Entrepeneur Jack Ma’s downfall has been stunning in speed and magnitude.
Since Beijing suspended Ant Group’s highly anticipated IPO in November 2020, Chinese entrepreneur Jack Ma has been met with one obstacle after another.
Ma, an apparent Chinese Communist Party (CCP) member, has also witnessed Chinese authorities launch an investigation into e-commerce giant Alibaba Group while being publicly rebuked in state media and at the same time, lose his status as China’s richest person.
Ma—whose Chinese name is Ma Yun—has long rankled CCP authorities, enjoys a “larger than life” rock star status among Chinese youth, and oversees a technology empire that pushes the regulatory envelope. It’s understandable that CCP regulators are irked.
But Beijing’s sudden and draconian pushback against Ma underscores the problems within the country’s economic system—a system that runs on mafia capitalism. The CCP’s thin-skinned reaction to Ma proves that its political system continues to hold the country back.
Jack Ma isn’t so different than Elon Musk or Jeff Bezos—iconic entrepreneurs who lead a country’s innovation, assert dominance in a particular sector, and exert influence globally. Along the way, Musk and Bezos do push the regulatory envelope, impact established legacy industries, and sometimes exhibit monopolistic tendencies. Some would argue that is the necessary price to pay for true innovation.
Yet someone like Ma is invaluable for a country’s image. He is the international face of China’s tech industry. He regularly attends global conferences, where his freewheeling and informal persona has earned him a following. He is effectively an “unofficial ambassador” for China.
All of this isn’t to exonerate Ma. He operates within a Communist country, with himself likely a sanctioned product of the Party. But ultimately his outspokenness became his downfall.
At an international forum in Shanghai in November, Ma criticized China’s regulatory regime, attacking state-owned banks as having a “pawnshop mentality” in demanding collateral from borrowers. This is in contrast to Ant Group, which apparently uses artificial intelligence and its own proprietary computer and data models to predict repayment probability, which could severely disrupt the banking and lending industry. Days later, new rules governing online lending industry were introduced and Ant’s IPO was pulled.
In December, China’s State Administration for Market Regulation launched an investigation into Alibaba—the e-commerce giant that Ma founded—for alleged “monopolistic” behavior. China introduced more stringent antitrust rules earlier in the year apparently targeting not just Alibaba but also other online retailers.
Then in late December, regulators met with Ant Group executives and demanded that the payments and lending company overhaul its business. The demands could completely alter Ant’s business, bring parts of it under banking compliance regulations, and ultimately render it far less valuable than previously constructed.
“The best solution is to break up Ant into a finance unit for its online lending, brokerage, and insurance businesses that will be under full regulatory oversight, and a less regulated technology and data unit,” one unnamed former regulator told the Financial Times.
And herein lies the problem with China’s economic system.
Ant, as a private company owned by private shareholders, is not the government’s property for it to devise a “solution.” Ant’s lending model, while novel, is unproven and may not even work at scale. But instead of letting capitalism determine winners and losers, the CCP apparently didn’t like the potential outcome and decided to step in.
Ma is a businessman and he also has the right to push the regulatory envelope to the extent allowed under the law. And the government has a right to set the regulatory framework. But the CCP’s sudden pushback ultimately proves Ma’s point that the regulatory framework is a complicated mess—which set the stage for him to arbitrage cross-industry compliance in the first place.
The CCP and Ma have reportedly been at odds for years on these matters. But the regime’s inability to work with him and other entrepreneurs to set agenda and map out a pro-innovation regulatory structure is concerning. The CCP decided it had to move the goalposts while neutering China’s only international success story.
This should be very concerning to any aspiring Chinese entrepreneur. Despite China’s goals of becoming a global power, its ruling regime continues to exhibit the capriciousness and insecurity of a mafia organization.
As long as the CCP remains in power, China can never reach its full potential.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.