Alibaba Group Holding Limited
Fiscal Year 2024 Annual Report
Fiscal Year
Annual Report
2024
Alibaba Group Holding Limited
NYSE: BABA
HKEX: 9988 (HKD Counter) 89988 (RMB Counter)
Accelerating our core businesses’ growth
Maintaining leadership in fundamental
technologies and innovation, including AI
2
Our Mission
3
Our Vision
5
Our Values
6
Key Events in Fiscal Year 2024
8
Letter from our Chairman and our CEO
12
Business Overview
80
Management Discussion
and Analysis
132 Directors, Senior Management
and Employees
Contents
153 Major Shareholders and
Related Party Transactions
169 Other Information to Shareholders
183 Exemptions and Waivers
185 Risk Factors
250 Definitions
256 Financial Statements
344 Further Information
Years
We do not pursue size or power; we aspire to be a good company that will
last for 102 years. For a company that was founded in 1999, lasting for 102
years means we will have spanned three centuries, an achievement that
few companies can claim. Our culture, business models and systems are
built to last, so that we can achieve sustainability in the long run.
We aim to build the future infrastructure of
commerce. We envision that our customers will
meet, work and live at Alibaba, and that we
will be a good company that lasts for 102 years.
Our Mission
Our Vision
Our founders started our company to champion small businesses, in the belief that the
Internet would level the playing field by enabling small enterprises to leverage innovation
and technology to grow and compete more effectively in domestic and global economies. We
believe that concentrating on customer needs and solving their problems — whether those
customers are consumers, merchants or enterprises — ultimately will lead to the best outcome
for our business. In the digital era, we are staying true to our mission by helping our customers
and business partners harness the power of digital technology. We have developed a large
ecosystem powered by technology infrastructure that enables participants to create and share
value on our platforms. Our decisions are guided by how they serve our mission over the long
term, not by the pursuit of short-term gains.
To make it easy to do
business anywhere
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Fiscal Year 2024 Annual Report
2
Alibaba Group Holding Limited
Customers first, employees
second, shareholders third
This reflects our choice of what’s
important, in order of priority. Only
by creating sustained customer
value can employees grow and
shareholders achieve long-term
benefit.
Trust makes
everything simple
Trust is both the most precious and
fragile thing in the world. The story
of Alibaba is a story of building
and cherishing trust. Complexity
begets complexity, and simplicity
breeds simplicity. Aliren (阿里人)
are straightforward – what you see
is what you get. With trust, there is
no second-guessing or suspicion,
and the result is simplicity and
efficiency.
Change is
the only constant
Whether you change or not, the
world is changing, our customers
are changing and the competitive
landscape is changing. We must
face change with respect and
humility. Otherwise, we will fail
to see it, fail to respect it, fail to
understand it and fail to catch
up with it. Whether you change
yourself or create change, both
are the best kinds of change.
Embracing change is the most
unique part of our DNA.
Today’s best performance is
tomorrow’s baseline
In Alibaba’s most challenging
times, this spirit has helped us
overcome difficulties and survive.
In bad times, we know how to
motivate ourselves; in good times,
we dare to set “dream targets”
(stretch goals). Face the future,
or we regress. We must shoot for
the moon, challenge ourselves,
motivate ourselves and exceed
ourselves.
Live seriously,
work happily
Work is now, life is forever. What
you do in your job is up to you, but
you have responsibility to the ones
who love you. Enjoy work as you
enjoy life; treat life seriously as you
do work. If you live with purpose,
you will find reward. You make
Alibaba different and make your
loved ones proud. Everyone has
their own view of work and life;
we respect each person’s choice.
Whether you live by this value
depends on how you live your life.
If not now, when?
If not me, who?
This was a tagline in Alibaba’s first
job advertisement and became our
first proverb. It is not a question,
but a call of duty. This proverb
symbolizes the sense of ownership
that each Aliren must possess.
Our Values
Our values are fundamental
to the way we operate and
how we recruit, evaluate and
compensate our people.
We empower our customers
with the fundamental
infrastructure for commerce and
new technology, so that they can
build businesses and create value
that can be shared among our
ecosystem participants.
We strive to expand our
products and services to
become central to the
everyday lives of our
customers.
Alibaba
@
LIVE
Alibaba
@
WORK
We enable commercial and social
interactions among hundreds
of millions of users, between
consumers and merchants, and
among businesses every day.
Alibaba
@
MEET
Customers
First,
Employees Second,
Shareholders Third
Trust
Makes
Everything Simple
If Not Now,
When?
If Not Me,
Who?
Today’s Best
Performance Is
Tomorrow’s
Baseline
Live Seriously,
Work Happily
Change
Is The Only
Constant
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Fiscal Year 2024 Annual Report
September
Alibaba Group completed the leadership
transition of its Chairman and Chief
Executive Officer. The company laid out
“user-first” and “AI-driven” as its two
main strategic focuses, reshaping its
business priorities.
The Hangzhou 19th Asian Games were
held from September 23 to October
8, 2023. As the official partner of the
Hangzhou Asian Games, Alibaba Group
worked to digitalize the Games by
migrating the Games’ core systems onto
the cloud and transforming it into the
first ever “Asian Games on the Cloud”.
June
Alibaba Cloud’s AI-driven sustainability
solution, Energy Expert, was leveraged
at the first Olympic Esports Week to
measure and analyze carbon emissions
generated by the construction of
the event’s temporary stadium and
to provide data-driven insights on
materials and equipment used.
April
Alibaba Cloud unveiled
its proprietary AI large
language model (LLM),
Qwen (also known as
Tongyi Qianwen), which
has been increasingly
integrated into various
business applications
across the Alibaba
ecosystem. Later in the
year, Alibaba Cloud
released Qwen 2.0,
along with multiple
brand new industry-
specific vertically-
trained LLMs.
May
Taobao celebrated its 20th anniversary
by hosting the Taobao Maker Festival
across ten cities popular with tourists in
China with free public admission.
Alibaba Group board of directors
introduced a new Capital Management
Committee to enhance shareholder
value through a comprehensive plan.
The board of directors also established
a Compliance and Risk Committee
to oversee Alibaba Group’s overall
regulatory compliance and risks in key
areas other than financial reporting.
2023
2024
December
Alibaba Cloud open-sourced LLMs with parameters ranging from
0.5 billion, 1.8 billion, 4 billion, 7 billion, 14 billion, 32 billion and 72
billion, as well as multimodal LLMs with audio and visual understanding
capabilities. As of March 31, 2024, Alibaba Cloud’s open-source AI
model community ModelScope has become the leading destination for
high-quality models and thousands of datasets, providing models and
free computing power services to developers.
Alibaba Group is the world’s fourth largest and Asia Pacific’s largest
Infrastructure-as-a-service provider by revenue in 2023 in U.S. dollars,
according to Gartner’s April 2024 report(1).
November
For the 2023 11.11 Global Shopping Festival, Taobao and Tmall Group
recorded positive year-on-year growth in participating merchants,
transacting buyers and order volume compared to the same period last year.
Alibaba Group board of directors approved the company’s first annual
dividend for fiscal year 2023 to enhance shareholder returns.
Eddie Wu, Chief Executive Officer of Alibaba Group, unveiled a strategy
for the next growth phase, highlighting the Group’s future direction, key
priorities and execution path.
Alibaba Group joined the World Business Council for Sustainable
Development and collaborated with its members to develop a
framework and methodology on Avoided Emissions.
February
Alibaba Group upsized its share buyback
program by US$25 billion as part of its ongoing
enhancement of shareholder returns.
March
AliExpress Choice celebrated its first anniversary. Merchants are
empowered by Choice to focus on supply chain management
while minimizing retail commerce operational barriers through
the “Fulfilled by AliExpress” offering.
Note:
(1) Gartner®, “Market Share: Services, Worldwide, 2023”, Neha Sethi et al., 12 April 2024, Sorted by Infrastructure-as-a-Service (IaaS), Vendor
Revenue Basis) (Asia Pacific refers to Mature Asia/Pacific, China (Region), Emerging Asia/Pacific and Japan (Region), and market share
refers to that of Infrastructure-as-a-Service (IaaS).
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Fiscal Year 2024 Annual Report
Key Events in Fiscal Year 2024
Joe Tsai
Chairman,
Alibaba Group
Eddie Wu
Chief Executive Officer,
Alibaba Group
Dear Shareholders,
Our fiscal year ended March 31, 2024 was a watershed. It was a year in which Alibaba made several pivots
toward strategic clarity. This clarity has helped us to define who we are, our direction, and how we will execute
our strategy. We believe it is important to share the thought process we went through this past year, and what it
means for Alibaba in the future.
Who We Are
Alibaba has two core businesses: e-commerce and cloud computing. As part of the consumer economy
in China, we have developed an ecosystem of Internet platforms to tap into opportunities in local services,
communications, search, and digital entertainment.
In e-commerce, we run Taobao and Tmall Group (TTG), which includes platforms for the domestic China
consumer and business-to-business markets, and Alibaba International Digital Commerce Group (AIDC), which
includes platforms for the international consumer and business-to-business markets. Other divisions in the
company provide strategic value by bringing synergies that make our e-commerce businesses more valuable.
For example, the on-demand delivery business Ele.me provides the infrastructure for instant delivery of fresh and
perishable items purchased from our e-commerce platforms; and our logistics subsidiary Cainiao provides the
supply chain, transport, and delivery capabilities to create a great experience for the consumers shopping on the
TTG and AIDC platforms.
In cloud computing, we aim to be the leading public cloud infrastructure and platform technology provider in
China, supplying a broad range of capabilities to our customers, including elastic computing, storage, network
infrastructure, security, big data, and artificial intelligence (AI).
Our Strategic Direction
We have chosen two important paths for the strategic direction of our business. As leaders of the company, we
must clearly articulate our direction.
The first strategy is User First. Users of our various platforms come first in the way we operate our business and
design products, from user interface to algorithmic matching to customer service. China has the world’s largest
Internet population with 1.1 billion users, and China’s e-commerce penetration is one of the highest in the world
at around 28% of total consumer retail. Today, you can find every kind of consumer product for sale online. If
brands and distributors want to differentiate themselves, they will increasingly need the targeted consumer
marketing services provided by Internet platforms.
Our User First approach will prioritize user experience in business strategy and product design to drive retention
and repeat purchases. This will provide the best value proposition to sellers of goods and services on our
platforms, such as Taobao, Tmall, Xianyu, Fliggy, Ele.me, Amap, and AliExpress, because Alibaba is where they
can find the most robust, well-segmented, and highest frequency user base for online consumption.
The second strategic direction is our focus on AI as the single most powerful element that will change and
accelerate the growth of our businesses.
Over the next decade, no industry will be spared the disruption brought about by AI. Rather than protecting
the old way of doing things, AI has re-ignited our start-up passion and imagination. Each of our businesses
has massive numbers of use cases, all of which can use AI applications to unleash powerful value, and the
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Alibaba Group Holding Limited
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Fiscal Year 2024 Annual Report
Letter from our Chairman and our CEO
Letter from our Chairman and our CEO
Joe Tsai
Chairman
May 23, 2024
Eddie Wu
Chief Executive Officer
deployment of AI will increase demand for computing and drive growth for Alibaba Cloud. AI will not be a threat
but will herald in massive opportunities as the driver for breakthrough user experience and business models. If
we don’t keep up with the constant and marvelous improvements that AI is showing us on a daily basis, we will
be displaced.
Operating Principles
We follow a number of operating principles as we execute our strategy.
First, we take a long-term perspective when making hard decisions. We think in 10-year cycles as the
development cadence of technology businesses typically experience the phases of investment, growth, harvest,
profit, and invariable decline. Our businesses are in different phases and must be managed differently. For
example, AIDC is nascent and requires upfront investment; Alibaba Cloud is investing for future growth while
harvesting the fruits of economies of scale; and TTG is a mature business that must innovate fast and capture the
next growth cycle.
Second, we apply extreme focus and intentionality in everything we do. Focus means we are not distracted by
unimportant things, and in determining what is important or not, we are unemotional when facing hard choices.
Intentionality means we develop sound reasons for doing what we do. For example, Alibaba Cloud’s pivot to
a public cloud strategy reflects the rationale of our structural advantages in technology leadership and scale
economies; at the same time, we made a hard choice to forego short-term revenue from low-margin project-
based business.
Last but not least, we communicate a clear direction to our teams and seek alignment from them by setting
sound incentive systems. We believe that transparency of strategic direction and demonstration of intentionality
from company leaders make a more productive and happier workforce. We have developed employee incentive
systems that are tied to our mid- and long-range strategic goals, so that our teams know exactly where they
stand financially based on business performance.
Capital Management
In fiscal year 2024, Alibaba generated US$21.6 billion in free cash flow. It is the responsibility of management
to determine how we deploy our cash to maximize shareholder value. We face a trade-off of returning cash to
shareholders on the one hand, and re-investing the cash into existing or new businesses on the other hand.
Our capital management activities in fiscal year 2024 reflected the company’s focus on our core business. We
did not put money into new business lines. Instead, we declared and paid, for the first time in company history,
a dividend of US$2.5 billion, and we repurchased US$12.5 billion of our own shares, which resulted in a net
reduction of 5.1% in outstanding shares. In fiscal year 2024, we delivered value to shareholders by returning cash
and creating earnings accretion.
Investing for the Future
Returning cash to shareholders does not mean we will stop investing. There are two areas where Alibaba will
continue to invest: (1) to accelerate our core businesses’ growth, and (2) to maintain leadership in fundamental
technologies and innovation, including AI.
It is important for you to understand our investment in AI. The latest developments in generative AI with new
iterations of large language models (LLMs) from major global technology companies are relevant to Alibaba in
three ways.
First, as technology pioneers, we are interested in exploring the potential of machine intelligence to achieve
artificial general intelligence (AGI). Ultimately, humankind may be able to achieve AGI based on certain
definitions. The current approach that pushes toward AGI is LLMs that use the transformer architecture. As LLMs
get bigger and go multimodal to incorporate voice, video and image in addition to text, the level of investment
that is required in infrastructure and development can only be taken on by large technology companies that
generate substantial free cash flows from their core business. Alibaba has a market-leading proprietary LLM,
Qwen, and we will continue to invest in LLM and other AI innovations to push the limits of machine intelligence.
Second, investment in LLMs drives the growth of our cloud computing business as the training and usage of LLMs
in development or inference will require computing resources. We have made open-source versions of our LLM
Qwen available to the public, bringing additional demand for our proprietary model that results in computing
resource needs. We also have China’s largest open-source LLM community, ModelScope, which includes third-
party LLMs for developers who need access to our computing resources. Thus, being a leader in the development
of AI brings direct positive growth to our cloud computing business.
Third, Alibaba is an integral part of the consumer economy. The user experience within our multitude of consumer
use cases can be transformed with AI applications, from shopping recommendations to virtual showrooms to
personal assistants. We are excited by the limitless possibilities for AI to drive our User First strategy.
In closing, we want to say this: Alibaba is about the future. In the past 25 years, Alibaba has grown consistently
but, unfortunately, acquired “large company” characteristics. For the next ten years, we see ourselves again as a
start-up defined by entrepreneurship, innovation, and our mission “to make it easy to do business anywhere.” We
will apply long-term thinking when we make trade-offs today and invest for tomorrow.
Letter from our Chairman and our CEO
Letter from our Chairman and our CEO
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Fiscal Year 2024 Annual Report
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Alibaba Group Holding Limited
Business
Overview
Company Overview
To fulfill our mission “to make it easy to do business
anywhere,” we enable businesses to transform the
way they market, sell and operate and improve their
efficiencies. We provide the technology infrastructure
and marketing reach to help merchants, brands,
retailers and other businesses to leverage the power
of new technology to engage with their users and
customers and operate in a more efficient way. We
also empower enterprises with our leading cloud
infrastructure and services and enhanced work
collaboration capabilities to facilitate their digital
transformation and to support the growth of their
businesses.
In fiscal year 2024, our businesses comprise Taobao
and Tmall Group, Cloud Intelligence Group, Alibaba
International Digital Commerce Group, Cainiao Smart
Logistics Network Limited, Local Services Group, Digital
Media and Entertainment Group and All Others. An
ecosystem has developed around our platforms and
businesses that consists of consumers, merchants,
brands, retailers, third-party service providers,
strategic alliance partners and other businesses.
Taobao and Tmall Group
China Commerce Retail
We are the largest retail commerce business in the
world in terms of GMV in the twelve months ended
March 31, 2024, according to Analysys. Our China
commerce retail businesses primarily include Taobao
and Tmall, which together constitute the world’s
largest digital retail business in terms of GMV for the
twelve months ended March 31, 2024, according to
Analysys.
Our China commerce retail business derives the
majority of its revenue from customer management
services. We generate customer management revenue
from merchants by offering an integrated package
and a comprehensive solution comprising a diverse
array of services to enable them to attract, engage
and retain consumers, complete transactions, improve
their branding and enhance operating efficiency.
Customer management revenues are charged
primarily on cost-per-click (CPC) basis, cost per-
thousand impressions (CPM) basis, time basis and
cost-per-sale (CPS) basis.
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Alibaba Group Holding Limited
Business Overview
Alibaba International Digital Commerce
Group
Alibaba International Digital Commerce Group
operates various retail and wholesale platforms to
empower brands, merchants and SMEs to serve global
buyers and consumers through wide product selection
and differentiated customer experiences.
International Commerce Retail
Our International commerce retail businesses,
including AliExpress, Trendyol, Lazada, Daraz and
Miravia, empower brands and merchants with local
market insights and critical commerce infrastructure.
AliExpress, one of our international e-commerce
platforms, enables global consumers to buy directly
from manufacturers and distributors in China and
around the world. AliExpress’ new business model,
Choice, provides an enhanced experience to
consumers by combining better product selection,
price and quality with speed of logistics and great
customer support. Trendyol, which we believe is by
far the leading e-commerce platform in Türkiye in
terms of both GMV and order volume in 2023, serves
consumers with a broad selection of products and
services through its e-commerce business as well
Leveraging our product and supply chain capabilities
as well as fulfillment and delivery expertise, our
consumers can enjoy a broad variety of quality
products and services at attractive prices with a wide
selection of delivery options that satisfy their varying
needs.
China Commerce Wholesale
1688.com, China’s largest integrated domestic
wholesale marketplace in the twelve months ended
March 31, 2024 by net revenue according to Analysys,
connects wholesale buyers and sellers across a wide
range of categories.
Cloud Intelligence Group
Alibaba Group is the world’s fourth largest and Asia
Pacific’s largest Infrastructure-as-a-service provider
by revenue in 2023 in U.S. dollars, according to
Gartner’s April 2024 report (Source: Gartner®, “Market
Share: Services, Worldwide, 2023”, Neha Sethi et al.,
12 April 2024, Sorted by Infrastructure-as-a-Service
(IaaS), Vendor Revenue Basis) (Asia Pacific refers to
Mature Asia/Pacific, China (Region), Emerging Asia/
Pacific and Japan (Region), and market share refers
to that of Infrastructure-as-a-Service (IaaS)). Alibaba
Group is also China’s largest provider of public cloud
services by revenue in 2023, including PaaS and IaaS
services, according to IDC (Source: IDC Semiannual
Public Cloud Service Tracker, (2023 Q4)). Cloud
Intelligence Group offers a complete suite of cloud
services, including proprietary servers, computing,
storage, network, security, database, big data and
AI, container, machine learning, and model training
and inference, serving our ecosystem and beyond.
We leverage these capabilities and technologies
to provide our customers across various verticals
with industry-specific solutions, enabling intelligent
business decisions and operations. We believe our
cloud services’ added value translates into direct and
tangible results, and these services have become a
critical foundation for our customers, many of whom
are reputable industry leaders in their respective
verticals. Our proprietary large language model (LLM),
Tongyi Qianwen, has been progressively integrated
into various business applications across Alibaba’s
ecosystem to further enhance user experience. To
enable enterprise customers to reap the benefits of
AI-driven innovation, Cloud Intelligence Group has
started offering its clients access to Tongyi Qianwen
on the cloud, enabling them to develop customized
LLM for their business scenarios.
We enable businesses to
transform the way they
market, sell and operate and
improve their efficiencies.
Business Overview
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Fiscal Year 2024 Annual Report
as local consumer services for food and groceries.
Consumers also enjoy the quality and convenient
delivery services provided by Trendyol’s fulfillment
and logistics networks. Beyond Türkiye, Trendyol
has expanded to other valuable emerging markets,
including the Gulf region, by leveraging its abundant
product supply and fast and reliable logistics
capability. Lazada, a leading e-commerce platform
in Southeast Asia, serves one of the largest user
bases among the global e-commerce platforms by
providing consumers with access to a broad range of
offerings from local SMEs, and regional and global
brands. Additionally, Lazada operates one of the
leading e-commerce logistics networks in Southeast
Asia, which provides reliable, quality and convenient
logistics services to its consumers and merchants. We
also operate Daraz, a leading e-commerce platform
across South Asia with key markets in Pakistan and
Bangladesh. Additionally, we operate Miravia, an
e-commerce platform in Spain that connects brands
and content creators with consumers by providing
consumers with an innovative and entertaining
shopping experience.
International Commerce Wholesale
We operate Alibaba.com, China’s largest integrated
international online wholesale marketplace in the
twelve months ended March 31, 2024 by revenue,
according to Analysys. During fiscal year 2024, buyers
who sourced business opportunities or completed
transactions on Alibaba.com were located across over
190 countries.
Cainiao Smart Logistics Network Limited
Our vision for our logistics services is to fulfill consumer
orders within 24 hours in China and within 72 hours
anywhere else in the world. To realize this vision,
Cainiao has established a smart logistics network, with
end-to-end logistics capabilities, on a global scale.
Cainiao controls the key nodes of the logistics network
to ensure service quality, efficiency and reliability,
while leveraging trusted partners’ capabilities to drive
scalability and capital efficiency. Globally, Cainiao
offers a comprehensive suite of cross-border express
delivery solutions designed to meet customers’
different needs and provides one-stop global supply
chain solutions to empower brands and merchants to
offer a close-to-local retail experience for consumers.
In China, Cainiao offers end-to-end standardized
supply chain solutions that can be applied on a
massive scale across various industries, as well
as certain vertical solutions to address the unique
requirements of products that need special handling.
Cainiao also offers a wide array of technology and
other services to remove logistics hurdles and address
unfulfilled customer needs.
Local Services Group
We leverage our proprietary mobile and online
technology to enhance the efficiency, effectiveness
and convenience of consumer services for both
service providers and their customers in two distinct
scenarios: “To-Home” and “To-Destination.”
Our “To-Home” business enables consumers to order
food and beverages, groceries, FMCG, flowers and
pharmaceutical products anytime and anywhere
through Ele.me, a leading local services and on-
demand delivery platform.
Our “To-Destination” businesses provide consumers
with convenient access to quality services to and at
their destinations primarily through Amap, a leading
provider of mobile digital map, navigation and real-
time traffic information in China. Amap provides users
with a simple one-stop access point to services such
as navigation, local services and ride-hailing.
Digital Media and Entertainment Group
Digital Media and Entertainment Group is an extension
of our strategy to capture consumption opportunities
beyond our commerce businesses. Insights we gain
from our commerce businesses and our proprietary
data technology enable us to deliver relevant digital
Business Overview
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Alibaba Group Holding Limited
media and entertainment content to our consumers,
which drives a superior entertainment experience,
increases customer loyalty and improves monetization
for content providers across the ecosystem.
Digital Media and Entertainment Group comprises the
platforms of Youku and Alibaba Pictures, including
its wholly-owned subsidiary Damai. Youku, a leading
online long-form video platform in China, provides
users with captivating online media and interactive
experience through its high-quality content, and also
promotes the transformation of the media industry by
applying AI technologies. Alibaba Pictures, including
its wholly-owned subsidiary Damai, provides content
production, promotion and distribution, performance
and event ticketing management, intellectual
property-related licensing and commercial operation,
cinema ticketing management and Internet data
services for the entertainment industry. Through Youku
and Alibaba Pictures, Digital Media and Entertainment
Group extends its reach across online and offline
entertainment channels, allowing users to discover
and enjoy content as well as interact with each other.
All Others
We continue to innovate and develop new service
and product offerings with the goals of meeting the
evolving needs of our customers, improving efficiency
in their daily lives and creating synergies among our
ecosystem participants. DingTalk is our intelligent
collaboration workplace and enterprise management
platform that offers new ways of working, sharing
and collaboration for enterprises and organizations.
Quark is a leading information services platform for
young users in China and provides users with a one-
stop platform for information search, storage and
consumption.
Our Ecosystem
An ecosystem has developed around our platforms
and businesses, consisting of consumers, merchants,
brands, retailers, third-party service providers,
strategic alliance partners and other businesses.
At the nexus of this ecosystem are our technology
platform, our marketplace rules and the role we play
in connecting these participants to make it possible
for them to discover, engage and transact with each
other and manage their businesses anytime and
anywhere. Much of our effort, time and energy is
spent on initiatives that are for the greater good of
the ecosystem and on balancing the interests of its
participants. We feel a strong responsibility for the
continued development of the ecosystem and we
take ownership in this development. Accordingly, we
refer to this as “our ecosystem.” Our ecosystem has
strong self-reinforcing network effects benefiting its
various participants, who are in turn invested in our
ecosystem’s growth and success.
Business Overview
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Fiscal Year 2024 Annual Report
Taobao and Tmall Group
Alibaba International
Digital Commerce
Group
Cainiao Smart
Logistics Network
Limited
Digital Media and
Entertainment
Group
Local Services
Group
All Others
To-Home
Retail
Cloud
Intelligence
Group
(Ele.me)
Retail
Alibaba Ecosystem
The following chart sets forth our main businesses for fiscal year 2024 by segment:
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Fiscal Year 2024 Annual Report
Wholesale
Wholesale
To-Destination
(Xianyu)
(Amap)
Our Strategies
In an increasingly complex world, digital adoption
and transformation of our customers are accelerating
across different industries. On the consumer retail
side, online shopping is no longer deemed merely
as a purchase behavior by the consumers but also
has been adopted as a necessary sales channel
by brick-and-mortar retailers. For enterprises and
organizations, digital transformation is accelerating
as technology changes the way people live and
work. Generative AI, an innovative technology
enabled by LLMs, provides innovative ways to elevate
productivity to a new level, further accelerating digital
transformation of enterprises and organizations.
While such transformation presents tremendous
opportunities, it requires us to be more focused,
innovative and agile in establishing-strategic priorities
and strengthening our competitive advantages.
To this aim, we have proactively transformed our
organization through a new organizational and
governance structure to place more focus on our core
business, infuse more agility into decision making
process and further unlock value for our shareholders.
We believe our new structure will continue to empower
all of our businesses to respond quickly to industry
transformation and promote innovation.
With our environmental, social and governance
responsibilities as the foundation of our long-term
strategy, we strive to strengthen our leadership
and build core capabilities in three strategic areas:
consumption, cloud, and globalization.
Consumption
Consumption continues to present significant
opportunities in China and globally.
China’s digital consumption market has evolved into
a market that boasts differentiated value propositions
for consumers with multi-tiered spending power.
While our annual active consumer base already
captures the vast majority of Internet users with
meaningful spending power, we believe there still
remains significant growth opportunities in wallet
share expansion. To capture these opportunities,
we adopt a consumer-centric strategy and focus on
prioritizing and enhancing shopping experience for
our consumers.
To improve shopping experience for our consumers,
we continue to develop the Taobao app that provides
our consumers with a vast range of quality products
and services at attractive prices. Our commitment
to building a comprehensive digital consumption
platform that caters to all aspects of consumer needs
is unwavering.
Through the Taobao app, we will continue to execute
a multi-tiered marketing strategy to acquire and
retain consumers with different spending power,
consumption behavior and taste. We focus on
enriching an immersive and interactive consumer
experience with highly engaging, consumption-
related contents and quality services. We will
continue to enhance consumer experience and
enable new consumption models to better serve the
evolving needs of consumers. We will also further
strengthen our supply chain capabilities to improve
the competitiveness of our products and enhance
penetration in categories that are essential to our
consumers’ daily lives.
Business Overview
20
Alibaba Group Holding Limited
Across our efforts of executing a multi-tiered strategy
to cater to all aspects of consumption needs, we view
price competitiveness as a vital value proposition to
our consumers. To make the price of our products
more appealing to our consumers, we continue
to leverage our position as China’s leading digital
retail platform to further improve the efficiency of
our service offerings and supply chain capabilities.
Through Cainiao, our established hybrid delivery
network, we strive to improve our consumers’
shopping experience via a more reliable and multi-
tiered delivery experience. Going forward, we will
also continue to invest in key capabilities such as AI
technologies to further improve shopping experience
for our consumers.
We will discuss the consumption opportunity outside
of China under the globalization strategy.
Cloud
We believe digitalization presents the biggest business
opportunity of our time, and cloud computing
plays a fundamental role in digital transformation
across various industries. Cloud infrastructure
enables traditionally unstructured, undiscovered
and underutilized data to be captured, activated
and harnessed as a new source of intelligence to
help businesses make decisions, improve operating
efficiency and grow. It also provides higher cost
effectiveness and therefore is rapidly replacing
traditional IT infrastructure. Enabled by generative
AI, digitalization at enterprises and organizations
is expected to further accelerate to fuel higher level
of operating efficiency and business growth. To
capture the tremendous opportunities presented
by digitalization in the new era of generative AI, we
have established a two-pronged strategy to improve
operating efficiency and enhance our core product
offerings to strengthen our market leadership as a
global cloud service provider and fuel high-quality
growth going forward.
First, our growth strategy will be unswervingly driven
by our technological capabilities in AI. We believe
the cloud industry is at an inflection point to further
accelerate its transition from traditional computing
to accelerated computing. This transition will drive
incremental business demand and opportunities
for a full suite of our enterprise cloud services.
Under this belief, we aim to increase investments
into AI technologies and enable our cloud service
offerings with AI capabilities, in the hope of better
addressing the incremental business demand driven
by generative AI. Meanwhile, we will stay committed to
building a reliable and efficient infrastructure network
to empower our customers and ecosystem partners,
and support the growth of their businesses.
Second, we will focus on prioritizing growth initiatives
in our public cloud core business. We believe that, by
scaling our public cloud business, we will not only be
able to improve the quality of earnings in the short
term but also reap more benefits from economy of
scale in the long run. Therefore, we will continue to
invest into the core products of public cloud offerings
and gradually exit certain project-based businesses
with suboptimal rate of return.
Business Overview
21
Fiscal Year 2024 Annual Report
Globalization
Despite evolving complexities in the global macro
environment, we remain firmly committed to providing
a multi-tiered suite of product and service offerings
to our consumers worldwide, and empowering our
global merchants and partners. Our core globalization
strategies are supported by our robust ecosystem of
consumption and technology.
First, we are dedicated to building a leading
digitalized global supply chain network. Leveraging
our established supply network with a vast variety of
product supplies and our global logistics network, we
aim to integrate and upgrade the two networks into
a digitalized global supply chain network anchored
by key local merchandise and logistics hubs covering
respective overseas markets. Second, we will continue
to invest in AI and digitalized retail technologies,
to facilitate operational synergies across different
operating platforms and markets, and further spur
innovation for consumer experience. Third, we will
focus our efforts on key strategic markets such as
Southeast Asia and Europe and strategically pursue
growth opportunities with ideal return on investments.
We believe that most of our key strategic markets’
e-commerce penetration rates still present significant
headroom for growth. Basing off our established
business footprints and foundations, assessments
on growth potential of respective local markets and
our strategic priorities, we hope to increase our
investments into certain regional markets to gradually
upgrade our localization capabilities.
Environmental, Social and Governance
Responsibilities
ESG, as the foundation of our long-term strategy,
not only provides a framework for solving a series of
global challenges, but is fundamental to Alibaba’s
journey towards lasting 102 years. We believe we can
only create and sustain a profitable and prosperous
business by bringing positive changes to the society.
We are committed to assuming greater responsibility
while pursuing business excellence as the operator of
a platform economy. See “— Environmental, Social and
Governance (ESG).”
Our Businesses
Taobao and Tmall Group
China Commerce Retail
We operate the largest retail commerce business in
the world in terms of GMV in the twelve months ended
March 31, 2024, according to Analysys. Our retail
commerce businesses in China, primarily consisting of
Taobao and Tmall, have become an important part of
the everyday lives of consumers in China. Consumers
can access our various marketplaces, channels,
features and content within our ecosystem through
the Taobao app. Empowered by our commerce
technologies and services, we appeal to a massive
base of consumers by providing them with diversified
and comprehensive offerings at attractive prices in
highly engaging and social formats.
Business Overview
22
Alibaba Group Holding Limited
•
Consumers. We serve a large and diversified
consumer base in China, across both large
cities and less-developed areas. We believe our
platforms continue to appeal to consumers at
various income levels and address all aspects
of consumption needs. Our ability to offer and
deliver value has driven increased consumer
engagement over time. Generally, the longer
the consumers have been with us, the more
orders they tend to place across a more diverse
range of product categories. Consumers on
Taobao and Tmall continue to exhibit high
retention. In fiscal year 2024, the number of
annual active consumers who each spent more
than RMB10,000 on China commerce retail
marketplaces continued to increase. For fiscal
year 2024, the retention rate of annual active
consumers who each spent over RMB10,000 on
China commerce retail marketplaces in the prior
fiscal year stayed at a similar level compared to
that of fiscal year 2023.
•
Products and Services. We believe our ecosystem
offers the most comprehensive range of
products and services among global commerce
platforms to meet the diverse demands of our
massive and diversified consumer base across
different segments. We have developed a
digital commerce infrastructure that offers an
upgraded consumer experience by seamlessly
integrating online and offline capabilities for
our marketplaces and direct sales businesses.
Consumers can enjoy a broad variety of quality
products at different price levels with a wide
selection of delivery options that satisfy their
varying needs. The core capabilities that form
the critical foundation of our digital commerce
infrastructure include the following:
—
Product and supply chain capabilities.
We believe our ecosystem provides the
most comprehensive product and service
offerings at attractive prices. Through
the Taobao app, consumers can access
products ranging from branded products
and imported goods to products sourced
directly from manufacturers and farms
and to other long-tail products offered by
our various marketplaces. For example,
consumers may look for branded products,
including luxury brands, trendy fashion
brands and new brands, on Tmall, and
imported products from around the world
on Tmall Global. Xianyu, our consumer-
to-consumer community and marketplace
for second-hand goods in China, enables
consumers to find a wide variety of idle
goods, recycled goods, consignment, items
for rent, and other long-tail products. We
also continue to go upstream to source
products directly from manufacturers and
farms to enhance our product selection,
which we believe is key for us to satisfy all
aspects of consumption needs.
Business Overview
23
Fiscal Year 2024 Annual Report
—
Fulfillment and delivery expertise. We
have developed logistics expertise and
capabilities that allow us to offer a full
range of high-frequency fulfillment
services to satisfy consumer demand. Our
comprehensive delivery options include on-
demand delivery, half-day delivery, same-
or-next-day delivery and next-day pick-up
services, which capture the varying needs
of consumers living in large cities and
less-developed areas. For example, Tmall
Supermarket offers daily necessities, FMCG
and general merchandise through Taobao
app with same-or-next-day delivery
services.
•
Consumer Experience. We aim to provide
an immersive and personalized shopping
experience with engaging content and quality
service to our consumers. The massive amount of
user and merchant activities taking place every
day on our China commerce retail platforms
generate significant consumer insights. By
leveraging proprietary AI and data technologies,
we are able to aggregate and build on deep
consumer insights to provide more accurate
search results and relevant recommendation
feeds that enhance the shopping experience
for our consumers. Our various commerce
platforms also enable merchants to engage
with consumers through a variety of formats,
including livestreaming, short-form videos,
interactive games and microblogs. We continue
to introduce interactive features and innovative
formats to facilitate user engagement with
brands, merchants and content creators. Along
with these features and formats, our relevant
and engaging entertainment content plays an
important role in consumers’ product discovery
process and shopping journey, and drives user
stickiness and retention on our various platforms.
In addition, we are committed to providing
consumers with quality services which we
believe is key to our consumer-centric strategy.
We also offer the subscription service 88VIP, a
membership program that includes everyday
coupons on selected items, free shipping
coupons for returned goods and other benefits,
to further enhance consumer experience on our
marketplaces.
Taobao and Tmall
Taobao means “search for treasure” in Chinese.
Taobao serves as the starting point and destination
portal for many users’ shopping journey and provides
a top-level traffic funnel that directs users to the
various marketplaces, channels and features within
our ecosystem. Through the Taobao app, consumers
can also access display listings from Tmall merchants
and brands, as well as our various other marketplaces,
including: Xianyu that offers a variety of idle goods
and long-tail products; Tmall Supermarket that offers
daily necessities, FMCG and general merchandise;
and Tmall Global that offers imported products from
around the world, among others. Consumers from
both large cities and less-developed areas come
to Taobao to enjoy an engaging and personalized
shopping experience, optimized by our data analytics
and technology. Through highly relevant content,
engaging and interactive formats and real-time
updates from merchants, consumers can learn about
products and new trends. They can also interact with
each other and their favorite merchants and KOLs
through a broad range of interactive features such as
livestreaming and short-form videos.
Tmall caters to consumers’ ever-growing demand
for high-quality products and premium shopping
experience. A large number of international and
Chinese brands and retailers have established
storefronts on Tmall. Tmall is the partner of choice
for brands. Brands and retailers operate their own
storefronts on Tmall with unique brand identities
and look and feel, accompanied by full control over
their own branding and merchandising. Because of
the presence of a large number of brands and the
stringent standards required for merchants, brands
and retailers to join and operate on Tmall, a presence
on Tmall has become a validation of quality, allowing
merchants, brands and retailers to take advantage
of our significant traffic to extend and build brand
awareness and customer engagement. Major
international brands that have physical operations
in China are well represented on Tmall. Taobao and
Tmall together constitute the world’s largest digital
retail business in terms of GMV for the twelve months
ended March 31, 2024, according to Analysys.
Business Overview
24
Alibaba Group Holding Limited
“We have previously engaged with
numerous livestreaming teams and
invested in considerable resources but
faced setbacks. After experimenting with
different platforms and channels, we
concluded that Taobao best fits our needs.”
Min Qiu,
Founder, Guifei handmade women’s footwear
Factory owner leverages Taobao to
directly reach consumers with their
high-quality products
Min Qiu, founder of Guifei handmade women’s footwear, opened a footwear
factory jointly with her friends several years ago. The business focused on
Original Equipment Manufacturer (OEM) production and offline wholesale of
women’s footwear. In its business operations, Qiu faced challenges relating
to long payment cycles from wholesalers and distributors, and supply chain
issues. Qiu and her brother took advantage of the livestreaming trend and
started livestreaming on Taobao to sell their products directly to consumers.
Qiu capitalized on her wholesale cost basis and inventory advantages to offer
value-for-money and high-quality products directly to consumers. With her
down-to-earth style and expertise in shoemaking, her livestreams showcased
her products’ advantages and craftsmanship, creating an immediate and vivid
connection with consumers while establishing brand awareness.
Taobao Live offers bespoke livestreaming tools, a simplified process for
store setup, and online customer traffic support to bolster merchants in the
industrial belt. These measures allow factories and entrepreneurs to focus on
livestreaming and offer value-for-money, high-quality products to consumers
directly from their factories.
