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China tech

Alibaba defends No.1 position in China's e-commerce market

First earnings since Jack Ma's resignation sends optimistic signal to the market

Alibaba Group Executive Chairman and CEO Daniel Zhang.    © Reuters

BEIJING -- China's Alibaba is maintaining its reputation as an e-commerce powerhouse, booking a 40% surge in sales in its latest quarterly earnings report, although Chinese gross domestic product growth reaching a 30-year low of 6% and ongoing uncertainties surrounding the Sino-American trade war cloud the country's outlook somewhat.

The quarter ended Sept. 30 saw Alibaba generate better-than-expected revenue of $16.7 billion, up 40% from the previous year. Net income almost tripled to $9.9 million, primarily due to a one-time gain from its acquisition of equity in affiliate Ant Financial earlier in September.

This is the first earnings report since Daniel Zhang succeeded founder Jack Ma as chief executive of the e-commerce empire and it sends optimistic signals to the market.

With 785 million mobile monthly active users on Alibaba's online marketplaces and local services platforms, its core e-commerce business -- which includes Taobao, Tmall, new retail initiative Freshippo and logistics arm Cainiao Network -- is still the main profit driver for the company. Alibaba's international retail businesses, including Lazada in Southeast Asia and the global AliExpress, also contributed to the robust growth momentum.

Adjusted earnings before interest, tax and amortization for this segment rose 29% year-on-year to $5.4 billion, accounting for nearly 40% of this quarter's overall revenue.

This partly offset Alibaba's continued loss in its nascent cloud computing operations, as well as in its digital media and entertainment unit.

CEO Zhang emphasized the strategic importance of its enterprise-facing businesses during an earnings call, indicating that the company would continue to invest in big data and cloud computing technologies.

As Alibaba faces increasing competition from growing businesses such as on-demand service provider Meituan Dianping, group-buying platform Pinduoduo and retailer Suning, Zhang highlighted the potential opportunities for synergies between different groups of its users.

"We are identifying and executing new initiatives to convert the users from our China retail marketplace to users of our local services and the digital entertainment platforms," said Zhang.

The upcoming Nov. 11 sales event known as "Single's Day" or "Double 11" has become a battleground for China's e-commerce players. The Chinese version of Black Friday, initiated by Alibaba 10 years ago, has grown into a worldwide shopping festival.

Last year, Alibaba's Tmall hit record gross merchandise volumes of 213.5 billion yuan ($30.5 billion) on Singles' Day, representing a 27% increase year-on-year, while competitor JD.com sold goods worth 159.8 billion yuan ($22.5 billion).

KrASIA is a digital media company focused on technology-driven businesses and trends across the Asia-Pacific region. It is part of 36Kr, a tech news portal based in Beijing. Nikkei has a minority stake in 36Kr.

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