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Alibaba Says It Relies on Markets, Not Connections

Alibaba Says It Relies on Markets, Not Connections

By Michael Forsythe, The New York Times | Updated: 22 July 2014 15:13 IST

The Alibaba Group responded Monday to an article in The New York Times about the political connections of some of its shareholders, saying the company relies on the market, not on the background of any of its investors, to drive its business.

An article published Monday in The Times reported that the three Chinese investment companies helping Alibaba finance a $7.6 billion deal to buy back half of Yahoo's stake in it employed sons and grandsons of some of the most powerful politicians in the ruling Communist Party. The article said Alibaba had not disclosed the ownership stakes of these politically connected firms and said a fourth company, co-founded by the son of former Prime Minister Wen Jiabao, also acquired a stake around the same time.

In a strongly worded statement Monday in Chinese on its account on Weibo, a Twitterlike social media network, Alibaba said the Times article "mistakenly described" Alibaba's relationship with the investors.

"To those outsiders who stress companies' various 'backgrounds,' we didn't have them before, we don't have them now, and in the future we won't need them!" the company said in the statement.

The statement did confirm that the three companies highlighted by the Times held small, but significant stakes in Alibaba.

The statement was made available to readers in mainland China, where The New York Times' website has been blocked since late 2012. Thus, most readers in China would not have been able to view the original article that Alibaba was responding to.

Alibaba said the three Chinese investment companies - Boyu Capital, Citic Capital Holdings and CDB Capital - had acquired their stakes in 2012 at a time when "global capital markets were depressed" and there were few companies that wanted to invest. Alibaba said their stakes were relatively small. At the end of June, Boyu Capital held 0.55 percent of Alibaba's common shares, Citic Capital held 1.1 percent and CDB Capital held 0.47 percent.

Alibaba's initial public offering in New York, expected later this year, is expected to value the company at $200 billion. That would put the combined value of the three companies' stake at more than $4 billion.

One of Boyu's partners is Alvin Jiang, the grandson of China's former President Jiang Zemin. Another branch of Citic Capital's parent, the conglomerate Citic, employs Liu Lefei, the son of Liu Yunshan, the country's propaganda chief. And CDB Capital employs He Jinlei, the son of a former Communist Party discipline chief, He Guoqiang.

Many businesses find that such connections are often critical to the success of companies doing business in China by helping secure deals and giving companies a leg up.

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