The ViewAlibaba, in New York, can’t escape China’s stock market rout
Alibaba executive chairman Jack Ma Yun clearly takes pride in the fact his company trades on the New York stock exchange. But he hasn’t been able to escape the ongoing stock market rout in China.
As China’s stocks plunge, traders have been rushing to cut ties with the country, and Alibaba, the New York stock exchange’s biggest bet on Chinese consumers, hasn’t been spared. The company’s biggest selling point – its access to Chinese shoppers – has suddenly become its biggest vulnerability. On Tuesday, its stock slid to its lowest price since its IPO.
And there’s little reason to expect Alibaba’s fortunes will improve anytime soon. Even if the stock rout doesn’t crash China’s economy, it will likely reduce President Xi Jinping’s appetite for sweeping economic reform.
That shift threatens Alibaba more than Ma would ever publicly admit. In a series of New York speeches last month, Ma detailed his company’s vast ambitions for global growth. They included expanding warehousing investments in the West – in ways that must have worried executives at Amazon.com – and helping American startups “go to China and sell their products to China”.
China’s plunging stocks will also have an impact on Xi’s efforts to make China the linchpin of a new global order
To succeed outside China, though, Ma first needs a vibrant home market. And that depends on Xi having the courage to accelerate efforts to transform China into a service economy led by a thriving private sector. Xi would have to diversify the country’s growth engines, not just re-open its credit floodgates.
But China’s economy is dominated by giant state-owned enterprises whose political connections make change hard in the best of times. With shares plunging, those monopolies’ resistance to any reduction of their influence will only intensify. Xi’s team will likely have less leeway to internationalise the country’s financial system, free its interest rates and liberalise currency trading. Beijing might now “take a more cautious approach regarding capital account opening, given that too rapid an opening may further amplify domestic fluctuations, especially given fragile fundamentals and flawed regulations”" says economist Tao Wang of UBS.