8/5/2022: Alibaba's First Revenue Decline
Crazy COVID zero policy is destroying the Chinese economy.
Alibaba reported earnings for the quarter ending June 2022 and saw the first ever revenue decline due to the severe COVID lockdowns in China. The past two years have been brutal for Alibaba. BABA 0.00 stock went from $300 in October 2020 to $92 dollars today. The nightmare started when CCP ordered the suspension of IPO for Ant Financial. Then there’s the Jack Ma disappearance, all the “common prosperity” push, potential stock delisting from NYSE and then severe COVID lockdowns.
I never owned any Chinese stocks. It’s probably because I read too much dark history about CCP. I don’t think CCP actually believes in capitalism. (They are the Chinese COMMUNIST party anyway.) I believe they would use capitalism as a tool to accumulate wealth and power and when the time comes, they would get rid of the capitalists and operators that made all the prosperity happen and assume control of big successful businesses. This is exactly what happened. In the past 40 years, more than 850 million Chinese people have been lifted out of extreme poverty after the Chinese economic reform(改革開放). On average, Chinese people’s life is definitely better compared to 40 years ago when China first emerged from the cultural revolution hell. Despite the phenomenal growth, I really don’t know how to be an investor knowing that CCP could one day take over a big well-run company like Alibaba or Tencent. The current Xi Jinping regime seems to be going backwards aggressively with more control and less freedom in all aspects such as asserting control of the Chinese big tech and cracking down on billionaires . The current crazy covid zero policy is literally restricting physical movement of people and bankrupting many individuals and businesses. I honestly don’t know what’s going to happen if the CCP continue their current trajectory.
Softbank is unwinding their stake in Alibaba and Jack Ma plans to cede control of Ant Financial. With the 20th party congress on the horizon, China (and potentially the World) is going through a tumultuous period. I believe investors need to pay more attention to the geopolitical risks than to the numbers when investing internationally. After all, not every country is like the United States of America. .