Friday, November 13, 2015

Alibaba Executive Chairman Jack Ma Speaks with CNBC’s “Squawk on the Street” Today


DAVID FABER: SPEAKING OF RETAIL, WHICH WE HAVE BEEN DOING A LOT THIS MORNING INVOLVING MACY'S AND AMAZON, YEAH, THERE'S ANOTHER BIG RETAILER OVER IN CHINA. IT'S CALLED ALIBABA. IT'S BROKEN ITS OWN SALES RECORD FOR SINGLES DAY. IT HAS EXCEEDED LAST YEAR'S 24 HOUR TOTAL OF $9.3 BILLION IN ABOUT HALF THE TIME THIS YEAR. SALES NOW RUNNING AT $13.5 BILLION FOR THEIR BIG 11/11 DAY PROMOTION AND WE'VE STILL GOT OF COURSE SOME TIME LEFT BEFORE THEY RING THE FINAL BELL OVER THERE. CNBC'S EUNICE YOON IS LIVE IN BEIJING WITH ALIBABA'S EXECUTIVE CHAIRMAN JACK MA. TAKE IT AWAY, EUNICE.
EUNICE YOON: THANKS SO MUCH, DAVID. WELL, YOU KNOW, CHINESE CONSUMERS TODAY WERE GREETING EACH OTHER WITH THE QUESTION, DID YOU BUY? THE TRANSACTIONS ARE JUST AMAZING. MASSIVE, MASSIVE NUMBERS. AS YOU HAD SAID, THE CHINESE POST OFFICE EXPECTS 760 MILLION PARCELS TO BE SHIPPED OUT TODAY. AND ALIBABA ALONE HAS ALREADY SEEN OVER 430 MILLION TRANSACTIONS ON ITS SITES. I DON'T KNOW IF YOU CAN SEE THE BOARD BEHIND ME, BUT IT'S $13 BILLION IN SALES. THAT'S ALREADY A RECORD. AND OF COURSE THE MAN WHO HAS DONE IT ALL IS HERE WITH ME NOW, JACK MA. THE EXECUTIVE CHAIRMAN. CONGRATULATIONS ON ALL OF THE SINGLES DAY EVENTS.
JACK MA: THANK YOU.
YOON: SO BIG QUESTION, WHAT DO YOU THINK THE NUMBERS FROM SINGLES DAY ARE REALLY TELLING US ABOUT FUTURE GROWTH FOR ALIBABA?
MA: YEAH. I THINK IT'S – I WOULD NOT SAY IT SYMBOLIZES THE FUTURE GROWTH OF ALIBABA, BUT DEFINITELY IT WILL SYMBOLIZE THE FUTURE GROWTH OF CHINA ECONOMY AND CHINA DOMESTIC CONSUMPTIONS. BECAUSE CHINA HAS A HUGE POTENTIAL OF DOMESTIC CONSUMPTIONS. WE'VE GOT 300 MILLION MIDDLE CLASS PEOPLE AND WE BELIEVE IN THE NEXT 15 YEARS, WE ARE GOING TO HAVE A HALF BILLION PEOPLE WILL BE MIDDLE CLASS. AND THE DEMAND FOR HIGH QUALITY PRODUCTS, HIGH QUALITY SERVICE IS HUGE. AND 11/11 SINGLES DAY IS JUST A SYMBOL THAT WE CAN DO SOMETHING TO SORT OF GET THE CONSUMPTION DEMAND OUT.
YOON: AT THE SAME TIME, THE ECONOMY IS SLOWING DOWN. SO WHAT IS YOUR OUTLOOK THEN FOR THE CHINESE CONSUMER WHILE THE ECONOMY IS SLOWING DOWN?
MA: I THINK THE ECONOMY SLOWS DOWN BECAUSE THE TRADITIONAL WAY OF PROMPTING THE ECONOMY, LIKE EXPORTING AND INVESTMENT, IS SLOWING DOWN. AND A LOT OF BUSINESSES RELY ON THESE TWO METHODS, EXPORTING AND DOMESTIC INVESTMENT OF INFRASTRUCTURE. BUT DOMESTIC DEMAND IS ALWAYS A BIG HEADACHE FOR CHINA IN THE PAST 20 YEARS. TODAY BECAUSE OF THE INTERNET, BECAUSE OF E-COMMERCE, WE ARE GETTING THIS OUT OF THAT. SO I THINK TODAY WE SEE THE DEMAND IS THERE. THE OPPORTUNITIES, THE POTENTIAL IS THERE. SO WE JUST ARE LUCKY THAT WE ARE THE COMPANY TO BE THE FIRST ENGINE OF THAT ECONOMY.
