Virus outbreak hitting many areas of China economy: Alibaba

17 February, 2020 12:00 AM printer

Hong Kong: Alibaba Group Holding Ltd warned that the coronavirus responsible for killing more than 1,300 people in China is exerting a fundamental impact on the country’s consumers and merchants, and will hurt its revenue growth in the current quarter.

Alibaba, the first major Chinese technology corporation to report results since the epidemic emerged in January, said the virus is undermining production in the economy because many workers can’t get to or perform their jobs. It has also changed buying patterns with consumers pulling back on discretionary spending, including travel and restaurants, report agencies.

The Chinese e-commerce giant made the comments after reporting strong financial results for the quarter that ended in December. Revenue surged a better-than-expected 38 per cent to 161.5 billion yuan (S$32 billion), while net income rose 58 per cent to 52.3 billion yuan.

But chief executive officer Daniel Zhang and chief financial officer Maggie Wu were clear about the fallout from the deadly virus on employees, suppliers and merchants. Many merchants that work with the company have not been able to return to normal operations because of a shortage of employees. Alibaba’s US-listed shares slid 1.8 per cent Thursday.

“The epidemic has negatively impacted the overall China economy, especially the retail and service sectors,” said Ms Wu in a conference call after the results. “While demand for goods and services is there, the means of production in the economy has been hampered by the delayed opening of offices, factories and schools after the Lunar New Year’s holiday.”

Asked about the affect on Alibaba, she voiced caution about giving estimates because it’s only halfway through the March quarter. “Overall revenue will be negatively impacted,” she said, adding that the hit to growth could be “significantly” negative.

Mr Zhang said that they are seeing relatively large changes in buying patterns. While food delivery is growing, areas like clothing and electronics are running into logistical problems. He warned that the core e-commerce business suffered a negative impact in the first two weeks after the holiday. Restaurant orders and travel bookings have also taken hits, hurting its delivery and Alitrip businesses.

Alibaba is rolling out measures to support merchants, including lowering the fees it charges and providing subsidies for delivery personnel.

Mr Zhang said more workers are going back to work in Beijing, Guangzhou and Shenzhen. Many logistics companies are also recovering their capacity in the past 12 days.