Chinese e-commerce giant Alibaba has launched the marketing “roadshow” for a $21 billion-plus initial public offering to take place this month. If all goes according to the company’s plans, it could be the biggest IPO in Wall Street history.
In New York, so many potential investors flocked to see Alibaba founder Jack Ma at a Waldorf Astoria ballroom that the line to get on the elevator ran through the lobby.
What Alibaba is selling, and wealthy Americans would be buying, is a stake in the coming boom in Chinese consumer spending; at present, 80 percent of Chinese online shopping goes through Alibaba. When you include its business-to-business, social media and other operations, Alibaba had $248 billion in sales during 2013, more than eBay and Amazon combined, according to the Wall Street Journal. (It should be noted that the latter of these is run by Jeff Bezos, who owns The Post.)
As with so many other aspects of China’s rise, however, Alibaba’s mega-IPO is cause for ambivalence.
It is marvelous indeed that hundreds of millions of Chinese are prosperous enough to shop online in a country where grinding poverty reigned a generation ago. For U.S. companies and workers, Alibaba’s planned growth is a hopeful sign because it’s in their interest for China to shift its emphasis from exports to domestic consumption.
And for those who believe that economic interdependence can contribute to peace, there is something encouraging indeed about the worldwide web of advisers, investors and executives that Ma is spinning around his 15-year-old firm — from Goldman Sachs to Deutsche Bank to Yahoo to Japan’s SoftBank to Ma’s Taiwanese American right-hand man, Joseph Tsai.
Alibaba’s dark side, though, is apparent from its U.S. securities registration form. As that document makes clear, the firm is beholden to the Chinese state, and, by extension, the Communist Party mandarins who dominate it through means that can charitably be described as non-transparent.
The state controls Alibaba’s Internet access and “continues to play a significant role in regulating industry development by imposing industrial policies . . . exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.”
Consequently, Alibaba plays ball with the regime’s Internet censors: “We may be subject to liability for content on our websites and mobile interfaces that is alleged to be socially destabilizing . . . or otherwise unlawful,” the securities registration form allows. The firm must be vigilant about troublesome pictures and words — though “it may be difficult to determine the type of content that may result in liability to us,” which is just how Beijing wants it, no doubt.
Alibaba appears to have spread its newfound riches around the upper echelons of the Chinese power structure, buying political influence at the risk of making its ownership structure more convoluted.
As the New York Times has reported, four of the Chinese companies with large stakes in Alibaba employ, as executives, sons or grandsons of current or former members of the Chinese Politburo’s Standing Committee. These “princelings” stand to make a killing on the IPO.
“Analysts say that forging alliances with the government is a vital part of doing business in China,” the Times notes. “Companies see it as a way to improve their chances of securing approvals and licenses. In a sense, it is insurance against overly aggressive government intervention.” Well, that’s one way to put it.
In response to a question at the Waldorf about how he spends his time, Ma replied that a top priority would be to maintain relationships with government officials in China and elsewhere, according to the Journal.
Crony capitalism, lobbying and influence-buying (and peddling) are hardly unknown in the rest of the world, the United States included. What’s special about China is the vast extent of it, and the lack of democratic checks, such as a free press and the rule of law. Not to mention the repressive nature of the state that enriches and empowers itself by penetrating every nook and cranny of the Chinese economy.
Many believed that capitalism would liberate Chinese society almost by osmosis; markets thrive on free-flowing information, so Beijing would have to allow more of the latter to benefit from the former.
So far, it hasn’t quite worked out that way. China’s authorities have constructed a system that censors Western Internet and social-media companies while taking advantage, both personally and institutionally, of home-grown counterparts like Alibaba.
Intentionally or not, those who participate in the Alibaba IPO are taking stock in that system, too.