Submitted by George Chen via The South China Morning Post,
What is the biggest risk for investors in China’s e-commerce giant Alibaba? In one word: politics.
Jack Ma Yun, English teacher-turned entrepreneur, is already a legend in China for the incredibly fast growth and remarkable success of the e-commerce firm he founded in 1999. I have no doubt about Ma’s business experience and leadership skills, but there is one thing Ma – and many of his rivals – may be worried about. Politics.
The Alibaba success story is not just about Alibaba itself. It is about the inevitable trend of globalisation, the rise of China as a country on political and economic fronts, and also about how eager Beijing is to support and build up a crop of new national brands that can compete with the likes of Google and Amazon in the United States.
“To have political connections in Beijing … isn’t necessarily bad. Many companies try to do so”
Beijing’s support – directly or indirectly – is a key factor in Alibaba’s success. Without the government’s support, Ma would not have felt confident enough to speak in New York in front of hundreds of Wall Street investors during the recent roadshow for Alibaba’s initial public offering on the New York Stock Exchange.
Ma understands the importance of the government’s backing for Alibaba and most of the time he has been good at lobbying Beijing for policy support.
However, in at least one case he had a setback and was honest enough to tell the public how he felt about that.
“Sometimes, what can beat you is not technology, but just a document,” said Ma at a technology conference in Beijing in March this year, in response to a question about what challenges Alibaba would face in the next phase of its business expansion.
Ma didn’t elaborate, but many industry watchers believe his comments were in reference to increasing domestic policy uncertainties related to internet finance and online payments in the world’s No2 economy.
Internet finance is completely new in China. Chinese regulators have been back and forth when dealing with some new policy issues, such as whether e-commerce companies can issue credit cards for their online customers as commercial banks do.
On a more personal level, Ma is widely believed to be well-connected to Beijing’s political circles. Let’s be fair – to have political connections in Beijing or Washington isn’t necessarily bad. In fact, many companies try to do so. But it is also a challenge in how you play in an opaque regulatory environment.
That is to say, you should be extremely careful not to cross the line in Chinese politics. Otherwise, the story may turn out very differently. Indeed, we have already seen the rise and fall of Chinese businessmen, including many on the Forbes list, in the past decades.
via Zero Hedge http://ift.tt/1D92LCw Tyler Durden