Ma, a former English teacher who shot out of nowhere a decade ago to become one of China's most prominent business stars, has used the Internet to link up millions of buyers and sellers through his Alibaba platform - the most profitable business-to-business marketplace in the world.

In the process, he has laid an ambitious foundation for e-commerce in the country, demonstrating with his success China's readiness for an online revolution.

When Ma looks at Hong Kong, however, he said he sees a stagnant and outmoded economy.

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"People here are still relying on guanxi [connections], the old way of doing things," Ma said after delivering a speech Thursday to the Hong Kong General Chamber of Commerce.

"But the Internet is such a powerful tool that has fundamentally changed how people do business. I worry about a lot of my Hong Kong friends. If Hong Kong doesn't use the Internet [for business], there's going to be a disaster."

For years, Ma said, Hong Kong has profited from its role as a middleman between China and the rest of the world. But many local businessmen hardly realize how much the Internet has changed the role of the middleman.

"The Internet is not going to kill the middleman, but it's going to create a new kind of e-middleman," Ma said.

Ma, who periodically visits Hong Kong, where Alibaba is based, said businesses in the territory are doing well - but some of them are doing so well they have no reason to adapt. "In 10 years, 80 percent of business is going to be in e-commerce," Ma cautioned. "If you don't switch, you will see a big disaster."

Ma's warning is dramatic, but he was quick to remind his listeners that similar predictions he made about China's Internet business environment were dismissed at first - only to prove prophetic years later.

Ma talks about the middleman because Alibaba's business model is exactly that, pairing up suppliers with buyers through online profiles that the companies post online. Alibaba makes its money from charging members an annual fee, while charging nothing for the actual transactions.

The model has worked. Alibaba has about 14 million registered businesses in China, accounting for more than 80 percent of the mainland's business-to- business market. That stunning success has lifted the profile of Ma, Alibaba's founder, chief executive and chairman.

But he did not stop there.

When online auctioneer eBay broke into the China market, Ma quickly responded by forming a local competitor, Taobao, in May 2003. Taobao relied on a free-service business model to retake the market lead from eBay, and now has 27 million registered users, with transaction volume now sitting at about US$1 billion (HK$7.8 billion) a year. A year later, he launched Alipay to rival eBay's Paypal online payment system.

And Ma said his online ambitions are growing steadily.

His next step is to roll out mobile services - soon, he says - describing the current market as much more suitable than it was even a year ago.

"We see the potential for mobile," Ma said.

Consumer-to-consumer services like Taobao and Alipay, he added, would fit nicely in mobile-savvy China.

But even another success there is unlikely to diminish his hunger.

In another 10 years, Ma said, "we want to make Alibaba one of the top three Internet companies in the world - not just in China."

That will not be easy. CONTINUED M4