Imagine if Jeff Bezos or Bill Gates disappeared from public view and it was automatically assumed they had been arrested on the orders of President Joe Biden and were being interrogated in a secret government jail.
That is the situation in the world’s second-biggest economy, where Jack Ma, the Bezos of China with more than $50bn to his name, has appeared just once since October — in a short video that did little to quell speculation he was being held hostage by the state. Ma vanished after Chinese authorities blocked his fintech group Ant Financial’s initial public offering, which would have been the largest listing in history.
The latest rumours suggest he is playing golf on an island in the South China Sea and may still emerge with his wealth mostly intact. But the brutal humiliation of China’s most famous entrepreneur reveals the sharp and growing contradiction at the heart of the Chinese state.
On the one hand, President Xi Jinping has embarked on a grand project to bring about the “great rejuvenation” of the Chinese nation, which can only be achieved through rapid economic growth that relies overwhelmingly on private enterprise. But at the same time, he has centralised political power, expanded the state-owned sector and asserted the Communist party’s right to insert itself in to all aspects of people’s lives and business.
“East, west, south, north and centre, the party rules over all,” is one of Xi’s favourite slogans. Although he constantly touts the orthodoxy of Marxism and “socialism with Chinese characteristics”, the uncomfortable reality is that capitalists provide 80 per cent of urban jobs and account for 60 per cent of GDP.
As a billionaire and a member of the Communist party himself, Ma personifies the contradiction inherent in China’s governing ideology. His career until late last year was one of the deftest examples of entrepreneurial survival in a “market Leninist” system that stamps out alternative sources of power or authority. As in Vladimir Putin’s Russia, Chinese oligarchs are dealt with quickly and ruthlessly at the first sign they are not slavishly loyal.
Until recently, Ma played the role of pet capitalist well. I first met him in 2005 at the signing ceremony for the partnership between Yahoo and Ma’s ecommerce company Alibaba. At the time, Yahoo was in trouble in the US after handing emails to Chinese authorities that led to long prison sentences for journalists and human rights activists in the country.
When asked about this, Ma’s response was unequivocal: “Whatever [government officials] say, we’ll do it.” He later spoke approvingly of the party’s decision in 1989 to send in tanks to crush the Tiananmen Square democracy movement. He told me in a separate interview he would hand over his entire company to “the nation” at any time if the government asked him to.
Like all China’s tech billionaires, Ma has played a crucial role in the construction of a budding techno-totalitarianism. And like any wealthy person in China, he has scrupulously cultivated party officials and their relatives. Large investors in Alibaba and Ant Financial include several “princelings”, including the grandson of former Chinese president Jiang Zemin.
Some of Ma’s current troubles could stem from the fact these patrons no longer have the political heft to protect him from a newer generation of leaders with no personal stake in the world’s biggest IPO. But his biggest problem was the hubris that $50bn buys and the visibility that comes with being China’s most flamboyant entrepreneur.
This year marks the centenary of the founding of the Chinese Communist party and Xi is keen to boost his legitimacy with paeans to the country’s socialist pedigree. That is rather hard in a country where the richest 20 per cent had an average disposable income 10.2 times that of the poorest one-fifth last year. In the supposedly heartless capitalist US, the multiple was about 8.4.
Despite Xi’s past dalliances with free market thinking, most policy signals suggest he now believes in more Marxist, socialist goals, even if his overwhelming ideology remains ethno-nationalism. But his government knows it cannot just nationalise private enterprise as the party did after it won the revolution in 1949.
The goal today is more subtle, and difficult. Xi wants to encourage private enterprise while asserting total Communist party control over the actions, incentives and even thoughts of entrepreneurs. In September, Beijing issued a set of guidelines ordering private companies to establish Communist party committees that should play a role in personnel appointments and other important decisions. They specified that businesspeople should be educated to “identify politically, intellectually and emotionally” with the party. Interference in the private sector, along with the humbling of high-profile capitalists like Ma, is likely to increase in frequency and intensity.
The big question is what this means for foreign investors, in particular the Wall Street banks and money managers currently piling into China. Will icons of American capitalism such as Goldman Sachs and BlackRock really be able to align themselves “politically, intellectually and emotionally” with Xi? And how will the US government regard Communist party cells in their management structures?