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Jack Ma surprised to see the State Administration for Industry and Commerce (SAIC) attack his company’s reputation. Photo: Bloomberg
Opinion
Mr. Shangkong
by George Chen
Mr. Shangkong
by George Chen

SAIC-Alibaba dispute offers a new lesson for China’s richest man

Row between SAIC and Alibaba shows Jack Ma should cultivate relationships at lower levels

When the mainland’s richest man gets involved  in a public war of words with an  important industry regulator,  that is certainly news.

What really bothered many global business partners and shareholders of Alibaba,  the mainland’s top e-commerce firm,  might not be really about the government allegations about how many fake products were sold via Alibaba’s online shopping networks but more about how good or bad self-made billionaire Jack Ma Yun’s government relations can grow after this dispute.

Doing business in China is all about politics.  For Ma, it was completely a surprise to see the State Administration for Industry and Commerce (SAIC) suddenly attack Ma on his company’s reputation just days after he returned from the World Economic Forum in Davos where Ma was clearly portrayed as the most important business leader from China.

What surprised and probably worried Ma deeper may be the fact that SAIC first revealed to the whole world there was a closed-door meeting and a white paper about Alibaba’s quality problems just ahead of Alibaba’s mega  US listing late last year. Then for the sake of the company’s listing plan, the SAIC decided to hold off the white paper. Alibaba didn’t disclose this particular detail as one of the investment risks for its investors during the listing roadshow and that became a significant question about Alibaba’s information disclosure. Several US law firms immediately acted on this before the SAIC later clarified the white paper didn’t have legal status and was “just for internal reference”.

The U-turn in such a rare public dispute between Alibaba and the SAIC within just 24 hours late last week made the whole incident even more mysterious. It is believed that the drama has caught enough attention from top leaders inside Zhongnanhai, China’s White House, and Beijing wants to end this unexpected crisis immediately to avoid losing face and money for both sides.

Alibaba lost billions of dollars in just few trading sessions as shareholders were worried about Ma’s government relations. Beijing cannot afford a crash of an online business that many small private businesses now heavily rely on. So, your choice – win-win or lose-lose? Industry insiders say Ma should have got a lesson that although he enjoys good personal ties with some top leaders at the central government level,  he may also want to show more respect to lower-level government bodies.

Ma is lucky to get  by this crisis but politics will remain the top challenge for him and Alibaba – and Chinese politics is clearly getting more sophisticated than just having  one or two powerful friends who can help someone do everything.

 

George Chen is the SCMP’s financial editor and a Yale World Fellow. Mr. Shangkong columns appear every Monday. Follow @george_chen on Twitter or visit facebook.com/mrshangkong

This article appeared in the South China Morning Post print edition as: A new lesson for China’s richest man
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