If Jack Ma's business empire can be broken up—and that is what's happening—all foreign investment is at risk of confiscation. (Photo by BERTRAND GUAY/AFP via Getty Images)
Ma Yun, until recently China's richest individual, is in detention in a Chinese cell, is in hiding in China, is "embracing supervision" from the ruling Communist Party, or is in Singapore after having evaded Chinese authorities. One observer even argues Ma's disappearance, the object of intense speculation in China and elsewhere, is nothing more than a ruse.
Which version of the truth is true? Take your pick.
Facts are scarce. Jack Ma, as Ma is known outside China, possesses one of his country's most famous faces and evidently loves the limelight, but he has not been seen in public since the last day of October, vanishing soon after criticizing state bankers.
Ma's disappearance suggests deep troubles in China's financial circles and almost certainly problems in top Communist Party leadership ranks.
On October 24, Ma criticized China's state bankers at a high-profile event, the Bund Summit in Shanghai.
In his most publicized comment, Ma highlighted the excessive reliance of state bankers on collateral for lending. He called their thinking out-of-date.
What he said is accepted truth in Chinese financial circles and the substance of his comments have been voiced by state bankers themselves. Yet Ma, with a flair for publicity, ridiculed them and spoke dismissively. For instance, he said these bankers had a "pawnshop mentality," a reference to overly cautious lending.
At the same time, he also said his Ant Group, a financial payments platform that was fast branching out into other financial services, would promote lending to China's small businesses.
It is generally believed the that Xi Jinping, general secretary of China's Communist Party, was particularly disturbed by Ma's comments in Shanghai. In any event, Chinese regulators—probably on Xi's direct orders—called Ma on the carpet and, at the last minute, suspended Ant's initial public offering in Shanghai and Hong Kong. The offering was expected in early November to raise $39.5 billion and would have set a world record.
Beijing has since gone after Ma's business empire hard. In late December, China's State Administration for Market Regulation announced an Anti-Monopoly Law investigation of Alibaba Group, which owns about a third of Ant. Regulators are concerned that Alibaba, China's premier online retailer, is forcing sellers not to do business with the online platforms of competitors. Ma in the public eye is associated with Alibaba, which he co-founded. He stepped down as executive chairman in 2019 and left the company's board last October.
At the same time, the State Administration for Market Regulation and the Ministry of Commerce called Alibaba and five competitors, including Tencent and JD.com, in for a "meeting" to discuss their subsidy policies, which were said to be predatory.
Moreover, regulators appear to be forcing Ant to restrict its profitable investment and loan businesses and making the company accept bank-like regulation. Tighter control would ensure that the fast-growing Ant would pose less of a challenge to state control of lending.
The Wall Street Journal reported this regulatory move would facilitate state entities taking a larger stake in the company.
It is not clear Beijing wants to own a bigger slice of Ant, but Ma, on November 2, is said to have offered to hand over portions of the business to Beijing, in an apparent attempt to save the offering. "You can take any of the platforms Ant has, as long as the country needs it," Ma told regulators according to Wall Street Journal reporting.
Rumor has it that Beijing ordered Ma not to leave the country. "His passport has supposedly been held by the Foreign Ministry for a long time," Anne Stevenson-Yang of J Capital Research told Gatestone, passing along financial community gossip.
Ma is not traveling far; he may not be moving around at all. Whatever his travel status, he has also dropped out of sight. As the Financial Times reported on New Year's Eve, he was not included as a judge on the final round of "Africa's Business Heroes" when it was taped in November. Ma was removed from promotional material for the "Shark Tank"-like television show, which he had a hand in creating. His Jack Ma Foundation offers contestants prizes.
Why did Ma, who has been a Communist Party member for at least a half decade, run into such trouble? Analysts believe this incident shows Ma had become arrogant, that Xi Jinping could not tolerate another larger-than-life figure in China, that the Communist Party was determined to maintain control of the country's financial markets and banking sector.
Of course, this series of incidents also shows that foreign optimism about the Chinese markets—large inflows of capital have recently driven the Chinese currency sharply higher against the dollar—could be misplaced. If Jack Ma's business empire can be broken up—and that is what's happening—all foreign investment is at risk of confiscation.
Every so often the Communist Party confiscates assets. One such move was the expulsion of foreigners from China Unicom in the late 1990s. Chinese law prohibited foreigners from the telecom business, so Unicom devised a complex shareholding relationship to evade Beijing's rules. Foreigners need to begin paying attention. They are not permitted to own Alibaba's internet business, and its shareholding structure uncomfortably resembles Unicom's.
Stevenson-Yang tells Gatestone that the regime has detained "most private entrepreneurs who amassed wealth in hard currency." "The key," she says, is that they become dangerous when they own real currency and thus can escape the Mainland death ray."
Several detained entrepreneurs have reappeared, she points out. Some, however, have not.
So, what will happen to Jack?
"Uncle Horse," as he's known in China, chose a particularly bad moment to attract unwanted attention. Not only was official concern and resentment against Alibaba and Ant growing over a long period, but also Ma's words came at what looks to be a time of turmoil in Beijing circles.
There are, most notably, unsubstantiated stories of Xi Jinping undergoing brain aneurism surgery; an official announcement that a senior finance executive, Lai Xiaomin, will be put to death; and a sweeping amendment of Chinese law that strips Premier Li Keqiang of much of his authority and gives it to the military.
We do not know exactly what is happening, but Jack Ma looks as if he has been caught up in intensified political infighting. That turbulence, unfortunately, can also ripple beyond China's borders and affect others.
Jack Ma's fate, then, is a leading indicator.