In China, Where Have All the Values Gone?

Ichiro Suzuki

On September 18, 2025, Alibaba has finished its 12th year as a public company. It was a dozen years of turbulent experiences in the NYSE. Few companies made a market debut in a more frenzied atmosphere than Alibaba. It was the largest IPO in U.S. history at that time. Alibaba looked a company of the future, destined to be bigger than Amazon and eBay combined, it was believed. Founder Jack Ma was a rockstar on a roadshow. The IPO raised record $21.8 billion, later expanding to $25 billion via extra shares. The IPO was priced at $68 per share, at the top of the expected range. The share opened at $92.7, surging 36% right out of the gate on September 19, 2014. 

A dozen years later, Alibaba closed at $113.2, up 22.1% from the opening price of $92.7 on the day of its IPO, for a compound annual rate of return of mere 1.73%. The company pays divided that yields approximately 1%, but this doesn’t make Alibaba look greatly more attractive. At this juncture, U.S. money market funds that yield 3.5 to 3.7% look better investments, especially on a risk-adjusted basis. No frenetic IPO has undershot the originally hyped expectations more than Alibaba.

For Alibaba, its business’s home field is the domestic Chinese market, which is a nightmarish place for anyone to operate. It’s the land of cutthroat competition for any industry, squeezing margins to bare minimum. A case in point is the EV industry. Of over hundred electric vehicle manufacturers, only a handful is reporting profits, with the rest simply struggling to survive. Retailers may be slightly better than EV makers, but only slightly. Competition among retailers is fierce. China’s online retail market is the world’s largest and one of the most competitive ecosystems globally, driven by over 1.1 billion internet users, aggressive price wars and digitally sophisticated consumers. The market is heavily contested by Alibaba (Taobao and Tmall), JD.com and Pinduoduo. Over 12 million businesses compete in the domestic landscape forcing continuous margin compression and  rapid operational iteration. With over a billion internet users accustomed to rapid innovations, live-streaming commerce, and influencer marketing, consumer tolerance for uncompetitive pricing or mediocre product value is extremely low. Chinese shoppers exhibit low brand loyalty, shifting quickly to emerging alternatives that offer better pricing, real time products updates, or higher emotional or functional value. Domestic brands frequently outperform international legacy brands because they scale products faster, adjust real time pricing and align more closely with fast-shifting local tastes. 

In sharp contrast, the U.S. market is led by established giants like Amazon, Walmart and eBay. Amazon holds the largest share, focusing on fast delivery, reliable customer service and Prime membership. Innovation cycles are slower in the U.S. Brands rely on established loyalty and traditional marketing. In a nutshell, the U.S. offers a much cozier business environment than China. 

On top of competitive environment, China’s macro economic factors are weighing on consumption severely. A collapse in consumer confidence triggered a defensive shift toward precautionary savings over active spending. A profound real estate downturn has led to falling property prices, plunging property investments and major solvency crisis. Chinese households experienced a severe drop in net worth since houses have been a major source of their wealth. Falling house prices damaged their balance sheets. Negative wealth effects through houses made families feel significantly poorer, causing them to cut back on big ticket item purchases. 

Household confidence is heavily tied to employment security. Slower growth in private sector businesses, coupled with structurally high youth unemployment rates hovering around 20%, has fueled deep widespread income anxiety. When people worry about losing their jobs or face sluggish wage growth, they cut back on spending. 

On top of it, the central government’s macroeconomic strategy has been heavily geared toward state-led investments, manufacturing expansion and tech supply chain development over direct stimulus to consumers. Xi Jinping has a strong penchant for manufacturing-driven growth, with his ambition to dominate the global markets with made-in-China products. Chinese consumers are struggling but he pays little attention to the, despite his occasional lip service to do something about them. The strategy is causing ever-widening imbalances with China accumulating obscene amount of external surpluses. He simply doesn’t care, with his firm belief in manufacturing and technology. 

Due to these effects, consumption accounts for mere 40% of the Chinese economy. This is considerably lower than developed economies where consumption runs around 60% of GDP and the U.S. where the number is as high as 70%. Don’t be so joyful looking down on profligate American consumers. The global economy is dependent on their spending. On top of it, don’t ever forget Xi Jinping’s wrath in November 2020 that punished Alibaba founder Jack Ma who tried to behave as if he were above the Communist Party at a time when the Chinese president was expanding the government’s authority over private corporations. Xi intervened to cancel Ant Financial’s IPO only a few days before the scheduled date. He wielded immense power over not only on Alibaba but also on other Chinese tech giants. Xi’s wrath gave monumental damages to valuations of the tech sector as a whole, from which they don’t recover more than five years later. It was the last straw that brought down valuations on Corporate China as a whole at a time when the market was beginning to take away premiums on China on its economy’s deceleration. 

After all, Alibaba’s equity market capitalization at $267 billion is one-tenth of that of Amazon’s $2,677 billion at the end of September. Worse, low valuations are rampant outside the retail industry as well. Baidu, at $29 billion, is a fraction of over $4 trillion for Alphabet, to which it is most comparable to. China’s largest company Tencent was valued at a touch higher than half a trillion dollars, again less than 10% of NVIDIA, the largest in the U.S. Up until ten years ago, Corporate China boasted of massive equity market capitalization, because of an ever-ascending outlook of the Chinese economy, as well as limited free-float shares that bloated valuations. Taking advantage of their valuations, Corporate China tried to buy U.S. and European companies aggressively for their advanced technology, mineral deposits, etc. A decade later, positions have totally reversed between the two. Chinese companies are dwarfed by Americans as the numbers above show. Corporate China, however, is still free from fears of being taken over by foreign companies. In very recent memory, Beijing blocked Meta’s acquisition of artificial intelligence start-up Manus even if the latter is based in Singapore. Companies based in mainland China can be even more relaxed than Manus. This provides little incentive to management to do something with their valuations. In addition, equity firms are leaving China due to difficulties of repatriating their capital. (Since then, the West has tightened regulations on foreign takeovers, especially by China for national security reasons but undervalued companies are always facing a threat of being taken over by buyout funds or other aggressive predators.) 

About the author: Mr. Suzuki is a retired banker based in Tokyo, Japan.