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Alibaba Mirrors the Fits and Starts Rise of China's New Economy

When Alibaba Group Holding Ltd. on Tuesday released bumper third quarter sales figures, the e-commerce company’s stock price shot to the highest level in more than two months. The upbeat results were noteworthy, given that corporate profits across China are under pressure in an economy on track to deliver its weakest annual expansion in 25 years.

Yet the better-than-expected numbers from Alibaba, a company with exposure to everything from business-to-business web portals and online retail to shopping search engines and cloud computing, point to emerging trends in the world’s second-biggest economy as well.

In many ways, Alibaba is a useful proxy for the broader, if sometimes halting, transition underway within China’s complex, $10 trillion-plus economy away from debt-fueled investment, exports and heavy industry as dominant drivers of growth and more toward sectors like consumption and services.

This rebalancing act by President Xi Jinping’s government seems to be gaining traction. Retail sales grew faster than investment in the year through September, a marked change from the days when residential construction was the primary growth driver. Top Communist Party officials, gathered this week for a plenum meeting, are expected to sign off a new five-year blueprint for the economy that will have consumption and services at the center.

"The building blocks are now in place for what could be the world’s greatest consumption story of the 21st century," said Stephen Roach, a senior fellow at Yale University and former Morgan Stanley non-executive chairman in Asia.

The...


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