China's Arabian knight

E-commerce pioneer and founder Jack Ma shares his thoughts.

The office of the CEO of, Jack Ma, is in a nondescript, medium -rise building, the group's operational headquarters in Hangzhoug. Located in a rough-and-ready commercial part of the city, it nevertheless seems to suit the unpretentious style of its 40-year old chairman and founder.

The first thing you notice about Ma is that he has an extraordinary face. All bone and angles, it is exceptionally animated and his willingness to crack jokes and laugh is infectious.

Wearing a simple collarless blue shirt and grey trousers, he exudes none of the pomposity of most board chairmen - but then not being a listed company he doesn't have to worry too much what the public thinks.

The fact the company has not listed, despite the recent China fever relating to Chinese Internet stocks is perhaps the most striking aspect of China's leading e-commerce company, founded in 1998.

Tomonline and Linktone are two companies that have recently accessed the Hong Kong and US markets this year, eager to emulate the rocketing share price of US-listed web portals Sina, Sohu and Netease.

But Ma says he is not tempted by a listing as he has plenty of cash for his expansion. Operationally, he is not ready to join the mad scramble for an ever-rising share price, which is often the lot of the leaders of listed companies.

In that sense, Ma is already special. Many Chinese entrepreneurs are suspected of being more interested in chasing a fast buck, but for Ma that would be to misunderstand the nature of the word.

"More than just earning money, a true entrepreneur should want to change the world. In that sense, he's far superior to a businessman or a merchant," he says.

The fact that Ma speaks fluent English is not surprising. The Hangzhou native was trained as an English teacher and was the only one out of 500 trainee teachers who was not sent to a high school teaching job, but to a university following graduation.

The importance of teaching permeates Ma's conversation and he even refers to himself as the Chief Education Office.

Education extends beyond the vital range of technical skills he must impart to his workforce, to setting moral standards.

"China's business world is full of traps and cheats. Traditional morality was devastated during the Cultural Revolution - although I feel it's slowly coming back," he says'.

It was an especially rude awakening for a former teacher, a profession accorded a great deal of respect in China, he says.

The only way to act in such an environment, Ma believes, is to emphasize one's rectitude - and to get street smart very fast.

"People who cheat are usually doomed to failure. Partly, it's because they are greedy and over reach themselves. It's also because, by definition, a conman thinks he is smarter than everybody else. That's the stupidest thing anybody can delude themselves with. I'm fully aware of the difficulties around me and I tread extremely warily," he says.

The challenges Ma faces are what is causing him to have stockpiled a reported total of $112 million in venture capital funding, including $82 million in February this year alone from Softbank Corp, Granite Global and Venture TDF Technology Group - although $22 million went to buying out the total stake of earlier investor Goldman Sachs.

"Sunzi, the classical Chinese strategist, said a good general should win without fighting, but when you do fight it's good to have plenty of ammunition," he says with a grin when queried about the point of sitting on such a large cash pile.

Ma is reluctant to give figures for his stake in the company, reportedly around 10%, but says he is not the controlling shareholder, and that he doesn't want to be.

"I'm not interested in handing this business on to my children. When I left teaching for business it was because I wanted to complement book learning with skills from the real world. I gave myself a timeline of ten years before switching to something completely different," he says.

"I'm perfectly happy to walk away and pass the baton to someone else," he adds.

His claim to being CEO rests on his ability to deliver on the promises he makes to the board each year, he says - and also because there is no dominant shareholder who can impose their wishes.

In any event, preparations would seem a good idea given that top Internet portal has teamed up with Yahoo to offer an auction service, while US online auction giant eBay has also boosted its China presence via its Chinese unit Eachnet.

Many observers were cynical about e-business in China, and given the problems with logistics and the lack of credit card usage, rightly so.

Even Alibaba is currently only a 'meeting point' where customers come to obtain information. Information needs to be just as trustworthy as cash, however, and a five-step vetting system, including references from peers and online assessments from fellow Alibaba users is in place to ensure truthfulness.

Payments are carried out away from the platform between the users on their own terms.

Ma, whose company just opened its own consumer-to-consumer (C2C) auction site, is clearly somewhat stung that neither of the two giants bothered to talk to him.

"Yahoo is always very sure of itself, very arrogant when going into a new market. They want to do everything themselves. They believe they have the best technology and simply chose the portal with the highest traffic, which was Sina," he comments.

Taobao is new departure for Ma, since the C2C space is different to the business to business operation (B2B) of's three interlinked websites, covering Japan, Greater China and the international markets respectively., which reported a free cashflow of $20 million last year, functions simply by charging Chinese companies, predominantly SMEs in the five richest provinces of China, Shandong, Zhejiang, Jiangsu, Guangdong and Shandong between $5000-$8000 per year to put their profiles on line. Companies are willing to pay that because of the one million plus foreign companies who browse the sites looking for cheap mainland goods.

The foreign companies, as the buyers, don't pay. As Ma says, you never expect payment from the girls you bring to a party...

Ma estimates that of the 2.4 million Chinese SMEs, which use the Internet he has a 90% market share.

"We are the dominant player in this space. Nobody comes remotely close," he says, adding that auction site Taobao will get a massive shot in the arm when the customer database is merged with the Taobao database.

Taobao, which is popular with young, white collar women for selling cosmetics and lingerie to each other, is not yet a core part of Alibabal's strategy.

"We believe the sector could become important, and we would like the symmetry of being the top B2B site along with the top C2C site," he says, adding that the initial investment in Taobao was very small.

Only half joking he says that Taobao is also a great human resources tool.

"When employees at Alibaba get a little stale, it's a marvelous way of freshening them up and giving them something new to do, "he says.

He's especially pleased the day of the interview because a report on Sina estimates that Taobao is beating his two competitors in user numbers.

But with the competition heating up, it's getting tougher.

"We found when we wanted to publicize our site that Eachnet and Yahoo had signed exclusive contracts with most the online portals. But we came up with some great alternatives, such as a just-launched campaign on the Shanghai subway. The competition must be wondering how we can be in first place," he says.

That bodes well for the company as the battle in Chinese e-commerce heats up. Ma isn't intent on battle. He emphasizes he is ready to talk to eBay or Yahoo at any time and that he has great respect for them.

But in the short term he will be using his cash pile to build up entry barriers as high as they will go.

If Ma is right, these three players are the most likely to redraw online business in China.

"E-commerce is the next frontier in China. That's where I am placing my chips. We'll see how long all the wireless, value-added voice services companies can survive," he says with a glint in his eye.