|To: Glenn Petersen who wrote (739)||12/27/2020 3:26:57 PM|
|From: Julius Wong|
|How The Chinese Use Illegal Online Gambling And Tether To Launder Over $1 Trillion Yuan|
Last month, another gig job platform backed by Ant Group, China’s dominant online payment service provider, was investigated for suspected money laundering activities. Beijing Bujiao Technology Co. Ltd. was suspected of having falsely issued more than 1.3 billion yuan of value-added tax invoices. Some of the company’s money laundering activities involved cross-border gambling, Caixin learned.
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|From: Glenn Petersen||1/4/2021 8:26:51 AM|
|Where is Jack Ma? Alibaba's billionaire founder is reportedly missing following China's crackdowns on his companies|
January 4, 2020
-- Chinese billionaire Jack Ma is suspected missing, Jessica Yun reported for Yahoo Finance.
-- Per the report, the Alibaba and Ant Group founder has not been seen publicly in more than two months and he was abruptly replaced as a judge on the African talent show he founded.
-- Chinese regulators have been cracking down on Ma's business empire in recent months, halting Ant Group's IPO in November and launching an antitrust investigation into Alibaba in 1December.
-- The clampdowns came after Ma publicly criticized China's banking rules in October.
-- Ma, who has a net worth of $50.6 billion, was China's richest man until recently. Visit
Chinese billionaire Jack Ma, the founder of Alibaba and Ant Group, is suspected missing, Jessica Yun reported for Yahoo Finance.
The 56-year-old businessman has not been seen in public for more than two months, per the report.
Ma has been in the spotlight recently as China has cracked down on his business empire. In late December, Chinese regulators launched an antitrust investigation into Alibaba, the country's biggest e-commerce company that some refer to as "the Amazon of China." And in November, China had introduced a series of new regulations that put a halt to what would have been the massive initial public offering of Ma's fintech company, Ant Group.
The new rules came weeks after Ma criticized China's financial regulatory system at a conference in Shanghai in October. At the conference, Ma reportedly dismissed the global financial regulations used by China as "an old people's club" and said, "We can't use yesterday's methods to regulate the future."
Blair Silverberg, CEO of debt-financing startup Capital told Business Insider's Katie Canales in November that the new regulations were introduced " so the government can assert its supremacy over Jack Ma."
In November, Ma was replaced as a judge on the African talent show he founded, "Africa's Business Heroes," the Financial Times reported. The talent show did not immediately respond to Business Insider's request for comment, but an Alibaba spokesperson told Business that Ma could no longer be on the judging panel for the show's finale — which was filmed in November but has not yet been released — "due to a scheduling conflict."
"We do not have anything to add beyond that," the spokesperson said in response to questions about Ma's whereabouts.
Ma stepped down as chairman of Alibaba in 2019.
Until recently, Ma was China's richest man with a fortune that reached more than $60 billion. Ma's net worth has however taken a $12 billion hit over the past two months as China has tightened rules for the financial technology industry. Today, Ma is worth $50.6 billion, making him the fourth-richest person in China, according to the Bloomberg Billionaires Index.
As news of Ma's suspected disappearance has spread, an August 2019 prediction about Ma by another billionaire Chinese businessman has been recirculating on social media.
In the video interview, Guo Wengui, who fled China as a fugitive in 2014 and claims to be a whistleblower exposing corruption in the country, said that in the next year, Ma would likely end up in jail or dead because China wants to "take back" Ma's lucrative Ant Group.
Last week, the Chinese government ordered Ant Group, which owns China's largest digital payment platform Alipay, to scale back its operations after expressing concerns that its corporate governance was "not sound."
A spokesperson for Ant Group did not immediately respond to Business Insider's request for comment for this story.
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|From: Glenn Petersen||1/7/2021 7:34:51 AM|
|Alibaba and Tencent shares fall after report says they could be added to U.S. blacklist|
PUBLISHED THU, JAN 7 20216:45 AM EST
Sam Shead @SAM_L_SHEAD
-- The shares of Alibaba and Tencent saw heavy falls after a report, citing several people familiar with the matter, suggested the Trump administration could be about to add the Chinese tech giants to a U.S. blacklist.
