Alibaba, Dengism, and the Chinese push for foreign investment
China's Crown Jewel, Alibaba, is trading lower in US markets on uncertainty surrounding a series of problems the company has been facing in the US media and public eye. The following are the 'catalysts' to this price action, by order of popularity in the US News media:
1. The delay of Ant Group's IPO, owner of Alipay and affiliate company of Alibaba, headed by Jack Ma
2. Antitrust investigation into Alibaba for antitrust practices, namely 'forced exclusivity' agreements with vendors
3. Rumors of bad blood betweeen Xi Jinping and Jack Ma
4. Fears of heightening hostility between US and China through trade and posturing, risk of a 'Cold War II'
All of these are immaterial, however, in the face of a much larger 'catalyst' that has been historically holding down prices for Chinese firms: red-scare propagandizing of planned economies within the US public, lack of information available to foreign investors, and a fundamental misunderstanding of the political environment and philosophies of Chinese government.
The fundamental reason for my thesis is my belief that these secondary catalysts will be removed as China opens further to foreign investment, in line with the philosophical framework that underlies their society, namely Socialism with Chinese characterstics and Deng Xiaoping Theory. Under these philosophies, China, a socialist state whose stated goal is the development of communism--a form of stateless, classless society--must harness markets where necessary within society's productive forces to maintain their position as a global power while the state apparatus continues the 'transitional phase' between socialism and communism, which is basically a very slow retraction or 'phasing-out' of the state once stability has been attained under public ownership. The people must resist capitalist aggression against China in order to be successful, since in their view China has a target on its back in the capitalist world community, and must be destroyed to maintain the validity of existing contradictory power structures within capitalist nations. In order to accomplish this, China has opened itself to foreign investment from capitalist nations, and seems eager to stabilize their role in the international community and 'spread the good word'. Whether you agree with the dominant political ideology in China, it's highly likely that it will be a key predictor of their actions in the coming months, and it is the misunderstanding oft his ideology by foreign investors that is driving their overreaction to recent news about Alibaba, and a much larger problem of high volatility and negative sentiment surrounding Chinese firms.
Under the philosophy of Dengism, if we re-examine the four catalysts driving down prices in international markets, they prove to be immaterial. Ant Group's IPO delay after Ma's struggle against regulators is part of a larger push to attract controlled foreign investment in the Chinese finance industry. Alibaba itself is not Jack Ma's property, but now part of a larger structure that must be maintained, at the risk of the collapse of the entire socialist project. If Jack Ma displays insubordination or lack of adherence to this goal, then he must be made to understand the error in his ways, or risk condemnation by the state which he is working against. Antitrust investigations into Alibaba are a push to encourage competition in the market, again with the purpose of attracting foreign investment in the country as a whole. Alibaba and Ant Group both welcome regulation, as it is part of a larger social project towards and evolution of society, and to go against this imperative would go against the very ideology their nation was founded on. Any 'bad blood' between Jack Ma and Xi Jinping is no greater than between Xi and any other chinese billionaire, and entirely depends of Ma's willingness to rejoin the path of Dengist thought, which he eventually will under penalty of death. Nonetheless, Alibaba will press on without him.
In the long run, a rising tide will lift all boats. Both Alibaba and its domestic competitors $PDD, $JD, and others will continue to grow as the sector expands, and as foreign investors gain a better understanding of China. $BABA is uniquely positioned to these other firms, as it has the strongest fundamentals and largest marketshare, with its fingers in about as many pies as a company can. Anti-trust and anti-big business are not synonymous, and Alibaba has done its part to prepare itself for the day when it would inevitably be brought into the fold by diversifying its revenue sources, and cementing itself as THE most important player in China's ascension to world superpower without falling out of favor with China's dominant political denomination.
1. The delay of Ant Group's IPO, owner of Alipay and affiliate company of Alibaba, headed by Jack Ma
2. Antitrust investigation into Alibaba for antitrust practices, namely 'forced exclusivity' agreements with vendors
3. Rumors of bad blood betweeen Xi Jinping and Jack Ma
4. Fears of heightening hostility between US and China through trade and posturing, risk of a 'Cold War II'
All of these are immaterial, however, in the face of a much larger 'catalyst' that has been historically holding down prices for Chinese firms: red-scare propagandizing of planned economies within the US public, lack of information available to foreign investors, and a fundamental misunderstanding of the political environment and philosophies of Chinese government.
The fundamental reason for my thesis is my belief that these secondary catalysts will be removed as China opens further to foreign investment, in line with the philosophical framework that underlies their society, namely Socialism with Chinese characterstics and Deng Xiaoping Theory. Under these philosophies, China, a socialist state whose stated goal is the development of communism--a form of stateless, classless society--must harness markets where necessary within society's productive forces to maintain their position as a global power while the state apparatus continues the 'transitional phase' between socialism and communism, which is basically a very slow retraction or 'phasing-out' of the state once stability has been attained under public ownership. The people must resist capitalist aggression against China in order to be successful, since in their view China has a target on its back in the capitalist world community, and must be destroyed to maintain the validity of existing contradictory power structures within capitalist nations. In order to accomplish this, China has opened itself to foreign investment from capitalist nations, and seems eager to stabilize their role in the international community and 'spread the good word'. Whether you agree with the dominant political ideology in China, it's highly likely that it will be a key predictor of their actions in the coming months, and it is the misunderstanding oft his ideology by foreign investors that is driving their overreaction to recent news about Alibaba, and a much larger problem of high volatility and negative sentiment surrounding Chinese firms.
Under the philosophy of Dengism, if we re-examine the four catalysts driving down prices in international markets, they prove to be immaterial. Ant Group's IPO delay after Ma's struggle against regulators is part of a larger push to attract controlled foreign investment in the Chinese finance industry. Alibaba itself is not Jack Ma's property, but now part of a larger structure that must be maintained, at the risk of the collapse of the entire socialist project. If Jack Ma displays insubordination or lack of adherence to this goal, then he must be made to understand the error in his ways, or risk condemnation by the state which he is working against. Antitrust investigations into Alibaba are a push to encourage competition in the market, again with the purpose of attracting foreign investment in the country as a whole. Alibaba and Ant Group both welcome regulation, as it is part of a larger social project towards and evolution of society, and to go against this imperative would go against the very ideology their nation was founded on. Any 'bad blood' between Jack Ma and Xi Jinping is no greater than between Xi and any other chinese billionaire, and entirely depends of Ma's willingness to rejoin the path of Dengist thought, which he eventually will under penalty of death. Nonetheless, Alibaba will press on without him.
In the long run, a rising tide will lift all boats. Both Alibaba and its domestic competitors $PDD, $JD, and others will continue to grow as the sector expands, and as foreign investors gain a better understanding of China. $BABA is uniquely positioned to these other firms, as it has the strongest fundamentals and largest marketshare, with its fingers in about as many pies as a company can. Anti-trust and anti-big business are not synonymous, and Alibaba has done its part to prepare itself for the day when it would inevitably be brought into the fold by diversifying its revenue sources, and cementing itself as THE most important player in China's ascension to world superpower without falling out of favor with China's dominant political denomination.
BABA 295c 1/20/2023, and shares to hold. On a red open, I will be scalping puts and looking for a bottom to enter the same long-term position