The Chinese giant Alibaba, in search of lost profits

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Alibaba, the number 1 Chinese e-commerce, announced Thursday, profits down 81% for the second quarter. A tumble, linked to the economic and political context in China, sanctioned by the financial markets.

Alibaba’s profit cavern is far less stocked than usual. The Chinese e-commerce giant has, for the first time in five years, announced lower profits for the second quarter. The figures, released Thursday, November 18, show an 81% plunge in profits compared to the same period last year.

Bad news that did not please the financial markets. Alibaba’s stock ended Thursday down 11% on the New York Stock Exchange.

This fall in profits comes as a tightening of regulations in China has shaken the tech giants for several months.

Long considered a model of success for Chinese companies, Alibaba was the first to suffer the punishment of the authorities.

A year ago, the communist power had cut the wings of the private group, by stopping the gigantic IPO of its payment subsidiary Ant Group in Hong Kong, 48 hours before the event.

Presented then as the biggest fundraiser of all time, the operation should have brought in 27.4 billion euros.

The following month, Alibaba was investigated for impeding competition.

The group founded by the whimsical Jack Ma has since been sentenced in the spring to a fine of 2.3 billion euros.

Slower growth and new competitors

And the authorities then extended their regulatory tightening to other lucrative sectors (private tutoring, meal delivery, entertainment, video games), causing the loss of billions of yuan in capital.

But Alibaba isn’t just suffering from a tighter regulatory environment. The Chinese economy as a whole is also faltering. The country’s GDP grew by just 4.9% in the third quarter, its weakest pace since the rebound in international demand in early 2021, following the start of an improvement on the fight against corruption. Covid-19 pandemic.

In addition, new players are nibbling away at Alibaba’s market share in its most strategic sectors. Another e-commerce giant, Pinduoduo can boast of having more active users than Alibaba, recalls Le Monde. Groups like Bytedance, the creator of Douyin, the Chinese version of TikTok, are managing to capture more and more ad spend. The latter were, until now, the main source of profits for Alibaba.

The only good news for the historic e-commerce giant: the famous “Singles’ Day” – the great Chinese consumer mass on November 11 – was a success for Alibaba since 74 billion euros were spent on its sites, i.e. 8 .5% more than last year.

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