New focus on rural regions
The troubled Chinese economy has urged investors to put pressure on Chinese e-commerce players like Alibaba Group Holding (BABA) and JD.com (JD). China’s sluggish economy has impacted consumer spending, and so players like Alibaba and JD.com are now focusing on expanding their user bases to rural regions.
The objective is to reach out to the untouched user base in the rural areas and to boost the online sales, which in turn will generate more revenue.
2015 slow growth
This year’s growth in China’s (FXI) economy has been the slowest in 25 years. The country’s GDP (gross domestic product) grew by a meager 6.76% in the first half of 2015, compared to its GDP of 7.36% in 2014. The above chart depicts the price movement of four Chinese mutual funds in the last month.
The economic slowdown has hit the internet sector as well, and a few leading internet players have begun showing signs of a slowdown. One such player is Sina Corporation (SINA). The Chinese Internet portal reported an 8% fall in its advertising revenue last month. The company accounted this decline to stricter spending on advertising, particularly in the automotive sector, due to the decline in car sales.
Other leading players like Alibaba that are expected to take a hit as well include Tencent Holdings (TCEHY) and Baidu (BIDU). Alibaba recently lowered its estimates for sales in the third quarter of fiscal 2016, calling attention to the sluggish economy’s impact on consumer spending.