Alibaba’s $2.8B Fine: The Deadly Fight Behind the Bamboo Veil

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I am often told that the Chinese analyze news and events differently from Caucasians. In the West we tend to accept Government and Media proclamations without question. We believe that officials and those in authority are working with our best interests in mind. We are, by and large, naive. The Chinese have a 5,000-year of history of largely hostile Emperors, Empresses, and dictators. A history full of court intrigue, plots and jockeying for power. A history replete with purges and suffering by the Lao Bai Xing (old hundred names or ‘ordinary people’). This is an environment where the Lao Bai Xing learned to “read the tea leaves”, interpret the court intrigue, to determine which way the wind was blowing. Fear and distrust of pronouncements coming from court or local officials was inculcated into the population for millennia. In-bred distrust led to minds that were always looking for ulterior motives, and jockeying for survival.

When you read news do you read it thinking; “oh, this must be all true”, or do you “read between the lines”? In other words, do you read critically, searching for the true meaning? When you watch TV news do you accept what you hear unquestioningly? Trust is virtuous as long as you are dealing with trustworthy individuals. Ethics are laudable as long as you are dealing with ethical people. The truth is usually revealed like peeling the layers off an onion.

Here is a headline I read recently:  “Why Alibaba is “full of gratitude” for record $2.8 Billion fine imposed by Beijing”.

Source: The Epoch Times. Alibaba Beijing headquarters.

Does anybody genuinely appreciate getting fined $2.8B? Apparently, Jack Ma and Alibaba do, if we believe the press release from Alibaba. Of course, the CCP (Chinese Communist Party) has a long history of devouring its own, and trotting them out in front of the cameras to say what is needed, and what is required. On April 10, Alibaba, the world’s biggest e-commerce firm (2020 revenue $72B) was fined 18.2B Chinese Yuan (4% of the company’s 2019 sales in China). Alibaba issued a response indicating that it is “full of gratitude and respect” over the fine. “Had it not been for the sound government regulation, and critical support we would not have achieved our growth“, the company said. 

The dichotomy in this statement gives westerners a window into the inner workings of the elite world of the CCP’s quasi-Capitalism and political intrigue. An opportunity to understand the fight to the death behind the bamboo veil.

Ten years ago, Jack Ma, co-founder and former executive chairman of Alibaba Group, was prophetically quoted as saying “Chinese entrepreneurs really don’t end up well [6]“. I would broaden his thesis by saying that a Revolution always ends up eating its own. This has been proven throughout the seventy-year history of the CCP, as well as throughout the history of revolutions in general. The purges in China are still taking place. 

Source: The Epoch Times. Jack Ma former head of Alibaba

Let’s try peeling the layers of the story about Chinese regulatory sanctions against Alibaba & Ant Financial.

A westerner might read this news and instinctually think, wow, the Chinese regulators are clamping down on companies behaving monopolistically in China. That’s great! That’s what we were told would happen by the establishment politicians and Wall street. They told us giving up our jobs and industries to the CCP under the pretense of the WTO was a good thing in the long run because China would begin behaving like a regular Capitalist model-citizen if exposed to free trade, democracy and international rules. But that instinct would be dead wrong. Why? Free trade and the CCP’s flirtation with capitalism has ultimately been about enriching the top elite CCP families and Wall Street, and raping the Chinese working class along with the US working class. 

Much has been written recently about the “wing-clipping” received by Jack Ma and his business empire. Undoubtedly Alibaba and Ant Financial were exploding in size, scope and market influence. Perhaps party leaders were somewhat worried about the dominance of China’s biggest internet company, which was expanding into finance, health services, and other sensitive areas. But, we must ask: would the top of the party elite – meaning Xi Jingping – have been concerned with monopolistic behavior of a major Chinese company had Alibaba and Ant Financial been controlled by Xi’s family instead of his rivals inside the party, the Jiang family?

