Jack Ma personifies the contradiction of China’s ideology

Imagine if Jeff Bezos or Bill Gates disappeared from public view and it was automatically assumed they had been arrested on the orders of President Joe Biden and were being interrogated in a secret government jail.That is the situation in the world’s second-biggest economy, where Jack Ma, the Bezos of China with more than $50bn to his name, has appeared just once since October — in a short video that did little to quell speculation he was being held hostage by the state. Ma vanished after Chinese authorities blocked his fintech group Ant Financial’s initial public offering, which would have been the largest listing in history.
The latest rumours suggest he is playing golf on an island in the South China Sea and may still emerge with his wealth mostly intact. But the brutal humiliation of China’s most famous entrepreneur reveals the sharp and growing contradiction at the heart of the Chinese state.
On the one hand, President Xi Jinping has embarked on a grand project to bring about the “great rejuvenation” of the Chinese nation, which can only be achieved through rapid economic growth that relies overwhelmingly on private enterprise. But at the same time, he has centralised political power, expanded the state-owned sector and asserted the Communist party’s right to insert itself in to all aspects of people’s lives and business.

“East, west, south, north and centre, the party rules over all,” is one of Xi’s favourite slogans. Although he constantly touts the orthodoxy of Marxism and “socialism with Chinese characteristics”, the uncomfortable reality is that capitalists provide 80 per cent of urban jobs and account for 60 per cent of GDP.
As a billionaire and a member of the Communist party himself, Ma personifies the contradiction inherent in China’s governing ideology. His career until late last year was one of the deftest examples of entrepreneurial survival in a “market Leninist” system that stamps out alternative sources of power or authority. As in Vladimir Putin’s Russia, Chinese oligarchs are dealt with quickly and ruthlessly at the first sign they are not slavishly loyal.
Until recently, Ma played the role of pet capitalist well. I first met him in 2005 at the signing ceremony for the partnership between Yahoo and Ma’s ecommerce company Alibaba. At the time, Yahoo was in trouble in the US after handing emails to Chinese authorities that led to long prison sentences for journalists and human rights activists in the country.
When asked about this, Ma’s response was unequivocal: “Whatever [government officials] say, we’ll do it.” He later spoke approvingly of the party’s decision in 1989 to send in tanks to crush the Tiananmen Square democracy movement. He told me in a separate interview he would hand over his entire company to “the nation” at any time if the government asked him to.
Like all China’s tech billionaires, Ma has played a crucial role in the construction of a budding techno-totalitarianism. And like any wealthy person in China, he has scrupulously cultivated party officials and their relatives. Large investors in Alibaba and Ant Financial include several “princelings”, including the grandson of former Chinese president Jiang Zemin.
Some of Ma’s current troubles could stem from the fact these patrons no longer have the political heft to protect him from a newer generation of leaders with no personal stake in the world’s biggest IPO. But his biggest problem was the hubris that $50bn buys and the visibility that comes with being China’s most flamboyant entrepreneur.

This year marks the centenary of the founding of the Chinese Communist party and Xi is keen to boost his legitimacy with paeans to the country’s socialist pedigree. That is rather hard in a country where the richest 20 per cent had an average disposable income 10.2 times that of the poorest one-fifth last year. In the supposedly heartless capitalist US, the multiple was about 8.4.
Despite Xi’s past dalliances with free market thinking, most policy signals suggest he now believes in more Marxist, socialist goals, even if his overwhelming ideology remains ethno-nationalism. But his government knows it cannot just nationalise private enterprise as the party did after it won the revolution in 1949.
The goal today is more subtle, and difficult. Xi wants to encourage private enterprise while asserting total Communist party control over the actions, incentives and even thoughts of entrepreneurs. In September, Beijing issued a set of guidelines ordering private companies to establish Communist party committees that should play a role in personnel appointments and other important decisions. They specified that businesspeople should be educated to “identify politically, intellectually and emotionally” with the party. Interference in the private sector, along with the humbling of high-profile capitalists like Ma, is likely to increase in frequency and intensity.
The big question is what this means for foreign investors, in particular the Wall Street banks and money managers currently piling into China. Will icons of American capitalism such as Goldman Sachs and BlackRock really be able to align themselves “politically, intellectually and emotionally” with Xi? And how will the US government regard Communist party cells in their management structures?
jamil.anderlini@ft.com

Zoom predicts business boom extending beyond pandemic

Wall Street may be anticipating that workers will become less reliant on Zoom calls as Covid-19 vaccines are rolled out, but the video conferencing start-up still turned in a surprisingly strong performance in the last quarter and predicted faster than expected growth in the coming 12 months.
The news sent Zoom’s shares up 10 per cent in after-market trading on Monday, valuing it at $131bn. They are still more than 20 per cent below a high point touched last October, before investors started to look ahead to an easing of pandemic restrictions this year
Zoom’s revenues soared to $883m in the three months to the end of January, up from $188m the year before, and 9 per cent above most analysts’ expectations. The company said it now has 467,100 customers with more than 10 employees, nearly five times as many as it had before the pandemic hit.