# Creating Possibilities
# Innovation
25
Fiscal Year 2024 Annual Report
“The journey of entrepreneurship and
innovation is always filled with unexpected
challenges. We are always pleasantly
surprised when we can view users' pain
points from a different perspective. Tmall
offers a comprehensive consumer and
market insight system. With these digital
operating tools, we can implement holistic
operations that integrate consumer insights,
R&D, market reach, and user retention. This
enables us to precisely map our products
to our target users and allows us to
transition smoothly from rapid growth into
sustainable solid development.”
Di Zhang,
Founder, seedshub
Pet products have emerged as a growing consumer trend in recent
years. Given the fierce competition landscape, it is difficult to stand
out. Di Zhang, founder of seedshub, saw that pet-focused brands
mainly catered to the daily food and basic needs of pets, often
overlooking pet owners’ unique household cleaning requirements.
Di Zhang founded seedshub with a consumer-oriented approach to
create a specialized cleaning and care brand for pet-owning families.
Using Tmall’s comprehensive consumer and market insights, seedshub
has successfully introduced specialized cleaning products such as
liquid laundry detergent, laundry detergent pod, and disinfectant
tailored for families with pets.
For the long-term steady development of the brand, seedshub has
joined Tmall's new brand support plan, which allows it to target
a specific group of pet consumers. As part of the plan, the
membership program on Tmall helps brands enhance
consumer mind share and improve user growth and
retention across various channels. Through user
interaction, seedshub has been developing new
innovative products. Within six months after its
launch on Tmall, the brand has earned positive
reviews and recognition from KOLs and users.
# Creating Possibilities
# Innovation
Pet brand leverages Tmall’s
comprehensive operating and
membership programs to create a niche
category offering household cleaning
products for pet owners
26
Alibaba Group Holding Limited
Merchants, brands and retailers turn to Taobao
and Tmall not only for their broad user base, but
also for their consumer insights and technology.
Taobao and Tmall have driven the digitalization and
transformation of merchants, brands and retailers by
enabling them to digitalize their operations, engage,
acquire and retain consumers, increase brand
recognition, innovate product offerings, manage
supply chains and enhance operating efficiency. In
particular, Taobao and Tmall offer a variety of one-
stop brand marketing and promotional products to
help merchants, brands and retailers quickly acquire
new users, enhance brand awareness and launch new
products.
Merchants, brands and retailers can easily create
storefronts and listings on Taobao and Tmall. Taobao
and Tmall merchants can purchase P4P, in-feed
marketing and display marketing services to direct
traffic to their storefronts. In addition, merchants can
acquire additional traffic from third-party marketing
affiliates. Taobao and Tmall merchants can also pay
for advanced storefront software that helps upgrade,
decorate and manage their online storefronts.
Xianyu
Xianyu is China’s largest consumer-to-consumer
community and marketplace for second-hand goods,
in terms of GMV for the twelve months ended March
31, 2024, according to Analysys. Through Xianyu,
consumers can find a wide variety of idle goods,
recycled goods, consignment, items for rent, and other
long-tail products, offered by other users and small
businesses.
Tmall Supermarket
Tmall Supermarket offers daily necessities, FMCG
and general merchandise through Taobao app with
same-or-next-day delivery services. By leveraging our
technology capabilities and consumer insights, Tmall
Supermarket facilitates the digital transformation
of its offline partners, enhancing their supply chain
management capabilities.
Tmall Global
Tmall Global addresses increasing demand of
consumers in China for international products and
brands. Tmall Global serves as the premier platform
through which overseas brands and retailers reach
consumers in China, build brand awareness and gain
valuable consumer insights to form their overall China
strategies, without the need for physical operations
in China. We believe Tmall Global is a leading import
e-commerce platform in China.
Branding and Monetization Platforms
Alimama, our proprietary monetization platform
Alimama is our monetization platform. Using our
proprietary technology, this platform matches the
marketing demands of merchants, brands and
retailers on all of the platforms in our ecosystem
with the media resources on our own platforms and
third-party properties, and enables us to monetize
our Taobao and Tmall Group, Cloud Intelligence
Group, Alibaba International Digital Commerce
Group, Cainiao Smart Logistics Network Limited, Local
Services Group, Digital Media and Entertainment
Group and other businesses in our ecosystem. The
platform supports P4P marketing services based on
keyword search rankings, in-feed marketing targeting
different groups of consumers, or display marketing
at fixed positions that are bid on through auctions,
as well as cost per thousand impression (CPM)-
based, time-based marketing formats, or individual
campaigns at fixed cost, through the display of
photos, graphics, videos and livestreaming.
The ranking of P4P search results on our marketplaces
is based upon proprietary algorithms that take into
account the bid price of keywords, the popularity and
quality of an item, service or merchant, as well as
customer feedback rankings of the merchant or service
provider. Our in-feed and display marketing services
take these factors into consideration, along with other
consumer insights generated across our ecosystem,
to further deliver an engaging and relevant content
discovery process and shopping experience to our
consumers through livestreaming, short-form videos,
interactive games and other formats. The relevance
and comprehensiveness of insights based on
commercial activity and user activity in our ecosystem
as well as our AI capabilities provide a unique
advantage for Alimama to deliver the most relevant
information to users through highly engaging content
and effective format, which in turn enables merchants
to improve their efficiency.
Alimama also has an affiliate marketing program
that places marketing displays on third-party apps
and websites, thereby enabling marketers, if they so
choose, to extend their marketing and promotional
reach to properties and users beyond our own
platforms. Our affiliate marketing program not only
provides additional traffic to our marketplaces, but
also generates revenue to us.
Business Overview
27
Fiscal Year 2024 Annual Report
Alimama operates Taobao Ad Network and Exchange,
or TANX, one of the largest real-time online bidding
marketing exchanges in China. TANX helps publishers
monetize their media inventories both on mobile apps
and web properties. TANX automates the buying and
selling of tens of billions of marketing impressions on
a daily basis.
Participants on TANX include publishers, marketers
and demand-side platforms operated by agencies.
Marketing Partner of Choice for Brands
Drawing on our proprietary technology, capabilities
and consumer insights, we have developed
an approach that digitalizes consumer-brand
relationships and enables brands to build robust
relationships with consumers throughout their
lifecycles in our ecosystem. We aim to help brands
reach consumers by leveraging our platforms as well
as other major third-party Internet media in China. We
intend to become the key partner for brand building
by creating an open, inclusive and transparent
platform where brands and marketing agencies
can design, execute, track and optimize their brand
building activities using our consumer insights and
tools.
Leading Commerce Technologies and Integrated
Merchant Services Platform
We provide merchants, brands and retailers with
a comprehensive suite of commerce technologies,
consumer insights and innovative online and offline
services through a unified and intuitive platform, to
better engage with their customers, build mindshare
and optimize their operating efficiency. By leveraging
the power of our ecosystem, merchants, brands and
retailers on Taobao and Tmall can acquire, retain and
further deepen their engagement with consumers
in an efficient and effective manner, build brand
awareness and deliver seamless consumer experience
with our logistics and fulfillment capabilities. This
enhances the loyalty of merchants, brands and
retailers to our platforms. Our commerce technologies
and merchant services include the following key
components:
Effective Consumer Engagement Platform
Our merchants, brands and retailers can leverage our
proprietary technology, consumer insights, and cloud
services to optimize their marketing strategies. Our
upgraded advertising platform provides merchants
with a single interface to manage their advertising
across all available properties within the Alibaba
ecosystem, thereby enhancing their efficiency. We
equip brands on our secure cloud-based platform
with integrated online and offline capabilities
and solutions, and provide them with access to
sophisticated analytics services. These services help
merchants, brands and retailers gain insights into
each stage of the consumer journey and enable them
to provide personalized and seamless online and
offline shopping experience that fulfills consumers’
evolving consumption needs.
Cloud-based Smart Operation Dashboard
We provide a cloud-based integrated smart operation
dashboard that enables merchants, brands and
retailers to digitalize their daily operations. Through
our online dashboard, our merchants, brands and
retailers can easily manage their storefronts and
product listings, source products, process orders and
payments, fulfill orders and provide customer services.
Leveraging the capabilities of our third-party service
providers, we also provide our merchants, brands
and retailers with access to various types of business
software, content creators, credit financing, IT services
and market data analytics. In addition, our merchants,
brands and retailers can access our smart operation
dashboard through mobile devices to manage their
business on the go.
Enabled by our analytics capabilities and consumer
insights, our smart operation dashboard also provides
merchants with recommendations on the most
effective approaches to improve their respective
performance and to deliver differentiated services to
their customers.
Business Overview
28
Alibaba Group Holding Limited
China Commerce Wholesale
1688.com
1688.com, China’s largest integrated domestic
wholesale marketplace in the twelve months ended
March 31, 2024 by net revenue, according to Analysys,
provides sourcing and online transaction services
by connecting manufacturers and wholesale sellers
to wholesale buyers in China. These manufacturers,
wholesale sellers and wholesale buyers typically
trade office supplies, apparel, accessories, packaging
materials, home decoration and furnishing materials,
electronics and computers, among others. Sellers
may purchase a China TrustPass membership for an
annual subscription fee to list items on 1688.com,
reach customers, provide quotations and transact
on the marketplace without any additional charges.
As of March 31, 2024, 1688.com had over 1 million
paying members. Paying members may also pay for
premium memberships and value-added services,
such as premium data analytics and upgraded
storefront management tools, as well as customer
management services, such as P4P marketing services
from the website and app. In the twelve months ended
March 31, 2024, value-added services and customer
management services together contributed the
majority of 1688.com’s total revenue.
Cloud Intelligence Group
Alibaba Group is the world’s fourth largest and Asia
Pacific’s largest Infrastructure-as-a-service provider
by revenue in 2023 in U.S. dollars, according to
Gartner’s April 2024 report (Source: Gartner®, “Market
Share: Services, Worldwide, 2023”, Neha Sethi et al.,
12 April 2024, Sorted by Infrastructure-as-a-Service
(IaaS), Vendor Revenue Basis) (Asia Pacific refers to
Mature Asia/Pacific, China (Region), Emerging Asia/
Pacific and Japan (Region), and market share refers
to that of Infrastructure-as-a-Service (IaaS)). Alibaba
Group is also China’s largest provider of public cloud
services by revenue in 2023, including PaaS and IaaS
services, according to IDC (Source: IDC Semiannual
Public Cloud Service Tracker, (2023Q4)). China’s
cloud computing industry is still at a nascent stage of
development. In 2023, the revenue of China’s public
cloud service market, including IaaS, PaaS and SaaS
markets, only accounted for 0.2% of China’s GDP,
which is significantly lower than that of the U.S. and
indicates tremendous room for growth. The industry
has experienced significant growth in recent years
with increasing adoption of both basic infrastructural
services and value-added services by enterprises.
The technologies that power Cloud Intelligence Group
grew out of the massive scale and complexity of the
needs of our China commerce businesses, which
require commerce, payments and logistics elements.
Leveraging our full-stack cloud capabilities and
proprietary products portfolio, Cloud Intelligence
Group offers a comprehensive suite of cloud services
based on a three-tiered architecture of infrastructure-
as-a-service (IaaS), platform-as-a-service (PaaS) and
model-as-a-service (MaaS) to customers worldwide.
These services not only enable our customers to
build a flexible, scalable, affordable and secure
technology infrastructure, but also equip them with
leading data capabilities that efficiently handle
complex management, analytics and machine
learning tasks, thereby generating significant business
insights and enabling intelligent business decisions
and operations. We leverage these capabilities and
technologies to support our ecosystem and provide
our customers across various verticals with industry-
specific solutions, including those for commerce,
financial services, and industrial applications. In
addition, as part of our globalization strategy,
Cloud Intelligence Group continued to expand our
international cloud computing infrastructure to better
serve our customers’ needs in overseas markets. As
of March 31, 2024, Cloud Intelligence Group offered
computing services in 35 regions globally.
Leveraging Cloud Intelligence Group’s large scale
and strong foundation in IaaS and PaaS, our MaaS
platform provides enterprises with high-performance
and low-cost computing resources and machine
learning platform services for large-scale model
training and inference. Our services not only support
our self-developed foundation model, but also
support the training and services of other large
models and vertical models in the market. Our
proprietary LLM, Tongyi Qianwen, is in the process
of integrating into various business applications
across Alibaba’s ecosystem to further enhance user
experience. To enable enterprise customers to reap
the benefits of AI-driven innovation, Cloud Intelligence
Group has started offering clients access to Tongyi
Qianwen on the cloud and enabling them to develop
customized LLMs for their business scenarios.
Business Overview
29
Fiscal Year 2024 Annual Report
Music AI company leverages Alibaba
Cloud’s computing powers to achieve
exceptional efficiency
Futureverse, a leading AI and metaverse technologies and content
company, created a music AI platform, JEN Music AI, that is at the
forefront of AI music generation. Futureverse collaborated with Alibaba
Cloud to bring about technology breakthroughs in Futureverse’s JEN
Music AI platform, and advance the impact of AI on the development
of the music and entertainment industry. The partnership combines
Futureverse’s expertise in AI music solutions with Alibaba Cloud’s secure
and scalable cloud computing capabilities to further elevate standards
for high-performance AI infrastructure and security. Futureverse has
been training its text-to-music generation model JEN-1 on Alibaba
Cloud’s Machine Learning Platform for AI to enhance its effectiveness
and efficiency. JEN-1 is the first version of an unprecedented universal
high-fidelity model for text-to-music generation. While other areas of
generative AI have achieved significant advancements, AI continues to
present challenges in generating high-fidelity and realistic music.
The JEN-1 music AI represents exceptional efficiency and high quality
in outputs compared to industry baselines.
# Technology for Change
# Creating Possibilities
“JEN is at the forefront of AI generative
music. The access to Alibaba Cloud’s
advanced on-demand training
infrastructure and global partner network
enables us to move fast and stay ahead in
this rapidly evolving market.”
Aaron McDonald,
Co-Founder, Futureverse
30
Alibaba Group Holding Limited
Cloud Intelligence Group’s unique advantages
lie in our proprietary technology and continued
commitment to invest in research and development
in new product offerings and industry-specific
solutions for our customers and partners. Cloud
Intelligence Group continues to attract customers
that are reputable and have the potential to adopt
cloud services at a meaningful scale. In fiscal year
2024, Cloud Intelligence Group served approximately
60% of A-share listed companies in China. As digital
transformation accelerates, our customers, especially
those from traditional verticals, have increased their
usage of our cloud services. We believe our cloud
services have become a critical foundation that many
of our customers increasingly depend on in their daily
operations.
Alibaba International Digital Commerce
Group
Alibaba International Digital Commerce Group
operates various retail and wholesale platforms
including AliExpress, Trendyol, Lazada, Daraz, Miravia
and Alibaba.com.
International Commerce Retail
In fiscal year 2024, our retail businesses together
achieved over 20% order growth via technological
innovation, business model enhancement, supply
chain upgrade and enhanced consumer experience. In
fiscal year 2024, our cross-border businesses exhibited
rapid year-over-year growth in response to increasing
global demand for high-quality products at attractive
prices.
AliExpress
AliExpress is a global e-commerce platform targeting
consumers around the world and enabling them to
buy directly from manufacturers and distributors in
China and around the world. Consumers can access
the marketplace through AliExpress’ mobile app or
websites. In addition to the global English-language
version, AliExpress platform is also available in 15
other languages, including Portuguese, Spanish and
French.
AliExpress continues to expand its regional merchant
networks and supply chains to make available more
localized products and better services for consumers
in their respective regions. With synergies from the
cross-border logistics operations of Cainiao, AliExpress
is also dedicated to improving delivery lead time and
customer experience. Additionally, AliExpress’ Choice
provides an enhanced experience to consumers by
combining better product selection, price and quality
with speed of logistics and great customer support.
Consumers in selected countries can enjoy free
shipping, free returns and quality delivery guarantees.
Furthermore, AliExpress continues to invest in markets
such as South Korea. In fiscal year 2024, the number of
AliExpress orders in South Korea more than doubled.
Trendyol
Trendyol, which we believe is by far the leading
e-commerce platform in Türkiye in terms of both GMV
and order volume in 2023, serves consumers with
a broad selection of products and services through
its e-commerce business as well as local consumer
services for food and groceries. Consumers also enjoy
the quality and convenient delivery services provided
by Trendyol’s fulfillment and logistics networks,
namely Trendyol Express for e-commerce business
and Trendyol GO for local consumer services. Beyond
Türkiye, Trendyol has expanded to other valuable
emerging markets, including the Gulf region, by
leveraging its abundant product supply and fast and
reliable logistics capability. During fiscal year 2024,
Trendyol achieved over 20% order growth.
Lazada
Lazada, a leading e-commerce platform in Southeast
Asia, serves one of the largest user bases among
the global e-commerce platforms, by providing
consumers with access to a broad range of offerings
from local SMEs, and regional and global brands.
Additionally, Lazada operates one of the leading
e-commerce logistics network in Southeast Asia,
serving its consumers and merchants with reliable,
quality and convenient logistics services that are
critical to online shopping experience in Southeast
Asia. Lazada’s loss per order continued to narrow
year-over-year, via further increased monetization
and decreased logistics costs.
Business Overview
31
Fiscal Year 2024 Annual Report
Second-generation factory owner
leverages AliExpress cross-border
e-commerce model to rejuvenate
family business and pursue new
overseas business opportunities
Haiying Zhang is a second-generation owner of a family factory, and
she spearheaded the creation of a brand, TENTAGON, to revive her
family’s struggling business. TENTAGON targeted the Korean market
through AliExpress.
The brand specializes in offering custom, exquisite golf umbrellas.
It launched via AliExpress during Korea’s rainy season, and its first
batch of inventory quickly sold out. As orders increased, Zhang
capitalized on her supply chain resources and actively expanded
into additional markets. The company also integrated other high-
quality supply chains and expanded its catalog to include popular
categories such as camping and outdoor products. Its orders took off
during the 11.11 Global Shopping Festival in 2023.
“AliExpress offered us fresh
perspectives on cross-border
e-commerce, presenting traditional
export factories like us a new
opportunity for online sales. The
platform also enables more overseas
consumers to access high-quality
made-in-China products.”
Haiying Zhang,
Owner, TENTAGON
# Creating Possibilities
# New Consumption Trend
32
Alibaba Group Holding Limited
Mengqi Pan, founder of Tianruiyi, a textile and clothing export
company based in Shengze, Suzhou, has been in the apparel
business for over a decade. In 2019, his business hit a bottleneck, but
he found new life after the discovery of Alibaba.com. The platform
allowed him to garner insights and unlock opportunities in the niche
market for clothing made of recycled materials.
To encourage exporters that focus on manufacturing products with
recycled materials, Alibaba.com provides their online storefronts
with additional customer traffic. While the cost of recycled materials
is generally higher, a community of global buyers on Alibaba.com
is willing to pay the premium, presenting more potential business
opportunities to exporters in this sector. Currently, the recycled
materials used in Pan's clothing production are not limited to plastic
bottles. They also include coffee grounds, fishing nets, oyster shells,
and other marine waste.
# Creating Possibilities
# New Consumption Trend
Textile company expands into niche
markets and captures new business
opportunities in recycled material
clothing through Alibaba.com
“Clothing companies typically have little
interest in manufacturing clothing from
recycled materials due to its high production
costs and time-consuming process.
Fortunately, Alibaba.com is witnessing
a growing demand for clothing made of
recycled materials from its global buyer base,
which allows our products to reach global
markets, including Europe, the U.S., Mexico,
Canada, and Australia, among others.”
Mengqi Pan,
Founder, Tianruiyi
33
Fiscal Year 2024 Annual Report
34
Alibaba Group Holding Limited
International Commerce Wholesale
Alibaba.com is China’s largest integrated international
online wholesale marketplace in terms of revenue in
the twelve months ended March 31, 2024, according to
Analysys. It connects Chinese and overseas suppliers
to overseas wholesale buyers, who are typically trade
agents, wholesalers, retailers, manufacturers and
SMEs engaged in the import and export business,
and provides them with sourcing, online transaction,
digital marketing, digital supply chain fulfillment and
financial services.
Sellers on Alibaba.com may purchase an annual
membership to reach customers, provide quotations
and transact on the marketplace. As of March 31,
2024, Alibaba.com had over 230,000 paying members
from China and around the world. Sellers may also
purchase additional value-added services to manage
product listings and facilitate transaction processes,
such as upgraded storefront management tools,
customer relationship management SaaS services,
trade assurance and logistics fulfillment services,
as well as customer management services, such as
P4P marketing services from the website and app. In
fiscal year 2024, value-added services and customer
management services together contributed the
majority of Alibaba.com’s total revenue. Additionally,
during the same period, over 48 million buyers from
over 190 countries sourced business opportunities or
completed transactions on Alibaba.com.
During fiscal year 2024, Alibaba.com acquired Visable,
a renowned B2B digital trading platform, expanding
its supplier base in Europe and enhancing its ability
to serve a wider client group, which help facilitate its
global strategy.
Cainiao Smart Logistics Network Limited
Our vision for our logistics services is to fulfill consumer
orders within 24 hours in China and within 72 hours
anywhere else in the world. To realize this vision,
Cainiao has established a smart logistics network, with
end-to-end logistics capabilities, on a global scale.
Cainiao controls the key nodes of the logistics network
to ensure service quality, efficiency and reliability,
while leveraging trusted partners’ capabilities to drive
scalability and capital efficiency. Cainiao provides a
wide array of innovative logistics solutions in China
and around the world.
International Logistics
We provide a comprehensive suite of cross-border
express delivery solutions primarily for merchants,
brands and e-commerce platforms selling goods
from and into China. Our solutions include a range of
premium, standard and economy options, designed
to meet customers’ different needs for shipping
time, cost, destination and any special handling
requirements. We also provide one-stop global supply
chain solutions that enable efficient global inventory
deployment and order fulfillment and empower
brands and merchants to offer a close-to-local retail
experience for consumers. Our solutions for cross-
border logistics cover a wide spectrum of products,
ranging from best-sellers to long-tail items, which
expand the categories of products available for cross-
border e-commerce. We mainly serve merchants on
various e-commerce platforms operated by Alibaba
Group, including AliExpress, Tmall Global and Tmall
Taobao World, as well as a variety of e-commerce
platforms and online channels beyond the Alibaba
ecosystem. We also support AliExpress’ Choice and
the direct sales businesses of certain e-commerce
platforms. Cainiao achieved daily average cross-
border and international package volume of more
than 5 million in fiscal year 2024.
China Logistics
We offer brands and merchants a suite of end-to-
end standardized supply chain solutions that can be
applied on a massive scale across various industries,
as well as certain vertical solutions to address the
unique requirements of products that need special
handling. We support brands and merchants for their
sales through various e-commerce platforms operated
by Alibaba Group, such as Taobao and Tmall, as
well as a wide array of other e-commerce platforms,
digital and offline channels, and we also serve
Tmall Supermarket, a direct sales channel operated
by Alibaba Group. We provide a premium express
delivery service, Cainiao Express, with superior service
quality tailored for e-commerce at low costs. Our
premium express delivery service offers fast, reliable
and time-definite services with a doorstep delivery
pledge to a large, underserved market.
Business Overview
Zhuocheng Cai, Product Director of Guangzhou Qiancheng Trading
Co., Ltd, is an experienced seller on AliExpress. Seven years ago, he
and a few partners started their own brand with the vision to develop
a portable, smart water purifier that would meet European and
American consumer aesthetic preferences. He soon recognized that
the success of a brand hinges not only on product quality and design
but also on providing an exceptional logistics customer experience.
The “5-Day Delivery” and other express delivery services introduced
by Cainiao and AliExpress have boosted the growth of his brand.
Many customers can now receive their products in less than a
week after placing an order, which leads to enhanced customer
satisfaction and rapid sales growth. Cainiao’s efficient logistics
services not only give their products a competitive advantage but
also foster repeat purchases from customers.
# Logistics Capability
Trading company leverages Cainiao
to win over consumers, enabling
their in-house brands to seize global
market opportunities
“Promoting our in-house brands requires
collaboration and improvements across
various operational functions. Cainiao’s
highly efficient logistics services allow
our products to stand out against the
competition, leading to increased
customer repurchase rates.”
Zhuocheng Cai,
Product Director, Guangzhou Qiancheng
Trading Co., Ltd
35
Fiscal Year 2024 Annual Report
36
Alibaba Group Holding Limited
Technology and Other Services
Cainiao offers a wide array of technology and other
services to remove logistics hurdles and address
unfulfilled customer needs. Cainiao offers a suite
of practical and cost-effective logistics technology
solutions, encompassing automation, digital supply
chain and smart hardware solutions, in order to
improve efficiency and cost-effectiveness across the
logistics value chain.
Local Services Group
We leverage our proprietary mobile and online
technology to enhance the efficiency, effectiveness
and convenience of consumer services for both
service providers and their customers in two distinct
scenarios: “To-Home” and “To-Destination.” In fiscal
year 2024, Local Services Group recorded rapid order
volume growth year-over-year.
To-Home
Our “To-Home” business enables consumers to easily
access merchants’ services at home through Ele.me,
a leading local services and on-demand delivery
platform in China. Ele.me enables consumers to use
Ele.me, Alipay, Taobao apps to order meals, food,
groceries, FMCG, flowers and pharmaceutical products
online. In addition, Fengniao Logistics, Ele.me’s on-
demand delivery network, provides last-mile logistics
services, including delivery of food, groceries, FMCG
and pharmaceutical products for Sun Art, Alibaba
Health, as well as brands. Our strategy for Ele.me
is to leverage our China commerce retail platforms
and our data technology to expand our offerings
from shopping to services, further tapping into
new addressable consumption markets in China. In
fiscal year 2024, Ele.me recorded strong year-over-
year order growth while Ele.me’s losses continued
to narrow driven by improving business scale and
efficiency.
To-Destination
Our “To-Destination” businesses provide consumers
with convenient access to quality services to and at
their destinations primarily through Amap. In fiscal
year 2024, the order volume of “To-Destination”
businesses grew rapidly year-over-year.
Amap is a leading provider of mobile digital map,
navigation and real-time traffic information in
China. Amap empowers major mobile apps across
different industry verticals, including local services,
ride-hailing and social networking, which end users
can access directly through Amap’s leading open
platform. In addition, Amap provides digital map data,
navigation software and real-time traffic information
to automobile manufacturers as well as aftermarket
consumers in China. Amap also empowers major
platforms and infrastructural service providers,
including our China commerce retail platforms,
Cainiao and Alipay. During an eight-day holiday
period from September 29, 2023 to October 6, 2023
that combined Mid-Autumn Festival and National Day
holidays, Amap recorded an all-time high of over 280
million peak daily active users.
Digital Media and Entertainment Group
Digital Media and Entertainment Group leverages our
deep consumer insights to serve the broader interests
of consumers through Youku and Alibaba Pictures,
which provide comprehensive entertainment offerings
including online videos, films and live events, among
others.
Youku
Youku, a leading online long-form video platform in
China, produces and distributes high-quality video
content, enabling users to search, view and share such
content quickly and easily across multiple devices. The
Youku brand is among the most-recognized online
video brands in China.
Insights we gain from our ecosystem and our
proprietary technology enable Youku to leverage
artificial intelligence technology to deliver relevant
and captivating content to its users. According to
Enlightent, “Till the End of the Moon” (長月燼明), which
was distributed exclusively by Youku ranked no. 2
by online views among all television series aired on
online video platforms during fiscal year 2024.
We offer a diverse range of digital media and
entertainment content using a sustainable production
and acquisition approach. First, we provide self-
produced content. Second, we jointly produce content
with studios, some of which are distributed exclusively
on our platforms. Third, we acquire rights to display
content on our digital media and entertainment
platforms pursuant to licensing agreements with rights
holders. Lastly, we offer an open platform on which
user-generated content and professional-generated
content are produced and distributed.
Business Overview
Hong Kong TV director leverages the
Hong Kong Cultural and Art Industry
Revitalisation Program to bring his
film and drama to a wider audience
Nearly 20 years ago, Director Shu Kai Chung, President of 77
Atelier Limited under Television Broadcasts Limited, ventured to
mainland China to pursue film and television production. He has
since frequently collaborated with platforms such as Youku, and
gained a deeper understanding of the mainland China market
and local audience preferences. Chung incorporated new tactics
and approaches taken from Chinese mainland film and television
production into “The Queen of News.” The show was a hit in both
Hong Kong and mainland China after being broadcast on Youku, and
served as an example of the “new Hong Kong drama.” Its success
catalyzed Alibaba Digital Media and Entertainment Group to launch
the Hong Kong Cultural and Art Industry Revitalisation Program. Over
the next five years, the Group will support the development of the
next generation of Hong Kong film and drama, nurture more young
talents, and provide a bigger stage for young artists and creators.
# Creating Possibilities
“The Hong Kong Cultural and Art Industry
Revitalisation Program launched by
Alibaba Digital Media and Entertainment
Group is the beginning of opportunities.
We need more young artists to showcase
their talents on a bigger stage and to
connect their work with the Mainland
Chinese and global market, in hopes of
ushering in a new era of excellence for
Hong Kong’s film and television industry.”
Shu Kai Chung,
Director of “The Queen of News”
37
Fiscal Year 2024 Annual Report
Alibaba Pictures
Alibaba Pictures has a diversified business model,
providing content production, promotion and
distribution, performance and event ticketing
management, IP-related licensing and operations,
cinema ticketing management, and data services for
the entertainment industry. In fiscal year 2024, the box
office of films in which Alibaba Pictures participated
in investment, production, and distribution accounted
for over 60% of China’s total box office revenue. In
addition, as a testament to Alibaba Pictures’ consistent
ability in selecting high-quality films, Alibaba Pictures
participated in 15 out of the top 20 films in China in
terms of box office during fiscal year 2024, including
“No More Bets” (孤注一擲), “Lost in the Stars” (消失的
她), “YOLO” (熱辣滾燙) and “Chang’an” (長安三萬里).
Alibaba Pictures’ subsidiary Damai is a comprehensive
live performances service provider in China, providing
ticketing management for events including concerts,
plays, and sports events. In fiscal year 2024, Damai
recorded rapid year-over-year GMV growth by serving
almost all large-scale concerts in China.
All Others
All Others include Sun Art, Freshippo, Alibaba
Health, Lingxi Games, Intime, Intelligent Information
Platform (which mainly consists of UCWeb and Quark
businesses), Fliggy, DingTalk and other businesses.
DingTalk
DingTalk is our intelligent collaboration workplace
and enterprise management platform that offers
new ways of working, sharing and collaboration for
enterprises and organizations. Millions of enterprises
and users use DingTalk to stay connected and work
remotely. In March 2024, DingTalk’s paying daily active
users reached 28 million. According to QuestMobile,
DingTalk is the largest business efficiency mobile app
in China by monthly active users in March 2024.
DingTalk provides a comprehensive suite of solutions
for enterprise collaboration, including real-time
communication, organizational management
and various network collaboration tools such as
office automation, HR management, workflow
management, collaborative editing of cloud
documents, video conference and calendars.
Enterprises can also enjoy convenient access to a
broad range of applications, including those offered
by third-party service providers, that are seamlessly
integrated with DingTalk’s platform. In addition,
DingTalk offers a low-code development infrastructure
that enables enterprises to develop customized
solutions in a more convenient and cost-efficient
manner. DingTalk has also introduced a suite of AI
products and AI agents leveraging Alibaba’s Tongyi
Qianwen LLM, enabling enterprises to harness AI
technology on DingTalk. We believe DingTalk is a
highly effective platform that enables enterprises to
achieve fully customized digital transformation.
Intelligent Information Platform
Intelligent Information Platform includes Quark,
UCWeb, and other businesses, which provide
integrated information services including search
engine and feed to online users.
Quark is a leading information services platform for
young users in China. During fiscal year 2024, Quark
recorded rapid year-over-year growth in daily active
users. Quark provides young users with a one-
stop platform for information search, storage and
consumption with its suite of AI-enabled tools and
services, such as smart search, Quark cloud drive,
AI camera, Quark learning and Quark documents,
to help users better acquire and utilize a variety of
digital content and information for learning and work
purposes.
Sun Art
Sun Art, a leading multi-format and omni-channel
retailer, continues to focus on target customers, and
create diversified shopping scenarios, and endeavors
to improve online and offline shopping experience.
Sun Art continues to meet consumers’ needs for offline
shopping and home delivery service, thereby creating
opportunities for revenue growth, through store
remodeling, digitalization and building product and
fresh produce supply chain capabilities.
Business Overview
38
Alibaba Group Holding Limited
Freshippo
Freshippo, our new retail platform for groceries and
fresh goods, seamlessly integrates the online and
offline retail experiences, providing consumers with
a new shopping experience. Consumers visit over
360 Freshippo Supermarket stores for the touch
and feel of quality fresh goods, join tasting events
for new products, and shop for private label or
exclusive products that are not available elsewhere
or simply spend time with family. Many of Freshippo’s
consumers also place orders online and have fresh
goods delivered to door as quickly as within 30
minutes. In fiscal year 2024, online transactions
contributed more than 63% of Freshippo’s GMV. The
creation of a new shopping experience is attributable
to Freshippo’s significant retail expertise, including
supply chain management, proprietary technology,
and robust multi-layer and multi-temperature logistics
and fulfillment infrastructure, all specifically designed
for Freshippo’s offerings. Freshippo demonstrates
scalability and sustainability with Freshippo’s overall
GMV reaching over RMB59 billion in fiscal year 2024.
The majority of self-operated Freshippo Supermarket
stores that have been operating for more than one
year achieved positive cashflow during the same
period.
Alibaba Health
Alibaba Health is our flagship vehicle that offers
one-stop solutions to consumers through integrating
online and offline resources of the pharmaceutical
and healthcare industries. We prioritize the needs of
the customers through leveraging the strength of the
existing pharmaceutical e-commerce business along
with exploring innovative business models of Internet
healthcare services.
Lingxi Games
Lingxi Games is a leading digital interactive
entertainment service provider in China, specializing in
the development, operation and licensed publishing
of mobile games and providing a professional
distribution and service platform for both players and
developers. Lingxi Games operates a number of high-
quality mobile games, such as Three Kingdoms Tactics
(三國志•戰略版) and Three Kingdoms Fantasy Land
(三國志幻想大陸). In fiscal year 2024, Lingxi Games
ranks among Top 5 largest mobile gaming company
in Chinese mainland (iOS App Store) among global
companies in terms of grossing, according to Sensor
Tower.
Sales and Marketing
Our sales and marketing efforts emanate from the
fundamental pillars that constitute our ecosystem,
which include Taobao and Tmall Group, Cloud
Intelligence Group, and Alibaba International
Digital Commerce Group. We have wide consumer
recognition of our brands and enjoy significant
organic traffic through word-of-mouth. We believe the
reputation and ubiquitous awareness of our brands
and platforms in China and abroad provide us with
the best and most cost-efficient marketing channel. In
addition, we continue to increase interactive content
and broaden the assortment of value-for-money
products under our user-engagement and price-
competitive strategy. During fiscal year 2024, we
enhanced our marketing efforts, such as by organizing
a highly coordinated marketing and promotional
campaign for the 11.11 Global Shopping Festival and
AliExpress’ Black Friday promotion, in order to expand
our user base both within China and abroad. We
expect to continue allocating our resources in future
marketing activities. We also expect to enhance our
monetization capability through leveraging our data
technologies to develop and offer more personalized
and innovative services, so as to improve customer
experience and wallet share. Furthermore, our
major business segments and other elements in our
ecosystem provide synergistic advantages and create
cross-promotional opportunities. For example, the
large number of consumers on our marketplaces
attracts a large number of merchants who become
customers of our online marketing services, while
an increasing number of KOLs, video bloggers and
content creators are actively producing content to
engage with consumers and fans on our platforms,
thereby driving revenue for merchants, brands and
retailers.
Our Cloud business remains committed to continually
upgrading our products and services to better
facilitate the digital transformation and long-term
sustainable growth of our customers. We have
established a professional in-house sales team that
works closely with our solution architects and product
team to provide product recommendation and
services to our customers. We have also conducted a
variety of marketing activities to promote our brand
and products and grow our customer base on an
ongoing basis.
Business Overview
39
Fiscal Year 2024 Annual Report
Our Technology
Technology is key to our success in achieving
efficiency, improving user experience, and enabling
innovation. Our world-class proprietary technology
supports peak order volumes of up to hundreds of
thousands per second, delivers tens of billions of
online marketing impressions per day, and enables
millions of merchants, brands and other businesses to
conduct their operations efficiently and effectively. The
uniqueness of our technology lies in the unparalleled
large-scale application environment due to the scale
of our businesses as well as our diverse range of
product and service offerings. By continually applying
our technology across our businesses, we generate
knowledge and innovations that drive improvements
and further technological development.
Members of our research and development team
play key roles in various international standardization
organizations in areas such as security, and actively
participate in international open source foundations
focusing on areas such as software engineering,
cloud-native applications and databases. This fiscal
year, Alibaba established “User first, AI driven” as our
strategy. Therefore, we have increased our research
and development investment in AI model and
infrastructure technology.
Key components of our technology include those
described below:
Technology Infrastructure
Our data centers employ leading technologies in
distributed fault-tolerant architecture, advanced
in-house power and cooling equipment, AI-driven
intelligent monitoring and operational technology,
to support AI computation businesses with high
resilience and high-density capabilities. Combined
with a high proportion of clean energy use, our data
centers provide a more stable, secure, efficient, agile,
and greener infrastructure service.
Cloud Operating System
Apsara (our proprietary general-purpose distributed
computing operating system), ShenlongCompute
(our hardware virtualization architecture), Pangu
(our distributed cloud storage system) and Luoshen
(our cloud network structure), together, provide
Cloud Intelligence Group’s customers and our core
businesses with enhanced computing power and
storage capabilities to support their and our business
growth in the new technology era.
Database
We have comprehensively upgraded the serverless
capabilities of our cloud-native transactional
database PolarDB, which helps our customers to meet
their real-time storage and transaction processing
requirements with elasticity and scalability. We also
developed AnalyticDB, a cloud-native distributed
analytical database that can be integrated with LLMs,
to support real-time interaction and complex analysis
of massive data. We have also developed a multi-
model database Lindorm, which leverages its efficient
storage and integrated analysis capabilities to achieve
intelligent analysis and processing of unstructured
data.
Big Data Analytics Platform
We have developed a large-scale distributed data
analytics platform that can efficiently handle the
complex computing tasks of hundreds of petabytes
of data per day, such as batch computing, real-
time computing, interactive analysis and data
governance. We also launched a new generation of
streaming lakehouse solutions, Streaming Lakehouse
(Flink+Hologres), with a real-time dedicated data
lake format Paimon, which innovatively combines
lake format with real-time streaming updates into
the lake architecture, among others. To meet the
needs for multi-modal large model data processing,
we launched MaxFrame, a data science computing
framework compatible with the Python development
ecosystem.
Artificial Intelligence
Our proprietary distributed deep learning platform,
PAI, and our Lingjun intelligent computing service
employ leading hardware and software optimization
technologies that feature large-scale cluster scalability
and boast the speed and stability of the training of
LLMs. PAI also supports fine-tuning and deployment of
mainstream open-source large models with serverless
service modes available.
Our proprietary LLM, Tongyi Qianwen, is committed to
achieving artificial general intelligence (AGI). In fiscal
year 2024, eight industry-oriented models based on
Tongyi Qianwen were launched. In May 2024, Tongyi
Qianwen was upgraded to version 2.5 and we open-
sourced Qwen-110B, the 110B parameter version,
allowing AI community and customers to customize
and innovate based on their own needs.
