Capital Markets

Keith Krach 02.04.2021

Jack Ma snub shows it’s ‘very risky’ to ‘set up shop’ in China

Former Under Secretary of State, Keith Krach, in conversation with Fox’s Maria Bartiromo regarding the risks of setting up shop in China.

Maria Bartiromo: Jack Ma snubbed. Chinese state media arm, Shanghai Securities News, leaving Ma off of its list of entrepreneurial leaders after the Alibaba and Ant Group leader blasted Beijing’s regulatory system back in October. And then he was disappeared. Among those highlighted in today’s editorial, were the leaders of Tencent, Xiaomi, Huawei and BYD Group, the article coming out ahead of Alibaba quarterly earnings later today.

Joining me right now is former Under Secretary of State for Economic Growth, Energy and the Environment under President Trump. He’s also the former chairman and CEO of DocuSign, Keith Krach. And Keith, it is great to see you today. Thanks very much for being here… Is this not a clear cut message to all those American businesses looking to start up and grow a business in China that you just cannot build a business and expect it to get big and then expect to keep it in China? Look what happened to Jack Ma. And he was one of the jewels of the country. Builds Ant Group, ready to take it public, 30 plus billion dollar deal. It gets yanked from him and then he disappears for two months because he made a negative comment about regulations from Beijing.

Keith Krach: Maria, it totally shows you got to toe the party line, the Communist Party line, you know, when you look at Alibaba and you look at what he’s done, I mean, why wouldn’t he be on that list? It’s very clear that it’s a total shot across his bow.

And then you look at the companies that are on that list, like Huawei and Xiaomi. And, you know, Huawei is the extension of the Chinese Communist Party’s surveillance state.

And then Xiaomi, we just put on the Pentagon list so that they, you know, they have to be divested from American companies and American investors. So it’s kind of it’s kind of doing two things. Maria is propping up these tools of the Chinese Communist Party and at the same time, you know, suppressing Jack Ma, guys who you’ve spoken of. And it is a message, I think, for our financial community that it’s very, very risky to set up shop in China.

And I think as you know, we posted a couple of weeks ago twelve hundred Chinese subsidiaries and companies that are on that Pentagon list that, you know, now require divestment.

Maria Bartiromo: That’s right, and Keith, China is now sending Twitter users to prison for any posts that are negative about China, even if Chinese citizens can’t even see them because they’re in other countries…
I mean, the US has to react, we haven’t reacted to any of this stuff… How should the Biden administration react?

Keith Krach: Well, you know, I think what we’ve seen is they are just getting more and more aggressive. Now on July 4th. I was on Fox and I talked about China’s genocide in Xinjiang.

And then that got officially designated by Secretary Pompeo a few weeks ago. And Tony Blinken agreed with that during his Senate confirmation. So I think we’re going to see a tough stand, hopefully, by the new administration. I’m bullish on that, because if you look at all this stuff that they’ve got amped up, I think the world has woken up to the Chinese Communist Party’s, I call it their three pronged doctrine of concealment, cooption and coercion. And I think people understand now that the Wuhan virus is a result of the concealment of the virus. The pandemic is — and the cooption of Hong Kong has eviscerated all the freedoms there. And, you know, whether it’s freedom of speech, liberty, all of that. And then, of course, the coercion. And in Xinjiang, it’s really it’s grown some of the worst human rights abuses, you know, of our lifetimes. And I think citizens of the world have woken up and it’s given the political will, to the government leaders and political leaders. And it’s the most unifying bipartisan issue on Capitol Hill.

Maria Bartiromo: What about you? You were sanctioned. Yeah. Three seconds after Joe Biden was inaugurated, you were sanctioned. Shouldn’t the current administration come out and say something?

Keith Krach: I think it would be really wise to and I know members of Congress are asking the administration to speak out because it’s really a shot across their bow.

And, you know, the other part of the Chinese Communist Party’s doctrine is intimidation, retaliation and retribution. And this is a clear sign.

It also is a sign that we were very effective. I mean, if you look at the clean network. And that was able to accomplish and prove that China is beatable and we stop Huawei’s global domination of 5G with an alliance of democracies of 60 countries representing two thirds of the world’s GDP and over 200 telcos. So these these guys are going to continue to do that. And, you know, they look at it as a zero sum game and the only thing that they know strength. So before we can cooperate, we have to compete.