Record penalty for Ma's Alibaba marks tumultuous stretch for its founder

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Written by northsouth

Category: Asia

Published: 11 April 2021

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By Tony Munroe

BEIJING - Once seemingly untouchable, Alibaba founder Jack Ma has endured a tumultuous run that saw his Chinese e-commerce giant hit with a record 18 billion yuan ($2.75 billion) antitrust fine on Saturday, resolving one key uncertainty even as others persist for himself and his business empire.

The reversal of fortune for the 56-year-old Ma, who has all-but-disappeared from public view since an October speech blasting China’s regulatory system, has been striking for an entrepreneur whose transformation of commerce in China - and his relentless optimism - commanded cult-like reverence.

Ma, who stepped down from Alibaba in 2019 but looms large in the corporate psyche and in the eyes of investors, had revelled in pushing boundaries with audacious statements, taking a high profile even as most Chinese peers kept their heads down.

Friends in high places, as well as pride in Alibaba’s success, had protected Ma, sources have said.

That was until his Shanghai speech triggered a backlash that led to the scuppering of a blockbuster $37 billion IPO for Alibaba financial technology affiliate Ant Group, as well as a clampdown by authorities on the e-commerce giant itself and the wider “platform economy”, which continues to reverberate.

Ant, whose rapid growth and freewheeling lending practices drew regulatory concern about financial risk, remains subject to an enforced restructuring that is expected to rein in some of its most profitable businesses and slash its valuation.

“Entrepreneurship has to be disruptive. But being provocative to the government has its limits,” said Duncan Clark, chairman of Beijing-based tech consultancy BDA China and author of a book on Alibaba and Ma.

Saturday’s settlement, he said, “should draw a line” under the matter for Alibaba.]

“But for Ant and Jack, there’s no line drawn yet,” he said.

Alibaba declined to comment on Ma, and his foundation did not immediately respond to a request for comment on Sunday.

CONSPICUOUS ABSENCE

Ma’s absence from public view became conspicuous until he surfaced for the first time in three months in late January, speaking to a group of teachers by video, which sent Alibaba shares surging. He has continued to keep an extremely low profile.

“He’s playing a lot of golf and improving his handicap,” said one person who knows him.

A former English teacher, Ma co-founded Alibaba in 1999 from a shared apartment in the eastern city of Hangzhou, ultimately building a colossus that spans e-commerce, financial services, cloud computing and even supermarkets, making him China’s most famous businessman.

He was also China’s richest, until the clampdown knocked him back to fourth place on the Hurun Global Rich List published in March, although Ma and his family’s wealth still grew last year by 22% to 360 billion yuan, according to the list.

As of last July, he owned 4.8% of Alibaba.

In 2018, Ma was revealed to be a Communist Party member by its official newspaper, debunking a public assumption that he was politically unattached.

‘ARROGANCE DISCOUNT’

Ma has often been described in Chinese media as a source of national pride and even legend. His global prominence made him an almost-diplomatic figure. Countless books have been published on Alibaba’s founding and Ma’s business tactics.

Ma-isms such as “Today is hard, tomorrow will be worse, but the day after tomorrow will be sunshine”, are common in Chinese business circles. In Hangzhou, small firms have been known to set up altars adorned with images of Ma to bring good fortune.

But in a February snub, Ma was left off a list of Chinese entrepreneurial leaders published by state media.

Franklin Chu, president of Sage Capital in Rye, New York, noted that Alibaba shares are trading at a 30% discount to their 52-week high.

“I call this the ‘Jack Ma arrogance discount,’ combined with the recent round of China-bashing coming out of Washington,” he said.

Alibaba, he said, “needs to work hard to re-establish an accommodative relationship with its regulatory handlers.”

Since stepping back from the company, Ma has sought to focus his time on philanthropy and education, including his charitable trust, the Jack Ma Foundation, and two schools in Hangzhou.

