Alibaba

I wonder whether the new anti-competive law will be sub-standard when it benefits the China local gov.
It benefits local gov. So would they make noise in this case?

Tencent won xiamen gov cloud contract for a mere 0.01 rmb.
https://www.marketing-interactive.com/te...-0-01-yuan

(13-08-2021, 05:19 PM)Bibi Wrote: I wonder whether the new anti-competive law will be sub-standard when it benefits the China local gov.
It benefits local gov. So would they make noise in this case?

Tencent won xiamen gov cloud contract for a mere 0.01 rmb.
https://www.marketing-interactive.com/te...-0-01-yuan

"Tencent won xiamen gov cloud contract for a mere 0.01 rmb."
This story was dated 2017. Any significance of this old story?

(13-08-2021, 10:27 PM)Shiyi Wrote:

(13-08-2021, 05:19 PM)Bibi Wrote: I wonder whether the new anti-competive law will be sub-standard when it benefits the China local gov.
It benefits local gov. So would they make noise in this case?

Tencent won xiamen gov cloud contract for a mere 0.01 rmb.
https://www.marketing-interactive.com/te...-0-01-yuan

"Tencent won xiamen gov cloud contract for a mere 0.01 rmb."
This story was dated 2017. Any significance of this old story?

Its just food for thought that if the same thing were to happen now whcih benefits the local gov despite being anti competitive pricing, will they close one eye?

https://fortune.com/2021/08/16/china-reg...relations/

Quote:As Beijing’s crackdown widens, Chinese companies are offering massive pay packages to former regulators

Companies in China are scouring ministries and regulators for officials willing to cross over and help them navigate a sweeping crackdown on the private sector that has upended some of the nation’s most high-profile firms.

Officials at watchdogs in charge of the financial system, and those from ministries overseeing commerce, industry and information are the most sought after, with pay packages in some instances approaching half a million dollars, about 60 times the average for civil servants, according to headhunters.

---

Not Alibaba specific. But will this backfire?

Meltdown on Chinese Tech market valuation continues, with the exception of very select groups: 1. Hardware "Deep Tech" (e.g. SMIC), 2. New Energy (e.g. BYD), 3. Non-Mainland China "Chinese" Tech companies (e.g. TSMC, Sea Limited etc).

It's either a great opportunity or a great (value) trap.

The bear case is that the Chinese tech firms will now be hampered by got measures resulting in flat line earnings. Alibaba and TenCent affiliates are forecasting that their earnings will likely stagnate in for the remainder of this year due to higher cost. this affects their margin.

China is regulating their companies to the extent that the amount of profits/commission they extract for their products and services are controlled by the government. This is scaring investors as it is unlike other market controlled economies where price/supply is left to the invisible hand.

I recall in China, even the prices developers can sell their housing units is capped by a number/PSF dictated by the local government. This was something gleamed from KSH's holding's financial report.

(17-08-2021, 11:12 AM)CY09 Wrote: The bear case is that the Chinese tech firms will now be hampered by got measures resulting in flat line earnings. Alibaba and TenCent affiliates are forecasting that their earnings will likely stagnate in for the remainder of this year due to higher cost. this affects their margin.

China is regulating their companies to the extent that the amount of profits/commission they extract for their products and services are controlled by the government. This is scaring investors as it is unlike other market controlled economies where price/supply is left to the invisible hand.

I recall in China, even the prices developers can sell their housing units is capped by a number/PSF dictated by the local government. This was something gleamed from KSH's holding's financial report.

Alibaba has always been a revenue growth play (investors mainly focusing on revenue growth, like they do with Amazon). In their last earnings call, I'm not sure if they specifically cited any particular regulatory policy that would hamper profitability. Except, maybe Ele.me minimum wage policy.

If you seen/heard any specific new regulation that may fundamentally threaten their profitability/business prospects, please do share, thank you.

Forgot to link one more important policy update, possibly significant: https://www.bloomberg.com/news/articles/...own-widens

Quote:Alibaba Warns of Higher Taxes as China Crackdown Widens
China’s No.1 e-commerce company told some investors during post-earnings calls this week that the government stopped treating some of its businesses as so-called Key Software Enterprises (KSE) -- a designation that conferred a preferential 10% tax rate, according to people familiar with the matter. The Tmall operator forecasts an effective tax rate of 20% for the September quarter, up from just 8% a year ago, the people said, asking not to be identified discussing private conversations. Going forward, Alibaba warned that most internet companies will likely no longer enjoy the 10% rate, they added.

(17-08-2021, 11:38 AM)Wildreamz Wrote:

(17-08-2021, 11:12 AM)CY09 Wrote: The bear case is that the Chinese tech firms will now be hampered by got measures resulting in flat line earnings. Alibaba and TenCent affiliates are forecasting that their earnings will likely stagnate in for the remainder of this year due to higher cost. this affects their margin.

China is regulating their companies to the extent that the amount of profits/commission they extract for their products and services are controlled by the government. This is scaring investors as it is unlike other market controlled economies where price/supply is left to the invisible hand.

I recall in China, even the prices developers can sell their housing units is capped by a number/PSF dictated by the local government. This was something gleamed from KSH's holding's financial report.

Alibaba has always been a revenue growth play (investors mainly focusing on revenue growth, like they do with Amazon). In their last earnings call, I'm not sure if they specifically cited any particular regulatory policy that would hamper profitability. Except, maybe Ele.me minimum wage policy.

If you seen/heard any specific new regulation that may fundamentally threaten their profitability/business prospects, please do share, thank you.

Restrict the pricing mean hit to revenue while cost remain. 

Nowadays almost everywhere I go has alibaba china tech experts

(17-08-2021, 12:47 PM)donmihaihai Wrote: Restrict the pricing mean hit to revenue while cost remain. 

Nowadays almost everywhere I go has alibaba china tech experts

Refer to CY09's original post: "Flat line earnings" and "higher cost" implies revenue will continue to grow, but net income remain flattish (cost grow in tandem with revenue).

Alibaba is known to reinvest excess profitability to grow their ecosystem (marketing cost, R&D etc.), like Amazon. Investors throughout the years, has grown accustomed to look at overall revenue growth (~35% per year these past few years), free cash flow growth etc, while ignoring absolute net income growth.

That's all I'm trying to convey. Certainly not an expert, and my allocation to China is small (restricted to $BABA) and can be closed at any time (if situation continues to worsen).