With the coronavirus (now having just been given the official name “Covid-19”) still ongoing, tens of millions of people remain under soft quarantine in Hubei, China and consumers across the nation have stayed at home more.
China’s government has deployed vast resources to fight the coronavirus and Chinese Premier Li Keqiang recently visited Wuhan in a show of solidarity.
The Chinese government isn’t alone in fighting the coronavirus. Leading Chinese companies like e-commerce giant Alibaba Group Holding (NYSE: BABA) (SEHK: 9988) and Alibaba Health Information Technology Ltd (SEHK: 241) are also doing their part.
Why Alibaba is spending money
Although Alibaba isn’t required to contribute anything and donating resources won’t be profitable in the near term, fighting the disease makes good business sense.
If the coronavirus does too much damage, it could slow China’s GDP growth and hurt the already weak Chinese ad market. If the ad market softens, Alibaba’s e-commerce results might not be as strong. It makes a substantial portion of its sales from displaying search ads on its Tmall and Taobao marketplaces.
Donating resources will also help Alibaba win goodwill from the Chinese consumer. As the company expands into new segments such as healthcare over the coming decade, the extra goodwill it earns could help it in winning more market share.
Alibaba has exposure to the sector through partial ownership of Alibaba Health Information Technology, one of China’s largest online pharmaceutical platforms in China.
Chinese healthcare a massive opportunity
In terms of China’s healthcare market, the sector is large and growing fast. According to KraneShares, the healthcare market in China has had a five-year compound annual growth rate (CAGR) of around 11% and the market is expected to grow to as much as US$1.1 trillion this year. Given rising dispoable incomes, the country’s ageing population, and increased urbanisation, there is likely a lot of growth ahead.
Similarly, China’s healthcare IT market is a large one and growing fast. According to China Internet Datacenter Services, the market is expected to reach US$7.2 billion this year. By utilising technology and the internet, IT companies can increase the convenience when patients consult their healthcare providers. Through telemedicine, rural residents can access higher quality healthcare that’s only usually found in China’s large cities.
Alibaba is donating money
Alibaba is joining the fight against the Wuhan coronavirus by donating money. The technology conglomerate recently committed to donating 1 billion yuan for the purchase of medical supplies for hospitals in Wuhan and Hubei province.
Alibaba founder Jack Ma has also joined the fight. Through a foundation, Ma pledged 100 million yuan (US$14.4 million) to both find a vaccine and to support the treatment and prevention of the coronavirus.
Alibaba and Alibaba Health offering resources
In terms of Alibaba Health, the company has used telemedicine to help relieve the strain that the coronavirus has put on the Hubei province healthcare system (Wuhan is the capital of Hubei). Specifically, patients with minor illnesses in the area can consult with Alibaba Health’s online doctors for free.
Besides donating money, Alibaba has also donated other resources. The e-commerce firm’s food delivery division, Ele.me, has offered free lunchboxes to Hubei medical staff, and its cloud division (AliCloud) has offered AI computing capabilities to many scientific research institutions free of charge to potentially expedite the creation of a cure or vaccine.
Source: Motley Fool