Hong Kong News

Nonpartisan, Noncommercial, unconstrained.
Tuesday, Mar 19, 2024

China's war on everything turns towards its own tycoons, with Jack Ma being a prime example

China's war on everything turns towards its own tycoons, with Jack Ma being a prime example

The aggressive economic approach the Chinese Communist Party has taken to its perceived enemies is also being used against some of its most wealthy citizens, writes Ian Verrender.

Until around nine months ago, Jack Ma was one of the world's richest and most powerful business figures, worth more than $54 billion.

He was certainly the richest man in China, with influence extending well beyond the world of commerce.

A high-flying tech entrepreneur, the Alibaba founder was on the brink of launching the world's biggest Initial Public Offering (IPO), the public float of an Alibaba offshoot, a financial services giant called ANT.

It wasn't just the size of the deal – at $34.5 billion it dwarfed even the float of Saudi Arabia's oil giant Aramco – that raised eyebrows. For the first time in history, a company of such scale would not be listing in New York. Its public debut would be via Hong Kong and Shanghai.

Throughout October, global investors clamoured for a slice of the company that in the space of four years had become the world's biggest retail funds manager.

They achieved this by enticing ordinary Chinese consumers, mostly Alibaba customers, to deposit their spare cash in its money market operations.

Then, without warning, Beijing killed the deal just before the float in November, apparently at the behest of President Xi Jinping.

The Chinese Communist Party has since dismembered ANT, hiving off its consumer transaction database — which had given the group its competitive advantage over the banking sector — and introducing a range of new "partners" into the business.

Mr Ma has gone into hibernation.

Once an outspoken and flamboyant figure, who would dress and perform like a rock star at lavish Alibaba functions, sightings these days are rare.

While never stated, the attack on ANT was seen as retribution for his vocal and public attack on Beijing last October accusing it of stifling innovation.

That wasn't the end of it. A few months ago, Alibaba was fined $US2.8 billion ($3.8 billion) for anti-competitive behaviour along with a range of other transgressions.

And in a personal insult, Mr Ma was removed as head of Hupan, the business school he founded four years ago.

The elite business academy is slated to close.

Jack Ma found himself once again a pioneer, at the forefront of industry trends.

Ever since his comeuppance last year, the Chinese Communist Party, in its war on everything, has turned inwards and for the past six months has been targeting technology giants and their leaders, exacting retribution on any group that does not come to heel.

First it was technology, now it is education


The news last week came without warning and left global investors gasping.

In yet another regulatory crackdown, Beijing ordered that all education companies, particularly those engaged in after-school tutoring, would be banned from making a profit.

Education companies tanked on the Shanghai, Shenzen and Hong Kong exchanges as the broader market surrendered all its gains for 2021.

JP Morgan analysts declared the rule changes made China's education sector "un-investable".

Early last month, ride-sharing company DiDi, which days earlier listed on the New York Stock Exchange with a $US4.4 billion ($6 billion) IPO, suddenly found itself out in the cold.

Apparently miffed that the founders ignored advice to delay the New York listing, Beijing regulators ordered a "security review" of the company's technology before issuing an edict that mobile stores remove DiDi's apps. Its share price since has halved.

Entertainment group Tencent also has incurred the wrath of authorities following scrutiny over its gaming development and its music streaming services, all under the guise of fostering competition.

While Washington too has attempted to rein in the power of huge technology companies and the extensive data they control, the authoritarian approach from Beijing, the sudden, highly co-ordinated nature of the clampdowns and the forced break-ups hint at something more sinister.

The Chinese Communist Party appears to have fallen out of love with the nation's most powerful tycoons, many of whom are at the forefront of technical innovation essential for the future of the People's Republic.

For an unelected regime struggling to maintain the growth necessary for social harmony, the enormous wealth, popularity and power from the country's most successful entrepreneurs present a clear and potent threat.

