Alibaba a new link in China-US ties

Alibaba's upcoming initial public offering on the New York Stock Exchange has raised doubts both in China and the United States, generating negative vibes for China-US trade relations, which is a strange reaction.

In China, Alibaba's decision to launch its IPO in the United States rather than in China is being seen as a failure of China's capital market. Some observers have even described the decisions of Alibaba, Tencent, Baidu and some other companies to list overseas as "non-patriotic" because their users and source of revenue are mostly Chinese citizens while most of their profits go to overseas investors.

In the US, Alibaba's listing is seen as a victory for an "unruly company". In June, the US Economic Security Review Commission issued a report, "The Risks of China's Internet Companies on US Stock Exchanges", which says the corporate structure of Alibaba, because of its variable interest entity, or VIE, caries some legal risks and could lead to legal disputes. Other US-based analysts say Alibaba would become a powerful competitor to Amazon and other US e-commerce companies, and pose a threat to the US e-economy.

Such criticism, however, has not lowered Alibaba's enthusiasm. According to some US and Chinese investment agencies, the Alibaba IPO could raise more than $20 billion, making it the largest in history. In China, some overseas funds have started designing products to help Chinese investors buy Alibaba shares. Since money speaks best in today's market-driven world, Alibaba's listing on the NYSE will prompt the US and China to again recognize the importance of their economic ties.

The Alibaba IPO shows that China will continue to open up its market and continue its integration into the international economy. Alibaba is not only an Internet company but also a symbol of emerging private enterprises in China. E-commerce is gradually breaking down the geographical and administrative barriers in the Chinese market, and creating a new entrepreneurial class in the country.

Alibaba and some of the other Internet companies have chosen the US and Hong Kong to list because the international rules of business are better suited to their long-term development. And by listing overseas, they can compel their domestic business partners to abide by the same rules to avoid legal disputes or damage to their reputation.

Alibaba's IPO launch on the NYSE also shows that the common interests of China and US are increasing, which, in turn, could help stabilize economic relations between the two countries. Alibaba is a model of a multiple-stakeholder company, whose owners include Softbank and Yahoo with the founding team being from China. After the IPO, more investors from the US and China are likely to join Alibaba, and the resultant economic interests will make investors an important force in stabilizing and promoting China-US relations, and make the company a new link between the two sides.

Besides, with companies such as Alibaba listed on the NYSE, China and the US will be more cautious while taking decisions that could affect bilateral relations and thus harm people's interests on both sides.

Moreover, Alibaba's IPO shows that China's economic rise will not only benefit the Chinese people, but also create more opportunities for the US and the rest of the world. Alibaba is an attractive company with growing earnings. As the leader of China's e-commerce sector, Alibaba earned more than 23 billion yuan ($3.75 billion) in the 2013-14 fiscal year, up 170 percent year-on-year.

In addition, Alibaba owns Yuebao, the biggest monetary fund in China. Since e-commerce has not yet caught on in rural areas and many cities, Alibaba still has a long period of growth ahead. So, Alibaba's listing and the deepening of reform in State-owned enterprises should be seen as a signal from China's leadership that it is ready to share the experience and benefits of the country's best companies with the US and the rest of the world.

The author is an assistant researcher at the Institute of American Studies of China Institutes of Contemporary International Relations.

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