China’s slow growth is having negative impacts on its largest tech giants
China’s big tech giants are recording their lowest levels of growth, and there are too many fingers to point…
What’s the big deal? China’s consumer spending has slowed as a property crisis, regulatory crackdowns, and zero-COVID policies ravage its economy. These issues led to a poor quarter for the country’s tech giants:
- E-commerce and cloud giant Alibaba (NYSE:BABA) sales fell .09%.
- E-commerce giant JD.com (NASDAQ:JD) grew sales by 5.4% — its slowest growth on record.
- Gaming giant Tencent (OTC:TCEHY) reported its first sales decline ever.
These companies are also dealing with a slowdown in e-commerce and China’s tougher stance on gaming — creating the perfect storm.
With growth slowing, these companies are turning to cost cuts to satisfy investors — exiting non-core or unprofitable businesses, reducing headcount and cutting marketing expenses. But eventually, investors will demand growth and here’s where these companies are finding it:
Tencent’s WeChat began serving ads in its short-form video platform, competing with Douyin, China’s cousin to TikTok — saying it could bring in “substantial” revenue.
Alibaba will focus on its cloud computing and overseas e-commerce — per Senior Equity Analyst Chelsey Tam at Morningstar (CNBC).
The bull: Bloomberg Intelligence Analyst Marvin Chen thinks “sales growth may pick up from here” and “the worst should be behind us as the economy picks up… but it may be a bumpy recovery” (BBG).