Alibaba’s strong results suggest Chinese consumers are still spending

The Chinese consumer isn’t dead yet.

So says Alibaba Group, the Chinese e-commerce giant, which on Thursday reported strong financial results for the three months that ended in June, despite China’s slowing economic growth and a trade war with the United States that has hit the country’s factories.

The results, from a company that symbolises the rising confidence of the Chinese consumer, suggest a mixed picture for the world’s second-largest economy after the United States. Just the day before, the country reported its worst monthly figures for industrial output in 17 years. Exports have fallen, though they rose unexpectedly in July, and the country’s factories are having a harder time charging higher prices for the goods they turn out.

But Alibaba’s results point to strengths. Though the pace of growth has slowed, Alibaba is still adding customers. China’s overall retail sales growth, while also slowing, is still strong compared with that of other countries.

The question for Alibaba — and for China’s leaders as the trade war grinds on — is how long that strength will last and whether it will be enough to blunt other headwinds.

Alibaba said on Thursday that revenue rose 42%, to $16.7 billion. Its net profit more than doubled to $3.1 billion from a year earlier, when costs involving employee compensation sharply reduced the bottom line. The company’s shares, which trade in New York, rose about 3% in early trading.

Alibaba’s earnings were consistent with retail sales in China that showed shoppers continued to spend. According to official statistics, retail sales rose 8.3% in the first seven months of the year compared with a year earlier, though July retail sales were up 7.6%, missing estimates.

Alibaba may have also benefited from shifts in what Chinese consumers want to buy. Analysts say the trade war with the United States has prompted shoppers to become more selective, and many have switched to buying domestic brands that they feel are of high quality.

“There’s definitely a ‘China for China’ trend that’s happening right now, meaning people shifting toward domestic brands,” said Ben Cavender, a senior analyst at China Market Research, a consultancy based in Shanghai.

c.2019 New York Times News Service