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There's a Dark Side to Alibaba's Massive Profits in China

Artist Wu Tun's T-shirt print. From Wu's Twitter.

Artist Wu Tun's T-shirt print. From Wu's Twitter.

Every year on November 11, e-commerce giant Alibaba makes business headlines with its sales record on Singles Day, a holiday celebrating China's single men and women that has become a popular online shopping day. This year, the company racked up US$9.3 billion, almost doubled last year's US$ 5.8 billion.

The news came about two months after Alibaba set the record for the world's largest initial public offering (IPO) in the US stock market, with its market value measured as US$231 billion at closing time on its first day.

Alibaba's rosy prospects are to a large extent a result of its monopolized status in China's online shopping market. Yet to maintain such privilege, it has to work closely with the government and the Chinese Communist Party in sanctioning independent organizations and political dissents.

In September, not long before Alibaba's began trading on the US stock market, the Taobao online shop of an independent library project called China Rural Library (CRL) was forced to shut down while the authorities cracked down its 19 libraries across the country. The CRL's main income for its education and library project has been generated from its online shop. The Chinese authorities consider independent citizen initiatives a challenge to the Chinese Community Party's representation of the people.

A few days ago, Amazon-like Taobao, which is owned by Alibaba, shut down artist Wu Tun's online shop, which sold T-shirts with the phrase “Love Can't Be Here” printed on them. The Chinese character for “love” sounds like “Ai,” and the T-shirt is inspired by an overseas campaign, “Ai Can't be Here,” which calls for the release of Ai Weiwei, an artist-activist who was detained for 81 days without any official charges in 2011. Currently Ai is still monitored by the national security police and could not leave the country.

Prominent political dissident Hu Jia explained to Radio Free Asia how the authorities have suppressed dissents via online shops:

你只要是发出异见,当局一般来讲围剿你的手段基本上两方面,一个是斩断你的社会联系,让你四面楚歌,你身边的家人朋友对你避而远之,还有一个手段就是斩断你的经济来源。现在当局就是这样,他的侦查情报系统非常发达,可以获取到各种各样的信息,这些异见者他们的生活来源是从哪里来的。如果你是在中国国内获得的这些收入,他掐死你太容易了,就给你关这个网店,用不了10分钟就办妥了,你的店就给你销户了。

Once your voice your opinion in opposition, the authorities take two measures to get at you. First, cut off your social contacts. Make you feel lonely and sad as your family and friends are forced to stay away. Second, cut off your income. They collect information from all sources and identify dissidents’ major sources of income. If you get your income from mainland China, it is too easy to bring you down: They just need to shut down your online shop. In less than 10 minutes, your shop no longer exists.

Political dissidents have not only criticized Taobao. The monopolized market means small retailers face vicious competition, of which only a minority of shops survive.

A small retail shop owner explained the adverse effects of the monopoly on online shopping business in China. The article circulated online for a period of time and Letscorp, a website that bridges information across the Chinese-speaking community, reposted it on November 13, 2014:

绝大多数人会使用网络购物的方式来购物。当中也包括我,我现在所有的衣服裤子和很多工具都是网购,又好又便宜,又方便。的确很好。[…]

不良影响 ①:大批的商店、服装店、工具店、数码城、商场、将会关门歇业,即使留下的也是苦苦支撑,难以有富余的利润。网上经常有看到北京中关村,深圳华强北等一些以前举足轻重的大市场已经陷入了萧条。

②:很多零售店主失业,很多营业员,促销员将会失业。很多房东老板的店铺将会租不出去。这一部分人是最先受到淘宝影响的,且影响是最大最直接的。[…]

淘宝的成立初衷就是让所有卖家直接面对消费者,减少中间环节,让消费者得到好处。这个成立初衷也许是好的,但是淘宝演变到今天他自己也没有想到会发展成这样。会发展成为消灭了实体中间商,最后连厂家都不得不为了生存大量竞争起来。[…]

马云曾经说过一句话将来要么电子商务,要么无商可务。[…]整个中国百分之五十的零售都归淘宝卖了,而且还是很低或者没有利润的卖的,而且还会影响本来实体店卖的价格,大家想一想中国会怎样,中国的经济会怎样。原本从中能够获得利润而养家糊口的有多少人,多少家庭。我不敢想,没有利润的中国将会发生什么。

The majority of people, including myself, will shop online. I get all my clothing and hardware from the Internet. It is very convenient and cheap, which is really great. […]

Yet the adverse effects are: 1. A large number of shops — fashion shops, hardware shops, electronics shops — will be forced to close. Even if they manage to survive, business is difficult and they hardly make enough profit to carry on. From what has been reported online, Beijing's Zhongguancun, Shenzhen's Huaqiang North district [both are famous shopping destinations for computers and electronics] and others are in a great depression.

2. Many owners of small retail shops are forced to shutter. Their sales workers lose their jobs. The situation affects the landlord of shop floors as they can't rent out their place. These people are directly affected by Taobao.

The original idea of Taobao is to reduce the transaction costs so that the consumers can get more benefit. This is a good intention. But now the platform has evolved into something that the founder could not foresee. It will eventually eliminate all the middlemen and the manufacturers will have to compete with each other in a vigorous manner. […]

Jack Ma [the founder and CEO of Alibaba] once said, in the future there would be no more trading except from e-commerce […] Now 50 percent of the retail business in China is traded through Taobao. The price is so low that there is very little profit margin. The pricing has affected the prices in real shops. Please imagine the future of China's economy. Without making enough profits, how can people support their families?

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