Ma was an active conference participant, making at least 12 appearances in 2019 before the COVID-19 pandemic began. In March 2020, he opened a Twitter account - the platform is blocked in China - which mainly tweeted about his foundation’s COVID-19 prevention efforts. Its last tweet was on Oct. 10.

“It’s crucial for Chinese entrepreneurs to be low-key. Don’t speak casually. And don’t say anything wrong,” Edward Chen, chairman of Shanghai-based fintech consultancy China Rising Group, said in a social media video post.

“Prudence in words and action is the No. 1 priority so that Chinese entrepreneurs can live longer.”

China turning South China Sea supply ships into mobile surveillance bases

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Written by northsouth

Category: Asia

Published: 10 April 2021

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By Zachary Haver

BEIJING - China is upgrading two of its civilian South China Sea supply ships with new high-tech surveillance equipment to help the vessels track ships from the United States, Vietnam, and other foreign countries, new Chinese government procurement documents show.

This is just the latest instance of the Chinese government leveraging civilian assets to pursue its national security interests in the South China Sea, a common practice under China's strategy of "military-civil fusion."

The contract for this project was awarded Thursday to Zhejiang Dali Science and Technology Co., Ltd. by Sansha City, which is responsible for administering China's maritime and territorial claims in the contested South China Sea.

Dali, which appears to also work with the Chinese military, is set to provide a pair of its "DLS-16T Long-Distance Optoelectronic Monitoring Systems" for use on the city's two main supply ships — the Sansha 1 and Sansha 2 — for 3,830,000 yuan ($547,000).

Multi-function supply ships

The Sansha 1 and Sansha 2 are mainly tasked with supplying Woody Island, which is China's largest base in the Paracels and serves as the headquarters for Sansha City. Though the Paracels are claimed by Vietnam, China, and Taiwan, only the PRC occupies any features in the archipelago.

But both vessels have also ventured down further south to the Spratlys, where China is locked in maritime and territorial disputes with Vietnam, the Philippines, Malaysia, Taiwan, and Brunei.

The Sansha 1 came into service in January 2015 and the Sansha 2 completed its maiden voyage in August 2019. This allowed the city's older Qiongsha 3 supply ship to focus on supplying China's settlements in the Crescent Group in the Paracels, state-run Hainan Daily reported.

State-owned CSSC Guangzhou Shipyard International, which built the Sansha 2, said that the 128-meter-long vessel would integrate "transportation and supply, administrative jurisdiction, emergency rescue command, emergency medical assistance, and island and reef scientific survey capabilities."

The company also stated that the Sansha 2 would "play an important role in defending the motherland's southern gate" — which is how China sometimes refers to its claimed territory in the disputed South China Sea.

Defending the motherland's southern gate

Once they are outfitted with their new surveillance equipment, the Sansha 1 and Sansha 2 will be able to play an even greater role in asserting China's claims.

According to bidding documents reviewed by RFA, the DLS-16T Long-Distance Optoelectronic Monitoring Systems from Dali are intended to allow the supply ships to "carry out omnidirectional search, observation, surveillance, and video evidence collection against maritime and aerial targets" such as ships, overboard people, objects floating in the sea, and aircraft under all weather conditions, 24 hours a day.

Sansha City was seeking a tracking system that would integrate visible light imaging, infrared thermal imaging, automatic target tracking, radar, fog penetration, image enhancement, the U.S.-run satellite navigation system GPS, the Chinese equivalent system BeiDou, and other capabilities, the bidding documents show.

The software system for the tracking equipment is to be used to detect, identify, and track "sensitive ships" from countries like the United States, Japan, the Philippines, Vietnam, Indonesia, and Taiwan, as well as record and display this information in real-time, the documents say.

Corporate documents from Dali indicate that the company works closely with state-owned Chinese defense contractors and the People's Liberation Army (PLA).

Dali will be obligated to complete its work on the Sansha 1 and Sansha 2 within three months of signing its contract with Sansha City, the bidding documents say.

