Jack Ma, now China’s fourth-richest man and the former CEO of Chinese e-commerce giant Alibaba, criticized China’s financial system policies at the Bund Summit 2020 in October. Since then, his enterprises have become the target of Xi Jinping.
At first, the listing plan for Ant Group, an affiliate company of Alibaba, was halted on Nov. 3. On April 10 this year, the Alibaba Group was fined $2.8 billion on the grounds that it violated an antitrust law, and Ma’s elite business school, Hupan University, was forced to halt enrolments.
I don’t think Ma’s troubles are over.
But why did Xi Jinping purge Ma? In my opinion, there are five main reasons:
Xi’s Authority Is Untouchable
On Oct. 24 last year, in the opening remarks, Wang Qishan, Vice President of the Communist Party of China (CCP), said at the Bund Summit that the bottom line is that no systemic financial risks should be taken.
However, as a keynote speaker, Ma responded, “systemic risks do not exist in China” because “there is not a financial system in China and in fact China is at a risk of lacking a financial system.”
Ma’s sharp comments were actually very much an open challenge to Xi Jinping, because Wang was speaking on behalf of Xi Jinping.
In May 2018, at a meeting with American businessmen in Beijing, Wang Qishan had said that his job as the vice president of the country is to do what Xi Jinping asks him to do.
The outbreak of the CCP virus, commonly known as the novel coronavirus, and the subsequent pandemic has resulted in Xi’s biggest threat to his dictatorship. The anti-Xi voices are ever-growing both at home and abroad. Political opposition is a major issue that Xi will never be able to tolerate.
Xi Is Worried About the Recurrence of a Financial Coup
The crux of a financial coup is politics. It involves the seizure of the CCP’s highest power.
In June 2015, at a critical moment when Xi Jinping and the former CCP dictator Jiang Zemin were engaged in a power struggle, China experienced a major stock market crash, and trillions in funds were transferred to foreign countries. Some people called it an anti-Xi financial coup.
Since then, Xi has been purging senior officials and their agents from Jiang Zemin’s faction in the financial sector. In addition to investigating a group of senior financial officials from the People’s Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission, and China Insurance Regulatory Commission, Xi’s arrested financial predators include: Ye Jianming, chairman of Huaxin Group; Lai Xiaomin, chairman of Huarong Group; Hu Huaibang, chairman of China Development Bank; Wu Xiaohui, Chairman of Anbang Group; and Xiao Jianhua, founder of Tomorrow Group.
If Ma’s Ant Group was successfully listed in Shanghai and Hong Kong simultaneously on Nov. 5 last year, he could have become China’s largest financial giant and surpassed Tomorrow Group founder Xiao Jianhua.
Before Ant Group went public, individual investors in Shanghai and Hong Kong placed bids of a record high of $3 trillion. Ant’s IPO valued the company at $313 billion, the biggest IPO of all time.
Who is behind the Ant Group? With careful inspection, most of them are from Xi Jinping’s number one political opponent, former CCP dictator Jiang Zemin’s faction.
The Ant Group was first established with the support of an important figure in the Jiang faction, Huang Qifan, the mayor of Chongqing at the time.
On Feb. 16, the Wall Street Journal published an investigative report stating that the author interviewed more than twelve CCP officials and the regime’s advisors. “Behind layers of opaque investment vehicles that own stakes in the firm are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle,” the report said. They are known as the secret “strategic investors” of the Ant Group, for example, Jiang Zemin’s grandson, Jiang Zhicheng (Alvin Jiang), and Li Botan, the son-in-law of Jia Qinglin, a former member of the Politburo Standing Committee and a close friend of Jiang Zemin.
Ma’s Alibaba Group is also highly connected to Jiang’s faction. The New York Times disclosed in its report on July 20, 2014, that Alibaba’s shareholders include princelings Alvin Jiang, Chen Yuan, He Jinlei, and Liu Lefei. Liu Lefei is the son of Liu Yunshan and He Jinlei is the son of He Guoqiang, both were former members of the Politburo Standing Committee and top officials of the Jiang faction. Chen Yuan’s father, Chen Yun, was the most important CCP veteran cadre who promoted Jiang Zemin to the leadership of the CCP.
Before Ant Group was ready to be listed, Jack Ma was already publicly opposing Xi in Shanghai at the Bund Summit. If Ant Group successfully goes public and establishes its dominant financial kingdom, will it repeat the 2015 financial coup with the support of Jiang’s faction? I believe this is also one of Xi’s biggest concerns.
Xi Jinping Must Prevent Financial Risks
The risks here mainly refer to social problems relevant to the economy.
Wang Qishan said during the Bund Summit: “China’s financial sector must not follow the crooked path of speculation and gambling, the wrong track of self-circulation of financial bubbles, or the evil path of Ponzi schemes.” This is a strong warning to the financial chaos in the communist society.
China has the biggest Peer to Peer (P2P) lending market. In the 2018 Unreliable Entity List issued by the regime’s State Council, China’s financial market was faced with a crisis of 1,282 “problematic” P2P platforms. Also stated in the report is that 472 companies were involved in financial fraud of more than $15.4 million, and 30 companies involved in financial fraud of $77 million or more.
