Cash Inflows to China After Alibaba’s Strategy Announcements


Now international investors are streaming back to China, thanks to the Chinese government’s pro-business outlook and the restructuring plans of Chinese e-commerce giant Alibaba. The MSCI China has risen 4.5%, far outpacing the 2.8% gain in world stocks, and the Shanghai Composite has just closed out its best quarter in more than two years, with a 5.9% gain.

Foreign investors have been flow back ever since Alibaba announced plans to split and float its business units last week and their buying is a positive indication of their sentiment towards the company. Alibaba’s shares have risen more than 14% in the last five days and the influx of foreign funds have totaled a record high of 186 billion yuan for the quarter.

Derrick Irwin of Allspring Global Investments suggests these moves are part of the Chinese government’s effort to extend an olive branch to entrepreneurs who have been affected by the country’s violent crackdown on a wide range of industries. He is hopeful this will lead to more investment in the private sector.

Rob Brewis of UK-based asset manager Aubrey Capital Management Ltd echoes this sentiment, as they have recently moved back into Chinese equities, due largely to their newfound hopes of economic recovery and the now cheaper valuations. He also made the decision to re-invest in Alibaba and plans to keep “decent exposure” in the company.

In late 2020, China unleashed a wave of regulation that which companies of all sizes to confront an increasingly uncertain environment. That also included punishing technology companies, including levying large fines on individuals like Alibaba founder Jack Ma.

These latest steps by the Chinese government are being seen akin in some circles as a sort of “Hundred Flowers Moment”, which refers to a short period of time in 1957 when Mao Zedong invited people to freely express their opinions of the Communist Party. It remains to be seen, however, if the government will backtrack if their efforts don’t fall in line with its political ideology.

Alibaba is a Chinese multinational technology company specialising in e-commerce, retail, internet, video, and artificial intelligence. It was founded on 4 April 1999 in Hangzhou and is one of the world’s largest retail conglomerates. It operates online marketplaces for consumer-to-consumer, business-to-consumer, business-to-business, and cloud computing services.

Jack Ma, or Ma Yun, is a Chinese billionaire entrepreneur and philanthropist. He is the founder and executive chairman of Alibaba Group and is one of China’s most successful entrepreneurs. He began his professional career by teaching English and international trade at Hangzhou Dianzi University. He later founded Alibaba in 1999 after believing that the internet could generate significant economic and social value in China. He currently serves as a Strategic Consultant on Alibaba’s Board of Directors.