Those Years When I Was Forced to Top the Forbes List

Chapter 380 Ali: Using a Tiger to Devour a Wolf
It didn't take long to convince Jack Ma.

The main reason is that they don't have much time left on Taobao. The arrival of the mobile internet era will greatly boost the enthusiasm for online shopping, which is a consensus between them.

People will gradually realize the impact of internet consumption on the real economy. When that happens, online shopping businesses will face even fiercer resistance if they try to enter Hong Kong, and the resistance will likely extend beyond just retail.

Online shopping is not entirely absent in Hong Kong.

Amazon and eBay are both based in Hong Kong, but their websites are in English and logistics costs are high, making them affordable only for a small number of people. Middle-aged and elderly people generally don't use them. Local lifestyle platforms like Hong Kong Price Comparison Network mainly focus on price comparison and shopping guides, with very weak transaction functions. Yahoo Auctions mainly deals in second-hand goods and is very small in scale.

According to a survey by the University of Hong Kong, only about 12% of internet users have experience with online shopping, and these are mainly for standardized goods such as books and airline tickets.

This is practically a completely untapped market.

Taking advantage of Hong Kong's slow adoption of smartphones and online shopping, we must seize the opportunity and launch a surprise attack on Pearl Harbor.

"The attack on Pearl Harbor," Ma said again, seemingly admiring the near-successful attack.

“Hong Kong residents have a payment trust barrier. They are used to paying with credit cards and have deep concerns about the security of online transfers. They are afraid of leaking personal information and their funds are not safe. PayPal has not been able to penetrate this market.”

Joseph Tsai, who has extensive knowledge of the Hong Kong market, expressed his concerns.

“One more promise,” Chen Xuebing said decisively. “Do you remember my six words?”

Jack Ma perked up, clapped his hands, and said, "If you dare to pay, I dare to compensate!"

“Let’s add information security insurance,” Chen Xuebing added. “Hong Kong residents pay a ten-dollar annual fee to insure their information security, which is like buying a membership. If their registration information on Alipay is leaked, they will receive a hundredfold compensation. Although one thousand dollars isn’t much, most Hong Kong residents will believe that a typical customer data entry isn’t worth one thousand dollars. If there are still concerns, individuals can buy up to fifty insurance policies, totaling fifty thousand dollars. That should be enough, right?”

"This..." Jack Ma pondered the security technology safeguards of Alipay.

Once this commitment is made, it will be a huge risk exposure for Alibaba, as countless hackers may attack the Alipay backend.

"All data goes through the intranet to the core database. Why not just shut down the external network interface of the core database? Isn't that what you're doing now? Add more security barriers to the external network, set the highest level of access for user data, use distributed storage, and the core data center will be located in mainland China. Set up more facilities and improve physical defenses. Add more security gates. I don't believe anyone can force their way into the data center in mainland China."

Chen Xuebing had also inquired about Alipay's 20-year record of "zero major security incidents" in his previous life. This was no accident. Alipay was physically isolated from the beginning and transmitted through an internal network. It was almost impossible to obtain Alipay's core data through network means unless an agent was sent to infiltrate it.

Later, Alipay added many cybersecurity mechanisms and even relied on the export of financial security technology to increase revenue.

His actions also prompted Jack Ma to invest in data technology research and development as soon as possible.

Chen Xuebing continued, "Since there is demand and paid services, there can be discounts. The first 100,000 registered Hong Kong residents can get two years of free insurance to quickly open up the market."

Jack Ma's eyes lit up; this was a great idea.

“But…” Tsai Chung-hsin was about to speak.

Chen Xuebing waved his hand: "I know some customers will be dissatisfied, believing that security should be a basic service. So after initially opening up the market, Alipay can launch a refund campaign, returning the collected security fees to customers' Alipay accounts, and promising each customer a free 10 yuan insurance service, plus a Taobao shopping coupon. At the same time, Taobao will list a large number of practical products priced between 10 and 20 yuan. Will the 10 yuan refunded to Alipay accounts encourage some customers who have never shopped online before to make their first purchase?"

Two sentences deeply moved Jack Ma and Joseph Tsai.

Mr. Chen is amazing.

From the very first move, it was a series of elaborate schemes!
Chen Xuebing wasn't finished speaking: "This plan needs to solve a preliminary problem, which is the issue of Alipay's insurance premiums. Why should users pay insurance premiums for Alipay? Because of Taobao? If it's just about attracting Taobao customers, then why does this promotional plan even exist?"

"What we want to win over are all users who prefer to use the internet to pay for services."

"Therefore, once Alipay is launched in Hong Kong, it must exist as a valuable independent product. Services such as virtual game top-ups, business services, air tickets, and utility bill payments must be resolved before its launch. First, absolute security; second, absolute convenience. Regarding convenience, our smartphones can bring added value to you. As a mobile application that allows users to solve various online payment issues with a simple gesture, Alipay will be unique in the short term, and I can assure you of that."

"As for signing up various paid merchants, you'll have to do that yourselves."