YOON: OK JACK, SOME OF MY COLLEAGUES ARE GOING TO BE JUMPING IN NOW FROM THE NYSE.
MA: THANK YOU.
FABER: JACK, IT'S DAVID FABER, GOOD TO SEE YOU. SORRY WE'RE NOT IN THE SAME ROOM, BUT VERY MUCH APPRECIATE YOUR JOINING US. JACK, ON THE ECONOMY ITSELF, THERE'S CERTAINLY BEEN A FOCUS AMONG SOME PEOPLE ON THE CRACKDOWN IN CHINA ON BROADLY SPEAKING CORRUPTION. WELCOMED AS IT IS BY MANY, IT DOES SEEM TO HAVE AN IMPACT ON ECONOMIC ACTIVITY AND ON PERHAPS OSTENTATIOUS DISPLAYS OF WEALTH. ARE YOU SEEING THAT IN YOUR BUSINESS? AND DO YOU BELIEVE THAT CRACKDOWN IS DEPRESSING ECONOMIC ACTIVITY?
MA: WELL, I THINK CHINA HAS BEEN TAKING A VERY FIRM STAND ON ANTI-CORRUPTION. AND I THINK IT'S GOOD FOR CHINA. CHINA IN THE PAST 30, 40 YEARS HAS BEEN GROWING SO FAST. A LOT OF THINGS ALSO COMING WITH IT. I THINK THAT THIS CURRENT LEADERSHIP OF THE GOVERNMENT, DOING THE RIGHT THINGS. BECAUSE ONLY THE CHINA ECONOMY IS IN A CLEAN AND TRANSPARENT WAY. THE CHINA ECONOMY CAN BE SUSTAINABLE. SO I BELIEVE THE NEXT 5 TO 15 MONTHS WILL BE A TOUGH TIME FOR CHINA, VARIOUS REASONS. OF COURSE ONE OF THE ANTI-CORRUPTION DEFINITELY HAVE SOME EFFECT. BUT NEXT 5 TO 10 AND I THINK 15 YEARS FOR CHINA ECONOMY SHOULD BE GOOD. AND WILL BE GOOD.
FABER: RIGHT. SETTING THE STAGE FOR GROWTH. BUT LET ME FOLLOW UP ON THAT. I KNOW YOU JUST MENTIONED IT, YOU MENTIONED IT WHEN YOU SPOKE TO THE LOCAL MEDIA AS WELL. I THINK YOU BASICALLY HAVE BEEN SAYING CHINESE ECONOMY COULD FACE BIG PROBLEMS IN THE NEXT 5 TO 10 MONTHS. HOW BIG ARE WE TALKING ABOUT? WHAT ARE YOU EXPECTING? A SIGNIFICANT DECLINE?
MA: WELL, I DON'T SEE THERE'S A SIGNIFICANT DECLINE BECAUSE THE GOVERNMENT REALIZED, THE BUSINESS REALIZED, AND ALL THE PEOPLE REALIZED THE SITUATION WE'RE HAVING RIGHT NOW. BUT I THINK 7% OF GROWTH OF CHINA IS STILL REACHABLE. BUT EVEN LIKE A 5% OR 6%, EVEN – I MEAN, EVEN A 5% OR 6%, THIS ECONOMY IS STILL BIG ENOUGH. I THINK THE PROBLEM OF CHINA IS WE HAVE TO KNOW THAT IT'S NOT – IT'S IMPOSSIBLE TO KEEP ON GROWTH FOR 8% AND 9% EVERY YEAR. THE PROBLEM IS HOW WE CAN MAKE BETTER USE OF THE MONEY, THE 5%, 6%, IN THE RIGHT WAY, IN THE RIGHT AREA, IN THE RIGHT FIELD. SO I THINK NEXT YEAR – BECAUSE THIS ECONOMY IS TRANSFORMING. SO, WHAT WE SEE IS NEXT 5 TO 10 YEARS THAT CHINA SHOULD PAY MUCH MORE ATTENTION TO THE QUALITY INSTEAD OF THE QUANTITY. BECAUSE IF WE PAY ATTENTION TO QUANTITY, THE ENVIRONMENT WILL BE TERRIBLE. AND I THINK EVEN IF YOU WORK HARD, THIS 9% CAN NEVER SUSTAIN.