A brief history of Xi Jinping's economic failures
China has had several economic failings under President Xi Jinping.


Since he assumed power in March 2013, Xi Jinping has repeatedly attempted to transform China's economy to institute reforms that would shift the basis for future growth.

Each time he has failed and each time he has been forced to revert to the old model – a debt-driven stimulus program revolving around infrastructure and construction.

On at least two occasions his banking sector reforms designed to limit risky loans backfired.

The banking system has seized, forcing the central bank to inject liquidity, which then caused an explosion of high-risk lending.

Efforts to make it easier for Chinese firms to invest offshore resulted in massive capital outflows, a series of questionable investments in everything from real estate to resources and the re-imposition of capital controls.

His plan to fire up local stock markets by cutting restrictions on new floats resulted in a huge bubble on Shanghai and Shenzen markets which burst spectacularly in 2015.

And efforts to promote the renminbi as a global currency foundered when massive outflows again threatened financial stability, forcing a retreat.

Then there was the much-trumpeted goal of transforming China from a global factory of cheap exports into a western-style consumer economy.

No-one mentions that now.

But the well-worn path of government infrastructure is beginning to wear thin.

Growth has declined sharply from 14 per cent in 2007 to just over 6 per cent prior to the onset of the pandemic.

And for every yuan invested in government-funded infrastructure, the returns have fallen sharply.

A 2019 study by the Lowy Institute charts a huge lift in government funding with diminishing returns.

Steel cuts to hurt Australia — and China


After months of embarrassing failures in its bid to hurt Australia, Beijing last Friday finally looked to have turned a corner.

Iron ore prices, which had spiked above $US230 ($313) a tonne in May, a new record, last week slumped more than 7 per cent to $US187 ($254) a tonne.

The command economy which had ordered huge lifts in steel production for ever more infrastructure as a way out of the pandemic-induced recession now has ordered a dramatic cut in steel output.

Steel production has been running 12 per cent above last year's levels and recent proclamations that annual production must be lower than 2020 – ostensibly to reduce carbon emissions – will require drastic cutbacks in the second half.

While that will hurt iron ore prices, they are likely to remain elevated even if substantially lower than recent records.

But what pain may the decree force upon its own economy?

Ultimately, China's ability to maintain its iron-fisted control over the economy will be restrained by its own limitations.

Along with slumping productivity and slowing growth, debt has soared to 340 per cent of GDP and it is running out of levers to pull.

Alienation and aggression towards perceived enemies, including within its borders, appears to be on the rise.

And the exhortations of former premier Li Keqiang to ditch the top-down model have long been abandoned.

Newsletter

Related Articles

Hong Kong News
0:00
0:00
Close
It's always the people with the dirty hands pointing their fingers
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
Steve Jobs' Son Launches Venture Capital Firm With $200 Million For Cancer Treatments
Google reshuffles Assistant unit, lays off some staffers, to 'supercharge' products with A.I.
End of Viagra? FDA approved a gel against erectile dysfunction
UK sanctions Russians judges over dual British national Kara-Murza's trial
US restricts visa-free travel for Hungarian passport holders because of security concerns
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Political leader from South Africa, Julius Malema, led violent racist chants at a massive rally on Saturday
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
'I am not your servant': IndiGo crew member, passenger get into row over airline meal
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Spanish Citizenship Granted to Iranian chess player who removed hijab
US Senate Republican Mitch McConnell freezes up, leaves press conference
Speaker McCarthy says the United States House of Representatives is getting ready to impeach Joe Biden.
San Francisco car crash
This camera man is a genius
3D ad in front of Burj Khalifa
Next level gaming
BMW driver…
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
The politician and the journalist lost control and started fighting on live broadcast.
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
Joe Biden admitted, in his own words, that he delivered what he promised in exchange for the $10 million bribe he received from the Ukraine Oil Company.
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
40,000 child slaves in Congo are forced to work in cobalt mines so we can drive electric cars.
×