Good morning. It’s Saturday night here in Hong Kong and the big news is a story that popped up about an hour ago on the website of the South China Morning Post. The headline: “Jack Ma to remain Alibaba’s chairman in succession plan for younger talent to take over reins.”
The SCMP story refutes a widely cited account published in yesterday’s New York Times claiming that the founder and executive chairman of Alibaba Group, China’s most valuable company, in an interview with the Times, had declared his intention to retire and step down as chairman effective Monday.
Ordinarily, when reporting in those two newspapers is in conflict, I’m inclined to give the benefit of the doubt to the Times. But in this case, there’s a good reason to accept the Post’s version: it’s wholly owned by Alibaba Group.
I’d been puzzling over the Times story all day. It appeared to be a huge scoop, and was picked up by news services around the world. The Times said Ma had decided to relinquish his position as executive chairman on Monday, his 54th birthday, in order to shift his attention to philanthropy and education. The headline, over a long analysis, declared the move a “retirement” and in the first paragraph deemed it a “changing of the guard” for Alibaba.
The report invited speculation. Was Ma leaving the company because he felt it was in good hands? Or stepping back because it was in trouble? Just the other day in Data Sheet, I mused that China’s tech sector has entered a cutthroat new era in which the advantage has shifted from tech companies with visionary founders to those with steely-eyed execution-oriented managers. The Journal yesterday explored the harsh new realities that have caught up with China’s tech giants.
But as Saturday unfolded, no one seemed able to match the Times report. Alibaba didn’t issue any statements about the Times’ report or Ma’s retirement. Officials in Hong Kong didn’t respond to my queries about it. There was no mention of Ma surrendering the executive chairmanship on Alizilla.com, the official Alibaba website, and nothing on the website of The South China Morning Post.
Then, at 8:17 PM China time, the Post weighed in: “An Alibaba spokesman said Ma remains the company’s executive chairman and will provide transition plans over a significant period of time, contrary to a New York Times article that said he was ‘stepping down’ to ‘retire.’ The Times story was taken out of context and factually wrong, the spokesman said.” Ouch.
Then there was this quote from Ma himself:
“Anybody who knows me knows I embrace the future. This is not about retiring, stepping away, or backing off. This is a systematic plan.”
More China news below.
Innovation and Tech
The JD debacle. Shares in JD.com, China’s second largest online retailer, tumbled this week on the back of CEO Richard Liu’s arrest in America last Friday. Initial reports claimed Liu had been accused of sexual assault or “misconduct”, but later reports revealed he had been accused of rape. Liu was released without charge and has returned to China but an investigation is ongoing and details of the night the alleged incident occurred continue to emerge. Three U.S. law firms are preparing class action suits against JD.com, alleging the company misled investors by not disclosing full details of the case straight away. The case has also drawn attention to JD.com’s complicated ownership structure, wherein Liu is both CEO and chairman. If Liu were to be detained indefinitely, it’s unclear who would step forward to managed JD.com in his absence. Fortune
Suspension plan. Didi Chuxing will suspend its late-night ride hailing services for a week, starting September 8, to implement new safety precautions. The measures include upgrading an app function that allows passengers to call the police, increasing driver background checks and trialling in-trip audio recording. South China Morning Post
No more outlaws. Chinese authorities passed the country’s first e-commerce law, which will come into effect January 1, 2019. The law outlines regulations for individual merchants as well as operators of online marketplaces, such as Alibaba, including what fines are payable if either violates the new codes. TechNode
Cash cycle. Shanghai Phoenix, a Chinese bicycle manufacturer, has sued Alibaba-backed bike sharing start-up Ofo for $10 million in unpaid bills. The suit comes hot on the heels of Ofo’s bike lock manufacturer threatening to remotely “freeze” locks if Ofo didn’t pay its outstanding bills. Financial Times
Chipping in. Huawei unveiled the world’s first 7-nanometer smartphone chip, beating Apple and Samsung to the punch. The chip, called Kirin 980, was designed by Huawei but manufactured by Taiwan Semiconductor Manufacturing Company (TSMC), which is also the exclusive provider of semiconductors for Apple. Apple is expected to announce its own 7nm chipset during the launch of its new product line next week. Fortune
Economy and Trade
Tariff ticker. President Trump said on Wednesday that America isn’t ready to make a trade deal with China, but that negotiations will continue. A public consultation period on the next round of tariffs, which could bring the total value of effected imports up to $200 billion, came to an end on Thursday. Reuters
Don’t panic. The Financial Stability and Development Commission (FSDC) convened a high-profile meeting to discuss how the government can better manage market expectations and bolster investor confidence as China’s stock market continues to sag. South China Morning Post
Brain gain. A decades-old trend of Chinese talent emigrating to study and work abroad appears to be in reverse. Today, six out of seven students return to China after studying abroad, up from one in seven a decade ago. The higher salaries and greater opportunities available in China are appealing to overseas Chinese while, according to a Chinese academic, President Trump’s anti-China rhetoric has also been discouraging students from staying in America. Fortune
FONOP faux pas. Last week, a British warship conducted a Freedom of Navigation Operation (FONOP) in the South China Sea, sailing close to islands claimed by China. The action could jeopardize the UK’s chances of striking a good post-Brexit trade deal, Beijing warned. An op-ed in the China Daily on Friday further accused Westminster of attempting to curry favor with Washington and warned that “the UK risks losing more than it can gain.” Reuters
In Case You Missed It
Politics and Policy
Stick with Taiwan. Republican and Democratic senators introduced a bill on Wednesday to help Taiwan retain its few remaining allies. The legislation would authorize the State Department to downgrade U.S. relations with any nation that ceases to recognize Taipei in favor of Beijing, such as El Salvador did last month. The U.S. does not have official diplomatic relations with Taiwan but views the self-governed island as a key ally in the Pacific Rim. Reuters
Free money. At the Forum on Africa-China Cooperation (FOCAC) this week, Xi Jinping pledged $60 billion in funding for African nations, emphasizing that the money came with ‘no strings attached’ but must not be used for “vanity” projects. Recently, China has been accused of engaging in debt diplomacy. Several Southeast Asian nations have pulled back from China-funded projects this year for fear of falling into debt traps. The Washington Post
Station masters. During a ceremony held late at night on Tuesday, the government of Hong Kong ceded jurisdiction over an area inside its new train station to mainland Chinese authorities. Opponents view the controversial move as a violation of Hong Kong’s Basic Law, which guarantees the SAR will retain its own legal system until 2047. The Hong Kong government was also criticized for not inviting journalists to the handover ceremony. Reuters
Party in Korea. Li Zhanshu, chairman of the Politburo Standing Committee and China’s third highest ranking official, will lead a delegation to Pyongyang this weekend to attend North Korea’s 70th anniversary celebrations of its founding. Media previously speculated that President Xi Jinping would attend, which would have been his first visit to North Korea. New York Times