine what’s involved in preparing for a moment like that. The number of banks and financial institutions, the media, the PR…. This was years in the making by hundreds, maybe thousands, of people; and millions spent just to get Ant ready to be sold.

This was financial hype of the highest kind.

But then, in a flash, the deal was off. And now, disclaimer, I’m not just going to tell you in this podcast about an IPO gone wrong. I’m Basia Cummings, and in this week’s Slow Newscast I’m going to tell you about why it was called off. Because, yes, this is a story about Jack Ma and Ant Financial. But really it’s about Xi Jinping, the Chinese president, and it’s a parable of modern China – about how it deals with the contradictions at the heart of the country that it’s become.

Because China is, as you know, still a one-party state. It’s still run by the Communist Party with that towering figure of President Xi sitting at the top of it all. But, according to rich lists, China now has nearly 400 dollar-billionaires. So how does that work? How does that tension in power work? And the question we need to ask after the last few days is, was it actually totally blindingly obvious that, at some point, President Xi would look around one day and worry that maybe one of those billionaires might just be getting too powerful?

Steve Tsang: In China, there is nothing more important than the Communist Party of China and therefore anyone or any institution, any corporation appearing to challenge the authority of the Communist Party simply cannot be accepted.

Basia: So let’s go over it. Jack Ma, this charismatic schoolteacher turned China’s richest man, was getting ready to launch Ant on the stock exchanges in Shanghai and Hong Kong.

You can imagine the focus and the chaos in the countdown to that moment.

This was an IPO that was going to set records. The bids were projected to total 3 trillion, chasing 34 billion worth of shares. And then, suddenly, a nasty surprise.

China’s financial regulators called Jack Ma in for a meeting. And this wasn’t just one agency poking its nose in. This was the whole lot. This was all of them: the People’s Bank of China and three other regulators, who they said conducted “regulatory interviews” with Jack Ma.

And in a flash, shares in Alibaba – the company that owns a part of Ant – fell by more than 8 per cent, with 3 billion wiped off Jack Ma’s net worth.

But you know, it is possible that Jack Ma had an inkling of what was really going on. Because, just a few days before, he’d taken a risk. Very publicly, he’d criticised the way that the Chinese financial system is run.

Steve Tsang: I think, by any standard, Jack Ma is one of the world’s greatest entrepreneurs.

Basia: This is Steve Tsang. He’s director of the China Institute at the School of Oriental and African Studies in London.

Steve Tsang: He understood the Chinese system, and had been very careful in how he managed it.

Basia: But at a conference in Shanghai at the end of October, Jack Ma was less careful. For a man in his position, you might say that he was reckless.

Steve Tsang: But sometime last week at an extremely high level conference in China, where some of the most senior leaders in managing the Chinese economy were present together with some of the very senior Western investors, Jack Ma gave a speech in which he effectively said that the Chinese financial system was unfit for the 21st Century. What Ant Financial is doing is something that really is looking forward and suitable for the world of the 21st Century. Now that caused really a serious problem, in the Chinese context. It is a serious problem because the financial regulators in China are very conservative. And Ant Financial is very, very innovative. So you have an inherent problem there that the financial regulators are not comfortable with the way how Jack Ma is going about it anyway. But they were willing to let it happen, until Jack Ma embarrassed the Chinese government and the Communist Party in front of their enlightened foreign guests.

That is just something that the Communist Party of China will never tolerate – Jack Ma or not. He will have to be taught a lesson.

Basia: In your view this was a direct catalyst. These words that he spoke at this conference were the direct reason why he was summoned by the regulators at this crucial moment of launching the IPO?

Steve Tsang: The reality is that nobody knows exactly why the Communist Party decided to summon Jack Ma. But the most likely explanation would be not only what he said, but the way he said it and the conditions in which he said it.

Basia: So the stage was set in the most public way possible. Jack Ma had stuck pretty much two fingers up to the whole leadership of the Chinese financial system and to their bosses in the communist party, too.

His comments went viral on the Chinese internet and they were seen as a direct attack on officials.

So why? Why would he do that? Well, first you need to understand something about Jack Ma – because it takes quite a character to take a gamble like that.

