For years, Alibaba founder Jack Ma has had a safe spot at the top table of Chinese business. Members of the Chinese Entrepreneurs Association even recall an evening outing on West Lake in Hangzhou some years ago when he boasted about his close relations with the president, dating from when Xi Jinping was a provincial Communist Party secretary.
But this week, which was supposed to end with the US$37 billion ($54.6b) listing of Alibaba's Ant Group financial business, instead saw Xi himself, according to people close to events, pulling the plug on what was meant to be the biggest IPO ever.
The immediate catalyst for the action was at least in part a speech Ma made in October that was critical of Chinese banks and regulators. But in the background, regulators and banks threatened by the rise of nimble new competitors have been lobbying hard to rein the sector in, particularly Ant and its ebullient founder.
"He had become too arrogant," said the head of Asian economics at one major international bank with close relations with regulators. "They needed to put a leash on the monster that Ant was becoming."
In retrospect, it is clear that Ma, now 56, has become caught up in a mess that was a long time brewing and is at least partly of his own making.
The ripple effects of the cancelled IPO are many — and mostly worrying. "The message is that no big private businessman will be tolerated on the mainland," said Chen Zhiwu, a professor at Hong Kong University.
The threat to Ant has been building up in Beijing for many months, but Ma and his closest associate Joe Tsai, who built the firm with him since its founding in 1999, did not assign enough weight to it, as it seems now. "Jack and Joe signed off on the listing as soon as they were satisfied that they had the regulators' blessing," said one of Ant's most senior executives.
From the beginning, Ma, a former English teacher, was really the only public face of Alibaba. Yet the man who established the ecommerce group that is now China's most valuable company never openly displayed the deep understanding of technology shown by Robin Li, the founder of Baidu, or the knowledge of product development of Pony Ma, chief executive of Tencent. Alibaba's culture, meanwhile, demanded fierce loyalty from staff, while demonising the competition. Few staff would dare use the Tencent WeChat pay app, for example.
"For all these years, Jack Ma was the biggest branding success and the best asset for the Alibaba group," said Chen.
Yet it was the combination of Ma and Tsai that made the empire flourish. Ma was the visionary but always with him, to make sure the vision was executed, was Tsai who grew up in Taiwan and studied law at Yale before joining Ma. It also fell to Tsai to keep his flamboyant boss in check.
When Goldman Sachs took a stake in Alibaba in 1999, for example, it was Tsai who was more fluent in the language of the financiers.
Despite its big name backers, Ant was always a threat to the vested interests of the financial industry in China — including credit card company Unionpay and the state-owned banks.
Although it started out as a payments company and dominates mobile payments in China, in recent years it has branched out into other lucrative areas previously the preserve of state-owned banks. The largest share of its revenues now comes from a lending business focused on smaller customers.
When it did its last capital raising in the private market in 2018, it described itself as a "disrupter", in materials circulated to potential investors seen by the FT. Yet analysts such as Jason Bedford, then at UBS in Hong Kong, described it as a parasite on the Chinese financial system, taking advantage of its freedom from the heavy regulation imposed on deposit-taking banks.
China's plans to create a digital currency and electronic payments system announced last spring were in large part a response to concerns that Ant's Alipay app, and to a lesser extent Tencent's WeChat pay, had too large a share of digital payments at the expense of established banks, regulators said.
More recently, regulators also have their eye on micro-lending, though in its most recent annual report, Alibaba described Ant as a partner helping banks lend money to the small and medium businesses that are the engine of job creation.
The banks and regulators have never viewed Ant quite that way. While it does not take deposits from the public, the funds it channels from the banks do come from deposits. Under new guidelines unveiled this week, online lenders would need to make at least 30 per cent of loans themselves rather than outsourcing them.
"The banks were right to complain, they are so tightly regulated and Ant was free to do whatever it wanted," said Chen. "This is the end of light touch regulation."
Ma infuriated regulators with his attack on them and the banks in Shanghai last month. He also overplayed his hand by lobbying regulators aggressively at that time, said several people with knowledge of the matter. "Trying to corner regulators was not a good idea," said one former executive at the China Securities Regulatory Commission. "He should have been smarter."
At an Alibaba board meeting last year when Ma formally stepped down as executive chairman, he appeared in his rock star uniform — clad in black, wearing sunglasses and with purple beads in his hair — and sang You Raise Me Up to an audience of staff, family and friends. The cheers turned to sentimental tears when new chief executive Daniel Zhang appeared on stage on bended knee to serenade his predecessor.
But one problem was that Ma did not really retire. True, he surrendered the reins of Alibaba and Ant Financial. Yet he and Tsai continue to call the shots in crucial matters.
Ma has always told associates he wanted to retire early. Now it is likely he will be forced to actually do so.
Written by: Henny Sender
© Financial Times