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Baosteel plans to set up a brand new e-commerce platform with an initial registered capital of 2 billion yuan. Photo: EPA

China’s No 1 steelmaker wants to be the next Alibaba selling steel online

Many Chinese people want to be the next Jack Ma in China nowadays and many companies want to copy the success story of Alibaba too including the latest and unusual effort by something that doesn’t have too much to do with technology – China’s No.1 steelmaker.

Baosteel

Many Chinese people want to be the next Jack Ma in China nowadays and many companies want to copy the success story of Alibaba too including the latest and unusal effort by something that doesn’t have too much to do with technology – China’s No.1 steelmaker.

Shanghai-headquartered Baosteel surprised its shareholders this week by announcing a grand plan on red-hot e-commerce business in the world’s second largest economy. Baosteel said in a stock filing to the Shanghai Stock Exchange on Tuesday evening that it planned to set up a brand new e-commerce platform with an initial registered capital of 2 billion yuan. Market reaction? Its share prices suddenly shot up like rocket within 24 hours.

Even before Baosteel spent literally a coin of its expensive investment plan on the e-commerce business, share prices of Baosteel rose by nearly the daily trading uplimit of 10 percent in the Shanghai stock market on Wednesday, making it the largest single-day rise since December.

Suddenly, it just became a mission that was not too easy to buy a single share of Baosteel. Those investors who were too slow to react realized their bidding prices for Baosteel’s stocks went too low to get a single share on Wednesday. Thanks to Baosteel’s ambitious new e-commerce plan, many of its smaller peers, such as Valin Steel and Shougang Steel, saw their stock prices also jumped between five percent and ten percent as investors may expect them to follow Baosteel’s move to become the so-called “next Alibaba”.

“I get it – now as long as you turn yourself into an e-commerce concept in China, your stock will fly high and fast,” said a venture capital investor who declined to be named due to his company policy.

Baosteel didn’t offer details about its new e-commerce plan in the stock filing. In an interview on Wednesday with local media Jiemian, Baosteel executives said the giant steelmaker would take best use of the new e-commerce platform, which was yet to be launched, for “big-data” research, cheaper and faster logistics and potentially new “Internet finance” business for its steel industry clients.

All those industry terms, such as “big-data”, “Internet finance” and “e-commerce”, are the most popular buzzwords often heard in China’s capital markets nowadays. A short message that went viral in China’s investment community recently joked all companies should change the so-called “concept” of their businesses this year to somewhat be linked with the concept of Internet, then they would seem to have the potential to be the next Alibaba or Xiaomi.

Xiaomi, also known as the “Apple of China”, is a homegrown technology company with relatively a short history. Xiaomi has been already valued at about US$50 billion. Alibaba made its name worldwide last year by launching the world’s largest listing on Wall Street. Some analysts and investors expected Baosteel to do the same thing – someday to make a spinoff of its new e-commerce arm and get it listed for a big show in the global capital markets.

“So many people in China are fascinated by the perception of quick and big success online. The symbol of success is an IPO and the associated big market capitalisation. While the internet can play a constructive role in the economy, what's going on is part of China's get-rich-quick bubble,” said Andy Xie, an influential Chinese economist in a 2014 report to warn investors of the e-commerce bubble in the making.

Apparently, Xie’s warning has been so far well ignored in China’s stock market and Baosteel will not be the last “next Alibaba” story that many other businesses want to sell to their investors.

 

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