Chinese private companies are in the headlines these days with the tycoon Jack Ma’s troubles with the authorities.

Under the Chinese model, private entities are guided by the State towards what it believes are national strategic priorities even as they are allowed to focus on the revenue stream. This is in synch with Mao’s dictum that money has no colour but it must serve the larger national interest.

Jack Ma is a product of the system that Mao’s successors had put in place in their bid to make China emerge out of the shadows of Cultural Revolution and become the Bamboo capitalist of the post-cold war world.

Jack Ma’s Alibaba enterprise has spread across the world, and has given him a clout that has had few parallels. And by last October, he felt it fair and proper for him to take on the Chinese regulators just when one of his subsidiaries, Ant Group was about to make a $37 billion IPO.

“Chinese regulators”, he said “are harbouring a pawnshop mentality, focusing on pledges and collaterals when it came to finance.”

Swiftly came the official response. Regulators ordered the suspension of the Ant IPO; Jack Ma disappeared from public view for close to four months. There is no official word as yet on how and why he became a missing person for such a long while.

The Dragon may not offer any insights into this phenomenon content that Jack Ma’s public discomfiture has sent the right signal to his fellow comrades in trade and commerce. The influential American business daily, the Wall St Journal (WSJ) put the issue in perspective thus: Jack Ma’s critique was “the last straw in the battle between the regulators and Jack Ma, with President Xi Jinping personally engaged in greenlighting regulations that would scuttle Ant’s plans.”

A widely circulated English daily from Jack Ma stable, has been taking pot-shots at Beijing with unabated glee in recent months. So much so, the snub to the Alibaba chief is part of a much larger issue of personality clashes that seems to have become endemic ever since President Xi Jinping appeared on the scene as the new helmsman.

There is also a view that the Ant Group’s misfortune is symptomatic of President Xi Jinping’s campaign to expand State’s authority over private entities to “meet the challenges of stability and direct capital towards strategic imperatives”. Since 2017, President Xi has been harping on the need to prevent “financial risks” and has prioritised this campaign as one of the “three tough battles” ahead.

It can be argued, therefore, that the Ant group invited attention by virtue of its position as the leader in fintech sector with its online shopping and lending services. Its payment app, Alipay, has more than a billion plus users at home and abroad. It has ‘facilitated loans’ to hundreds of millions besides some 20 million small business entities. The risk inherent in these advances, according to market pundits, is “largely borne” by the government –owned Chinese banks, while Ant collected a transaction fee.

The foregoing contention is popped up as justification for the latest Chinese drive designed to target new monopolies in micro –lending space. But it does not hide the reality that the whole effort is to “rebalance the power dynamics between the State and technology firms in favour of the former,” according to a perceptive observer.

Stephen Olson, a Research Fellow at the Hinrich Foundation, has an interesting take in this context.

“Private Chinese companies will be increasingly called upon to conduct their operations in tight coordination with governmental policy objectives and ideologies in no uncertain terms. The rest of the world should take note,” he wrote in The Diplomat recently under the heading, “Are Private Chinese companies really private?”

It is difficult to disagree with his assessment. More so since the Chinese Communist Party (CCP) declared last October itself that its objective is to establish a “united front” between business and government and to facilitate the “enhancement of the party’s leadership over the private economy”. And elaborated the line in the Central Committee document titled “Opinion on Strengthening the United Front Work of the Private Economy in the New Era.”

Put simply, private capital has no level playing field in China. Nor does the country have an enabling environment for market forces to remain at play. With the State in full control both directly and indirectly, private enterprise in China is no more than a myth perpetuated by the Dragon as he goes around as the Bamboo capitalist of the day with deep pockets.
Free market and private enterprise as the world has come to know have no relevance to Communist China. Beijing is transparent in this respect with the Central Committee document.

The world must therefore realise without much ado that business dealings with a private Chinese enterprise are in essence dealings with the Chinese State. It will do well to work out new rules of trade engagement with China.

By Magda Lipan, Boston

The writer, a management consultant, and freelance columnist, writes on a wide range of subjects from China’s debt to Philippines’s maverick rulers and from Pakistan’s missed GDP goals to Sri Lanka’s wounds of civil war.