Alibaba Group Holding (BABA) Daniel Yong Zhang on Q3 2016 Results
We see increased consumption in the Chinese economy from urban areas and younger generations
“We believe Alibaba has a significant opportunity that will be realized by the growth of the Chinese consumption economy. Specifically, we see increased consumption from the two key segments: number one, an expanding middle-class, particularly those living in urban areas who are undergoing lifestyle change and upgrading to higher-quality products and services; number two, young people who have strong appetite for spending but little interest in saving compared to their parents.”
Rural development will be a key to our success
“The future of our retail businesses will be driven by three key growth engines. Number one, rural development. Approximately half of China’s population live in rural areas. Our platform can reach rural villages very efficiently. So far, we have expanded our rural service centers to 12,000 villages. Our strategy is to sell goods from urban areas to village, as well as help farmers sell farmer products to people living in the cities.”
When times are not good advertisers will spend more on our platform because it’s more effective
“And as you said, today is a tough time in terms of macroeconomy and it’s not that good. And the brands are usually more cautious about spending marketing dollar. And that’s also the good time for us because when people are cautious, people care more about the effectiveness of the marketing dollar usage. So that’s why we can – they continue to spend more dollar on our platform because that’s one of the few platforms they can find to get the close-looped consumer track and to consumer interaction. Thank you.”
Chung Tsai – Executive Vice Chairman
The Chinese economy is undergoing a structural shift from high growth to moderate growth, investment to consumption and manufacturing to service
“I wanted to give you a few thoughts on the macroeconomic conditions in China since I know it is something that you are watching very closely.
The Chinese economy is going through a structural shift from high growth to more moderate but more sustainable growth. China is still one of the fastest growing economies in the world and we have no reason to think anything different in the foreseeable future. We are witnessing two significant trends consistent with Chinese government reforms that provide the secular drivers to Alibaba’s business.
First, China is moving from an investment-driven economy to a consumption-driven economy. Consumption-driven growth is clearly more sustainable and this plays to the strength of Alibaba with more than 400 million Chinese consumers shopping on our platforms.
Second, China is moving from an industrial manufacturing economy to a service economy. While the manufacturing sector lost jobs in 2014, the service sector added 17 million jobs. Job growth is taking place and it is driven by the services economy. People now have more employment opportunities in technology, commerce, logistics, entertainment, leisure, travel and finance. This is good for Alibaba because our platforms enable millions of small businesses and service providers to capture the growth of this new economy.”
Retail sales are going against the grain of a decelerating economy
“Chinese retail sales grew 10.7% in 2015. And it’s actually a higher growth rate than the prior year. So retail sales is going against the grain of what many consider to be a decelerating economy. And that’s because the shift of the Chinese economy is going from investment-driven to consumption-driven. So consumption, as a shared GDP, is becoming higher. So we benefit from that.”