For a brief while there was talk that some Alibaba shareholders were planning legal action against founder Jack Ma for bringing down the wrath of Chinese President Xi Jinping on their investment. That wrath is estimated to have resulted in the combined loss of $877bn for Ant Group, the fintech company Ma founded, and Alibaba.
Xi’s wrath wasn’t limited to Ma’s companies. The ensuing regulatory crackdown also affected the valuations of other tech giants such as Tencent, DiDi and Meituan.
Perhaps Alibaba shareholders are feeling a little sorry for Ma, who, with $61bn of net assets, was once Asia’s richest person but is now, according to Bloomberg, worth only $30bn. It does seem his wealth has held up better than the Alibaba share price. That has slumped from a record high of $309 in October 2020 to $82.82.
Ma used a public platform in October 2020 to attack China’s financial regulators for being out of touch and out of date. Talk about biting the hand that feeds you — that out-of-date financial system had played a significant role in enabling Ma to build his empire, as he fed the resulting gap in the market.
But even if he was totally accurate in his criticisms of China’s financial, regulatory and political establishment, as well as his description of Chinese banks operating with a “pawnshop” mentality, he was remarkably ill-advised in sharing them on a public platform.
He might have got away with it 10 years earlier, when Xi was known to few outside China’s elite political establishment, and even they would have thought little of his chances of leading the all-powerful Chinese Communist Party (CCP).
By 2020 Xi had left no doubt about his style of leadership and what he wanted for the CCP and China. Close to the top of his priorities was reining in the seemingly unaccountable and enormously wealthy private business sector.
Xi’s goal of “common prosperity”, which called for a more equal distribution of wealth, would have placed someone of Ma’s ilk firmly in his crosshairs. You didn’t have to be a China expert to know this. Ma should surely have known, and if not, where were his advisers? For this reason alone, he does deserve to be sued for his remaining $30bn.
Now Foxconn chair Terry Gou is giving it a go. Gou, who had just announced he was running for president in his native Taiwan, taunted China’s leaders a few months ago by insisting his business interests in China would not allow the Beijing government to have any influence over him. “I cannot follow their orders; I won’t be threatened,” boasted Gou.
The Alibaba share price has slumped from a record high of $309 in October 2020 to $82.82
Foxconn’s business interests in China are substantial. It is essentially Apple’s production arm and has secured that position thanks to considerable help from Chinese authorities, which have provided all manner of subsidies, as well as ready access to hundreds of thousands of workers.
It wasn’t the first time Gou had taken a shot at the Chinese leadership. He told a press conference in 2019: “If Beijing later threatens to close down my factories after I become Taiwanese president, and says I can’t talk to them as a peer in a respectful way … I will tell them to just give me a couple of months and I will move my production sites to more competitive places in the world.”
Hardly surprising, then, that Beijing finally decided to respond. Towards the end of October tax inspectors arrived to inspect Foxconn subsidiaries in two Chinese provinces and, according to China Daily, “natural resources regulatory departments are carrying out on-site investigations into the company’s land use” in two other provinces.
On the same day, China Daily reported that China’s Luxshare had landed Apple’s order to make the Apple Vision Pro reality headset.
It’s not just the powerful, established companies Xi is challenging. Shanghai’s Star Market, which was set up to provide access to capital for start-up tech companies, has had 125 firms cancelling or suspending their IPO plans because regulators have introduced much tougher listing standards.
Foreigners looking at developments in China seem convinced Xi will buckle any day and introduce measures that would see a return to the gilded, corruption-ridden days of the early 21st century to boost the flagging economy and lift employment.
But Xi, who apparently has fond memories of the hardships of the Cultural Revolution, seems to believe a bit of suffering is acceptable because it will make China stronger.
So there’s no sign of the Chinese president doing what a Western leader might, which is why foreign direct investment in the country is plummeting. Latest figures show it was down 34% in September.
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