FABER: JACK, A YEAR AGO OF COURSE, I WAS WITH YOU, $9.3 BILLION IN SALES FOR SINGLES DAY. THIS YEAR IT'S GOING EXCEED 13.5. YOU'VE ALSO INCREASED YOUR USER BASE FROM, I THINK IT WAS 307 MILLION A YEAR AGO TO WHAT IS 387 MILLION NOW. HOW MUCH HIGHER CAN THAT GO? YOU MENTIONED THE GROWTH OF THE MIDDLE CLASS. YOU KNOW WHAT WILL IT BE A YEAR FROM NOW? OR TO YOUR POINT 5 OR 10 YEARS FROM NOW?
MA: WELL, I THINK 8 OR 10 YEARS AGO WHEN I CAME TO THE STATES, IN THE SILICON VALLEY, I SAID ONE DAY CHINA INTERNET USERS WILL BE BIGGER THAN AMERICA. A LOT OF PEOPLE DID NOT BELIEVE THAT. AND YEARS AGO I SAID CHINA INTERNET USERS, MOBILE USERS WILL BE BIGGEST IN THE WORLD. AND PEOPLE SAID, WOW, YOU KNOW, TODAY OUR USERS, ACTIVE USERS OF ALIBABA ONLINE SHOPPERS ARE BIGGER THAN AMERICAN POPULATION. AND TODAY, MOST PEOPLE STILL LIKE 20, 25 YEARS OLD. WE BELIEVE TEN YEARS LATER, WHEN THEY ARE 35 TO 40 YEARS OLD, THESE ARE THE PEOPLE BREATHE THE INTERNET, DRINK THE INTERNET, THINK THE INTERNET, MOVE EVERYTHING ON THE INTERNET. SO WE THINK MAYBE THE NUMBER WILL PROBABLY GO TO LIKE 600 MILLION TO 800 MILLION. THE PEOPLE WHO ARE SPENDING MONEY ON THAT WILL BE EACH PERSON, WILL BE MUCH HIGHER. BY THE WAY, I THINK BASED ON THE ONE BELT TO ONE ROAD POLICY, AS WE THINK ONE INTERNET POLICY, WE WANT TO SERVE TWO BILLION PEOPLE ALL ACROSS THE WORLD. WE'RE DOING GLOBALIZATION, NOT ONLY CHINA. SO THAT'S WHY WE ARE IN A LOT OF NATIONS, WE'RE IN EUROPE, WE'RE IN SOUTHEAST ASIA, AND INDIA. AND I THINK WE WANT TO USE OUR MODEL TO SERVE MORE PEOPLE. SERVE MORE SMALL BUSINESS AND CONSUMERS.
JIM CRAMER: JACK, JIM CRAMER. IT LOOKS LIKE UNABATED DEMAND FOR NIKES, FOR APPLES, ANYTHING APPLE. YOU'RE ABLE TO SEE WHAT IS BEING BOUGHT DURING THIS SINGLES DAY. HOW ARE AMERICAN COMPANIES FAIRING IN THEIR GOODS DURING THE LAST 24 HOURS?
MA: WELL, I THINK, YOU KNOW, ALL THE GOOD PRODUCTS – I MEAN, NOT CHEAP PRODUCTS, GOOD PRODUCTS. HIGH QUALITY, EVEN VERY EXPENSIVE, PEOPLE BUY ALL OF THEM. YOU KNOW, YOU SEE THE SLOWING DOWN IN THE LATE AFTERNOON BECAUSE MOST OF THE MANUFACTURING, MOST OF THE SHOPS THAT PREPARED, THEY STOCK ENOUGH PRODUCTS. BUT EVEN THAT, THEY STILL SOLD OUT. AND I THINK THE APPLE, THE NIKE, AND ALL OF THE BRANDS, THE COMPANIES IN THE STATES AND IN EUROPE, THEY'RE EXCITED. A LOT OF CUSTOMERS. THEY HAVE TO START TO PREPARE FOR NEXT YEAR.
FABER: JACK, YOU AND I – JACK, IT'S DAVID FABER AGAIN. YOU AND I HAVE SPOKEN EXTENSIVELY WHEN I WAS WITH YOU A YEAR AGO, ALSO IN CHICAGO IN JUNE ABOUT THE OTHER CHALLENGES FACING CHINA. ONE YOU FOCUS ON ALL THE TIME, THE ENVIRONMENTAL CHALLENGE. IS THERE PROGRESS BEING MADE IN YOUR COUNTRY AT THIS POINT? OR ARE YOU STILL PERHAPS DISAPPOINTED WITH THE LACK OF PROGRESS ON THAT FRONT?