Business Overview
40
Alibaba Group Holding Limited
Security
Our comprehensive security technology encompasses
areas such as network security, data protection,
business risk control, and AI safety. We have built
an end-to-end multi-dimensional defense system,
including endpoints, public networks backbone
networks and data centers, to continue to strengthen
cloud security technologies ensuring the safety of
customer data and consumer data. We are also
committed to the security in the application of
LLMs and their applications. By combining AI with
security technology, we have established a strong
identification and defense system.
Environmental, Social and Governance
(ESG)
Our ESG Strategy
ESG is part of the foundation of our business strategy
and long-term development. We are dedicated to
addressing society’s pressing issues by integrating
ESG objectives into our business strategy.
Our ESG strategy has seven dimensions,
corresponding to all of the 17 Sustainable
Development Goals (SDGs) issued by the United
Nations and closely tied to China’s modernization
goals.
We have devised our ESG strategy to be pragmatic,
long-term and action-oriented, regimented by a
transparent and rigorous indicator system. We focus
our efforts on the seven areas below:
Advancing Towards the Goal of Carbon Neutrality
We target to reach carbon neutrality in our own
operations, including Scope 1 and Scope 2 emissions,
by 2030. We actively work with our value chain
partners with green initiatives, with the target of
reducing their greenhouse gas emissions and thus
our overall Scope 3 carbon intensity by at least 50%
from the base year of 2020 by 2030. We continue to
promote carbon reduction in our platform ecosystem
(Scope 3+), in which we strive towards a cumulative
ecosystem-wide reduction of greenhouse gas
emissions by 1.5 billion tons by 2035.
We have made solid progress towards our targets
in fiscal year 2024. Electricity used and logistics are
the two main types of emissions sources across our
Scope 1, 2 and 3 emissions. In fiscal year 2024, we
continue to accelerate our transition to clean energy.
In November 2023, Bloomberg New Energy Finance
released the “China’s Top Clean Energy Buyers and
Sellers in 2023.” Alibaba Group, with a green electricity
transaction volume of 1,610 gigawatt-hours, became
the leader in China for green electricity procurement
for the first time. In the logistics sector, we continued
to reduce emissions through various measures such
as intelligent order consolidation, reduction and
recycling of packaging, as well as electrification of
transportation. In fiscal year 2024, the ratio of trips
using new energy vehicles for urban distribution by
Cainiao Express’ own fleet reached 99%. Unlike Scope
1, 2 or 3, advancing Scope 3+ requires establishing
new scientific and credible standards while advancing
carbon reduction and in this regard we continued to
focus on our established directions in fiscal year 2024.
Supporting Our People
It is our employees that make our business and culture
thrive. None of our goals can be accomplished without
our people. It is critical for us to ensure that all of our
employees can enjoy an equal and inclusive working
environment of dignity and diversity. This also means
supporting our employees to fulfil their potentials
by providing them with on-the-job training and
opportunities for career advancement.
Based on a series of existing rules and years of
practice, we released the “Alibaba Group Employee
Rights Code” to further emphasize employee rights,
covering areas such as human rights, occupational
health and safety, diversity, equality, and inclusion
(DEI), along with employee training and development
in fiscal year 2024. Furthermore, we established a
DEI working group tasked with the formulation of
policies, the establishment of standards, and the
implementation of initiatives related to DEI issues.
Business Overview
41
Fiscal Year 2024 Annual Report
Enabling a Sustainable Digital Life
Sustainable consumption is crucial to our sustainable
development goals and we run our business to
provide consumers with diverse, inclusive, trustworthy,
and responsible consumption means.
For instance, we pay special attention to being
accessible and senior-friendly. We understand
the difficulties of the disabled community in using
digital technology and help provide them with equal
access to digital technologies. We also provide well-
designed, convenient and efficient digital services to
senior consumers. In fiscal year 2024, Taobao and
Tmall Apps served over 260,000 visually impaired
users and “Wheelchair Navigation,” developed by
Amap, provided accessible navigation over 54 million
times.
Fueling Small Businesses
Enhancing the prosperity of micro, small, and
medium-sized enterprises (MSMEs) is a core
commitment of Alibaba. In the era of digital and
intelligent transformation, MSMEs face a series of
challenges, including technological adaptation,
market access and competitive dynamics. We aim
to facilitate the transformation of MSMEs through
our dedication to open technological innovations
and upgrade e-commerce platform mechanisms.
ModelScope, our open-source platform that provides
a large number of machine-learning and deep
learning models, tools and services, hosted over
3,800 AI models as of March 31, 2024. Taobao and
Tmall Group also provides AI products and services to
merchants that enhance their operational efficiency.
Propelling Community Inclusion and Resilience
We are committed to leveraging technology and
platform innovation for social responsibilities. In
fiscal year 2024, we developed an AI-powered tool
PANDA that can screen for early signs of pancreatic
cancer, one of the most fatal cancers worldwide,
which was published by international top scientific
journal Nature Medicine. In addition, we worked with
partners to launch the GreenNet Program in 2020,
which redirects searches for certain products, such as
banned wildlife products, to educational webpages. In
fiscal year 2024, over 70 million harmful searches were
automatically guided to educational webpages.
Facilitating Participatory Philanthropy
We have connected with a wide range of philanthropic
ecosystems and leveraged the power of technology
to address social challenges. Starting with our
employees, we have involved stakeholders across our
ecosystem to engage in philanthropy via flexible forms
and mechanisms, aiming to promote greater social
involvement.
Building Corporate and Social Trust
As digital technology unprecedentedly transforms
ways of social production and our lifestyles, we are
even more convinced that trust is a prerequisite for
our social responsibility and a cornerstone for our
business development. With this conviction, we have
been focusing on building corporate and social trust
in two areas — privacy protection and data security,
and science and technology ethics. We believe these
priorities are in line with our strategic positioning,
corporate governance mechanism and technological
capabilities, as we aim to become a pioneer in the
technology industry to build corporate and social trust.
ESG Governance Structure
Alibaba’s over 20 years of business success has been
predicated on a thoughtful system of governance
to oversee our wide array of brands, platforms and
services. We recognize that no ESG strategy can
reach its full potential without a dedicated structure
of governance. Accordingly, we have embedded ESG
oversight into a three-layer structure at the board,
senior management, and group and business unit
levels.
Competition
We face competition principally from established
Chinese Internet companies and their respective
affiliates, global and regional e-commerce players,
cloud computing service providers, logistics service
providers and digital media and entertainment
providers. These competitors generate significant
traffic and have established strong brand recognition,
robust technological capabilities and significant
financial resources. The areas in which we compete
primarily include:
Business Overview
42
Alibaba Group Holding Limited
•
Consumers. We compete to attract, engage and
retain consumers based on the variety, quality
and value of products and services listed on our
platforms, the engagement of digital media
and entertainment content available on our
platforms, the overall user experience of our
products and services, and the effectiveness of
our consumer protection measures.
•
Merchants, Brands, Retailers and other
Businesses. We compete to attract and retain
merchants, brands and retailers based on the
size and the engagement of consumers on our
platforms and the effectiveness of our products
and services to help them build brand awareness
and engagement, acquire and retain customers,
complete transactions, expand service
capabilities, protect intellectual property rights
and enhance operating efficiency. In addition,
we compete to attract and retain businesses of
different sizes across various industries based on
the effectiveness of our cloud service offerings
to help them enhance operating efficiency
and realize their digitalization transformation
ambitions.
•
Marketers. We compete to attract and retain
marketers, publishers and demand-side
platforms operated by agencies based on
the reach and engagement of our properties,
the depth of our consumer insights and the
effectiveness of our branding and marketing
solutions.
•
Talent. We compete for motivated and capable
talent, including engineers and product
developers to build compelling apps, tools,
and functions and to provide services for all
participants in our ecosystem.
If international players gain greater access to the
China market, certain of our business could be subject
to greater competition. As we acquire new businesses
and expand into new industries and sectors, we face
competition from major players in these industries
and sectors. In addition, as we continue to expand
into markets outside of China, we increasingly face
competition from domestic and international players
operating in these markets. See “Risk Factors —
Risks Related to Our Business and Industry — If we
are unable to compete effectively, our business,
financial condition and results of operations would be
materially and adversely affected.”
Seasonality
Our overall operating results fluctuate from quarter
to quarter as a result of a variety of factors, including
seasonal factors and economic cycles that influence
consumer spending as well as promotions.
Historically, we have severally experienced the highest
levels of revenues in the fourth calendar quarter
of each year due to a number of factors, including
merchants allocating a significant portion of their
online marketing budgets to the fourth calendar
quarter, promotions, and the impact of seasonal
buying patterns in respect of certain merchandise
categories such as apparel. We also have severally
experienced lower levels of revenues in the first
calendar quarter of each year due to a lower level
of allocation of marketing budgets by merchants
early in the calendar year and during the Chinese
New Year holiday, during which time consumers
generally spend less and businesses in China are
generally closed. Moreover, as our fixed costs and
expenses, such as payroll and benefits, bandwidth
and location fees, grow at a relatively stable rate
compared to our revenue growth, we expect to enjoy
increased operating leverage in seasonally strong
quarters, but will face significant margin pressure in
seasonally weak quarters. Our international commerce
businesses are also subject to seasonal fluctuations
depending on the markets we operate in. Except for
our China and international commerce businesses,
operating results of our other businesses have not
demonstrated clear seasonal patterns, which we
believe may partially reduce the seasonality impact of
our China and international commerce businesses as
we continue to grow these other businesses.
Permissions and Approvals Required to be
Obtained from PRC Authorities for our Business
Operations
In the opinion of Fangda Partners, our PRC legal
counsel, our consolidated subsidiaries and the VIEs in
China have obtained all major licenses, permissions
and approvals from the competent PRC authorities
that are necessary to the operations of our Taobao
and Tmall Group, Cloud Intelligence Group and
AIDC Group, which accounted for a substantial
Business Overview
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Fiscal Year 2024 Annual Report
majority of our revenue in fiscal year 2024. In
addition, we have implemented policies and control
procedures to obtain and maintain the necessary
licenses, permission and approvals to conduct our
businesses. On the basis of the legal opinion issued
by our PRC legal counsel and our internal policies
and procedures, we believe that our consolidated
subsidiaries and the VIEs in China have received
the requisite licenses, permissions and approvals
from the PRC authorities as are necessary for our
business operations in China. Such licenses, permits,
registrations and filings include, among others, Value-
added Telecommunication License, License for Online
Transmission of Audio-Visual Programs, Network
Cultural Business License, Online Publishing Service
License and License for Surveying and Mapping.
If we, our consolidated subsidiaries or the VIEs in China
(i) do not maintain such permissions or approvals,
(ii) inadvertently conclude that such permissions or
approvals are not required, or (iii) applicable laws,
regulations, or interpretations change, and we or
the VIEs are required to obtain such permissions or
approvals in the future, we may be unable to obtain
such necessary approvals, permits, registrations
or filings in a timely manner, or at all, and such
approvals, permits, registrations or filings may be
rescinded even if obtained. Any such circumstance
may subject us to fines and other regulatory, civil
or criminal liabilities, and we may be ordered by
the competent PRC authorities to suspend relevant
operations, which could materially and adversely
affect our business, financial condition, results of
operations and prospects. Please see “Risk Factors —
Risks Related to Our Business and Industry — We are
subject to a broad range of laws and regulations,
and future laws and regulations may impose
additional requirements and other obligations that
could materially and adversely affect our business,
financial condition and results of operations, as well
as the trading prices of our ADSs, Shares and/or other
securities.”
Furthermore, if the PRC government determines that
the contractual arrangements constituting part of
the VIE structure adopted by us do not comply with
PRC regulations, or if these regulations change or
are interpreted differently in the future, our securities
may decline in value or become worthless if the
determinations, changes, or interpretations result
in our inability to assert contractual control over the
assets of our consolidated subsidiaries and the VIEs
in China that conduct a significant portion of our
business operations. In addition, there are substantial
uncertainties as to whether the VIE structure adopted
by us may be deemed as a method of foreign
investment in the future. If the VIE structure adopted
by us were to be deemed as a method of foreign
investment under any future laws, regulations and
rules, and if any of our business operations were to
fall under the “Negative List” for foreign investment,
we would need to take further actions in order to
comply with these laws, regulations and rules, which
may materially and adversely affect our current
corporate structure, business, financial condition
and results of operations. See “Risk Factors — Risks
Related to Our Corporate Structure — Substantial
uncertainties exist with respect to the interpretation
and implementation of the PRC Foreign Investment
Law and its implementing rules and other regulations
and how they may impact the viability of our current
corporate structure, business, financial condition and
results of operations.”
Given the uncertainties relating to the interpretation
and enforcement of PRC laws, rules and regulations,
it is possible that our existing operations may be
found not to be in full compliance with relevant laws
and regulations in the future. In addition, the PRC
legal system is based in part on government policies
and internal rules, some of which are not published
on a timely basis or at all, and which may have a
retroactive effect. As a result, we may not be aware
of our violation of these policies and rules until after
the occurrence of the violation. For more detailed
information, see “Risk Factors — Risks Related to Doing
Business in the People’s Republic of China — There
are uncertainties regarding the interpretation and
enforcement of PRC laws, rules and regulations, and
changes in policies, laws, rules and regulations in the
PRC could adversely affect us.”
Permissions and Approvals Required to be
Obtained from PRC Authorities for our Securities
Offerings
The PRC government has enhanced its regulatory
oversight of Chinese companies listing overseas. In
connection with our prior securities offerings and
overseas listings, under PRC laws and regulations
in effect as of the date of this annual report, after
consulting our PRC legal counsel, Fangda Partners, we
are not aware of any PRC laws or regulations which
Business Overview
44
Alibaba Group Holding Limited
explicitly require us to obtain any permission from
the CSRC or other Chinese authorities, and we, our
consolidated subsidiaries and the VIEs in China (i) have
not been required to obtain any permission from or
complete any filing with any PRC authority, (ii) have not
been required to go through a cybersecurity review by
the Cyberspace Administration of China, and (iii) have
not received or were denied such requisite permissions
by any PRC authority. There are uncertainties with
respect to how PRC authorities will regulate overseas
securities offerings and overseas listings in general,
as well as the interpretation and implementation of
any related regulations. Although we intend to fully
comply with the then effective relevant laws and
regulations applicable to any securities offerings we
may conduct, there are uncertainties with respect
to whether we will be able to fully comply with
requirements to obtain any permissions and approvals
from, or complete any reporting or filing procedures
with, PRC authorities that may be in effect in the future.
If we, our consolidated subsidiaries or the VIEs in China
(i) do not maintain such permissions or approvals,
(ii) inadvertently conclude that such permissions,
approvals or filing or reporting are not required, or
(iii) applicable laws, regulations, or interpretations
change, and we or the VIEs are required to obtain
such permissions, approvals or filing or reporting
in the future, we may be unable to obtain such
necessary approvals, permits, registrations or filings
in a timely manner, or at all, and such approvals,
permits, registrations or filings may be rescinded even
if obtained. Any such circumstance could subject us
to penalties, including fines, suspension of business
and revocation of required licenses, significantly limit
or completely hinder our and our subsidiaries’ ability
to offer securities to investors and cause our securities
to decline in value or become worthless. For more
detailed information, see “Risk Factors — Risks Related
to Doing Business in the People’s Republic of China —
There are uncertainties regarding the interpretation
and enforcement of PRC laws, rules and regulations,
and changes in policies, laws, rules and regulations in
the PRC could adversely affect us” and “Risk Factors —
Risks Related to Our Business and Industry — We may
need additional capital but may not be able to obtain
it on favorable terms or at all.”
Regulation
We operate in an increasingly complex legal and
regulatory environment. We and our key service
provider, Ant Group, are subject to a variety of PRC and
foreign laws, rules and regulations across a number
of aspects of our business. As we have expanded
our operations to other countries, we have become
increasingly subject to applicable regulations in
these jurisdictions This section primarily summarizes
the principal PRC laws, rules and regulations that
we believe have the most significant impact on our
business and operations within the PRC, because
the PRC remains the country where we conduct the
substantial majority of our business and generate
the substantial majority of our revenues. Other
jurisdictions where we conduct business have their
own laws and regulations that cover many of the
areas covered by PRC laws and regulations, but
their focus, specifics and approaches may differ
considerably. Areas in which we are subject to laws,
rules and regulations outside of the PRC mainly
include data protection and privacy, consumer
protection, content regulation, intellectual property,
competition, cross-border trade, taxation, anti-
money laundering and anti-corruption. We may also
face protectionist policies and regulatory scrutiny
on national security grounds in foreign countries in
which we conduct business or investment activities.
See “Risk Factors — Risks Related to Our Business and
Industry — We are subject to a broad range of laws
and regulations, and future laws and regulations may
impose additional requirements and other obligations
that could materially and adversely affect our
business, financial condition and results of operations,
as well as the trading prices of our ADSs, Shares and/
or other securities.”
Our online and mobile commerce businesses are
classified as value-added telecommunication
businesses by the PRC government. Current PRC laws,
rules and regulations restrict foreign ownership in
certain value-added telecommunication services. As
a result, we operate our online and mobile commerce
businesses and other businesses in which foreign
investment is restricted or prohibited through variable
interest entities, each of which is owned by PRC
citizens or by PRC entities which are ultimately owned
by PRC citizens, and holds all licenses associated with
these businesses.
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Fiscal Year 2024 Annual Report
The applicable PRC laws, rules and regulations
governing value-added telecommunication services
may change in the future. We may be required to
obtain additional approvals, licenses and permits
and to comply with any new regulatory requirements
adopted from time to time. Moreover, substantial
uncertainties exist with respect to the interpretation
and implementation of these PRC laws, rules and
regulations. See “Risk Factors — Risks Related to Doing
Business in the People’s Republic of China — There
are uncertainties regarding the interpretation and
enforcement of PRC laws, rules and regulations, and
changes in policies, laws, rules and regulations in the
PRC could adversely affect us.”
Regulation of Telecommunications and
Internet Information Services
Regulation of Telecommunications Services
Under the Telecommunications Regulations of the PRC,
or the Telecommunications Regulations, promulgated
on September 25, 2000 by the State Council of the
PRC and most recently amended in February 2016,
a telecommunications service provider in China
must obtain an operating license from the MIIT, or
its provincial counterparts. The Telecommunications
Regulations categorize all telecommunications
services in China as either basic telecommunications
services or value-added telecommunications services.
Our online and mobile commerce businesses, as well
as Youku’s online video businesses, are classified
as value-added telecommunications services. The
Administrative Measures for Telecommunications
Business Operating License, promulgated by the
MIIT in September 2017, set forth more specific
provisions regarding the types of licenses required to
operate value-added telecommunications services,
the qualifications and procedures for obtaining the
licenses and the administration and supervision of
these licenses.
Foreign investment in telecommunications
businesses is governed by the State Council of the
PRC’s Administrative Rules for Foreign Investment
in Telecommunications Enterprises, or the Foreign
Investment Telecommunications Rules, which was
recently amended on March 29, 2022 and became
effective on May 1, 2022. According to the amended
Foreign Investment Telecommunications Rules, a
foreign investor’s beneficial equity ownership in an
entity providing value-added telecommunications
services in China is generally not permitted to exceed
50% unless otherwise allowed by the competent
PRC governmental authorities. Although the revised
Foreign Investment Telecommunications Rules
no longer require major foreign investors holding
equity in enterprises providing value-added
telecommunications services in China to have a good
track record and operational experience in providing
these services, the PRC governmental authorities have
not promulgated the relevant implementation rules.
Accordingly, there are uncertainties as to whether
foreign investors without a good track record and
operational experience in providing these services
may qualify as major foreign investors in value-added
telecommunications enterprises. Based on the Notice
regarding the Strengthening of Ongoing and Post
Supervision of Foreign Invested Telecommunication
Enterprises issued by the MIIT in October 2020, foreign
invested telecommunications enterprises will no
longer be subject to the requirement for prior MIIT
approval. Nonetheless, these enterprises still need
to submit the relevant materials to the MIIT to apply
for new telecommunications operating permits or
amended permits.
Although the Negative List allows foreign investors to
hold more than 50% equity interests in a value-added
telecommunications service provider engaging in
e-commerce, domestic multi-party communications,
or storage-and-forward and call center businesses,
other requirements provided by the amended Foreign
Investment Telecommunications Rules shall still apply.
The MIIT’s Notice Regarding Strengthening
Administration of Foreign Investment in Operating
Value-Added Telecommunications Businesses, or the
MIIT Notice, issued on July 13, 2006 prohibits holders
of these service licenses from leasing, transferring
or selling their licenses in any form, or providing
any resource, site or facility, to any foreign investors
intending to conduct this type of business in China. In
addition to restricting dealings with foreign investors,
the MIIT Notice contains a number of detailed
requirements applicable to holders of value-added
telecommunications service licenses, including that
license holders or their shareholders must directly
own the domain names and trademarks used in their
daily operations and each license holder must possess
the necessary facilities for its approved business
operations and maintain its facilities in the regions
covered by its license, including maintaining its
network and providing Internet security in accordance
with the relevant regulatory standards. The MIIT or
its provincial counterparts have the power to require
corrective actions after they discover any non-
compliance by license holders, and where license
Business Overview
46
Alibaba Group Holding Limited
holders fail to take those steps, the MIIT or its provincial
counterparts have the power to revoke the value-
added telecommunications service licenses.
On December 28, 2016, the MIIT promulgated the
Notice on Regulating Telecommunications Services
Agreement Matters, or the Telecommunications
Services Agreement Notice, which came into
effect on February 1, 2017. According to the
Telecommunications Services Agreement Notice,
telecommunications service providers must require
their users to present valid identification certificates
and verify the users’ identification information before
provision of services. Telecommunications service
providers are not permitted to provide services to
users with unverifiable identity or users who decline to
proceed with identity verification.
Regulation of Internet Information Services
As a subsector of the telecommunications industry,
Internet information services are regulated by the
Administrative Measures on Internet Information
Services, or the ICP Measures. “Internet information
services” are defined as services that provide
information to online users through the Internet.
Internet information service providers that provide
commercial services are required to obtain an
operating license from the MIIT or its provincial
counterpart.
To the extent the Internet information services
provided relate to certain matters, including news,
publication, education or medical and healthcare
(including pharmaceutical products and medical
equipment matters), approvals or filings must also
be obtained from the relevant industry regulators
in accordance with the laws, rules and regulations
governing those industries.
Regulation of Advertising Services
The principal regulations governing advertising
businesses in China are:
•
the Advertising Law of the PRC (2021, as
amended);
•
the Advertising Administrative Regulations (1987,
as amended);
•
the Administrative Regulations on Internet
Information Search Services (2016); and
•
the Administrative Measures for Internet
Advertising (2023).
These laws, rules and regulations require companies
such as ours that engage in advertising activities
to obtain a business license that explicitly includes
advertising in the business scope from the SAMR,
formerly the SAIC, or its local branches.
The applicable PRC advertising laws, rules and
regulations contain certain prohibitions on the content
of advertisements in China (including prohibitions
on misleading content, superlative wording,
socially destabilizing content or content involving
obscenities, superstition, violence, discrimination or
infringement of the public interest). Advertisements
for anesthetic, psychotropic, toxic or radioactive
drugs are prohibited, and the dissemination of
advertisements of certain other products, such as
tobacco, patented products, pharmaceuticals, medical
instruments, agrochemicals, foodstuff, alcohol and
cosmetics, are also subject to specific restrictions and
requirements. Advertisers, advertising operators or
advertising distributors may be subject to civil liability
if they infringe the legal rights and interests of third
parties, such as infringement of intellectual property
rights, unauthorized use of a name or portrait and
defamation.
On June 25, 2016, the Cyberspace Administration of
China promulgated the Administrative Regulations on
Internet Information Search Services, or the Internet
Search Regulations, which came into effect on August
1, 2016. According to the Internet Search Regulations,
Internet search service providers must verify paid-
search service customers’ qualifications, limit the ratio
of paid-search results on each web page, and clearly
distinguish paid-search results from natural search
results.
On February 25, 2023, the SAMR released the
Administrative Measures for Internet Advertising, which
came into effect from May 1, 2023 and replaced the
Internet Advertising Interim Measures promulgated by
the SAIC on July 4, 2016. The Administrative Measures
for Internet Advertising set out, among other things,
the following requirements for Internet advertising
activities:
•
online advertisements for tobacco (including
e-cigarettes) are not allowed, and online
advertisements for prescription medicine are not
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Fiscal Year 2024 Annual Report
allowed unless otherwise permitted by laws and
regulations;
•
online advertisements for special commodities
and services such as medical treatments,
pharmaceuticals, medical devices,
agrochemicals, veterinary medicine, health foods
and food for special medical purposes must be
reviewed by competent authorities before online
publication, and the advertisements for such
commodities and services are not allowed to
be published in the form of introducing health
and wellness knowledge. In addition, when
introducing health and wellness knowledge,
information such as the address or contact
information of commodity operators or service
providers and shopping links related to these
products must not appear on the same page or
at the same time;
•
advertisements for medical treatments,
pharmaceuticals, health foods, special medical
purpose formula foods, medical devices,
cosmetics, alcohol, beauty advertisements, and
online game advertisements that are detrimental
to the physical and mental health of minors shall
not be published on Internet media targeted to
minors;
•
Internet advertisements must be visibly marked
as “advertisement”, while paid-search results
must be obviously distinguished from natural
search results;
•
when promoting commodities or services
through knowledge introduction, experience
sharing or consumer evaluation, and purchase
methods such as shopping links are attached,
the advertisements publishers shall visibly mark
them as “advertisements”;
•
“pop-up ads” must be clearly marked with a
“close” sign and be closable with one click.
Furthermore, the advertisers and publishers
are prohibited from engaging in the following
behaviors that affect one-click closure: (i) there
is no “close” sign or the timing is over to close
the advertisements; (ii) the “close” sign is false,
not clearly identifiable or difficult to locate which
set up obstacles to close the advertisements;
(iii) closing the advertisements requires more
than two clicks; (iv) during the process of
browsing the same page or document, the
advertisements continue to pop up after closing,
which affect users normal use of the network.
These requirements also apply to open screen
ads displayed when launching an Internet
application;
•
if the Internet advertisements are published by
means of algorithmic recommendation or other
technologies, the rules related to algorithm
recommendation services and advertising
records shall be included in the advertising
archives.
According to the Administrative Measures for Internet
Advertising, the advertisers are responsible for the
authenticity of the content of Internet advertisements,
while the Internet advertisement publishers and
advertisement agencies are required to establish,
improve, and implement registration, review,
and archive management systems for Internet
advertising businesses, which include verifying
and registering advertiser information, verifying
supporting documents and advertisements content,
and allocating advertising review personnel familiar
with advertising laws and regulations or establish
advertising review bodies.
In addition, the Administrative Measures for Internet
Advertising require Internet platform operators
providing Internet information services to take
measures to prevent and stop illegal advertisements,
which include recording and storing the real identity
information of users who publish advertisements for
at least three years, monitoring and investigating the
content of advertisements, and employing measures
to stop illegal advertisements. Internet platform
operators are also required to establish effective
complaint and reporting mechanisms, cooperate
with market regulatory departments in investigating
illegal conduct, and use measures such as warnings,
suspending or terminating services for users who
publish illegal advertisements. Furthermore, Internet
platform operators are prohibited from using technical
means or other methods to obstruct market regulatory
departments’ advertising monitoring.
Regulation of Online and Mobile Commerce
China’s online and mobile commerce industry as
well as the PRC laws, regulations or rules specifically
regulating this industry are constantly evolving.
The SAIC adopted the Administrative Measures for
Online Trading on January 26, 2014, which became
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Alibaba Group Holding Limited
effective on March 15, 2014. On December 24, 2014,
the MOFCOM promulgated the Provisions on the
Procedures for Formulating Transaction Rules of Third
Party Online Retail Platforms (Trial) to regulate the
formulation, revision and enforcement of transaction
rules for online retail marketplace platforms. These
measures impose more stringent requirements and
obligations on online trading or service operators as
well as marketplace platform providers. For example,
marketplace platform providers are obligated to
make public and file their transaction rules with
MOFCOM or its respective provincial counterparts, to
enable examination of the legal status of each third-
party merchant selling products or services on their
platforms and display on a prominent location on the
merchant’s web page the information stated in the
merchant’s business license or a link to its business
license, and group buying website operators must
only allow a third-party merchant with a proper
business license to sell products or services on their
platforms. Where marketplace platform providers also
act as online distributors, these marketplace platform
providers must make a clear distinction between their
online direct sales and sales of third-party merchant
products on their marketplace platforms.
Since the promulgation of the Administrative Measures
for Online Trading, the SAIC has issued a number
of guidelines and implementing rules providing
greater specificity to these regulations. The relevant
governmental authorities continue to consider and
issue guidelines and implementing rules, and we
expect that regulation in this industry will further
develop. For example, three PRC governmental
authorities (the MOF, General Administration of
Customs and STA) issued a Notice on Tax Policy for
Cross-Border E-commerce Retail Imports on March 24,
2016 to regulate cross-border e-commerce trading
which experienced rapid growth in recent years.
According to the notice, which became effective on
April 8, 2016, goods imported through cross-border
e-commerce retail are subject to tariff, import value-
added tax, or VAT, and consumption tax based on
the type of goods. Individuals purchasing any goods
imported through cross-border e-commerce are
liable to pay tax, while e-commerce companies,
e-commerce transaction platform operators
or logistics companies shall be responsible for
withholding such tax.
On August 31, 2018, the Standing Committee of
the National People’s Congress promulgated the
E-commerce Law, which came into effect on January
1, 2019. The E-commerce Law imposes a series of
requirements on e-commerce operators including
e-commerce platform operators, merchants operating
on the platform and the individuals and entities
carrying out business online. According to the
E-commerce Law, e-commerce operators who provide
search results based on consumers’ characteristics
such as hobbies and consumption habits shall
also provide consumers with options that are not
targeted at their personal characteristics at the same
time, and respect and fairly protect the legitimate
interests of consumers. The E-commerce Law requires
e-commerce platform operators to, among other
things, verify and register the identities, addresses,
contacts and licenses of merchants who apply to
provide goods or services on their platforms, establish
registration archives and update this information on
a regular basis; submit the identification information
of the merchants on their platforms to market
regulatory administrative authorities as required and
remind the merchants to complete registration with
market regulatory administrative authorities; submit
identification information and tax-related information
to tax authorities as required in accordance with the
laws and regulations regarding the administration of
tax collection and remind the individual merchants
to complete the tax registration; and establish
intellectual property rights protection rules and
take necessary measures against infringement of
intellectual property rights by merchants on their
platforms.
In addition, e-commerce platform operators are not
allowed to impose unreasonable restrictions over or
add unjustified conditions to transactions concluded
on their platforms by merchants, or charge merchants
operating on their platforms any unreasonable fees.
According to the E-commerce Law, e-commerce
platform operators are required to assume joint
liability with the merchants and may be subject to
warnings and fines up to RMB2,000,000 where (i)
they fail to take necessary actions where they know
or should have known that the products or services
provided by the merchants on the platform do not
meet personal and property security requirements,
or otherwise infringe upon consumers’ legitimate
rights; or (ii) they fail to take necessary actions, such
as deleting and blocking information, disconnecting,
terminating transactions and services, where they
know or should have known that the merchants on the
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platform infringe upon the intellectual property rights
of others. With respect to products or services affecting
consumers’ health and safety, e-commerce platform
operators will be held liable if they fail to review
the qualifications of merchants or fail to safeguard
the interests of consumers, and may be subject to
warnings and fines up to RMB2,000,000.
On March 15, 2021, the SAMR promulgated the Online
Trading Measures, which took effect and replaced the
Administrative Measures for Online Trading on May 1,
2021. The Online Trading Measures further strengthen
the administration and supervision of online
trading activities, and impose a series of regulatory
requirements on new forms of online trading, such
as online social networking e-commerce and online
livestreaming e-commerce. The Online Trading
Measures expressly prohibit an online transaction
platform operator from unreasonably restricting or
setting any unreasonable conditions on transactions
on its platform and interfering with merchants’
independent business operations. The Online Trading
Measures specify typical examples of unreasonable
restrictions or conditions imposed by e-commerce
platform operators on transactions concluded on
their platforms, including prohibiting or restricting the
merchants to operate on other e-commerce platforms,
by means of unfair practices, such as reducing their
search exposure, removing their products or services,
blocking their stores, or prohibiting or restricting the
merchants from freely choosing supporting service
providers for transactions, such as logistics services
providers. Furthermore, the Online Trading Measures
require e-commerce platform operators to verify and
update each merchant’s profile on a regular basis and
monitor their market participant registration status.
In October 2020, the SAMR promulgated the Interim
Provisions for Regulating Promotional Activities, which
requires e-commerce platform operators to design
rules and procedures to foster fair and transparent
merchandise promotional activities.
On April 16, 2021, the Cyberspace Administration of
China and six other PRC governmental authorities
jointly issued the Administrative Measures on Online
Livestreaming Marketing (Trial), which came into effect
on May 25, 2021. According to the Administrative
Measures on Online Livestreaming (Trial), online
livestreaming marketing platforms are required,
among other things, to set up a system to internally
rank streamers by metrics such as views and
transaction volumes, and take heightened regulatory
measures in relation to key livestreaming operators.
In addition, online livestreaming marketing platforms
are also required to establish and maintain risk
management systems to guard against high-risk
marketing activities, including taking measures such
as pop-up warnings, limiting traffic, suspending
livestreaming, and prominently alerting users of the
risks involved in transactions that are conducted
outside livestreaming platforms.
On March 1, 2022, the Supreme People’s Court of the
PRC issued the Provisions on Issues Concerning the
Application of Law for the Trial of Cases on Online
Consumption Disputes (I), which came into effect
on March 15, 2022 and clarified the responsibilities
of online consumption platforms and the scope
of the seven-day unconditional return policy.
According to these judicial interpretations, standard
terms provided by e-commerce operators that are
unfair and unreasonable to consumers may be
deemed invalid, and contracts entered into between
e-commerce operators and any other entity leading
to false publicity by means of fictitious deals, hits or
user comments shall also be null and void. Moreover,
e-commerce platform operators shall be held liable
as the product seller or service provider if the labels
used mislead consumers to believe that the product
or service is provided by the e-commerce platform.
Furthermore, operators of livestreaming platforms
are responsible for verifying the qualification and
license of live-streamers who sell food products. The
operators of e-commerce platforms can be held jointly
liable for damages incurred by consumers resulting
from defects in foods purchased from merchants on
their platforms, if these operators fail to fulfill certain
requirements and obligations.
Regulation of Mobile Apps
On June 28, 2016, the Cyberspace Administration
of China promulgated the Regulations for the
Administration of Mobile Internet Application
Information Services, which came into effect on August
1, 2016, requiring ICPs who provide information
services through mobile Internet apps to, among
other things, verify the real identities of registered
users through mobile phone numbers or other
similar channels; establish and improve procedures
for protection of user information; and establish
and improve procedures for information content
censorship.
If an ICP who provides information services through
apps violates these regulations, mobile app stores
through which the ICP distributes its apps may
issue warnings, suspend the release of its apps,
or terminate the sale of its apps, and/or report the
violations to governmental authorities.
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On June 14, 2022, the Cyberspace Administration of
China promulgated the revised Regulations for the
Administration of Mobile Application Information
Services, which came into effect on August 1,
2022. Pursuant to the revised Regulations for the
Administration of Mobile Application Information
Services, mobile app providers shall comply with
relevant provisions on the scope of necessary personal
information when engaging in personal information
processing activities and shall not compel users
to agree to non-essential personal information
collection or ban users from their basic functional
services due to their refusal of providing unnecessary
personal information. In addition, mobile app
providers shall, among other things, verify the real
identities of registered users; establish and improve
procedures for protection of user information and
information content censorship, fulfill data security
protection obligations and various obligations of
minors’ protection, and shall not induce users to
download the applications by illegal methods or bad
information. Furthermore, mobile app providers who
launch new technologies, applications or functions
with the attribute of public opinion or the ability of
social mobilization shall conduct security assessment
in accordance with the relevant provisions. If an
application provider violates these regulations,
application distribution platforms may issue warnings,
suspend the release of its applications, or terminate
the sale of its applications, and/or report the violations
to governmental authorities, and the application
provider may be imposed administrative penalty by
the Cyberspace Administration of China and relevant
competent authorities in accordance with relevant
laws and regulations.
According to the Provisions on the Scope of Necessary
Personal Information Required for Common Types
of Mobile Internet Applications which became
effective on May 1, 2021, clarifying that necessary
personal information means the personal information
necessary for ensuring the normal operation of the
basic functional services of the apps, without which
the app cannot perform its basic functional services.
Regulation of Internet Content
The PRC government has promulgated measures
relating to Internet content through various ministries
and agencies, including the MIIT, the News Office of
the State Council of the PRC, the Ministry of Culture and
Tourism and the General Administration of Press and
Publication. In addition to various approval and license
requirements, these measures specifically prohibit
Internet activities that result in the dissemination of
any content that is found to contain pornography,
promote gambling or violence, instigate crimes,
undermine public morality or the cultural traditions
of the PRC or compromise state security or secrets.
ICPs must monitor and control the information posted
on their websites. If any prohibited content is found,
they must remove the content immediately, keep a
record of it and report to the relevant authorities. If
an ICP violates these measures, the PRC government
may impose fines and revoke any relevant business
operation licenses.
Regulation of Broadcasting Audio/Video
Programs through the Internet
We are subject to various laws and regulations
in connection with providing online audio/video
programs and livestreaming via our platform. For
example, according to the Rules for the Administration
of Internet Audio and Video Program Services,
commonly known as Circular 56, jointly issued by the
State Administration of Radio, Film, and Television, or
the SARFT, and the MIIT, all online audio/video service
providers are generally required to be either wholly
state-owned or state-controlled. According to the
relevant official answers to press questions published
on the SARFT’s website dated February 3, 2008, online
audio/video service providers that already had been
operating lawfully prior to the issuance of Circular
56 may re-register and continue to operate without
becoming state-owned or controlled, provided that
the providers have not engaged in any unlawful
activities. This exemption will not be granted to online
audio/video service providers established after
Circular 56 was issued.
We are also subject to a series of requirements for
audio/video content posted on our platform. The
General Administration of Press and Publication,
Radio, Film and Television, or GAPPRFT (which was split
into the National Radio and Television Administration,
or NRTA, and the State Administration of News and
Publication in March 2018) released several notices on
the administration of online audio/video programs,
which stress that entities producing online audio/
video content must obtain a permit for radio and
television program production and operation, and
that online audio/video content service providers
should not release any Internet dramas or micro
films that were produced by any entity lacking the
permit. For Internet dramas or micro films produced
and uploaded by individual users, the online audio/
video service providers transmitting this content will
be deemed responsible as the producer. Furthermore,
the online audio/video contents, including Internet
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drama and micro films, are required to be filed with
the relevant authorities before release.
According to the Circular on Strengthening the
Administration of the Online Show Livestreaming and
E-commerce Livestreaming issued by the NRTA on
November 12, 2020, platforms providing e-commerce
livestreaming services shall register their information
and business operations by November 30, 2020.
The overall ratio of front-line content analysts to
livestreaming rooms shall be 1:50 or higher on
such platforms. A platform shall report the number
of its livestreaming rooms, streamers and content
analysts to the provincial branch of the NRTA on a
quarterly basis. To host any e-commerce promotional
events such as E-commerce festivals, E-commerce
days or promotion days using livestreaming, live
performances, live variety shows and other live
programs, the platforms shall register the information
of guests, streamers, content and settings with the
local branch of NRTA 14 business days in advance.
