We have earlier written about how Jack Ma’s leaving Alibaba (BABA US) might be the beginning of the end as an independent company. Also, how one as a foreign shareholder do not have any rights in China and  how the Chinese government can strip foreign listed Chinese companies of any assets due to their VIE structure with JD.Com (JD US) as an example.

Under the VIE corporate structure, sensitive assets like operating licenses and core technologies are controlled by Liu and a handful of key employees. JD.com, the listed entity, in turn signs contracts with Liu and others for the right to glean profits and dividends from the business.

“VIE structures are relatively loose in terms of shareholder rights,” said Frank Bi, a partner at the law firm Ashurst in Hong Kong, which focuses on IPOs, compliance and mergers and acquisitions. “Basically, you’re using contracts to control the fund flow and collect your dividends and profits so you could simply breach or not honor the terms that are in the contract.”

Earlier this week it was announced that China’s richest man Jack Ma have become member of the communist Party. CNN writes;

Jack Ma, founder and executive chairman of Chinese e-commerce juggernaut Alibaba (BABA), with a net worth of more than $30 billion, was identified Monday as a Communist Party member by the People’s Daily, the ruling party’s official newspaper.

The revelation — for the first time by state-run national media — comes amid rising concerns over the tightening grip on China’s private sector by the Communist Party under President Xi Jinping

Interestingly, today there are news out that Jack Ma have given away all his shares in Alibaba, or more importantly not the listed no control U.S. shares, but actual VIE entities. WSJ writes;

Billionaire Jack Ma surrendered control of the legal entities that hold Alibaba Group Holding Ltd.’s BABA -2.75% business licenses in China nearly two months before announcing his plans to retire, regulatory filings show.

Mr. Ma, who has said he wants to do more in education and philanthropy, ceded control of the so-called variable-interest entities, or VIEs, partly to reduce his administrative burden.

In essence, Jack Ma have given up all his control and shares in Alibaba. There are doubts about if this is voluntary. Or part of the process of “get in line or lose assets” President Xi instructing. If it is Xi making it clear to everyone in the Chinese business community who the real owner and boss is. Funnily enough Russian President Putin made fun of Ma and the whole situation at an event in Russia post the announcement.  SCMP cites;

“I’d like to ask that young man sitting over there eating Russian snacks, Jack Ma, you are still so young, why are you retiring?” Putin asked Ma, who was also a participant at the forum. The Eastern Economic Forum is the fourth time that Ma and Putin have met.

Ma seemed caught by surprise at the sudden question. However, he told Putin he was no longer a young man.

“I spent my 54th birthday in Russia yesterday,” Ma responded. “I have been [running Alibaba] for 19 years and achieved something, but there are still many things I hope to accomplish, like education and philanthropy.”

Putin laughed and said, “You’re younger than me, I’m already 66!”

Form an investor perspective, especially one owning Chinese companies listed outside of China the recent developments are concerning. The events show that when it matters, all the power, control and ownership of Chinese companies are 100% of the Chinese state. With the trade war escalation between U.S and China, these types of risks have become even more real.