MA: WELL, I THINK THIS PROBLEM HAS BEEN THERE FOR YEARS. SO, IT'S IMPOSSIBLE TO SOLVE THE PROBLEM WITHIN ONE YEAR OR SEVERAL MONTHS. BUT THE THING IS THAT THE WHOLE CHINA IS AWARE OF THAT. THE GOVERNMENT, THE PEOPLE, THE BUSINESS. AND I THINK THE GOVERNMENT IS TAKING EFFORTS, AND WE ARE TAKING EFFORTS. SO THAT'S WHY, YOU KNOW, APART FROM MY JOB AS AN E-COMMERCE COMPANY, I SPEND A LOT OF TIME DOING – TELLING PEOPLE, COMMUNICATING WITH PEOPLE, AND ALSO WORKING WITH THE TEAMS AT THE NATURE CONSERVANCY AND PARADISE FOUNDATION, I THINK A LOT OF HUNDREDS OF THOUSANDS OF PEOPLE IN CHINA REALLY WORRY ABOUT IT. AND MAKE ACTIONS. AND I THINK I'M CONFIDENT IN THREE, FIVE YEARS WE WILL – AND I SAID, IF CHINA HAS THE – BREW, WHY NOT WE SHOULD HAVE A BREW EVERY DAY. AND THIS THING COULD BE DONE IF IT HAS BEEN DONE BEFORE.
FABER: JACK, SOMETHING ELSE WE TALKED ABOUT A YEAR AGO, CERTAINLY, THAT GOT A LOT OF ATTENTION WAS AT THE TIME AT LEAST YOU SEEMED TO BE SOMEWHAT FRUSTRATED, IF YOU WILL, WITH BEING THE WEALTHIEST MAN IN CHINA. AND IT SEEMED TO BE A WEIGHT ON YOU TO A CERTAIN EXTENT. BUT I'M CURIOUS, YOU'VE BEEN BUYING A LOT OF REAL ESTATE LATELY. YOU'VE BEEN PUTTING THAT MONEY TO WORK. YOU BOUGHT 28,000 ACRES HERE IN NEW YORK STATE, THANK YOU, IN THE ADIRONDACKS. AND I THINK IT'S REPORTED YOU SPENT ANOTHER $193 MILLION FOR PROPERTY IN HONG KONG. IS IT MAKING YOU HAPPY BUYING ALL THAT REAL ESTATE? AND WHY ARE YOU DOING IT?
MA: WELL, I'M HAPPY ABOUT BUYING BIG LAND IN NORTH NEW YORK BECAUSE THIS IS SOMETHING THAT I'M PASSIONATE ABOUT PROTECTING THE ENVIRONMENT. ESPECIALLY SUCH A WONDERFUL FOREST THERE, AND THE WONDERFUL FRESHWATER LAKES. AND I LEARNED THE STORY ABOUT THE AREA LAST CENTURY, IN THE 30s, IN THE STATE, IN NEW YORK, A LOT OF POLLUTION. BUT AMERICA MADE THIS THING CLEAN AND HAPPEN. SO I BOUGHT THAT LAND. I WANTED TO LEARN THE HISTORY, HOW AMERICAN PEOPLE MAKE THAT THING HAPPEN. AND WHAT CHINESE PEOPLE CAN LEARN FROM THAT. AND THIS IS WHAT I BOUGHT THE LAND FOR. AND I'M HAPPY ABOUT THAT. IN HONG KONG, I BOUGHT THE LAND BECAUSE I THINK I NEED – SOME DAY I ALSO WOULD LOVE TO STAY – WHEN I GET OLD – BECAUSE AS I SAID AGAIN AND AGAIN, MY BUSINESS, MY JOB, I WAS A TEACHER. I'M A TEACHER. AND I WAS A TEACHER. AND MY JOB IS TO TRAIN AND DEVELOP YOUNG PEOPLE. I WANT TO MAKE YOUNG PEOPLE HAVE MORE OPPORTUNITIES. SO, I WANT TO RETIRE EARLY. NOT BECAUSE I WANT TO ENJOY MY LIFE, BUT I WANT TO GIVE THIS OPPORTUNITY AS RUNNING THE COMPANY FOR THOSE YOUNG PEOPLE. BY THE WAY, IF I WANT TO RETIRE OR I HAVE TO RETIRE, I HAVE TO PREPARE FOR MY RETIRED LIFE. THAT IS WHY I AM PREPARING NOW. BUYING SOMETHING. IT'S NOT FUN, BUT I HAVE TO, I THINK IT IS A WAY TO PREPARE FOR MY FUTURE.
