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Alibaba’s Jack Ma: The Man Who Flew With Wings Of Capitalism In A Communist Nation

For over two decades, Alibaba Group’s Jack Ma had the global business world eating out of his hands till he ran afoul of Chinese authorities. Will ceding control of Ant Group pour oil on these troubled waters?

Alibaba’s Jack Ma: The Man Who Flew With Wings Of Capitalism In A Communist Nation
Jack Ma, founder, Alibaba Group
Wikimedia Commons
POSTED ON January 07, 2023 5:46 PM

Failure is something that Chinese billionaire Jack Ma encountered several times in his life. The 57-year-old diminutive looking entrepreneur once said, “I failed for funny things like a key primary school test 2 times. I failed the middle school test 3 times…then for 3 years I tried and failed University…I applied for KFC when it arrived in China. 24 people came for the job, 23 got it. I was the only one who didn’t. I applied for Harvard, got rejected 10 times.” 

While constant rejections would have taken the wind out of anyone’s sail, it only propelled Ma to build a stronger mast for Alibaba Group Holding, a company he co-founded in 1999. It also gave him the keenness to think long-term and out-of-the-box, a characteristic that helped him grow Alibaba into a Chinese conglomerate with diversified business interests and a market capitalisation of $284.35 billion on January 2023, as per Nasdaq. 

When Ma announced his decision to cede control of Ant Group, Alibaba’s affiliate company, it did not come as an unexpected move for market watchers. This step will placate Chinese authorities who have been stepping up pressure on the company to reorganise its complex organisational structure as stipulated by the country’s central bank, People’s Bank of China.  

The company released a statement claiming it was adjusting the organisation’s ownership structure to ensure that “no shareholder, alone or jointly with other parties, will have control over Ant Group”. Ma will now hold a mere 6.2 per cent of the voting rights, as “the adjustment is being implemented to further enhance the stability of our corporate structure and sustainability of our long-term development,” the statement added. 

The billionaire had been contemplating separating the fintech from Alibaba for a while, after facing pushback from Chinese regulatory authorities for over two years.  

Jack Ma launched consumer-oriented platform Taobao in 2003
Jack Ma launched consumer-oriented platform Taobao in 2003

Things came to a head last November when authorities suddenly halted Alibaba Group-backed Ant Group’s initial public offering (IPO), touted to be the world’s biggest public listing at over $200 billion valuation. However, this was put on the backburner after China’s financial regulators cracked down on US-listed Chinese stocks. 

So, how did China’s most famous and flamboyant business icon fall from grace and land in the bad books of the Chinese administration? 

Rags To Riches Story  

Born in 1964 in China’s Zhejiang district, Jack Ma was always a curious child.  Eager to learn English as a teen, he worked as a guide for foreign tourists to refine his grasp of the language, figuring this was a better practice than reciting words from a book.  

He later applied for an entrance exam to Hangzhou Teachers College to become a teacher but failed twice. Not one to back down from failure, Ma persevered and in 1984, he gained admission to the college. Four years later, he graduated with a degree in English, following which he taught English at the Hangzhou Dianzi University till 1993.  

However, keeping a self-starter down for long is well-nigh impossible. Ma decided to leverage his knowledge of English to provide translation and interpretation by founding Haibo Translation Agency in 1994.  

A year later, on an official trip to the US on behalf of the Hangzhou city government, he saw people using the internet for most of their needs, be it searching for information, ordering products, communication or entertainment.  

Amazed by how technology could transform lives, livelihoods, lifestyles and the economy at large, Ma returned home and founded China Pages in 1995, an online directory for indigenous companies seeking overseas customers. Many called it the first homegrown Chinese Internet company. However, Ma left it after two years and later worked as the head of a government-backed Internet company till 1999.  

The urge to strike out on his own prevailed and he founded the Alibaba Group Holding in 1999, as a B2B website to facilitate deals between small businesses. He overturned the business applecart by charging customers a nominal fee to get certified as dependable sellers on the platform and a premium charge to sell to overseas customers.  

Alibaba Group's Hangzhou headquarters
Alibaba Group's Hangzhou headquarters

Once, while visiting a bank, the bank officials refused to facilitate an online transaction claiming it was a financial product. This got the teacher-turned-technocrat thinking and he later said in a speech, “If a Chinese company didn’t get into payments, some international company would come do it and we’d end up the victims. When I was at Davos, I went to hear Clinton speak on the power of leadership. I suddenly understood what that meant: boldly doing something you believe in, something that won’t hurt your country or your customers. So, I decided to do it, and threw everything into it.”  

Thus, how Alipay came into being in 2003, acting as a third party in online transactions. By 2013, it had surpassed Paypal’s 377 million user base to become the world’s most popular mobile payment platform with 1.3 billion users, ahead of Apple Pay’s 507 million and Google Pay’s 421 million users.  

Bucking The Trend 

With Alibaba’s B2B site churning profits, Ma decided to train his sight on consumer-oriented platform Taobao, launched in 2003. That year, China was wrecked by the outbreak of the SARS virus, with many parts of the country under stringent lockdown to control the disease’s spread.  

