'Alibaba's Revenue Surges as "China Economy Barometer"... Reopening Effects Kick In'

[Asia Economy Reporter Yujin Cho] Alibaba in China recorded its first profit growth since 2020. The lifting of lockdowns that had suppressed the Chinese economy over the past two years significantly revived domestic consumption. As Alibaba, China's largest e-commerce company and a barometer of the Chinese economy, posted solid results, evaluations suggest that the effects of China's reopening (economic resumption) are gaining momentum.

According to the earnings report Alibaba released on its website on the 23rd, the company's net profit for the fourth quarter of last year surged 69% year-on-year to 46.82 billion yuan (approximately 8.8 trillion KRW). This marks the first quarterly growth since before the COVID-19 pandemic in 2020, easily surpassing the market expectation of 34.02 billion yuan. During the same period, revenue grew 2.1% year-on-year to 247.76 billion yuan. Although slightly below the market estimate of 245.18 billion yuan, the company succeeded in transitioning to quantitative growth.

U.S. Bloomberg News commented, "Alibaba's earnings surprise, a barometer of Chinese consumer demand, indicates that the authorities' reversal of epidemic prevention policies is revitalizing the overall economy." Alibaba also assessed that the Chinese economy and consumption are rebounding. CEO Daniel Zhang stated in a press release that "despite demand slowdown and supply chain disruptions due to the pandemic in Q4, we achieved solid quarterly results," and added, "We expect consumer sentiment and economic activity to continue recovering."

[Image source=Yonhap News]

Key economic indicators for the fourth quarter of last year were also robust. In particular, industrial production and retail sales, indicators centered on consumption, significantly exceeded expectations. Retail sales in December, which reflect the effects of economic reopening, recorded -1.8%, greatly surpassing the market forecast of -8.6%, and industrial production grew 1.3% year-on-year, exceeding the market estimate of 0.2%.

The fourth-quarter gross domestic product (GDP) growth rate also exceeded expectations, recording 2.9% compared to the forecast of 1.8%. Although still distant from the government’s target, considering the economic reopening and base effects, there are forecasts that the target for this year is likely to be achieved. U.S. economic media CNBC, citing economic experts, predicted that "China will record faster domestic growth following economic reopening," and that domestic consumption in China is likely to turn to growth starting in January.

[Image source=Reuters Yonhap News]

The lifting of the Chinese authorities' stringent big-tech regulatory curtain is also expected to structurally accelerate Alibaba's growth pace. Bloomberg noted, "Since the regulatory measures, Alibaba has focused on increasing profits by implementing massive cost-cutting measures across all business sectors, including e-commerce, media, and cloud," and predicted that as the effects of China's economic reopening take hold, Alibaba will show faster revenue growth this year.

In the securities industry, expectations for Alibaba are also rising. Morgan Stanley recently selected Alibaba as the 'top pick' in the Chinese technology sector for the first time in three years in an investor memo. Goldman Sachs also added Alibaba to its 'buy' list, setting a target price of $138, which is a 47% increase from the previous day's closing price.

Alibaba's stock, listed on the New York Stock Exchange, surged over 6% in early trading following the better-than-expected earnings but closed slightly down by 0.65% after profit-taking sales. Alibaba's stock price had been cut to one-third over the past two years due to multiple adverse factors such as performance deterioration from COVID-19 lockdowns and stringent big-tech regulations by authorities. However, with expectations that the authorities' reversal of epidemic prevention policies will invigorate the overall Chinese economy, the stock price rebounded, rising more than 10% since the beginning of this year.

This content was produced with the assistance of AI translation services.