Why Alibaba is storming rural China

When Mao was leading a Communist insurrection against the Nationalist Chinese government in the 1920s and 30s, his basic strategy was to use the country’s vast countryside and hinterland to encircle the cities. His guerrilla tactics worked effectively and he won the civil war.

Now it seems many of China’s corporate titans are taking a leaf or two out of Mao’s strategy book. Huawei, a Chinese telecommunication is a good example. The company marketed its cheap gear in rural and regional areas before it broke into urban markets dominated by foreign competitors.

Now the latest corporate giant to adopt this Maoist strategy is the red-hot Alibaba, which made IPO history last month with its spectacular $25 billion listing on the New York Stock Exchange. The company has announced its ambition to move aggressively into the country’s rural market.

Alibaba’s chief operating officer Zhang Yong sets out Alibaba’s grand ambition with a set of impressive figures. The e-commerce giant is eyeing China’s large one billion rural population and intends to spend 10 billion yuan or $AU1.9 billion within the next three to five years to build 1000 county-level operating centres and 100,000 rural services stations.

Alibaba will start the rural expansion project at Zhejiang province; a prosperous eastern region where Alibaba’s headquarters is based. The provincial government has agreed to make developing e-commerce in the region one of its top priorities. The next province on the radar is Guangdong province, the export powerhouse of the country, according to Caixin, a respected Chinese business publication.

Read the full story vía: Business Spectator Australia

Author: Peter Cai