Is Beijing’s Clampdown on Private Industry Easing?
After Alibaba founder Jack Ma’s return from a yearlong absence, Communist China would like American businesses to think so.
China is open for business, or at least that is what its Communist leaders want American business leaders to believe. Should anyone trust Beijing?
The Communist Country’s most famous entrepreneur, Alibaba founder Jack Ma, just returned to China after a yearlong absence. On Monday he visited a school at Hangzhou that he had founded after his career at the helm of the tech company ended. His departure from Alibaba was widely perceived as forced retirement, orchestrated by Chairman Xi’s administration.
The Jack Ma foundation was diplomatic in a statement, denying that his absence from the country has been forced. Mr. Ma “travels very often in China and overseas,” it said. Yet, Mr. Ma spent most of the last 12 months in Japan, far from his homeland. His return is seen as a signal from above that the Beijing clampdown on private industry is easing up.
On Tuesday Alibaba, the tech behemoth often compared to Amazon, announced it will break up into six parts. Each new division will be helmed by its own chief operations officer. Each will be free to raise funds in China and abroad. Alibaba’s shares at the Hong Kong exchange gained eight percent on the news Tuesday.
The company breakup was meant to signal a relaxation in government controls, heavy regulations, and onerous harassment of Chinese companies. It was advertised as part of Prime Minister Li Quiang’s attempt at restoring confidence in the country’s business environment.
For three years, a clampdown on entrepreneurs, onerous regulatory pressures on companies, and Covid-related shutdowns that ended activities in major business hubs like Shanghai, significantly slowed down the country’s economy. Beijing decided to announce a new direction, nominating Mr. Li as the new premier in hope that a reshuffle at the top would revamp the business environment.
Earlier this month Mr. Li vowed to provide “unswerving” support for the private sector, the Wall Street Journal reported, quoting the premier as telling legislators, “Our commitment in this regard is unequivocal and steadfast.” Mr. Xi also said that private businesses are a “vital cog” in the economy.
Now Beijing is inviting executives from around the world, and most crucially from America, to visit and demonstrate confidence in its new business environment. This week Apple’s chief executive, Tim Cook, is in the country, meeting with Mr. Li.
With the Apple tycoon by his side, the premier promised that the Communist country will provide a “top-tier business environment despite changes in geopolitical affairs.”
Yet, to do business in China currently “one would have to believe that Xi is actually going to embrace the market friendly policies business wants, or that foreign businesses in China have bought into Xi’s non-market economic vision,” a Taiwan-based private equity executive, Mark Simon, tells the Sun. “Neither the former nor the latter are the likely outcome, and we are left with the propaganda charade it is.”
Mr. Simon, a former group director at Next Digital, adds that all the foreign business executives paraded by Beijing are the ones that are already invested in the country. “No one I saw came prospecting,” he says, “and with so many U.S. business leaders refusing to be seen in public it looked more like a hostage-taking.”
Mr. Ma is returning to China “with a gun to his business,” Mr. Simon says, while his old company, Alibaba, is broken up in what has “far more to do with what the CCP wants than what the business needs would be.”
One of the goals of Beijing’s new campaign is to counter Washington’s growing realization that America needs to decouple its economy from China’s. Last week the Biden Administration informed semiconductor companies seeking funding under the Chips Act that they would need to choose: receive federal aid and manufacture in America, or expand their operations in China — but not both.
The Xi regime would love American companies to opt for the latter. Reverting to the pre-Xi days, when Communist China was perceived as a place where businesses flourish with little control from above, seems like a good deal — and that is the kind of business environment Mr. Xi hopes to project.
Yet, to believe that Beijing has once again changed direction “you’d have to be Charlie Brown thinking that this time Lucy is going to hold the football and let you kick it,” a retired Marine who has worked in Japan as risk assessor for Morgan Stanley, Grant Newsham, tells the Sun.
“The CCP has promised a ‘greater opening up’ every quarter for the last four decades,” Mr. Newsham, the author of “When China Attacks, A Warning To America,” says. “At some point, even American and Western businessmen ought to figure out the market is rigged against them. A foreign company will only be as successful in China and for as long as the CCP allows it to be. And that applies to Chinese businessmen as well.”
Whether Beijing’s latest whim is more economic freedom or more control, one does business in China at Mr. Xi’s pleasure.