The progressive sales records of the Chinese Singles’ Day in November are like bottles of new wine on supermarket shelves at the end of October. Punctual and unfailing. Superlatives and exclamation points, therefore, are taken for granted and risk hiding the most important information that should be sought in the event. This year, however, the large numbers of Singles’ Day almost take a back seat to the pitched battle between Alibaba and the Chinese government.
Singles’ day numbers
Overall, Chinese consumers spent 498 billion yuan ($ 74 billion) on the online platforms of Alibaba, Tmall and Taobao. Much more, in this case, than the sales volume, 268.4 billion yuan, achieved in 2019. High-level performance also for JD.com, the second largest eCommerce service provider in the country, which exceeded 271 billion (40 billion dollars).
There are many Western brands that have made a profit of yuan, 470 have exceeded 100 million in GMV. The data is important and should encourage Made in Italy to make appropriate decisions, because in digital commerce the share of imported products in China is much higher, in proportion, than offline channels.
It was the first Singles’ Day since, due to the pandemic, eCommerce exploded in live streaming, a new way of touching (so to speak …) products online before purchasing. For Yu Feng, head of Taobao Live, “the live streaming market is still in its infancy, but it will be worth trillion dollars; our goal is to be the first to reach this threshold”.
To the great spite of conspiracy theorists of all levels, finally, this year the interest in 5G technology has skyrocketed. According to JD.com, sales of smartphones with this technology, on its platform, increased eleven times from the previous year.
Antifact
To the success, sure, on Singles’ Day, Jack Ma would have perhaps preferred a different outcome of the story linked to the listing of Ant, the Alibaba fintech. A week before Singles’ Day, the Shanghai and Hong Kong stock exchanges blocked the super IPO. Shares of Alibaba plunged 7.5% immediately after the announcement, resulting in $ 3 billion in damage. The operation, in the premises, was the largest in history, with an expected collection of 35 billion dollars. So far, the highest price has been in Saudi oil company Saudi Aramco, with $ 29 billion.
Behind the decision, the drastic change of the rules for digital financial operators, wanted by the Chinese government. For ANT, November 5 should have been the date it established itself as one of the largest financial operators in the world. The total capitalization of 316 billion, in fact, would place it above most of the large Chinese and American banks.
On October 24, in an event that saw the presence of China’s highest political and economic profiles, Jack Ma had harshly criticized the regulations of the financial sector, saying that the authorities have a “pawnshop mentality” that holds back innovation. “If the banks do not change, we will change the banks”, after all, that was another one of his sorties which, years ago, had already wreaked havoc on the Chinese establishment.
In our West, it is not easy to think of Amazon, Facebook and Google offering loans to families. ANT services, on the other hand, apply to credit and payments, the backbone of the business and, to a lesser extent, to investments and insurance. The success has been such that other large digital companies have introduced their own microloan systems.
The risks
ANT has two main products. The first is is Jiebei, a microloan system. The second is Huabei, a virtual credit card that operates at an annual interest rate of 15 percent, at the limit of what, under Chinese law, is considered loan sharking. This is also due to the fact that the vast majority of the Chinese population lives in modest conditions. Away from the big cities of the coast, the average income for a month is around $ 300, just the average value of the loan granted by ANT. The consequence is a high level of risk. In one year, the two services had access to a total of 500 million users.
For the Chinese leader Xi Jinping, the enterprise cannot be in contradiction with popular interest. Rules (or apparently such) of the global market and centrality of the state do not, notoriously, agree. Furthermore, his government has long been convinced that Ant does not have enough capital to guarantee its loans. In fact, the company outsources most of these to banks: according to the Financial Times, with $ 450 million in capital, it provides $ 45 billion in loans.
Guo Wuping, the head of consumer protection of the Chinese regulator, publicly criticized Alipay. For Guo, online financial products are essentially no different from traditional ones and managers should therefore be regulated in a similar way to traditional institutions. “The excessive softness of regulation has allowed fintechs to charge higher fees than banks. This has caused young and low-income people to fall into the debt trap.”
The consequences
The restrictions on fintechs provide, above all, the obligation for the lender to directly disburse 30 percent of the loan. Until yesterday, Ant had backed only 2 percent of the global value of equity loans; this means that, to meet the new criteria, the company would have to increase it by 20 billion dollars. Although the IPO is perhaps only postponed, it is not easy to predict the consequences on Alibaba’s action. For Jack Ma it may be just a hiccup, but when finance and politics come to an end, the results are unpredictable, in China more than elsewhere.
In the end, Confucius may still be right: “No matter how slow you go, the important thing is that you don’t stop.”
