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Alibaba Collaborates With Yiwu to Build SME Trading Platform

Zacks Equity Research

Reportedly, Alibaba Group Holding Limited BABA has signed an agreement with the Yiwu government to establish an e-commerce trade hub under the Electronic World Trade Platform (eWTP) initiative.

Located in the province of Zhejiang, Yiwu is the world’s largest wholesale market for daily commodities. It attracts more than 500,000 buyers from around the world every year. Also, it exports goods to more than 200 countries and regions.

This deal will allow Yiwu’s small sellers to gain a quick access to overseas buyers, digital services and infrastructure, thereby enhancing trade activities in the city.

The deal is inline with Alibaba’s strategy of enhancing cross border e-commerce activities and setting up an equitable platform for small players in the global trade market.

The company expects this move to help it in increasing e-commerce activities and gaining greater logistics efficiency.

Coming to share price performance, the company's shares have lost 17% in the past year compared with the industry’s decline of 8.6%.

eWTP Concept

In 2016, the eWTP was first laid out by Alibaba’s founder and chairman, Jack Ma. The aim of the initiative was to lower e-commerce trade barriers for small- and medium-sized enterprises (SMEs) so that they get an easy access to global markets.

The benefits of using eWTP hubs include simple regulations, speedy customs clearance, logistics support and minimal tariffs.

Alibaba Group Holding Limited Price and Consensus

 

Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote

China Holds Promise

Per the latest report from Statista, revenues in the e-commerce market of China are expected to witness a CAGR of 11% between 2019 and 2023.

This immense growth potential of the market can be attributed to rising demand for apparel in the fashion world.

We believe that Alibaba is well poised to gain momentum in the country's e-commerce market with the help of the logistics service platform.

Summing Up

The Chinese e-commerce giant is consistently trying to expand e-commerce presence on a worldwide basis and capitalize on increasing online demand in international markets.

In this regard, the company had announced a plan to set up an e-commerce hub in Malaysia in 2017. Since then, the eWTP project launched hubs in Hangzhou (China), Belgium and Rwanda. These hubs include logistics, cloud computing, and e-financial service for boosting trade as well as e-commerce in the region.

The Yiwue WTP Pilot Area is the fifth eWTP hub under the global eWTP initiative. The latest deal will further strengthen Alibaba’s e-commerce activities in China.

Alibaba’s chief executive officer Daniel Zhang said, “Alibaba Group and Yiwu both have a long history of enabling small businesses to participate in global trade. While Yiwu brings together buyers from around the world, Alibaba’s platforms also bring together millions of merchants and hundreds of millions of consumers. The synergy of the two ecosystems will create value for our communities of users.”

Zacks Rank & Stocks to Consider

Currently, Alibaba has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Facebook, Inc. FB, IAC/InterActiveCorp IAC and AXT, Inc. AXTI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Facebook, IAC/InterActiveCorp and AXT is currently projected at 20.2%, 20.5% and 15%, respectively.

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