BEIJING – Chinese e-commerce giant Alibaba on Thursday announced a 59 percent year-on-year drop in net profit for 2021, amid an economic slowdown in China and tighter regulations in the technology sector.
Anti-Covid restrictions are weighing heavily on the country’s economy, with consumption at its lowest for two years and unemployment close to an all-time high, which in turn is penalizing e-commerce companies. The company is also facing increased competition and a regulatory tightening imposed by the government.
In this context, the group founded by the whimsical Jack Ma reported on Thursday a significant decline in its profit last year. It amounted to 61.9 billion yuan (8.6 billion euros), against 150.3 billion yuan a year earlier – a drop of 59 percent.
Over one year, its turnover increased by 19 percent, to 853 billion yuan (118.3 billion euros). In the last quarter of its staggered financial year, the group also shows some 2.3 billion euros in losses, which it attributes to the “epidemic resurgence in China, in particular in Shanghai”.
Faced with the resurgence of Covid-19 which has hit China for a few months, a large part of the 25 million inhabitants of the economic capital have been forced to stay at home since the beginning of April, which is heavily penalizing activity.
The zero Covid strategy pursued by the Chinese authorities, which sometimes leads to preventive confinements or closures of businesses, is also disrupting supply chains and deliveries and dampening demand.
The weakness of household spending is weighing heavily on e-commerce companies, accustomed until now to exponential growth with the trivialization of purchases on the Internet.
The authorities are also intransigent against certain practices previously tolerated in the tech sector, such as the abusive collection of users’ personal data. Long considered a model of success for Chinese companies, Alibaba was the first to suffer the punishment of the authorities at the end of 2020.
Since then, many of them have been singled out, in particular for anti-competitive practices. Alibaba was fined 2.3 billion euros for this last year. (AFP)