Online e-commerce livestreaming platforms shall
conduct relevant qualification examination and real-
name authentication on businesses and individuals
providing livestreaming marketing services and
keep complete examination and authentication
records, and shall not enable imposters or businesses
or individuals without qualification or real-name
registration to conduct livestreaming marketing
services.
On April 12, 2022, the NRTA and the Publicity
Department of the China Communist Party Central
Committee promulgated the Notice on Strengthening
the Administration of Live Games on Online Audio/
Video Program Platforms, specifying that online
livestreaming platforms shall discretely select the
hosts and guests with political standpoint, moral
character, artistic standard and social evaluation as
the selection criteria, and resolutely refuse hosts and
guests who are politically incorrect, or have committed
any violations of laws, regulations, public order or
good morals. The notice further specifies that online
livestreaming platforms shall establish and implement
a mechanism for the protection of minors, implement
the real-name registration system, prohibit minors
from tipping, and establish a special channel for
returning the tips of minors.
Regulation of Internet Publication
The SARFT is responsible for nationwide supervision
and administration of publishing activities in China.
On February 4, 2016, the GAPPRFT, the SARFT’s
predecessor, and the MIIT jointly promulgated the
Online Publication Service Administration Rules, or the
Online Publication Rules, which took effect on March
10, 2016.
Pursuant to the Online Publication Rules, an online
publication service provider must obtain the Online
Publication Service License from the GAPPRFT. The
term “online publication service” is defined as the
provision of online publications to the public through
information networks. The term “online publications”
is defined as digital works characteristic of publishing
such as editing, production or processing provided to
the public through information networks.
The Online Publication Rules expressly prohibit foreign
invested enterprises from providing online publication
services. In addition, if an online publication service
provider intends to cooperate for an online publication
services project with foreign invested enterprises,
overseas organizations or overseas individuals, it
must report to the GAPPRFT and obtain an approval in
advance. Also, an online publication service provider is
prohibited from lending, leasing, selling or otherwise
transferring the Online Publication Service License, or
to allow any other online information service provider
to provide online publication services in its name.
Regulation of Internet Drug Information Service
The State Food and Drug Administration, or the SFDA,
the predecessor of the National Medical Products
Administration, promulgated the Administrative
Measures on Internet Drug Information Service in July
2004 and further amended the same in November
2017. Since the promulgation of the Administrative
Measures on Internet Drug Information Service,
the SFDA has issued certain implementing rules
and notices aimed at adding specificity to these
regulations. These measures set out regulations
governing the classification, application, approval,
content, qualifications and requirements for Internet
drug information services. An ICP service operator
that provides information regarding drugs or medical
equipment must obtain an Internet Drug Information
Service Qualification Certificate from the applicable
provincial level counterpart of the National Medical
Products Administration.
On August 3, 2022, the SAMR released the
Administrative Measures for the Supervision of Online
Drug Sales, which came into effect on December
1, 2022, for the regulation of enterprises engaging
in online drug sales and online drug trading third-
party platforms. According to these measures,
enterprises engaging in online drug sales shall be
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drug marketing authorization holders or drug business
enterprises, and shall report relevant information
including names of the websites and application
programs, the IP addresses and domain names,
etc. to the medical products regulators. In addition,
drug trading third-party platforms are also required
to file relevant information including their names,
legal representatives, etc. with the provincial medical
products administration.
Regulation of Internet News Information Services
On May 2, 2017, the Cyberspace Administration of
China issued the Administrative Provisions on Internet
News Information Services, which came into effect on
June 1, 2017 and define news information as reports
and commentary on political, economic, military,
diplomatic and other social and public affairs, as well
as reports and commentary on emergency social
events. Pursuant to these provisions, the Cyberspace
Administration of China and its local counterparts
replaced the State Council of the PRC Information
Office as the government department in charge of
supervision and administration of Internet news
information. Furthermore, an ICP operator must obtain
approval from the Cyberspace Administration of China
in order to provide Internet news information services,
including through websites, applications, forums,
blogs, microblogs, public accounts, instant messaging
tools, and webcasts.
Regulation of Internet Culture Activities
On February 17, 2011, the Ministry of Culture, the
predecessor of the Ministry of Culture and Tourism,
promulgated the Internet Culture Administration
Tentative Measures, or the Internet Culture Measures,
which was most recently amended in December 2017.
The Internet Culture Measures require ICP operators
engaging in “Internet culture activities” to obtain a
permit from the Ministry of Culture and Tourism. The
term “Internet culture activities” includes, among
other things, online dissemination of Internet cultural
products (such as audio-video products, gaming
products, performances of plays or programs, works
of art and cartoons) and the production, reproduction,
importation, publication and broadcasting of Internet
cultural products.
On August 12, 2013, the Ministry of Culture
promulgated the Notice on Implementing the
Administrative Measures for the Content Self-
examination of Internet Culture Business Entities.
According to this notice, any cultural product or
service shall be reviewed by the provider before being
released to the public and the review process shall
be done by persons who have obtained the relevant
content review certificate.
On October 23, 2015, the Ministry of Culture
promulgated the Notice on Further Strengthening
and Improving the Content Review of Online Music,
which took effect on January 1, 2016 and stipulated
that ICPs shall carry out self-examination in respect
of the content management of online music, which
shall be regulated by the cultural administration
departments in process or afterwards. According to
this notice, ICP operators are required to submit their
content administrative system, review procedures, and
work standards to the provincial culture administrative
department where they are located for filing within a
prescribed period.
Regulation of Audio/Video Program Production
On July 19, 2004, the SARFT promulgated the
Administrative Measures on the Production and
Operation of Radio and Television Programs, which
came into effect on August 20, 2004 and most recently
amended on December 1, 2020. These measures
provide that anyone who wishes to produce or
operate radio or television programs must first obtain
an operating permit for their business.
On December 25, 2001, the State Council of the PRC
promulgated the Regulations for the Administration of
Films, or the Film Regulations, which became effective
on February 1, 2002. The Film Regulations set forth
the general regulatory guidelines for China’s film
industry and address practical issues with respect to
production, censorship, distribution and screening.
They also establish the SARFT as the sector’s
regulatory authority, and serve as the foundation for
all other legislation promulgated in this area. The Film
Regulations provide the framework for an industry-
wide licensing system operated by the SARFT, under
which separate permits (and permit application
procedures) apply.
Regulation of Express Delivery Services
The PRC Postal Law, which took effect in October 2009
and was most recently amended in 2015, sets forth
the fundamental rules on the establishment and
operation of an express delivery company. According
to the Postal Law, an enterprise that operates and
provides express delivery services is required to
obtain a Courier Service Operation Permit. Pursuant
to the Postal Law, “delivery” refers to delivery of
correspondence, parcels, printed materials and other
items to specific individuals or entities according to the
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names and addresses on the envelopes or packages,
including mail acceptance, sorting, transportation,
delivery, and “express delivery” refers to rapid mail
“delivery” within a specified time limit.
The PRC Postal Law also requires that a company
operating express delivery services must apply for
and obtain the Courier Service Operation Permit prior
to applying for its business license. Pursuant to the
Administrative Measures on Courier Service Operation
Permits, which was promulgated by the Ministry of
Transport in June 2015 and most recently amended
in November 2019, any entity engaging in express
delivery services is required to obtain a Courier Service
Operation Permit from the State Post Bureau or its
local counterpart and is subject to their supervision
and regulation. The express delivery business must
be operated within the permitted scope and the valid
term of the Courier Service Operation Permit.
On March 2, 2018, the State Council of the PRC
promulgated the Provisional Regulations for Express
Delivery, or the Provisional Regulations, which came
into effect on May 1, 2018 and was amended on
March 2, 2019. The Provisional Regulations reiterate
that a company operating express delivery services
must obtain the Courier Service Operation Permit and
sets forth specific rules and security requirements for
express delivery operations.
Regulation of Anti-counterfeiting
According to the Trademark Law of the PRC,
counterfeit or unauthorized production of the label
of another person’s registered trademark, or sale of
any label that is counterfeited or produced without
authorization will be deemed as an infringement of
the exclusive right to use a registered trademark. The
infringing party will be ordered to cease infringement
immediately, a fine may be imposed and the
counterfeit goods will be confiscated. The infringing
party may also be held liable for damages suffered by
the owner of the intellectual property rights, which will
be equal to the gains obtained by the infringing party
or the losses suffered by the owner as a result of the
infringement, including reasonable expenses incurred
by the owner in connection with enforcing its rights.
Under the Civil Code of the PRC, an Internet service
provider may be subject to joint liability if it is aware
that an Internet user is infringing upon the intellectual
property rights of others through its Internet services,
such as selling counterfeit products, and fails to
take necessary measures to stop that activity. If an
Internet service provider receives a notice from an
infringed party regarding an infringement, the Internet
service provider is required to take certain measures,
including deleting, blocking and unlinking the
infringing content, in a timely manner.
In addition, under the Online Trading Measures
promulgated by the SAMR on March 15, 2021, as an
operator of an online trading platform, we must adopt
measures to ensure safe online transactions, protect
consumers’ rights and prevent unfair competition.
Regulation of Monopoly and Unfair
Competition
On June 24, 2022, the Standing Committee of the
National People’s Congress promulgated the
amended PRC Anti-monopoly Law, which came into
effect on August 1, 2022. The amended PRC Anti-
monopoly Law requires that where concentration of
undertakings reaches the filing threshold stipulated
by the State Council of the PRC, a filing must be
made with the anti-monopoly authority before the
parties implement the concentration. Concentration
refers to (i) merger of undertakings; (ii) acquisition of
control over other undertakings by acquiring equities
or assets; or (iii) acquisition of control over, or the
possibility of exercising decisive influence on, an
undertaking by contract or by any other means. The
anti-monopoly authority may also require business
operators to file for merger control review where
concentration of undertakings fails to reach such filing
threshold but there is evidence that the concentration
has or may have the effect of eliminating or restricting
competition. If business operators fail to comply
with the mandatory filing requirement, the PRC State
Administration for Market Regulation, or the SAMR,
is empowered to terminate the transaction, require
the disposal of relevant assets, shares or businesses
within certain period, or take any other necessary
measures to restore the pre-concentration status, and
may also impose fines of up to 50% of the previous
year’s turnover of the filing obligor if the concentration
has or may have the effect of eliminating or restricting
competition, or fines of up to RMB25 million if the
concentration does not have such effect. In addition,
the amended PRC Anti-monopoly Law introduces
a “stop-clock mechanism” which may prolong the
merger control review process. The SAMR issued a
new set of guidelines in September 2018 to set forth
the specific procedures and materials for review of
concentration of undertakings. On August 3, 2008, the
State Council of the PRC promulgated the Provisions
of the State Council of the PRC on the Thresholds for
Filing of Concentration of Undertakings, which was
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most recently amended in January 2024, clarifying
the filing thresholds of merger control review and
significantly adjusting the revenue threshold of
merger control filing to either one of the following two
conditions:
•
the worldwide revenue of all business operators
involved in the concentration exceeds RMB12
billion (increased from the current threshold of
RMB10 billion) collectively in the last fiscal year,
and the revenue in China of at least two business
operators among them each exceeds RMB800
million (increased from the current threshold of
RMB400 million) in the last fiscal year; or
•
the revenue in China of all the business operators
involved in the concentration exceeds RMB4
billion (increased from the current threshold of
RMB2 billion) collectively in the last fiscal year,
and the revenue in China of at least two business
operators among them each exceeds RMB800
million (increased from the current threshold of
RMB400 million) in the last fiscal year.
Even if the aforementioned revenue threshold is not
met, the transaction may be required to be reported
to anti-monopoly authority of the State Council of the
PRC if there is evidence to prove that the concentration
of operators has or may have the effect of excluding or
restricting competition.
In addition, on March 10, 2023, the SAMR released
the Provisions on the Review of Concentration of
Undertakings, or the Review Provisions, which came
into effect from April 15, 2023 and replaced the
Interim Provisions on the Review of Concentration
of Undertakings issued on October 23, 2020. These
provisions provide detailed rules on how to operate
the “stop-clock mechanism”, allowing the SAMR to
suspend the calculation of time period for merger
review if (i) the notifying parties fail to provide the
documents or information so that the review cannot
proceed, (ii) new circumstances or new facts appear,
and the review cannot proceed without examining
the new circumstances or facts, or (iii) the proposed
remedies require further assessment, and the
relevant parties request for suspension. If the filing
threshold is not met but the proposed concentration
has or may have the effect of eliminating or
restricting competition, the SAMR can request the
undertakings to notify. If the concentration has not
yet been implemented, the standstill obligation
automatically kicks in. Even if the concentration has
been implemented, the undertakings need to file
a notification within 120 days and take necessary
measures to reduce the negative impact the
concentration has on competition such as temporarily
stopping the implementation of the concentration.
The amended PRC Anti-monopoly Law prohibits a
business operator with a dominant market position
from abusing such position, such as by selling
commodities at unfairly high prices or buying
commodities at unfairly low prices, selling products
at prices below cost without any justifiable cause,
or refusing to trade with a trading party without
any justifiable cause. Sanctions for violation of
the prohibition on the abuse of dominant market
position include an order to cease the relevant
activity, confiscation of the illegal gains and fines up
to 50% of sales revenue of the preceding year. On
March 10, 2023, the SAMR issued the Provisions on
the Prohibition of Acts of Abuse of Dominant Market
Positions, which came into effect from April 15, 2023
and replaced the Interim Provisions on the Prohibition
of Acts of Abuse of Dominant Market Positions issued
on June 26, 2019 to further prevent and prohibit the
abuse of dominant market positions.
The amended PRC Anti-monopoly Law also prohibits
business operators from entering into monopoly
agreements, which refers to agreements that
eliminate or restrict competition with competing
business operators or transaction counterparties,
such as by boycotting transactions, fixing or changing
the price of commodities, limiting the output of
commodities or fixing the price of commodities
for resale to third parties, among others, unless
the business operators can prove the agreements
do not have the effect of eliminating or restricting
competition, their market share in relevant market
is below the standard set by the anti-monopoly
authority, or the agreements satisfy certain exemptions
under the amended PRC Anti-monopoly Law, such
as improving technologies, increasing the efficiency
and competitiveness of small and medium-sized
undertakings, or safeguarding legitimate interests in
cross-border trade and economic cooperation with
foreign counterparts. Sanctions for violations include
an order to cease the relevant activity, confiscation
of illegal gains, and fines up to 50% of sales revenue
of the preceding year, fines up to RMB25 million if
there is no sales revenue of the preceding year, or
fines up to RMB15 million if the intended monopoly
agreement has not been performed. In addition,
business operators are prohibited from organizing
other business operators to reach any monopoly
agreement or providing substantive assistance for
others to reach such agreements under the amended
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Fiscal Year 2024 Annual Report
PRC Anti-monopoly Law. On March 10, 2023, the
SAMR issued the Provisions on the Prohibition of
Monopoly Agreements, which came into effect from
April 15, 2023 and replaced the Interim Provisions on
the Prohibition of Monopoly Agreements to further
enhance the enforcement on the supervision of
monopoly agreements.
In addition, the amended PRC Anti-monopoly Law
further regulates monopolistic behaviors in the
Internet sector. The amended PRC Anti-monopoly Law,
among others:
•
provides in general provisions that enterprises
must not engage in monopolistic behaviors
through data and algorithms, technology, capital
advantages, or platform rules; and
•
provides that enterprises with dominant market
position must not abuse their dominant positions
through data and algorithms, technology, capital
advantages, or platform rules.
In February 2021, the SAMR published the Guidelines
on Anti-monopoly Issues in Platform Economy, or
the Platform Economy Anti-monopoly Guidelines.
The Platform Economy Anti-monopoly Guidelines set
out detailed standards and rules in respect to the
definition of relevant markets, typical types of cartel
activity and abusive behavior by companies with
market dominance, which provide further guidance
for enforcement of anti-monopoly laws regarding
network platform operators. The Platform Economy
Anti-monopoly Guidelines further detail the types of
horizontal agreements, vertical agreements, hub-and-
spoke agreements and collusion which may constitute
monopoly agreements in the platform economy. The
Platform Economy Anti-monopoly Guidelines also
set out a number of key factors that may be relevant
in identifying a dominant undertaking, including,
among others, predatory pricing, unfair pricing,
refusal to deal, restraint of trade, tie-in, unreasonable
trading conditions and discrimination. In addition,
concentration of undertakings involving contractual
arrangements is expressly included within the ambit
of SAMR’s merger control review if the filing thresholds
are met. Under the Platform Economy Anti-monopoly
Guidelines, the SAMR is empowered to investigate
if the filing threshold is not met but the proposed
concentration may have the effect of eliminating or
restricting competition, and the SAMR will pay close
attention to those cases where one of the following
circumstances exists: (i) a party to the concentration is
a start-up or an emerging platform; (ii) the turnover is
low because the business model of the parties to the
concentration involves the provision of free services
or services charged at low prices; (iii) the relevant
market is highly concentrated; and (iv) the number of
competitors is small. These newly enacted measures
and guidelines may require us to make adjustments
to some of our business practices, and our business,
financial condition and results of operations may be
materially and adversely affected. In addition, due to
our size, these new measures and guidelines, when
enacted and implemented, may affect us more than
our competitors.
According to the Anti-unfair Competition Law
promulgated by the Standing Committee of the
National People’s Congress of China on September
2, 1993 and most recently amended on April 23,
2019, business operators may not engage in anti-
competitive activities, such as undue influence
transactions, confusion marketing, commercial
bribery, trade secret infringement and commercial
libel. Failure to comply with the Anti-unfair
Competition Law would subject business operators to
various administrative penalties, such as imposition
of fines, confiscation of illegal gains and an order
to cease business activities, and payment of
compensatory damages.
In August 2021, the SAMR issued the Provisions
on Preventing Unfair Online Competition (Drafts
for Public Comments), or the Draft Provisions on
Preventing Unfair Online Competition, which detail
the implementation of the Anti-unfair Competition
Law, under which business operators must not
use technical means such as data or algorithms to
implement traffic hijacking or interference, cause
malicious incompatibility or conduct any activity
impeding or disruptive to the normal operation of
network products or services legally provided by other
business operators. Furthermore, business operators
are not allowed to (i) fabricate or spread misleading
information to damage the reputation of competitors,
or (ii) employ marketing practices such as fake reviews
or use coupons or “red envelopes” to entice positive
ratings.
In May 2024, the SAMR issued the Interim Measures
on Online Anti-unfair Competition, which will
come into effect on September 1, 2024. These
Measures have improved the standards and
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regulatory requirements for various types of online
unfair competition behaviors, including the new
manifestations of traditional unfair competition
behaviors such as counterfeiting, confusion and false
advertising, and the new types of unfair competition
behaviors conducted through technological means
such as reverse bidding manipulation and illegal
data acquisition. Regarding platform operators,
these Measures highlight the platform operators’
responsibilities and require platforms operators to
strengthen the management of competition behavior
within the platform. Necessary measures should
be taken to deal with unfair competition behavior
within the platform, relevant records should be kept,
and timely reports should be made to the market
supervision authorities. In addition, these Measures
prohibit platforms from abusing their competitive
advantages to obstruct the normal operation of
network products or services of other operators,
using service agreements or transaction rules to
unreasonably restrict the transactions of operators
within the platform, or charging unreasonable service
fees to operators within the platform. If a platform
operator fails to comply with the requirements of these
Measures, it may be subject to administrative penalties
including rectification orders, fines and orders to
suspend operations.
Regulation of Internet Security
The Decision in Relation to Protection of Internet
Security enacted by the Standing Committee of the
National People’s Congress of China on December
28, 2000, as amended, provides that the following
activities conducted through the Internet are subject to
criminal punishment:
•
gaining improper entry into a computer or
system of strategic importance;
•
disseminating politically disruptive information or
obscenities;
•
leaking state secrets;
•
spreading false commercial information; or
•
infringing intellectual property rights.
The Administrative Measures on the Security Protection
of Computer Information Network with International
Connections, issued by the Ministry of Public Security
on December 16, 1997 and amended on January 8,
2011, prohibit the use of the Internet in a manner
that would result in the leakage of state secrets or
the spread of socially destabilizing content. The
Provisions on Technological Measures for Internet
Security Protection, or the Internet Security Protection
Measures, promulgated on December 13, 2005
by the Ministry of Public Security require all ICPs
to keep records of certain information about their
users (including user registration information, log
in and log out time, IP address, content and time
of posts by users) for at least 60 days and submit
the above information as required by laws and
regulations. Under these measures, value-added
telecommunications services license holders must
regularly update information security and content
control systems for their websites and must also
report any public dissemination of prohibited content
to local public security authorities. If a value-added
telecommunications services license holder violates
these measures, the Ministry of Public Security and the
local security bureaus may revoke its operating license
and shut down its websites.
The Communication Network Security Protection
Administrative Measures, which were promulgated
by the MIIT on January 21, 2010, require that all
communication network operators, including
telecommunications service providers and Internet
domain name service providers, divide their
own communication networks into units. These
communication network units shall be rated in
accordance with degree of damage to national
security, economic operation, social order and
public interest in the event a unit is damaged.
Communication network operators must file
the division and ratings of their communication
networks with the MIIT or its local counterparts. If
a communication network operator violates these
measures, the MIIT or its local counterparts may order
rectification or impose a fine up to RMB30,000 in case
a violation is not duly rectified.
Internet security in China is also regulated and
restricted from a national security standpoint. On July
1, 2015, the National People’s Congress Standing
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Committee promulgated the PRC National Security
Law, or the National Security Law, which took effect
on the same date and replaced the former National
Security Law promulgated in 1993. According to the
National Security Law, the state shall ensure that the
information system and data in important areas are
secure and controllable. In addition, according to
the National Security Law, the state shall establish
national security review and supervision institutions
and mechanisms, and conduct national security
reviews of key technologies and IT products and
services that affect or may affect national security.
There are uncertainties on how the National Security
Law will be implemented in practice.
On November 7, 2016, the National People’s
Congress Standing Committee promulgated the PRC
Cybersecurity Law, or the Cybersecurity Law, which
came into effect on June 1, 2017, and applies to the
construction, operation, maintenance and use of
networks as well as the supervision and administration
of cybersecurity in China. The Cybersecurity Law
defines “networks” as systems that are composed of
computers or other information terminals and relevant
facilities used for the purpose of collecting, storing,
transmitting, exchanging and processing information
in accordance with certain rules and procedures.
“Network operators,” who are broadly defined as
owners and administrators of networks and network
service providers, are subject to various security
protection-related obligations including, among
others, security protection, user identity verification,
cybersecurity emergency response planning and
technical assistance.
According to the Cybersecurity Law, network service
providers must inform users about and report to
the relevant authorities any known security defects
and bugs, and must provide continuous security
maintenance services for their products and services.
Network products and service providers shall not
contain or provide malware. Network service providers
who do not comply with the Cybersecurity Law may
be subject to fines, suspension of their businesses,
shutdown of their websites, and revocation of their
business licenses. In addition, the Cybersecurity Law
provides that personal information and important
data collected and generated by operators of critical
information infrastructure in the course of their
operations in the PRC should be stored in the PRC, and
the law imposes heightened regulation and additional
security obligations on operators of critical information
infrastructure.
In addition, the PRC Anti-Telecom and Online Fraud
Law was promulgated by the National People’s
Congress Standing Committee on September 2, 2022
and came into effect on December 1, 2022. In order
to prevent and curb the telecom and online fraud, the
Anti-Telecom and Online Fraud Law requires, among
others, Internet service providers to obtain real identity
information of users before providing certain services
including information and software distribution
services, etc.
On July 30, 2021, the State Council of the PRC
promulgated the Regulations on Security Protection
of Critical Information Infrastructure, effective on
September 1, 2021, which provide that a “critical
information infrastructure” refers to an important
network facility and information system in important
industries such as public communications and
information services, as well as other important
network facilities and information systems that
may seriously endanger national security, national
economy, people’s livelihood, or public interests in
the event of their damage, loss of function, or data
leakage. The competent governmental authorities
and supervision and management authorities of
the aforementioned important industries will be
responsible for (i) identification of critical information
infrastructures in their respective industries in
accordance with relevant identification rules, and (ii)
promptly notifying the identified operators and the
public security department of the State Council of the
PRC of the identification results. However, the exact
scope of “critical information infrastructure operators”
under the current regulatory regime still remains
unclear, and the PRC government authorities have
discretion in the interpretation and enforcement of
these laws, rules and regulations.
On April 13, 2020, the Cyberspace Administration
of China, the NDRC, the MIIT, and several other
governmental authorities jointly issued the Measures
for Cybersecurity Review, or the Cybersecurity Review
Measures, which came into effect on June 1, 2020.
According to the Cybersecurity Review Measures, the
purchase of cyber products and services including
core network equipment, high-performance
computers and servers, mass storage devices,
large databases and application software, network
security equipment, cloud computing services, and
other products and services that have an important
impact on the security of critical information
infrastructure which affects or may affect national
security is subject to cybersecurity review by the
Cybersecurity Review Office. On December 28, 2021,
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the Cyberspace Administration of China, together
with certain other PRC governmental authorities,
promulgated the Revised Cybersecurity Review
Measures which replaced the then-effective version
and took effect on February 15, 2022. According
to the Revised Cybersecurity Review Measures,
operators of critical information infrastructure who
purchase network products and services and network
platform operators who carry out data processing
activities that affect or may affect national security
shall be subject to cybersecurity review. In addition,
any network platform operator possessing over one
million users’ individual information must apply
for a cybersecurity review before listing abroad.
Relevant competent governmental authorities may
also initiate cybersecurity review if they determine
certain network products, services or data processing
activities affect or may affect national security. Article
10 of the Revised Cybersecurity Review Measures also
sets out certain general factors that are the focus in
assessing the national security risk in a cybersecurity
review, including (i) the risks of critical information
infrastructure being illegally controlled by any
individual or organization or subject to interference or
destruction; (ii) the harm caused by the disruption of
the supply of the product or service to the continuity
of critical information infrastructure business; (iii)
the security, openness, transparency and diversity
of sources of the product or service, the reliability of
supply channels, and risks of supply disruption due
to political, diplomatic, trade and other factors; (iv)
compliance with PRC laws, administrative regulations
and department rules by the provider of the product
or service; (v) the risk of core data, important data
or a large amount of personal information being
stolen, leaked, damaged, illegally used, or illegally
transmitted overseas; (vi) the risk that critical
information infrastructure, core data, important data
or a large amount of personal information for a listing
being affected, controlled, and maliciously used by
foreign governments, as well as network information
security risks; and (vii) other factors that may endanger
the security of critical information infrastructure,
cybersecurity and data security. However, there are
still uncertainties as to the exact scope of network
products or services or data processing activities
that will or may affect national security, and the
PRC government authorities have discretion in the
interpretation and enforcement of these measures.
According to the Administrative Provisions on Security
Vulnerability of Network Products jointly promulgated
by the MIIT, the Cyberspace Administration of China
and the Ministry of Public Security, which came
into effect on September 1, 2021, network product
providers, network operators as well as organizations
or individuals engaging in the network product
security vulnerability discovery, collection, release
and other activities shall establish channels to
receive information of security vulnerability of their
respective network products and shall examine and
fix such security vulnerability in a timely manner.
Network product providers are required to report
relevant security vulnerability of network products
with the MIIT within two days of discovery and provide
technical support to network product users. Network
operators shall take measures to examine and fix
security vulnerability after discovering or becoming
aware that their networks, information systems or
equipment have security loopholes. According to these
provisions, the network product providers and network
operators who fail to perform the aforementioned
obligations may be subject to administrative penalty in
accordance with the Cybersecurity Law.
The Cyberspace Administration of China is responsible
for organizing and implementing cybersecurity
reviews, while the competent departments in key
industries such as finance, telecommunications,
energy and transport shall be responsible for
organizing and implementing security review of cyber
products and services in their respective industries or
fields.
On November 15, 2018, the Cyberspace Administration
of China issued the Provisions on Security Assessment
of the Internet Information Services with Public Opinion
Attributes or Social Mobilization Capacity, which came
into effect on November 30, 2018. The provisions
require ICPs to conduct security assessments on their
Internet information services if their services include
functions that provide channels for the public to
express opinions or have the capability of mobilizing
the public to engage in specific activities. ICPs must
conduct self-assessment on, among other things, the
legality of new technology involved in the services
and the effectiveness of security risk prevention
measures, and file the assessment report with the
local competent cyberspace administration authority
and public security authority.
On September 17, 2021, the Cyberspace
Administration of China and the SAMR, together with
several other governmental authorities, jointly issued
the Guidelines on Strengthening the Comprehensive
Regulation of Algorithm for Internet Information
Services, which provide that relevant regulators shall
carry out daily monitoring of data use, application
scenarios and effects of algorithms, and conduct
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security assessments of algorithm, and that an
algorithm filing system shall be established and
classification and hierarchical security management
of algorithms shall be adopted. On December 31,
2021, the Cyberspace Administration of China, the
MIIT, the Ministry of Public Security and the SAMR jointly
promulgated the Administrative Provisions on Internet
Information Service Algorithm Recommendation,
or the Algorithm Recommendation Provisions,
which came into effect on March 1, 2022. The
Algorithm Recommendation Provisions implement
the classification and hierarchical management
of algorithm recommendation service providers
based on various criteria, and stipulate that
algorithm recommendation service providers shall
clearly inform users of their provision of algorithm
recommendation services, and properly publicize
the basic principles, intentions, and main operating
mechanisms of algorithm recommendation services,
and that algorithm recommendation service providers
selling goods or providing services to consumers
shall protect consumers’ rights of fair trade, and are
prohibited from carrying out illegal conduct such as
unreasonable differentiated treatment on transaction
conditions based on consumers’ preferences,
purchasing habits, or such other characteristics.
In October 2021, the SAMR released the draft
Guidelines for Classification and Grading of Internet
Platforms, or the Draft Classification Guidelines,
and the draft Guidelines for Implementing Subject
Responsibilities of Internet Platforms, or the
Responsibilities Guidelines, for public comments. The
Classification Guidelines divide Internet platforms
into super platforms, large platforms, and small
and medium platforms, on the basis of the scale of
users, business types, and restrictive capacities. The
Responsibilities Guidelines further lay down additional
responsibilities for operators of super platforms with
respect to fair competition, equal governance, open
ecosystem, data management, internal governance,
risk assessment and prevention, security audit and
innovation. For example, super platforms should
promote interoperability between the services they
provide and those provided by other platforms.
On November 25, 2022, the Administrative Provisions
on Deep Synthesis of Internet Information Services
was jointly issued by the Cyberspace Administration
of China, MIIT and Ministry of Public Security, and
took effect on January 10, 2023. According to these
provisions, deep synthesis technology refers to any
technology that utilizes deep learning, virtual reality
or any other generative or synthetic algorithm to
produce text, images, audio, video, virtual scenes
or other network information. These provisions
emphasize that the providers of deep synthesis
services, as the primary entities responsible for the
information security, should not use deep synthesis
services to engage in activities prohibited by laws and
regulations. If the Cyberspace Administration of China
and other competent government authorities find that
the deep synthesis service has a serious information
security risk, they may require the deep synthesis
service providers and technical supporters to suspend
information updates, user account registration or
other related services, and deep synthesis service
providers and technical supporters shall take
measures to rectify and eliminate such information
security risks. A violation of these provisions by
deep synthesis service providers and/or technical
supporters will subject them to penalties under the
laws related to the administration of public security.
Deep synthesis service providers and/or technical
supporters may also be prosecuted for criminal
responsibility if their act constitutes a crime.
On March 18, 2023, the Cyberspace Administration of
China released the Provisions on the Administrative
Law Enforcement Procedures for the Cyberspace
Administration Authorities, which came into effect on
June 1, 2023. These provisions clarify the procedures
of cyberspace administrative law enforcement
actions of the cyberspace administration authorities,
as well as the procedures and requirements for
administrative penalty. These provisions state that,
prior to the imposition of administrative penalties,
cyberspace administration authorities must notify
parties concerned of their right to request a hearing,
and that they must make such request within five days
of receiving a notification, otherwise they shall be
deemed to have waived their right to a hearing.
On July 10, 2023, the Cyberspace Administration
of China, together with other relevant authorities,
released the Interim Measures on Generative AI
Services, which came into effect on August 15, 2023
and mainly impose compliance requirements on
providers of generative AI services. According to
the Interim Measures on Generative AI Services,
individuals or organizations that provide generative
AI services of text, image, audios, videos and other
content shall be responsible as the producers of such
network information content and as the personal
information processors to protect any personal
information involved. Providers of generative AI
services shall enter into service agreements with users
registering for their generative AI services and shall
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adopt effective measures to prevent minor users from
over-relying or addicting to generative AI services. In
the event illegal content or users engaging in illegal
activities using generative AI services are discovered,
the generative AI services providers are required to
take appropriate measures, including stopping the
generation of such illegal content and suspending
or terminating the provision of services, undergo
rectifications, keep relevant records and report to the
competent authority. Any provider of generative AI
services with attribute of public opinions or capable of
social mobilization shall conduct security assessment
and complete certain filings in accordance with the
Administrative Provisions on Internet Information
Service Algorithm Recommendation. Providers of
generative AI services may be subject to penalties
for non-compliance, including warning, public
denouncement, rectification orders and suspension of
the provision of relevant services.
Regulation of Data and Privacy Protection
Under the ICP Measures, ICPs are prohibited from
producing, copying, publishing or distributing
information that is humiliating or defamatory to others
or that infringes upon the lawful rights and interests of
others. Depending on the nature of the violation, ICPs
may face criminal charges or sanctions by PRC public
security authorities for these acts, and may be ordered
to temporarily suspend their services or have their
licenses revoked.
Under the rules issued by the MIIT, ICPs are also
prohibited from collecting any personal user
information or providing any information to
third parties without the consent of the user.
The Cybersecurity Law provides an exception to
the consent requirement where the information
is anonymous, not personally identifiable and
unrecoverable. ICPs must expressly inform the users
of the method, content and purpose of the collection
and processing of user’s personal information and
may only collect information necessary for its services.
ICPs are also required to properly maintain the user
personal information, and in case of any leak or likely
leak of the user’s personal information, ICPs must
take remedial measures immediately and report any
material leak to the telecommunications regulatory
authority.
The PRC government retains the power and authority
to order ICPs to provide an Internet user’s personal
information if a user posts any prohibited content or
engages in any illegal activities through the Internet.
According to the Cybersecurity Law, individuals may
request that network operators make corrections
to or delete their personal information in case the
information is wrong or was collected or used beyond
an individual’s agreement with network operators.
On June 10, 2021, the Standing Committee of the
National People’s Congress of China promulgated
the Data Security Law which took effect in September
2021. The Data Security Law provides for data
security and privacy obligations of entities and
individuals carrying out data activities, prohibits
entities and individuals in China from providing any
foreign judicial or law enforcement authority with
any data stored in China without approval from the
competent PRC authority, and sets forth the legal
liabilities of entities and individuals found to be in
violation of their data protection obligations, including
rectification order, warning, fine, suspension of
relevant business, and revocation of business permits
or licenses. The Data Security Law also introduces a
data classification and hierarchical protection system
based on the importance of data in economic and
social development, as well as the degree of harm
it will cause to national security, public interests,
or legitimate rights and interests of individuals or
organizations when such data is tampered with,
destroyed, leaked, or illegally acquired or used,
and an appropriate level of protection measures is
required to be taken for the respective categories of
data, for example, the processor of important data
shall designate the personnel and management
institution responsible for the data security,
carry out risk assessment for its data processing
activities and file the risk assessment report with
the competent authorities. On March 15, 2024, the
National Cybersecurity Standardization Technical
Committee issued the Data Security Technology
Data Classification and Grading Rules, which provide
guidelines for identifying important data. This
voluntary national standard will become effective on
October 1, 2024. In addition, the Data Security Law
provides a national security review procedure for
those data activities which may affect national security
and imposes export restrictions on certain data and
information.
On July 7, 2022, the Cyberspace Administration of
China promulgated the Measures for the Security
Assessment of Cross-border Data Transmission, which
came into effect on September 1, 2022 and shall
regulate the security assessment on the cross-border
data transfer by data processor of important data
and personal information collected and generated
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during operations within the PRC. According to these
measures, personal data processors will be subject
to security assessment conducted by the Cyberspace
Administration of China prior to any cross-border
transfer of data if the transfer involves (i) important
data; (ii) personal information transferred overseas
by operators of critical information infrastructure
or a data processor that has processed personal
data of more than one million persons; (iii)
personal information transferred overseas by a
data processor who has already provided personal
data of 100,000 persons or sensitive personal data
of 10,000 persons overseas since January 1 of last
year; or (iv) other circumstances as requested by
the Cyberspace Administration of China. According
to the official interpretation by the official of the
Cyberspace Administration of China, cross-border
data transfer activities subject to these measures
include (1) the transmission and storage overseas by
data processors of the data generated during PRC
domestic operations, and (2) the access to or use of
the data collected and generated by data processors
and stored in the PRC by overseas institutions,
organizations or individuals. Furthermore, any cross-
border data transfer activities conducted in violation
of the Measures for the Security Assessment of Cross-
border Data Transmission before the effectiveness of
these measures are required to be rectified by March
2023. In addition, on June 1, 2023, the Provisions on
the Prescribed Agreement on Cross-border Data
Transfer, or the Provisions on Prescribed Agreement
promulgated by the Cyberspace Administration of
China came into effect, which stipulates detailed
procedure and provide a prescribed agreement
template for data transfer activities.
Furthermore, in November 2021, the Cyberspace
Administration of China promulgated Draft
Regulations on Network Data Security Management,
or the Draft Cyber Data Security Regulations, for
public comments, pursuant to which, data processors
shall apply for cybersecurity review if they engage
in (i) merger, reorganization or division of Internet
platform operators with significant data resources
related to national security, economic development
or public interests that affects or may affect national
security; (ii) overseas listing while processing over one
million users’ personal information; (iii) Hong Kong
listing that affects or may affect national security;
or (iv) other data processing activities that affect or
may affect national security. The Draft Cyber Data
Security Regulations also provide that operators of
large Internet platforms with headquarters, operation
centers or R&D centers overseas shall report to the
Cyberspace Administration of China and relevant
authorities. The Draft Cyber Data Security Regulations
further require data processors processing important
data or going public overseas to conduct annual data
security self-assessment, and submit the data security
assessment report to their respective local branch
of the Cyberspace Administration of China before
January 31 each year. Internet platform operators
shall also establish and publish data policies
and rules on their websites for user comments. In
addition, data policies and rules and any material
amendments thereof of large Internet platforms with
over 100 million daily active users shall be evaluated
by a third-party organization designated by the
Cyberspace Administration of China and approved
by the respective local branches of the Cyberspace
Administration of China and the MIIT. There is no
definite timetable as to when this draft will be
enacted. As such, substantial uncertainties exist with
respect to the enactment timetable, final content,
interpretation and implementation of such measures.
On March 22, 2024, the Cyberspace Administration
of China issued the Provisions on Promoting and
Regulating Cross-border Data Flow, which provide
several exemptions from undergoing security
assessment, obtaining personal information
protection certification, or entering into prescribed
agreement for cross-border transfer of personal
information for businesses. These exemptions
include, among others, scenarios where a data
processor transfers personal information abroad for
the necessity of entering into or performing a cross-
border shopping, cross-border delivery, cross-border
remittances, or cross-border payments contract to
which an individual is a party. The provisions also
explicitly state that data processors are not required
to conduct data security assessment for cross-border
data transfers if the concerning data has not been
notified or published as important data by relevant
departments or regions.
