Beijing’s uncompromising measures to combat coronavirus outbreaks as part of a policy of zero tolerance for COVID have led to a significant slowdown in the Chinese economy. Due to the government’s stringent sanitary restrictions, major Chinese tech companies saw their sales drop significantly. Resulting in the worst quarterly growth in their history.
E-commerce giant Alibaba saw no year-on-year quarterly revenue growth for the first time in its history, and Tencent, owner of the WeChat messenger and one of the world’s largest gaming companies, reported its first-ever drop in sales.
Lockdowns hit Chinese tech giants hard: recorded the weakest quarterly growth in history
“Retail sales decreased year-over year in April and May. Due to the resurgence of Covid-19 in Shanghai and other major cities. And has slowly recovered in June,” Daniel Zhang, CEO of Alibaba, said on the company’s earnings call this month.
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JD.com, China’s second-largest e-commerce company, reported its weakest revenue growth ever. While electric vehicle maker Xpeng posted a larger-than-expected quarterly loss. And a weaker-than-expected analysts forecast for the next quarter, promising to deliver 29,000 to 31,000 vehicles. Together, these companies have a market capitalization of over $770 billion.
“What I find interesting is how the narrative on the big tech companies … has changed: early on in the pandemic, COVID was expected to benefit the big online platforms at the expense of ‘offline’ businesses, as much of the economy would be stuck at home with little other choice than to shop online and entertain themselves online,” Tariq Dennison, wealth manager at GFM Asset Management, told CNBC.
China saw a spike in coronavirus cases last quarter. In the fight against the spread of the pandemic, the authorities imposed lockdowns in major cities. Including Shanghai, lasting several weeks, and carried out mass testing of the population.