It may be election day in the US, but here in China the focus is decidedly on imports with the staging this week of a massive import-focused expo in Shanghai. This particular event, officially called the China International Import Expo, has big political overtones, which I've looked at in a bit more depth in my weekly column on doing business in China, for anyone who is interested (English article).
I'll recap that element briefly in a moment, but the focus of this post will fall squarely on some relatively big numbers coming out of three of China's leading e-commerce companies, in terms of the kinds of imports they think they can facilitate over the next few years. One report has added up commitments from Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), Suning and NetEase (NASDAQ:NTES), and determined the four have collectively said they could facilitate 1.5 trillion yuan in imports, equal to about $216 billion (Chinese article).
While that number looks impressive as a headline figure, it's helpful to parse it up a bit to see what it really means, especially since the lion's share comes from a fuzzy forecast from Alibaba. I'll also offer my thoughts on whether this kind of figure is really reachable, in the context of how much Chinese are importing now and what, if anything, may change after this massive government-sponsored event in Shanghai.
Just about everyone is aware of the ongoing trade war between the U.S. and China, and one of Donald Trump's biggest grievances is the massive trade imbalance between the two countries. To address that, Chinese President Xi Jinping wants to show that China will step up its import game, and this particular import expo has been billed as one of the president's periodic "signature events," meaning it's at the top of his agenda.
When these kinds of agenda items pop up, everyone in China, including private companies like Alibaba and JD, and especially big state-owned companies, tend to quickly jump in to show they are supporting the cause and curry favor with the government. In this case Alibaba has made the biggest commitment by far, saying it will facilitate $200 billion - far more than any of its rivals - in imports over the next five years.
Alibaba announced an A-list of foreign partners who will help to fuel that drive, running the range from Japanese watch maker Casio to French food specialist Danone (OTCQX:DANOY) and South Korean electronics giant LG (OTC:LGEPF). A little math will show the figure breaks down to $40 billion in imports each year, which looks relatively large when one considers the value of all goods traded on the company's China marketplaces last year was worth about $700 billion. But Alibaba was never one to think small, and the roughly 5 percent ratio represented by the $40 billion figure doesn't really look all that unreasonable.
Next there's JD, which said that during the Expo period it signed orders to import nearly 100 billion yuan worth of goods, equal to a far more modest $14 billion. Suning put its orders signed during the Expo at a similar level of about 15 billion euros, while NetEase said its cross-border trade platform called Kaola had signed 20 billion yuan worth of orders, equal to a relatively modest $3 billion.
The list of products covered by the four companies is quite diverse, though infant care, makeup and electronics products seem to be a few of the favorites. The fact of the matter is that Chinese consumers have shown a growing penchant for buying these kinds of products from abroad due to higher quality of such imports, and that trend is unlikely to change. In fact, I do think the JD, Suning and NetEase figures would have been attainable in the normal course of business with or without the help of the expo.
Alibaba's figure is the most likely to be possibly exaggerated, as founder Jack Ma is often prone to doing. The company most recently said it aimed to serve 2 billion customers globally by 2036, equal to more than a quarter of the world's current population, which seems like a bit of a stretch (previous post).
But the bottom line in all this is that imports are clearly growing in China, and perhaps they will grow even more quickly now with Beijing's blessing. That should be good news for retail-focused e-commerce companies as a whole, especially ones with strong cross-border trading platforms like Alibaba, JD, Suning and NetEase.