China presents British firms with almost unlimited opportunity, but that opportunity is fraught with difficulty and requires very careful navigation. Even those at the very top of have to tread carefully.
It has been nearly three months since the disappearance of Chinese business magnate Jack Ma. Recently he re-appeared in a video praising China’s teachers, a platform far from business and politics, where he stated “My colleagues and I have been studying and thinking, and we have become more determined to devote ourselves to education and public welfare.”
His re-emergence leaves a bittersweet taste in investors’ mouth, both reassuring investors against possibilities such as nationalisation of Alibaba at the same as an introduction of newly proposed anti-monopoly rules. Shares in Alibaba fell nearly 3% on the day together with Ma’s net worth plummeting by more than 10% (~$54.5bn according to Bloomberg).
“It showed that it’s life as normal [for Mr Ma] but not business as normal,” said Rupert Hoogewerf, chairman and chief researcher of the Hurun Report who has chronicled the rise of China’s elites for over 20 years.
Since the speech, draft rules issues by the PBOC, make it clear that regulators will now target Alipay and potentially even competitor WeChat Pay. Under these new rules, the People’s Bank can advise the State Administration of Market Regulation to break-up any ‘non-bank payment company’ that controls more than 50% of the market- or any two holding a combined share of 67%. (AliPay holds 55.6% and WeChat Pay 38.8% according to the FT)
The PBOC “is stepping into someone else’s territory to state what a monopoly is — it signals they are strengthening their control”, said Angela Zhang, an antitrust expert and head of the Centre for Chinese Law at the University of Hong Kong. “Both Ant and Tencent have a strong market position in payments — I imagine they will be quite nervous about this.”
Beyond the significant consequences for Ant Financial, these recent changes further enforce the precedent that the PBOC has ultimate control over the private sector in Mainland China.
The above underlines that doing business in China requires local knowledge and contacts, both in the business world, but also the Communist Party. Polestar’s partners in China are well positioned to help you. If you are looking to make the most of the immense opportunity China affords please get in touch and we will gladly make introductions to teams in Beijing, Shanghai or elsewhere.
Doing business in China requires local knowledge and contacts, both in the business world, but also the Communist Party. Polestar’s partners in China are well positioned to help you