Source: The Irish Times. Xi Jinping (Chinese President) with Jiang Zemin (former President)

Let me assert, the sanctions meted out to Alibaba and Ant Financial were not principally about monopolistic behavior. They were the culmination of many costly difficulties for Alibaba, but most of all it was a result of who the controlling shareholders are, and the deadly fight for control of the CCP, and for the CCP’s “family business” – which happens to be all of China. In November, 2020 Alibaba’s affiliate, Ant Group’s mammoth initial public stock offering, forecasted to raise $37 billion, also ran aground. It was halted. It was stopped by financial regulators in Shanghai and Hong Kong days before the listing.

What would make Xi use his power in the party to sanction both Alibaba and Ant Financial?

Alibaba’s 2014 post-IPO financial statements reported the main shareholders as: Alibaba Management 14.6% (including 7.8% held by Jack Ma); Softbank 32.4%; Yahoo 16.3%. That leaves 36.7% unaccounted for. In November 2017, 13.4 million documents were leaked from a large offshore legal firm Appleby, corporate service providers Estera and Asiaciti Trust, as well as business registries in 19 offshore jurisdictions. These were documents showing the holdings of individuals and companies in offshore jurisdictions called Tax Havens. The disclosures (known as the “Paradise Papers”) forced these tax evaders and anonymous investors to transfer investments from these jurisdictions back to onshore jurisdictions (where these individuals or corporations were resident or citizens) in order to comply with the law. Among these investors were companies controlled by Jiang Zhicheng, grandson of Jiang Zemin, former General Secretary of the CCP and former President of the PRC. In the US alone, as much as 20% of Alibaba shareholdings were repatriated by companies ultimately controlled by Jiang Zhicheng’s.

Source: forum24.cz

The ‘red princeling’ Jiang Zhicheng has utilized his father’s and grandfather’s connections to amass a fortune of at least $1T through his private equity firm Boyu Capital, and has laundered much of that money out of China. Other than controlling holdings in Alibaba, Huawei and Tencent, the Jiang family also controls the Alibaba spin-off Alipay (now Ant Financial). In 2011 Alibaba (Jack Ma under instruction from the Jiang’s) transferred Alipay to a company called Zhejiang Alibaba without the consent of major Alibaba shareholder Yahoo, thereby sabotaging the asset value for Alibaba shareholders. Alipay was then renamed Ant Financial. Ironically, Boyu then helped Alibaba buy Yahoo’s shareholding in Alibaba – I am certain at this point Yahoo was relieved to be removed from this cesspool of CCP mafia.

The financial power and connections of the Jiang family are what Xi fears, and is what propelled him to use the power of his position to clip their wings through sanctions on the companies they control – Alibaba and Ant Financial. When something happens in China you cannot simply interpret it naively as an independent department of the government working to protect the integrity of the market, consumers or society. It is always about the opaque power struggle for dominance between the powerful, elite CCP families for control of the CCP’s “family business” – which in this case is the entire country. Always look for ulterior meaning in the headlines and official pronouncements by looking behind the bamboo veil.

Reference:

[1]”China fines Alibaba $2.8Billion for breaking anti-monopoly law”, Elena Moore, NPR, April 10, 2021

[2] “Why Alibaba is “full of gratitude” for record $2.8 Billion fine imposed by Beijing?”, Alexander Liao, The Epoch Times, April 21, 2021

[3] “Alibaba Fined $2.8 Billion on Competition Charge in China”, Reprinted by The Epoch Times from Associated Press, April 13, 2021

[4] “China Reins in Jack Ma’s Ant Group with Enforced Overhaul”, Reprinted by The Epoch Times from Reuters, April 12, 2021

[5] “Unmasking the Family Fortunes of Jiang Zemin, Former Chinese Regime Leader”, Epoch Times Staff, The Epoch Times, June 18, 2019

[6] “Jack Ma was right when he said. Chinese entrepreneurs really don’t end up well”, Jessica Mao, The Epoch Times, April 21, 2021

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