Is China’s economy really slowing down?
Alibaba just told Wall Street and all the pundits decrying the economic slowdown in China that they were just looking in the wrong place. It was almost as if Jack Ma, the founder and executive chairman of Alibaba, stood at the head of the room and addressed the naysayers claiming China’s economy was about to enter a recession:
“Hello, boys and girls,” he’d say. “The economy is no longer where you’re looking. The economy is over here, ” and he’d be pointing to his mobile device.
The giant Chinese e-commerce site shocked Wall Street Thursday with a 45% surge in revenue for both the fiscal fourth quarter and year ended March 31. For the quarter, revenues jumped to $17.43 billion, compared with $12.03 billion for the same quarter last year. Total sales for fiscal 2015 also leapt 45% to $76.20 billion.
It appears the Chinese love to shop on their smartphones and tablets. Why should they be different from anyone else? For the quarter, Alibaba said mobile active monthly users soared 77% to $289 million. Meanwhile, mobile revenues rocketed 352% to $5.25 billion, from $846 million. “Its e-commerce platforms including Taobao and Tmall make up 80% of Chinese e-commerce,” according to Associated Press
The numbers for net income weren’t so stellar. Alibaba posted earnings of $2.87 billion, a 49% plunge from the year-ago quarter of $5.66 billion. This may be the reason Alibaba also shocked the market by giving its chief executive the ol’ heave-ho. Alibaba took the earnings report to be the perfect time to announce that Daniel Zhang, the current chief operating officer, was named the new chief executive officer, effective May 10. Current CEO Jonathan Lu will remain on the board of directors.
In conclusion, a 45% surge in revenue at the country’s largest e-commerce site means the people the pundits have been waiting for, have arrived. The Chinese domestic market, the group needed to grab the torch for leading Chinese economic growth, has begun to raise its head and start spending money. This is a good sign for the Chinese economy as a whole. On the other hand, a 49% drop in profits at the same company means the enterprise is spending too much money and not being well-managed. It appears Alibaba sees the disconnect and is working quickly to remedy the problem.
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Categories: Asia Unhedged