On Friday morning, Jack Ma, the main founder of the Chinese e-commerce company Alibaba, applauded with almost childlike pleasure as a group of his customers rang the opening bell at the New York Stock Exchange. Alibaba was going public in the biggest I.P.O. in U.S. history. Minutes later, Ma told CNBC about his ambition to make Alibaba even larger. “We want to be bigger than Walmart,” Ma said. He may not have to wait long. At the close of trading, Alibaba, founded fifteen years ago, was worth two hundred and thirty-one billion dollars. Walmart was worth two hundred and forty-eight billion.
The Walmart comparison was resonant. Walmart wasn’t the first foreign retailer to do business in China, but, in the eighties, it became one of the most aggressive importers of products manufactured there. The company took advantage of economic-liberalization policies that had been championed by Deng Xiaoping, overturning many of the socialist structures set up by Mao Zedong. Soon analysts were noting that if Walmart were a country, it would be among China’s biggest trading partners. For skeptics critical of labor standards and low wages for those working in manufacturing in developing countries, Walmart became a symbol of all that was wrong with globalization—especially after a 1992 “Dateline” exposé showed children in Bangladesh sewing Walmart labels onto clothing.
In 1992, Ma was in his twenties, working as a university lecturer in Hangzhou, when Deng made a series of famous speeches during a tour of southern China, to persuade people that his policies, which seemed decidedly capitalist to some, could coexist with—and even advance—socialism. Ma later recalled Deng’s message as “Move fast, develop the nation.” In Ma’s view, what precipitated China’s boom was a change, around that time, in Chinese people’s feelings about business. “People think, doing business is good,” he said. “And people think, you can be rich, you can help other people be rich.” He soon left his teaching job to become an entrepreneur and, during a visit to Silicon Valley, became especially inspired. In 1999, he founded Alibaba in his apartment.
Learning about Alibaba has been a bit confounding for people in the U.S. Over the past several decades, we’ve gotten used to being the most important market for companies selling to consumers. Alibaba, however, doesn’t sell in the U.S.; a recent Ipsos/Reuters poll found that, even in the days leading up to the much-hyped I.P.O., eighty-eight per cent of Americans hadn’t heard of the company. (If you’re among them—or if your understanding of Alibaba doesn’t extend far beyond having heard the name—the Wall Street Journal has put together an explainer that should help.) Alibaba’s main Web site, Taobao, uses an eBay-style model to put shoppers and sellers in touch; it doesn’t charge transaction fees but makes money by selling ads to merchants. There are also other businesses, like a payment service called Alipay.
Because its business is Web-based, Alibaba is often described, in shorthand, as the Amazon or eBay of China, but that’s not quite right. When Amazon and eBay were founded, in the mid-nineties, the middle class in the U.S. was already well-formed, with plenty of other retailers, including Walmart, catering to it; all Amazon and eBay did was to bring commerce to the Internet. But Alibaba emerged in China at the same time that its middle class was starting to grow rapidly—in that sense, it’s more like Walmart, whose rise coincided with the rise of the middle class in the U.S.
Investors who bought shares of Alibaba are betting that China’s growth—and, in turn, the expansion of the consumerist middle class—will continue well into the future, bringing Alibaba more and more customers. Already, Alibaba is worth about thirty-five times the earnings that underwriters forecast for next year, according to the Wall Street Journal, which cited people familiar with the banks’ projections; by comparison, companies in the S. & P. 500 trade at fifteen times expected earnings. Ilya Grozovsky, a senior equity analyst at SPQR Capital, told me his firm was able to get some shares of Alibaba on Thursday night, at the I.P.O. price of sixty-eight dollars, but not as many as it wanted. So even after Alibaba began trading, at ninety-three dollars, his firm bought more. Grozovsky notes that while the number of Internet users in China is about twice the number in the U.S., most Chinese people still aren’t online. “There’s another two United States of Americas waiting to get online over there,” he said. That’s a lot of potential Alibaba users.
Ma, in his interview with CNBC, mentioned that his hero is Forrest Gump—the fictional character played by Tom Hanks in the 1994 drama. “Every time I get frustrated, I watch the movie,” he said. “I watched the movie before I came here”—to New York, for the I.P.O. He learned from the movie, he said, that “no matter what changed, you are you;” he seemed to identify with Forrest Gump, who rose from a modest childhood to make a fortune with an investment in Apple. “Forrest Gump” contains a number of themes to which a Chinese viewer might be expected to object, the glorification of capitalism notwithstanding. Gump is shown fighting heroically in the Vietnam War, while his childhood friend, Jenny, ruins her life by falling in with hippie war protesters. Newt Gingrich described it, admiringly, as a conservative film. One imagines that Mao Zedong might not have been too pleased with Ma’s choice; then again, Ma came of age not in Mao’s China but in Deng’s.
