Paper cuts sharpest, says Alibaba's Jack Ma
How do you defeat the country's No 1 e-commerce firm? It may not require any innovation in technology, just a piece of paper, says Jack Ma Yun, the founder and chairman of Alibaba.
As the central government steps up its efforts to crack down on the red-hot online finance sector - led by Alibaba and its rival Tencent - Ma could not remain silent any longer.
In response to a question about the obstacles his firm - which confirmed on Sunday its plan to list in New York - is facing, Ma said at a technology forum in Beijing on Tuesday: "Sometimes, what can beat you is not technology, but just a document."
He did not elaborate but most market watchers and industry players believe his comment was related to the central bank's crackdown on internet finance.
Beijing is increasingly concerned over the supervision of the new online financial services, which may change the landscape of traditional banking services.
Ma's complaint about a potential setback to his business came a few days after the People's Bank of China issued two drafts for consultation aimed at limiting online shopping and money transfers for online payment service providers.
Alibaba's Taobao.com is the leading online store on the mainland. The firm also controls Alipay, the dominant online payment system, through which internet users can easily transfer money and make transactions when they shop on Taobao or other websites.
The PBOC's move came after it decided last week to put on hold plans by Alibaba and Tencent to offer virtual credit cards.
The directive came the day after the two firms announced those plans, clearly aimed at making inroads into the card payments business of commercial banks.
The Big Four state-run banks, led by Industrial and Commercial Bank of China, dominate the credit card market.
"It's just a suspension. We're not killing internet finance," said a central bank official, who declined to be named because of the sensitive nature of the matter.
"We do support financial innovation, but we must get very clear knowledge of what the risks could be and how we can regulate the new business and get the potential risks under control."
While Beijing's crackdown on internet finance may be recent, it reflects a long-standing problem in doing business on the mainland.
Some entrepreneurs have tried to take advantage of regulatory loopholes to enjoy a first-mover advantage in starting new businesses, but once the businesses grow bigger and attract more attention from the government, the regulators tighten the rules.
Many foreign investors have complained about regulatory uncertainty as one of the biggest challenges they face when doing business in the world's second-largest economy.
A PwC survey of foreign banks found regulatory uncertainty to have been a factor undermining foreign investors' confidence in China in recent years.
As it turns out, Ma once took advantage of "a document" to strengthen his control of Alibaba's core businesses.
He shocked Wall Street in May 2011 when he transferred Alipay, the online payment system created and owned by Alibaba, to a private company held by him.
Yahoo, one of Alibaba's key shareholders, was outraged, and some fund managers in the United States even threatened to sue Ma. Yahoo and Alibaba later resolved their differences.
At that time, Ma defended his move on Alipay, saying mainland banking regulations did not allow an online payment business to be controlled by a foreign investor or a joint venture with foreign participation.
At the time of Alipay's launch, the rules for online payments and who could run the business were unclear. The central bank later defined the rules by issuing a policy document - a piece of paper.