"We're already doing it!" Jack Ma exclaimed excitedly. "Currently, we have signed contracts with over 30 domestic merchants! We also have 126 overseas merchants, all of whom are large service providers, covering the United States, Japan, Singapore, Australia, and Hong Kong and Taiwan! We also plan to launch cooperation with banks for foreign exchange purchases. As long as you buy goods on our service platform, you can enjoy one-stop settlement in 12 foreign currencies and RMB! We should be able to complete the settlement plan for some regions this year!"

As he spoke, his expression suddenly became strange: "Mr. Chen, Alipay has to complete these plans this year, which will cost a lot, at least two or three hundred million in losses. You are the major shareholder with 30% of the shares, shouldn't you make up the difference proportionally? Besides, you still haven't given me the $3750 million you invested."

Chen Xuebing gave him a disdainful look: "You were the one who chased me to invest back then, and we agreed that I could pay later."

"It's too late! It's been almost half a year! Alipay's value is getting higher and higher. I should have known better than to urge you and let you buy in at a higher price! If you don't pay soon, I'm going to raise the price!"

"Heh, if you hadn't let me invest earlier, would I be hearing all this today? Without shares, does Alipay expect me to support it?"

"Then you tell me a time, when do you want to pay!"

"I need the money right now, so I'll wait another six months."

Jack Ma: "."

Whose money is useless?

Chen Xuebing didn't really want to delay, but he still had a lot of debts to pay recently.

He hasn't paid for the land in Chengdu High-tech Zone. He prepaid 3 million yuan to Huawei for the building purchase in Shanghai, but he still owes 3 million yuan and can only settle the debt with Goldman Sachs after the loan is approved. Next, there's the construction in Sichuan, the auction of the Chenghua plot in Chengdu, the Qidian Industrial Park, and the land from Nanjing West Road to Huaihai Road in Shanghai.

This is still the money needed for Gu'an Development; there are also investments, such as the current capital injection into Huayi Brothers.

And ARM.

And JD.com, a group of investors are still eagerly waiting for its Series D funding.

The agreed timeframe was before April of this year.

Valuation of 5 million, investment of 1.25 million US dollars, or 10 billion RMB.

Of course, the current exchange rate is less than 10 billion.

Liu Qiangdong may not want it, but he has a contract, so it can't be left unmentioned. A shareholders' meeting is bound to be held to discuss it.

If it can be financed, then finance it; if it can be postponed, then postpone it. Although he's not in a big panic, having more cash on hand will make him feel more at ease with so many people in the group.

"Here's what we'll do. I know you need to give an explanation to the board of directors. You can delay this payment until the end of the year. I'll do something big for you that will ensure Alipay's revenue for the next few years."

"What is it?" "The issue of who owns the interest on the reserve fund."

The reserve fund is a deposit temporarily held by Alipay. Currently, it is a "transfer station fund" for Taobao users who have paid money but have not yet received it from the merchant.

Chen Xuebing used to sell goods on Taobao, and often about 80% of his funds were tied up in a reserve fund. For merchants who have been doing business on Taobao for a long time, this money is almost always there. The better the business and the faster the turnover of goods, the larger the amount of deposit.

When this was mentioned, Jack Ma's eyes began to gleam.

Chen Xuebing laughed: "Alipay only has 3 billion yuan in reserve funds right now. The bank gives you about 2% interest on demand deposits, right? That's only 60 million yuan in interest a year. It's a small amount of money. Why are you panicking? In the future, when Taobao's transaction volume increases and users have more funds stored, tens of billions or even hundreds of billions of yuan in deposits, with interest of billions or two billion yuan a year, that's when you'll be panicking."

"This is indeed a big problem," Jack Ma sighed.

When he first started Alipay, besides opening up payment channels, he was also after the interest.

Although Taobao is losing money, it has been supporting Alibaba's B2B business and Alipay.

As Taobao's business grows, Alipay's reserve fund also grows larger. Currently, there are no regulations in place, and Alipay is taking the interest from this deposit.

But it's ultimately a gray area; such rights can be taken away at will. Without this money, Alipay barely makes any profit.

Chen Xuebing didn't want to keep making up for the expenses incurred by Alipay's service expansion. After thinking for a moment, he said, "How about this, you come up with a plan to ask the central bank to designate a bank and a reserve fund account to apply for proactive inclusion in the supervision. As an Alipay shareholder, I will help you negotiate with the relevant departments of the central bank. I will also be responsible for finalizing the interest rate to ensure that it is based on the market demand deposit rate. Although it may be lower than your current interest rate, proactively connecting to the central bank's supervision system as soon as possible can ensure the legality of the interest on this part of the funds. You can have peace of mind."

"Hiss about this, and you even took the initiative?"

"What else can you do? You're enjoying it now, but what if the central bank issues a fine and summons you for a talk? You'll have to pay back a lot of money. Be proactive and get on the same page as the government sooner rather than later. It'll be easier to apply for a third-party payment license in the future. Don't worry, with this little bit of money, the central bank won't issue a special regulation to determine the ownership of the interest. It'll most likely still be yours. And even if the central bank does take it seriously one day, can you really keep this money?"

