{"id":67002,"date":"2022-01-18T12:45:46","date_gmt":"2022-01-18T12:45:46","guid":{"rendered":"https:\/\/www.nationalturk.com\/en\/?p=67002"},"modified":"2022-01-18T12:45:47","modified_gmt":"2022-01-18T12:45:47","slug":"down-but-not-out-chinas-alibaba-looks-towards-challenging-2022","status":"publish","type":"post","link":"https:\/\/www.nationalturk.com\/en\/down-but-not-out-chinas-alibaba-looks-towards-challenging-2022\/","title":{"rendered":"Down but not out: China\u2019s Alibaba looks towards challenging 2022"},"content":{"rendered":"\n

Chinese tech giant\u2019s deep pockets and ability to adapt are seen as key to weathering the tough year ahead.<\/em><\/p>\n\n\n\n

Alibaba has not had the best 14 months. Ever since China\u2019s regulators abruptly nixed the initial public offering of its financial technology subsidiary Ant Group, the Chinese tech giant has struggled.<\/p>\n\n\n\n

With such a difficult environment persisting into the New Year, Alibaba, which has been described as China\u2019s answer to Amazon, faces a potentially challenging 2022 \u2013 although analysts count the firm\u2019s deep pockets and ability to adapt to the vast Chinese market in its favour.<\/p>\n\n\n\n

The Ant deal, slated for dual listings in Shanghai and Hong Kong, was supposed to raise $34bn. That would have made it the biggest IPO of all time.<\/p>\n\n\n\n

Indeed, so confident was Alibaba founder Jack Ma in his company\u2019s position that he criticised China\u2019s financial regulators to their faces in a now-infamous October 2020 speech in Shanghai, telling them \u201cthe game in the future is about innovation, not just regulatory skills\u201d.<\/p>\n\n\n\n

\u201cMa\u2019s Shanghai speech aside, because of its size and wealth, Alibaba became the poster boy for the government crackdown,\u201d Daniel Tu, founder and managing director of Hong Kong-based wealth management advisory Active Creation Capital, told Al Jazeera. \u201cThe company and other large Chinese tech platforms, in essence, became a threat to the government\u2019s authority.\u201d<\/p>\n\n\n\n

While Alibaba paid a record $2.8bn antitrust fine in September after regulators found it had abused its market position, the amount was small for a company that earns revenue of more than $100bn a year. Required changes to its business model will have more far-reaching consequences. Restructuring will reduce the profitability of Ant Group\u2019s once-lucrative lending business and curb its formidable data harvesting capabilities.<\/p>\n\n\n\n

\u201cThe rising regulations in China signal the end of an era of so-called \u2018wild growth\u2019 of Chinese tech companies,\u201d Winston Ma, managing partner and co-founder of venture capital firm CloudTree Ventures, told Al Jazeera. \u201cThe new regulatory framework means more scrutiny and potential changes to the business models of China\u2019s internet giants.\u201d<\/p>\n\n\n\n

In December, Alibaba unveiled a restructuring plan that will split its core e-commerce business into separate global and domestic units.<\/p>\n\n\n\n

\u201cThrough the reorganization, Alibaba will be able to more clearly identify domestic demand to efficiently grow sales in China via its China Digital Business Unit while expanding e-commerce and logistics businesses overseas via the Overseas Digital Business Unit,\u201d Yannie Liao, an industry analyst at the semi-governmental Marketing & Consulting Institute (MIC) in Taipei, told Al Jazeera.<\/p>\n\n\n\n

Thanks to the success of its flagship e-commerce platforms, Taobao and TMall, Alibaba has long been China\u2019s largest online commerce marketplace.<\/p>\n\n\n\n

However, its share of China\u2019s e-commerce market steadily fell from 78 percent in 2015 to an estimated 51 percent in 2021 according to research firm eMarketer. Most of that decline occurred prior to China\u2019s Big Tech crackdown, reflecting intensifying competition and changing consumer habits. Alibaba\u2019s e-commerce business relies primarily on search, which is less popular with younger Chinese shoppers than live streaming or other interactive ways of shopping.<\/p>\n\n\n\n

At the same time, China\u2019s economy is slowing and consumer habits are mirroring that change. The profligate spending that defined China\u2019s go-go years of the late 2000s and early 2010s is winding down. Deutsche Bank estimates the Chinese economy will grow just 5 percent this year, compared with 8.1 percent in 2021.<\/p>\n\n\n\n