Rui Ma: This rarely gets mentioned in Western media, but in Chinese media people comment on his appearance and say he’s sort of a funny-looking guy. A lot of people call him alien-looking

Basia: Rui Ma is a financial tech journalist working out of Silicon Valley. She says that you can’t really understand what happened with Ant Financial without getting into this story about a man from humble beginnings who’s come to embody this fascinating paradox in contemporary China.

Rui Ma: Jack Ma was a really, really terrible student, actually. In fact, when he took the college entrance exam, which is one of the most important exams in China, because it really determines your future career trajectory, he had to take it three times – and that exam is only given once a year.

On his first try, he only scored one point on the math section of the exam. So this is something he talks about a lot; that he is not some technical or mathematical genius, as we can see by his scores. His abilities really lie in his charisma. And his penchant for hiring the right people versus having all of that knowledge himself. So he talks a lot about how he relies on experts versus being the expert.

Basia: So Jack’s this odd-looking guy. He’s an unremarkable student. He’s rejected from every job he applied for. And so he starts studying English. And he’s pretty good at it. He starts looking to the West, to America.

Rui Ma: After teaching English for a couple of years, he started a translation company, which allowed him to interact with foreigners. Actually, he already had some experience with international visitors because he was actually really good at English even before he got into college.

Basia: And it was his English language skills that meant that in 1995 – a year, incidentally, after Jeff Bezos launched Amazon – Jack Ma travels to the States, where he discovers the internet really for the first time.

Jack Ma clip: My friend said: “This is the internet. You can find whatever you can find through the internet.” I say: “Really?” So I, I searched the word beer. Beer, very simple word. I did not know why I searched the beer. Yeah, and I find American beer, Germany beer, and no Chinese beer – so I was curious. I searched China. And all search engines: no China, no data.

And I told my friend, can we make a Chinese homepage and post that to see what’s the result. So I made a whole translation agency, the homepage, very ugly looking homepage. 9.30 we launched it. And by 12 o’clock I received five emails. Three from the USA, one from Japan, one from Germany. I was so excited. I think: this is something interesting.

Basia: This was a real turning point. When he gets back to China, he set up his first internet company, called China Pages, which is basically a Chinese version of the Yellow Pages (if you remember what that was). And within four years, he’s in this small apartment in Hangzhou setting up something called Alibaba.

Now, Alibaba’s rise was lightning fast. It’s an online marketplace, a place where small businesses and big ones can sell their products directly to us, the consumers.

But, early on, it wasn’t without its sceptics.

News clip

Basia: But it kept growing and growing and growing and growing. And by 2014, Jack Ma had properly silenced any of his doubters. He’d gone from huddling in this small apartment in eastern China to, 15 years later in 2014, and he’s standing in the New York stock exchange…

News clip: …about to launch Alibaba at $68 per share, making it one of the largest IPOs in history, certainly the largest in the US yet.

Basia: So this is a key moment. Alibaba was about to be listed and Jack Ma was about to make history for the first time. And at that point in 2014, Alibaba’s stock market launch became the biggest in history, with a market value of $231 billion.

So he’s a superstar abroad and at home. And he’s a superstar not just because he has this remarkable nose for business. He’s becoming an icon in China because he’s not just a faceless businessman. As Rui says, it’s his charisma, his charm, that’s part of his power. He’s bombastic. He wears these wacky clothes on stage. He revels in the limelight. And it’s this that propelled him to such a public spot as China’s most successful entrepreneur.

But it puts him in danger, too.

Steve Tsang: I think the Chinese government absolutely loved Jack Ma and wanted Alibaba and Ant Financial to be not only successful, but be absolutely regarded as top-notch globally.

I don’t think they have a problem with that. They only have a problem with Jack Ma and the Alibaba group, including Ant Financial, to challenge the authority of the Communist Party of China.

Basia: So is that sort of what this episode tells us? I wonder whether it’s fair to characterise it like this: that calling him before the regulators, just before this huge moment for Ant Financial, is a sort of sign of how capitalist China has become, but also how communist it remains – and that tension that continues.

Steve Tsang: I think that’s a very good way of putting it, except that I wouldn’t necessarily use the word communist. I will use the word Leninist. The Leninist heritage is about control. And it is very much in the DNA of the Communist Party of China. Whether the members of the Communist Party still believe in communism or not – that’s a different issue – but the effectiveness and the centrality of the Communist Party in controlling everything and everyone, if and when the party wants to do so, is totally non-negotiable. So, yes. Allow Chinese companies to be successful in capitalist terms, that will be great. But this cannot happen at the expense of the effective Leninist control of the Communist Party.

