- The Chinese tech sector has benefited immensely from the country’s economic recovery
- E-commerce giant JD.com raised over £3 billion in its secondary listing in Hong Kong in June
- Pinduoduo is the fastest-growing e-commerce platform in China and has more active users than Pinduoduo
Chinese tech giants have witnessed significant growth in the second half of the year so far despite the global Covid-19 pandemic that started in the world’s most populous country.
Rebound in progress
The tech sector in China has benefited immensely from the country’s economic recovery following a shutdown of certain parts of countries due to the pandemic.
“On the user behavior side (in China), the pandemic gave an impetus to the penetration of several major digitization businesses, helping some of them grow significantly to reach the necessary scale and achieve economic efficiency in a short time,” said Charlie Chai, an analyst at 86 Research.
“On the other hand, a countervailing force is a cut in investment on the business side, as major industry leaders including BAT (Baidu, Alibaba, Tencent) prioritize margins amid a potentially turbulent economic and geopolitical environment.”
The COVID-19 outbreak initially started in January in China, forcing more than half of operations and businesses across the country to shut down. As a result, the country saw a 6.8% drop in growth in the first quarter.
This then led to a sharper recovery as domestic businesses began reopening in March, leading to a positive Q2 GDP (3.2%).
“Because of the virus, China is more hungry for technology than ever before,” said Abishur Prakash, a geopolitical specialist at the Center for Innovating the Future (CIF), a US consulting company.
“From health care to transportation to finance, projects are underway that will rewire China — and put technology at the heart of everything.”
2 Chinese tech stocks to buy
The pandemic led to a surge in online shopping numbers. Physical stores were closed for weeks, which forced businesses to invest heavily in expanding their online presence. For this reason, among other factors, JD.com (NASDAQ: JD) seems well-positioned to benefit.
In June, the e-commerce giant JD.com raised over £3 billion in its secondary listing in Hong Kong at a per-share price of £23. The company sold 133 million shares at a price of £23 per share.
Just a few days after its secondary listing in Hong Kong, JD.com and Alibaba (NYSE: BABA) made combined sales of an unprecedented £110 billion on “618”, that is among the biggest annual shopping events in China. JD.com aline sold £30.62 billion worth of goods this year, higher than £22.96 billion in 2019.
Similar to JD.com, Pinduoduo (NASDAQ: PDD), an interactive shopping platform, is growing at a rapid pace. For instance, JD.com’s has 417 million annual active users, whereas Pinduoduo’s annual active buyers are reported at around 683 million.
“In the future, there won’t be a distinction between online and offline as no business can do without technology. So how do we become a pioneer and leader in this new world is something that we ponder a lot on,” ex-Google engineer and PDD’s founder Colin Huang said.
Pinduoduo is the fastest-growing e-commerce platform in China.
As Chinese tech stocks have surged in Q2 and Q3, JD.com and Pinduoduo look well-positioned to yield strong growth in a post-pandemic economic rebound.