Alibaba monitoring geopolitical tensions to adjust its strategy

CHINESE e-commerce giant Alibaba Group Holding Ltd said it would steer clear of looming geopolitical tension and adjust international businesses accordingly after it reported higher-than-expected sales in the second quarter of this year.

In an earnings’ call late on Thursday, its chairman Daniel Zhang said the company has decided to cease operations of its popular UC Browser app and other innovation-related initiatives in India, after New Delhi banned them along with other Chinese apps.

He said: “Globalisation is our long-term strategy, but in the near term we are closely monitoring the changes in the geopolitical environment, and also the national policy of other countries, and we will adjust our strategies according to this change.”

Meanwhile, he said Alibaba is “closely monitoring the latest shift in US government policies toward Chinese companies”.

“Management expects there will be limited impact on group financial performance,” Alicia Yap, head of Pan-Asia Internet Research at Citigroup Global Markets Asia, wrote in a research note following the earnings announcement.

“Alibaba reiterated its mission to make it easy to do business anywhere . . . Meanwhile, the company will closely monitor the latest implications of US government policies toward Chinese companies given its fluid situation,” she said.

Hangzhou-based Alibaba saw revenue jump 34 per cent year-on-year to 153.8 billion yuan ($22.2 billion) for the three-month period ending June 30, with growth dynamics reverting to its core Tmall and Taobao e-commerce marketplaces after experiencing stagnation in the first quarter owing to Covid-19.

Analysts from JPMorgan Chase & Co said in a report earlier this month that geopolitical tension between the two major economies could exert a negative impact on the growth of Chinese internet companies such as Alibaba, Tencent Holdings Ltd and NetEase Inc in the midto-longer term as they might encounter obstacles to international expansion.

The increasingly complicated international environment has propelled Chinese companies to take political risks into substantial consideration. That includes localisation efforts and full compliance, such as forging local partnerships and common interest groups, said Raymond Wang, global partner at consultancy Roland Berger.

But one bright spot of Alibaba’s international layout has been Lazada, its Southeast Asian footprint that recorded over 100 per cent year-onyear order growth.

Yap said: “With strength in technology, global supplier sourcing network and diversified marketplace strategies, and engaging social network approach, Alibaba is confident to ride on structural growth demand of the Southeast Asian region.”

At home, the company accounts for more than 800 million monthly active users on its mobile retail platforms, and reported its core platforms have “recovered to preCovid-19 levels across the board”, chief financial officer Maggie Wu said on Thursday.

But it still faced mounting pressure from both upstart Pinduoduo, which lured rural and small-township buyers with cheaper bargains, and Meituan, backed by Tencent, in fierce competition for market share in food deliveries.

Alibaba’s full line-up and leadership in bigger-ticket items indicates its post-pandemic recovery might take longer than its smaller rivals, according to Steven Zhu, an analyst at research firm Pacific Epoch.

The company said it will continue to foster new ways of marketing, such as using livestreaming to demonstrate its products.

Chinese economy expanded by over three per cent in the second quarter, making it the first major economy to bounce back to growth since the start of the pandemic.