The cooling China economy is no longer speculation following a report that Alibaba growth is staggering. This comes on the back of a major stock market crash and a weakening currency forced by government intervention. With customer confidence staggering Jack Ma is putting on a brave face. Is the cooling China economy to blame for this, or is it something else?
How Bad Are Things Really for Alibaba?
Chinese Business News reports the virtual markets have faced a ‘heavy bump’ with Lenovo cutting several thousand jobs, Tencent admitting its gambling business is slowing, and Alibaba’s August 12 report ‘missing all expectations’ owing to the cooling China economy. It advises that Alibaba plans to buy back $4 billion of its own stock to prop its value up and stem falling confidence in its brand.
The driver behind Alibaba’s woes is revenue rising just 28% in Quarter 2 of 2015, compared to an average 56% across the previous 12 quarters per Bloomberg. This is trending towards negative growth, shaken investor confidence and the company’s market value plunging $100 billion. The cooling China economy on the local front and lawsuits over counterfeits have not helped.
How Mobile Demographics Combine with Cooling China Economy
Alibaba is suffering a double whammy because its core market has been showing signs of slowing too. Bloomberg believes ecommerce activity has peaked in China’s larger, wealthier cities. Advertising income is also down, owing to the shift across to tablets and smartphones which attract lower rates. Could Alibaba have started aging like Weibo?
Jack Ma Diversifies His Way Through the Problem
Alibaba’s founder-chairman is continuing on his acquisition roll regardless. This makes financial sense with company values in China generally down. Health care, entertainment and location-based services are all within his sights. He is also continuing to pump the Internet via smartphones and tablets, despite the cooling China economy.