- The CEO of Alibaba, Daniel Zhang, downplayed the impact of President Trump’s trade war on China and said the country can become a self-sufficient market of one billion consumers.
- Alibaba is the seventh most valuable company in the world, and the second most valuable firm in China, with a market cap of $US394 billion.
- Zhang said Chinese consumers were accustomed to saving money, giving them higher spending power than counterparts in the US and Europe.
- China’s household debt-to-GDP ratio is indeed low, but that’s changing fast.
The chief executive of China’s second biggest company, Alibaba, struck a defiant note about US President Donald Trump’s trade war.
Speaking at the World Economic Forum, Alibaba CEO Daniel Zhang said the trade war wouldn’t detract from the fact foreign companies would always want to access China’s market of one billion consumers.
Beginning diplomatically, Zhang said: “From China’s side, most Chinese people want… a better resolution between the two countries. People realise that these two largest economies create value and benefit for people all round.”
But he continued by saying China had “other opportunities.”
“The trade war is one matter,” he said. “China is such a huge market, with one billion consumers and if we can make China the whole market in the right conditions, it’s a self-sufficient market.”
Zhang has a point.
Chinese tech giants such as Tencent, the sixth most valuable company in the world, and Alibaba, seventh most valuable company in the world, have appeared seemingly out of nowhere by racking up hundreds of millions of consumers in their own country. The emerging middle class of consumers who have money to burn in China is so big that many giant local firms haven’t had to look for success beyond their own country.
Chinese firms are aided by the country’s protectionism, which makes it difficult for foreign firms to set up shop without a local partner. And China’s internet is blocked off for outside players such as Facebook or Google.
“As long as the consumption power is there, the US, Europe [will] want to come to China,” Zhang said. “The most important thing is consumption power, [of] which I believe China is a strong growing driver in the future.”
Zhang pointed to Chinese consumers’ low debt burden.
“If you look at household debt for Chinese families compared to the US, it’s very low. And Chinese people are used to a higher saving rate. The market is there,” he said.
China’s household debt-to-GDP ratio is indeed low, but that’s changing rapidly. According to a report by German insurer Allianz, China’s household debt ratio stands at 49.1%. This is low compared to Western economies, with the US at 82%, but Allianz described this as “alarmingly high”, and up around 20 percentage points over five years.
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