Could New Threats Force Alibaba Out Of Taiwan?

What Happened: On Monday, Reuters reported that the Taiwanese government gave the local branch of Alibaba Group Holding Ltd’s e-commerce platform, Taobao, six months to re-register as a Chinese investment rather than a foreign one, or it must leave the country. The order comes at a time of escalating political tensions, emphasized through the country’s intensified scrutiny of Chinese investments.

Taobao Taiwan is operated by a UK-registered company called Claddagh Venture Investment. But according to the investment commission of Taiwan’s Economics Ministry, Alibaba holds a controlling stake in the company. Claddagh Venture Investment was fined $13,950 (410,000 TWD) for breaching Taiwanese law regarding Chinese investments, the commission said in a statement. Alibaba’s Taobao had a similar fallout in 2015 with the Taiwanese authorities for failing to apply for the permit required for mainland Chinese companies to do business on the island.

Jing Take: We foresee that Alibaba will manage to come to an understanding with Taiwanese authorities. Taobao Mall has become a luxury gateway that brings consumers closer to luxury brands, and Taiwan is slowly growing into an important and fashionable luxury destination. According to the 2019 Knight Frank Wealth Report, Taiwan ranks no. 19 in the world in “ultra-rich” populations (people whose net worth exceeds $30 million), and Taipei ranks no. 9 globally for cities with the highest number of ultra-high-net-worth individuals.

Statista highlights that the revenue from online wholesale and retail goods in Taiwan amounted to approximately $25.7 billion (753.7 billion TWD) in 2018, and Euromonitor reported that luxury sales continued to rise in Taiwan during 2019 — despite the economic slowdown, falling demand among Chinese tourists, and the challenging macroeconomic situation.

Taiwan will continue to field a healthy demand for luxury goods, and the Taiwanese will remain faithful to Taobao and Taobao Mall (Tmall) if they offer access to a marketplace where consumers can find with tens of thousands of their most-loved brands.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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