Military-civil fusion

China has a long track record of utilizing civilian ships like the Sansha 1 and Sansha 2 to assert control over the South China Sea.

Devin Thorne, a Washington D.C.-based analyst, told RFA that "there are a few ways that China's civilian fleets contribute to national security as part of military-civil fusion," referencing China's strategy of synthesizing resources to simultaneously advance both defense and development goals.

"They help assert China's maritime rights by simply being active in disputed areas, they facilitate military power projection, and they extend Beijing's eyes and ears throughout the near seas," Thorne said.

For example, the Chinese government has installed the BeiDou satellite navigation system — which has built-in texting capabilities — on thousands of fishing boats to enable these vessels to carry out maritime surveillance in the South China Sea, Chinese documents show.

On top of leveraging ordinary fishermen, China also deploys professionalized maritime militia forces to monitor contested areas.

Thorne told RFA that "the fishing vessels of the People's Armed Forces Maritime Militia are best suited for carrying out reconnaissance missions given their training in intelligence gathering and ability to covertly linger for long periods in disputed maritime spaces."

"But since at least 2014, some maritime militias have started enlisting heavy industrial vessels as well. Their role appears to be providing logistics support and conducting reconnaissance missions during military operations," Thorne explained.

Thorne added that "China's civilian fleets are also used to apply pressure in territorial disputes and, in some cases, instigate conflict."

For instance, the presence of over two hundred Chinese fishing or maritime militia vessels at Whitsun Reef in the Spratly Islands sparked a diplomatic showdown between Manila and Beijing in late March, RFA-affiliated news service BenarNews reported.

"Fishing fleets are most frequently at the forefront of this activity. However, during the 2014 HYSY 981 standoff we also saw China's state-owned merchant marine chase, ram, and spray Vietnamese ships," Thorne said.

"I am not aware of another instance in which China has used the merchant marine like this, but the maritime militia and other parts of China's armed forces have continued to create linkages with industrial fleets. It could happen again," Thorne warned.

Philippines claims Beijing aims to occupy more ‘features' in South China Sea

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Written by northsouth

Category: Asia

Published: 06 April 2021

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MANILA - The Philippines claimed that the continued presence of Chinese vessels in Manila's maritime territory in the South China Sea revealed that Beijing plans to occupy more features in the disputed waterway.

Philippine Defense Secretary Delfin Lorenzana's latest statement came after the Chinese Embassy in Manila a day earlier defended the presence of Chinese boats at the Whitsun Reef saying it was part of "China's Nansha Islands" – Beijing's name for the Spratly Islands.

"China should respect Philippine sovereignty over the Kalayaan Islands, and its sovereign rights over its Exclusive Economic Zone as defined by UNCLOS and affirmed by the arbitral award," Lorenzana said in a statement, referring to the Spratly Islands by its Philippine name, and the United Nations Convention on the Law of the Sea.

The Whitsun Reef is about 175 nautical miles off the Philippine island province of Palawan and within the country's 200-nautical mile exclusive economic zone (EEZ).

"The continued presence of Chinese maritime militias in the area reveals their intent to further occupy features in the West Philippine Sea," Lorenzana said, referring to the South China Sea by its Philippine name.

The Philippine defense secretary was citing a July 2016 U.N.-backed tribunal's ruling that affirmed the Philippines' sovereign rights in the waterway.

China claims the Spratly Islands in addition to almost all of the South China Sea and rejects the tribunal's ruling.

The Philippines had said last month that 220 Chinese ships were seen moored at Whitsun Reef on March 7, and "showed no actual fishing activities." Manila on March 22 lodged a diplomatic protest with Beijing over the presence of the vessels.

Lorenzana said that as of Saturday, 44 of those Chinese vessels were still near the reef and ought to leave. Beijing's earlier explanation that the vessels were fishing boats sheltering in bad weather was not true, he claimed.

"I am no fool. The weather has been good so far, so they have no other reason to stay there. These vessels should be on their way out," Lorenzana said.

"The Chinese Ambassador has a lot of explaining to do."