-- The conglomerates saw their shares on the Hong Kong stock exchange slide by around 4% after the report from The Wall Street Journal said that officials were considering prohibiting Americans from investing in the firms.
-- If they do get added to the U.S. blacklist, then American investors won’t be able to trade their stocks from Jan. 11.
The shares of Alibaba and Tencent saw heavy falls on Thursday after a report, citing several people familiar with the matter, suggested the Trump administration could be about to add the Chinese tech giants to a U.S. blacklist.
The conglomerates saw their shares on the Hong Kong stock exchange slide by around 4% after the report from The Wall Street Journal said that officials were considering prohibiting Americans from investing in the firms.
The U.S. government blacklisted 31 Chinese companies in November over concerns that they support Beijing’s military through an executive order. U.S. state and defense officials have been discussing expanding the executive order so the blacklist includes more companies, according to anonymous sources cited by the WSJ.
When the Hong Kong stock exchange closed, Tencent’s share price was down 4.69% to 568.5 Hong Kong dollars, while Alibaba’s share price was down 3.91% to 221 Hong Kong dollars.
If they do get added to the U.S. blacklist, then American investors won’t be able to trade their stocks from Jan. 11. Those that already own shares in the companies would have until November to offload them.
Trump signed the initial executive order shortly after losing the 2020 presidential election to Joe Biden and it is already having consequences. The New York Stock Exchange confirmed on Wednesday that it plans to delist China Mobile, China Telecom and China Unicom.
On Tuesday, the Trump administration moved to ban Chinese payments apps including Alipay and WeChat Pay, which are linked to Alibaba and Tencent respectively.
In December, the U.S. added Chinese drone company DJI and Semiconductor Manufacturing International to a trade blacklist. The U.S. Commerce Department said the action against SMIC “stems from China’s military-civil fusion (MCF) doctrine and evidence of activities between SMIC and entities of concern in the Chinese military industrial complex.”
Alibaba’s battles extend beyond the U.S. and to its home turf, where Chinese regulators have recently launched an antitrust investigation against the company.
Jack Ma, Alibaba’s founder and CEO, is keeping a low profile and hasn’t been seen in public since last October after he appeared to criticize the country’s regulators.
Alibaba and Tencent did not immediately respond to CNBC’s request for comment.
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|From: Glenn Petersen||1/20/2021 7:50:22 AM|
|Alibaba founder Jack Ma appears for the first time since crackdown on his tech empire|
PUBLISHED TUE, JAN 19 202111:58 PM EST
UPDATED WED, JAN 20 20211:46 AM EST
-- Alibaba’s Hong Kong-listed stock was up 5% on news of his reappearance.
-- In a video posted on Chinese social media, Ma addressed rural teachers as part of one his charity foundation’s initiatives.
-- In October, Ma made some comments that appeared critical of China’s financial regulator leading to the IPO of Ant Group being pulled. Since then, he had been laying low, a source told CNBC.
GUANGZHOU, China — Alibaba founder Jack Ma has emerged after weeks out of the spotlight, which sparked speculation about his whereabouts as his companies face increased regulatory scrutiny.
Alibaba’s Hong Kong-listed stock was up over 8% on news of his reappearance.
In a video posted on Chinese social media, Ma addressed rural teachers as part of one his charity foundation’s initiatives. The annual event, which is usually hosted in the resort city of Sanya, sees the Jack Ma Foundation celebrate the achievements of rural teachers who are awarded cash support.
“Jack Ma participated in the online ceremony of the annual Rural Teacher Initiative
event on January 20,” a spokesperson for the Jack Ma Foundation said.
In October , Ma made some comments that appeared critical of China’s financial regulator.
It was one of the reasons attributed to Chinese regulators pulling the plug on what would have been a record-setting initial public offering of Ant Group, the financial technology giant Ma founded.
Since those comments, Ma had not been seen, leading to speculation he had gone missing. But a source told CNBC this month that he was just laying low.
Chinese authorities have cracked down on Ma’s technology firms Alibaba and Ant Group.