Outlook for Southeast Asia<\/h2>\n\n\n\n

\u201cIn the face of many uncertainties caused by the pandemic\u2019s impact, the consumption outlook of young consumers [those born since 1990] is becoming more rational,\u201d Cheng Shi, chief economist at ICBC International Securities, wrote in a commentary published by Chinese media outlet Yicai in September. \u201cWe believe that this will continue even after the pandemic ends.\u201d<\/p>\n\n\n\n

The outlook for emerging Southeast Asia is rosier. The internet economies of countries like Indonesia, the Philippines and Vietnam are relatively nascent, similar to China\u2019s circa 2010, inspiring Alibaba to aggressively expand in the region through its Singapore-headquartered e-commerce platform Lazada. Lazada\u2019s annual active consumers rose 80 percent to 130 million in the 18 months to September 2021, Alibaba said at an investor presentation at the end of last year.<\/p>\n\n\n\n

At present, Alibaba remains the largest e-commerce retailer in China and the second-largest Chinese internet company by market capitalization after gaming giant Tencent. Alibaba\u2019s deep pockets are paramount to its future prospects, analysts say.<\/p>\n\n\n\n

With regards to China\u2019s Big Tech crackdown, \u201cthe government needs private companies to restructure to adapt to the latest requirements,\u201d Herbert Yum, a research manager at Euromonitor in Hong Kong, told Al Jazeera. \u201cAs long as they are financially healthy, they can adapt their businesses successfully.\u201d<\/p>\n\n\n\n

Yum noted that Alibaba\u2019s cash flow remains stable, despite the many headwinds the company faces. Net income growth fell sharply in its 2021 fiscal year, but still managed to expand 4 percent to reach $20.9bn. In the previous pre-crackdown fiscal year, Alibaba\u2019s net income grew almost 68 percent to reach $20.2bn.<\/p>\n\n\n\n

Such breakneck growth is unlikely to return for Alibaba, but it is not alone. All of China\u2019s internet companies face a more difficult business environment.<\/p>\n\n\n\n

Auguring well for Alibaba is an enduring ability to cater to the needs of China, the world\u2019s largest e-commerce market. Despite the company\u2019s international expansion efforts, China remains the priority.<\/p>\n\n\n\n

\u201cAlibaba is still focused on China because it is the [company\u2019s] largest source of revenue and still offers huge market potential,\u201d said Euromonitor\u2019s Yum.<\/p>\n\n\n\n

Data and analytics firm GlobalData predicts that China\u2019s e-commerce market will grow at an annual clip of 11.6 percent between 2021 and 2025 to reach $3.3 trillion.<\/p>\n\n\n\n

Cloud computing, meanwhile, offers Alibaba additional growth opportunities. In the 2021 fiscal year, the company\u2019s Alibaba Cloud unit reported $9.18bn in revenue, up 50 percent year-on-year. MIC\u2019s Liao noted that Alibaba\u2019s cloud computing revenue has expanded on a quarterly basis since the first quarter of 2020.<\/p>\n\n\n\n

However, regulatory obstacles exist in cloud computing too. Active Creation Capital\u2019s Tu noted that, ahead of the implementation of a national data security law, Beijing in August ordered state-owned enterprises to speed up the migration of their data from private operators such as Alibaba and Tencent to government cloud infrastructure.<\/p>\n\n\n\n

The loss of business will be substantial, though Alibaba can still work with the private sector. China\u2019s public cloud service market was worth $19.4bn in 2020, according to research firm International Data Corporation.<\/p>\n\n\n\n

\u201cIn the context of the ongoing crackdown and reforms, it would behove Alibaba to pivot and focus in the areas that sync with national initiatives \u2013 \u2018hard technologies\u2019 such as semiconductors, artificial intelligence and quantum computing,\u201d Tu said.<\/p>\n","protected":false},"excerpt":{"rendered":"

Chinese tech giant\u2019s deep pockets and ability to adapt are seen as key to weathering the tough year ahead. Alibaba has not had the best 14 months. Ever since China\u2019s regulators abruptly nixed the initial public offering of its financial technology subsidiary Ant Group, the Chinese tech giant has struggled. With such a difficult environment …<\/p>\n","protected":false},"author":4,"featured_media":55490,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-67002","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/posts\/67002","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/comments?post=67002"}],"version-history":[{"count":0,"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/posts\/67002\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/media\/55490"}],"wp:attachment":[{"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/media?parent=67002"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/categories?post=67002"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationalturk.com\/en\/wp-json\/wp\/v2\/tags?post=67002"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}