On August 20, 2021, the Standing Committee of the
National People’s Congress of China promulgated
the Personal Information Protection Law which took
effect in November 2021. The Personal Information
Protection Law requires, among others, that (i) the
processing of personal information should have
a clear and reasonable purpose which should be
directly related to the processing purpose, using a
method that has the least impact on personal rights
and interests, and (ii) the collection of personal
information should be limited to the minimum scope
necessary to achieve the processing purpose to avoid
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the excessive collection of personal information.
Different types of personal information and personal
information processing will be subject to various rules
on consent, transfer, and security. Entities handling
personal information shall bear responsibility for
their personal information handling activities, and
adopt necessary measures to safeguard the security
of the personal information they handle. Otherwise,
information processors could be subject to liability for
their processing activities, including rectification, or
suspension or termination of their provision of their
services as well as confiscation of illegal income,
fines or other penalties. The Personal Information
Protection Law stipulates the specialized personal
information protection obligations for the personal
information processors who provide significant
Internet platform services with a massive user base
and complex business types. These processors
are required to establish and improve a personal
information protection compliance system, establish
an independent agency to supervise the protection
of personal information, formulate platform rules
to clarify the norms for the processing personal
information on the platform, stop providing services
to products or service providers who illegally process
personal information on the platform, issue personal
information protection social responsibility reports
regularly and accept social supervision. As the Data
Security Law, the Personal Information Protection Law
and relevant rules and regulations are still evolving,
we may be required to make further adjustments to
our business practices to comply with these laws, rules
and regulations.
Regulation of Consumer Protection
Our online and mobile commerce business is subject
to a variety of consumer protection laws, including
the PRC Consumer Rights and Interests Protection
Law, as amended and effective on March 15, 2014,
and the Online Trading Measures, both of which have
imposed stringent requirements and obligations
on business operators, including Internet business
operators and platform service providers like us. For
example, consumers are entitled to return goods
purchased online, subject to certain exceptions,
within seven days upon receipt of goods without
any reason. Furthermore, on March 15, 2024, the
Implementing Rules of the Consumer Rights Protection
Law of the People’s Republic of China was released
and will come into effect on July 1, 2024. These rules
further specify the obligations stipulated in the PRC
Consumer Rights and Interests Protection Law, such as
protecting consumers’ personal and property safety,
handling of defective products, prohibiting fraudulent
advertising and unfair practices in standard terms,
price transparency, quality guarantee, and protecting
consumers’ personal information. Additionally, these
rules added the obligations of business operators
regarding the protection of elderly and minors
as consumers. Furthermore, these rules provide
requirements to address situations where business
operators may abuse technology, platform rules or
their dominant positions to infringe on consumer
rights, such as prohibiting price discrimination,
fraudulent advertising and excessively collecting
consumers’ personal information. In addition, these
rules require livestreaming marketing platform
operators to establish and improve mechanisms for
consumer rights protection. On January 6, 2017, the
SAIC issued the Interim Measures for No Reason Return
of Online Purchased Commodities within Seven Days,
which came into effect on March 15, 2017 and was
amended on October 23, 2020, further clarifying the
scope of consumers’ rights to make returns without a
reason, including exceptions, return procedures and
online marketplace platform providers’ responsibility
to formulate seven day no-reason return rules and
related consumer protection systems, and to supervise
merchants for compliance with these rules. To
ensure that merchants and service providers comply
with these laws and regulations, we, as platform
operators, are required to implement rules governing
transactions on our platform, monitor the information
posted by merchants and service providers, and report
any violations by merchants or service providers to the
relevant authorities. In addition, online marketplace
platform providers may, pursuant to PRC consumer
protection laws, be subject to liabilities if the lawful
rights and interests of consumers are infringed in
connection with consumers’ purchase of goods
or acceptance of services on online marketplace
platforms and the platform service providers fail to
provide consumers with the contact information of
the merchant or manufacturer. In addition, platform
service providers may be jointly and severally liable
with merchants and manufacturers if they are aware
or should be aware that the merchant or manufacturer
is using the online platform to infringe upon the lawful
rights and interests of consumers and fail to take
measures necessary to prevent or stop this activity. On
January 1, 2024, the Regulations on the Protection of
Minors on the Network came into effect and stipulate
that important Internet platforms with large number of
minor users and significant influence among minors
must fulfill their obligations, including but not limited
to establishing a protocol to oversee the protection
of minors online and carrying out periodic impact
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assessment, adopting “teenager modes” for minors,
and suspending services to providers of products or
services on the platform who seriously violate laws
and regulations and harm minors’ rights and interests.
Failure to comply with these consumer protection
laws could subject us to administrative sanctions,
such as the issuance of a warning, confiscation of
illegal income, imposition of a fine, an order to cease
business operations, revocation of business licenses,
as well as potential civil or criminal liabilities.
Regulation of Pricing
In China, the prices of a very small number of
products and services are guided or fixed by the
government. According to the PRC Pricing Law, or the
Pricing Law, business operators must, as required by
the government departments in charge of pricing,
mark the prices explicitly and indicate the name,
production origin, specifications, and other related
particulars clearly. Business operators may not sell
products at a premium or charge any fees that are
not explicitly indicated. Business operators must not
conduct unlawful pricing activities, such as colluding
with others to manipulate the market price, providing
fraudulent discounted price information, using
false or misleading prices to deceive consumers to
transact, or conducting price discrimination against
other business operators. In addition, in July 2021,
the SAMR released the revised draft Provisions on the
Administrative Penalties on Price-related Violations for
public comment, which proposed significant penalties,
including fines of up to 10% of revenue during the
violation period, suspension of business or revocation
of business license, for a number of price-related
violations, such as below-cost pricing to squeeze out
competitors, price discrimination, manipulation of
market prices and fraudulent pricing. In particular,
improper pricing by e-commerce platform operators,
including the use of big data analysis, algorithms or
other technologies to conduct differentiated pricing
and price subsidies, may be subject to significant
penalties, including fines of up to 5% of prior year’s
revenue, suspension of business and revocation of
business license. Failure to comply with the Pricing
Law or other rules or regulations on pricing may
subject business operators to administrative sanctions
such as warnings, orders to cease unlawful activities,
payment of compensation to consumers, confiscation
of illegal gains, and/or fines. The business operators
may be ordered to suspend business for rectification,
or have their business licenses revoked if the
circumstances are severe. Merchants on Tmall and
Taobao undertake the primary obligation under the
Pricing Law. However, in some cases, we have been
and may in the future be held liable and be subject
to fines or other penalties if the authorities determine
that, as platform operator, our guidance for platform-
wide promotional activities resulted in unlawful pricing
activities by the merchants on our platforms or the
pricing information we provided for platform-wide
promotional activities was untrue or misleading.
Labor Laws and Social Insurance
Pursuant to the PRC Labor Law and the PRC Labor
Contract Law, employers must execute written labor
contracts with full-time employees. All employers
must comply with local minimum wage standards.
Violations of the PRC Labor Contract Law and the PRC
Labor Law may result in the imposition of fines and
other administrative and criminal liability in the case of
serious violations.
In addition, according to the PRC Social Insurance Law
and the Regulations on the Administration of Housing
Funds, employers in China must provide employees
with welfare schemes covering pension insurance,
unemployment insurance, maternity insurance,
work-related injury insurance, medical insurance and
housing funds.
Other Regulations
Regulation of Corporate Governance
On December 29, 2023, the Standing Committee of
the National People’s Congress promulgated the
amended PRC Company Law, which will come into
effect on July 1, 2024 and replace the existing PRC
Company Law. The revisions include (i) optimizing
the governance mechanism, clarifying that the board
of directors is the executive body of the company,
allowing the company to choose to establish a
corporate governance structure composed of “board
of directors with an audit committee under the board
of directors” or “board of directors and board of
supervisors” based on its actual circumstances, and
allowing small companies limited by shares to be
incorporated without a board of directors; (ii) further
improving the company capital system, introducing
the authorized capital system for companies limited
by shares, clarifying the classes of shares that can be
issued by companies limited by shares, strengthening
the principle of capital maintenance, and allowing
the use of capital reserves to cover losses; (iii)
strengthening the fiduciary duties of the directors,
supervisors and senior management, including the
responsibilities of the directors, supervisors and
senior management to maintain adequate company
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Alibaba Group Holding Limited
capital and report related party transactions, their
joint and several liabilities and liquidation obligations;
and (iv) improving the company registration system,
clarifying that equity interests and creditor rights can
be contributed as capital, allowing the establishment
of companies limited by shares with one shareholder,
and introducing simplified procedures for capital
reduction and de-registration of company to facilitate
a company’s operation. When the amended PRC
Company Law takes effect, it will have a substantial
impact on the current PRC Company Law and
corporate governance structures governed by it,
and our PRC corporate entities and their governance
systems may be adjusted and changed accordingly.
On December 27, 2021, the SAMR issued the Interim
Measures for the Administration of Beneficial
Owner Information of Market Entities (Draft), or the
Draft Measures for the Administration of Beneficial
Owners, for public comment. The Draft Measures
for the Administration of Beneficial Owners specify
the scope of market entities that are subject to filing
obligations, the conditions to exemption from filing,
and the definition and identification standards of
beneficial owners. According to the general standard
for identifying the beneficial owners of companies
and partnerships, natural persons who meet any
of the following conditions are beneficial owners:
ultimately owning 25% or more equity interests,
shares or partnership interests in a company or
partnership directly or indirectly, ultimately being
entitled to 25% or more of its income, or exercising
actual control over the company or partnership
individually or jointly. If there is no person who meets
the aforesaid standards, the person responsible for
routine operation and management shall be deemed
as the beneficial owner. The Draft Measures for the
Administration of Beneficial Owners provide that the
actual control includes without limitation the control
by agreement, but does not conclusively determine
the beneficial owner under contractual arrangements,
and uncertainties exist with respect to our disclosure of
beneficial owners pursuant to these draft measures.
Regulation of Foreign Investment
On March 15, 2019, the National People’s Congress
promulgated the 2019 PRC Foreign Investment Law,
which became effective on January 1, 2020 and
replaced the major former laws and regulations
governing foreign investment in the PRC. Pursuant
to the 2019 PRC Foreign Investment Law, “foreign
investments” refer to investment activities conducted
by foreign investors directly or indirectly in the PRC,
which include any of the following circumstances:
(i) foreign investors setting up foreign-invested
enterprises in the PRC solely or jointly with other
investors, (ii) foreign investors obtaining shares, equity
interests, property portions or other similar rights and
interests of enterprises within the PRC, (iii) foreign
investors investing in new projects in the PRC solely
or jointly with other investors, and (iv) investment of
other methods as specified in laws, administrative
regulations, or as stipulated by the State Council of the
PRC.
According to the 2019 PRC Foreign Investment Law
and its implementing rules, China adopts a system of
pre-entry national treatment plus negative list with
respect to foreign investment administration, and
the negative list will be proposed by the competent
investment department of the State Council of the
PRC in conjunction with the competent commerce
department of the State Council of the PRC and
other relevant departments, and be reported to
the State Council of the PRC for promulgation, or
be promulgated by the competent investment
department or competent commerce department
of the State Council of the PRC after being reported
to the State Council of the PRC for approval. Foreign
investment beyond the negative list will be granted
national treatment. Foreign investors shall not invest
in the prohibited industries as specified in the negative
list, while foreign investment must satisfy certain
conditions stipulated in the negative list for investment
in the restricted industries. The current industry
entry clearance requirements governing investment
activities in the PRC by foreign investors are set out
in two categories, namely the Negative List and the
Encouraged Industry Catalogue for Foreign Investment
(2022 version), or the 2022 Encouraged Industry
Catalogue, both of which were promulgated by the
NDRC and the MOFCOM and took effect in January
2022 and January 2023 respectively. Industries not
listed in these two categories are generally deemed
“permitted” for foreign investment unless otherwise
restricted by other PRC laws. Our major subsidiaries
are registered in China and mainly engage in software
development, technical services and consulting,
all of which fall into the encouraged or permitted
category. These major subsidiaries have obtained
all material approvals required for their business
operations. The Negative List does not apply to our
major subsidiaries that are registered and domiciled
in Hong Kong, the British Virgin Islands or the Cayman
Islands, and operate outside of Chinese mainland. The
businesses of our other PRC subsidiaries — including
PRC subsidiaries of our major subsidiaries — are
generally software development, technical services
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Fiscal Year 2024 Annual Report
and consulting, which fall into the encouraged or
permitted category. Industries such as value-added
telecommunications services, including Internet
information services, are generally restricted to foreign
investment pursuant to the Negative List. We conduct
business operations that are restricted or prohibited to
foreign investment through variable interest entities.
On December 19, 2020, the NDRC and MOFCOM
promulgated the Foreign Investment Security
Review Measures, which took effect on January 18,
2021. Under the Foreign Investment Security Review
Measures, foreign investments in military, national
defense-related areas or in locations in proximity
to military facilities, or foreign investments that
would result in acquiring the actual control of assets
in certain key sectors, such as critical agricultural
products, energy and resources, equipment
manufacturing, infrastructure, transport, cultural
products and services, IT, Internet products and
services, financial services and technology sectors,
are required to obtain approval from designated
governmental authorities in advance. Although the
term “actual control” is not clearly defined under the
Foreign Investment Security Review Measures, it is
possible that control through contractual arrangement
may be regarded as a form of actual control and
therefore requires approval from the competent
governmental authority. Since there are significant
uncertainties with respect to the interpretation and
implementation of the Foreign Investment Security
Review Measures, there are substantial uncertainties
as to whether our contractual arrangements may be
deemed as a method of foreign investment in the
future.
Regulation of Foreign Debts
The Administrative Measures for Examination and
Registration of Medium and Long-term Foreign Debts
of Enterprises, or the Foreign Debts Measures, was
promulgated by NDRC on January 5, 2023 and came
in effect on February 10, 2023, requiring that the PRC
enterprises and overseas enterprises or branches
controlled by them, including holding companies with
a VIE structure, to complete application for registration
of foreign debts with the NDRC prior to the borrowing
of foreign debts with a term of over one year.
Tax Regulations
PRC Enterprise Income Tax
The PRC enterprise income tax, or EIT, is calculated
based on the taxable income determined under the
applicable PRC Enterprise Income Tax Law, or EIT Law,
and its implementation rules, both of which became
effective on January 1, 2008 and were most recently
amended on December 29, 2018 and April 23, 2019,
respectively. The EIT Law generally imposes a uniform
enterprise income tax rate of 25% on all resident
enterprises in China, including foreign-invested
enterprises.
The EIT Law and its implementation rules permit
certain High and New Technologies Enterprises, or
HNTEs, to enjoy a reduced 15% enterprise income
tax rate if they meet certain criteria and are officially
acknowledged. In addition, the relevant EIT laws and
regulations also provide that entities recognized as
Software Enterprises are able to enjoy a tax holiday
consisting of a two-year-exemption commencing from
their first profitable calendar year and a 50% reduction
in ordinary tax rate for the following three calendar
years. In 2020, the relevant governmental authorities
further announced that Key Software Enterprises will
be exempted from enterprise income tax for the first
five years, commencing from the first year of profitable
operation after offsetting tax losses generating from
prior years, and be subject to a preferential income tax
rate of 10% after the first five years. The qualification
as a “Key Software Enterprise” is subject to annual
evaluation and approval by the relevant authorities
in China. A number of our PRC subsidiaries and
operating entities enjoy these types of preferential tax
treatment.
PRC VAT
According to the amended Interim Regulation of the
People’s Republic of China on Value Added Tax issued
by the State Council of the PRC on November 19, 2017,
a VAT rate of 6% applies to revenue derived from the
provision of certain services. A taxpayer is allowed
to offset the qualified input VAT paid on taxable
purchases against the output VAT chargeable on the
revenue from services provided.
On March 20, 2019, the MOF, the STA and the
General Administration of Customs issued the
Announcement on Policies for Deepening VAT Reform,
or Announcement 39, which came into effect on
April 1, 2019, to further slash VAT rates. According to
Announcement 39, (i) the 16% or 10% VAT previously
imposed on sales and imports by general VAT
taxpayers is reduced to 13% or 9% respectively; (ii) the
10% purchase VAT credit rate allowed for procured
agricultural products is reduced to 9%; (iii) the 13%
purchase VAT credit rate allowed for agricultural
products procured for production or commissioned
processing is reduced to 10%; and (iv) the 16% or
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Alibaba Group Holding Limited
10% export VAT refund rate previously granted to
exportation of goods or labor services is reduced to
13% or 9%, respectively.
PRC Import Tax
According to the Notice on Tax Policy for Cross-Border
E-commerce Retail Imports, or New Tax Notice on
Cross-Border E-commerce, which became effective
on April 8, 2016, goods imported through cross-
border e-commerce platforms have been treated as
normal goods subject to VAT, consumption tax and
tariff. In general, a VAT at the rate of 17% (before
May 1, 2018) or 16% (from May 1, 2018 to March 31,
2019) or 13% (from April 1, 2019 onwards) is levied on
most goods imported via cross-border e-commerce
platforms and a 15% consumption tax is levied on
high-end cosmetics and high-end skincare products,
while no consumption tax is levied on regular skin
care products, maternity or baby care products. As a
preferential tax treatment, the Notice on Improving
the Tax Policies on Cross-Border E-Commerce Retail
Imports, which was issued on November 29, 2018 and
took effect on January 1, 2019, provides that, if the
goods imported through cross-border e-commerce
platforms are within the quota of RMB5,000 per
purchase order and RMB26,000 per year per buyer,
there is a 30% discount off the applicable VAT and the
consumption tax, and the tariff is waived.
PRC Export Tax
According to the Notice on the Taxation Policies
for Cross-border E-Commerce Retail Export, or the
E-Commerce Export Taxation Notice, which was jointly
issued by the MOF and the STA and took effect on
January 1, 2014, an e-commerce export enterprise
may be exempt from or refunded with consumption
tax and VAT upon satisfaction of certain conditions or
requirements under such notice. However, third-party
e-commerce platforms providing transaction services
for e-commerce export enterprises are not eligible
for a tax refund or exemption under the E-Commerce
Export Taxation Notice.
Regulation of Foreign Exchange and Dividend
Distribution
Foreign Exchange Regulation
The principal regulations governing foreign currency
exchange in China are the Regulations on Foreign
Exchange Administration of the PRC. Under the PRC
foreign exchange regulations, payments of current
account items, such as profit distributions and trade
and service-related foreign exchange transactions,
may be made in foreign currencies without prior
approval from SAFE by complying with certain
procedural requirements. By contrast, approval
from or registration with appropriate government
authorities is required where RMB is to be converted
into foreign currency and remitted out of China to pay
capital expenses, such as the repayment of foreign
currency-denominated loans, or foreign currency is to
be remitted into China under the capital account, such
as capital increases or foreign currency loans to our
PRC subsidiaries.
In June 2016, SAFE issued the Circular on Reforming
and Regulating Policies on the Control over Foreign
Exchange Settlement of Capital Accounts, or Circular
16, which took effect on the same day and was
most recently amended in December 2023. Circular
16 provides that discretionary foreign exchange
settlement applies to foreign exchange capital, foreign
debt offering proceeds and remitted foreign listing
proceeds, and the corresponding Renminbi obtained
from foreign exchange settlement is not restricted
from being used to extend loans to related parties or
repay the inter-company loans (including advances by
third parties).
On January 18, 2017, SAFE promulgated the Circular
on Further Improving Reform of Foreign Exchange
Administration and Optimizing Genuineness and
Compliance Verification, or Circular 3, which took effect
on the same day. Circular 3 sets out various capital
control measures with respect to outbound remittance
of funds from PRC entities to offshore entities. Circular
3 requires banks to verify board resolutions, tax
filing forms, and audited financial statements before
wiring foreign invested enterprises’ foreign exchange
distribution above US$50,000. Moreover, pursuant
to Circular 3, PRC entities must explain in detail the
sources of capital and how the capital will be used,
and provide board resolutions, contracts and other
proof as a part of the registration procedure for
outbound investment.
On October 23, 2019, SAFE issued the Notice of Further
Facilitating Cross-border Trade and Investment, or
Circular 28, which took effect on the same day and
was most recently amended in December 2023.
Circular 28 allows non-investment foreign-invested
enterprises to use their capital funds to make equity
investments in China, provided that such investments
do not violate the negative list and the target
investment projects are genuine and in compliance
with laws. According to the Circular on Optimizing
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Fiscal Year 2024 Annual Report
Administration of Foreign Exchange to Support the
Development of Foreign-related Business issued by
SAFE on April 10, 2020, eligible enterprises are allowed
to make PRC domestic payments with their income
under capital accounts such as capital funds, foreign
debts and proceeds from overseas listing without
submitting evidence of genuineness to the banks in
advance, provided the use of such funds is genuine
and in compliance with administrative regulations on
the use of income under capital accounts.
We typically do not need to use our offshore foreign
currency to fund our PRC operations. In the event we
need to do so, we will apply to obtain the relevant
approvals of SAFE and other PRC government
authorities as necessary. Our PRC subsidiaries’
distributions to their offshore parent companies and
our cross-border foreign exchange activities are
required to comply with the various requirements
under the relevant foreign exchange rules.
Regulation of Dividend Distribution
The principal laws, rules and regulations governing
dividend distribution by foreign-invested enterprises
in the PRC are the Company Law of the PRC, as
amended, which applies to both PRC domestic
companies and foreign-invested companies,
and the 2019 PRC Foreign Investment Law and its
implementation rules, which apply to foreign-invested
companies. Under these laws, rules and regulations,
foreign-invested enterprises may pay dividends only
out of their accumulated profit, if any, as determined
in accordance with PRC accounting standards and
regulations. Both PRC domestic companies and
wholly-foreign owned PRC enterprises are required
to set aside as general reserves at least 10% of their
after-tax profit, until the cumulative amount of their
reserves reaches 50% of their registered capital. A
PRC company is not permitted to distribute any profits
until any losses from prior fiscal years have been
offset. Profits retained from prior fiscal years may be
distributed together with distributable profits from the
current fiscal year.
Regulation of Overseas Listing
The PRC government has enhanced its regulatory
oversight of Chinese companies listing overseas.
The Opinions on Intensifying Crack Down on Illegal
Securities Activities issued on July 6, 2021 called
for (i) tightening oversight of data security, cross-
border data flow and administration of classified
information, as well as amendments to relevant
regulations to specify responsibilities of overseas
listed Chinese companies with respect to data security
and information security; (ii) enhanced oversight of
overseas listed companies as well as overseas equity
fundraising and listing by Chinese companies; and (iii)
extraterritorial application of PRC’s securities laws.
Furthermore, on February 17, 2023, the CSRC released
the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies
and five relevant guidelines, or collectively, the
Overseas Listing Trial Measures, which took effect
from March 31, 2023, requiring Chinese domestic
companies’ overseas offerings and listings of equity
securities be filed with the CSRC. The Overseas Listing
Trial Measures clarify the scope of overseas offerings
and listings by Chinese domestic companies which
are subject to the filing and reporting requirements
thereunder, and provide, among others, that
Chinese domestic companies that have already
directly or indirectly offered and listed securities in
overseas markets prior to the effectiveness of the
Overseas Listing Trial Measures shall fulfill their filing
obligations and report relevant information to the
CSRC within three working days after conducting a
follow-on offering of equity securities on the same
overseas market, and follow the relevant reporting
requirements within three working days upon the
occurrence of any specified circumstances provided
thereunder. According to the Overseas Listing Trial
Measures, if we fail to complete the filing procedures
with the CSRC for any of our follow-on offerings or fall
within any of the circumstances where our follow-on
offering is prohibited by the State Council of the PRC,
our offering application may be discontinued and
we may be subject to penalties, sanctions and fines
imposed by the CSRC and relevant departments of the
State Council of the PRC.
On February 24, 2023, the CSRC and several other
governmental authorities jointly issued the revised
Provisions on Strengthening Confidentiality and
Archives Administration of Overseas Securities
Offering and Listing by Domestic Companies, or the
Revised Confidentiality Provisions, which came into
effect on March 31, 2023. According to the Revised
Confidentiality Provisions, Chinese companies that
directly or indirectly conduct overseas offerings and
listings, shall strictly abide by the laws and regulations
on confidentiality when providing or publicly
disclosing, either directly or through their overseas
listed entities, materials to securities services providers.
In the event such materials contain state secrets or
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Alibaba Group Holding Limited
working secrets of government agencies, the Chinese
companies shall first obtain approval from authorities,
and file with the secrecy administrative department
at the same level with the approving authority; in the
event that such materials, if divulged, will jeopardize
national security or public interest, the Chinese
companies shall comply with procedures stipulated
by national regulations. The Chinese companies
shall also provide a written statement of the specific
sensitive information provided when providing
materials to securities service providers, and such
written statements shall be retained for inspection.
Data Protection Regulation in Europe
The EU General Data Protection Regulation, or the
EU GDPR, which has been retained and transposed
in UK law as the UK GDPR, entered into force on May
25, 2018. The EU GDPR and UK GDPR each apply to
companies that process personal data (i) in the context
of an establishment in the European Economic Area,
or the EEA, or UK (as applicable) or (ii) outside of the
EEA or UK (as applicable) in relation to the offering of
goods or services to, or the monitoring of the behavior
of, individuals located in the EEA or UK (as applicable).
The EU GDPR and UK GDPR each impose stringent
operational requirements for controllers of personal
data, including, for example, disclosures about
how personal information is to be used, limitations
on retention of personal data and pseudonymized
data, security requirements, mandatory data breach
notification requirements, and the need for a valid
legal basis for data processing activities.
The activities of data processors are also regulated,
and companies undertaking processing activities
are required to offer certain guarantees in relation
to the security of processing and the handling of
personal data. Contracts with data processors need
to include certain prescribed terms. Failure to comply
with the EU GDPR, UK GDPR and other laws relating
to the protection of personal data may result in fines
(for example, under the EU GDPR up to the greater
of €20,000,000 or 4% of the total worldwide annual
turnover), and other administrative penalties including
criminal liability.
Further legislative evolution in the field of European
privacy is expected. For example, the current EU
ePrivacy Directive may in due course be repealed by
the EU’s draft Regulation on Privacy and Electronic
Communications, or the ePrivacy Regulation, which
contains updated rules and more severe penalties in
respect of, amongst other things, the use of cookies
(and similar tracking technologies), direct marketing
and communications data. In addition, the UK has
proposed amendments to the UK GDPR via the Data
Protection and Digital Information (No. 2) Bill which, if
passed, will likely create greater divergence between
EEA and UK requirements. This could create a dual
regulatory compliance burden in circumstances
where companies are subject to both regimes. It is
also possible that a diverging UK regime may result
in the EU re-evaluating the ‘adequacy’ of the UK data
protection framework, which could result in additional
compliance costs when transferring data from the EEA
to the UK.
Regulation of Data and Digital Services in
Europe
The European regulatory framework governing the
use and sharing of data, and the provision of digital
services, is rapidly evolving. The EU and the UK have
recently enacted new laws and regulations relating
to data and digital services including, in the EU, the
Digital Services Act, or the DSA, and the Data Act, or
the DA, as well as, in the UK, the Online Safety Act, or
the OSA.
The DSA entered into force on November 16, 2022
and the majority of its provisions became applicable
on February 17, 2024. It governs intermediary services
provided to recipients established or resident in
the EU, and is applicable to conduit and caching
providers, hosting service providers, online platforms,
online consumer marketplaces, very large online
platforms, and very large search engines. The DSA
contains obligations relating to, amongst other things:
illegal content; algorithmic transparency; content
moderation; so-called ‘dark patterns’; recommender
systems; the protection of children; know-your-
trader requirements; traders’ legal compliance;
illegal products; online advertising; accountability
and reporting requirements; transparency; risk
identification and mitigation; independent audits;
data sharing requirements; and the payment of
an annual supervisory fee. The precise obligations
depend on the scale and nature of the service
provider, with ‘very large online platforms’ and ‘very
large online search engines’ (defined as having
a monthly average of 45 million or more active
recipients of the service in the EU) being subject to
the most comprehensive rules. Non-compliance
with the DSA may result in fines of up to 6% of global
annual turnover. The UK has also introduced its own
requirements in this area via the OSA, although not
all of its provisions are in effect yet. Infringements of
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Fiscal Year 2024 Annual Report
the OSA are punishable by fines of up to the greater
of £18 million or 10% of global annual turnover.
AliExpress has been designated as a very large online
platform, or VLOP, under the DSA, and is undergoing
an assessment by the European Commission as to
whether it may have infringed the DSA. See “Risk
Factors — Risks Related to Our Business and Industry
— We are subject to complex and evolving laws and
regulations regarding privacy and data protection
and cybersecurity. Complying with these laws and
regulations increases our cost of operations, limits
our business opportunities and may require changes
to our data collection, use and other practices or
negatively affect our user growth and engagement.
Failure to comply with these laws and regulations
could result in claims, regulatory investigations,
litigation or penalties, or otherwise negatively affect
our business.”
Cybersecurity
Cybersecurity risk management is an important part
of our overall risk management efforts. We, including
our six major business groups and various other
businesses, maintain a comprehensive process
for identifying, assessing and managing material
risks from cybersecurity threats. In addition to the
cybersecurity risk management framework designed
by our holding company and implemented across
our businesses, certain of our major business groups
have also formulated more detailed cybersecurity risk
management measures tailored to their operations.
The Compliance and Risk Committee of our board
of directors is responsible for overseeing our overall
compliance and risk management framework,
including cybersecurity risk management. Our
risk management committee, consisting of senior
management team members across legal, finance,
security, technology and other departments, oversees
the implementation and operation of our compliance
and risk management policies and procedures
and review risk assessment reports. Among the risk
management committee members, the head of
security department has over 10 years of experience
in the fields of data security and cybersecurity. Our risk
management committee reports to the Compliance
and Risk Committee on material regulatory
developments, risk management measures and risk
incidents, including those related to cybersecurity. In
case a significant cybersecurity incident occurs, our risk
management committee will review the information
and issues involved, oversee the remedial procedures
to be taken and report to the Compliance and Risk
Committee as appropriate.
Led by our head of security department, our teams of
dedicated cybersecurity, data security and technology
professionals with extensive industry knowledge are
responsible for detecting, tracking and remediating
cybersecurity incidents, as well as assessing and
mitigating cybersecurity threats, and reporting to the
risk management committee as appropriate. As part
of our cybersecurity risk management process, we
regularly conduct application security assessments
and vulnerability testings to prevent potential attacks
and maintain a variety of incident response plans. In
addition, we monitor industry trends on cybersecurity
risks and may also obtain input on our system and
network security from external intelligence teams and
experts. We require all our employees to undertake
data security training and compliance program
annually and employees involved in app development
and in the security department to take more
specialized courses and obtain certification before
product release. We operate mostly on our proprietary
information systems, and in the few circumstances
where we engage third-party service providers, we
work closely with them to ensure their compliance with
our cybersecurity standards.
We are not faced with any risks from cybersecurity
threat that have materially affected or are reasonably
likely to materially affect us, including our business,
results of operations, or financial condition. However,
despite the cybersecurity risk management procedures
and measures that we have implemented, we still
face risks of security breaches and attacks against
our systems and network which may adversely affect
our operation and result in data loss and leakage. For
more information, see “Risk Factors — Risks Related
to Our Business and Industry — Security breaches and
attacks against our systems and network, and any
potentially resulting breach or failure to otherwise
protect personal, confidential and proprietary
information, could damage our reputation and
negatively impact our business, as well as materially
and adversely affect our financial condition and
results of operations.”
Legal and Administrative Proceedings
We are involved from time to time, and may in the
future be involved in, litigation, claims or other
disputes in the ordinary course of business regarding,
among other things, third-party and principal
intellectual property infringement claims, contract
disputes involving merchants and consumers on
our platforms, consumer protection claims, claims
relating to data and privacy protection, employment-
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Alibaba Group Holding Limited
related cases and other matters, as well as claims
pursuant to anti-monopoly or anti-unfair competition
laws, arising out of investment transactions or others
involving high amounts of alleged damages. We
have also been, and may in the future be, involved
in litigation, regulatory investigations or inquiries
and administrative proceedings that may or may
not necessarily arise from our ordinary course of
business, such as securities class action lawsuits and
investigations or inquiries by securities regulators.
We establish balance sheet provisions relating to
potential losses from litigation based on estimates
of the losses. For this purpose, we classify potential
losses as remote, reasonably possible or probable. We
analyze potential outcomes from current and potential
litigation and proceedings as loss contingencies in
accordance with U.S. GAAP.
Shareholder Class Action Lawsuits
In November and December 2020, we and certain of
our officers and directors were named defendants in
two putative securities class action lawsuit filed in the
United States District Court for the Southern District of
New York concerning the suspension of Ant Group’s
planned initial public offering, captioned Laura
Ciccarello v. Alibaba Group et al., No. 1:20-cv-09568
(S.D.N.Y.) (the “Ciccarello Action”) and Robert Romnek
v. Alibaba Group et al., No. 1:20-cv-10267 (S.D.N.Y.)
(the “Romnek Action”). Both lawsuits assert claims
under Section 10(b) and Section 20(a) of the U.S.
Exchange Act.
In January 2021, we and certain of our officers and
directors were named defendants in a putative
securities class action lawsuit filed in the United States
District Court for the Southern District of New York
concerning certain antitrust developments, captioned
Elissa Hess v. Alibaba Group et al., No. 1:21-cv-00136
(S.D.N.Y.) (the “Hess Action”). The complaint in the
Hess Action, which also includes certain allegations
about the suspension of Ant Group’s planned initial
public offering, asserts claims under Section 10(b) and
Section 20(a) of the U.S. Exchange Act.
On January 12, 2021, four plaintiff groups filed motions
to consolidate and motions for appointment as the
lead plaintiff under the Private Securities Litigation
Reform Act, or the PSLRA, seeking consolidation
of the Ciccarello, Romnek, and Hess Actions and
appointment of the lead plaintiff and lead counsel
under the PSLRA. The court consolidated the three
actions on April 20, 2021, and appointed the lead
plaintiff on February 10, 2022. On April 22, 2022, the
lead plaintiff filed an amended complaint, naming a
founder as an additional defendant, and asserting
new and existing claims concerning the SAMR’s
antitrust investigation and fine and the suspension of
Ant Group’s planned initial public offering.
On July 21, 2022, defendants filed motions to dismiss
the amended complaint. On March 22, 2023, the court
granted in part defendants’ motions, among other
things, dismissing the founder and all allegations
relating to the suspension of Ant Group’s planned
initial public offering. The portion of the case related
to the SAMR’s antitrust investigation and fine is
proceeding to discovery, which is scheduled to
conclude in January 2025.
On October 6, 2023, plaintiffs filed a motion for class
certification. On January 19, 2024, defendants filed
an opposition to plaintiffs’ motion. On April 19, 2024,
plaintiffs filed a reply in support of their motion.
Defendants filed a sur-reply on May 17, 2024. Oral
argument on the motion is scheduled for June 20,
2024.
JD.com Lawsuit
In 2017, Beijing Jingdong Shiji Trading Co., Ltd. and
Beijing Jingdong 360 E-commerce Co., Ltd. sued
Zhejiang Tmall Technology Co., Ltd., Zhejiang
Tmall Network Co., Ltd. and Alibaba Group Holding
Limited for abuse of dominant market position (Case
No. (2017) Jing Min Chu Zi No.152). The plaintiffs
requested the three defendants to cease relevant
acts and claimed a substantial amount of damages
in the original complaint. In March 2021, the plaintiffs
amended their claim to seek higher damages. In
December 2023, the Beijing High People’s Court
issued a judgment in favor of the plaintiffs, and we
have appealed the court judgment. As of the date
of this annual report, the case is in second-instance
stage. We have accrued for the potential damages in
connection with this lawsuit.
Business Overview
71
Fiscal Year 2024 Annual Report
Corporate Structure
Alibaba Group Holding Limited is an exempted
company incorporated with limited liability under the
laws of the Cayman Islands on June 28, 1999, and we
conduct our business through our subsidiaries and
variable interest entities. We are listed on the NYSE
under the symbol “BABA” and on the Hong Kong Stock
Exchange under the stock codes “9988 (HKD Counter)”
and “89988 (RMB Counter).”
Our significant subsidiaries, as that term is defined
under Section 1-02 of Regulation S-X under the U.S.
Securities Act, include the following entities:
•
Taobao Holding Limited, an exempted company
incorporated with limited liability under the laws
of the Cayman Islands, which is our wholly-
owned subsidiary and a holding company of
certain major subsidiaries of Taobao and Tmall
Group and Local Services Group.
•
Taobao China Holding Limited 淘寶中國控股有
限公司, a limited liability company incorporated
under the laws of Hong Kong, which is a direct
wholly-owned subsidiary of Taobao Holding
Limited and a holding company of certain major
subsidiaries of Taobao and Tmall Group and
Local Services Group.
•
Alibaba.com Limited, an exempted company
incorporated with limited liability under the laws
of the Cayman Islands, which is our wholly-
owned subsidiary and a holding company of
certain major subsidiaries relating to AIDC Group
and Cloud Intelligence Group.
•
Alibaba.com Investment Holding Limited, a
company incorporated with limited liability under
the laws of the British Virgin Islands, which is a
direct wholly-owned subsidiary of Alibaba.com
Limited and a holding company of certain major
subsidiaries relating to AIDC Group and Cloud
Intelligence Group.
•
Alibaba.com China Limited 阿里巴巴網絡中國有
限公司, a limited liability company incorporated
under the laws of Hong Kong, which is a direct
wholly-owned subsidiary of Alibaba.com
Investment Holding Limited and mainly operates
back office and administrative functions.
•
Alibaba Investment Limited, a company
incorporated with limited liability under the laws
of the British Virgin Islands, which is our wholly-
owned subsidiary and a holding company for
strategic investments, the holding company of
AIDC Group and major subsidiaries of Digital
Media and Entertainment Group.
•
Alibaba Group Services Limited, a limited liability
company incorporated under the laws of Hong
Kong, which is our wholly-owned subsidiary and
operates as our treasury center in Hong Kong.
•
Taobao (China) Software Co., Ltd. 淘寶（中
國）軟件有限公司, a limited liability company
incorporated under the laws of the PRC, which
is a direct wholly-owned subsidiary of Taobao
China Holding Limited and provides software
and technology services for Taobao.
•
Zhejiang Tmall Technology Co., Ltd. 浙江天
貓技術有限公司, a limited liability company
incorporated under the laws of the PRC, which
is a direct wholly-owned subsidiary of Taobao
China Holding Limited and provides software
and technology services for Tmall.
•
Alibaba (China) Co., Ltd. 阿里巴巴（中國）有限
公司, a limited liability company incorporated
under the laws of the PRC, which is a direct
wholly-owned subsidiary of Alibaba Group
Services Limited and is mainly involved in our
strategic cooperation.
•
Alibaba (Beijing) Software Services Co., Ltd. 阿里
巴巴（北京）軟件服務有限公司, a limited liability
company incorporated under the laws of the
PRC, which is a direct wholly-owned subsidiary of
Zhejiang Tmall Technology Co., Ltd. and engages
in software development activities.
•
Hanbao E-Commerce Corp., an exempted
company incorporated with limited liability
under the laws of the Cayman Islands, which
is our wholly-owned subsidiary and a holding
company of certain subsidiaries.
Business Overview
72
Alibaba Group Holding Limited
•
Hanbao Investment Holding Limited, a company
incorporated with limited liability under the
laws of the British Virgin Islands, which is a
direct wholly-owned subsidiary of Hanbao
E-Commerce Corp. and a holding company of
certain subsidiaries.
