Last week, while the world’s attention was fixed on the outcome of the hard-fought U.S. election, a very different kind of battle was unfolding across the Pacific, one with the potential to upend how China does business. Unlike the election, however, the outcome in this case wasn’t long in coming: On Nov. 3, shortly after a closed-door meeting between regulators and executives from Ant Group, the Shanghai Stock Exchange announced the company’s record-breaking initial public offering, originally scheduled for later in the week, was being put on ice indefinitely.

Ant, whose Alipay digital payments service has made it the most valuable financial technology company in the world, has long operated in the gray areas of China’s otherwise tightly controlled financial sector. This has been a source of frustration for banks who feel unable to compete with their less regulated high-tech peer, officials worried about spiraling consumer debt, and for Ant itself. One week before the IPO freeze, Ant’s controlling shareholder, outspoken Alibaba founder Jack Ma, delivered an impassioned speech at a high-profile economic forum criticizing China’s financial regulations for stifling innovation. “We shouldn’t regulate an airport as if it is a train station,” Ma said. “We shouldn’t regulate the future with yesterday’s means.”

While it’s hard to say how much blame Ma’s blunt words bear for his company’s predicament, a week later Ant’s IPO plans had gone up in smoke. So far, public responses to the regulatory decision have run the gamut from supportive to critical and even bemused. Zhendahu, a well-known financial commentator and internet personality, lambasted Ant’s microlending service Huabei — Chinese for “Just Spend” — for debt-trapping young people and driving them to consumerism. A repost of her video on microblogging platform Weibo received hundreds of thousands of likes and numerous supportive comments, with some users likening the company’s business practices to those that sparked the 2008 global financial crisis.

Others, including many Western media outlets, were critical of what they saw as the government’s intervention in the financial market. Netizens, meanwhile, had fun with Ma’s purported gaffe. Online, a clip from the Alibaba Pictures-produced martial arts short “Gong Shou Dao” — in which Jack Ma tests his preferred tai chi style against a string of kung fu masters — was widely shared by Ma’s supporters as a tongue-in-cheek reference to the often conflicted entrepreneur-state relationship. In the clip, Ma must hastily apologize to a team of Chinese policemen after accidentally punching one of them in the eye.

Intentional or not, the use of “Gong Shou Dao” is instructive. While critics and supporters of the Ant crackdown both tend to dichotomize regulatory action into a zero-sum game between the state and entrepreneurs or the market, the reality is much more complicated. Indeed, the post-2008 history of Alibaba and Ant closely resembles a tai chi routine.

When Jack Ma founded Alibaba as a business-to-business e-commerce platform in 1999, the firm marketed itself as both easier to use and more open than competing state-led e-commerce platforms, and more “Chinese” than American rival eBay. One of its biggest innovations was an embedded customer service messaging system that allowed buyers and sellers to communicate quickly and easily.

This alternative market positioning helped shape Alibaba’s brand image as an ally of small businesses and Jack Ma’s personal brand as a self-made IT entrepreneur. It also offloaded the labor — and especially the emotional labor — of customer outreach on to seller-entrepreneurs. All throughout, the Chinese government maintained a largely laissez-faire stance toward the company.

After Alibaba secured monopoly status around 2007, however, it gradually redefined its relationships with the state and with platform-based entrepreneurs. In particular, as it grew in size, its deepening ties to a government hungry to boost domestic consumption and cut reliance on exports led to a symbiotic platform-state relationship. In the countryside, for example, Alibaba worked hand-in-glove with various levels of the state to generate employment opportunities through its “Taobao village” initiative — a reference to the company’s flagship e-commerce platform. Of course, the program also helped Alibaba expand its reach in rural areas.

As Alibaba expanded and its significance to the Chinese economy grew, however, government regulators became more cautious and interventionist. One sticking point has been the emergence of Ant. A product of the country’s ongoing post-2008 experiment to reinvent its economy, Ant’s history can be traced to October 2003, when Alibaba debuted Alipay, its third-party payment system and answer to PayPal. Over the ensuing years, Alipay leveraged its relationship with Alibaba’s e-commerce empire and began to partner with major state-owned banks.

The relationship took a turn, however, after the June 2013 launch of Alibaba’s investment product Yu’ebao. The service allowed Alipay users to invest their money through Alibaba directly, encroaching on the wealth management turf of banking institutions.

Yet the launch of Yu’ebao also coincided with China’s leadership transition and the country’s embrace of state-led financialization, in which the state and state-aligned actors invested heavily in both private and public firms, including Alibaba, blurring the lines between “public” and “private.” And it dovetailed with emerging priorities like mass innovation, entrepreneurship, and the idea of “inclusive finance,” which sought to support rural areas and small businesses traditionally underserved by the big banks.

