Nearly a year on from Jack Ma’s ill-conceived decision to criticize regulators, Alibaba is committing billions to Xi Jinping’s “common prosperity” push.
The company will spend 100 billion yuan over the next four years to bolster Xi’s vision. The money will be spread over ten separate initiatives aimed at increasing investment in technology and supporting small companies, among other things. 20 billion yuan will go directly into a common prosperity fund.
Alibaba is hardly alone. Late last month, Pinduoduo promised to donate $1.5 billion in profits to “improve [the] lives and livelihood” of farmers. Tencent is doubling its own financial commitment to social responsibility programs to $15 billion.
Bloomberg counted more than 70 mentions of “common prosperity” in earnings reports from Chinese corporates this quarter, including Ping An and Meituan, whose founder Wang Xing reminded investors (read: Beijing) that the company’s name means “better together.” That, Wang suggested, makes Meituan synonymous with common prosperity. Of course, if I name my child “Charity” and she grows up to be a robber baron, that’s just insult to injury for the impoverished masses.
Beijing will likely extract sizable fines from Meituan as part of an antitrust probe into the company’s operations. It’s been a bumpy ride (figure below).
On Thursday, authorities told Meituan and Didi to “rectify” their behavior within the next four months. Specifically, the Transportation Ministry (along with a hodgepodge of other departments), convened a meeting with nearly a dozen car-hailing platforms, some of which were accused of “adopting a variety of marketing methods, vicious competition, and recruiting or inducing unlicensed drivers and vehicles to ‘bring cars to join’ illegal operations.”
That’s according to a lengthy statement in which the companies were also chastised for “disrupting fair competition and affecting the safety and stability of the industry, which damages the legitimate rights and interests of drivers and passengers.”
Tech shares in Hong Kong trimmed gains when the statement was released. Regulators ordered the companies to “review their own problems, immediately rectify non-compliance, jointly maintain a fair and competitive market order, and jointly create a good environment for the standardized and healthy development of the online car-hailing industry.” That’s a lot to do when the deadline for compliance is “immediately.”
Some readers have likely seen the chart below. “Common prosperity” is now ubiquitous in Xi’s speeches.
As discussed at length here over the past several weeks, this isn’t a flash in the pan, nor is it “just authoritarianism.” It’s an across-the-board societal overhaul.
Many market participants and various heavyweights (including MSCI) would rather not accept this reality, in part because, in a worst-case scenario, it could compel a dramatic rethink of… well, of damn near everything, including index construction.
It’s interesting to ponder where we’d be right now had Jack Ma listened to his advisors 11 months ago. “While Ma might not have realized the impact his words would have, people close to him had been baffled to learn in advance about the tone of the speech he planned to deliver,” Reuters wrote late last year, citing a pair of sources close to Ma who “suggested the 56-year-old soften his remarks as some of China’s most senior financial regulators were due to attend” his infamous speech in Shanghai.
At that speech, Ma launched into a critique of regulatory standards which he blamed for stifling growth and innovation. At one point, he accused Chinese banks of acting like “pawnshops.” Ahead of his remarks, Ma refused to back down, citing free speech, apparently forgetting what country he was in.
On Monday, officials were instructed to “urge companies to obey the leadership of the party” as Xi continues to unfurl his vision for Chinese society.
And companies are doing just that, including Ma’s. Alibaba’s $15.5 billion commitment was originally reported by the state-backed Zhejiang Daily. A company spokesperson confirmed the report’s veracity “without elaborating,” according to Bloomberg.
Both China and the USA have effectively printed lots and lots of currency.
China is doing what it is doing to put the full faith and maybe/maybe not the credit of the CCP behind the yuan.
The USA isn’t doing what it should be doing (what are we doing to be a global leader, now that the petrodollar might be on its way out?) to telegraph the full faith and credit of the USA to support the USD.
The world will decide which currency it wants. No wonder some are saying “neither”.
Xi Jinping ought to play Civilization more and interfere less… 😉
I think capitalism and democracy are the better way as opposed to authoritarianism and socialism, and yet there are points in Xi’s and regulator’s pronouncements that seem rather desirable.
We’re pretty much admitting that capitalism is “broken” except for the few, and the income and wealth gaps in the US are unacceptable.
It seems to me a little more civic-mindedness in this country on the part of corporations would be a good thing.
While we really don’t want “socialism” we nevertheless ARE a society.
We need to stop cringing at the “socialism” so much. When the Piigrims landed the Mayflower they signed a document called the “Mayflower Compact” pledging to pool their resources and work together for the good of the colony. Guess what, that was socialism. Every time we tax the general population and take the money to spend for the general good, that’s a form of socialism. Socialism isn’t communism, it’s what a society does for the good of all — might I add, a Christian society, in fact, any morally upright society.
perhaps also when overcrowded and unsanitary food markets can serve as breeding grounds for deadly viruses it might be time to invest in better infrastructure one way or another … one might also want to temper regulatory criticisms during times of human existential crisis as well…
…meanwhile in America Bezos and Branson are blasting themselves into space…quite the juxtaposition …