China has a closed capital account, putting all kinds of limitations on businesses. All those yuan they get from listing in China is hard to exchange to other currencies, which they want for future expansion. The USD they collect now, they can however quite easily channel back into China as "foreign investment".
Also note that in fact Alibaba first looked at the Hong Kong stock market for listing. Again outside of China, but a lot closer to home. They were rejected by the Hong Kong board, as they could not fulfil certain requirements on financial openness and stability (details I don't know - I'm not a financial guy - however I got this part of the news as I live in Hong Kong and follow the local news). Alibaba even tried to have the Hong Kong stock exchange change the rules just for them, and when that didn't work they went to New York, where the stock exchange is apparently more lax in their rules for companies to list, or they were more willing to make an exeption for this big fish.
There are quite some local investment analysts that believe the financial basis of Alibaba is not sound, especially their payments services platform (something similar to PayPal), and that there is a risk of the company coming crashing down, again based on the unclear financial situation of the company.