What Alibaba's record IPO will do for China-US relations
- By He Weiwen
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E-mail China.org.cn, September 25, 2014
Caution after a Jubilee
The resounding success of Alibaba's successful IPO has focused on face-value wealth only. A number of headlines in the Chinese media have trumpeted Jack Ma's ascension to become the richest man in the country; the fact that over a thousand people in Hangzhou have become millionaires overnight; and Alibaba's market value eclipsing the GDP of Portugal. This is indeed negative attention for Alibaba. This author fully agreed with Ma when he expressed no feeling at all at being "the richest man in the country".
Alibaba's market value calculated on the share price multiplied by the number of shares is only the face value of the business, instead of its real, tangible assets. The author worked in San Francisco in late 1990's and heard many of my friends in Silicon Valley say that "Silicon Valley creates 62 millionaires per day." However, with the dot.com crash that followed, many of them became homeless as their face value evaporated and had to sell their luxurious houses. Measurement of wealth by share value, although still used, is already outdated in significance and tends to make people lazy.
The goal of Alibaba is certainly not to remain an empty facade, but to become a global player providing cutting-edge services to change the world. Alibaba faces three major challenges in the US.
Compliance. Alibaba has to comply with all US laws and regulations, especially regarding intellectual property rights, and financial governance, trading and accounting. These regulations are considerably different to those in China. Online shopping garnered 97,350 customer complaints in China in 2013, and this could be a serious problem in the US. Also essential is naturalization, or local business practices.
Competition. Alibaba has to face intense competition with the local giants (Google, Amazon, E-Bay and Facebook), who definitely have an advantage on their own soil.
Creativity. Alibaba must make new innovations every month in order to compete and grow. All previous innovations could be summarized as "cost innovation," saving money in the supply chain due to trading facilitation. The next generation of innovation has to penetrate into the product and service core technology. Alibaba should pioneer in all the new creativity to become an ever stronger, sustainable global leader.
He Weiwen is co-director, China-US/EU Study Center, China Association of International Trade.
This article was first published at chinausfocus.com To see the original version please visit http://www.chinausfocus.com/finance-economy/what-alibabas-record-ipo-will-do-for-china-us-relations/
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