In December, China’s State Administration for Market Regulation opened an investigation into Alibaba over monopolistic practices. Beijing is also finalizing details of a wide-sweeping anti-monopoly law.
Regulators also asked Ant Group to rectify its business and comply with regulatory requirements. China is pushing through new rules on so-called microlending, which included provisions such as capital requirements for technology firms offering loans.
Beijing is concerned about the power of its tech companies that have managed to grow, largely unencumbered, over the past few years and have become key parts of everyday life in China.
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|To: TimF who wrote (745)||2/12/2021 8:39:52 PM|
|From: Glenn Petersen|
|Jack Ma Spotted Playing Golf in Eastern China, Quelling Fears He Was Detained|
FEBRUARY 11, 2021 4:01 AM EST
For months, speculation over Jack Ma’s whereabouts has run rampant. Maybe the embattled billionaire had fled to Singapore, some posited. Or he had been placed under house arrest. Or worse yet, he was locked up in a high-security jail.
As it turns out, China’s most talked-about tycoon has been working on his golf game.
The co-founder of Ant Group and Alibaba Group Holding teed off in recent weeks at the Sun Valley Golf Resort, a secluded 27-hole course on the Chinese island of Hainan, people familiar with the matter said, asking not to be identified discussing private information. Located near the island’s southern tip, the course offers expansive greens and stunning views.
It’s the first known Ma sighting since the former English teacher joined a live-streamed video chat with rural educators on Jan. 20. While that appearance helped quiet talk of Ma’s detention, speculation about his standing with China’s Communist Party has continued to swirl as authorities clamp down on his sprawling business empire.
Ma’s golf outing adds to recent evidence that the outspoken entrepreneur has — for now at least — avoided nightmare scenarios like jail time or a government seizure of his assets.
Ant, for instance, has reached an agreement with Chinese authorities on a restructuring plan that could be officially announced as soon as this week, Bloomberg reported on Feb. 3, citing people familiar with the matter. The deal is a first step on what could be a long path back to a revival of the fintech behemoth’s initial public offering, which was halted by regulators in November just days before Ant was due to start trading in Shanghai and Hong Kong.
Another positive clue emerged this week from SoftBank Group Corp founder Masayoshi Son, a longtime friend of Ma’s who was among the earliest investors in Alibaba. Son said during SoftBank’s quarterly earnings presentation on Monday that he has remained in touch with Ma. While he didn’t talk about the Chinese billionaire’s whereabouts, Son said Ma likes to draw and has been sharing his sketches via chat.
Alibaba shares rose as much as 1.5% in New York on Wednesday, closing at a more than 10-week high.
Representatives for Alibaba, Ant and the Sun Valley Golf Resort declined to comment.
Before the implosion of Ant’s IPO, Ma’s appearance on a golf course would have attracted little if any attention. The 56-year-old has been steadily relinquishing day-to-day oversight of his businesses in recent years, stepping down as executive chairman of Alibaba in September 2019.
But even in semi-retirement, Ma has rarely stayed out of public view for as long as he did after his now-infamous critique of Chinese financial regulators in October. Within weeks of his speech at the Bund Summit in Shanghai, authorities scuttled Ant’s listing, called for an overhaul of the company and started an antitrust probe of Alibaba.
Ma’s extended absence during the crackdown sent China’s rumor mill into overdrive, with some observers drawing parallels to Mikhail Khodorkovsky. Once Russia’s richest man, the Yukos Oil Co. boss spent about a decade in prison on fraud and tax-evasion charges that he said were retribution for challenging the authority of Vladimir Putin.
Given the opacity of Xi Jinping’s Communist Party, it’s difficult to assess the endgame for Ma with any certainty. He was conspicuously absent from a list of Chinese tech luminaries published by state media last week, a sign his standing with the party remains diminished.
For Hao Hong, chief strategist at Bocom International in Hong Kong, the most likely explanation is that Ma is simply laying low as his companies sort through their issues with regulators. Both Alibaba and Ant have formed special teams to work with the Chinese government, which is still fine-tuning new rules for the country’s fintech and internet industries.