"Mr. Chen, what are you saying? What do you mean 'mine'? You're a shareholder too, this money is ours!" Jack Ma said, his eyes brightening. "Can this really be negotiated?"

Chen Xuebing pondered for a moment: "We'll see. Even if the central bank doesn't want to get involved, at least we've taken the initiative to bring it up. If you continue to stay out of the loop, you won't get a ticket later."

He only had one option: to contact the central bank, namely Central Huijin Investment Ltd.

Central Huijin was established with a $2000 billion foreign exchange injection from the central bank. Regardless of whether Huijin will eventually separate from the central bank, it is still a legitimate subsidiary, and many of its senior executives were sent down by the central bank.

However, this matter doesn't involve a very high level of authority; at most, it's just a matter of signing something. He helps Huijin make money, and as long as the returns are good, it's not a big problem to pull some strings.

In other words, these are all connections he built up by doing jobs for others.

"Mr. Ma, if we can reach an agreement on this, it would be fair if I only held a small percentage of Alipay's shares," Chen Xuebing said casually. "And what about the shares in Taobao? Could you offer me a discount?"

The $3750 million from Alipay isn't important; the real topic today is Taobao shares.

"Of course!" Mr. Ma immediately patted his chest. "Alibaba, how much do you want to invest? I'll give it to you at the strategic shareholder price! But this investment has to be paid in cash!"

"It's not Alibaba, it's Taobao. I don't want to invest in your listed company," Chen Xuebing corrected.

"I know! I didn't tell you to invest in 1688! But Taobao isn't going to be split up! I'm telling you to invest in the group company! Okay?"

1688.HK is the confirmed Hong Kong listing code for Taobao, whose name is Alibaba Network Limited, a subsidiary of Alibaba Group.

Chen Xuebing's face darkened: "So all that I said during dinner was for nothing?"

"Taobao cannot be sold separately." Jack Ma's expression hardened, and his aura grew stronger. "Mr. Chen, to be honest with you, Carlyle Group, Warburg Pincus, and Tiger Global Management all approached me last year to discuss Taobao's independent equity, with the highest valuation being $30 billion. Even when Yahoo invested in 05, their initial proposal was to acquire a 70% controlling stake in Taobao at a valuation of $10 billion. I haven't told anyone about these proposals, but all of them are closed in my office. Taobao is the heart of Alibaba's future and cannot be spun off for equity sale. If I were to do that, it would be irresponsible to the group company."

Hearing this, Chen Xuebing gradually calmed down.

Also.

He felt that the investment in Alipay went too smoothly and that he had gotten a great deal, so he was also tempted to try and buy Taobao at a low price.

However, Alipay's future prospects are currently unclear and it needs Alipay's help, while Taobao's future prospects are too obvious and it will develop over time.

As the leading C2C platform in China, eBay's complete failure is only a matter of time. Taobao will almost become the exclusive platform. B2C competitors like JD.com cannot match Taobao's product diversity. The creativity and low prices of individual sellers are incomparable to the genuine manufacturers that JD.com introduces. The two are not entirely on the same track.

Taobao's model can be compatible with JD.com, but JD.com cannot be compatible with Taobao.

To understand the future prospects of Taobao, you only need to calculate the development process of online shopping consumption.

“Mr. Ma, it’s not that I can’t do things like Taobao, but that I don’t want to.” Chen Xuebing said calmly.

At this moment, a tense atmosphere, a key point in the negotiation, finally arose in the room.

A hint of helplessness flashed across Jack Ma's face.

"Mr. Chen, I don't deny that. Sometimes I feel that you know our company's structure and development path too well, and your resources are also very strong. So I didn't hesitate to have a fight with Yahoo at the board meeting and ask Masayoshi Son to send directors to vote so that Alipay could be spun off and you could invest in it. But I really can't do it if you ask me to split up Taobao."

His decision to let Chen Xuebing invest in Alipay was the result of careful consideration.

At that time, Chen Xuebing had just invested in JD.com and assembled a powerful investment group, which quickly generated a lot of buzz for JD.com. After several sleepless nights, Jack Ma, thinking about Chen Xuebing's interest in Alipay, decided to use Alipay to win Chen Xuebing over to join the company.

He even believes that ARM is profitable in the smartphone era, and could further strengthen the relationship between the two parties, so he might consider joining the partnership.

But Taobao is a principle he cannot compromise on.

"Mr. Chen."

Seeing that Chen Xuebing's expression was not good, Cai Chongxin knew it was time for him to speak.

"This matter isn't really up to us. You know that Yahoo is Alibaba's largest shareholder right now, and they also consider Taobao to be Alibaba's most valuable asset. If you're to invest in Taobao independently, we at least need to have a say in it, right? How about this: you talk to Yahoo and buy half of their shares, and we'll put pressure on you. If you successfully take over Yahoo, we'll agree to let you hold 10% of Taobao independently."

Chen Xuebing grinned as he listened.

What a clever tactic of using one tiger to devour another.

(End of this chapter)