Shares of Alibaba Group were up after the company put forth its plan to break down its empire into six individual companies and announced their listing plans. Alibaba’s Hong Kong-listed shares closed up 14.6% at HK$94.55 (US$12) on Wednesday. Other internet stocks also surged as Meituan grew 4% at HK$140 while Tencent rose 1.53% at HK$56.25.
The restructuring plan was announced on Tuesday after news reports said the e-commerce giant’s founder, Jack Ma, who had lived in Japan for more than a year, returned to mainland China.
Ma was reportedly persuaded by Premier Li Qiang to go back to the mainland to help boost private firms’ investment confidence in China. On different occasions, Li has promoted the country’s opening-up policy and welcomed foreign investments.
At the same time, Beijing imposed a set of new rules forbidding netizens and opinion leaders to defame corporations and entrepreneurs.
On Monday, the South China Morning Post, owned by Ma, reported that the Chinese billionaire has returned to China. Yungu, a Zhejiang-based primary school, said in a video that it had received a visit by its founder, Ma.
On Tuesday, Alibaba’s chairman and chief executive Daniel Zhang told the staff in a letter that the group will push forward a restructuring plan called “1+6+N.” He said the group’s six units – Aliyun, Taobao TMall, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group and Digital Media and Entertainment Group – will operate their businesses and go public individually.
In the restructuring plan “1” refers to Alibaba Group while “N” refers to its smaller subsidiaries, including AliHealth, Sun Art Retail Group, Intime Retail (Group) Co, Hema Xiansheng and Quark.
“This change is definitely big, drastic and unprecedented over Alibaba’s 24- year history,” Zhang told the staff.
“Sitting in Hangzhou, we found it challenging to react to rival actions and the fast-changing world,” he said. “Today we have the courage to walk out this historical step, making our organization simpler and more agile.”
He said it is better to use the markets to decide the direction of the company’s units, rather than using incentives to try to create synergy.
Also on Tuesday, Niu Yibing, vice minister at the Cyberspace Administration of China, said in a press briefing in Beijing that the government will start a special program to identify and punish those who maliciously make up stories and spread false information hurting the legal rights of private companies and entrepreneurs. Niu said those who blackmail private firms or damage the reputations of businesspeople will be penalized.
Chinese ‘need time for consensus’
Zhang and Niu were playing their parts in Li Qiang’s rollout of what are billed as more business-friendly policies. Commentators joined in the chorus.
“After the Chinese economy experienced high growth, a group of private companies has emerged with assets that have world-class impacts,” Wu Xijin, former editor-in-chief of the Global Times, said in a Weibo post on Monday. “These are all new things to China while they need some time to run in together and reach consensus.”
Wu said it requires a joint effort from all parties to cooperate and develop initiative and constructiveness under China’s system.
“For a period of time, some Chinese entrepreneurs have felt a bit down, and our society should look into this situation,” Wu said. “In the next stage, all local governments should follow the central government’s direction to support private firms.”
Wu adds that private companies and entrepreneurs should be treated fairly by public opinion.
Background: the tech clampdown
This story goes back to November 2020, when the planned US$37 billion IPO of Alibaba’s Ant Group was abruptly stopped less than 48 hours before its scheduled listing. Since then, Beijing has increasingly tightened its regulations on Internet companies.
The regulatory storm, which slashed internet firms’ valuations by 50-70%, ended in mid-2022 as Beijing said it would support the internet sector.
Li Daokui, a former advisor to the People’s Bank of China, said on June 3 last year that the scrapping of Ant’s IPO plan was a political decision as top Chinese leaders were shocked by the huge list of the company’s shareholders, which even involved some party secretary members on a city level.
During the clampdown, state media and commentators criticized internet firms and their owners for neglecting labor and consumer rights and failing to help boost the real economy.
Sima Nan, an influencer or so-called “Big V’ (verified person on social media), last year published a series of articles criticizing Jack Ma on issues ranging from personal lifestyle to business decisions.
Sima was then slammed by state media, including the Guangming Daily, which said some Big Vs had tried to attract eyeballs by defaming entrepreneurs. In late December, he apologized to Ma and suggested that Ma should be invited back to the mainland.
Ant Group said on January 7 that Ma and other persons acting in concert had given up their control in the company.
Take that, Big Vs
ThePaper.cn said in its editorial on March 1 that the private economy and companies should not be defamed; the government wants them to grow bigger. It said some Big Vs had deliberately provoked hatred of entrepreneurs by calling them hanjian (traitor to the Han Chinese) and “comprador.”
In the 19th century, Qing officials, either Manchurians or Mongolians, used the term hanjian to describe people they saw as bad apples among the Han Chinese. Ever since the Qing government collapsed in 1911, hanjian and the Portuguese-derived term comprador (mai-pan in Cantonese, mai-ban in Mandarin) have referred to Chinese people who secretly provide information or services to foreigners.
On March 6, an article published by a media channel of the Zhejiang government, in which Li Qiang and Chinese President Xi Jinping had worked together, said the private sector is the real growth engine as it represents 60% of China’s GDP, contributes more than half of the government’s tax income and offers 80% of jobs in urban areas.
“During the three-year pandemic, many private companies have been struggling,” it says. “Now they are facing new challenges such as cash and labor shortages, declining orders and squeezing margins due to the restructuring of the global supply chain.”
On the same day, Xi told a group of businesspeople that the government has always treated private firms and entrepreneurs as its own people.
Some commentators say Ma’s appearance on the mainland, together with officials’ calls for supporting the private sector, will help boost companies’ investment confidence. Some others, however, say that Chinese entrepreneurs will adopt a wait-and-see approach in view of the fact Beijing still tightly regulates the internet sector.
Follow Jeff Pao on Twitter at @jeffpao