Alibaba Group Holding (BABA) and HK:9988 figurehead Jack Ma is on a rare trip back to China today, after a period of living in exile. But his treatment at the hands of the Beijing administration remains a warning sign to China's entrepreneurial class, who have very good reason to question recent affirmations that the Chinese Communist Party wants to stimulate the private sector again.
Ma on Monday visited a school he helped establish in his hometown of Hangzhou, which is also where Alibaba is based. He met with teachers and students at Yungu School, a private academy teaching kindergarten through high school that was set up by Ma and Alibaba's other founders in 2017.
Ma discussed education issues and the use of ChatGPT Artificial Intelligence technology with the school, according to the South China Morning Post, a newspaper that Alibaba owns.
It is a cautionary tale that China's most-feted entrepreneur does not discuss business at all inside China. He has kept a very low profile, most recently basing himself in Japan, since an ill-fated speech at a financial conference in October 2020 that angered the Communist officials and regulators in attendance.
It is at the request of China's new Premier Li Qiang that Ma is visiting China. Li asked Ma to return to China, Reuters reports, because his choice to remain in exile was damaging corporate confidence. The Chinese government has this year made noise about once again supporting what it calls the "platform" economy of companies such as Alibaba, having slapped it with a record US$2.8 billion fine for anticompetitive behavior.
Ma has spent the past year traveling the world, exploring agricultural technology and fish farming. He has appeared in Japan, Spain, Australia, Thailand, Israel and the United States. He headed to Hangzhou after attending the Asian edition of the Art Basel fair, held in Hong Kong this past weekend.
Hong Kong celebrates the arts only when they fit with the city's oppressive politics. A digital display called No Rioters was removed from Hong Kong's equivalent of Times Square after its Los Angeles-based creator, Patrick Amadon, embedded it with surveillance cameras and the names, ages and prison sentences of people convicted of "rioting" during pro-democracy demonstrations in Hong Kong in 2019. The display sat in broad daylight on the side of the Sogo department store in Causeway Bay until reporters pointed out its content. Once that became clear, the authorities ordered it to be removed - all while the Art Basel fair was selling (and supposedly celebrating) art in the nearby convention center.
"Ma is known to be very passionate about painting and the arts," the SCMP reports. It's not clear if he expressed any interest in purchasing No Rioters to adorn the Hangzhou headquarters of Alibaba. Perhaps he just likes pretty paintings of flowers and cats.
He has experienced the pain that attends anyone who criticizes the dictatorship inside China. Ma retired as chairman of Alibaba in 2019. That occurred on the occasion of his 55th birthday, the SCMP reminds us, but in fact Ma was very much forced out of the company that he founded by the Chinese Communist Party.
Ma took to a Shanghai stage in October 2020 with Alibaba shares at their peak. He criticized the Chinese banking sector for its lack of innovation and its "pawnshop mentality," with bank regulators in attendance. A furious Chinese President Xi Jinping then personally intervened to block what would have been a world-record initial public offering by Alibaba's fintech spinoff Ant Group. The IPO had been approved by regulators and the stock exchanges in Shanghai and Hong Kong, and was poised to occur in two days before Xi stepped in to shoot it down.
If anyone needed a reminder of where the seat of power resides in China, that was it. Ma had developed a reputation for jetset trips on which he met heads of state and power brokers, necessitating Communist officials to request a debrief session when he returned. With Big Tech companies such as Alibaba wielding increasing power thanks to the data they have mined and the brand loyalty they command, Xi had had enough.
While it at first seemed that the Communist Party was targeting only Alibaba, it soon became clear that the whole of Big Tech was in trouble, and indeed the private sector as a whole. Xi launched a series of Maoist policies and started championing "common prosperity" as well as targeting the "disorderly expansion of capital" all while discussing the need to redistribute wealth.
Any entrepreneur or business owner with any sense disappeared from public life. It was a sea change from a culture inside China that had started to celebrate commercial success, with people like Ma treated as celebrities and idols.