In this case, I don’t think we are bringing in Xi Jinping himself, but if you’re dealing with a situation where Xi Jinping’s personal standing or reputation is being put at stake, then it would be even more clear and the party will act even more decisively.

Basia: And the thing is, Jack Ma is no stranger to speaking his mind. In 2015 – no doubt, you can imagine, bolstered by this enormous success with the Alibaba IPO a year earlier – he says publicly, and I quote: “Chinese consumption is not driven by the government but by entrepreneurship and the market.”

He said – and you won’t need me to tell you that this probably didn’t go down well, this bit – “In the past 20 years, the government was so strong. Now, they are getting weak. It’s our opportunity; it’s our showtime, to show how the market economy, entrepreneurship, can develop real consumption.”

And at the World Economic Forum that same year, he said quite famously: “Be in love with the government. But don’t marry them.”

And then, just four years later, in 2018, Jack Ma made a surprise announcement. He said that he was going to resign from the company that he built. He said he wanted to focus on his philanthropic ventures, his charity work. Which, by the way, is huge: he supports tech entrepreneurs in Africa, education in Tibet, and in the pandemic he has been donating millions of items of PPE – protective gear – to America and six other major countries.

But let’s stay at that moment in 2018. There were rumours swirling at the time that the decision to step back from Alibaba was really because he had been pushed by the Chinese state.

Steve Tsang: I think when Jack Ma decided that he would – as they say – step into the second line rather than stay on the front line, he was being politically very smart. He was aware that the financial and economic cult of Alibaba Group was becoming so big that he was getting attention from the Chinese government.

Basia: But he’s not going quietly. At his leaving party for Alibaba, Jack Ma took centre stage.

News clip

Basia: He soon had another run-in with the authorities over his online marketplace Taobao, a place where small businesses can sell their products.

Rui Ma: So he had this very public bout with authorities a couple of years ago, when the state administration for industry and commerce basically put out this quote-unquote “white paper” and said that, hey, there’s a lot of fraudulent products on Alibaba’s marketplace.

And, of course, this caused the stock to drop very sharply, and for Jack Ma basically to come out and say like, “Hey, that’s not cool. Um, why are you saying that?” And really fighting back against the authorities. Very, very, very publicly. Ultimately this got resolved and the authorities actually backed out and said, “Oh, our bad. This is not fully with basis.” Because it was based on, apparently, conversations that had been had in private.

But I think that that incident could have given Jack the idea that having such a strong approach towards the financial regulators might have the same result. So he is definitely known for being a very hot-headed entrepreneur.

Basia: And, of course, what’s happening here is obvious in many ways.

Jack Ma had become a powerful public figure. He had fans, immense wealth, he’s an international asset for the Chinese government and for Xi Jinping, the president. But only if he plays by the rules of the state.

Until now – until that moment – Jack Ma had been performing, quite successfully, this careful dance with the Chinese government. But it’s a dance that, to some extent, he’s performing in a straightjacket.

And there is a cautionary tale here. In September this year, a billionaire investor called Ren Zhiqiang was sentenced to 18 years in prison for insulting Xi Jinping.

Steve Tsang: Well, the commonality is the signalling. Not only to individuals like Jack Ma or Ren Zhiqiang: the signalling is to everybody, whatever your background. The other commonality between Jack Ma and Ren Zhiqiang is that Jack Ma is the iconic symbol of the new entrepreneurs of China.

Ren Zhiqiang is what in China they call a “red second generation”. He is somebody who is an offspring of a senior Communist Party leader from the past, believing that because of his family background he would be protected and therefore he could, in his case, actually criticise Xi Jinping personally, in effect saying that Xi Jinping was a clown pretending to be an emperor.

And that’s why he was given 18 years – to show to all other so-called red second generations that, “Don’t even think about it. You will enjoy no protection. We will get you if you did something similar to what Ren Zhiqiang has done.”

Basia: If we zoom out a bit, it’s clear that the country around Jack Ma has been changing.

