In China, being a successful businessman makes you both a symbol of the Chinese economy’s success and a threat to the Chinese political system.
It’s hard to believe that the future of Tencent Holdings Ltd., the champion of China’s tech industry, was in question just over a year ago, but a November 2019 report from CNN Business described the technology conglomerate at the time as being in a “slump.”
According to the report, “investors were dispirited by a lackluster earnings report” and the company’s “net profit for the third quarter dropped 13% compared to a year ago.”
The article went on to paint a more favorable picture of Tencent’s rival, Alibaba Group Holding Limited, which was “riding a very public wave of prosperity.”
CNN reported that Alibaba “once again broke its record for Singles Day, the world’s biggest annual shopping event” that brings in more income than “Black Friday and Cyber Monday combined.”
Singles Day is an unofficial Chinese holiday, celebrated on November 11, in which those who aren’t in a relationship celebrate being single by buying themselves gifts.
The CNN report then reminded readers of Alibaba’s substantial suspected initial public offering (IPO) of 13.4 billion on the Hong Kong Stock Exchange. Now, more than a year later, a very different picture exists for both companies.
The Asian century
Tencent and Alibaba have often been compared to each other, usually by those analyzing which company to invest in or as the focus of news articles evaluating the modern Chinese economy.
A Nasdaq article from August 2020 advised readers to invest in Tencent and a Motley Fool article, also from last August, ranked Tencent the stronger company.
Despite their often being compared to one another, there are differences between the two companies. Tencent is more diversified, with interests in music, social media, fintech, video games and film production. Alibaba, meanwhile, is an e-commerce giant often compared to Amazon.
Alibaba is also the parent of Ant Group, a fintech company that has revolutionized Chinese banking and digitized much of China’s monetary system. Perhaps the most glaring difference is between the two business titans who run the companies.
Clash of the titans
There may be no two men more different than Jack Ma and Pony Ma. The only thing they seemingly have in common is their last name (though they are not related) and their desire to be the richest man in China.
Pony Ma, the founder of Tencent, is what one would expect of a tech entrepreneur. An introverted computer whiz, Ma largely stays out of the public eye.
Meanwhile, Alibaba’s Jack Ma is an English major who claims never to have written a line of code. Jack Ma is also world-renowned for his charisma and videos of him impersonating Michael Jackson at an Alibaba company concert can be found online. The latter Ma also likes to speak his mind, a habit that recently altered the course of his company.
Hazards of the profession
At a summit last October in Shanghai, Jack Ma spoke of his discontent for China’s financial regulatory system, comparing it to a “pawn shop mentality.”
“We shouldn’t use the way to manage a train station to manage an airport,” Ma said, adding “we cannot regulate the future with yesterday’s means.”
Ma’s words were not appreciated by Chinese President Xi Jinping and soon after his show of opposition, Ma was summoned to speak with financial regulators in Beijing. The following day, Ma’s fintech company Ant Group Co., Ltd. was barred from being listed on the Hong Kong and Shanghai stock exchanges.
Ant’s IPO, which was expected to be one of the largest in history, fell by more than 8% and Jack Ma’s net worth dropped by billions. Beijing soon ordered an investigation into Alibaba for “monopolistic practices.” Jack Ma, one of the richest men in Asia, soon disappeared.
Businesses operating in China play by a different set of rules than those operating in the West. In China, being a successful businessman makes you both a symbol of the Chinese economy’s success and a threat to the Chinese political system.
As a result, entrepreneurs must tread carefully. One who does this relatively well is Pony Ma, who not only avoids criticizing the Chinese Communist Party (CCP), but tries to avoid public life more generally. Ma has also reinforced his loyalty to the CCP by serving in the National People’s Congress. In this way, Pony Ma has lessened the likelihood that the government will feel threatened by him.
After vanishing from the public spotlight for nearly three months, Jack Ma resurfaced. In a short and awkward video, Ma, while speaking to a group of English teachers from his hometown, said that he has been spending his time “studying and thinking” about, among other things, how to support “public welfare.”
This incident shows the importance of playing politics right in China in order to achieve business success. Whether Jack Ma has taken this experience to heart and Alibaba’s fortunes will improve, though, is yet to be seen.
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