Alibaba ‘Closely Monitoring’ US Policy ‘Shift’ on Chinese Companies: CEO
All companies face uncertainties from the global pandemic, but also increasing trade tensions between the U.S. and China, said Alibaba CEO Daniel Zhang on a fiscal Q1 investor call Thursday: “As the world's largest e-commerce platform, Alibaba's primary commercial focus in the U.S. is to support American brands, retailers, small businesses and farmers to sell to consumers and trade partners in China as well as the other key markets around the world.”
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Alibaba's “active pursuit of our mission” to make it easy to do business anywhere is “fully aligned with the interests of both China and the United States,” said Zhang. “We are closely monitoring the latest shift in U.S. government policies towards Chinese companies, which is in a very fluid situation. We ... will take necessary actions to comply with any new regulations.” President Donald Trump signed executive orders Aug. 6 barring the parent companies of TikTok and WeChat from doing business in the U.S. after Sept. 20, citing national security.
COVID-19 accelerated the “digital transformation of consumer behavior and enterprise operations,” said Zhang. “Alibaba is a key beneficiary of this development with most of our businesses, including core commerce and cloud computing.” The pandemic has “fundamentally altered our macroeconomic environment and everyday life, but it has also introduced new opportunities,” said Zhang. Alibaba’s Chinese retail marketplaces had 742 million “active consumers” at the June 30 close to Q1, a quarterly net increase of 16 million, he said. The company will continue to drive “user acquisition” as it works toward reaching its “midterm goal of serving more than 1 billion Chinese consumers,” he said.
COVID-19 also “transformed the way enterprises work, accelerating demand for cloud infrastructure and services,” said Zhang. Alibaba Cloud maintained its position in the quarter as the largest public cloud service provider in China, he said. Cloud computing revenue in the June quarter grew 59% year over year in sectors such as internet, financial services, consumer retail and public services, he said.
Cloud is such a “fast-growing business” because all industries are in the process of a “digital transformation,” said Zhang. “Moving to the cloud is a very important step” in that process, he said. All businesses, “sooner or later,” will move to the cloud, with the biggest migration coming “near and midterm,” he said. “Even in the longer term, this will totally change how enterprises work.”
Third-party studies estimate the Chinese cloud market at about $15 billion in “total size,” said Executive Vice Chairman Joe Tsai. “The U.S. market is about eight times that,” so China is “still at a very early stage,” he said. “We expect, based on what we've seen of our customers, as well as observing the whole market growth, the China market is going to be a much faster-growing market in cloud than the U.S. market. So we feel very good, very comfortable to be in the China market and just being an environment of faster digitization.”