•
Hanbao China Holding Limited, a limited liability
company incorporated under the laws of Hong
Kong, which is a direct wholly-owned subsidiary
of Hanbao Investment Holding Limited and a
holding company.
The principal executive offices of our main operations
are located at 969 West Wen Yi Road, Yu Hang District,
Hangzhou 311121, People’s Republic of China. Our
telephone number at this address is +86-571-8502-
2088. Our registered office in the Cayman Islands
is located at the offices of Trident Trust Company
(Cayman) Limited, Fourth Floor, One Capital Place,
P.O. Box 847, George Town, Grand Cayman, Cayman
Islands. Our agent for service of process in the United
States is Corporation Service Company located
at 1180 Avenue of the Americas, Suite 210, New
York, New York 10036. Our corporate website is
w w w.alibabagroup.com.
We have a demonstrated track record of successful
organic business creation. In addition to organic
growth, we have made, or have entered into
agreements to make strategic investments,
acquisitions and alliances that are intended to further
our strategic objectives. See “Management Discussion
and Analysis — Operating Results — Recent Investment,
Acquisition and Strategic Alliance Activities” for more
information.
We are subject to the periodic reporting and other
disclosure requirements under the U.S. Exchange Act
that are applicable to foreign private issuers in the
United States. Under the U.S. Exchange Act, we are
required to file periodic reports, financial statements
and other information with the SEC. We are required
to, among other things, file our annual report on Form
20-F within four months after the end of each fiscal
year. However, we are exempt from certain disclosure
requirements under the U.S. Exchange Act that apply
to domestic U.S. companies, and we are not required
to file periodic reports and financial statements with
the SEC as frequently or as promptly as domestic U.S.
companies with securities registered under the U.S.
Exchange Act. See “Risk Factors — Risks Related to Our
ADSs and Shares — As a foreign private issuer in the
United States, we are exempt from certain disclosure
requirements under the U.S. Exchange Act, which may
afford less protection to holders of our ADSs than they
would enjoy if we were a domestic U.S. company.”
Copies of our periodic reports, financial statements
and other information, once filed with the SEC, can be
read and copied at the SEC’s Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549 and at
the SEC’s regional offices in New York, New York and
Chicago, Illinois. You can also request copies of these
documents, upon payment of a duplicating fee, by
writing information on the operation of the SEC’s
Public Reference Room. The SEC also maintains an
Internet website at h t t p://w w w.sec.gov that contains
reports, proxy and information statements, and other
information regarding issuers that file electronically
with the SEC. Our annual report and some of the
other information submitted by us to the SEC may
be accessed through this website. Such information
can also be found on our investor relations website
at h t t ps://w w w.alibabagroup.com/en-US/investor-
relations.
Share Repurchase Program
In May 2019, our board of directors authorized a share
repurchase program for an amount of up to US$6.0
billion over a period of two years, which has since
been upsized and extended a number of times by our
board of directors. Most recently, in February 2024,
our board of directors authorized a further increase
of US$25.0 billion to our share repurchase program
effective through March 2027. See “Other Information
for Shareholders — Purchases of Equity Securities by
the Issuer and Affiliated Purchasers” for more details.
Business Overview
73
Fiscal Year 2024 Annual Report
Organizational Structure
Like many large scale, multinational companies with
businesses around the world and across industries,
we conduct our business through a large number of
Chinese and foreign operating entities, including VIEs.
The chart below summarizes our corporate structure
as of March 31, 2024 and identifies the subsidiaries
and VIEs that together are representative of the
major businesses operated by our group, including
our significant subsidiaries, as that term is defined
under Section 1-02 of Regulation S-X under the U.S.
Securities Act, and other representative subsidiaries,
which we collectively refer to as our major subsidiaries,
as well the corresponding representative VIEs, which
we refer to as the representative VIEs:
Alibaba Group Holding Limited (Cayman Islands)
Taobao Holding
Limited
(Cayman Islands)
Alibaba.com Limited
(Cayman Islands)
Taobao China
Holding Limited
(Hong Kong)
Alibaba.com Investment
Holding Limited
(British Virgin Islands)
Hangzhou Cainiao Supply Chain
Management Co., Ltd.(5)
Zhejiang Tmall
Technology
Co., Ltd.
Zhejiang
Tmall
Network
Co., Ltd.(2)(9)
Taobao (China)
Software Co., Ltd.
Zhejiang
Taobao
Network
Co., Ltd.(1)(9)
Rajax Network
Technology
(Shanghai)
Co., Ltd.(6)
Shanghai Rajax
Information
Technology
Co., Ltd.(6)(9)
Alibaba
Investment
Limited (British
Virgin Islands)
Alibaba.com
International
(Cayman) Holding
Limited(4)
(Cayman Islands)
Alibaba Group
Services
Limited
(Hong Kong)
Zhejiang Alibaba
Cloud Computing
Ltd.(3)(11)
Alibaba Cloud
Computing Ltd.(3)(9)
Equity interest
Contractual arrangements
Offshore PRC
Onshore PRC
100%
100% (through
intermediary
holding entities)
3.497% (through
intermediary
holding entities)
100%
100%
100%
Hanbao E-
Commerce Corp.
(Cayman Islands)
Hanbao Investment
Holding Limited
(British Virgin Islands)
100%
Hanbao China
Holding Limited
(Hong Kong)
100%
100%
100%
0.007%
100%
100%
Alibaba.com
China Limited
(Hong Kong)
100%
96.496%
64.54%
(through
intermediary
holding entities)(10)
5%
(through
intermediary
holding
entities)
100%
100%
Alibaba (China)
Co., Ltd.
46.72%
(through
intermediary
holding
entities)
29.1%
(through
intermediary
holding
entities)
100%
(through
intermediary
holding
entities)
Alibaba
Culture
Entertainment
Co. Ltd.(7)(9)
Beijing Youku
Technology
Co., Ltd.(7)
Alibaba
(Beijing)
Software
Services Co.,
Ltd.
Hangzhou Ali
Venture
Capital Co.,
Ltd.(8)(9)
100%
(through
intermediary
holding
entities)
(1) Primarily involved in the operation of Taobao
(2) Primarily involved in the operation of Tmall
(3) Primarily involved in the operation of Cloud Intelligence Group
(4) The holding company of AIDC Group
(5) Primarily involved in the operation of Cainiao Smart Logistics Network Limited
(6) Primarily involved in the operation of Local Services Group
(7) Primarily involved in the operation of Digital Media and Entertainment Group
(8) Primarily involved in investment projects
(9) A VIE
(10) On March 26, 2024, we announced our plan to offer to minority shareholders of Cainiao Smart Logistics Network Limited (including
employees) an opportunity to sell all outstanding shares of Cainiao Smart Logistics Network Limited held by them to us. The
completion of this transaction is subject to negotiations and satisfaction of closing conditions.
(11) In April 2024, Hangzhou AliCloud Feitian Information Technology Co., Ltd., a wholly owned subsidiary of Zhejiang Alibaba Cloud
Computing Ltd., became the WFOE corresponding to Alibaba Cloud Computing Ltd.
Business Overview
74
Alibaba Group Holding Limited
For information about the major VIEs, which account
for a significant majority of the total revenue
and assets of the VIEs, please see “Management
Discussion and Analysis — Operating Results — Variable
Interest Entity Financial Information.”
Contractual Arrangements among
Our Subsidiaries, the Variable Interest
Entities and Variable Interest Entity
Equity Holders
Due to legal restrictions on foreign ownership and
investment in, among other areas, value added
telecommunications services, which include the
operations of ICPs, we, similar to all other entities with
foreign incorporated holding company structures
operating in our industry in China, operate our
Internet businesses and other businesses in which
foreign investment is restricted or prohibited in the
PRC through various contractual arrangements with
VIEs that are incorporated and owned by PRC citizens
or by PRC entities owned and/or controlled by PRC
citizens. The relevant VIEs hold the ICP licenses and
other regulated licenses and operate our Internet
businesses and other businesses in which foreign
investment is restricted or prohibited. Specifically, for
fiscal year 2024, our representative VIEs are Zhejiang
Taobao Network Co., Ltd., Zhejiang Tmall Network Co.,
Ltd., Hangzhou Ali Venture Capital Co., Ltd., Shanghai
Rajax Information Technology Co., Ltd., Alibaba Cloud
Computing Ltd. and Alibaba Culture Entertainment
Co., Ltd. See “— Organizational Structure” above.
While the VIEs hold licenses and approvals and
assets for regulated activities that are necessary
for our business operations, as well as certain
equity investments in businesses, to which foreign
investments are typically restricted or prohibited
under applicable PRC law, our subsidiaries hold the
significant majority of our assets and operations
and capture the significant majority of our revenue.
Therefore, we directly capture the significant
majority of the profits and associated cash flow from
operations without having to rely on contractual
arrangements to transfer cash flow from the VIEs to
our subsidiaries.
The currently effective contractual arrangements,
as described in more detail below, by and among
us, our relevant subsidiaries, the VIEs, and their
shareholders include loan agreements, exclusive call
option agreements, proxy agreements, equity pledge
agreements and exclusive services agreements. As
a result of the contractual arrangements with the
VIEs and their shareholders, we include the financial
results of each of the VIEs in our consolidated financial
statements in accordance with U.S. GAAP. The VIE
structure involves risks and is subject to uncertainties
under PRC laws and regulations. See “Risk Factors –
Risks Related to Our Corporate Structure.”
VIE Structure
Overview
The following diagram is a simplified illustration of the typical ownership structure and contractual arrangements
for VIEs:
Legal ownership
Contractual arrangements
Offshore PRC
Onshore PRC
100%
100% (through offshore holding companies)
• Loan Agreement
• Exclusive Call Option Agreement
• Proxy Agreement
• Equity Pledge Agreement
• Exclusive Technical Service Agreement
Company
WFOE
Variable Interest Entities
Variable Interest
Entity Equity Holders
Business Overview
75
Fiscal Year 2024 Annual Report
For most of the VIEs, our group uses a different
structure, or the Enhanced VIE Structure. The Enhanced
VIE Structure maintains the primary legal framework
that we and many peer companies in our industry
have adopted to operate businesses in which foreign
investment is restricted or prohibited in the PRC. We
may also create additional holding structures in the
future.
Compared with the prior VIE structure adopted by
many peer companies in our industry, which uses
natural persons to serve as direct or indirect equity
holders of the VIE, we have designed the Enhanced VIE
Structure to:
•
reduce the key man and succession risks
associated with natural person VIE equity
holders, through a new structure that has widely
dispersed interests among natural person
interest holders; and
•
create a VIE ownership structure that is more
stable and self-sustaining, by distancing the
natural person interest holders with the VIE
with multiple layers of legal entities, including
a partnership structure and multiple layers of
contractual arrangements.
VIE equity holders under the Enhanced VIE
Structure
Under the Enhanced VIE Structure, a VIE is typically
held by a PRC limited liability company, instead
of individuals. This PRC limited liability company
is directly or indirectly owned by two PRC limited
partnerships, each of which holds 50% of the equity
interest. Each of these partnerships is comprised of
(i) a PRC limited liability company, as general partner
(which is formed by a number of selected members
of the Alibaba Partnership and our management
who are PRC citizens), and (ii) the same group of
natural persons, as limited partners. Under the terms
of the relevant partnership agreements, the natural
person limited partners must be members of the
Alibaba Partnership or our management who are PRC
citizens and as designated by the general partner
of the partnership. For our representative VIEs, these
individuals are Daniel Yong Zhang, Jessie Junfang
Zheng, Xiaofeng Shao, Zeming Wu and Fang Jiang
(with respect to each of Zhejiang Taobao Network Co.,
Ltd., Zhejiang Tmall Network Co., Ltd., Hangzhou Ali
Venture Capital Co., Ltd., Shanghai Rajax Information
Technology Co., Ltd. and Alibaba Cloud Computing
Ltd.), and Jeff Jianfeng Zhang, Winnie Jia Wen, Jie Song,
Yongxin Fang and Li Cheng (with respect to Alibaba
Culture Entertainment Co., Ltd.). Because Li Cheng is
no longer a member of the Alibaba Partnership, we
are in the process of replacing him. In addition, we are
in the process of restructuring the VIEs and changing
these individuals as part of our Reorganization.
Business Overview
76
Alibaba Group Holding Limited
The following diagram is a simplified illustration of the typical ownership structure and contractual arrangements
of the VIEs under the Enhanced VIE Structure.
50%
50%
0.0001%
20%
20%
20%
20%
20%
19.99998%
19.99998%
19.99998%
19.99998%
19.99998%
100%
100% (through offshore holding companies)
Our Company
Wholly-owned Entities
PRC Investment Holding Company
(a PRC Limited Liability Company)
Variable Interest Entities
Individual Shareholders of G.P.(1)
PRC Limited Liability
Company Serving as
General Partner
Individual Limited
Partners(1)
PRC Limited
Partnership
PRC Limited
Partnership
Legal ownership
Contractual arrangements
Offshore PRC
Onshore PRC
(1) Selected members of the Alibaba Partnership or our management who are PRC citizens.
Business Overview
77
Fiscal Year 2024 Annual Report
Under the Enhanced VIE Structure, the designated
subsidiary, on the one hand, and the corresponding
VIE and the multiple layers of legal entities above the
VIE, as well as the natural persons described above, on
the other hand, enter into contractual arrangements,
which are substantially similar to the contractual
arrangements we have historically used for VIEs.
See “— Loan Agreements,” “— Exclusive Call Option
Agreements,” “— Proxy Agreements,” “— Equity Pledge
Agreements” and “— Exclusive Services Agreements”
below.
There are risks associated with the VIE structure in
general and the Enhanced VIE Structure. See “Risk
Factors — Risks Related to Our Corporate Structure.”
The following is a summary of our typical contractual
arrangements.
Loan Agreements
Pursuant to the relevant loan agreement, our
respective subsidiary has granted a loan to the
relevant VIE equity holders, which may only be used for
the purpose of its business operation activities agreed
by our subsidiary or the acquisition of the relevant VIE.
Our subsidiary may require acceleration of repayment
at its absolute discretion. When the VIE equity holders
make early repayment of the outstanding amount,
our subsidiary or a third party designated by it may
purchase the equity interests in the VIE at a price
equal to the outstanding amount of the loan, subject
to any applicable PRC laws, rules and regulations.
The VIE equity holders undertake not to enter into any
prohibited transactions in relation to the VIE, including
the transfer of any business, material assets or equity
interests in the VIE to any third party. The parties to the
loan agreement for each of the representative VIEs
are the relevant VIE equity holders, on the one hand,
and Taobao (China) Software Co., Ltd., Zhejiang Tmall
Technology Co., Ltd., Alibaba (China) Co. Ltd., Rajax
Network Technology (Shanghai) Co., Ltd., Hangzhou
AliCloud Feitian Information Technology Co., Ltd. and
Beijing Youku Technology Co., Ltd., our corresponding
subsidiaries, on the other hand.
Exclusive Call Option Agreements
Under the Enhanced VIE Structure, each relevant VIE
and its equity holders have jointly granted our relevant
subsidiary (A) an exclusive call option to request
the relevant VIE to decrease its registered capital at
an exercise price equal to the higher of (i) the paid-
in registered capital in the relevant VIE and (ii) the
minimum price as permitted by applicable PRC law,
or the capital decrease price, and (B) an exclusive
call option to subscribe for any increased capital of
relevant VIE at a price equal to the capital decrease
price, or the sum of the capital decrease price and
the unpaid registered capital, if applicable, as of
the capital decrease. Our subsidiary may nominate
another entity or individual to purchase the equity
interest or assets, or to subscribe for the relevant
increased capital, if applicable, under the call options.
Execution of each call option shall not violate the
applicable PRC laws, rules and regulations. Each VIE
equity holders has agreed that the following amounts,
to the extent in excess of the original registered capital
that they contributed to the VIE (after deduction of
relevant tax expenses), belong to and shall be paid
to our relevant subsidiaries: (i) proceeds from the
transfer of its equity interests in the VIE, (ii) proceeds
received in connection with a capital decrease in the
VIE, and (iii) distributions or liquidation residuals from
the disposal of its equity interests in the VIE upon
termination or liquidation. Moreover, any profits,
distributions or dividends (after deduction of relevant
tax expenses) received by the VIE equity holder also
belong to and shall be paid to our subsidiary. The
exclusive call option agreements remain in effect until
the equity interest or assets that are the subject of
these agreements are transferred to our subsidiary.
The parties to the exclusive call option agreement for
each of the representative VIEs are the relevant VIE
equity holder, the relevant VIE and our corresponding
subsidiary.
Proxy Agreements
Pursuant to the relevant proxy agreement, each of
the VIE equity holders irrevocably authorizes any
person designated by our subsidiary to exercise the
rights of the equity holder of the VIE, including without
limitation the right to vote and appoint directors.
The parties to the proxy agreement for each of the
representative VIEs are the relevant VIE equity holder,
the relevant VIE and our corresponding subsidiary.
Business Overview
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Alibaba Group Holding Limited
Equity Pledge Agreements
Pursuant to the relevant equity pledge agreement, the
relevant VIE equity holders have pledged all of their
interests in the equity of the VIE as a continuing first
priority security interest in favor of the corresponding
subsidiary to secure the outstanding amounts
advanced under the relevant loan agreements
described above and to secure the performance
of obligations by the VIE and/or its equity holders
under the other structure contracts. Each subsidiary is
entitled to exercise its right to dispose of the VIE equity
holders’ pledged interests in the equity of the VIE and
has priority in receiving payment by the application
of proceeds from the auction or sale of the pledged
interests, in the event of any breach or default under
the loan agreement or other structure contracts, if
applicable. These equity pledge agreements remain
in force until the later of (i) the full performance of
the contractual arrangements by the relevant parties,
and (ii) the full repayment of the loans made to the
relevant VIE equity holders. The parties to the equity
pledge agreement for each of the representative VIEs
are the relevant VIE equity holder, the relevant VIE and
our corresponding subsidiary.
Exclusive Services Agreements
Under the Enhanced VIE Structure, each relevant
VIE has entered into an exclusive service agreement
with the respective subsidiary, pursuant to which our
relevant subsidiary provides exclusive services to the
VIE. In exchange, the VIE pays a service fee to our
subsidiary, the amount of which shall be determined,
to the extent permitted by applicable PRC laws as
proposed by our subsidiary, resulting in a transfer
of substantially all of the profits from the VIE to our
subsidiary.
The exclusive call option agreements described above
also entitle our subsidiary to all profits, distributions or
dividends (after deduction of relevant tax expenses) to
be received by the VIE equity holder, and the following
amounts, to the extent in excess of the original
registered capital that they contributed to the VIE (after
deduction of relevant tax expenses) to be received by
each VIE equity holder: (i) proceeds from the transfer
of its equity interests in the VIE, (ii) proceeds received in
connection with a capital decrease in the VIE, and (iii)
distributions or liquidation residuals from the disposal
of its equity interests in the VIE upon termination or
liquidation.
In the opinion of Fangda Partners, our PRC legal
counsel:
•
the ownership structures of the representative
VIEs in China and our corresponding subsidiaries
do not and will not violate any applicable PRC
law, regulation, or rule currently in effect; and
•
the contractual arrangements between the
representative VIEs, the VIE holders and our
corresponding subsidiaries governed by PRC
laws are valid, binding and enforceable in
accordance with their terms and applicable PRC
laws, rules, and regulations currently in effect,
and will not violate any applicable PRC law,
regulation, or rule currently in effect.
However, we have been further advised by our
PRC legal counsel, Fangda Partners, that there are
substantial uncertainties regarding the interpretation
and application of current and future PRC laws, rules
and regulations. Accordingly, the possibility that the
PRC regulatory authorities and PRC courts may in the
future take a view that is contrary to the opinion of our
PRC legal counsel cannot be ruled out. We have been
further advised by our PRC legal counsel that if the PRC
government finds that the agreements that establish
the structure for operating our business do not
comply with PRC government restrictions on foreign
investment in the aforesaid business we engage in,
we could be subject to severe penalties including
being prohibited from continuing operations. See “Risk
Factors — Risks Related to Our Corporate Structure.”
Property, Plant and
Equipment
As of March 31, 2024, we occupied facilities around
the world with an aggregate gross floor area of
office buildings, logistics warehouses, retail space,
data centers and other facilities owned by us
totaling approximately 24.1 million square meters.
We maintain offices in many countries and regions,
including Chinese mainland, Hong Kong S.A.R.,
Singapore and the United States. In addition, we
maintain data centers in a number of countries
including Chinese mainland, Hong Kong S.A.R.,
Indonesia, Malaysia, Thailand, India, Philippines,
Australia, Singapore, UAE, Germany, the UK, Japan,
South Korea and the United States.
Business Overview
79
Fiscal Year 2024 Annual Report
Management
Discussion and
Analysis
Operating Results
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our audited consolidated financial
statements and the related notes included in this
annual report and in particular, “Business Overview.”
This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual
results and the timing of selected events could differ
materially from those anticipated in these forward-
looking statements as a result of various factors,
including those set forth under “Risk Factors” and
elsewhere in this annual report. We have prepared
our consolidated financial statements in accordance
with U.S. GAAP. Our fiscal year ends on March 31 and
references to fiscal years 2022, 2023 and 2024 are to
the fiscal years ended March 31, 2022, 2023 and 2024,
respectively.
Overview
Our total revenue increased by 2% from RMB853,062
million in fiscal year 2022 to RMB868,687 million
in fiscal year 2023, and further increased by 8% to
RMB941,168 million (US$130,350 million) in fiscal
year 2024. Our net income increased by 39% from
RMB47,079 million in fiscal year 2022 to RMB65,573
million in fiscal year 2023, and increased by 9% to
RMB71,332 million (US$9,879 million) in fiscal year
2024.
Our non-GAAP net income, which excludes the effect
of share-based compensation expense, amortization
and impairment of intangible assets, gain or loss
on deemed disposals/disposals/revaluation of
investments, impairment of goodwill and investments
and others, and adjustments for the tax effects,
increased by 4% from RMB136,388 million in fiscal year
2022 to RMB141,379 million in fiscal year 2023. Non-
GAAP net income increased by 11% to RMB157,479
million (US$21,811 million) in fiscal year 2024. For
further information on non-GAAP financial measures
we use in evaluating our operating results and for
financial and operational decision-making purposes,
see “— Non-GAAP Measures.”
Our Segments
We organize and report our business in the following
segments:
•
Taobao and Tmall Group;
•
Cloud Intelligence Group;
•
Alibaba International Digital Commerce Group;
•
Cainiao Smart Logistics Network Limited;
•
Local Services Group;
•
Digital Media and Entertainment Group; and
•
All others.
This presentation reflects how we manage our
business to maximize efficiency in allocating
resources. This presentation also provides further
transparency to our various businesses that are
executing different phases of growth and operating
leverage trajectories.
In general, revenue, cost of revenue and operating
expenses are directly attributable, or are allocated, to
each segment. We allocate costs and expenses that
are not directly attributable to individual segments,
such as those that support infrastructure across
different operating segments, to different operating
segments mainly on the basis of usage, revenue or
headcount, depending on the nature of the relevant
costs and expenses.
In discussing the operating results of these segments,
we present each segment’s revenue and adjusted
earnings before interest, taxes and amortization, or
adjusted EBITA.
Our reported segments are described below:
•
Taobao and Tmall Group, which includes
Taobao, Tmall, Xianyu, 1688.com and other
businesses.
•
Cloud Intelligence Group, which includes
Alibaba Cloud and other businesses.
•
Alibaba International Digital Commerce Group,
which includes AliExpress, Trendyol, Lazada,
Alibaba.com and other businesses.
82
Alibaba Group Holding Limited
Management Discussion and Analysis
Customer management
We derive a majority of our China commerce retail
revenue from customer management services. We
generate customer management revenue from
merchants by offering an integrated package and a
comprehensive solution comprising a diverse array
of services to enable them to attract, engage and
retain consumers, complete transactions, improve
their branding and enhance operating efficiency. The
customer management revenue are charged primarily
on cost-per-click (CPC) basis, cost-per-thousand
impressions (CPM) basis, time basis and cost-per-
sale (CPS) basis (e.g., fees charged based on the GMV
transacted, including commission on transactions).
•
Cost-per-click (CPC), Cost-per-thousand
impressions (CPM) and time-based marketing
services, where merchants primarily bid
for keywords or bid to market to groups of
consumers with similar profiles that match
product or service listings appearing in search
results or browser results through our online
auction system on a CPC basis or CPM basis.
We provide these services directly on our
marketplaces or through collaboration with third-
party marketing affiliates program.
•
Cost-per-sale (CPS) marketing services, where we
charged fees from merchants when transactions
are completed on Taobao, Tmall and certain
other retail marketplaces of the Company. The
fees are generally determined as a percentage
based on the value of merchandise sold by the
merchants and typically range from 0.3% to 5.0%
for Tmall depending on the product category.
Direct sales and others
Direct sales and others revenue from our China
commerce retail businesses is primarily generated
by our direct sales businesses, comprising mainly
Tmall Supermarket and Tmall Global’s direct sales
businesses, and primarily consists of revenue from
product sales.
•
Cainiao Smart Logistics Network Limited, which
mainly includes our domestic and international
one-stop-shop logistics services and supply
chain management solutions.
•
Local Services Group, which mainly includes
“To-Home” business of Ele.me and the “To-
Destination” business of Amap.
•
Digital Media and Entertainment Group, which
includes Youku and Alibaba Pictures.
•
All others, which includes Sun Art, Freshippo,
Alibaba Health, Lingxi Games, Intime, Intelligent
Information Platform (which mainly consists of
UCWeb and Quark businesses), Fliggy, DingTalk
(previously reported under Cloud Intelligence
Group segment) and other businesses.
Accordingly, our segment reporting has been
updated to reflect how our chief operating decision
maker (“CODM”) reviews information under this new
structure.
Our Monetization Model
Our marketplaces and businesses are highly
synergistic, which create an ecosystem that enables
consumers, merchants, brands, retailers, other
businesses, third party service providers and strategic
partners to interconnect and interact with each other.
We leverage our leading technologies to provide
various value propositions to participants in our
ecosystem and realize monetization by offering
different services and creating value under each of our
business segments.
Our monetization and profit model primarily consists
of the following elements:
Taobao and Tmall Group
China Commerce Retail Business
We generate revenue from merchants by leveraging
our consumer insights and data technologies which
enable brands and merchants to attract, engage and
retain consumers, complete transactions, improve
their branding, enhance operating efficiency and offer
various services. On the consumer side, leveraging
these insights and technologies, as well as our
supply chain capabilities, we also generate revenue
from product sales for our direct sales businesses.
The revenue of our China commerce retail business
primarily consists of customer management revenue
and direct sales and others revenue.
Management Discussion and Analysis
83
Fiscal Year 2024 Annual Report
China Commerce Wholesale Business
We generate revenue from our China commerce
wholesale business primarily through membership
fees, value-added services and customer
management services. Revenue from membership
fees are primarily fixed annual fees from the sale of
China TrustPass memberships for paying members
to reach customers, provide quotations and transact.
Paying members may also purchase premium
memberships and additional value-added services,
such as premium data analytics and upgraded
storefront management tools, the prices of which
are determined based on the types and duration of
the value-added services. Revenue from customer
management services is primarily derived from P4P
marketing services.
Cloud Intelligence Group
Our Cloud businesses primarily generate revenue
from the provision of public and non-public cloud
services to our domestic and international enterprise
customers:
•
Public cloud services, where we generate revenue
from a wide range of cloud services, including,
among others, elastic computing, storage,
network, database, big data and AI, security
and proprietary servers. Enterprise customers
can pay for these services on a consumption or
subscription basis, such as on-demand delivery
of computing services and storage capacities.
•
Non-public cloud services, where we generate
revenue through packaged cloud services,
including hardware, software license, software
installation service, application development and
maintenance service.
Alibaba International Digital Commerce
Group
International Commerce Retail Business
We generate revenue from our International
commerce retail businesses primarily through
customer management services, direct sales and
logistics services. Our revenue from customer
management services is mainly contributed by
AliExpress, Lazada and Trendyol. We generate direct
sales revenue primarily from AliExpress, Trendyol
and Lazada. We generate logistics services revenue
primarily from Lazada and Trendyol.
International Commerce Wholesale Business
We generate revenue from our International
wholesale commerce businesses primarily through
membership fees, value-added services and customer
management services. Revenue from membership
fees are primarily fixed annual fees from the sale of
memberships for paying members to reach customers,
provide quotations and transact. Revenue from
value-added services primarily consists of fees for
services such as trade assurance services, the prices of
which are determined based on the types, usage and
duration of the value-added services. Revenue from
customer management services is primarily derived
from P4P marketing services.
Cainiao Smart Logistics Network Limited
We generate revenue from Cainiao business primarily
through express delivery and supply chain services.
Cainiao charges merchants delivery fees on a per-
parcel basis for express delivery services, and charges
merchants service fees based on the service selected,
such as storage, processing, delivery and various
value-added services. In addition, Cainiao generates
revenue by providing technology and other value-
added services.
Local Services Group
We generate revenue from Local Services Group
primarily through platform commissions and
on-demand delivery services by our “To-home”
business. Our revenue from platform commissions
is mainly contributed by transactions on Ele.me,
where merchants pay a commission based on a
percentage of the transaction value. The commission
percentages vary depending on product category. We
also generate revenue through on-demand delivery
services, including delivery of meals, food, groceries,
FMCG, flowers and pharmaceutical products, for
merchants and customers through Fengniao Logistics,
Ele.me’s on-demand delivery network.
In addition, our “To-destination” businesses mainly
generate revenue from Amap, by charging a software
service fee and technology service fee to enterprise
customers.
Management Discussion and Analysis
84
Alibaba Group Holding Limited
Digital Media and Entertainment Group
Revenue from Digital Media and Entertainment Group
primarily comprises membership subscription fees,
content investment income, customer management
revenue and ticketing services revenue. Membership
subscription fees are mainly generated from paying
subscribers. Content investment income is mainly
generated from box office income of movie investment
projects. Customer management revenue is mainly
generated from businesses and advertising agencies
and the monetization model is substantially similar
to the customer management revenue for our China
commerce retail business. Ticketing services revenue
is mainly generated from ticketing online sales
commissions.
All Others
All others include Sun Art, Freshippo, Alibaba
Health, Lingxi Games, Intime, Intelligent Information
Platform (which mainly consists of UCWeb and Quark
businesses), Fliggy, DingTalk (previously reported
under Cloud Intelligence Group segment) and other
businesses. The majority of revenue within All others
consists of direct sales revenue, which is recorded on a
gross basis.
Factors Affecting Our Results of
Operations
Our Ability to Create Value for Our Users and
Generate Revenue. Our ability to create value for our
users and generate revenue is driven by the factors
described below:
•
Number and engagement of consumers.
Consumers are attracted to our platforms by
the breadth of curated products and services,
personalized content and the interactive user
experience these platforms offer. Our platforms
include a comprehensive selection of product
and service offerings as well as engaging
content, such as recommendation feeds on
our Taobao app and entertainment content on
Youku. Consumers enjoy an engaging social
experience by interacting with each other
and with merchants, brands and KOLs on our
platforms. We leverage our consumer insights to
further optimize the relevance of this rich content
we provide to our users. The engagement of
consumers in our ecosystem is affected by our
ability to continue to enhance and expand our
product and service offerings and improve user
experience.
•
Broader value offered to merchants, brands,
retailers and other businesses. Merchants,
brands, retailers and other businesses use
our products and services to help them reach,
acquire and retain customers, build brand
awareness and engagement, complete
transactions, and enhance their operating
efficiency. We offer merchants and retailers a
complete suite of services and tools, powered by
our consumer insights, to help them effectively
engage consumers, efficiently manage their
operations and provide a seamless online and
offline consumer experience. With our proprietary
data and technologies, we also facilitate the
digital transformation of traditional merchants
and retailers. In addition, we empower
businesses of different sizes across various
industries through our comprehensive enterprise
cloud service offerings.
•
Empowering data and technology. Our ability
to engage consumers and empower merchants,
brands, retailers and other businesses is
affected by the breadth and depth of our
consumer insights, such as the accuracy of our
shopping recommendations and of our targeted
marketing, and our technology capabilities and
infrastructure, such as cloud computing, and our
continued ability to develop scalable products
and services that adapt to the quickly evolving
industry trends and consumer preferences.
Operating Leverage of Our Business Model. Our
primary business model has significant operating
leverage and our ecosystem enables us to realize
structural cost savings. For example, Taobao
drives significant traffic to Tmall as Tmall product
listings also appear on Taobao search result pages.
Furthermore, the large number of consumers
on our marketplaces attracts a large number of
merchants, who become customers for our customer
management and storefront services. In addition, the
vast consumer base of our ecosystem presents cross-
selling opportunities across our various platforms.
For example, we can offer consumer services, such
as Ele.me, and promote our digital media and
entertainment services, including Youku, to consumers
on our marketplaces. These network effects allow for
lower traffic acquisition costs and provide synergies
across our businesses.
Management Discussion and Analysis
85
Fiscal Year 2024 Annual Report
Our Investment in User Base, Technology, People,
Infrastructure, and Innovative Business Model. We
have made, and will continue to make, significant
investments in our platforms and ecosystem to
attract consumers and merchants, enhance user
experience and expand the capabilities and scope
of our platforms. We expect our investments will
include expanding our China and international
offerings, implementing our local consumer service
businesses, strengthening our logistics and fulfillment
capabilities, enhancing our Cloud business, investing
in content and user acquisition to further develop our
digital media and entertainment business, cultivating
innovation initiatives and new technologies as well as
executing our globalization strategy. Our operating
leverage and profitability enable us to continue to
invest in our people, particularly engineers, scientists
and product management personnel, as well as in
our technology capabilities and infrastructure. Our
investment in the above-mentioned new and existing
businesses has and will continue to lower our margins
but we believe the investment will deliver overall long-
term growth.
Strategic Investments and Acquisitions. We have
made, and intend to make, strategic investments
and acquisitions. Our investment and acquisition
strategy is focused on strengthening our ecosystem,
creating strategic synergies across our businesses,
and enhancing our overall value. Our strategic
investments and acquisitions may adversely affect
our future financial results, including our margins and
our net income, at least in the short term. In addition,
some of our acquisitions and investments may not
be successful. We have incurred impairment charges
in the past and may incur impairment charges in the
future.
Recent Investment, Acquisition and
Strategic Alliance Activities
In addition to organic growth, we have made, or
have entered into agreements to make, strategic
investments, acquisitions and alliances that are
intended to further our strategic objectives. The
financial results for these strategic transactions
that were completed are reflected in our operating
results beginning with the period of their respective
completion. Investments in which we did not obtain
control are generally accounted for under the equity
method if we have significant influence over the
investee through investment in common stock or
in-substance common stock. Otherwise, investments
are generally carried at fair value with unrealized
gains and losses recorded in the consolidated income
statements or accounted for using the measurement
alternative based on our accounting policies over
different categories of investments. For the details
of our accounting policies for each category of our
investments, see notes 2(d), 2(t) and 2(u) to our
audited consolidated financial statements included in
this annual report.
We have developed focused investment strategies,
targeting to invest, acquire or form alliances that will
either complement our existing businesses or drive
innovation initiatives. In some cases, we may take a
staged approach to our investment and acquisition
strategy, by beginning with an initial minority
investment followed by business cooperation. When
the business results, cooperation and the overall
relationship established with the management of
the investee company show increasing value to
our ongoing business strategy, we may increase
our investment or acquire the investee company
completely.
We have funded our strategic acquisitions and
investments primarily from cash generated from our
operations and through debt and equity financing.
Our debt financing primarily consists of unsecured
senior notes and bank borrowings, including an
aggregate of US$8.0 billion unsecured senior notes
issued in November 2014, of which US$5.05 billion
was repaid in 2017, 2019 and 2021, an aggregate
of US$7.0 billion unsecured senior notes issued in
December 2017, of which US$0.7 billion was repaid in
June 2023, an aggregate of US$5.0 billion unsecured
senior notes issued in February 2021, a five-year
term loan facility of US$4.0 billion drawn down in
fiscal year 2017, the maturity of which has been
extended to May 2024 in May 2019 and has been
further extended to May 2028 in July 2023, as well
as a US$6.5 billion revolving credit facility which we
have not yet drawn. Going forward, we expect to fund
additional investments through cash generated from
our operations and through debt and equity financing
when opportunities arise in the future. Although
we expect our margins to be negatively affected
by acquisitions of target companies with lower or
negative margins, we do not expect our investment
activities to have any significant negative impact
Management Discussion and Analysis
86
Alibaba Group Holding Limited
on our liquidity or operations. We believe acquired
businesses operating at a loss do not detract from
our total value because they bring clear strategic
value to us in the long run. However, there can be no
assurance that our future financial results would not
be materially and adversely affected if our strategic
investments and acquisitions are not successful. See
“Risk Factors — Risks Related to Our Business and
Industry — Sustained investment in our businesses and
our focus on long-term performance and maintaining
the health of our ecosystem may negatively affect
our margins and our net income” and “Risk Factors —
Risks Related to Our Business and Industry — We face
risks relating to our acquisitions, investments and
alliances.”
Our significant strategic investments and acquisitions
(including those that are under definitive agreement
but have not closed, and excluding equity transactions
in subsidiaries) in fiscal year 2024 and the period
through the date of this annual report are set forth
below.
Moonshot AI Ltd or Moonshot, is an artificial
intelligence company in the PRC. During the fiscal
year 2024, we invested a total of approximately
US$0.8 billion for an approximately 36% equity
interest, representing a preferred stock investment in
Moonshot.
Intangible Assets and Goodwill
When we make an acquisition, consideration that
exceeds the acquisition date amounts of the acquired
assets and liabilities is allocated to intangible assets
and goodwill. We have and will continue to incur
amortization expenses as we amortize intangible
assets over their estimated useful life on a straight-line
basis. We do not amortize goodwill. We test intangible
assets and goodwill periodically or whenever
necessary for impairment, and any impairment may
materially and adversely affect our financial condition
and results of operations. Some of our acquisitions
and investments may not be successful, and we may
incur impairment charges in the future. We recognized
an impairment of intangible assets of RMB2,811
million in fiscal year 2023 and RMB12,089 million
(US$1,674 million) in fiscal year 2024 , mainly relating
to one of our import e-commerce platform in China
and Sun Art within All others segment, respectively. We
recognized an impairment of goodwill of RMB2,714
million and RMB10,521 million (US$1,457 million) in
fiscal years 2023 and 2024 respectively, mainly in
relation to Digital Media and Entertainment Group.
For additional information, see “— Critical Accounting
Policies and Estimates — Impairment Assessment on
Goodwill and Intangible Assets” and “Risk Factors —
Risks Related to Our Business and Industry — We face
risks relating to our acquisitions, investments and
alliances.”
