Jack Ma, the founder of Alibaba, was the richest and arguably most successful man in China. Then he gave a speech that offended the Chinese Communist Party (CCP) by criticizing state-owned banks and their regulators. He was immediately summoned to Beijing and has not been seen in public since.
China would have you believe Jack is painting, playing golf, and devoting his life to charitable works, but the short videos they released are about as believable as when the emaciated and battered hostage reads a letter telling the world his captors are treating him well.
Imagine if Donald Trump had summoned Jeff Bezos, the founder of Amazon, to Washington and Bezos was never seen again. Think of the uproar that would ensue. (There was little or no uproar in China.) That’s the equivalent of what we are talking about with Jack Ma. That demonstrates the power that China wields over its population. It also tells you something about their government.
Sending a Message
When a country’s richest, most well-known individual can suddenly be removed from society, taken captive, “re-educated” via a 1984-style psychological reprogramming, and his company taken over by the government, it tells every other entrepreneur, company CEO, and average Joe to avoid offending the CCP. The implicit message is, if it can happen to Jack Ma, it can happen to you.
As a result, Ma went from being one of the most popular people in the country to one of the most vilified. Following the lead of their government, the Chinese people now brand him a villain and an “evil capitalist.” Whether they believe this inside their hearts does not matter; what they post on social media and say in public is what counts. Of course, the government is monitoring that as well.
China already exerts a great deal of control over its populace, but apparently that is not enough. The country is moving to stop certain IPOs at home and abroad, and has cracked down on industries as diverse as financing, after-school tutoring, and gaming. They aimed much of this new regulatory focus at tech giants, from Alibaba to DiDi because they have money and data, which equals power.
China’s ride hailing leader DiDi raised $4.4 billion dollars by having an IPO on the NYSE. Two days later, the Chinese government announced an investigation of the company and ordered its app kicked off of Chinese app stores.
As a result of this action, fewer Chinese companies will list on the U.S. stock exchanges, and U.S. investors should be more cautious about investing in Chinese companies.
According to this article in the Wall Street Journal, there are many signs that the CCP’s intervention, or what they call a “corporate crackdown,” is just getting started.
The Communist Playbook
China’s crackdown will give the CCP more control and it may direct more money into the government’s coffers. In the long run, it will result in less innovation, less market success, and limit growth of their tech market. In a country known for stealing its best technology from the U.S., they need innovation. By limiting growth opportunities and enforcing regulations that make competition unwelcome and penalize success, they will eventually end up with exactly that: companies that are set up to fail.
By inserting government loyalists into a company’s management structure, which is reportedly happening, you get a company that is more worried about following the government’s policies than making money for its shareholders. Before long, who you know and how you behave become more important to moving up in the organization than how you perform your job. That leads to mediocrity and sometimes to failure and collapse. For examples of how companies fail when success is no longer a target and profit is no longer a motive, look at how Russian companies and farms performed after the revolution or Venezuela’s oil industry after the government nationalized it.
Keep in mind that American politicians would love to be able to do this to American companies. They use the SEC, the IRS, and many other regulatory agencies and tools to control them, but it isn’t quite the same thing.
It’s All About Control
The CCP is taking back control, rewinding the tape to go back to the way things were, and returning to its communist principals. In the same breath, they are reminding its population that they are not free. Since China has never had an underlying culture of freedom, most of its people will accept this, just as they accepted being welded into their apartments when they had COVID-19.
Don’t for a minute think that the socialists in the U.S. government would not hesitate to do the same thing if they could get away with it. “The Squad” and many others would just love to arrest CEOs at companies that burn coal, don’t have solar panels on their roofs, or are contributing to global warning. Parts of our government would no doubt like to haul Q-Anon, MAGA, Proud Boys and other groups off to re-education camps, just like China has done with the Uighurs and other ethnic groups.
The things that keep the U.S. government from acting like the CCP are our court system, our culture of liberty and freedom, and hundreds of millions of guns in private hands. The socialists are well aware of this and are trying to do away with both these obstacles by coming after guns and expanding the court to get rid of the conservative majority. They want to stomp out freedom and liberty.
Don’t let it happen here.
Prior to editing, photo was by Foundations World Economic Forum – Enabling eCommerce: Small Enterprises, Global Players, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=68575690