Alibaba’s Strong Earnings May Be What China Needs Right Now

ChinaChina’s slowing economic market is making economies around the world shudder. As the world’s largest consumer and producer, a slow economy affects the globe at large, and what the world doesn’t need is another economic slowdown or decline. Growing political unease and other factors aren’t helping the once potent Asian economy.

Despite the economic slump, China’s premiere e-commerce group, Alibaba Group may be what the country needs to pull it out of the economic slowdown.

Alibaba’s Role

Alibaba’s role in influencing the Chinese economy is more than just being a platform for buying and selling. Economists and investors have been using the e-commerce group as a proxy of sorts, gauging Chinese consumption and the inner workings of the economy. Alibaba continues to be a magnifying glass that foreign investors and analysts use to gauge China’s internal spending and consumer strength.

Despite this, Alibaba is still inherently dependent on the whims of the country’s economy. While falling demand can seriously hurt the business, and the people who rely on it as an e-commerce platform. The current economic slump, at first glance, seems to position a future where Alibaba’s strength will waver as more money continues flying away from the country.

A Silver Lining

Despite the rather pessimistic environment China’s economy currently fosters, Alibaba itself seems to be booming as it continuously benefits from its recent shit to mobile spending, as well as the continuing growth of users. The e-commerce group reports that mobile spending accounted for over 65 percent of total China’s retail revenue, which is 30 percent more than last year.

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Image Courtesy of Charles Chan via Flickr

Additionally, annual active buyers rose 22 percent to roughly 407 million. This particular data is an important find to investors as it translates that despite fears, money is still moving inside the country despite more and more Chinese investors investing outside its home shores.

Alibaba’s increasing stats are a silver lining to the country, and will without a doubt help revitalizing its slowing economy.

Should Investors Take Advantage of Alibaba’s Strength?

Despite the e-commerce’s amazing performance amidst a slowing economy, foreign investors are still rightfully wary at investing in such a rough patch. Analysts explain that while there is growth in gross merchandise volume, the total growth itself was slower than the hefty 28 percent rise last quarter.

R.W. Baird analyst Colin Sebastian quips though that while the slowing gross merchandise can be seen as a “potential yellow flag” concerns about the economy itself are “largely overblown.”

He adds that, “Overall, we view these results as largely reinforcing a positive view of Alibaba, even in the face of a transitioning China economy.”

Will Alibaba help revitalize China’s economic slowdown, or is its newfound strength just a momentary respite? It’s hard to determine how the inner machinations of the Asian economy will turn. Analysts urge caution for those planning to take advantage of Alibaba’s new found strength, but doesn’t necessarily discount it as the numbers can easily turn to their favor in a heartbeat.