Management Discussion and Analysis
87
Fiscal Year 2024 Annual Report
Components of Results of Operations
Revenue
The following table sets forth our revenues by segment, presented before inter-segment elimination, for the
periods indicated (1):
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Taobao and Tmall Group:
China commerce retail
— Customer management
316,029
291,541
304,009
42,105
— Direct sales and others(2)
96,795
103,811
110,405
15,291
412,824
395,352
414,414
57,396
China commerce wholesale
17,106
17,854
20,479
2,836
Total Taobao and Tmall Group
429,930
413,206
434,893
60,232
Cloud Intelligence Group
102,016
103,497
106,374
14,733
Alibaba International Digital Commerce
Group:
International commerce retail
43,679
50,933
81,654
11,309
International commerce wholesale
18,506
19,573
20,944
2,901
Total Alibaba International Digital Commerce
Group
62,185
70,506
102,598
14,210
Cainiao Smart Logistics Network Limited
66,808
77,512
99,020
13,714
Local Services Group
44,890
50,249
59,802
8,282
Digital Media and Entertainment Group
18,105
18,444
21,145
2,929
All others(3)
189,543
197,115
192,331
26,637
Total segment revenue
913,477
930,529
1,016,163
140,737
Unallocated
1,556
866
1,297
180
Inter-segment elimination
(61,971)
(62,708)
(76,292)
(10,567)
Consolidated revenue
853,062
868,687
941,168
130,350
(1) During fiscal year 2024, our segment reporting has been updated to reflect our Reorganization and the reclassification of the
revenue of our DingTalk business, which was previously reported under Cloud Intelligence Group, to All others, the purpose of
which was to provide DingTalk with greater autonomy to promote innovation and enhance competitiveness. Our CODM started to
review information under this new reporting structure and segment reporting has been updated to conform to this change as well
as the way we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.
(2) Direct sales and others revenue under Taobao and Tmall Group primarily represents Tmall Supermarket, Tmall Global and other
direct sales businesses, where revenue and cost of inventory are recorded on a gross basis.
(3) All others include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent Information Platform (which mainly consists
of UCWeb and Quark businesses), Fliggy, DingTalk (previously reported under Cloud Intelligence Group segment) and other
businesses. The majority of revenue within All others consist of direct sales revenue, which is recorded on a gross basis.
A substantial majority of our revenue is attributable to our businesses in China. See “— Our Monetization Model”
for additional information regarding our revenue.
Management Discussion and Analysis
88
Alibaba Group Holding Limited
Cost of Revenue
The principal components of our cost of revenue
include: cost of inventories; logistics costs; expenses
associated with the operation of our mobile platforms
and websites, such as depreciation and maintenance
expenses for our servers and computers, call centers
and other equipment, as well as bandwidth and co-
location fees; salaries, bonuses, benefits and share-
based compensation expense relating to customer
service, mobile platform and platform operation
personnel as well as payment processing consultants;
traffic acquisition costs paid to third-party marketing
affiliates either at a fixed price or on a revenue-
sharing basis; content acquisition costs paid to third
parties and production costs of original content for
our online media properties; payment processing fees
paid to Alipay or other financial institutions; and other
miscellaneous costs.
Product Development Expenses
Product development expenses primarily
include salaries, bonuses, benefits and share-
based compensation expense for research and
development personnel and other expenses that
are directly attributable to the development of new
technologies and products for our businesses, such
as the development of the Internet infrastructure,
applications, operating systems, software, databases
and networks.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of
online and offline advertising expenses, promotion
expenses, salaries, bonuses, benefits and share-
based compensation expense for our employees
engaged in sales and marketing functions, and
sales commissions paid for membership and user
acquisition for our marketplaces and platforms.
General and Administrative Expenses
General and administrative expenses mainly consist
of salaries, bonuses, benefits and share-based
compensation expense for our management and
administrative employees, office facilities and other
support overhead costs, professional services fees,
provision for doubtful debts on receivables, charitable
contributions, as well as non-recurring items.
Interest and Investment Income, Net
Interest and investment income, net mainly consists
of interest income, gain or loss on deemed disposals,
disposals and revaluation of our long-term equity
investments and impairment of equity investments.
Interest Expense
Our interest expense is comprised of interest payments
and amortization of upfront fees and incidental
charges primarily associated with our US$8.0 billion
unsecured senior notes issued in November 2014,
of which US$5.05 billion was repaid in 2017, 2019
and 2021, an aggregate of US$7.0 billion unsecured
senior notes issued in December 2017, of which
US$700 million was repaid in June 2023, an aggregate
of US$5.0 billion unsecured senior notes issued in
February 2021, as well as the US$4.0 billion five-year
term loan facility drawn down in fiscal year 2017 and
extended in 2023. In addition, we have a US$6.5 billion
revolving credit facility, which we have not yet drawn
as of the date of this annual report.
Other Income, Net
Other income, net, primarily consists of input VAT
super-credit, exchange gain or loss and government
grants. Exchange gain or loss, arising from our
operations and treasury management activities,
recognized in our income statement is largely affected
by exchange rate fluctuation among Renminbi, U.S.
dollar and Turkish lira. Government grants primarily
relate to grants by central and local governments
in connection with our contributions to technology
development and investments in local business
districts. These grants may not be recurring in nature,
and we recognize the income when the grants are
received and no further conditions need to be met.
Management Discussion and Analysis
89
Fiscal Year 2024 Annual Report
Income Tax Expenses
Our income tax expenses are comprised primarily of
current tax expense, mainly attributable to certain
profitable subsidiaries in China, and deferred tax
expense, mainly including deferred tax recognized
for temporary differences in relation to investments,
share-based awards and withholding tax on dividends
to be distributed by our PRC operating subsidiaries.
Taxation
Cayman Islands Tax
Under Cayman Islands law, our company is not subject
to income, corporation or capital gains tax, and no
withholding tax is imposed upon the payment of
dividends.
Hong Kong Profits Tax
Our company’s subsidiaries incorporated in Hong
Kong were subject to Hong Kong profits tax at a rate of
16.5% in fiscal years 2022, 2023 and 2024.
PRC Income Tax
Under the EIT Law, the standard enterprise income tax
rate is 25%.
Entities qualifying as High and New Technology
Enterprises enjoy a preferential tax rate of 15%.
Entities recognized as Software Enterprises are exempt
from the EIT for two years beginning from their first
profitable calendar year and are entitled to a 50%
reduction in EIT for the following three consecutive
calendar years. Furthermore, entities recognized as
Key Software Enterprises (KSE) within the PRC national
plan enjoy a preferential EIT rate of 10%. KSE status
is subject to review by the relevant authorities every
year and the timing of annual review and notification
by the relevant authorities may vary from year to year.
The related reduction in tax expense as a result of
official notification confirming KSE status is accounted
for upon receipt of such notification.
Certain subsidiaries received the above preferential
tax treatments during calendar years 2021, 2022,
2023 and 2024. Four of our subsidiaries in China,
Alibaba (China) Technology Co., Ltd., Taobao (China)
Software Co., Ltd., Zhejiang Tmall Technology Co., Ltd.,
and Alibaba (China) Co., Ltd, which are our wholly-
owned entities primarily involved in the operations
of wholesale marketplaces, Taobao, Tmall, and
technology, software research and development
and relevant services, respectively, were qualified
as High and New Technology Enterprises and they
were subject to an EIT rate of 15%. Another one of
our subsidiaries in China, Alibaba (Beijing) Software
Services Co., Ltd., which is our wholly-owned entity
primarily engaged in the operations of technology,
software research and development and relevant
services, was recognized as a Software Enterprise and
was thereby entitled to an income tax exemption for
two years beginning from its first profitable calendar
year 2017, and a 50% reduction in the standard
statutory rate for the subsequent three consecutive
years starting from the calendar year 2019. For the
calendar years of 2021, 2022 and 2023, Alibaba
(Beijing) Software Services Co., Ltd. applied an EIT
rate of 12.5% (50% reduction in the standard statutory
rate) as a Software Enterprise for the calendar year of
2021 and applied an EIT rate of 15% as High and New
Technology Enterprise for the calendar years of 2022
and 2023.
VAT and Other Levies
Our major PRC subsidiaries are subject to VAT on
revenue earned for our services under a national VAT
reform program. In general, the applicable VAT rate on
the revenue earned for services is 6% with companies
entitled to crediting VAT paid on certain purchases
against VAT on sales. Revenue is recognized net of VAT
in our consolidated income statement.
Management Discussion and Analysis
90
Alibaba Group Holding Limited
PRC Withholding Tax
Pursuant to the EIT Law, a 10% withholding tax is
generally levied on dividends declared by companies
in China to their non-resident enterprise investors.
A lower withholding tax rate of 5% is applicable for
direct foreign investors incorporated in Hong Kong
with at least 25% equity interest in the PRC company
and meeting the relevant conditions or requirements
pursuant to the tax arrangement between Chinese
mainland and Hong Kong S.A.R. As the equity holders
of our PRC operating subsidiaries are qualified Hong
Kong incorporated companies, our deferred tax
liabilities for distributable earnings are calculated at
a 5% withholding tax rate. As of March 31, 2024, we
have accrued the withholding tax on substantially all
of the earnings distributable by our subsidiaries in
China, except for those being reserved for permanent
reinvestment in China of RMB304.7 billion (US$42.2
billion).
Share-based Compensation
Our equity incentive plans provide the granting of
share-based awards to eligible grantees. We believe
share-based awards are vital to attract, incentivize
and retain our employees and are the appropriate tool
to align the interests of the grantees with those of our
shareholders. See “Directors, Senior Management and
Employees — Compensation.”
In addition, prior to 2023, Junhan and Ant Group
granted share-based awards to our employees,
and the awards are settled by Junhan or Ant Group
respectively. See “Major Shareholders and Related
Party Transactions — Related Party Transactions —
Agreements and Transactions Related to Ant Group
and Its Subsidiaries — Our Commercial Arrangements
with Ant Group and Alipay — Share-based Award
Arrangements.”
We recognized share-based compensation expense of
RMB23,971 million, RMB30,831 million and RMB18,546
million (US$2,569 million) in fiscal years 2022, 2023
and 2024, respectively, representing 3%, 4% and 2% of
our revenue in those respective periods.
The following table sets forth an analysis of share-based compensation expense by function for the periods
indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Cost of revenue
5,725
5,710
3,012
417
Product development expenses
11,035
13,514
7,623
1,056
Sales and marketing expenses
3,050
3,710
2,265
314
General and administrative expenses
4,161
7,897
5,646
782
Total
23,971
30,831
18,546
2,569
Management Discussion and Analysis
91
Fiscal Year 2024 Annual Report
The following table sets forth an analysis of share-based compensation expense by type of awards for the
periods indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Alibaba Group share-based awards(1)
30,576
24,900
17,974
2,489
Ant Group share-based awards(2)
(11,585)
668
(6,691)
(927)
Others(3)
4,980
5,263
7,263
1,007
Total
23,971
30,831
18,546
2,569
(1) This represents Alibaba Group share-based awards granted to our employees.
(2) This represents Ant Group share-based awards granted to our employees, which is subject to mark-to-market accounting
treatment.
(3) This represents share-based awards of our subsidiaries.
We expect that our share-based compensation
expense will continue to be affected by changes
in the fair value of the underlying awards and the
quantity of awards we grant in the future. See “—
Critical Accounting Policies and Estimates — Share-
based Compensation Expense and Valuation of the
Underlying Awards” below for additional information
regarding our share-based compensation expense.
Share-based compensation expense related to
Alibaba Group share-based awards decreased in
fiscal year 2024 compared to fiscal year 2023. This
decrease was primarily due to the general decrease in
the average fair market value of the awards granted.
Share-based compensation expense related to
Ant Group reflected a reversal of share-based
compensation expense of RMB6,901 million (US$956
million) recorded in fiscal year 2024. This is the result
of a mark-to-market adjustment during the fiscal year
relating to Ant Group share-based awards granted to
our employees because of a decrease in the value of
Ant Group.
Results of Operations
The following tables set out our consolidated results of operations for the periods indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions, except per share data)
Revenue
853,062
868,687
941,168
130,350
Cost of revenue
(539,450)
(549,695)
(586,323)
(81,205)
Product development expenses
(55,465)
(56,744)
(52,256)
(7,237)
Sales and marketing expenses
(119,799)
(103,496)
(115,141)
(15,947)
General and administrative expenses
(31,922)
(42,183)
(41,985)
(5,815)
Amortization and impairment of intangible
assets
(11,647)
(13,504)
(21,592)
(2,990)
Impairment of goodwill
(25,141)
(2,714)
(10,521)
(1,457)
Management Discussion and Analysis
92
Alibaba Group Holding Limited
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions, except per share data)
Income from operations
69,638
100,351
113,350
15,699
Interest and investment income, net
(15,702)
(11,071)
(9,964)
(1,380)
Interest expense
(4,909)
(5,918)
(7,947)
(1,101)
Other income, net
10,523
5,823
6,157
853
Income before income tax and share of
results of equity method investees
59,550
89,185
101,596
14,071
Income tax expenses
(26,815)
(15,549)
(22,529)
(3,120)
Share of results of equity method investees
14,344
(8,063)
(7,735)
(1,072)
Net income
47,079
65,573
71,332
9,879
Net loss attributable to noncontrolling
interests
15,170
7,210
8,677
1,202
Net income attributable to Alibaba Group
Holding Limited
62,249
72,783
80,009
11,081
Accretion of mezzanine equity
(290)
(274)
(268)
(37)
Net income attributable to ordinary
shareholders
61,959
72,509
79,741
11,044
Earnings per share attributable to
ordinary shareholders(1)
Basic
2.87
3.46
3.95
0.55
Diluted
2.84
3.43
3.91
0.54
Earnings per ADS attributable to
ordinary shareholders(1)
Basic
22.99
27.65
31.61
4.38
Diluted
22.74
27.46
31.24
4.33
(1) Each ADS represents eight Shares.
Management Discussion and Analysis
93
Fiscal Year 2024 Annual Report
Year ended March 31,
2022
2023
2024
%
%
%
(as percentage of revenue)
Revenue
100
100
100
Cost of revenue
(63)
(63)
(62)
Product development expenses
(7)
(7)
(6)
Sales and marketing expenses
(14)
(12)
(12)
General and administrative expenses
(4)
(5)
(5)
Amortization and impairment of intangible assets
(1)
(1)
(2)
Impairment of goodwill
(3)
—
(1)
Income from operations
8
12
12
Interest and investment income, net
(1)
(1)
(1)
Interest expense
(1)
(1)
(1)
Other income, net
1
—
—
Income before income tax and share of results of equity
method investees
7
10
10
Income tax expenses
(3)
(1)
(2)
Share of results of equity method investees
2
(1)
(1)
Net income
6
8
7
Net loss attributable to noncontrolling interests
2
—
1
Net income attributable to Alibaba Group Holding Limited
8
8
8
Accretion of mezzanine equity
—
—
—
Net income attributable to ordinary shareholders
8
8
8
Management Discussion and Analysis
94
Alibaba Group Holding Limited
Segment Information for Fiscal Years 2022, 2023 and 2024
The tables below set forth certain financial information of our operating segments, before inter-segment
elimination, for the periods indicated(1):
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Taobao and Tmall Group:
China commerce retail
— Customer management
316,029
291,541
304,009
42,105
— Direct sales and others(2)
96,795
103,811
110,405
15,291
412,824
395,352
414,414
57,396
China commerce wholesale
17,106
17,854
20,479
2,836
Total Taobao and Tmall Group
429,930
413,206
434,893
60,232
Cloud Intelligence Group
102,016
103,497
106,374
14,733
Alibaba International Digital Commerce
Group:
International commerce retail
43,679
50,933
81,654
11,309
International commerce wholesale
18,506
19,573
20,944
2,901
Total Alibaba International Digital Commerce
Group
62,185
70,506
102,598
14,210
Cainiao Smart Logistics Network Limited
66,808
77,512
99,020
13,714
Local Services Group
44,890
50,249
59,802
8,282
Digital Media and Entertainment Group
18,105
18,444
21,145
2,929
All others(3)
189,543
197,115
192,331
26,637
Total segment revenue
913,477
930,529
1,016,163
140,737
Unallocated
1,556
866
1,297
180
Inter-segment elimination
(61,971)
(62,708)
(76,292)
(10,567)
Consolidated revenue
853,062
868,687
941,168
130,350
(1) During fiscal year 2024, our segment reporting has been updated to reflect our Reorganization and the reclassification of the
revenue of our DingTalk business, which was previously reported under Cloud Intelligence Group, to All others, the purpose of
which was to provide DingTalk with greater autonomy to promote innovation and enhance competitiveness. Our CODM started to
review information under this new reporting structure and segment reporting has been updated to conform to this change as well
as the way we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.
(2) Direct sales and others revenue under Taobao and Tmall Group primarily represents Tmall Supermarket, Tmall Global and other
direct sales businesses, where revenue and cost of inventory are recorded on a gross basis.
(3) All others include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent Information Platform (which mainly consists
of UCWeb and Quark businesses), Fliggy, DingTalk (previously reported under Cloud Intelligence Group segment) and other
businesses. The majority of revenue within All others consist of direct sales revenue, which is recorded on a gross basis.
Management Discussion and Analysis
95
Fiscal Year 2024 Annual Report
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Taobao and Tmall Group
192,218
189,140
194,827
26,983
Cloud Intelligence Group
3,744
4,101
6,121
848
Alibaba International Digital Commerce
Group
(8,614)
(4,944)
(8,035)
(1,113)
Cainiao Smart Logistics Network Limited
(1,465)
(391)
1,402
194
Local Services Group
(20,059)
(13,148)
(9,812)
(1,359)
Digital Media and Entertainment Group
(5,509)
(2,789)
(1,539)
(213)
All others(2)
(16,295)
(9,388)
(9,160)
(1,268)
Total segments adjusted EBITA
144,020
162,581
173,804
24,072
Unallocated(3)
(12,672)
(12,143)
(6,190)
(857)
Inter-segment elimination
(951)
(2,527)
(2,586)
(359)
Consolidated adjusted EBITA
130,397
147,911
165,028
22,856
(1) During fiscal year 2024, our segment reporting has been updated to reflect our Reorganization and the reclassification of the
results of our DingTalk business, which was previously reported under Cloud Intelligence Group, to All others, the purpose of which
was to provide DingTalk with greater autonomy to promote innovation and enhance competitiveness. Our CODM started to review
information under this new reporting structure and segment reporting has been updated to conform to this change as well as the
way we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.
(2) All others include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent Information Platform (which mainly consists
of UCWeb and Quark businesses), Fliggy, DingTalk (previously reported under Cloud Intelligence Group segment) and other
businesses.
(3) Unallocated primarily relates to certain costs incurred by corporate functions and other miscellaneous items that are not allocated
to individual segments.
Management Discussion and Analysis
96
Alibaba Group Holding Limited
U.S. GAAP and may not be comparable to similarly
titled measures presented by other companies. Other
companies may calculate similarly titled measures
differently, limiting their usefulness as comparative
measures to our data.
Adjusted EBITDA represents net income before
interest and investment income, net, interest expense,
other income, net, income tax expenses, share of
results of equity method investees, share-based
compensation expense, amortization and impairment
of intangible assets, depreciation and impairment of
property and equipment, and operating lease cost
relating to land use rights, impairment of goodwill,
and others, which we do not believe are reflective of
our core operating performance during the periods
presented.
Adjusted EBITA represents net income before interest
and investment income, net, interest expense, other
income, net, income tax expenses, share of results of
equity method investees, share-based compensation
expense, amortization and impairment of intangible
assets, impairment of goodwill, and others, which
we do not believe are reflective of our core operating
performance during the periods presented.
Non-GAAP net income represents net income before
share-based compensation expense, amortization
and impairment of intangible assets, gain or loss
on deemed disposals/disposals/revaluation of
investments, impairment of goodwill and investments,
and others, and adjustments for the tax effects.
Non-GAAP diluted earnings per share represents
non-GAAP net income attributable to ordinary
shareholders divided by the weighted average
number of outstanding ordinary shares for computing
non-GAAP diluted earnings per share on a diluted
basis. Non-GAAP diluted earnings per ADS
represents non-GAAP diluted earnings per share after
adjusting for the ordinary share-to-ADS ratio.
Non-GAAP Measures
We use adjusted EBITDA, adjusted EBITA, non-GAAP
net income, non-GAAP diluted earnings per share/
ADS and free cash flow, each a non-GAAP financial
measure, in evaluating our operating results and for
financial and operational decision-making purposes.
We believe that adjusted EBITDA, adjusted EBITA,
non-GAAP net income and non-GAAP diluted earnings
per share/ADS help identify underlying trends in our
business that could otherwise be distorted by the
effect of certain income or expenses that we include
in income from operations, net income and diluted
earnings per share/ADS. We believe that these non-
GAAP measures provide useful information about
our core operating results, enhance the overall
understanding of our past performance and future
prospects and allow for greater visibility with respect
to key metrics used by our management in its financial
and operational decision-making. We present three
different income measures, namely adjusted EBITDA,
adjusted EBITA and non-GAAP net income in order to
provide more information and greater transparency to
investors about our operating results.
We consider free cash flow to be a liquidity measure
that provides useful information to management
and investors about the amount of cash generated
by our business that can be used for strategic
corporate transactions, including investing in our new
business initiatives, making strategic investments and
acquisitions and strengthening our balance sheet.
Adjusted EBITDA, adjusted EBITA, non-GAAP net
income, non-GAAP diluted earnings per share/
ADS and free cash flow should not be considered in
isolation or construed as an alternative to income from
operations, net income, diluted earnings per share/
ADS, cash flows or any other measure of performance
or as an indicator of our operating performance.
These non-GAAP financial measures presented here
do not have standardized meanings prescribed by
Management Discussion and Analysis
97
Fiscal Year 2024 Annual Report
Free cash flow represents net cash provided by
operating activities as presented in our consolidated
cash flow statement less purchases of property
and equipment (excluding acquisition of land use
rights and construction in progress relating to office
campuses) and intangible assets (excluding those
acquired through acquisitions), as well as adjustments
to exclude from net cash provided by operating
activities the buyer protection fund deposits from
merchants on our marketplaces. We deduct certain
items of cash flows from investing activities in order to
provide greater transparency into cash flow from our
revenue-generating business operations. We exclude
“acquisition of land use rights and construction in
progress relating to office campuses” because the
office campuses are used by us for corporate and
administrative purposes and are not directly related
to our revenue-generating business operations.
We also exclude buyer protection fund deposits
from merchants on our marketplaces because
these deposits are restricted for the purpose of
compensating buyers for claims against merchants.
The following table sets forth a reconciliation of our net income to adjusted EBITA and adjusted EBITDA for the
periods indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Net income
47,079
65,573
71,332
9,879
Adjustments to reconcile net income to adjusted
EBITA and adjusted EBITDA:
Interest and investment income, net
15,702
11,071
9,964
1,380
Interest expense
4,909
5,918
7,947
1,101
Other income, net
(10,523)
(5,823)
(6,157)
(853)
Income tax expenses
26,815
15,549
22,529
3,120
Share of results of equity method investees
(14,344)
8,063
7,735
1,072
Income from operations
69,638
100,351
113,350
15,699
Share-based compensation expense
23,971
30,831
18,546
2,569
Amortization and impairment of intangible assets
11,647
13,504
21,592
2,990
Impairment of goodwill, and others
25,141
3,225
11,540
1,598
Adjusted EBITA
130,397
147,911
165,028
22,856
Depreciation and impairment of property and
equipment, and operating lease cost relating to
land use rights
27,808
27,799
26,640
3,690
Adjusted EBITDA
158,205
175,710
191,668
26,546
Management Discussion and Analysis
98
Alibaba Group Holding Limited
The following table sets forth a reconciliation of our net income to non-GAAP net income for the periods
indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Net income
47,079
65,573
71,332
9,879
Adjustments to reconcile net income to non-GAAP
net income:
Share-based compensation expense
23,971
30,831
18,546
2,569
Amortization and impairment of intangible assets
11,647
13,504
21,592
2,990
Loss on deemed disposals/disposals/revaluation of
investments
21,671
13,857
21,659
3,000
Impairment of goodwill and investments, and others
40,264
24,862
33,679
4,664
Tax effects(1)
(8,244)
(7,248)
(9,329)
(1,291)
Non-GAAP net income
136,388
141,379
157,479
21,811
(1) Tax effects primarily comprises tax effects relating to share-based compensation expense, amortization and impairment of
intangible assets and certain gains and losses from investments, and others.
Management Discussion and Analysis
99
Fiscal Year 2024 Annual Report
The following table sets forth a reconciliation of our diluted earnings per share/ADS to non-GAAP diluted earnings
per share/ADS for the periods indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions, except per share data)
Net income attributable to ordinary shareholders
— basic
61,959
72,509
79,741
11,044
Dilution effect on earnings arising from share-based
awards operated by equity method investees and
subsidiaries
(37)
(38)
(228)
(32)
Net income attributable to ordinary shareholders
— diluted
61,922
72,471
79,513
11,012
Non-GAAP adjustments to net income
attributable to ordinary shareholders(1)
81,593
71,520
78,846
10,920
Non-GAAP net income attributable to ordinary
shareholders for computing non-GAAP diluted
earnings per share/ADS
143,515
143,991
158,359
21,932
Weighted average number of shares on a diluted
basis for computing non-GAAP diluted earnings
per share/ADS (million shares)(2)
21,787
21,114
20,359
—
Diluted earnings per share(2) (3)
2.84
3.43
3.91
0.54
Non-GAAP diluted earnings per share(2) (4)
6.59
6.82
7.78
1.08
Diluted earnings per ADS(2) (3)
22.74
27.46
31.24
4.33
Non-GAAP diluted earnings per ADS(2) (4)
52.69
54.56
62.23
8.62
(1) See the table above regarding the reconciliation of net income to non-GAAP net income for more information of these non-GAAP
adjustments.
(2) Each ADS represents eight ordinary shares.
(3) Diluted earnings per share is derived from dividing net income attributable to ordinary shareholders by the weighted average
number of outstanding ordinary shares, on a diluted basis. Diluted earnings per ADS is derived from the diluted earnings per share
after adjusting for the ordinary share-to-ADS ratio.
(4) Non-GAAP diluted earnings per share is derived from dividing non-GAAP net income attributable to ordinary shareholders by
the weighted average number of outstanding ordinary shares for computing non-GAAP diluted earnings per share, on a diluted
basis. Non-GAAP diluted earnings per ADS is derived from the non-GAAP diluted earnings per share after adjusting for the ordinary
share-to-ADS ratio.
Management Discussion and Analysis
100
Alibaba Group Holding Limited
The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow for the
periods indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Net cash provided by operating activities
142,759
199,752
182,593
25,289
Less: Purchase of property and equipment
(excluding land use rights and construction
in progress relating to office campuses)
(42,028)
(30,373)
(27,579)
(3,820)
Less: Purchase of intangible assets (excluding
those acquired through acquisitions)
(15)
(22)
(842)
(116)
Less: Changes in the buyer protection fund
deposits
(1,842)
2,306
2,038
282
Free cash flow
98,874
171,663
156,210
21,635
Management Discussion and Analysis
101
Fiscal Year 2024 Annual Report
Comparison of Fiscal Years 2023 and 2024
Revenue
Year ended March 31,
2023
2024
YoY %
Change
RMB
RMB
US$
(in millions, except percentages)
Taobao and Tmall Group:
China commerce retail
— Customer management
291,541
304,009
42,105
4%
— Direct sales and others(2)
103,811
110,405
15,291
6%
395,352
414,414
57,396
5%
China commerce wholesale
17,854
20,479
2,836
15%
Total Taobao and Tmall Group
413,206
434,893
60,232
5%
Cloud Intelligence Group
103,497
106,374
14,733
3%
Alibaba International Digital Commerce Group:
International commerce retail
50,933
81,654
11,309
60%
International commerce wholesale
19,573
20,944
2,901
7%
Total Alibaba International Digital Commerce Group
70,506
102,598
14,210
46%
Cainiao Smart Logistics Network Limited
77,512
99,020
13,714
28%
Local Services Group
50,249
59,802
8,282
19%
Digital Media and Entertainment Group
18,444
21,145
2,929
15%
All others(3)
197,115
192,331
26,637
(2)%
Total segment revenue
930,529
1,016,163
140,737
9%
Unallocated
866
1,297
180
Inter-segment elimination
(62,708)
(76,292)
(10,567)
Consolidated revenue
868,687
941,168
130,350
8%
(1) During fiscal year 2024, our segment reporting has been updated to reflect our Reorganization and the reclassification of the
revenue of our DingTalk business, which was previously reported under Cloud Intelligence Group, to All others, the purpose of
which was to provide DingTalk with greater autonomy to promote innovation and enhance competitiveness. Our CODM started to
review information under this new reporting structure and segment reporting has been updated to conform to this change as well
as the way we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.
(2) Direct sales and others revenue under Taobao and Tmall Group primarily represents Tmall Supermarket, Tmall Global and other
direct sales businesses, where revenue and cost of inventory are recorded on a gross basis.
(3) All others include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent Information Platform (which mainly consists
of UCWeb and Quark businesses), Fliggy, DingTalk (previously reported under Cloud Intelligence Group segment) and other
businesses. The majority of revenue within All others consist of direct sales revenue, which is recorded on a gross basis.
Total revenue increased by 8% from RMB868,687 million in fiscal year 2023 to RMB941,168 million (US$130,350
million) in fiscal year 2024.
Management Discussion and Analysis
102
Alibaba Group Holding Limited
Adjusted EBITA
Year ended March 31,
2023
2024
YoY %
Change(4)
RMB
RMB
US$
(in millions, except percentages)
Taobao and Tmall Group
189,140
194,827
26,983
3%
Cloud Intelligence Group
4,101
6,121
848
49%
Alibaba International Digital Commerce Group
(4,944)
(8,035)
(1,113)
(63)%
Cainiao Smart Logistics Network Limited
(391)
1,402
194
N/A
Local Services Group
(13,148)
(9,812)
(1,359)
25%
Digital Media and Entertainment Group
(2,789)
(1,539)
(213)
45%
All others(2)
(9,388)
(9,160)
(1,268)
2%
Total segments adjusted EBITA
162,581
173,804
24,072
7%
Unallocated(3)
(12,143)
(6,190)
(857)
Inter-segment elimination
(2,527)
(2,586)
(359)
Consolidated adjusted EBITA
147,911
165,028
22,856
12%
(1) During fiscal year 2024, our segment reporting has been updated to reflect our Reorganization and the reclassification of the
results of our DingTalk business, which was previously reported under Cloud Intelligence Group, to All others, the purpose of which
was to provide DingTalk with greater autonomy to promote innovation and enhance competitiveness. Our CODM started to review
information under this new reporting structure and segment reporting has been updated to conform to this change as well as the
way we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.
(2) All others include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent Information Platform (which mainly consists
of UCWeb and Quark businesses), Fliggy, DingTalk (previously reported under Cloud Intelligence Group segment) and other
businesses.
(3) Unallocated primarily relates to certain costs incurred by corporate functions and other miscellaneous items that are not allocated
to individual segments.
(4) For a more intuitive presentation, widening of loss in YoY% is shown in terms of negative growth rate, and narrowing of loss in
YoY% is shown in terms of positive growth rate.
Management Discussion and Analysis
103
Fiscal Year 2024 Annual Report
Taobao and Tmall Group
(i)
Segment revenue
•
China Commerce Retail Business
Revenue from our China commerce retail
business in fiscal year 2024 was RMB414,414
million (US$57,396 million), increased by 5%
compared to RMB395,352 million in fiscal year
2023.
Customer management revenue increased
by 4% year-over-year, primarily due to an
approximately 5% year-over-year growth in
online GMV, excluding unpaid orders, while take
rate remained stable year-over-year.
Direct sales and others revenue under China
commerce retail business in fiscal year 2024
was RMB110,405 million (US$15,291 million),
increased by 6% compared to RMB103,811
million in fiscal year 2023, primarily due to
strong sales driven by consumer electronics and
appliances.
•
China Commerce Wholesale Business
Revenue from our China commerce wholesale
business in fiscal year 2024 was RMB20,479
million (US$2,836 million), increased by 15%
compared to RMB17,854 million in fiscal year
2023, primarily due to an increase in revenue
from value-added services provided to paying
members.
(ii)
Segment adjusted EBITA
Taobao and Tmall Group adjusted EBITA
increased by 3% to RMB194,827 million
(US$26,983 million) in fiscal year 2024, compared
to RMB189,140 million in fiscal year 2023. The
increase was primarily due to an increase in
revenue from customer management service
and narrowing losses in certain businesses,
partly offset by an increase in investment in user
experience and technology infrastructure.
Cloud Intelligence Group
(i)
Segment revenue
Revenue from Cloud Intelligence Group was
RMB106,374 million (US$14,733 million) in
fiscal year 2024, increased by 3% compared to
RMB103,497 million in fiscal year 2023. Year-
over-year revenue growth was mainly driven
by Alibaba-consolidated businesses. Overall
revenue excluding Alibaba-consolidated
subsidiaries decreased slightly year-over-year
as we transition away from low-margin project-
based revenues. We expect the strong revenue
growth in public cloud and AI-related products
will offset the impact of the roll-off of project-
based revenues.
(ii)
Segment adjusted EBITA
Cloud Intelligence Group adjusted EBITA
increased by 49% to RMB6,121 million (US$848
million) in fiscal year 2024, compared to
RMB4,101 million in fiscal year 2023, primarily
due to improving product mix through our focus
on public cloud and operating efficiency.
Alibaba International Digital Commerce Group
(i)
Segment revenue
•
International Commerce Retail Business
Revenue from our International commerce retail
business in fiscal year 2024 was RMB81,654
million (US$11,309 million), increased by 60%
compared to RMB50,933 million in fiscal year
2023. The increase in revenue was primarily due
to solid combined order growth of AIDC’s retail
businesses, revenue contribution from AliExpress’
Choice as well as improvements in monetization.
Of which, the year-over-year growth was
mainly driven by revenue growth contributed
by AliExpress and Trendyol of 36% and 18%,
respectively, to the total increase of 60%. As
certain of our international businesses generate
revenue in local currencies while our reporting
currency is Renminbi, AIDC’s revenue is affected
by exchange rate fluctuations.
•
International Commerce Wholesale Business
Revenue from our International commerce
wholesale business in fiscal year 2024 was
RMB20,944 million (US$2,901 million), increased
by 7% compared to RMB19,573 million in fiscal
year 2023. The increase was primarily due to an
increase in revenue generated by cross-border
related value-added services.
Management Discussion and Analysis
104
Alibaba Group Holding Limited
(ii)
Segment adjusted EBITA
Alibaba International Digital Commerce Group
adjusted EBITA was a loss of RMB8,035 million
(US$1,113 million) in fiscal year 2024, compared
to a loss of RMB4,944 million in fiscal year 2023.
Losses increased year-over-year primarily
because of increased investment in businesses
including AliExpress’ Choice, Trendyol’s cross-
border business and Miravia, partly offset by
improvements in monetization.
Cainiao Smart Logistics Network Limited
(i)
Segment revenue
Revenue from Cainiao Smart Logistics Network
Limited was RMB99,020 million (US$13,714
million) in fiscal year 2024, increased by 28%
compared to RMB77,512 million in fiscal year
2023, primarily contributed by the increase in
revenue from cross-border fulfillment services of
17%, to the total increase of 28%.
(ii)
Segment adjusted EBITA
Cainiao Smart Logistics Network Limited adjusted
EBITA was a profit of RMB1,402 million (US$194
million) in fiscal year 2024, compared to a loss
of RMB391 million in fiscal year 2023. The year-
over-year increase was primarily due to the
improved operating results from cross-border
fulfillment services as well as domestic logistics
services partly offset by retention incentives
granted to Cainiao employees in connection with
the withdrawal of its initial public offering.
Local Services Group
(i)
Segment revenue
Revenue from Local Services Group was
RMB59,802 million (US$8,282 million) in fiscal
year 2024, increased by 19% compared to
RMB50,249 million in fiscal year 2023, primarily
due to the order growth of Ele.me and Amap.
(ii)
Segment adjusted EBITA
Local Services Group adjusted EBITA was a loss of
RMB9,812 million (US$1,359 million) in fiscal year
2024, compared to a loss of RMB13,148 million in
fiscal year 2023, primarily due to the continued
narrowing of loss from our “To-Home” business
driven by Ele.me’s improved unit economics and
increasing business scale.
Digital Media and Entertainment Group
(i)
Segment revenue
Revenue from Digital Media and Entertainment
Group was RMB21,145 million (US$2,929 million)
in fiscal year 2024, increased by 15% compared
to RMB18,444 million in fiscal year 2023, primarily
driven by the strong revenue growth of offline
entertainment businesses of Alibaba Pictures.
(ii)
Segment adjusted EBITA
Digital Media and Entertainment Group adjusted
EBITA in fiscal year 2024 was a loss of RMB1,539
million (US$213 million), compared to a loss
of RMB2,789 million in fiscal year 2023. Loss
reduced year-over-year primarily due to the
increase in profitability of Alibaba Pictures.
All Others
(i)
Segment revenue
Revenue from All others segment was
RMB192,331 million (US$26,637 million) in
fiscal year 2024, decreased by 2% compared to
RMB197,115 million in fiscal year 2023, mainly
due to the decrease in revenue from Sun Art,
partly offset by the increase in revenue from
Freshippo. The decrease in revenue from Sun Art
was mainly driven by the scale down of supply
chain business and the decrease in basket size.
(ii)
Segment adjusted EBITA
Adjusted EBITA from All others segment in
fiscal year 2024 was a loss of RMB9,160 million
(US$1,268 million), compared to a loss of
RMB9,388 million in fiscal year 2023.
Management Discussion and Analysis
105
Fiscal Year 2024 Annual Report
Cost of Revenue
Year ended March 31,
2023
2024
YoY %
Change
RMB
RMB
US$
(in millions, except percentages)
Cost of revenue
549,695
586,323
81,205
7%
Percentage of revenue
63%
62%
Share-based compensation expense included in
cost of revenue
5,710
3,012
417
(47)%
Percentage of revenue
1%
0%
Cost of revenue excluding share-based
compensation expense
543,985
583,311
80,788
7%
Percentage of revenue
62%
62%
Our cost of revenue increased by 7% from RMB549,695
million in fiscal year 2023 to RMB586,323 million
(US$81,205 million) in fiscal year 2024. Without the
effect of share-based compensation expense, cost
of revenue as a percentage of revenue would have
remained stable at 62% in fiscal year 2024 compared
to fiscal year 2023.
Product Development Expenses
Year ended March 31,
2023
2024
YoY %
Change
RMB
RMB
US$
(in millions, except percentages)
Product development expenses
56,744
52,256
7,237
(8)%
Percentage of revenue
7%
6%
Share-based compensation expense included
in product development expenses
13,514
7,623
1,056
(44)%
Percentage of revenue
2%
1%
Product development expenses excluding
share-based compensation expense
43,230
44,633
6,181
3%
Percentage of revenue
5%
5%
Management Discussion and Analysis
106
Alibaba Group Holding Limited
Our product development expenses decreased by
8% from RMB56,744 million in fiscal year 2023 to
RMB52,256 million (US$7,237 million) in fiscal year
2024. Without the effect of share-based compensation
expense, product development expenses as a
percentage of revenue would have remained stable at
5% in fiscal year 2024 compared to fiscal year 2023.
Sales and Marketing Expenses
Year ended March 31,
2023
2024
YoY %
Change
RMB
RMB
US$
(in millions, except percentages)
Sales and marketing expenses
103,496
115,141
15,947
11%
Percentage of revenue
12%
12%
Share-based compensation expense included
in sales and marketing expenses
3,710
2,265
314
(39)%
Percentage of revenue
0%
0%
Sales and marketing expenses excluding
share-based compensation expense
99,786
112,876
15,633
13%
Percentage of revenue
12%
12%
Our sales and marketing expenses increased by
11% from RMB103,496 million in fiscal year 2023 to
RMB115,141 million (US$15,947 million) in fiscal year
2024. Without the effect of share-based compensation
expense, sales and marketing expenses as a
percentage of revenue would have remained stable at
12% in fiscal year 2024 compared to fiscal year 2023.