Ma, described as a golfing novice by one observer at the Sun Valley resort, may have ample time to work on his swing.\
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|To: Glenn Petersen who wrote (746)||3/11/2021 11:18:15 PM|
|From: Glenn Petersen|
|China Lays Plans to Tame Tech Giant Alibaba|
E-commerce company to face softer treatment than its Ant affiliate, provided it distances itself from founder Jack Ma
By Keith Zhai and Lingling Wei
Wall Street Journal
March 11, 2021 10:12 am ET
Under founder Jack Ma, Alibaba Group Holding Ltd. had regulators and local officials in its corner as it grew into a Chinese version of Amazon.com Inc. Chinese President Xi Jinping’s recent crackdown on the empire of China’s best-known entrepreneur has put an end to that.
Since late last year, Alibaba has been in Beijing’s crosshairs, along with its financial affiliate Ant Group Co. Regulators already have come down hard on Ant, which they consider a risk to the financial system, forcing it to make changes that will severely hamper its prospects.
Alibaba, though, appears destined for softer treatment. Officials familiar with Beijing’s thinking said regulators don’t want to crush a technology powerhouse popular with both Chinese households and global investors—as long as it disassociates itself from its flashy and outspoken founder and aligns itself more closely with the Communist Party.
Antitrust regulators are considering levying a record fine against Alibaba exceeding the $975 million that Qualcomm Inc. paid in 2015 over anticompetitive practices, so far the largest in China’s corporate history, according to people with knowledge of the matter.
Those people said Alibaba also will be required to end a practice that has been dubbed “er xuan yi”—literally, “choose one out of two”—under which, regulators believe, the tech giant punished certain merchants who sold goods both on Alibaba and its rival platforms, including JD.com. The precise remedies Alibaba will have to take likely will be hammered out only after a decision is announced, according to one of the people.
Alibaba founder Jack Ma retired as the company’s chairman in 2019.PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
In addition, regulators are weighing whether to require Alibaba to divest itself of some assets unrelated to its main online-retailing business. Once final, measures against Alibaba will need to be approved by China’s top leadership.
Alibaba now faces a two-pronged challenge: correcting the anticompetitive behavior alleged by regulators and adhering to the government’s political agenda. The pressure reflects Chinese leadership’s assertion of statist prerogatives over the economy, which could risk dulling the innovation and competitive spirit that powered China’s growth in recent decades.
Representatives for Alibaba declined to comment. China’s top market regulator, the State Administration for Market Regulation, didn’t respond to requests for comment.
While painful, none of the measures under consideration would come close to crippling the company, whose businesses include online retail, entertainment, media and cloud computing. Unlike Ant, which regulators viewed as a disrupter and a threat to the stability of the financial system Alibaba is considered the pride of China, a showcase for technology innovation that also is vital to the nation’s economy. Some 780 million Chinese consumers, or half of the country’s population, made purchases through the company’s platforms last year.
For a company that had net income of nearly $20 billion in its most recent fiscal year, a fine would allow it to throw money at a problem and move on. Some Alibaba executives said even a huge fine would be at least a provisional relief for a company battered by regulatory uncertainty and sinking employee morale.
Shares of Alibaba, which are listed in New York and Hong Kong, have lost more than $200 billion—roughly one-quarter of their market value—since the regulatory onslaught against Mr. Ma’s empire began late last year.
The crackdown comes as China’s leaders refashion their relationship with the country’s internet giants, whose troves of data, deep coffers and reach across all aspects of Chinese life have increasingly made them a national-security concern. Mr. Xi personally scrapped Ant’s initial public offering, The Wall Street Journal has reported, furious at Mr. Ma for criticizing his effort to limit financial risk in an October speech, and angered by the outsize payouts well-connected people stood to gain from the listing.
Chinese Premier Li Keqiang speaking at the opening session of the National People's Congress on March 5.PHOTO: KEVIN FRAYER/GETTY IMAGES
At the opening last week of China’s annual legislative session, Premier Li Keqiang declared that “the state supports the innovation and development of platform companies.” But Beijing also has another message for its tech giants: No matter how big or innovative they may be, they must align themselves with the state by championing causes such as poverty alleviation.
