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Down but out: Alibaba China looks tough 2022 | Modern

Alibaba did not have the best 14 months. Ever since the Chinese authorities suddenly fired its financial firm Ant Group, the Chinese tech giant has suffered.

Amidst these regulatory constraints, China’s economic downturn and growing competition, its market has dropped to $ 358bn from $ 846bn in the evening. Ant IPO in October 2020.

With such a difficult environment going on in the New Year, Alibaba, which has been described as China’s response to Amazon, is facing 2022 which could be challenging – although experts calculate the company’s deep pockets and its potential to fit the Chinese mainstream market instead.

The Ant Alliance, which is preparing for two series in Shanghai and Hong Kong, is expected to raise $ 34bn. This would make it the largest IPO ever.

On the contrary, the connection is on the ice forever while Ants are working to meet the many new Beijing regulatory requirements for Big Tech, which aims to reduce the market power of professional executives, strengthen consumer protection and reaffirm the Communist Party’s role in China’s secret economy.

Under the rule of Xi Jinping, China’s most powerful leader since Chairman Mao Zedong, Beijing inferior professional juggernauts that once seemed uncontroversial.

Indeed, the founder of Alibaba Jack Ma was so convinced of his company’s position that he criticized the Chinese financial authorities in a well-known October 2020 speech in Shanghai, telling them that “the game in the future is about skill, not management skills”.

Jack Ma looks like a young artist on the Beijing riot at Big Tech [File: Philippe Lopez/AFP]

“Shanghai’s words aside, because of its size and wealth, Alibaba became the founding son of the state,” Daniel Tu, founder and chief executive officer of Hong Kong Active Creation Capital, told Al Jazeera. “The company and other major Chinese platforms have become a threat to the government.”

When Alibaba paid a $ 2.8bn antitrust fine in September when regulators discovered it had misused its market, the amount was less than a company earning more than $ 100bn a year. Significant changes in his business practices will have far-reaching consequences. The restructuring will reduce the profitability of Ant Group’s pre-profit lending business and reduce its data collection capabilities.

“Increasingly China’s laws are signaling the end of so-called ‘natural growth’ for Chinese companies,” Winston Ma, co-founder and co-founder of CloudTree Ventures, told Al Jazeera. “The new regulatory framework represents the enlightenment and transformation that can take place in China’s larger businesses.”

In December, Alibaba unveiled a restructuring plan that will divide its e-commerce business into unique global and domestic segments.

“Through the redevelopment, Alibaba will be able to better understand domestic needs to grow Chinese products through China Digital Business Unit and promote e-commerce and overseas products through the Overseas Digital Business Unit,” said Yannie Liao, an industry expert. at the Semi-governmental Marketing & Consulting Institute (MIC) in Taipei, told Al Jazeera.

Thanks to the success of its top e-commerce platforms, Taobao and TMall, Alibaba has become the largest online marketplace in China.

However, its share in the Chinese e-commerce market declined slowly from 78 percent in 2015 to 51 percent in 2021 according to eMarketer research. Much of this minority happened before China Big Tech collapsed, showing greater competition and consumer change. Alibaba’s e-commerce business relies heavily on search, which is less popular with young Chinese consumers than on-line promotions or other marketing strategies.

At the same time, China’s economy is declining and consumer spending is showing signs of change. Expensive spending, which marks the end of China’s late 2000s and early 2010, is declining. Deutsche Bank estimates that China’s economy will grow by 5 percent this year, compared to 8.1 percent in 2021.

Hope for Southeast Asia

“In the face of the widespread uncertainty that results from the epidemic, how it affects young consumers. [those born since 1990] “Cheng Shi, an economist at ICBC International Securities, wrote a comment published by China’s Yicai in September.” We hope this will continue even after the epidemic. “

The prospects for developing countries in Southeast Asia are increasing. The online resources of countries like Indonesia, the Philippines and Vietnam are relatively new, similar to those of China in 2010, to encourage Alibaba to expand its presence in the region through its Lazada-based platform Singapore. Lazada’s annual users increased from 80 percent to 130 million in the 18 months to September 2021, Alibaba said in a donation by the end of last year.

Currently, Alibaba is still the largest e-commerce retailer in China and the second largest Chinese e-commerce company in terms of market capitalization after the major game Tencent. Alibaba’s deep pockets are crucial to its future, experts say.

In the case of the Big Tech crackdown in China, “the government needs the private sector to reform to keep up with the latest trends,” Herbert Yum, research director at Euromonitor in Hong Kong, told Al Jazeera. As long as they are healthy, they can change their businesses for the better.

Yum also said that Alibaba’s funding remains stable, despite the many winds the company is facing. Economic growth slowed sharply in its 2021 fiscal year, however it managed to grow 4 percent to $ 20.9bn. In the previous financial year, Alibaba’s total revenue grew by about 68 percent to $ 20.2bn.

Such gradual growth may not return to Alibaba, but it does not. All Chinese internet companies face a very difficult business.

A good start to Alibaba is the ability to meet the needs of China, the world’s largest e-commerce market. Despite global corporate growth, China is still in the forefront.

“Alibaba is still looking at China because then [company’s] a major source of revenue and still offers significant market opportunities, ”said Yum of Euromonitor.

Alibaba The Alibaba cloud computing segment reported $ 9.18bn in revenue in 2021 [File: Tingshu Wang/Reutrers]

Data and analytics company GlobalData predicts that China’s e-commerce market will grow by 11.6 percent annually between 2021 and 2025 to reach $ 3.3 trillion.

Cloud computing, meanwhile, offers Alibaba’s added features. In fiscal year 2021, the Alibaba Cloud unit claimed $ 9.18bn in revenue, an increase of 50% per annum. Mia Liao of MIC also said that Alibaba cloud computing revenue has grown for the first quarter since the first quarter of 2020.

However, management barriers also exist in cloud computing. Active Creation Capital’s Tu realized that, prior to the introduction of a national data protection law, Beijing in August ordered state-owned enterprises to speed up the transfer of their data from common users such as Alibaba and Tencent to state-owned cloud services.

The loss of business will be huge, though Alibaba can still work with secret agencies. The Chinese cloud computing market was worth $ 19.4bn by 2020, according to a study by International Data Corporation.

“Given the ongoing disruption and change, Alibaba should start looking at areas that are relevant to global testing – ‘solid technologies’ such as semiconductors, manufacturing intelligence and quantum computing,” Tu said.

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