Jack Ma's absence raises questions over Ant's

future
 

When Alibaba founder Jack Ma criticised the Chinese financial system during a
speech at a high-profile forum last October, industry watchers braced themselves.

Ant Group, the fintech titan also founded by Mr Ma, was days away from a record
US$37 billion (S$49 billion) listing.

During the Bund Summit in Shanghai on Oct 24, the outlandish billionaire - who
usually speaks off the cuff - launched a blistering attack on China's banks and
financial institutions.

Reading from prepared remarks, he said they operated with a "pawn shop mentality"
of requiring collateral before agreeing to lend money.

It set in course a now familiar series of events, including the pulling of Ant's initial
public offering (IPO), the investigation of the company by financial regulators, and
most recently speculation of whether Mr Ma has been detained.

While industry insiders and watchers say the potential backlash makes it unlikely the
tech billionaire has been arrested, the bigger question that remains is the
ramifications on Ant.

Mr Ma has not been seen in public since he gave that fateful 20-minute-long speech.

His fighting words also marked the start of a downward trend in Alibaba share prices,
losing some US$218.5 billion in market value, or about US$10.9 billion for every
minute of Mr Ma's oration.

 
And in President Xi Jinping's China, where open dissent - much less criticism - is
frowned upon, rumours are rife that Mr Ma, a Communist Party member, has been
detained in the fashion of fellow billionaire Ren Zhiqiang.

Mr Ren, a property tycoon, went missing last year after writing an allegedly critical
essay about Mr Xi. He later emerged in police custody and was sentenced to 18
years in prison for corruption.

The rumour mill went into overdrive after Mr Ma did not show up in the finale of his
own show, Africa's Business Heroes, where he is a judge. His profile has also been
taken off the programme's website.

But an executive at a financial services firm, who is in charge of government

relations, said it was unlikely that Mr Ma had been detained.

"He's probably just lying low now, as you would do, trying to calculate his next
move," said the executive, who declined to be named.

"We were all shocked when (the government) stopped the IPO. But to move
personally against Jack Ma is really something else altogether because he is such a
public figure."

But his fame could always work against him, said Professor Jeffrey Wasserstrom of
the University of California Irvine, who specialises in Chinese history.

"(Fame) could provide a bit of protection, but in an authoritarian system where the
leader is the focus of a personality cult, fame and popularity can actually make
someone more - rather than less - vulnerable to attack," he told The Sunday Times.

Given the tight flow of information out of Zhongnanhai, the central government
offices, there is no clarity about how the Alibaba founder is viewed within Mr Xi's
inner circle, said Professor Wasserstrom.

 
Since its founding in a Hangzhou apartment over two decades ago to help Chinese
businesses sell internationally, the company has grown into one of China's largest
tech behemoths.

Between Ant and Alibaba, the businesses cover nearly every facet of Chinese daily
life: e-commerce, food delivery, e-payments and even transport services.

Even contact tracing apps used during the coronavirus outbreak are hosted on the
Alipay app.

Throughout, Mr Ma has maintained that the conglomerate is a technology company

and that Ant, the financial services spin-off, should be viewed as a tech company
and thus not subjected to the same sort of regulatory scrutiny as the regular financial
institutions.

This did not go down well in Beijing: The central bank and the banking, insurance,
securities and foreign exchange regulators summoned Mr Ma and Ant executives for
a dressing-down on Nov 2 last year.

The following day, the Shanghai Stock Exchange suddenly pulled Ant's highly
anticipated debut, sending shock waves throughout the financial world. It led to the
firm later stopping its Hong Kong dual listing scheduled for Nov 5.

Chinese President Xi Jinping decided to halt Ant's IPO, reports Wall Street Journal

On Christmas Eve last year, Alibaba, which runs popular e-commerce website
Taobao and TMall, confirmed that it was being investigated by Chinese antitrust
authorities for anti-monopoly violations.

"Alibaba will actively cooperate with the regulators on the investigation. Company
business operations remain normal," the group said in a statement. The group did
not respond to multiple interview requests from The Sunday Times.

 
Yet industry watchers say this has been long overdue: There are similar anti-
monopoly laws already in place in Europe.

China's Anti-Monopoly Law was introduced in 2008, but it started to be enforced in

earnest only last year, when the Anti-Monopoly Commission investigated Ant
Group's payments arm Alipay and Tencent's WeChat Pay.

Going forward, there is a high chance of more tech firms coming under scrutiny as
regulators start enforcing the rules, said Associate Professor Angela Zhang, director
of the Centre for Chinese Law at the University of Hong Kong.

As for Alibaba, the firm is likely to be asked to stop monopolistic practices such as
asking vendors to choose between itself and rival WeChat Pay and penalising
merchants who do not sell exclusively on its platform.

"The Chinese antitrust regulator is unlikely to impose structural remedies such as

breaking up Alibaba - I don't see a strong legal basis for the regulator to do that,"
said Prof Zhang.

"Moreover, structural remedies would cause too much pain to the firm and erode
investors' confidence in Chinese tech firms."

They are also likely to be subjected to a large fine - up to 10 per cent of the past
year's revenue - which will dwarf the 500,000 yuan (S$102,000) fine they were
slapped with last year for failing to seek regulatory approval and for misleading
pricing and promotions.

And while Alibaba is no longer tied to Mr Ma's personal fortunes - he stepped down
from the board in 2019 - he has majority control of financial firm, Ant.

"Unfortunately, all there is now is speculation, isn't it? We live in an era where
anything can happen, so we can only wait and see (what happens to Jack Ma)," said
the financial executive.