Breakingviews: Jack Ma’s American Dream Runs Up Against China First

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Jack Ma’s American dream has woken up to a bitter reality. Alibaba’s retiring founder rescinded a promise to create 1 million jobs in the United States. He blamed tariff tensions between the United States and China, but his $420 billion company has not given foreigners a level playing field on his international e-commerce site. Like any exporter, Mr. Ma’s public championing of free trade blends enlightenment with self-interest.

Alibaba.com was originally built to connect small Chinese wholesale manufacturers to overseas buyers. As domestic consumption boomed, however, the export operation was eclipsed by Taobao, Alibaba’s eBay-like marketplace, and the complementary Tmall, which hosts stores for bigger retailers. When Mr. Ma met Donald Trump in January 2017 before his inauguration, the Alibaba chairman vowed that 1 million small American businesses would gain access over five years and lead to a similar number of jobs, helping rebalance trade in the process.

Most of those smaller merchants would have set up shop on Tmall Global. Theoretically, this subsite provides an easier channel to sell directly to Chinese customers, without the hassle and expense of creating an onshore entity, as required by Tmall. It attracted Costco, Gerber and most recently U.S. grocery chain Kroger, which began peddling a modest line of vitamins and nuts in August.

The portal hosts around 18,000 vendors, so 1 million more would have been impressive. Since shopkeepers pay for the privilege of a storefront, Alibaba’s fees were more likely to rise than sales or jobs.

The company does not break out specific sales figures for Tmall Global, describing it as a “testing ground.” While Tmall.com is the fourth most-visited website in China, Tmall.hk, the domain for Tmall Global, ranks 357th, according to Alexa data. In essence, it’s a smaller shopping center located far from where the Chinese action is. Why isn’t exactly clear, but domestic vendors on Taobao might not be so receptive to foreign competition.

Even the mainstream Tmall has lost some foreign interest of late. Some Western companies have complained about the cost, others of the grey marketeers reselling their brands — or counterfeits — next door at Taobao.

Alibaba has gotten better at helping Chinese merchants sell overseas. There’s nothing wrong with that per se, but it’s hardly a solution to imbalanced trade.

Pete Sweeney is Asia economics editor for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

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