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News Analysis: Alibaba Q1 performance attests to China's vibrant new economy

Xinhua, May 6, 2016 Adjust font size:

Alibaba reported stellar quarterly performance on Thursday, a victory for the Chinese e-commerce giant against persistent economic headwinds, and also an indication that China may not be too far away from a consumption-driven economy.

Total revenue increased 39 percent year on year to 24.18 billion yuan (3.75 billion U.S. dollars) in Q1. Revenue for China retail marketplaces grew by 41 percent, the highest for the past six quarters, to reach 18.34 billion yuan. Gross merchandise volume (GMV) -- a measure of value for online sales -- in China in Q1 expanded 24 percent to 742 billion yuan.

Annual active buyers rose by 16 million to 423 million, with growth especially strong in lower tier cities.

"Several consecutive quarterly increases in revenue per active buyer and revenue per mobile monthly active users, show the resilience and growing clout of the Chinese consumer," said Alibaba's Chief Financial Officer Maggie Wu.

As an example of Chinese consumers' purchasing power and enthusiasm for online shopping, Alibaba's success is welcome news for a China in transition.

Rapid growth of the past few decades has catapulted China into the position of being the world's second-largest economy, but the investment-led model behind such development has reached its limits.

A multitude of problems -- high debt levels, industrial overcapacity and environmental degradation at home and subdued global demand -- mean an imperative of transforming the economy into one that draws strength from consumption, services and innovation.

Innovation and entrepreneurship are thriving across China, on the back of government encouragement and support. In 2015, 4.4 million new enterprises were registered, or 12,000 every day. China led the world in invention patent applications for the fifth consecutive year last year, with 1.1 million filings, up 18.7 percent.

The service industry is also going from strength to strength, accounting for 56.9 percent of GDP in the first quarter, improving on 54.9 percent for the same period last year and 50.5 percent for 2015.

One area of obvious potential as a growth driver is consumption. With a population nearing 1.4 billion and becoming more affluent, China's expectation of a consumption-driven economy is a reasonable one.

In the first three months, retail sales grew 10.3 percent, better than 6.7-percent GDP growth. In March, retail sales were up 10.5 percent, faster than the growth rate in the first two months of this year.

During the six days of the Lunar New Year holiday in February, Chinese cinemas took in 3 billion yuan in ticket sales, up 67 percent over the same period last year.

"China consumers have a healthy balance sheet and ability to spend," Alibaba's Executive Vice Chairman Joseph Tsai told a conference call discussing the earnings.

"This will propel China from an export and investment-led economy to a consumption-driven economy," he added. Endi