FABER: RIGHT. SOUNDS LIKE A NICE PLACE TO RETIRE. FINALLY, JACK, BACK TO THE DAY ITSELF. VERY SUCCESSFUL, OF COURSE. THE NUMBERS KEEP RISING ON SINGLES DAY. BUT DOES IT HAVE AN IMPACT OF PULLING FORWARD SALES THAT WOULD OTHERWISE TAKE PLACE?
MA: NO. I DON'T THINK IT'S – YOU KNOW, PEOPLE CHALLENGED ME. I ALSO REALIZED ON THE METER PEOPLE SAID WHY ON THE ONE DAY? BECAUSE IT MIGHT BE SQUEEZING ALL THE SALES. WE DON'T BELIEVE THAT. THE POTENTIAL IS HUGE. WE JUST ARE TESTING THIS DAY TO TEST OUR PAYMENT CAPACITY. YOU KNOW, YESTERDAY EVENING WE CROSSED 86,000 TRANSACTIONS PER SECOND. SO THE TRANSACTION CAPACITY AND LOGISTIC CAPACITY, OPERATION CAPACITY OF THAT, WE NEED THAT CAPACITY FOR TEN YEARS LATER. ALSO, BY THE WAY, IF WE HAVE A BAD PRODUCT, WE WOULD SELL MORE TODAY. IF OUR LOGISTICS SYSTEM COULD HANDLE, WE COULD ALSO SELL MORE TODAY.
FABER: EUNICE?
YOON: THANKS SO MUCH, DAVID. WELL, JUST ONE MORE QUESTION FROM ME, JACK. I UNDERSTAND THAT YOU WANT SINGLES DAY TO BECOME A GLOBAL EVENT. AT SAME TIME, A LOT OF LUXURY BRANDS, SUCH AS KEURIG FOR EXAMPLE ARE CONCERNED ABOUT THE NUMBER OF COUNTERFEITS THAT ARE ACROSS YOUR SITE. DO YOU EVER WORRY THAT THOSE CONCERNS CAN GET IN THE WAY OF YOUR GLOBAL AMBITIONS?
MA: WELL I – AM I STILL ONLINE? I DON'T HEAR IT.
YOON: THAT'S THE QUESTION FROM ME.
MA: YEAH, I THINK THIS IS A BIG CHALLENGE. WE HAD THIS KIND OF CHALLENGE IN THE PAST 15 YEARS AND WE ARE DEALING WITH THIS EVERY DAY. I WOULD SAY IN THE PAST 15 YEARS, I MAY CANCEL, I MAY POSTPONE A LOT OF MEETINGS. THERE'S ONLY ONE MEETING THAT I WILL NEVER BE LATE, NEVER CANCEL. THAT'S ABOUT ANTI IP OR COUNTERFEIT PRODUCTS. THIS THING HAS BEEN THERE FOR ALMOST 30 YEARS IN CHINA OR MAYBE LONGER. THE WAR IS FIGHTING AGAINST HUMAN NATURE. SO, WE HAVE BEEN WORKING WITH A LOT OF BRANDED COMPANIES IN EUROPE AND AMERICA. SO WHAT WE NEED IS WE NEED LAWYERS BUT WE NEED PEOPLE WHO REALLY UNDERSTAND THE BUSINESS, WHO REALLY KNOW HOW TO FIGHT AGAINST THIS KIND OF COUNTERFEIT PRODUCT GUYS. WORKING WITH THEM, SOLVE THE PROBLEMS. AND I THINK, YOU KNOW, I AM CONFIDENT IN US. NOW WE ARE 28 TIMES LESS COMPLAINTS ABOUT COUNTERFEIT AND IP PROBLEMS IN CHINA ONLINE AND OFFLINE. BECAUSE USING THE BIG DATA WITH THE TECHNOLOGY WE HAVE, WE CAN CHASE WHO'S SELLING, WHO'S BUYING, WHO'S MANUFACTURING. LAST YEAR WORKING WITH THE CHINA MINISTRY OF POLICE WE ARRESTED CLOSE TO 500 PEOPLE. SO WE WILL CONTINUE TO WORK. I THINK IF WE ARE NOT THE BEST, WE ARE THE LARGEST TROOP IN FIGHTING AGAINST THESE COUNTERFEIT PRODUCTS. AND I WILL CONTINUE TO WORK. GIVE US SOME YEARS. GIVE US THREE, FIVE YEARS, WE WILL GIVE THE WORLD A WONDERFUL RESPONSE AND A GOOD RESULT.
YOON: OK. THANK YOU VERY MUCH.
MA: THANK YOU.

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