China’s graft busters are going after Jack Ma’s hometown

August 24, 2021, 11:17 AM UTC

The Chinese Communist Party’s corruption watchdog has ordered 25,000 cadres residing in the eastern city of Hangzhou to engage in “self-examination” to resolve business-related “conflicts of interest” involving themselves or family members.

The local arm of the powerful Central Commission for Discipline Inspection issued the edict via its website Monday, two days after announcing a probe into Hangzhou’s most senior party official, municipal party secretary Zhou Jiangyong, on charges of “serious violations of discipline and laws.”

The CCDI didn’t connect its investigation of Zhou to a specific company or entrepreneur. But the agency said it plans a thorough review of relationships between party members and local businesses, and will probe the financial dealings of current party officials and those who have retired within the past three years.

Hangzhou, the capital of Zhejiang province, is home to 10 million people and a bevy of fast-growing technology companies. Foremost among them: Alibaba Group Holding, the e-commerce giant founded by billionaire Jack Ma, and Ant Group, the Alibaba mobile payments affiliate that Ma controls.

Zhou was promoted to the top party post in Hangzhou three years ago. Like Ma, he is a former teacher and Zhejiang native. The Financial Times reports that he has been “an enthusiastic booster of the city’s tech sector.”

Zhou’s detention and the corruption watchdog’s warning to Hangzhou’s cadres come amid a nationwide regulatory crackdown on China’s largest Internet companies. State media coverage of the two developments ignited speculation on Chinese social media that Zhou and other senior party officials had hidden financial ties to Alibaba, or may have stood to profit financially from Ant’s planned initial public offering. That listing, which aimed to raise $37 billion making it the largest IPO ever, was personally scuttled by Chinese president Xi Jinping last November after Ma publicly mocked China’s financial regulators as narrow-minded “pawnbrokers” who were stifling innovation.

On Sunday, Ant Group issued a statement saying it had “strictly followed laws and regulations” in an “open and transparent” IPO process. The company dismissed speculation regarding its derailed IPO as “false rumors.”

That may be so. But in hindsight it is now clear that Xi’s decision to cancel Ant’s IPO was the opening salvo in a ten-month regulatory attack that has laid siege to Internet companies in some of the most dynamic sectors of China’s economy—not just e-commerce and mobile payments, but also food delivery, ride-hailing, video games, online tutoring, entertainment, and digital health care.

At a meeting of the Party’s central financial and economic affairs commission last week, Xi signaled that the Party intends to expand that campaign to address a host of other social ills including the increasingly unequal distribution of wealth and income in China. The committee noted that in the previous four decades of China’s economic “opening and reforms” the Party had focused on growth, enabling some people, in the words of then-leader Deng Xiaoping, to “get rich first.” But from here on, the panel vowed, the priority will be “common prosperity.”

Some Chinese entrepreneurs will find that latter slogan chilling; it was coined by Mao Zedong, who deemed capitalists public enemies. It’s possible that Xi means the term in a more benign sense to suggest merely eradicating extreme poverty.

As the Wall Street Journal‘s Keith Zhai and Stella Yifan Xie report, Xi was focused on social equality before he took power in 2012—but in internal party discussions dismissed debates about which should come first: making the “cake” bigger or dividing it into more equal slices. Xi argued, according to Zhai and Xie, that the Party should be able to achieve both. But it may also be that Xi is trying to eat his cake and have it—and fails to recognize that intimidating entrepreneurs, enlarging the role of state-owned enterprises, and seeking to micro-manage every aspect of China’s economy poses a genuine risk to long-term growth.

However Xi understands “common prosperity,” he uses the term with increasing frequency: Bloomberg reports the phrase has appeared 65 times in Xi’s speeches and meetings so far this year compared with 30 in all of last year.

Meanwhile Zhejiang, known for its thriving economy and robust private sector, will be at the vanguard of the new policy emphasis. A series of guidelines published in June by the State Council, China’s highest governing body, designates Zhejiang as a “pilot zone” for policies to “properly adjust excessively high incomes,” and encourage entrepreneurs to expand philanthropic contributions that “give back” to society.

Xi knows Zhejiang well; he served as the province’s party secretary between 2002 and 2007, just as Alibaba was emerging as a tech powerhouse.

It has been widely reported that policies to be tested in Zhejiang will include new taxes on property, inheritance, and capital gains, as well as expanded public health and welfare benefits. But it seems increasingly clear that the Party also intends to ramp up its anti-corruption campaign in the province. In fact, Hong Kong’s South China Morning Post, owned by Alibaba, says that effort has been underway for months. Of the 25,000 current party cadres and officials in Hangzhou, the Post reports, CCDI investigators will “randomly” select 10% for “further examination.”

More Eastworld news below.

Clay Chandler

This edition of Eastworld was curated and produced by Eamon Barrett. Reach him at


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