No More Special TreatmentMr. Ma, a fan of the writings of Mao Zedong, adopted the former leader’s tactics of playing localities and officials against each other, people close to him said. Over time, such methods became a liability for his businesses, said regulators and Alibaba employees.
The same day that government antitrust investigators marched into Alibaba’s headquarters in Hangzhou in December, city officials in a nearby government compound threw a large piece of cloth over the sign of a government arm established two years earlier specifically to assist the e-commerce giant.
It was an signal that the days of special treatment for Alibaba are over. Officials who have long been in Alibaba’s corner are telling the company it can no longer count on them, according to people close to Alibaba. One government meeting after another has been devoted to how to incorporate the new marching orders for preventing big tech firms from monopolizing credit and other resources.
The party boss of Alibaba’s home province, Zhejiang, has pledged to “strengthen antimonopoly efforts and prevent disorderly expansion of capital.” Other top party officials who had backed Mr. Ma in the past have echoed the message.
Alibaba’s headquarters in Hangzhou, China.PHOTO: QILAI SHEN/BLOOMBERG NEWS
One was Chen Min’er, a rising political star who once urged regulators to treat Alibaba with “an open, forward-looking and innovative perspective.”
Zhejiang recently opened a channel to let local merchants report pressure from Alibaba to sell their goods exclusively on its Taobao and Tmall platforms, complaints that authorities until now had largely ignored.
The Zhejiang provincial government told the Journal that the sign for the office to assist Alibaba had been covered for renovation purposes, and that as a province that boasts vibrant internet-based businesses, it “attaches importance to improving the regulatory capabilities of the platform economy.”
‘Biggest Source of Instability’Inside Alibaba, some workers famous for their “996” hustle—a culture of working 9 a.m. to 9 p.m. six days a week—hover in limbo with little work as they await new company guidelines, according to Alibaba employees.
Some workers have started to question the way the company handled Ant’s IPO. Alibaba owns one-third of Ant, and many employees had hoped for a windfall from the stock sale. Some had even preordered cars or bid on property. While Ant Chairman Eric Jing has promised employees that the company will go public eventually, investors expect its valuation to be lower after a restructuring in line with regulators’ new requirements.
On Alibaba’s internal discussion board, some employees are openly calling Mr. Ma “the biggest source of instability” at the company.
Mr. Ma has sought to boost employee morale by saying it is common for a company to go through ups and downs. “At this time, there’s no shortage of emotions and accusations, but there’s a lack of calm, rationality and objectivity,” he said in a Feb. 27 post on the discussion board.
Mr. Ma’s personal office has suspended most interactions with an office under the party’s Central Committee that it used to be in regular contact with, according to people close to the company. Alibaba’s public-relations department has set up an office to fix a public image that many regulators have said they regard as arrogant.
Regulators’ anger at Mr. Ma’s modus operandi mounted in recent years. Depending on whom you ask, he and his tech employees were either fearless or clueless about the likelihood that their exploitation of regulatory gaps or challenges to Beijing would backfire.
In 2015, a few months after Alibaba went public on the New York Stock Exchange in what was then the world’s largest stock sale, China’s top market regulator criticized its efforts to eliminate counterfeit goods from its platforms. With support from local officials, Alibaba fired back publicly, calling the report flawed and sponsoring online articles condemning the agency’s “arbitrary methodology.”
Shortly afterward, the regulator removed the report from its website and described it as an internal memo, not an official document. After pressure from global brands, Alibaba in 2016 promised changes to how it tackled fake goods on its site.
Chinese President Xi Jinping personally scrapped Ant’s initial public offering, The Wall Street Journal has reported.PHOTO: LI GANG/XINHUA/ZUMA PRESS
One early inkling that Mr. Ma was falling out of favor in Beijing came in late 2018, when Mr. Xi invited some 50 entrepreneurs to rebut criticism that his policies were hurting the private sector. The group included Pony Ma, founder of Tencent Holdings Ltd. , Alibaba’s rival and owner of the popular WeChat app; Robin Li, head of search engine Baidu Inc. ; and Lei Jun, co-founder of smartphone maker Xiaomi Corp.