'Niu'e Jiao part of China's Nansha Islands'

The Philippine defense secretary's statement was part of an escalating war of words between him and the Chinese Embassy in Manila over the weekend.

The Chinese Embassy in Manila on Saturday denounced Lorenzana's demand from earlier in the day that the Chinese vessels must leave "our sovereign territories." It also called Lorenzana's Saturday statement "perplexing."

"The Niu'e Jiao is part of China's Nansha Islands. The waters around Niu'e Jiao have been a traditional fishing ground for Chinese fishermen for many years," the Chinese Embassy's statement on Saturday said. Niu'e Jiao is the Chinese name for the Whitsun Reef.

"The Chinese fishermen have been fishing in the waters for their livelihood every year. It is completely normal for Chinese fishing vessels to fish in the waters and take shelter near the reef during rough sea conditions. Nobody has the right to make wanton remarks on such activities."

But Lorenzana said on Sunday that he didn't buy that explanation and that China had used similar tactics to occupy Scarborough Shoal and Mischief Reef, which the Philippine calls Panatag Shoal and Panganiban Reef, respectively.

"They have done this before at Panatag Shoal or Bajo de Masinloc and at Panganiban Reef brazenly violating Philippine sovereignty and sovereign rights under international law," Lorenzana said.

In 2012, the Chinese seized Scarborough Shoal, a traditional fishing ground within the 200-nautical-mile Exclusive Economic Zone of the Philippines in the South China Sea, after a two-month standoff with the Philippine Navy

Mischief Reef is one of several submerged natural features in the disputed waterway, which China has reclaimed and transformed into military installations.

'Summon the Chinese ambassador'

Renato Reyes, secretary general of Bayan, or the New Patriotic Alliance, a grouping of left leaning organizations in the Philippines, said Manila needs to get an explanation from the Chinese ambassador.

"Malacanang should summon the Chinese ambassador and ask him to explain his recent statements that insult the Philippines ... and disregards our sovereign rights in our EEZ," Reyes said in a statement, referring to the presidential palace in Manila.

"If he does not change the statements made, he should be expelled from the country. China's overweening arrogance is an affront to our nation. It has illegally annexed Juan Felipe Reef, claiming it as part of China's territory and effectively disregarding our EEZ."

According to Reyes, President Rodrigo Duterte's actions in the past few years and Manila's dependence on COVID-19 vaccines from China had placed Philippines' EEZ "in a precarious position."

Duterte is perceived to have been soft on China's intrusions in Philippine territorial waters in the South China Sea since he assumed office in 2016.

After years of soft-pedaling on the issue, Duterte in September declared that the 2016 international arbitration court's ruling in favor of the Philippines' claims in the South China Sea were "beyond compromise."

A Philippine defense historian and analyst said the economic effects of the COVID-19 pandemic would also hamper Manila's response to the Chinese ships.

"Even though the Philippines is mounting a more aggressive response, complete with protests and sorties and patrols, the dire economic situation of the country may make it difficult for the Manila to sustain such operations," Jose Antonio Custodio, of the Institute of Policy, Strategy and Development Studies, told BenarNews on Saturday.

"Thus, the Chinese expect that once the Philippine activities peter out against them, they will just tighten their hold on the area. Given the pro-Beijing posture of Duterte, he may consider these initial actions as face saving."

Custodio said the Chinese vessels' presence at Whitsun Reef is characteristic of China's "grey zone tactics through its maritime militia to enforce Beijing's outrageous and illegal claims on the South China Sea and West Philippine Sea."

The analyst was referring to China escalating its military build-up in the disputed waterway, by deploying ships and aircraft to the region.

Six other Asian governments – Brunei, Indonesia, Malaysia, the Philippines, Taiwan and Vietnam – have territorial claims or maritime boundaries in the South China Sea. While Indonesia does not regard itself as party to the South China Sea dispute, Beijing claims historic rights to parts of that sea overlapping Indonesia's EEZ.