So you could see him as being increasingly at odds with the kind of country Xi Jingping is building since he rose to power in 2012. Xi clamps down on dissent. He emphasises the importance of a state economy, but, all around him, he seeing China’s booming economy being turbocharged by private companies and private entrepreneurs.

So there’s that tension.

And this isn’t just happening to Jack Ma and Alibaba: all three of China’s biggest internet companies, Baidu (a search engine), Alibaba (e-commerce) and Tencent (messaging and gaming) have all felt the government’s wrath.

Take Tencent, for example: in 2018, it lost $200 billion from its market cap after regulators stopped approving its new online games.

But the key thing is this: at the same time, these companies are really valuable to the Chinese state. They generate mountains of data about Chinese citizens, and they have been described by many people as basically a real-time, privately run intelligence platform.

So they are, in that sense, something of a model for the ideal private company in Xi’s China. And I mean that in the sense that they drive huge economic growth, but they do so in service of the political system.

And so it’s possible that what we’ve seen this time, in the last few days, with Jack Ma, is a superstar businessman who simply flew too close to the sun.

It was at this Bund Summit – described as this place to promote China’s “financial opening-up” in Shanghai at the end of October – that Jack Ma made a keynote speech.

Rui Ma: And on the eve of this fantastic announcement, Jack Ma happened to be in Shanghai at the Bund financial conference. And he went on stage and gave this speech that really surprised everyone in how critical he was of the financial regulatory system in China – and the banks. Specifically, he called banks to be having a “pawn shop mentality”. And then he called out the regulators for not being innovative in their approach to policy.

Basia: It backfired. He was hauled in. The IPO was off.

Steve Tsang: If Jack Ma had simply said what he had to say in private to the Chinese financial regulators, I think they would have listened to him. They might not have agreed, but they will not need to open it, block the IPO and publicly humiliate Jack Ma.

They still want people like Jack Ma to be successful. So I would be surprised if when Ant Financial will make concessions and compromises along the lines of what China’s financial regulators want, then I would expect the Chinese government to allow Ant Financial to have its IPO at a later stage.

Basia: So to your mind, this was a sort of a pretty public slap on the wrist rather than a true sign of a kind of cooling towards Jack Ma or a sign of a breakdown in a relationship between him and the Chinese government.

Steve Tsang: Yes, I think it is exactly that. It is meant to be a public slap on the wrist and also a signal to any other leading entrepreneurs in China with enormous resources and capital: “Don’t even try to think about doing something like what Jack Ma has done.” And don’t forget that until Jack Ma crossed the line, Jack Ma was a hero that the Communist party was very happy to support.

So behave. That is the message I think the party is sending.

Steve Tsang: I think what this whole saga tells us is that China absolutely has the capacity, the human talent, to put up the kinds of industries or corporations that tend to compete globally. I think Jack Ma has demonstrated that.

And yet Xi Jinping’s approach fundamentally makes it very difficult for companies to be competitive in a free way.

And, here, I think we are looking at two things. The Communist Party system, the Leninist system itself, will have imposed huge amount of constraints anyway. But, before Xi Jinping, that system was in general terms moving in a direction of loosening of control and accepting of greater freedom for individuals and companies to move in the directions they want to be innovative.

Xi Jinping has reined in the party in that direction; imposing tighter control. And therefore, the scope for people like Jack Ma and Alibaba Group to be as free and successful in the way that they would like to be will be more restrained.

The party state under Xi Jinping is much more cautious in terms of allowing anyone or any institutions to become so big, so powerful that it could potentially challenge the party state or his leader.

Basia: As Steve says, the IPO might ultimately still happen. Jack Ma could still become Asia’s richest man and cement his place as arguably the greatest entrepreneur in the world. But what’s happened here tells us something important about China today. This was an IPO full of symbolism. But I want to end on a slightly different kind of symbolism – because there’s another power in Jack’s story, which isn’t just one of wealth, and it’s about what he represents to the Chinese people.

Rui Ma: So this is your very optimistic story of social mobility in China: you can be Jack Ma, be funny-looking, be very average, but as long as you’re fearless and go after your dreams, and you have the right sort of strategy in mind, the right market that you’re going after, your persistence – along with a little bit of luck – will get you to very far places. And that’s the sort of fairy tale, Chinese entrepreneurship story, that has resonated a lot in China with the population.