Jack Ma, co-founder and executive chairman of Alibaba, resigned as head of the Chinese technology behemoth last week. A self-made man who built an empire from nothing, Ma’s vision and hard work transformed the way China does business, and Alibaba’s success made him the richest man in China. Ma exemplifies much of modern China. He also anticipates that the time has come for him to relinquish his high-profile position. That too is a sign of the times in his country.
There is little in his background to have suggested that Ma was destined for greatness. He struggled to get into college — it took four tries to pass the entrance exam — and eventually became an English teacher. He claims to have been rejected by every private company he sought to join, including Kentucky Fried Chicken. He discovered the internet in 1995 during a trip to the United States; struck by the paucity of information about his country, he set up a crude website about China. That effort struck gold and in 1999 he and 17 other friends established Alibaba, a business-to-business website, in his apartment.
In two decades, Alibaba helped transform China. It drove the creation of the digital infrastructure and the mentality that today defines Chinese commerce. Every day, more than 700 million consumers shop on its pages and conduct 500 million digital financial transactions. It is estimated that Alibaba’s e-commerce platforms support more than 40 million jobs. When it commemorated the 40th anniversary of China’s opening and reform last year, the Chinese Communist Party identified 40 individuals — Ma among them — and noted that Alibaba “became an enormous driver to stimulate domestic consumer demand … and provided the commercial infrastructure for small and medium enterprises.”
The firm continues to show strong potential. Alibaba sold $853 billion worth of goods in 2018, more than three times Amazon’s reported sales of $277 billion, and a 25 percent increase over the previous year. It is making money, posting a $3.1 billion profit in the quarter ending in June, a 145 percent increase. Analysts detect gathering clouds, however. Revenue growth is decelerating, dropping from 51 percent in 2018 to 42 percent in the last quarter. Growth in online sales dropped to 17.8 percent in the first half of this year (from 23.9 percent in 2018) a deceleration that reflects the slowdown across the entire Chinese economy.
Ma recognized that Alibaba needed to ease its reliance on the Chinese domestic economy and venture overseas. He wants the company to eventually generate half its revenue outside China, but in 2019 international business was responsible for just 7 percent of total revenue and it is growing more slowly than the company’s core China business. That task will become harder in the face of mounting suspicions outside China about the motivations and business practices of Chinese companies like Alibaba and their ties to the state and the CCP.
Ma remains optimistic and determined to ensure that Alibaba “lives for 102 years” — or spans three centuries. That means rigorous commitment to its six founding principles — the “Six Vein Spirit Sword,” which is named after a popular kung fu technique; Ma’s an aficionado — such as “customers first” and “integrity.” It is easy to dismiss that as corporate puffery, but Alibaba’s first B2B business CEO was forced to resign after he could not reduce fraud by sellers on the website.
Ma announced his decision to retire a year ago and gave the company — and the market — ample time to prepare for the transition, the first among China’s big tech conglomerates. His successor is Daniel Zhang, currently Alibaba’s chief executive. But Ma will not be going far. While he says he will devote himself to philanthropy, he will retain membership in the Alibaba Partnership, a group of several dozen employees that controls key licenses, has influence over the board and leadership, and controls Alipay, the online payment system. One observer calls this Ma’s third retirement, having stood down as president in 2006 and chief executive in 2013.
Stepping away now makes sense. Apart from the business challenges, there are mounting political concerns. Alibaba is now so large that its carefully cultivated arms-length relationship with the government will be hard to maintain. The Beijing government’s desire for tighter social control and its use of the internet to accomplish that has profound implications for Alibaba, especially given its role in developing digital payment systems.
Japan is a beneficiary of Alibaba’s success. SoftBank was an early investor, parlaying a $20 million investment in 2000 into $60 billion when Alibaba went public in 2014; despite selling billions of dollars of its holdings, SoftBank remains the company’s largest investor, with a 26 percent stake. Alibaba has joined four other companies to standardize the Japanese QR codes that are essential to digital commerce and facilitate spending by the more than 8.3 million Chinese tourists who visit Japan annually. More than 300,000 Japanese businesses use Alipay to handle those transactions. There is every reason for Japanese to wish Ma the best of luck in retirement — and see how he changes the world next.