China is unveiling Xi-nomics, its new brand of capitalism, and how Jack Ma is cut to size

In episode 649 of Cut the Clutter, Shekhar Gupta discussed the cancellation of Jack Ma's Ant Group IPO and the deification of Chinese president Xi Jinping.

File photo of Jack Ma, co-founder and former executive chairman of Alibaba Group | Commons

New Delhi: On Sunday, Chinese regulators ordered Jack Ma’s online financial titan Ant Group to return to its roots as a provider of payments services, breaking the back of the $280 billion unicorn.

In episode 649 of Cut the Clutter, ThePrint Editor-in-Chief Shekhar Gupta discussed ‘Xi-nomics’, the brand of capitalism under President Xi Jinping, and how the Ant Group IPO, potentially the biggest in history, was cancelled.

Gupta started by explaining how Ma, the Alibaba founder, was a household name in China and worth close to $50 billion — which has now declined slightly. He is also an investor in tech companies and startups in India such as Paytm, Zomato and BigBasket.

In the first week of November, just when Ma was days away from the IPO of his big fintech giant, the Ant Group — which had been pre-valued at $280 billion and was expecting to list at over $300 billion — his top executives were summoned by the Chinese regulators and told to stop the IPO over compliance issues.

The executives were asked to clean up their act. This caused a chill in the markets globally and was also seen as a big takedown of Jack Ma, one of China’s poster boys, said Gupta. In view of this crackdown, he presented the larger China story.

Deification of Xi Jinping

Gupta highlighted two names — Zhang Zhan, a 37-year-old independent journalist in Wuhan, and Ren Zhiqiang, one of China’s biggest real estate entrepreneurs.

This week, Zhang was sentenced to four years’ imprisonment, months after she reported that the government’s claims on Covid spread in Wuhan were incorrect and that it was unable to control the virus.

Ren was an outspoken critic of the Chinese government.

Responding to a speech by Chinese President Xi Jinping, Ren had said in an article: “I too am curiously and contentiously studying the speech. What I saw was not an emperor standing there, exhibiting his new clothes. But a clown who stripped naked and instead insisted on continuing being an emperor.”

In September, Ren was sentenced to 18 years’ imprisonment for allegedly taking a bribe.

Gupta said Xi almost enjoyed Mao Zedong-level deification so no one can say anything against him.

The Chinese govt’s issue with Jack Ma

Gupta said Jack Ma could not go for Ant Group’s IPO right now, or maybe even in the near future, and definitely not at that valuation because his value has been shot down. Alibaba lost almost anything between 16 and 20 per cent of its value after the Chinese action.

Digital financial technology activities form 63 per cent of his turnover, while the traditional payments business contributes 36 per cent.

Gupta said this meant if Ma has to stop his fintech business, as ordered by Chinese regulators, he would lose 63 per cent of an operation that posted 60 per cent growth last year.

He then looked at the larger picture and explained why the Chinese authorities were going after Ma. He said Ma became a superstar in China and everything he touched turned to gold, which was a problem due to the vast inequality China is witnessing.

Over 60 crore people in China live on less than $150 a month, at a time when China has more billionaires than the US and India combined. While consumption per capita has declined by 5 per cent in China, spending on luxury goods has risen by 50 per cent. So the rich got richer and the poor, poorer, he said.

The Chinese Communist Party did not like this disorderly expansion of capital, and told Ma he was getting too big, said Gupta.

Xi’s brand of capitalism

Apart from Ma, the Chinese government was also putting pressure on Tencent, which is a huge investor that has put its money in Indian ventures such as Dream11 (title sponsor of IPL) and Swiggy, among others. Gupta said many believe President Xi Jinping was taking China back to 1950s-style communist control.

He explained that Xi did not like anybody becoming too big or acquiring a voice. So the logic is that “you can do your business, but you should always know that the party is superior”. So, Xi-nomics is a new kind of state capitalism that the Chinese president was revealing.

According to Gupta, there are three features of Xi-nomics. First, tight control on the economic cycle and debt machine — banks, etc. Second, a more effective administrative state, allowing bankruptcies and patent lawsuits in a more orderly manner than before. “The Wild West capitalism will not be allowed,” said Gupta. Third, blurring the boundary between the state and private firms.

Watch the latest episode of CTC here: