The catch in Alibaba’s promise of riches
China’s online giant is a rising star, but its foreign investors have no power and minimal information
By any measure, the listing of Alibaba Group on the New York Stock Exchange in September was a whopper. It raised $25 billion, making it the largest stock flotation in history. Overnight the diminutive Jack Ma, who founded his internet-based business services company in 1999, turned a handful of close friends from the eastern Chinese city of Hangzhou into billionaires, and transformed himself into one of the most famous entrepreneurs on the planet.
Alibaba is also an extraordinary success story, and testament to the calculated way an autocratic one-party state has constrained one facet of the internet, while giving another free rein. Mainland citizens cannot access Google, Facebook or Twitter, yet they can use the web for purely commercial purposes — booking holidays and taxis, trading unwanted for wanted goods, and gossiping about celebrities. Provided you keep away from political subjects, such as the future of Tibet or Taiwan, or avoid allusion to indelicate moments in the Communist Party’s recent past, you’re generally fine.
That’s how Ma turned Alibaba into an online powerhouse. He learned early in his business life to adhere to three strict rules. First, business is purely business: never stray into the political realm. Second, avoid flashy demonstrations of power or wealth. Beijing fears unrest stemming from a yawning wealth gap, and nothing stokes public ire more than a bejewelled billionaire in a flashy car. Finally, put on a good face for the country. Don’t make China look petty, small or cheap. Give it a successful mien, one that makes the People’s Republic look like a benevolent superpower in the making.
All of this Ma has done in spades. At home, his company is a Goliath — so commercially powerful that it would invite the attention of competition regulators in Britain or America in a heartbeat. By the time it listed in New York, it accounted for 80 per cent of all internet sales in China by volume, and half of all online transactions. Its consumer portal Taobao, similar to eBay, accounts for 60 per cent of all parcels shipped daily by the state delivery service, China Post. This dominance translates into heady financial figures: revenues rose by more than 50 per cent in the most recent full financial year, while net profit nearly tripled to 23.3 billion yuan (£2.4 billion).
All of this makes China look very good overseas. Alibaba is not a corporate marauder looking to snaffle market share from its western peers — at least not yet. Indeed, the group barely does any business outside the country’s borders. Nor does it inspire fear among foreign regulators in the way that, say, secretive telecoms equipment maker Huawei has done in India and the US. It’s not an industrial polluter, or a mining giant scraping away African and Latin American topsoil in a never-ending quest for natural resources. Even its brand, emblazoned in sunny orange, brings to mind a pleasant childhood memory: the tale of the poor woodcutter Ali Baba who discovers a secret cave filled with treasure.
This article first appeared in the print edition of The Spectator magazine, dated 8 November 2014