Why US Actions Might Slow Alibaba’s Progress in 2017

Taobao flagged as notorious market for fakes

Alibaba (BABA) is fighting claims that it operates a marketplace for counterfeit and pirated goods after a US agency named it among markets notorious for fake items. The US Trade Representative (or USTR) has included Alibaba’s Taobao marketplace on its annual list of notorious markets, which was a major setback for Alibaba given that the company is under pressure to defend its market share in China and unlock new growth abroad.

Why US Actions Might Slow Alibaba’s Progress in 2017

Taobao had been taken off the list in 2012 when it appeared that Alibaba was taking steps to remove fake goods from the site. But USTR said that complaints have soared recently that Alibaba’s marketplace is not only full of fake goods, but the company also appears to have erected obstacles to traders trying to remove illicit listings that infringe their copyright.

Did politics influence the move?

However, Alibaba has protested the decision to return it to the notorious markets list, saying the move ignores the efforts it has made to block the listing of fake items on its marketplaces. Alibaba wonders whether the USTR action is influenced by the prevailing political climate in the US, hinting at President-elect Donald Trump’s sharp criticism of China since he won the November presidential election.

Going beyond e-commerce

Given stiff competition from JD.com (JD) for the control of the Chinese e-commerce market, Alibaba has been looking to overseas markets to drive future growth. Besides e-commerce, the company is diversifying into new businesses such as mobile payments where it competes with PayPal (PYPL) and Apple (AAPL) and into cloud computing where it competes against Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOGL), and others.

Alibaba needs a credible image to succeed in these new markets, but the US has raised questions over its e-commerce practices and put its credibility in doubt.