Mr. Ma wasn’t invited, according to officials with knowledge of the arrangement.
Mr. Xi told the executives his government wanted to strengthen rather than weaken private businesses, according to state media reports. Excluded from the public readout of the gathering, the officials said, was a blunt message Mr. Xi directed at the tech chieftains: Commercial success is secondary to the mission of beefing up the country’s technological security.
Shortly after the meeting, Pony Ma of Tencent issued a statement pledging to shoulder the responsibility and mission of turning China into an “internet power.”
Both company employees and government officials point to a key moment in May 2020, when they felt a major shift in the government’s view on Alibaba. That was when China’s chief internet watchdog, the Cyberspace Administration of China, in a report to the leadership, said Alibaba had used “capital to manipulate public opinion,” according to officials who saw the report.
The report followed an incident in April on China’s Twitter-like platform Weibo. Speculation that an Alibaba executive was having an affair had sparked a torrent of posts, but in less than an hour some users started complaining their posts were being deleted—a practice common for politically sensitive posts but unusual for celebrity gossip.
The internet watchdog said Alibaba had directed the actions of Weibo, in which Alibaba holds about 30% stake, and that it had been told to stop influencing the media, according to the people who saw the report.
The incident further riled authorities and rivals who believe Alibaba is using its stakes in social-media and media firms and its public-relations department to lobby against government policies that affect its business. The Cyberspace Administration of China didn’t respond to requests for comment.
Softer ApproachDespite the government’s anger at Alibaba’s tactics, Beijing doesn’t want to cripple the company, according to people familiar with regulators’ thinking. With more than 110,000 employees, Alibaba features a fast-expanding artificial-intelligence business and is a leading Chinese provider of cloud storage—sectors seen as key to China’s future.
When regulators opened their antimonopoly probe of Alibaba, investigators told the company to ensure that the business kept running while the investigation was going on, according to people familiar with the instructions, because any break in service could affect Alibaba users around the world.
One sign of a measure of leniency toward Alibaba came earlier this year, before the company’s sale of $5 billion worth of bonds. Investors were worried that Mr. Ma had disappeared from public view after his October speech criticizing government regulatory efforts. Beijing wanted to reassure international investors that he was safe and sound, according to some officials.
In late January, Mr. Ma resurfaced in a video published online by Tianmu News, a subsidiary of the Zhejiang provincial government’s newspaper. He was shown speaking to rural teachers as part of a philanthropy event.
Alibaba successfully sold its bonds in early February. Part of the proceeds, the company said, would be used for projects involving “green buildings, Covid-19 crisis response, renewable energy”—all government priorities.
It also helps that Mr. Ma has gradually reduced his stakes in Alibaba, holding less than 5% as of July. He retired as Alibaba’s chairman in 2019, though he has maintained significant sway over the firm. He remains the controlling shareholder in Ant.
A video recording of Jack Ma speaking to rural teachers in late January.PHOTO: JUSTIN CHIN/BLOOMBERG NEWS
Alibaba still faces challenges. A data-security law could force it to feed consumer data to the central government. Tighter reins on Ant’s lending business would hurt Alibaba, too, as many customers make purchases with loans from Ant.
Alibaba has lobbied legislators in an effort to avoid divestitures, according to people with direct knowledge of the matter. Sales of noncore businesses would be easier to absorb for the company than anything in its core e-commerce operations.
On March 1, Study Times, a newspaper published by the elite Central Party School, published an interview with a former senior Zhejiang official, who attributed Alibaba’s success partly to Mr. Xi, who promoted information technology when he ran Zhejiang from 2002 to 2007, during Alibaba’s early days.
It is rare that a publication so close to the party’s center mentions a private-sector company at all, and to do so in direct connection to Mr. Xi suggested the company still matters to the leadership. There was no mention of Mr. Ma in the article.
Alibaba recently received a government certificate recognizing it as a “model” for Mr. Xi’s initiative to root out poverty, which Alibaba swiftly posted on its social-media account. Meanwhile, Mr. Ma was left off a list of business leaders compiled by government-controlled Shanghai Securities News.
