In the midst of an economic slowdown in China, Chinese e-commerce company Alibaba has reported strong financial results, proving that Chinese consumers are still spending. In China, exports have dropped and factories are struggling, according to The New York Times.
Nevertheless, Alibaba’s results provide a glimmer of hope. The company is still adding customers and the retail sales in the country as a whole are still strong.
“The question that is invariably asked is: How does Alibaba’s business, which is consumption-driven, continue to deliver robust growth despite challenges in the broader economy?” an Alibaba co-founder, Joseph Tsai, said.
“I want to offer two reasons. Both are big secular trends that are happening in China that we have taken advantage of. First is demographics, and the second is the rapid pace of digitization.”
Tsai mentioned that China’s market is driven primarily by the large middle class in big cities and the urbanizing countryside.
Now, Alibaba must wonder how long the trend will last.
Thursday, the company revealed that revenue rose 42 percent and its net profit more than doubled from the year before. Alibaba shares rose around 3 percent that day.
China’s consumers are continuing to spend. Retail sales rose 8.3 percent in the first seven months of the year compared to the year before according to official statistics.
“Confidence has improved somewhat,” said Wang Tao, chief China economist for UBS. “Late last year, there was a wall of uncertainty.”
In a survey of 3,000 consumers, Wang found that people were still spending because they had bigger salaries and more property wealth. Although it is unclear how long this will last, e-commerce remains strong.
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