Its pro forma earnings per share — struck after deducting stock compensation expenses — rose to $1.22 from 15 cents the year before, and were 43 cents above expectations. Based on formal accounting rules, Zoom’s net income rose from $15m to $260m, or 87 cents a share.
Despite predictions that its service will play a less central role in the lives of many workers and students in 2021, Zoom said it expected revenues for its next fiscal year to grow by as much as 43 per cent, to $3.76bn to $3.78bn, compared to Wall Street projections of about $3.5bn.
It also predicted pro forma earnings per share between $3.59 and $3.65, higher than the $2.96 a share analysts had pencilled in.

Coronavirus latest: Colombia becomes first country in Americas to receive Covax vaccines

Colombia has become the first country in the Americas and only the third in the world to receive coronavirus vaccines under the World Health Organization-backed Covax facility, which is designed to ensure low- and middle-income countries get access to the medicines.
A plane carrying 117,000 doses of the BioNTech/Pfizer vaccine touched down in Bogotá on Monday.
“Colombia, with support from Covax partners, has worked incredibly hard to be in a position to be able to receive its first wave of vaccines from Covax, and I pay tribute to all of those who have prepared diligently for this arrival,” the WHO’s director-General Tedros Adhanom Ghebreyesus said.
The Covax initiative was set up to ensure poorer countries do not lose out to richer nations in the rush for vaccines. It is backed by global vaccine alliances Gavi and Cepi and is designed to cover 20 per cent of citizens in participating countries by the end of the year.
Ninety-two of the poorest countries in the world should get the vaccines for free thanks to donations from wealthier nations while middle-income countries including Colombia will have to pay but should benefit from lower prices than they would if they were negotiating with pharmaceutical companies on their own.
In the Americas, Peru, El Salvador and Bolivia are also expected to receive vaccines through Covax’s first wave.
Colombia, with a population of 50m, has ordered 20m doses via Covax and has bought millions more through bilateral deals with producers.
The country, which has recorded nearly 60,000 deaths from the virus, started its vaccination rollout on February 17 — later than most other major Latin American nations — and has so far vaccinated only 130,000 people. 
The government says it expects to vaccinate the entire population by the end of the year.

North American groups seek to break China’s grip on rare earths supply

Three North American companies are setting up a rare earths supply chain to reduce dependence on China for the vital metals used in weapons, electric vehicles and other advanced technology.
Neo Performance Materials of Canada and Energy Fuels of the US have found an efficient way to safely produce rare earths from radioactive monazite sands. The sands, a mining byproduct, will be supplied by US-based chemicals group Chemours. 
China controls about 80 per cent of rare earths supply and has been considering an export ban, leading to fears it will gain a military and commercial advantage over the US and Europe. 

Most western rare earth companies have avoided monazite, produced from mining for zircon, titanium and other minerals, because of its high radioactive content.
But Energy Fuels, which already processes uranium, has developed a method of extracting the radioactive element from the monazite to use in nuclear fuel, turning a waste product into a revenue earner.
“It is a significant step towards building an integrated supply chain for rare earths in the US and Europe,” Mark Chalmers, president and chief executive of Energy Fuels, told the Financial Times. He said the company had only needed to invest $2m in its White Mesa Mill in Utah but could spend more to become a processor of rare earths.
Constantine Karayannopoulos, Neo’s chief executive, said the US’s large stocks of monazite were the answer to soaring demand for rare earths. 

Twice weekly newsletter
Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

Monazite contains about 50 per cent rare earths, far higher than other ores, as well as 0.2-0.3 per cent natural uranium. It also contains 15 of the 17 rare earths.

“We clearly see double-digit annual growth in demand [for rare earths] over the next five to 10 years,” Karayannopoulos said. “Sales of electric vehicles in Europe are now higher than in China. Our Silmet facility in Estonia is only operating at 75 per cent capacity and we need more feedstock.”
From March or April, Energy Fuels will send the deradiated mixed rare earth carbonate to the Silmet separation plant, the only one in Europe.
Neo will produce separated rare earth materials used in the permanent magnets needed in electric cars and other advanced materials.
Fighter jets such as the F-35 rely heavily on rare earths. A Congressional Research Service report found that Lockheed Martin aircraft contained 417kg of rare-earth materials and a nuclear submarine more than 4 tonnes.
The US government has prioritised an indigenous supply chain to reduce dependence on China. President Joe Biden last month ordered a review of the vulnerability of key supply chains including rare earths and the government has subsidised some miners and processing companies.
Chemours will supply Energy Fuels with at least 2,500 tons a year of monazite ore and will send 840 tonnes of rare earths to Estonia.
Energy Fuels eventually aims to process 15,000 tons of monazite a year, which would meet half the rare earth needs of the US.