The message was clear: Follow the party, not the man who founded the company.
Write to Keith Zhai at email@example.com and Lingling Wei at firstname.lastname@example.org
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the March 12, 2021, print edition as 'China Lays Plans to Tame E-Commerce Giant Alibaba.'
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|To: Julius Wong who wrote (743)||3/21/2021 2:50:23 PM|
|From: Glenn Petersen|
|How Pinduoduo Beat Alibaba to Become China’s Top Shopping Site|
Five-year-old company is first challenger to loosen Alibaba and JD.com’s stranglehold over online consumption in the country
By Trefor Moss
Wall Street Journal
March 20, 2021 5:30 am ET
Pinduoduo had 788.4 million users at the end of 2020, the company said, ahead of Alibaba’s 779 million. PHOTO: ORIENTAL IMAGE/CONNE
SHANGHAI—A five-year-old e-commerce app that turned discount shopping into an online game has overtaken Alibaba Group Holding Ltd. BABA 1.42% as China’s most popular internet shopping site.
Pinduoduo Inc. PDD -0.01% had 788.4 million users at the end of 2020, the company said Wednesday in its quarterly earnings report, ahead of Alibaba’s 779 million, as measured by the number of people who made purchases over the past 12 months.
Though Pinduoduo’s annual revenue of $9.1 billion remains a fraction of Alibaba’s $72 billion from its last fiscal year, it almost doubled relative to 2019, cementing the Shanghai-based company’s status as the first challenger to loosen Alibaba and JD.com Inc.’s JD 1.30% stranglehold over Chinese online consumption.
“Together we’ve produced a minor miracle,” said Colin Huang, Pinduoduo’s founder and an ex-Google engineer, in a speech to staff, which was later published, at the company’s fifth birthday celebration at its headquarters in October. “We’ve changed Chinese e-commerce and even the structure of the Chinese internet.”
Pitching itself as an online blend of Costco and Disney, or a combination of value-based shopping and light entertainment, Pinduoduo has spearheaded China’s adoption of social e-commerce, a new incarnation of online consumption that combines shopping with social media and effectively turns shopping into a game.
On a platform designed to offer the digital equivalent of a stroll through a mall, users typically browse without having a particular purchase in mind.
The app—whose name roughly translates as “bringing lots of people together”—allows friends and strangers to band together and win deals for goods bought either individually or in bulk for a discount. With socializing foremost and shopping almost an afterthought, friends congregate on Pinduoduo to watch live streams, share deals and make purchases together, while playing the app’s built-in games.
One hit is “Duoduo Orchard,” where players nurture virtual fruit trees to earn shopping vouchers, tangible prizes such as boxes of mangoes and kudos from friends. The game sparks fierce rivalry among players, said Li Wenjun, a 19-year-old from Pingdingshan in central China who obsessively tends to her digital orchard.
“It’s so much fun when you do something together with your friends,” Ms. Li said. “You just have to commit time to it.”
Pinduoduo’s approach reflects the gamification trend in the tech sector, with stock-trading recently garnering attention. For Pinduoduo, keeping people on the platform is the games’ purpose: They help build user habits and serve as gateways into the site’s shopping areas.
Unlike older rivals born in the PC age, Pinduoduo is a native smartphone app without a desktop version or a shopping-basket function.
“Pinduoduo did one thing very well: We grasped the shift from searching to browsing” as a social activity, said Chen Lei, who took over as chief executive from Mr. Huang last year after serving as chief technology officer.
Pinduoduo founder Colin Huang, here in 2017, stepped down as chairman on Wednesday.PHOTO: QILAI SHEN/BLOOMBERG NEWS
Mr. Huang also passed the role of chairman to Mr. Chen on Wednesday, stepping down to focus on research projects in life sciences, the company said. He remains Pinduoduo’s controlling shareholder. Shares dropped as much as around 11% in morning trade after the news of Mr. Huang’s departure.