The massive failures of the financial system have filled mainland China with desperate protests for government assistance.
As a significant figure of China’s digital economy, Jack Ma’s Alibaba Group and Ant Group affect the lives of hundreds of millions of Chinese people, including through shopping, deposits, investment, loans, and more.
Economic analyst Huang Shicong once analyzed that the two virtual credit card companies under the Ant Group, Huabei and loan provider Jiebei, only have $463 million in capital, but their bank loans are as high as $463 billion. The leverage ratio is too high. Huang questioned, “With so much money, how many bad debts are there? As long as the bad debt ratio is 3-4 percent, it will be totally unaffordable.”
The Impact of Internet Giants
I am sure that Xi is aware of the serious impact of internet giants such as Twitter and Facebook blocking the speeches of U.S. President Donald Trump during the 2020 U.S. presidential election.
Of course, it’s nearly impossible for this to happen in China under the dictatorship, but Xi has his concerns.
China’s e-commerce giant Jack Ma also invests in the media industry. According to a report on Chinese news portal sina.com, Alibaba owns about 30 percent of Weibo’s shares, valued at $3.5 billion. Weibo, a Twitter-like social media platform, pretty much directs public opinion in China. Alibaba has approximately 6.7 percent of the shares in Station B, valued at $2.6 billion. Station B is the most popular video platform for Chinese teenagers and young white-collar workers. Alibaba also owns approximately 5.3 percent of Focus Media, a value of $1.2 billion. Focus Media is the largest out-of-home advertising network in China, and perhaps the largest in the world. Their LCD screens allow 300 million people across the country to watch the same video at the same time.
In 2015, Alibaba acquired the South China Morning Post, the biggest English-language newspaper in Hong Kong, at the cost of $266 million. On Dec. 4, 2015, China policy researcher Cheng Xiaonong said in an interview with Voice of America that although Jack Ma was the investor who purchased the South China Morning Post, Zeng Qinghong, the former member of the Politburo Standing Committee, is the actual leader in the management and control of the newspaper. Zeng was the first leader of the Central Leading Group on Hong Kong and Macau Affairs. He is also the number two figure in Jiang’s faction.
Other media under Alibaba also include Wujie News, China Business Network, and Huxiu.com. On the night of March 4, 2016, an open letter asking Xi Jinping to resign showed up on the website of Wujie News.
Xi Is Running Out of Capital
China is nominally the second largest economy in the world. But in fact, the Chinese economy is facing a serious crisis.
According to an analysis from Epoch Times contributor Cheng Xiaonong, “It’s hard to understand or believe that with a nominal $3 trillion in foreign exchange reserves, the CCP actually has very little in cash reserves.” After deducting the hard currency debts, the foreign investment that flowed out of China, the U.S. debts, and the regime’s overseas investments, the regime’s cash reserves are nearly dried up.
What’s the routine practice when the CCP runs out of cash? It has been doing everything possible to collect the wealth of private enterprises.
On April 15, in a hearing (pdf) on “An Assessment of the CCP’s Economic Ambitions, Plans, and Metrics of Success”, Miles Yu, Senior Fellow at the Hudson Institute, said, “In the past 15 years alone, no fewer than 27 Chinese billionaires have been arrested—the charges range from the bizarre to the absurd. In America, we celebrate those who make it on the Forbes billionaires list. In China, getting on the Hurun rich people’s roster can be like being added to a hit list.”
Why did the CCP purge these people? An important reason is to collect the wealth in their hands.
Take November 2020 as an example. On Nov. 11, Sun Dawu, an entrepreneur from Hebei Province, was arrested and his Dawu agricultural and animal husbandry group was investigated; on Nov. 17, Yang Zongyi, Nanjing’s richest man and entrepreneur, was criminally detained and CCP authorities took control of his Fuzhong group; on Nov. 20, Chongqing’s entrepreneur Li Huaiqing was sentenced to 20 years of imprisonment and all his assets were frozen.
What Jack Ma is experiencing now is of course also for his money.
Jack Ma already knew how his story would end. In an interview with Esquire magazine in January 2013, a reporter asked Ma: “You made a lot of statements in 2011 that seemed very pessimistic. People have always seen you as a very optimistic person who inspires others. Why is that? You said it was a bad time, and you said that almost no Chinese entrepreneurs die a natural death. Have you become pessimistic?”
Ma denied having said that, he explained that what he actually said was “Chinese entrepreneurs really don’t end up well.”
“I, Jack Ma, already know my own end, so I am optimistic about this. I’ll just go ahead with it anyway because, good or bad, the end is there already,” Ma said.
Because there is no market economy in China today. Rather, it is a market dominated by the CCP. The private entrepreneurs rely on various factions within the CCP hierarchy to establish their kingdoms. Becoming a sacrifice in the power struggle is only a matter of time.
Wang Youqun graduated with a Ph.D. in Law from the Renmin University of China. He once worked as an aide and copywriter for Wei Jianxing (1931–2015), a member of the CCP Politburo Standing Committee from 1997 to 2002.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.