For his retirement, Ma has said he wants to focus on philanthropy, education, and helping rural China. You'd think a business leader who built a corporate empire worth many billions of yuan would be in big demand as an adviser to the Beijing authorities. Perhaps in the West he'd be asked to serve as the finance minister, or an ambassador, or to head an important public-private incubator. In China, he has to focus on aspects of life that have absolutely nothing to do with turning a profit.
Ma was in Thailand earlier this year, visiting farming and fishery operations, and he has apparently been exploring fish farming facilities while basing himself in Tokyo, the SCMP tells us. But he's also been hobnobbing with wealthy Chinese expats and his friend, the Softbank Group T:9984 and (SFTBY) entrepreneur Masayoshi Son. The SCMP notes he also traveled to Hong Kong, where he has a home, over the Lunar New Year.
But it is traditional to visit your ancestral hometown over that holiday. So it's notable that Ma remained outside mainland China, only surfacing now in Hangzhou following the premier's request.
Ma was originally an English teacher and lecturer after graduating from university with a degree in English. So to start a school does make sense. It was also at a school in rural China that Ma first surfaced after the Ant listing debacle, for a chat with teachers via a videolink.
But under Xi's direction, Beijing has curtailed what offerings a private school in China can offer, with all schools barred from teaching any foreign curriculum from kindergarten through Grade 9. Foreign textbooks are also banned, and only official versions of lessons such as history, politics and geography can be taught.
The government even blocks schools that take in Chinese students from linking themselves by name to overseas institutions, an increasingly popular strategy in Asia. You'll find international spinoffs of Harrow, one of Britain's most-famous private schools, in Hong Kong, Japan and Thailand. But the branch in Beijing, for instance, has had to change its name to remove "Harrow" from the title.
Westminster School, an elite institution in London, said in 2017 that it planned to build six schools in China. But it scrapped the whole idea after China's Ministry of Education tightened the rules.
Coupled with Covid, "recent changes in Chinese education policy have forced the school to cancel the entire project," the school stated in November. "It is highly unfortunate the landscape for developing such schools now is very different from 2017."
It has been a fraught time for any for-profit business in China. Over one weekend in July 2021, China banned the entire private-sector business of after-school tutoring, as I explained at the time. The US$120 billion industry was decimated after China outlawed the provision of for-profit courses in core classes during the academic year, a worst-case extreme scenario that analysts at Nomura predicted "will NOT happen." Shares in New York-listed TAL Education Group (TAL) plummeted from US$90 to US$6, and remain at that level.
Alibaba shares bottomed in October 2022, when Chinese stocks reached their nadir amid the never-ending disruption from China's "zero-Covid" attempts to stamp out the virus entirely. At US$63 and change, they were one-fifth the levels of their US$310 peak, before Ma's speech.
BABA shares then almost doubled in the three months through late January. Ma gave the rally legs when he said he would surrender control of Ant, as I noted in January, suggesting the company that runs Alipay would revisit a listing. But BABA shares have dipped back again, from US$121 to US$87, the enthusiasm over China's opening up giving way to the realization that consumer confidence is fragile.
Alibaba shares tread water in Hong Kong trading today, and are 3.8% below the levels where they began 2023, slightly worse than the 2.9% decline in the Hang Seng Index to date this year. While it's interesting and encouraging to see Ma back in Hangzhou, we have yet to see evidence that a Xi-directed Beijing will champion its entrepreneurs once again.
If anything, we may see a renewed push for a socialist paradise inside China. Xi, at the annual economic planning meeting early this month, said private companies should be "rich and loving," and shoulder a responsibility alongside state-owned enterprises to pursue prosperity for all. He urged private companies and entrepreneurs to be "patriotic" and participate in charity undertakings - hence Ma's first appearance inside China comes not at the businesses so closely associated with his name but at a school.
