For Alibaba, the property crackdown is another headache

China’s e-commerce giant Alibaba’s annus horribilis may not be over yet. Its latest challenge is the slowing Chinese economy.

Alibaba on Thursday announced revenue and operating profit for the quarter ending in September that was lower than analysts’ estimates on S&P Global Market Intelligence. Revenue last quarter increased 29% year on year, but growth would have been only 16% excluding the contribution of supermarket chain Sun Art, in which Alibaba acquired a controlling stake last year.

The company has been caught in the crosshairs of Beijing’s regulatory crackdown. Since the sudden pause of the initial public offering of its finance affiliate Ant Group in November last year, Alibaba has lost almost half of its market value, or around $380 billion. The government slapped a record $2.8 billion fine on the company in April for anticompetitive practices.

The new worry is a slowing Chinese economy. The company expects revenue for the fiscal year ending next March will grow 20% to 23% year on year, the slowest pace since it went public in 2014. That also implies sharply slower growth in the coming quarters.

Revenue from Alibaba’s core marketplace business last quarter grew only 3% year on year. That may have been affected by particularly weak domestic consumption due to the resurgence of Covid-19 in August. Online retail sales have since rebounded but are still below previous levels. Domestic demand has been an enduring weak link in the country’s recovery from the pandemic since last year.

Singles Day, a shopping bonanza in November akin to Black Friday, has been underwhelming this year. Alibaba said gross merchandise volume for the 11-day campaign grew only 8.5% from 2020—the slowest pace ever. Partly that’s because Alibaba wants to keep a low profile amid all the regulatory scrutiny. In contrast with the past when the company would show off how much turnover it generated in just an hour, the company is now emphasizing how the shopping festival has helped small and medium-size businesses as well as merchants in less-developed agricultural belts. Alibaba also mentioned how it has managed to reduce its carbon footprint by using renewable energy in its data centers.

But China’s housing slump could bring new headwinds. New home sales have plunged and home prices are starting to fall too. Unless Beijing takes its foot off the property sector’s neck, the economic slowdown will hurt consumption given the importance of the real-estate sector to the economy.

Alibaba has suffered from China’s crackdown on technology companies. Another crackdown—on the housing sector—may also deal collateral damage.

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