Once again, Ma’s never-say-never spirit came to the fore. He, along with a core team of techies, completed developing the site in his apartment and launched it despite the economic headwinds China faced back then. This move proved to be a tide-turner in the company’s fortunes.  

The self-imposed quarantine saw a growing number of Chinese pivot to online shopping, which helped Taobao gain a strong foothold in the ecommerce sector. By 2006, it had overtaken eBay as the country’s dominant ecommerce platform and by 2020, it had over 600 million users who contributed to $56 billion yearly revenue. 

Investors Come Flocking  

Alibaba Group’s growth did not go unnoticed. In 2005 Yahoo invested $1 billion in the company, picking up 40 per cent stake while Softbank picked up another 30 per cent. This gave the two companies a seat at the table of the internet giant that had become a household name in China. With this coalition, Ma had finally entered the big league and the New York Times called him “China’s New Internet King.”  

Buoyed by these tailwinds, the ecommerce company went public in 2007 at the Hong Kong stock exchange, raising $1.5 billion. However, in 2010, China’s central bank issued new rules governing third-party online payment companies. It claimed that these entities must apply for and receive licenses from the People’s Bank of China to continue their operations.  

A year later, Ma spun Alipay off into a separate company, while retaining 46 per cent stake in the financial services entity. This triggered a contentious battle with Yahoo, which claimed that it was not informed about Ma’s decision to cleave the organisation in advance, causing a severe drop in its share prices.   

Undaunted by this turn of events, in 2014 Ma-backed Alibaba filed for a $25 billion IPO in the US. However, confusion prevailed about the relationship between Alibaba and Alipay and questions arose as to how the parent company would benefit from the public listing.  

The Chinese conglomerate later clarified in its updated draft prospectus that Alibaba no longer has “an ownership interest in or control over Alipay or its current parent company.” At the same time, it conceded that Ma continued to hold 46 per cent of Small and Micro Financial Services Company (SMFSC), Alipay’s parent company. 

The Ant Keeps Marching  

Over the years, Ma was globally acknowledged as the man who had created a tech powerhouse and the best brand ambassador for the new-age China. He epitomised the country’s rapid strides in technology and economic growth, and was feted by business and political leaders worldwide, from erstwhile German Chancellor Angela Merkel to two-time American President Barack Obama.  

However, his growing political comments were watched with an increasingly wary eye by the administration back home. In October 2020, Ma attended the Bund Summit and that is when things started going wrong for him. In his speech, he criticised the Chinese regulatory market, adding, “Good innovation is not afraid of regulation, but is afraid of being subjected to yesterday's way to regulate.” 

While accusing the country of holding on to traditional business policies, likening it to a ‘pawn market’, the Chinese billionaire was possibly trying to be funny. However, the authoritarian administration was far from amused.  

American President Barack Obama with Jack Ma at the Asia-Pacific Economic Cooperation (APEC) CEO Sum
American President Barack Obama with Jack Ma at the Asia-Pacific Economic Cooperation (APEC) CEO Summit in 2015

Ma’s statements came as a direct criticism to Chinese President Xi Jinping’s decision to stop monopolistic practices to “prevent the disorderly expansion of capital.”   

The Chinese antitrust regulator retaliated by launching an investigation into Alibaba’s practice of asking merchants to sell exclusively on its platform, while Ant Group’s officials were summoned to discuss competition and consumer rights. Moreover, the ongoing geo-political war of words between China and the US, which intensified since COVID’s breakout, caught Alibaba in its crosshairs, as American authorities started closely inspecting listings of Chinese companies on its bourses. 

Trying to find a middle path, the ecommerce giant announced that it would add a primary listing in Hong Kong to its New York presence, to target investors in mainland China for Ant Group’s IPO. This was after China’s regulatory scrutiny saw the ecommerce giant pay a whopping $2.8 billion penalty.  

Following the administrative backlash, Ma flew below the radar and was missing from public presence for several months. In July 2022, Reuters reported that the Chinese financial authorities had cautiously given a nod to Ant Group to revive its dual public listing. 

The Man, The Visionary 

His missteps in the political circuit notwithstanding, there is no taking away that Ma remains a visionary in the business world and one that industry stakeholders and policymakers hold in high esteem.  

The more he met fellow thinkers from across various streams, the more he spoke about wanting to do more than just run a company. He was especially passionate about supporting innovation and philanthropy, focusing on education in rural parts of China, a throwback to his days as a teacher. 

“In the future it is not the competition of knowledge, it is the competition of creativity…of imagination…of learning… of independent thinking. If you think like a machine, the problem will come. In the past 20 years, we will make people like machine, in the next 20 years machines will look like people,” he predicted in one of his speeches.  

In 2019, Ma officially stepped down as the executive chairman of Alibaba. While announcing his resignation, he wrote in an open letter, “I still have lots of dreams to pursue. Those who know me know that I do not like to sit idle. The world is big, and I am still young, so I want to try new things.” 

His latest move to give up controlling rights of Ant Group is just another step of retreating from the massive empire he has built and leave behind a legacy that will be remembered for years.  

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