With this move, many believe that the CCP is making it very clear to China’s billionaires just what the rules of doing business within the country are.
Being a dedicated communist is the only way to be a successful capitalist in China – that, at least, is how the ruling Chinese Communist Party (CCP) sees it.
This became more apparent in November, when the CCP blocked the largest initial public offering in history. Ant Group, which is headed by the flamboyant Jack Ma, who also founded e-commerce giant Alibaba, was set to enter the Shanghai and Hong Kong exchanges with a groundbreaking initial public offering (IPO) of US$34.5 billion.
Previously, Saudi Aramco had the largest IPO at US$29.4 billion and, before that, Jack Ma’s Alibaba produced an IPO of US$25 billion.
But that IPO did not, and may never, happen. The official reason is Ant’s failure to meet financial regulations. But many believed that the reasoning behind Ant’s removal was personal: Jack Ma, who with a net worth of US$65.6 billion is the richest man in China, played his politics wrong.
In addition to being the richest man in China, Jack Ma may also be the most charismatic. The billionaire has been known to dress like Michael Jackson and perform in front of his employees, preside over unofficial mass weddings and voice his opinion over a number of issues – which may have been what destroyed Ant Group’s aspirations in Shanghai and Hong Kong.
Ma has raised his dissatisfaction with financial regulators in the past, most notably in the months preceding the proposed Ant Group IPO. Ma also has a lot to say about the financial system in China, likely because of his role in Alipay
Alipay is possibly the most valuable subsidiary of Ant Group and it has revolutionized China’s financial sector. Alipay allows for users to pay for products and services ranging from groceries to insurance with its app. For a society that never had a sizable credit card industry and for which much of the financial sector is inaccessible to large portions of the population, Alipay has driven China toward becoming a cashless society.
This, along with Jack Ma’s criticism, has led to a rift between the Beijing regulators and the billionaire. The tech mogul has accused China’s banks of operating with a pawnshop mentality, which angered bank officials, one of whom told Reuters that the accusation was a “punch in their faces.”
This fatal miscalculation led to the death of Ant Group’s IPO and serves as a reminder to Chinese billionaires of the importance of playing their politics correctly. For the most part, they do. Going forward, Jack Ma might choose to follow in the example of Ma Huateng, or Pony Ma as he is often known.
Pony Ma is the second-richest man in China with a net worth of US$55.2 billion. He founded Tencent, an international digital conglomerate that has stakes in industries ranging from film and video games to electric vehicles. Most notably, Tencent owns WeChat, China’s most popular social media platform.
The only thing Pony and Jack Ma appear to have in common is that they are both Chinese tech billionaires with the same surname (no relation). Pony Ma was a computer science major renowned for his hacking abilities. Whereas Jack Ma, an English major, claims to have never written a line of code. Pony Ma tries to keep out of the public eye. Jack does not.
While both men are CCP members, Pony has taken a more active stance in civic life. The tech tycoon is a delegate to the National People’s Congress (NPC) and has been active in municipal politics in Shenzhen.
Pony Ma is not the only billionaire serving as a delegate: in 2017 there were an estimated 100 billionaires serving in the NPC.
More billionaires are produced in China than in any other country and the country’s luxury goods market, which is expected to become the biggest in the world, reflects that. The communist nation even has its own butler academy to meet the needs of the newly moneyed elite.
Theoretically, Beijing is proud of this success. Amanda Phalin, an economist specializing in international business at the University of Florida’s Warrington College of Business, says “the Chinese government has appreciated and encouraged Jack Ma’s rock star status in the global business world. He is, to them, emblematic of what the country’s special brand of Communist-controlled capitalism can accomplish.”
But dissent is hardly tolerated. What the Communist Party Gives, the Communist Party can take away.
“However, despite his billionaire celebrity status,” Dr. Phalin adds, “the government is ultimately running the show—and they reminded him of this when they scratched Ant’s IPO after Ma’s dissentious public comments about the Chinese financial system. Certainly, the government cited arguably justifiable concerns when taking this measure. Yet, Jack Ma never would have risen to his current status without government intervention.”
Jack Ma is not the only billionaire or celebrity Beijing has punished. Many billionaires have disappeared, while other celebrities – most notably the actress Fan Bingbing – have vanished, only to reappear with a message apologizing for tax evasion.
Much of this could be attributed to Xi Jinping’s anti-corruption campaign, which has led to the arrest or resignation of some of China’s most powerful figures. The CCP has made it clear that being ultrawealthy is not immunity for anyone and saying the wrong thing has consequences, as Jack Ma has found out.
Ironically, Jack Ma has made attempts to stay on the CCP’s good side. In the months leading to the IPO, he changed the name of Ant Financial to Ant Group to downplay Ant’s financial role.
Ma has been consistent in his praise of President Xi and has been hesitant to criticize Chinese actions such as the violent crackdown on protests in Tiananmen Square. And even the businesses of more politically astute billionaires like Pony Ma have faced penalization from the Chinese state.
But evidently Jack Ma went too far. As a result of the IPO block, Alibaba’s stocks fell and Ma lost billions of dollars. Ant Group has had to scramble to reconcile the state actions with its investors. With this move, many believe that the CCP is making it very clear to China’s billionaires just what the rules of doing business within the country are.
Since the IPO disaster, Ant has pledged to embrace regulation.
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