(Photo/Global Times)
The strong results of e-commerce giant Alibaba, released on Thursday, are reflective of a robust Chinese economy and the great potential of the economy that is now in a tough but much-needed transition.
"Chinese consumers, with their balance sheets and ability to spend, will propel China's shift from an export- and investment-led economy to a consumption-driven economy," Joseph Tsai, executive vice chairman of Alibaba Group, said in his analysis of the drivers of its growth.
The e-commerce giant, listed on the New York Stock Exchange, reported a net profit of 42.7 billion yuan (6.6 billion U.S. dollars) for its financial year that ended March 31. Its net profit for the latest quarter was 7.6 billion yuan (1.2 billion dollars).
The strong growth has been driven by China's increasingly affluent consumers. The gross merchandise volume on its e-commerce platforms for the financial year grew by 27 percent year on year to 3.09 trillion yuan (475.3 billion dollars), which is comparable to the gross domestic product of a fairly large economy.
"The excellent results are a testament to the great potential of the Chinese economy. It is also reflective of the growth of various technology-enabled new business models we have been driving and shaping," said Wu Wei, the company's chief finance officer.
Statistics show that China has almost 700 million Internet users, of which three quarters are younger than 40 years old.
Alibaba said its Chinese retail platform received 423 million customers during the past year. During the month of March, 410 million mobile users were active on the company's Chinese retail mobile apps.
Tsai said Chinese households now have aggregate net cash reserves of 4.6 trillion yuan (707.7 billion dollars), which is the result of real double-digit wage growth over the past decade.
China is now in the midst of a painstaking restructuring to make domestic consumption a key driver of its economy. The services sector now accounts for slightly more than half of its economic output and has been growing faster than its manufacturing sector. Businesses from around the world have cast their eyes on the vast Chinese consumer market.
Despite a slowdown, China's economic growth remained at an enviable 6.7 percent in the first quarter of 2016, in line with the official target range of 6.5 percent to 7 percent for this year. The wages of Chinese workers have been growing fast as the labor market, especially the market for low-skilled workers, remains tight. Consumer spending has also been growing fast.
Electric tricycles delivering e-commerce orders are now seen around the corners of streets in Chinese cities. The core e-commerce business of Alibaba has generated strong cash flow, allowing the company to make investments that will potentially power its future growth.
Tsai said the company has also made some investments that are now producing fast growth in sectors such as cloud computing and mobile Internet services.
The company has also been investing in industries which Tsai said are of great potential over the long term.
"Going forward we are prepared to continue investing in high-potential businesses that are highly strategic to Alibaba, from digital entertainment to local services to international expansion," he said.
