Alibaba Founder’s Canceled Stock Sale a Sign of China’s Shrinking Private Sector

Jack Ma, co-founder and former executive chair of Alibaba Group, speaks during the Forbes Global CEO Conference in Singapore on October 15, 2019. Roslan Rahman/AFP via Getty Images

Alibaba founder Jack Ma (Ma Yun), one of China’s richest men, has halted plans for a huge stock sell-off after the company’s stock slid dramatically, according to a memo posted internally at the tech company on Nov. 22.

Nonetheless, analysts say the planned stock sell-off sent a message that Mr. Ma, like the rest of China’s private sector, is feeling the pain of a slumping economy.

Political and economic analysts believe the planned sale, announced Nov. 16, was largely propelled by concerns about China’s economic future and Mr. Ma’s shrinking fortunes under communist rule.

An official filing last week showed that two British Virgin Islands-registered companies owned by Mr. Ma’s family trust intended to sell Mr. Ma’s shares in Alibaba on Nov. 21, reducing his combined holdings by 10 million American Depository Shares, involving a total of about $870 billion.

The filing’s timing coincided with the company’s financial report, which announced that Alibaba was dropping plans to spin off its $11 billion cloud unit.

On Nov. 16, Alibaba’s stock plunged 9 percent in New York, and the next day it plummeted nearly 10 percent in Hong Kong. The staggering dive wiped out about $20 billion from the company’s market value.

In the post on Alibaba’s intranet Wednesday, Jiang Fang, the company’s chief talent officer, told staff the unfortunate timing was a “coincidence” and said that Mr. Ma had not sold any stock, is no longer planning the massive stock sell-off, and “remained very positive” about the company.

However, Lu Yuanxing, a U.S.-based political and economic analyst, feels that Mr. Ma’s plan to sell, although scrapped, tells a different tale—that he is pessimistic about China’s prospects for economic recovery.

In an interview with The Epoch Times, Mr. Lu highlighted the diminishing size of the Chinese market, the weakening purchasing power of consumers, and the fact that no industry is impervious to the effects of this decline. “For billionaire founders of all industrial sectors, it would be reassuring to liquidate equity and hold cash for the present,” he said.

In addition, Mr. Lu said, the Chinese Communist Party (CCP) is ruthlessly “digging for gold” in every field of society, with billionaires’ assets being the first batch to be harvested in the CCP’s “leek-cutting” operations.

“Cutting leeks” is an internet buzzword used to depict the vulnerability of Chinese citizens—comparable to leeks—to oppression and exploitation at the hands of the CCP.

China’s Super-Wealthy Feel the Pain

Mr. Ma’s slipping fortunes—along with those of his colleagues among China’s super-rich—were chronicled by the 2023 Hurun China Rich List, released Oct. 24.

The list shrank for the second year in a row—only the second consecutive loss in its 25-year history. The annual ranking found 1,241 individuals with a wealth of more than 5 billion yuan ($690 million). That number was down 5 percent from last year and down 15 percent from its peak two years ago, according to the Hurun report.

Released by the Shanghai-based Hurun Research Institute, the list included 895 billionaires, down 51 since last year, and down by 290 since its peak two years ago, the report said.

This year, the combined wealth of the 20 top billionaires was $3.2 trillion, down 20 percent from 2020’s 4 trillion.

Wealth comparison of China’s billionaires in 2020 and 2023, respectively. The Epoch Times

In 2020, Mr. Ma had taken the title of China’s wealthiest individual for three consecutive years and boasted a net worth of $58.8 billion. Yet, as of 2023, his total wealth had depreciated by $35 billion to $23.4 billion, resulting in a slip to tenth place.

Tencent CEO Pony Ma (Ma Huateng) moved back to second place this year, with a wealth increase of $9 billion. Despite the resurgence, he is still worth $18.8 billion less than he was in 2020.

“Bottled water king” Zhong Shanshan, the founder of Nongfu Spring, a packaging water supplier, and the third richest person in 2020, surpassed the internet moguls to seize the top spot in 2023 for the third year in a row, with a fortune worth $62  billion. Nonetheless, the 69-year-old’s net worth has decreased by about $3 billion from his net worth of $65 billion last year.

Hardest Hit: Real Estate, Solar Industry

According to the Hurun report, almost 500 names have fallen off the list in the past two years, while 179 dropped off just this year.

Four of the top 10 biggest wealth decreases were from the solar industry, which has been hit hard by China’s weak economy. Notable examples included Luo Liguo, chairman of Hoshine Silicon Industry, Li Zhenguo and Li Xiyan, founders of LONGi Green Energy, Ningbo Deye Inverter Technology’s Zhang Hejun, and Tongwei’s Liu Hanyuan and Guan Yamei. The solar leaders lost $18 billion between them.

The real estate sector accounted for 15 percent of the list’s dropouts, with the industrial products sector accounting for 14 percent.

A notable casualty of the real estate slump was Wanda Group founder Wang Jianlin, whose net worth plunged the most, by about $7.3 billion.

Real estate developer Country Garden’s Yang Huiyan saw her wealth reduced by almost 90 percent over two years, to $3.6 billion.

Xu Jiayin, the founder of embattled property giant Evergrande Group and once Asia’s second-richest person, topped the 2017 Hurun rich list with a total wealth of $40 billion. Since then, his fortune has steadily declined, falling to 172nd place in 2022 and further slipping to 268th place in 2023 with $2.8 billion.

Although Mr. Xu’s wealth has declined by a jaw-dropping 98 percent since its peak, he made the 2023 list on the strength of dividends paid in previous years. The world’s most indebted property developer, he was placed under police control in September and is being investigated for unspecified “crimes.”

Economic woes in the food industry were also reflected in this year’s rich list. Qin Yinglin and Qian Ying, owners of Muyuan Foodstuff, a pork processing company, lost $5.5 billion as pork prices dropped. Pang Kang, chairman of Foshan Haitian Flavouring and Food Company Ltd., lost $6.9 billion.

In other sectors, giant furniture retailer Red Star Macalline Group’s Che Jianxing dropped off the list, while JD.com founder Liu Qiangdong and his wife, Zhang Zetian, were down $6.2 billion, as the e-commerce giant lost ground to competitors.

Dysfunction and Economic Downturn 

“China is not a normal functioning society under communist rule,” said Mr. Lu. Widespread corruption is symptomatic of a dysfunctional system.

In the real estate sector, companies frequently collude with local authorities, bribing officials to obtain state funds, which are then used to pursue personal gain, Mr. Lu said.

As a result of the real estate crisis, homebuyers have been cheated out of down payments, workers unpaid, and building developments left unfinished throughout the country. A report from Nomura Holdings on Nov. 14 estimated that there are around 20 million unconstructed and delayed pre-sold homes in China.

Men working at a complex of unfinished apartment buildings in Xinzheng City in Zhengzhou, China's central Henan province, on June 20, 2023. Pedro Pardo / AFP

Moreover, the CCP’s draconian zero-COVID policies and years-long lockdown triggered an economic downturn and a real estate market implosion. “Consequently, the wealth of these real estate giants is bound to shrink severely,” Mr. Lu said.

The CCP’s policy of aggressively supporting the solar industry caused substantial capital to be injected into the industry. However, a significant portion of those funds flowed into private pockets in various segments.

“China’s photovoltaic [solar-related] products have long been in a state of surplus. Once the market bubble bursts, these entrepreneurs will inevitably suffer a loss accordingly,” Mr. Lu said.