Alibaba Group is a privately owned Hangzhou-based group of Internet-based e-commerce businesses including business-to-business online web portals, online retail and payment services, a shopping search engine and data-centric cloud computing services. In 2012, two of Alibaba’s portals together handled 1.1 trillion yuan ($170 billion) in sales, more than competitor’s eBay and combined. The company primarily operates in the People’s Republic of China, and in March 2013 was estimated by The Economist magazine to have a valuation between $55 billion to more than $120 billion. It’s easy to get caught up in the glossy numbers within Alibaba Group Holding Ltd.’s IPO prospectus: 44% profit margins, 72% revenue growth, and 231 million active buyers last year. Prospectus NOTE: Beyond page 19 of the document, though, lies a stark reminder that investing in a Chinese company -- especially one as sprawling as Alibaba -- is also a wager on how well it can get along with Beijing.

The company may raise as much as $20 billion in its initial public offering later this year, 100 times more than the average Chinese IPO in the U.S. Alibaba owes some thanks to Chinese government’s policies that have enabled its ascent, and a successful U.S. listing will highlight Alibaba’s value to China. At the same time, the government could alter Alibaba’s contract with U.S. shareholders, censor its platforms and restrict the payment service that’s vital to its business -- any of which could impact its value to investors. “As an investor, if you’re placing a bet on management’s ability to negotiate what is happening on every day of the week,” said Duncan Clark, chairman of BDA China Ltd., a Beijing-based consultant to technology companies. “The management is going to be the shock absorber that navigates the big risks.”

China has a stake in the success of Alibaba and its peers. More than 10 million people are employed in the nation’s e-commerce sector, a survey by the Ministry of Human Resources and Social Security, posted on Alibaba’s blog, shows. Government policies -- in particular bans on foreign companies from Twitter Inc. to Google Inc.’s YouTube -- have bolstered domestic companies. Alibaba has investments in Chinese messaging and video services. Moreover, Alibaba’s growth over the last 15 years has mirrored China’s, amid a wave of economic liberalization. “Anything that harms Alibaba has a direct impact on the reputations of everyone in the industry,” said Joseph Foudy, a professor of Asian studies at New York University’s Stern School of Business. “That doesn’t mean they won’t do it, it just means that decision will be taken at the highest level, where they’re tremendously proud of Alibaba.”

Worst Case -- While it is common for companies to outline the worst-case scenarios in IPO filings, some of the risks Alibaba raises are already affecting Chinese companies traded in the U.S. Chinese affiliates of the largest U.S. accounting firms have been barred from leading audits of U.S.-listed companies. The ban came after they refused to hand the Securities and Exchange Commission documents relating to Chinese operations because doing so is prohibited under Chinese law. While Alibaba’s auditor -- the Hong Kong affiliate of PricewaterhouseCoopers LLC -- isn’t subject to the ban because it’s not based in mainland China, it could still be affected. If PwC can’t properly inspect Alibaba’s mainland-China operations, the company will need to find a new auditor or, in the worst case, pull the IPO, according to the prospectus.