November 26, 2022

Jack Ma, the most famous businessman China has ever produced, eschews the limelight. Friends say he paints and practices tai chi. Sometimes he shares drawings with Masayoshi Son, the billionaire leader of the Japanese conglomerate SoftBank.

The big wide world saw Mr. Ma for the first time in months last week during a virtual board meeting of the Russian Geographical Society. As President Vladimir V. Putin and others discussed Arctic affairs and the protection of the leopards, Mr. Ma could be seen resting his head on one hand and looking deeply bored.

For Mr. Ma – the charismatic entrepreneur who showed for the first time two decades ago how China would shake the world in the Internet age; whose face adorns the shelves of admiring business books; If you’ve never met a crowd that you couldn’t dazzle – it’s a great change.

Under Communist Party’s Supreme Leader Xi Jinping, China has punished and shamed a number of tycoons who have amassed enormous wealth and influence but have exceeded their limits. Mr. Ma and the crown jewels of his online empire, e-retail titan Alibaba and fintech giant Ant Group, are Beijing’s biggest targets to date as officials begin to regulate the country’s powerful internet industry like never before.

American and European officials have been trying to contain internet giants for years. It is difficult to imagine, however, that Western regulators could effect such a significant change in wealth as what happened to Mr. Ma. Mr. Xi has asserted widespread control over China’s private sector, calling for commitment to the party and to social stability that is above profits.

Xiao Jianhua, once a trusted finance lieutenant for many Chinese elites, was kidnapped from a luxury hotel in Hong Kong in 2017. Ye Jianming, an oil tycoon with Washington ties, was arrested, as was Wu Xiaohui, whose insurance company bought the Waldorf Astoria Hotel in Manhattan. Mr. Wu later went to prison. Lai Xiaomin, the former chairman of a finance company, was executed that year.

“The general ironclad rule is that there should be no individual power centers outside the party,” said Richard McGregor, senior fellow at the Lowy Institute and author of “The Party: The Secret World of Communist Rulers of China.”

Beijing’s crackdown on technology is already running through boardrooms outside of Alibaba.

Ant Group’s CEO, Simon Hu, resigned in March. A few days later, Colin Huang resigned as chairman of Pinduoduo, the mobile bazaar that he founded and brought to the public within a few years. Pinduoduo announced his resignation the same day it had attracted 788 million shoppers in the past 12 months – a larger number than Alibaba.

At a political meeting earlier this month, Pony Ma, founder of social media giant Tencent, proposed stricter rules for internet companies – or, as an official newspaper put it, “innovative methods of regulation and governance”.

Last week, China’s antitrust agency asked 34 top Internet companies to discuss new rules for fair competition. Within a few hours, they discussed business changes and publicly promised to stay in line.

“These new regulations require Internet platforms to examine how they can innovate in the future, and the result may be less innovation,” said Gordon Orr, a non-executive board member at Meituan, the Chinese grocery giant.

Even so, Alibaba and other internet titans have a status in China that could protect them from the most severe treatment. Officials have praised the Titans’ economic contributions, even as they tighten supervision. Mr. Xi wants China’s economy to be driven more by its own innovations than those of capricious foreign powers.

That means it may be too early to declare Jack Ma for the count.

“His company is far more important to the success and functioning of the Chinese economy than any other entrepreneur,” said McGregor. “The government wants to continue to reap the benefits of his company – but on its terms. The government is not nationalizing Alibaba. It does not confiscate its property. It simply limits the field in which it operates. “

Alibaba declined to comment.

Mr. Ma is not new to dealing with the authorities in China.

He worked briefly and unhappily for a government-run advertising agency before founding Alibaba in 1999. At that time, China was still getting used to the idea of ​​powerful private entrepreneurs, and Mr. Ma proved adept at making charming government officials.

“Alibaba has absolutely an opportunity to grow into a world-class company,” said Wang Guoping, then secretary of the Communist Party in eastern Hangzhou, where Alibaba is based, in the 2000s. “What a world-class company needs most is a soul, a commander, a world-class businessman. I believe Jack Ma meets that standard. “

Mr. Ma saw early what success could bring in China, said Porter Erisman, an early Alibaba executive.

“There was only one person in the company who warned us that one day we might have problems being so big that we would be pressured to have too much market power,” said Erisman. “And that was Jack.”

Mr. Ma raised his concern at a staff meeting in the mid-2000s, Mr. Erisman said. At the time, he added, most of the Alibaba employees were just trying to think, how are we ever going to make money?

In 2011, Mr. Ma got a taste of how his ambitions could rub shareholders and regulators in the wrong direction. Quietly, he took over Alibaba’s payment service Alipay and angered one of Alibaba’s largest investors, Yahoo. Mr. Ma said the move was necessary under new Chinese regulations. Alipay later became Ant Group.

“He was encouraged by the Alipay transfer,” said Duncan Clark, who has known Mr. Ma since 1999 and is chairman of the consulting firm BDA China. “He somehow got away with it.”

As Alibaba grew, Mr. Ma was courted by presidents and movie stars, but also by a larger group of Chinese entrepreneurs. This “echo chamber” may have distorted Mr. Ma’s ideas about himself and his standing in the government, said Mr. Clark.

Otherwise, he might have seen the writing on the wall, especially since Mr. Xi has urged private companies to work more closely with the state.

When Mr. Ma resigned as chairman of Alibaba in 2019, a comment in the official Communist Party newspaper stated, “There is no so-called Jack Ma era – only Jack Ma as part of that era.”

China’s leaders need the private sector to sustain economic growth. Nor do they want entrepreneurs to undermine the party’s dominance in society.

Last October, while Ant was preparing to go public, Mr. Ma spoke at a conference in Shanghai and criticized China’s financial regulators. He had long seen Ant as a means of disrupting the country’s major state banks. But there could hardly have been a less favorable moment to get to the point. The officials discontinued Ant’s stock listing shortly afterwards.

In China, “it’s hard to say that the emperor is out of clothes these days,” said Kellee S. Tsai, a political scientist at Hong Kong University of Science and Technology.

Mr. Ma has also largely disappeared in his company. In January, he showed up on an internal chat group to answer a business question, according to a person who had seen the message but was not authorized to speak publicly. The staff later shared the message from Mr. Ma to calm nervous colleagues.

Recently, the Shanghai Research Group Hurun Report estimated that for the first time in three years, Mr. Ma was not one of the three richest people in China. The country’s new number one was Zhong Shanshan, the reluctant boss of both a bottled water giant and a pharmaceutical company.

When his water company went public last year, Mr. Zhong was so little known that Chinese news of his sudden wealth had to explain to readers how to pronounce the obscure Chinese character in his name.