May 13, 2019 - Economy

JD.com's earnings present questions about China's growth

Dion Rabouin

Despite rape allegations against its CEO, China's second-largest e-commerce company, JD.com, posted record quarterly earnings Friday with a $1.1 billion profit after a $364.6 million loss last year.

The big picture: The Nasdaq-listed company's stock got a major boost after reporting earnings but investors are starting to worry about its long-term health. As Axios' Erica Pandey reported, the 21% revenue growth posted by Chinese e-commerce giant was its slowest on record, signaling that the rush of new Chinese customers is starting to plateau. JD's chief rival, Alibaba, has also reported slowing growth.

Why it matters: The e-commerce companies experienced massive booms in earlier years as millions of new Chinese users entered the urban middle class and became customers. Now, the pace of growth for that user base is slowing down, forcing both JD and Alibaba to expand into other Asian markets to add shoppers.

My thought bubble: A big key to bullish expectations for China is that the country still has significant room to grow because of the number of rural citizens who could move into higher earning urban areas and occupations.

Together, India, China and Nigeria are expected to account for 35% of the projected growth of the world's urban population between 2018 and 2050, with China adding 255 million urban dwellers.

The bottom line: The dramatic slowing in revenue growth for JD and Alibaba suggest that growth may have hit a snag. That could have wide-ranging consequences for China and its trading partners.

Go deeper: JD.com makes 90% of its Chinese deliveries within 24 hours

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JD.com's earnings present questions about China's growth

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