Beijing and COVID-19 have hampered Alibaba’s profitability

(Beijing) Black Thursday: Chinese e-commerce giant Alibaba announced a nearly 60% drop in net income in 2021 and heavy quarterly losses, against the backdrop of an economic slowdown and tighter technology regulations.

Posted at 11:14 am

Sebastien RICCI
France Media Agency

Since the end of 2020, authorities have been stubborn against certain practices of digital giants, previously widely permitted, in terms of personal data collection and competition.

Beijing has therefore stepped up its blows against powerful internet companies, which have been barred from raising money around the world or fined for abuse in a dominant position.

These transfers cost the industry billions of dollars in market capitalization.

Long regarded in China as a model of success, Alibaba was the first to suffer punishment by public authorities.

The country’s economy has also been weakened by restrictions against COVID-19, which has the lowest consumption in two years and unemployment near the highest of all, which in turn penalizes e-commerce companies.

In this context, Alibaba on Thursday reported a significant drop in its revenue last year.

It stands at 61.9 billion yuan (8.6 billion euros), against 150.3 billion yuan last year – a decrease of 59%.

In the last quarter of its staggered financial year, the group also blamed about 2.3 billion euros of losses, which it puts on account of the “epidemic resurgence in China, especially in Shanghai”.

Difficult

China has been facing a resurgence of the epidemic for several months, affecting some parts of the country to varying degrees.

Under the zero COVID-19 health strategy, several cities have been locked down, including the economic capital Shanghai, penalizing production and consumption.

Poor household spending weighs heavily on e-commerce companies, which have been accustomed to date to exponential growth along with the commoditization of Internet purchases.

Alibaba said it was unable to set targets for 2022 “given the risks and uncertainties associated with COVID-19”.

The group, which has long been a pioneer of online commerce, has faced increasingly aggressive competition in recent years, specifically from Pinduoduo and JD.com sites.

Also present financially, Alibaba is also under pressure in this sector.

By the end of 2020, regulators derailed the massive IPO of its subsidiary Ant Group.

The company, which has seen its own increase of 34 billion dollars in Hong Kong and Shanghai, has been prevented by authorities from doing so too much, worried about potential financial risks.

In the process, Jack Ma disappeared from the radar for two and a half months, a silence that then raised many questions, particularly of a political nature.

Now, the twitter remains strong.

Gloom 2.0

Earlier this month, state television’s CCTV announced the arrest in Hangzhou of a particular “Mr. Ma” on behalf of national security, Alibaba’s stock was dug up.

CCTV needs to clarify that the person in question is not Jack Ma, but a nickname, to ensure markets.

According to the Bloomberg agency, this disaster was enough to temporarily lose Alibaba $ 26 billion in market capitalization.

Alibaba’s poor performance is far from an isolated case with China in the world of technology.

Earlier on Thursday, search engine Baidu announced approximately 120 million euros in losses in the first quarter.

Last week, Tencent announced a quarterly turnover in almost a year’s stagnation.

This is the first time since 2004 that the Chinese Internet and video game giant has recorded slow growth.

According to Chinese economic information media Caixin, Tencent is preparing to lay off 10% of its workforce.

Threatened by declining activity in China, an economic machine, the power received some tech bosses last week, raising hopes of partnering with this sector that has been under pressure for several months.

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