Pinduoduo is on the rise as Alibaba contends with various challenges including an antitrust inquiry and increased government scrutiny. Alibaba has said it is cooperating with regulators on the probe and that it would reassess and improve its business practices.
Pinduoduo’s Nasdaq-listed shares have surged in value over the past year, and its market capitalization has surpassed rival JD.com’s, peaking around $250 billion in February. That increase propelled the 41-year-old Mr. Huang’s personal fortune to $69 billion, according to Shanghai-based research firm Hurun Report, making him China’s third-richest man, ahead of Alibaba founder Jack Ma.
Yet 2021 has also been Pinduoduo’s toughest year. The deaths of two young employees around the turn of the year exposed the company’s working culture to criticism.
“We are doing everything we can to support their families and loved ones,” Mr. Chen said. Pinduoduo has been providing counseling services to employees, he added.
And this month Chinese regulators fined Pinduoduo, alongside several other e-commerce companies, alleging harmful practices, as Beijing moves to rein in the country’s big tech companies.
In response to the fine, Pinduoduo said it attaches great importance to the government’s intervention and promised to address the issues.
The company lost $1.1 billion in 2020, though in its favor, China’s e-commerce market is still growing strongly. Online retail in the country could expand from $354 billion last year to $549 billion in 2025, according to research company eMarketer.
Pinduoduo’s marriage of e-commerce and social media took some refining.
In the summer of 2015, Mr. Huang and his team—then operating a forerunner to Pinduoduo that specialized in selling cut-price fruit—filled their sole warehouse near Shanghai with lychees, Mr. Chen said. They advertised them on WeChat, a popular Chinese messaging and social-media app, in one of their first big campaigns.
Swamped with orders, the company’s systems broke down, and it struggled to make most deliveries. The lychees turned rancid in the summer heat, forcing the company to refund thousands of angry customers.
“We were really humbled by this failure,” said Mr. Chen, who met Mr. Huang at the University of Wisconsin-Madison, where they both studied computer science two decades ago.
The managers held an inquest in the warehouse surrounded by the debris, he recalled, resulting in a decision to upend the business model. The company would no longer buy its own stock, but would become a third-party platform connecting merchants and consumers, much like Alibaba, while plowing investment into software, logistics and infrastructure to avoid a repeat of the debacle.
The episode did, however, validate Mr. Huang’s hunch that social media and e-commerce could be powerfully combined. Most people who bought lychees were told about the deal by their WeChat friends, who encouraged people in their circle to team up to buy large quantities at a discount.
Making its money from advertising, the company has spent nearly $13 billion subsidizing products, effectively paying merchants to lower their prices and offer eye-catching bargains.
To succeed long term, Pinduoduo—which, like JD.com, is backed by Alibaba’s rival, Tencent Holdings Ltd.—must figure out how to turn off the subsidies without losing an audience attracted in large part by bargains.
Pinduoduo’s plan was to keep plowing revenue back into subsidies until it supplants Alibaba as the default shopping platform for perhaps a billion Chinese consumers, according to Mr. Chen.
The company could then in theory throttle back the subsidies while attracting more advertising money from merchants to become consistently profitable.
But after a recent rebuke for its use of subsidies—a practice regulators attacked as distorting the market and damaging consumers’ interests—the company might have to adjust more quickly than it would have liked.
Another drawback of Pinduoduo’s game-led approach is that most consumers don’t spend much. Ms. Li, for example, uses it chiefly to buy cheap snacks and packets of tissues. The average Pinduoduo user spent $324 in 2020. That number has been increasing but is still less than a quarter of Alibaba’s average user spend.
To close the gap, the company is doubling down on fresh foods—which contribute 15% of its revenue—after raising over $6 billion last year to fund an ambitious agriculture program. Relatively untapped by e-commerce players, the fresh-food segment is one Pinduoduo wants to dominate because users potentially place orders every day.
Pinduoduo has shaken up Chinese e-commerce for the better as rivals vie to offer consumers bargains, said Cathy Shen, a Pinduoduo user from Anqing in eastern China. “It’s now become all-out warfare between the tech companies,” she said.
—Raffaele Huang contributed to this article.
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