The Strategist

Is Alibaba Deserting the Sinking Chinese Ship?

10/13/2015 - 15:42

The largest Chinese online retailer Alibaba intends to open its first European offices in Italy, France and Germany in the next few months. This was aired by the president of Alibaba Group, Michael Evans, writes The Wall Street Journal.

The Conmunity - Pop Culture Geek via wikimedia
The Conmunity - Pop Culture Geek via wikimedia
According to Evans, the decision on opening the agencies abroad - another Alibaba’s step to expand its presence in foreign markets. As pointed out by WSJ, this way the company is trying to adapt to the economic slowdown in China.

Evans announced the news at Alibaba’s event, dedicated to shopping festival celebrating the so-called Anti-Valentine Day (November 11 - Day of single people in China). In 2014, during the festival, Alibaba set a record, having sold goods for 57.1 billion yuan ($ 9.3 billion) in a day.

Bloomberg View’s columnist William Pesek believes that the company's stock may serve as an indicator of the real state of affairs in the Chinese economy.

The founder of Alibaba has firmly linked its business with the Chinese middle class, and now his company's market capitalization falls in sync with the buying mood of people. Alibaba’s shares are falling with each message that the Chinese middle class postpones weddings, cancels vacations and orders for new cars, and throws credit cards.

- Anyone who doubts that China is getting a negative wealth effect from the collapse of the Shanghai Stock Exchange, has not looked at Alibaba’s data. The skeptical Investors deprived the company of its $ 65 billion market value, when the euphoria of entering the stock exchange has gone,"- says Pesek.

According to the journalist, it is not over yet: worst is yet to come both for the Chinese economy and for Alibaba’s investors. The fact is that although the fall in the stock market is not directly correlated with the income of the Chinese people (for the most part, they do not own shares), yet their consumer confidence is declining, along with stock indices. The government in Beijing, which always saved Chinese companies, seem to be tired of it, so, 1.3 billion people have realized that the state is not going to protect them from any crisis anymore, says the columnist. As a result, these people refuse non-essential items. Yes to food and baby diapers, No to new smart phones and bags. This mass cautious spending is just beginning to emerge. As the loss of confidence is be growing, it will only be intensifying. Alibaba, as the giant shopping online marketplace, cannot help but lives it.

With his store where 700 million Chinese can buy absolutely everything that they might need, Jack Ma has created a better indicator of GDP than the government in Beijing, summarizes Pesek. And now this indicator is flashing alarmingly red.