These shifts opened up new space for private fintech companies to break into the state-monopolized financial industry. Ma jumped at the opportunity, consolidating Alipay and Yu’ebao into Ant Financial — now known as Ant Group. Ant then expanded its offerings by launching its consumer loan business Huabei in 2014 and microloan service Jiebei — “Just Borrow” — the following year. Alibaba’s vast user base and reams of consumer data, its growing integration into many sectors of the Chinese economy, and its deep penetration into the everyday life of Chinese citizens gave the newly formed Ant a huge advantage in the nascent fintech market.

Of course, Alibaba’s transformation from industry outsider to connected monopoly sparked backlash from the small- and medium-sized entrepreneurs upon which its e-commerce platforms were built. Waves of “anti-Taobao” protests erupted in 2011 and again in 2013, as platform-based entrepreneurs organized against Alibaba’s increasingly extractive business practices.

Alibaba responded quickly. In 2011, on the very same day the Ministry of Commerce announced it was investigating Alibaba, Ma announced the company would spend 1.8 billion yuan (roughly $280 million at the time) to subsidize qualified sellers. In the absence of any organizing force, the protests soon faded.

Adding to the regulatory pressure on Alibaba were the escalating financial risks associated with liberalization, which culminated in the burst of the equity bubble in July 2015 and the fall of the under-regulated peer-to-peer lending sector after 2016. As part of a nationwide campaign to contain financial risks, Ant — particularly its profitable consumer credit and company loan services — came in for mounting regulatory scrutiny.

To defuse the situation, Ant strategically sought to rebrand itself as merely a technology firm, rather than a financial one. In 2018, Ant restructured its loan division into an “intermediary platform” between banks and borrowers, with Alipay simply collecting a “technology-service fee.” In preparation for its now-aborted IPO, the company even promoted itself as a “techfin” company, rather than a fintech firm.

Ultimately, regulators don’t seem to have bought it. Just a day before Ant’s IPO was suspended, China’s central banking regulator published new draft rules to regulate microlending services, putting a cap on consumer-lending and leverage levels. Prior to the move, lending services Huabei and Jiebei had grown to account for 40% of Ant’s revenues and 48% of profits; now, the company needs to set aside hundreds of billions of yuan in capital just to keep them afloat.

In short, once you place the collapse of the Ant IPO in its proper context, it’s clear that treating it as a simple matter of private business and entrepreneurs versus the state is reductionist, even misleading. The two sides have long been deeply entwined. But a better interpretive framework may already have been encoded into Ma’s own “Gong Shou Dao.”

The core of tai chi is maintaining the agility and flexibility to act according to constantly changing external conditions. A lifelong practitioner and avid promoter of tai chi, Ma is said to frequently cite tai chi terminologies and philosophy when talking to employees. “It’s important to control your rhythm,” he’s said. “To know when to take a move and when not to, and how to develop a company in a sustainable way.”

It’s not clear yet why Ma seems not to have taken his own advice in this case, but the history of Alibaba and Ant show just how fluid and murky the boundaries of China’s state-led financialization push can be. Many commentators have legitimate complaints about the last-minute timing of the IPO suspension, which reflects poorly on state regulators and highlights the continued opacity of Chinese regulation. But these blurred lines are part and parcel of state-led financialization as a model, in which the state is both a stakeholder and a watchdog.

We shouldn’t discount the latter role: Despite its clumsiness in this case, the Chinese state made it clear it is determined and able to stand up to capital, if not also to the pro-capitalist forces within itself. Just within the past 10 days, the Chinese government announced two new draft documents that would regulate the microloan industry and platform economy, respectively.

So rather than rush to judgment, let’s watch the unfolding negotiation between Ant and regulators with an open mind. After all, the challenges posed by big tech overreach to our existing legal and regulatory regimes are a global problem. On Nov. 3, the same day Ant’s plans were upended, ride-share firms in the U.S. celebrated a landmark win with the passage of California’s Proposition 22, a costly lobbying victory that functionally stripped the state’s legislature of the ability to regulate the industry’s labor practices.

The need to hold state actors accountable should not blind us to its constructive role in mobilizing resources for development, countering runaway financial risks, protecting workers and consumers, and redistributing wealth. Whether Ant and Ma can regain their balance remains uncertain, but there’s plenty of reason to hope the company will be allowed to continue with its IPO sooner or later — only with a more reasonable valuation and business model. This might disappoint some, but for Ant’s hundreds and thousands of small investors and debtors, it could well end up being a blessing in disguise.

Editors: Cai Yiwen and Kilian O’Donnell; portrait artist: Wang Zhenhao.

(Header image: Jack Ma at a conference in Hangzhou, Zhejiang procince, 2017. IC)