Asia Pacific

Alibaba IPO Underlines Rise of Chinese Private Sector


© Shutterstock

September 23, 2014 22:29 EDT

For all the fashionable talk of China’s dominant state capitalism and “Guo Jin Min Tui,” the numbers tell a slightly different story.

On September 5, Alibaba Group filed details about its forthcoming Initial Public Offering (IPO), suggesting a mid-range valuation of $155 billion. This would make the Hangzhou-based web retailer the most valuable listed private-sector company headquartered on the Chinese mainland, ahead of its Shenzhen-based online rival Tencent Holdings.

Alibaba’s coming of age underlines a continuous trend of the last half-decade. For all the fashionable talk of China’s dominant state capitalism and “Guo Jin Min Tui” — “the state advances, the private sector retreats” — the numbers tell a slightly different story, as illustrated in the chart below.

This chart shows the shares of four categories of companies in the aggregate market value of the largest listed Chinese firms, namely those that feature in the FT Global 500 list of the world’s 500 largest listed companies by market capitalization, which is regularly compiled by the Financial Times. Companies are included irrespective of the location of their main stock market listing, whether Hong Kong, Shenzhen, Shanghai or, in Alibaba’s case, New York.

The three main groups are state-owned enterprises (SOEs) of the People’s Republic of China (PRC), such as Petrochina, Industrial & Commercial Bank of China or China Mobile; companies from Hong Kong and Macao (mostly private-sector but also including municipal companies such as MTR, which operates the profitable Hong Kong metro system), such as Hutchison Whampoa, AIA Insurance, or Sands China; and private-sector companies from the mainland, such as Tencent or Ping An. A smaller fourth group includes banks with hybrid ownership of state and private-sector shareholders (with a public-sector majority), such as China Merchants, Industrial Bank or Shanghai Pudong Development Bank.

The numbers are as of December 31 of each year except in 2014, where the ranking as of June 30 is used. In the right-hand bar, Alibaba is added to the list on June 30 with the notional market value of $155 billion. This inclusion results in a corresponding expansion of the relative share of the mainland private sector. (The other companies’ market values were not adjusted from their June 30 amount, but this would not materially change the overall picture.)

The chart suggests three observations. First, with about two-thirds of the total, the PRC’s government retains a firm control of the “commanding heights” of Chinese business, as has been plain since the massive IPOs of state-owned enterprises in the mid-2000s. Second, however, this measure suggests a continuous erosion of state control for the past half-decade, as new entrants such as Tencent and Alibaba gain ground — and as private firms in Hong Kong and Macao have also comparatively recovered somewhat from their low point of the late 2000s. Third, and for the first time with Alibaba’s addition to the mix, large private-sector companies from the mainland collectively weigh as much as their peers from Hong Kong and Macao when measured by aggregate value.

As always in China, one must keep in mind that the distinction between the public and private sector remains somewhat fuzzy. Ultimate ownership of private-sector firms is often unclear, and the Communist Party of China retains ways to influence the strategy and behavior of many nominally private-sector companies.

Nevertheless, the gradual rise of private-sector companies as compared with the state-owned giants is too continuous to be ignored. Alibaba’s IPO is likely to be remembered as the symbolic moment of this momentous transformation of the Chinese corporate landscape.

*[This article was originally published by Peterson Institute and Bruegel.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Lu Jinrong /


Only Fair Observer members can comment. Please login to comment.
Inline Feedbacks
View all comments

Support Fair Observer

We rely on your support for our independence, diversity and quality.

For more than 10 years, Fair Observer has been free, fair and independent. No billionaire owns us, no advertisers control us. We are a reader-supported nonprofit. Unlike many other publications, we keep our content free for readers regardless of where they live or whether they can afford to pay. We have no paywalls and no ads.

In the post-truth era of fake news, echo chambers and filter bubbles, we publish a plurality of perspectives from around the world. Anyone can publish with us, but everyone goes through a rigorous editorial process. So, you get fact-checked, well-reasoned content instead of noise.

We publish 2,500+ voices from 90+ countries. We also conduct education and training programs on subjects ranging from digital media and journalism to writing and critical thinking. This doesn’t come cheap. Servers, editors, trainers and web developers cost money.
Please consider supporting us on a regular basis as a recurring donor or a sustaining member.

Will you support FO’s journalism?

We rely on your support for our independence, diversity and quality.

Donation Cycle

Donation Amount

The IRS recognizes Fair Observer as a section 501(c)(3) registered public charity (EIN: 46-4070943), enabling you to claim a tax deduction.

Make Sense of the World

Unique Insights from 2,500+ Contributors in 90+ Countries

Support Fair Observer

Support Fair Observer by becoming a sustaining member

Become a Member