China’s gigantic market and its growing firms

 
Alibaba's headquarters, Hangzhou, Zhejiang province

We always knew that China's potential market is huge, but today's prospectus from giant e-commerce firm Alibaba is a reminder as to how large it already is.

According to CNNIC, the Chinese Internet agency, there are 618 million Internet users. There's another 700 million people in China so about half of the population is currently online.

Impressively, 500 million are mobile internet users. And, 302 million shop online which is 7.9% of total consumption in China.

So, there's another one billion people who can shop online and thus a lot more scope for online commerce.

China's biggest e-commerce firm Alibaba says that it accounts for 76% of the mobile merchandise market which works out to $37 billion last year.

Share sale

I've written about how their business is similar to Amazon, eBay, and a few others all rolled into one.

So, its IPO can be viewed as a chance for global investors to buy into the rapidly expanding Chinese middle class.

It is also another example of a Chinese company "going global", particularly by choosing to take its listing to the US.

Indeed, the location of the IPO has been a point of debate.

Choosing to list in New York instead of Hong Kong, which is where big Chinese firms tend to list, is due to the founder, former schoolteacher Jack Ma's desire to retain control of the company.

I've written about how Hong Kong won't allow it, but New York would permit a founding minority shareholder to control the company like Facebook's Marc Zuckerberg.

Of course, these days, for investors, it's not as big an issue, but it is a sea change from large Chinese companies that had favoured the home market.

Record setters

So, with the push for Chinese companies to become multinationals and competitive on the world stage, plus the size of the Chinese market, it's unsurprising that the biggest IPOs on record are Chinese.

According to Dealogic, the biggest IPOs have been the Chinese banks, Agricultural Bank of China and ICBC.

This is followed by the insurer AIA and then US company Visa. If Alibaba raises $20 billion from its IPO, then it would be larger than Visa and rank as the fourth largest IPO of all time.

It means that of the top 5 biggest IPOs, three would be Chinese companies. Of course, there are valuation issues around the Chinese state-owned commercial banks with their state-funded deep pockets.

But, Alibaba isn't state-controlled, so its sale of shares would be a better reflection of what to expect from Chinese firms.

On the other hand, I've written about concerns over a tech bubble and Chinese companies won't be immune.

 
Linda Yueh Article written by Linda Yueh Linda Yueh Chief business correspondent

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  • rate this
    -4

    Comment number 62.

    Nobody leaving comments on this site is paid by the British public to write and report. Nobody leaving comments on this site has any responsibility to the British public. That's the difference. So the report states that China is a massive economy. Really, well spotted Sherlock.

  • rate this
    0

    Comment number 61.

    Why is it we allow China into our markets yet they are protective of their own. That's how they can grow so fast and big. More fools us me thinks

  • rate this
    +3

    Comment number 60.

    This article is perfectly sensible.
    The Chinese economy is something that most people in the West hardly ever think of, and when they do they underestimate it. Hence the value of this piece.
    We have no idea how an economy that big will work, nor of how social change, politics and the economy will interact in China over the next 20 years.

  • rate this
    +2

    Comment number 59.

    @52
    Racism is racism but calling someone a racist doesn't make them a racist, as clearly nobody is here.
    ++++++++++++

    There are some minor grammatical errors in the article, not as many as some have suggested. While it may be fair to criticise the linguistic skills of a writer, the lack of coherence as demonstrated in your statement quoted above make a mockery of your criticism.

  • rate this
    +5

    Comment number 58.

    Great article Linda. Yes, the potential of China is extraordinary much to the chagrin of many of the posters below who fear the rise of Asia.

    Also interesting that Alibaba chose New York over HK. Why should a minority shareholder be able to control a company at the expense of other shareholders? Goes to show corporate regulation is stronger in emerging Asia than the oligarch-controlled US.

  • rate this
    -3

    Comment number 57.

    Why is there absolutely no attempt to relate this back to what it means to us, in this article?

    I don't care. This could have been about Nigeria or India or Denmark.

    What is the point of the article? China has a lot of people in it? I knew that before I wasted 3 mins reading this and then a further 3 moaning about it.

  • rate this
    0

    Comment number 56.

    @52.AliBenSawali

    "When someone is paid to report and write in the English language the quality of that writing is fair game."
    +++
    If you said to someone who spoke poor english that they spoke poor english would that still be fair game?

    Point is its easy to understand what the report is saying, drawing attention to grammatical errors is not needed and rude in the same way as saying it in person.

  • rate this
    0

    Comment number 55.

    Linda's problem is that she writes how she talks. A kind of BBC one world jargonistic sex and the city mish mash.

  • rate this
    +1

    Comment number 54.

    The content is understandable, eve if the English is a little tortured in places.

    So there are grounds for criticism, even if one could consider them pedantic, but claims of 'racism' aimed at the complainants is ridiculous. The accusation is used so often it is worthless.

    So are accusations of racism the last refuge of the modern scoundrels?

  • rate this
    -3

    Comment number 53.

    42.
    Living stone
    2 Hours ago

    Terrible writing. The kind of quality you'd see in yahoo articles. Well...it's from China.
    ========

    A native Chinese speaking better English than a native English. Yes, made in China. Whereas made in the UK: I speek Englees, what languige u spekkin? sounds forun

  • rate this
    +3

    Comment number 52.

    When someone is paid to report and write in the English language the quality of that writing is fair game. It is an issue of quality not racism. Interestingly those suggesting racism feel the need to temper it with the words 'casual' or 'borderline'. Racism is racism but calling someone a racist doesn't make them a racist, as clearly nobody is here.

  • rate this
    -1

    Comment number 51.

    The comments on Linda's grammar is just casual racism - let's pick up on non flaws just because she isn't a white English speaker, despite the fact her English is better than most white English natives.

    As for China multinationals, where are they??? US is littered with them, but despite the market size of China, its companies have failed to have any world significance.

  • rate this
    +3

    Comment number 50.

    49 Beb I agree. Linda Yueh has a good enough command of English & anyway is employed for her journalistic insight into China

  • rate this
    +3

    Comment number 49.

    One despairs of the pedants on here. An article highlights the seismic shifts taking place in the world economy and they focus on clause structure!

  • rate this
    +1

    Comment number 48.

    Jupiter is big. China is a red spot in comparison.

  • rate this
    +2

    Comment number 47.

    @ 40. DS

    I wonder how grammatically accurate your Chinese is?

  • rate this
    -1

    Comment number 46.

    One day black people and white people finally live side by side in harmony… in Chinese concentration camps- Sir Frankie Boyle CBE, MBE, OBE, GBE, KBE.

  • rate this
    +3

    Comment number 45.

    This is impressive, very much so, a major economic move for China.

    By listing in New York, China now approaches this endeavor seriously.

  • rate this
    0

    Comment number 44.

    @42.Living stone

    Terrible writing. The kind of quality you'd see in yahoo articles. Well...it's from China. I bet Alibaba will follow the same quality standards.

    @40.DS

    There are almost as many grammatical errors in this article as there are people in China.
    +++
    You are terrible snobs and borderline racists. Its attitudes like these that will ensure our nations inferior place in the world.

  • rate this
    -1

    Comment number 43.

    OK...how do you get your website to show on China's search Engines?
    I know I'm an 'enemy of the people'...http://sharkfinsouptheyellowperil.blogspot.co.uk/ but by now so is Gordon Ramsey as well surely?

 

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