The year-over-year increase was primarily due to
significant increase in marketing and promotional
expenses, including apps promotional expenses,
advertising expenses and other related incidental
expenses that were incurred directly to improve
user experience, to attract or retain consumers and
merchants.
General and Administrative Expenses
Year ended March 31,
2023
2024
YoY %
Change
RMB
RMB
US$
(in millions, except percentages)
General and administrative expenses
42,183
41,985
5,815
(0)%
Percentage of revenue
5%
5%
Share-based compensation expense included
in general and administrative expenses
7,897
5,646
782
(29)%
Percentage of revenue
1%
1%
General and administrative expenses excluding
share-based compensation expense
34,286
36,339
5,033
6%
Percentage of revenue
4%
4%
Our general and administrative expenses decreased
from RMB42,183 million in fiscal year 2023 to
RMB41,985 million (US$5,815 million) in fiscal year
2024. Without the effect of share-based compensation
expense, general and administrative expenses as a
percentage of revenue would have remained stable at
4% in fiscal year 2024 compared to fiscal year 2023.
Management Discussion and Analysis
107
Fiscal Year 2024 Annual Report
Amortization and impairment of intangible assets
Year ended March 31,
2023
2024
YoY %
Change
RMB
RMB
US$
(in millions, except percentages)
Amortization and impairment of intangible assets
13,504
21,592
2,990
60%
Percentage of revenue
1%
2%
Amortization and impairment of intangible assets
increased by 60% from RMB13,504 million in fiscal year
2023 to RMB21,592 million (US$2,990 million) in fiscal
year 2024. During fiscal year 2024, an impairment
of intangible assets of RMB12,084 million (US$1,673
million) was recorded relating to Sun Art within All
others segment, which mainly include trade names,
trademarks and domain names, considering lower
than expected profitability as a result of uncertainties
in the market environment. During fiscal year 2023,
impairment of intangible assets of RMB2,811 million
was recorded mainly relating to one of our import
e-commerce platforms in China.
Impairment of goodwill
Impairment of goodwill in fiscal year 2024 was
RMB10,521 million (US$1,457 million), increased by
288% or RMB7,807 million from RMB2,714 million in
fiscal year 2023. Impairment recorded in fiscal year
2024 mainly represents the impairment of goodwill
relating to Youku.
Income from Operations
Year ended March 31,
2023
2024
YoY %
Change
RMB
RMB
US$
(in millions, except percentages)
Income from operations
100,351
113,350
15,699
13%
Percentage of revenue
12%
12%
Share-based compensation expense included
in income from operations
30,831
18,546
2,569
(40)%
Percentage of revenue
4%
2%
Income from operations excluding share-based
compensation expense
131,182
131,896
18,268
1%
Percentage of revenue
16%
14%
Our income from operations increased by 13% from
RMB100,351 million, or 12% of revenue, in fiscal year
2023 to RMB113,350 million (US$15,699 million), or
12% of revenue, in fiscal year 2024. The year-over-
year increase was primarily attributable to an increase
in adjusted EBITA and a decrease in share-based
compensation expense, partly offset by the increase in
impairment of intangible assets and goodwill. During
fiscal year 2024, the impairment of intangible assets
and goodwill was mainly in relation to Sun Art and
Youku respectively.
Interest and Investment Income, Net
Interest and investment income, net in fiscal year 2024
was a loss of RMB9,964 million (US$1,380 million),
compared to a loss of RMB11,071 million in fiscal year
2023.
Other Income, Net
Other income, net in fiscal year 2024 was RMB6,157
million (US$853 million), compared to RMB5,823
million in fiscal year 2023.
Management Discussion and Analysis
108
Alibaba Group Holding Limited
Share of results of equity method investees in fiscal years 2023 and 2024 consisted of the following:
Year ended March 31,
2023
2024
RMB
RMB
US$
(in millions)
Share of profit (loss) of equity method investees:
Ant Group
10,294
7,860
1,088
Others
(5,481)
(2,154)
(298)
Impairment loss
(8,310)
(9,895)
(1,371)
Others(1)
(4,566)
(3,546)
(491)
Total
(8,063)
(7,735)
(1,072)
(1) Others mainly include basis differences arising from equity method investees, share-based compensation expense related to
share-based awards granted to employees of our equity method investees, as well as gain or loss arising from the deemed
disposal of the equity method investees.
We record our share of results of all equity method
investees one quarter in arrears. The year-over-year
decrease in share of profit of Ant Group reflected a
RMB7.07 billion fine on Ant Group imposed by PRC
regulators as announced in July 2023.
During the quarter ended September 30, 2023,
Ant Group repurchased approximately 7% equity
interest from its existing shareholders and the shares
repurchased were allocated to the employee incentive
plans of Ant Group. The number of shares held by
us in Ant Group remains unchanged from a legal
perspective, and our equity interest in Ant Group on a
fully diluted basis remains unchanged at 33%.
For accounting purposes, we will take into
consideration a proportionate share of equity interest
held by the employee incentive plans of Ant Group to
account for our share of results from our investment
in Ant Group, subject to dilution as the equity interest
under the employee incentive plans of Ant Group is
transferred out.
Net Income
Our net income in fiscal year 2024 was RMB71,332
million (US$9,879 million), increased by 9% or
RMB5,759 million compared to RMB65,573 million
in fiscal year 2023. The year-over-year increase was
primarily attributable to the increase in income from
operations, partly offset by the increase in net loss
from our equity investments due to mark-to-market
changes.
Comparison of Fiscal Years 2022 and 2023
For a discussion of our results of operations for the
fiscal year ended March 31, 2022 compared with the
fiscal year ended March 31, 2023, see “— Operating
Results — Comparison of Fiscal Years 2022 and 2023”
of our annual report on Form 20-F for the fiscal year
ended March 31, 2023, filed with the SEC on July 21,
2023.
Income Tax Expenses
Income tax expenses in fiscal year 2024 were
RMB22,529 million (US$3,120 million), compared to
RMB15,549 million in fiscal year 2023.
Share of Results of Equity Method Investees
Share of results of equity method investees in fiscal
year 2024 was a loss of RMB7,735 million (US$1,072
million), compared to a loss of RMB8,063 million in
fiscal year 2023.
Management Discussion and Analysis
109
Fiscal Year 2024 Annual Report
Variable Interest Entity Financial
Information
The following tables present the condensed
consolidating schedule of operations and cash flows
information for the fiscal years ended March 31,
2022, 2023 and 2024, and condensed consolidating
schedule of balance sheet information as of March 31,
2023 and 2024 for:
•
Alibaba Group Holding Limited (“parent”);
•
the variable interest entities, including their
subsidiaries, that together account for a
significant majority of total revenue and assets of
the variable interest entities as a group, which we
collectively refer to as the “major variable interest
entities and their subsidiaries”;
•
subsidiaries that are, for accounting purposes
only, the primary beneficiaries of the major
variable interest entities; and
•
other subsidiaries and consolidated entities,
which include variable interest entities that are
not major variable interest entities.
We conduct our business through a large number
of subsidiaries and consolidated entities. We are
presenting the condensed consolidating information
for the major variable interest entities only. We believe
this presentation provides a reasonably adequate
basis for investors to evaluate the assets, operations
and overall significance of the variable interest
entities as a group, as well as the nature and amounts
associated with intercompany transactions. The large
number of variable interest entities not included as
major variable interest entities are individually, and in
the aggregate, not material for our company taken as
a whole. To include them in the presentation would
require tremendous time and efforts to prepare
condensed consolidating schedules for them,
which we do not believe would provide meaningful
additional information to investors.
The amounts shown in the tables do not reconcile
directly to financial information presented for the
variable interest entities in our audited consolidated
financial statements.
Although the variable interest entities hold licenses
and approvals and assets for regulated activities
that are necessary for our business operations, as
well as certain equity investments in businesses, to
which foreign investments are typically restricted or
prohibited under applicable PRC law, we hold the
significant majority of assets and operations in our
subsidiaries and the significant majority of our revenue
is captured directly by our subsidiaries. Therefore, our
subsidiaries directly capture the significant majority of
the profits and associated cash flow from operations,
without having to rely on contractual arrangements to
transfer cash flow from the variable interest entities to
our subsidiaries.
Management Discussion and Analysis
110
Alibaba Group Holding Limited
For the year ended March 31, 2024
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
US$
(in millions)
Revenue from third parties
—
782,497
90,662
68,009
—
941,168
130,350
Revenue from group companies
—
11,731
8,595
192,994
(213,320)
—
—
Total cost and expenses
(327)
(845,402)
(103,992)(1)
(157,042)
278,945
(827,818)
(114,651)
Income (loss) from subsidiaries and VIEs
86,057
123,181
—
(3,093)
(206,145)
—
—
Income (loss) from operations
85,730
72,007
(4,735)
100,868
(140,520)
113,350
15,699
Other income and expenses
(5,989)
24,387
31
35,442
(65,625)
(11,754)
(1,628)
Income tax (expenses) credit
—
(6,890)
1,428
(17,067)
—
(22,529)
(3,120)
Share of results of equity method investees
—
(11,656)
(17)
3,938
—
(7,735)
(1,072)
Net income (loss)
79,741
77,848
(3,293)
123,181
(206,145)
71,332
9,879
Net loss attributable to noncontrolling interests
—
8,477
200
—
—
8,677
1,202
Accretion of mezzanine equity
—
(268)
—
—
—
(268)
(37)
Net income (loss) attributable to ordinary shareholders
79,741
86,057
(3,093)
123,181
(206,145)
79,741
11,044
For the year ended March 31, 2023
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
(in millions)
Revenue from third parties
—
709,421
88,121
71,145
—
868,687
Revenue from group companies
—
29,159
5,671
136,113
(170,943)
—
Total cost and expenses
(846)
(763,158)
(97,402)(1)
(168,473)
261,543
(768,336)
Income from subsidiaries and VIEs
84,000
100,379
—
3,031
(187,410)
—
Income (loss) from operations
83,154
75,801
(3,610)
41,816
(96,810)
100,351
Other income and expenses
(10,645)
11,003
6,557
72,519
(90,600)
(11,166)
Income tax (expenses) credit
—
(6,551)
117
(9,115)
—
(15,549)
Share of results of equity method investees
—
(3,176)
(46)
(4,841)
—
(8,063)
Net income
72,509
77,077
3,018
100,379
(187,410)
65,573
Net loss attributable to noncontrolling interests
—
7,197
13
—
—
7,210
Accretion of mezzanine equity
—
(274)
—
—
—
(274)
Net income attributable to ordinary shareholders
72,509
84,000
3,031
100,379
(187,410)
72,509
Management Discussion and Analysis
111
Fiscal Year 2024 Annual Report
For the year ended March 31, 2022
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
(in millions)
Revenue from third parties
—
691,997
87,337
73,728
—
853,062
Revenue from group companies
—
75,610
8,485
160,947
(245,042)
—
Total cost and expenses
(444)
(771,883)
(96,262)(1)
(189,014)
274,179
(783,424)
Income from subsidiaries and VIEs
63,745
81,515
—
5,284
(150,544)
—
Income (loss) from operations
63,301
77,239
(440)
50,945
(121,407)
69,638
Other income and expenses
(1,342)
(27,923)
5,227
43,087
(29,137)
(10,088)
Income tax expenses
—
(15,506)
(258)
(11,051)
—
(26,815)
Share of results of equity method investees
—
15,055
755
(1,466)
—
14,344
Net income
61,959
48,865
5,284
81,515
(150,544)
47,079
Net loss attributable to noncontrolling interests
—
15,170
—
—
—
15,170
Accretion of mezzanine equity
—
(290)
—
—
—
(290)
Net income attributable to ordinary shareholders
61,959
63,745
5,284
81,515
(150,544)
61,959
Note:
(1) These include technical service fee incurred by major VIEs and their subsidiaries for exclusive technical service provided by primary
beneficiaries of major VIEs to major VIEs and their subsidiaries in the amounts of RMB17,225 million, RMB15,445 million and
RMB11,689 million (US$1,619 million) for the years ended March 31, 2022, 2023 and 2024, respectively.
Management Discussion and Analysis
112
Alibaba Group Holding Limited
For the year ended March 31, 2024
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
US$
(in millions)
Net cash provided by operating activities
93,308(1)
112,457
8,994
163,315
(195,481)
182,593
25,289
Net cash provided by (used in) investing activities
11,838(1)
922
(10,596)(2)
(20,462)
(3,526)
(21,824)
(3,023)
Net cash (used in) provided by financing activities
(104,666 )(1)
(60,507)
5,451(2)
(147,529)
199,007
(108,244)
(14,992)
Effect of exchange rate changes on cash and cash
equivalents, restricted cash and escrow receivables
58
4,328
3
—
—
4,389
608
Increase (Decrease) in cash and cash equivalents,
restricted cash and escrow receivables
538
57,200
3,852
(4,676)
—
56,914
7,882
Cash and cash equivalents, restricted cash and escrow
receivables at the beginning of the year
576
162,709
7,924
58,301
—
229,510
31,787
Cash and cash equivalents, restricted cash and escrow
receivables at the end of the year
1,114
219,909
11,776
53,625
—
286,424
39,669
Notes:
(1) For the year ended March 31, 2024, the cash transfer from the parent to our subsidiaries amounting to RMB74,951 million
(US$10,381 million), of which RMB67,670 million (US$9,373 million) and RMB7,281 million (US$1,008 million) were included in the
parent’s net cash provided by investing activities and net cash used in financing activities, respectively.
For the year ended March 31, 2024, the cash transfer from our subsidiaries to the parent amounting to RMB193,629 million
(US$26,817 million), of which RMB98,174 million (US$13,597 million), RMB81,979 million (US$11,354 million) and RMB13,476 million
(US$1,866 million) were included in the parent’s net cash provided by operating activities and investing activities, and net cash
used in financing activities, respectively.
(2) For the year ended March 31, 2024, the cash transfer from our subsidiaries and consolidated entities to the major VIEs and their
subsidiaries amounting to RMB17,986 million (US$2,491 million), of which RMB8,319 million (US$1,152 million) and RMB9,667
million (US$1,339 million) were included in the major VIEs and their subsidiaries’ net cash used in investing activities and net cash
provided by financing activities, respectively.
For the year ended March 31, 2024, the cash transfer from the major VIEs and their subsidiaries to our subsidiaries and
consolidated entities amounting to RMB25,432 million (US$3,522 million), of which RMB19,933 million (US$2,760 million) and
RMB5,499 million (US$762 million) were included in the major VIEs and their subsidiaries’ net cash used in investing activities and
net cash provided by financing activities, respectively.
(3) See “— Liquidity and Capital Resources — Holding Company Structure and Cash Flows through Our Company” for nature of cash
transfers mentioned above.
Management Discussion and Analysis
113
Fiscal Year 2024 Annual Report
For the year ended March 31, 2023
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
(in millions)
Net cash provided by operating activities
71,885(1)
154,186
3,622
196,309
(226,250)
199,752
Net cash used in investing activities
(12,290)(1)
(87,248)
(2,003)(2)
(100,132)
66,167
(135,506)
Net cash (used in) provided by financing activities
(59,439)(1)
(83,590)
1,766(2)
(84,439)
160,083
(65,619)
Effect of exchange rate changes on cash and cash
equivalents, restricted cash and escrow receivables
33
3,495
2
—
—
3,530
Increase (Decrease) in cash and cash equivalents,
restricted cash and escrow receivables
189
(13,157)
3,387
11,738
—
2,157
Cash and cash equivalents, restricted cash and escrow
receivables at the beginning of the year
387
175,866
4,537
46,563
—
227,353
Cash and cash equivalents, restricted cash and escrow
receivables at the end of the year
576
162,709
7,924
58,301
—
229,510
Notes:
(1) For the year ended March 31, 2023, the cash transfer from the parent to our subsidiaries amounting to RMB32,025 million, of which
RMB31,088 million and RMB937 million were included in the parent’s net cash used in investing activities and financing activities,
respectively.
For the year ended March 31, 2023, the cash transfer from our subsidiaries to the parent amounting to RMB112,153 million, of
which RMB75,355 million, RMB20,565 million and RMB16,233 million were included in the parent’s net cash provided by operating
activities, net cash used in investing activities and financing activities, respectively.
(2) For the year ended March 31, 2023, the cash transfer from our subsidiaries and consolidated entities to the major VIEs and their
subsidiaries amounting to RMB21,283 million, of which RMB11,858 million and RMB9,425 million were included in the major VIEs
and their subsidiaries’ net cash used in investing activities and net cash provided by financing activities, respectively.
For the year ended March 31, 2023, the cash transfer from the major VIEs and their subsidiaries to our subsidiaries and
consolidated entities amounting to RMB14,172 million, of which RMB6,513 million and RMB7,659 million were included in the major
VIEs and their subsidiaries’ net cash used in investing activities and net cash provided by financing activities, respectively.
Management Discussion and Analysis
114
Alibaba Group Holding Limited
For the year ended March 31, 2022
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
(in millions)
Net cash (used in) provided by operating activities
(4,739)
219,750
18,811
21,498
(112,561)
142,759
Net cash used in investing activities
(20,188)(1)
(235,528)
(15,672)(2)
(32,365)
105,161
(198,592)
Net cash provided by (used in) financing activities
24,920(1)
(51,502)
(9,099)(2)
(36,168)
7,400
(64,449)
Effect of exchange rate changes on cash and cash equivalents,
restricted cash and escrow receivables
(36)
(8,798)
—
—
—
(8,834)
Decrease in cash and cash equivalents,
restricted cash and escrow receivables
(43)
(76,078)
(5,960)
(47,035)
—
(129,116)
Cash and cash equivalents, restricted cash and escrow
receivables at the beginning of the year
430
251,944
10,497
93,598
—
356,469
Cash and cash equivalents, restricted cash and escrow
receivables at the end of the year
387
175,866
4,537
46,563
—
227,353
Notes:
(1) For the year ended March 31, 2022, the cash transfer from the parent to our subsidiaries amounting to RMB20,188 million was
included in the parent’s net cash used in investing activities.
For the year ended March 31, 2022, the cash transfer from our subsidiaries to the parent amounting to RMB95,621 million was
included in the parent’s net cash provided by financing activities.
(2) For the year ended March 31, 2022, the cash transfer from our subsidiaries and consolidated entities to the major VIEs and their
subsidiaries amounting to RMB2,539 million, of which RMB35 million and RMB2,504 million were included in the major VIEs and
their subsidiaries’ net cash used in investing activities and financing activities, respectively.
For the year ended March 31, 2022, the cash transfer from the major VIEs and their subsidiaries to our subsidiaries and
consolidated entities amounting to RMB24,404 million, of which RMB11,774 million and RMB12,630 million were included in the
major VIEs and their subsidiaries’ net cash used in investing activities and financing activities, respectively.
Management Discussion and Analysis
115
Fiscal Year 2024 Annual Report
As of March 31, 2024
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
US$
(in millions)
Cash and cash equivalents and short-term
investments
1,114
332,430
21,276
156,260
—
511,080
70,784
Investments in equity method investees and
equity securities and other investments
—
242,911
27,018
214,093
—
484,022
67,036
Accounts receivable and contract assets,
net of allowance
—
14,074
15,608
1,004
—
30,686
4,250
Amounts due from group companies
49,096
299,957
31,746
227,363
(608,162)
—
—
Prepayments and other assets
527
198,891
24,104
43,729
—
267,251
37,013
Interest in subsidiaries and VIEs
1,180,705
402,275
—
4,983
(1,587,963)
—
—
Property and equipment and intangible assets
—
186,545
10,053
15,513
—
212,111
29,378
Goodwill
—
257,719
1,960
—
—
259,679
35,965
Total assets
1,231,442
1,934,802
131,765
662,945
(2,196,125)
1,764,829
244,426
Amounts due to group companies
110,867
242,279
75,643
179,373
(608,162)
—
—
Accrued and other liabilities
134,031
327,402
36,467
77,443
—
575,343
79,684
Deferred revenue and customer advances
—
58,166
14,867
3,854
—
76,887
10,649
Total liabilities
244,898
627,847
126,977
260,670
(608,162)
652,230
90,333
Mezzanine equity
—
10,728
—
—
—
10,728
1,486
Total shareholders’ equity
986,544
1,180,705
4,983
402,275
(1,587,963)
986,544
136,635
Noncontrolling interests
—
115,522
(195)
—
—
115,327
15,972
Total liabilities, mezzanine equity and equity
1,231,442
1,934,802
131,765
662,945
(2,196,125)
1,764,829
244,426
Management Discussion and Analysis
116
Alibaba Group Holding Limited
As of March 31, 2023
Parent
Other
Subsidiaries
and
Consolidated
Entities
Major VIEs
and their
Subsidiaries
Primary
Beneficiaries
of Major
VIEs
Eliminations
Consolidated
Total
RMB
RMB
RMB
RMB
RMB
RMB
(in millions)
Cash and cash equivalents and short-term investments
576
301,264
22,301
195,437
—
519,578
Investments in equity method investees and
equity securities and other investments
—
375,195
32,556
50,258
—
458,009
Accounts receivable and contract assets, net of allowance
—
14,165
17,084
885
—
32,134
Amounts due from group companies
99,536
319,591
19,812
208,070
(647,009)
—
Prepayments and other assets
868
186,896
15,334
49,190
—
252,288
Interest in subsidiaries and VIEs
1,123,451
217,954
—
5,850
(1,347,255)
—
Property and equipment and intangible assets
—
193,827
8,910
20,207
—
222,944
Goodwill
—
266,133
1,958
—
—
268,091
Total assets
1,224,431
1,875,025
117,955
529,897
(1,994,264)
1,753,044
Amounts due to group companies
103,507
243,398
66,683
233,421
(647,009)
—
Accrued and other liabilities
131,267
317,945
32,040
74,016
—
555,268
Deferred revenue and customer advances
—
57,100
13,249
4,506
—
74,855
Total liabilities
234,774
618,443
111,972
311,943
(647,009)
630,123
Mezzanine equity
—
9,858
—
—
—
9,858
Total shareholders’ equity
989,657
1,123,451
5,850
217,954
(1,347,255)
989,657
Noncontrolling interests
—
123,273
133
—
—
123,406
Total liabilities, mezzanine equity and equity
1,224,431
1,875,025
117,955
529,897
(1,994,264)
1,753,044
Management Discussion and Analysis
117
Fiscal Year 2024 Annual Report
Liquidity and Capital
Resources
We fund our operations and strategic investments
from cash generated from our operations and through
debt and equity financing. We generated RMB142,759
million, RMB199,752 million and RMB182,593 million
(US$25,289 million) of cash from operating activities
for fiscal years 2022, 2023 and 2024, respectively. As
of March 31, 2024, we had cash and cash equivalents,
short-term investments and other treasury
investments of RMB248,125 million (US$34,365
million), RMB262,955 million (US$36,419 million) and
RMB106,150 million (US$14,701 million), respectively.
Short-term investments include investments in fixed
deposits with original maturities between three
months and one year and certain investments in
wealth management products, certificates of deposits,
marketable debt securities and other investments
whereby we have the intention to redeem within
one year. Other treasury investments mainly include
investments in fixed deposits, certificates of deposits
and marketable debt securities with original maturities
over one year for treasury purposes. The remaining
maturities of these treasury investments held by us
generally range from one to three years.
In November 2014, we issued unsecured senior
notes, including floating rate and fixed rate notes,
with varying maturities for an aggregate principal
amount of US$8.0 billion. Interest on the unsecured
senior notes is payable in arrears, quarterly for the
floating rate notes and semi-annually for the fixed
rate notes. We used the proceeds from the issuance of
the unsecured senior notes to refinance our previous
syndicated loan arrangements in the same amount.
In November 2017, November 2019 and November
2021, we repaid US$5.05 billion of our US$8.0 billion
unsecured senior notes that became due. We are not
subject to any financial covenant or other significant
operating covenants under the unsecured senior
notes. See note 21 to our audited consolidated
financial statements included in this annual report for
further information on unsecured senior notes.
In March 2016, we signed a five-year US$3.0 billion
syndicated loan agreement with a group of eight
lead arrangers, which we subsequently drew down
in April 2016. The loan was upsized from US$3.0
billion to US$4.0 billion in May 2016 through a general
syndication and the upsized portion was subsequently
drawn down in August 2016. The loan had a five-year
bullet maturity and was priced at 110 basis points over
LIBOR. In May 2019, we amended the pricing of the
loan to 85 basis points over LIBOR and extended the
maturity to May 2024. We further amended the pricing
of the loan to 80 basis points over SOFR with a credit
adjustment spread in May 2023 and extended the
maturity to May 2028 in July 2023. The use of proceeds
of the loan is for general corporate and working
capital purposes (including funding our acquisitions).
In April 2017, we entered into a revolving credit facility
agreement with certain financial institutions for an
amount of US$5.15 billion, which we did not draw
down during the availability period. The interest rate
for this credit facility was calculated based on LIBOR
plus 95 basis points. This loan facility is reserved for
future general corporate and working capital purposes
(including funding our acquisitions). In June 2021, the
terms of this facility were amended and the amount
of the credit facility was increased to US$6.5 billion.
The expiration date of the credit facility was extended
to June 2026. Under the terms of the amended facility,
the interest rate on any outstanding utilized amount
was calculated based on LIBOR plus 80 basis points. In
May 2023, we amended the pricing of the outstanding
utilized amount to SOFR with a credit adjustment
spread plus 80 basis points. We have not yet drawn
down this facility.
In December 2017, we issued an additional aggregate
of US$7.0 billion unsecured senior notes. In June
2023, we repaid US$0.7 billion of our US$7.0 billion
unsecured senior notes that became due. We are not
subject to any financial covenant or other significant
operating covenants under the unsecured senior
notes. See note 21 to our audited consolidated
financial statements included in this annual report for
further information on unsecured senior notes.
Management Discussion and Analysis
118
Alibaba Group Holding Limited
In February 2021, we issued unsecured fixed rate
senior notes with varying maturities for an aggregate
principal amount of US$5.0 billion. Interest on the
unsecured senior notes is payable semi-annually.
Except for the sustainability notes we set aside for
an aggregate principal amount of US$1.0 billion,
we have used the proceeds from the issuance of
the remaining unsecured senior notes for general
corporate purposes, including working capital needs,
repayment of offshore debt and potential acquisitions
of or investments in complementary businesses. We
have used the net proceeds from the issuance of the
sustainability notes to finance or refinance, in whole
or in part, one or more of our new or existing eligible
projects in accordance with our sustainable finance
framework as described in the final prospectus
supplement relating to the offering. Examples of
eligible projects include those in the sectors of green
buildings, energy efficiency, COVID-19 crisis response,
renewable energy and circular economy and design.
See note 21 to our audited consolidated financial
statements included in this annual report for further
information on unsecured senior notes.
As of March 31, 2024, we also had other bank
borrowings of RMB39,607 million (US$5,486 million),
primarily used for our capital expenditures in relation
to the construction of corporate campuses, office
facilities and infrastructure for logistics business, and
for other working capital purposes. See note 20 to our
audited consolidated financial statements included in
this annual report for further information.
We believe that our current levels of cash and cash
flows from operations will be sufficient to meet
our anticipated cash needs for at least the next
twelve months. However, we may need additional
cash resources in the future if we find and wish to
pursue opportunities for investment, acquisition,
strategic cooperation or other similar actions, which
may include investing in technology, infrastructure,
including data management and analytics solutions,
or related talent. If we determine that our cash
requirements exceed our amounts of cash on hand or
if we decide to further optimize our capital structure,
we may seek to issue additional debt or equity
securities or obtain credit facilities or other sources of
funding.
The following table sets out a summary of our cash flows for the periods indicated:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(in millions)
Net cash provided by operating activities
142,759
199,752
182,593
25,289
Net cash used in investing activities
(198,592)
(135,506)
(21,824)
(3,023)
Net cash used in financing activities
(64,449)
(65,619)
(108,244)
(14,992)
Cash Flows from Operating Activities
Net cash provided by operating activities in fiscal year
2024 was RMB182,593 million (US$25,289 million), and
primarily consisted of net income of RMB71,332 million
(US$9,879 million), as adjusted for non-cash items and
the effects of changes in working capital and other
activities. Adjustments for non-cash items primarily
included depreciation and impairment of property and
equipment, and operating lease cost relating to land
use rights of RMB26,640 million (US$3,690 million),
loss related to equity securities and other investments
of RMB23,480 million (US$3,252 million), impairment
of goodwill and intangible assets of RMB22,610
million (US$3,131 million), share-based compensation
expense of RMB18,546 million (US$2,569 million),
and amortization of intangible assets and licensed
copyrights of RMB17,864 million (US$2,474 million).
Changes in working capital and other activities
mainly consisted of an increase of RMB37,621 million
(US$5,209 million) in prepayments, receivables and
other assets, and long-term licensed copyrights,
partially offset by an increase of RMB27,126 million
(US$3,757 million) in accrued expenses, accounts
payable and other liabilities.
Management Discussion and Analysis
119
Fiscal Year 2024 Annual Report
Net cash provided by operating activities in fiscal year
2023 was RMB199,752 million, and primarily consisted
of net income of RMB65,573 million, as adjusted for
non-cash items and the effects of changes in working
capital and other activities. Adjustments for non-cash
items primarily included share-based compensation
expense of RMB30,831 million, depreciation and
impairment of property and equipment, and operating
lease cost relating to land use rights of RMB27,799
million, amortization of intangible assets and licensed
copyrights of RMB19,139 million and loss related to
equity securities and other investments of RMB14,911
million. Changes in working capital and other activities
mainly consisted of an increase of RMB11,159 million
in accrued expenses, accounts payable and other
liabilities and a decrease of RMB8,605 million in
prepayments, receivables and other assets, and long-
term licensed copyrights.
Net cash provided by operating activities in fiscal year
2024 was RMB182,593 million (US$25,289 million),
decreased by 9% compared to RMB199,752 million in
fiscal year 2023. The year-over-year decrease mainly
reflected special dividends of RMB14,464 million from
Ant Group in fiscal year 2023 and changes in working
capital, partially offset by the year-over-year increase
in adjusted EBITA.
Please also see our consolidated statements of cash
flows set forth in our audited consolidated financial
statements included in this annual report.
Cash Flows from Investing Activities
Net cash used in investing activities in fiscal year
2024 was RMB21,824 million (US$3,023 million)
primarily reflected an increase in other treasury
investments by RMB64,392 million (US$8,918 million),
capital expenditures of RMB32,087 million (US$4,444
million), as well as cash outflow of RMB20,969 million
(US$2,904 million) for investment and acquisition
activities. These cash outflows were partially offset by
a decrease in short-term investments by RMB71,426
million (US$9,892 million) and cash inflow of
RMB23,930 million (US$3,314 million) from disposal of
investments.
Net cash used in investing activities in fiscal
year 2023 was RMB135,506 million, and was
primarily attributable to an increase in short-term
investments by RMB61,086 million, an increase in
other treasury investments by RMB40,794 million,
capital expenditures of RMB34,330 million primarily
in connection with the acquisitions of land use
rights, property and equipment, and cash outflow
of RMB23,574 million for investment and acquisition
activities, partially offset by cash inflow of RMB22,734
million from disposal of investments.
Cash Flows from Financing Activities
Net cash used in financing activities in fiscal year 2024
was RMB108,244 million (US$14,992 million) primarily
reflected cash used in repurchase of ordinary shares
of RMB88,745 million (US$12,291 million) and dividend
paid of RMB17,946 million (US$2,485 million).
Net cash used in financing activities in fiscal year 2023
was RMB65,619 million and was primarily reflected
cash used in repurchase of ordinary shares of
RMB74,746 million, partially offset by the net proceeds
from bank borrowings and other borrowings of
RMB11,342 million.
Capital Expenditures
Our capital expenditures have been incurred primarily
in relation to (i) the acquisition of computer equipment
and construction of data centers relating to our Cloud
business and the operation of our mobile platforms
and websites; (ii) the acquisition of infrastructure for
logistics services and direct sales businesses; and (iii)
the acquisition of land use rights and construction of
corporate campuses and office facilities. In fiscal years
2022, 2023 and 2024, our capital expenditures totaled
RMB53,309 million, RMB34,330 million and RMB32,087
million (US$4,444 million), respectively.
Holding Company Structure and Cash
Flows through Our Company
We are a holding company with no operation other
than ownership of operating subsidiaries in Chinese
mainland, Hong Kong S.A.R., and elsewhere that own
and operate our marketplaces and other businesses
as well as a portfolio of intellectual property rights. As
a result, we rely on dividends and other distributions
paid by our operating subsidiaries for our cash and
financing requirements, including the funds necessary
to repurchase shares, to pay dividends and other cash
distribution to our shareholders, fund inter-company
loans, service outstanding debts and pay our
expenses. If our operating subsidiaries incur additional
debt on their own, the instruments governing the debt
may restrict the ability of our operating subsidiaries
to pay dividends or make other distributions or
remittances, including loans, to us.
Management Discussion and Analysis
120
Alibaba Group Holding Limited
Our holding company structure differs from some
of our peers in that, although the variable interest
entities hold licenses and approvals and assets for
regulated activities that are necessary for our business
operations, as well as certain equity interests in
businesses, to which foreign investments are typically
restricted or prohibited under applicable PRC law, we
hold the significant majority of assets and operations
in our subsidiaries and the significant majority of
our revenue is captured directly by our subsidiaries.
Therefore, our subsidiaries directly capture the
significant majority of profits and associated cash flow
from operations, without having to rely on contractual
arrangements to transfer cash flow from the variable
interest entities to our subsidiaries. In fiscal years 2022,
2023 and 2024, the significant majority of our revenues
were generated by our subsidiaries. See “Business
Overview — Organizational Structure” for a description
of these contractual arrangements and the structure
of our company. Also see “— Operating Results —
Variable Interest Entity Financial Information” for
further financial information of Alibaba Group Holding
Limited, the major variable interest entities and their
subsidiaries, our subsidiaries that are, for accounting
purposes only, the primary beneficiaries of the major
variable interest entities, and other subsidiaries and
consolidated entities.
Investors in our securities, including our ADSs, Shares
and notes, should note that, to the extent cash or
assets in our business is in the PRC or a PRC entity,
the funds or assets may not be available to fund
operations or for other use outside of the PRC due to
interventions in or the imposition of restrictions and
limitations on the ability of us or our subsidiaries,
or the VIEs by the PRC government to transfer cash
or assets. Under PRC laws and regulations, our PRC
subsidiaries are subject to certain restrictions with
respect to paying dividends or otherwise transferring
any of their net assets to us. Applicable PRC law
permits payment of dividends to us by our operating
subsidiaries in China only out of their retained
earnings, if any, determined in accordance with PRC
accounting standards and regulations. Our operating
subsidiaries in China are also required to set aside a
portion of their net income, if any, each year to fund
general reserves for appropriations until this reserve
has reached 50% of the related subsidiary’s registered
capital. These reserves are not distributable as cash
dividends. In addition, registered share capital and
capital reserve accounts are also restricted from
distribution. As of March 31, 2024, these restricted
net assets totaled RMB317.0 billion (US$43.9 billion).
See note 23 to our audited consolidated financial
statements included in this annual report. Also see
“Risk Factors — Risks Related to Doing Business in the
People’s Republic of China — We rely to a significant
extent on dividends, loans and other distributions on
equity paid by our operating subsidiaries in China.”
Remittance of dividends by a wholly foreign-owned
enterprise out of China is also subject to certain
restrictions on currency exchange or outbound
capital flows. See “Risk Factors — Risks Related to
Doing Business in the People’s Republic of China —
Regulations on currency exchange or outbound capital
flows may limit our ability to utilize our PRC revenue
effectively.”
Under the PRC Enterprise Income Tax Law, a
withholding tax of 5% to 10% is generally levied
on dividends declared by companies in China to
their non-resident enterprise investors. As of March
31, 2024, we have accrued the withholding tax on
substantially all of the earnings distributable by our
subsidiaries in China, except for those being reserved
for permanent reinvestment in China of RMB304.7
billion (US$42.2 billion). See “— Components of Results
of Operations — Taxation — PRC Withholding Tax.”
We do not have specific cash management policies in
place that dictate how funds are transferred between
Alibaba Group Holding Limited, our subsidiaries, the
VIEs or our investors. However, we have implemented
procedures and control mechanisms to manage the
transfer of funds within our organization to support
our business needs and in compliance with applicable
laws and regulations.
For the years ended March 31, 2022, 2023 and 2024,
Alibaba Group Holding Limited provided capital
contributions and loans, and repaid loans, in the
aggregate amounts of RMB20,188 million, RMB32,025
million and RMB74,951 million (US$10,381 million),
respectively, to our subsidiaries, and our subsidiaries
provided dividends and loans, and repaid loans, in the
aggregate amounts of RMB95,621 million, RMB112,153
million and RMB193,629 million (US$26,817 million),
respectively, to Alibaba Group Holding Limited.
For the years ended March 31, 2022, 2023 and 2024,
our subsidiaries and consolidated entities provided
loans and repaid loans, in the aggregate amounts of
RMB2,539 million, RMB21,283 million and RMB17,986
million (US$2,491 million) to the major VIEs and their
subsidiaries, and the major VIEs and their subsidiaries
provided loans, repaid loans and paid technical
service fees to our subsidiaries and consolidated
entities in the aggregate amounts of RMB24,404
million, RMB14,172 million and RMB25,432 million
Management Discussion and Analysis
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Fiscal Year 2024 Annual Report
(US$3,522 million), respectively. See “— Operating
Results — Variable Interest Entity Financial Information”
for classification of cashflow detailed in footnotes
to the condensed consolidating schedule. We have
settled and will continue to settle fees under the
contractual arrangements with the variable interest
entities. For a condensed consolidating schedule
of financial information that disaggregates the
operations and depicts the financial position, cash
flows, and results of operations for the same periods
for which audited consolidated financial statements
are required, see “— Operating Results — Variable
Interest Entity Financial Information.” Please also see
the consolidated financial statements included in this
annual report for more financial information.
For fiscal year 2023, we declared a cash dividend
in the amount of US$0.125 per Share or US$1.00
per ADS, for a total amount of approximate US$2.5
billion. For fiscal year 2024, we declared a cash
dividend in the amount of US$0.2075 per Share or
US$1.66 per ADS, consisting of (i) a regular dividend
in the amount of US$0.125 per Share or US$1.00 per
ADS and (ii) a one-time extraordinary dividend in
the amount of US$0.0825 per Share or US$0.66 per
ADS as a distribution of proceeds from disposition of
certain financial investments, for a total amount of
US$4 billion. See “Other Information to Shareholders
— Taxation — Material United States Federal Income
Tax Considerations — Taxation of Dividends.” For PRC
and United States federal income tax considerations
of an investment in our ADS, see “Other Information to
Shareholders — Taxation.”
Inflation
Inflation in China has not materially impacted our
results of operations in recent years. Although we
have not been materially affected by inflation in the
past, we can provide no assurance that we will not be
affected in the future by higher inflation rates in China.
Critical Accounting Policies and Estimates
Our significant accounting policies are set forth in note
2 to our audited consolidated financial statements
included in this annual report. The preparation of
our consolidated financial statements requires our
management to make estimates and assumptions
that affect the amounts reported in the consolidated
financial statements. Our management periodically
re-evaluates these estimates and assumptions based
on historical experience and other factors, including
expectations of future events that they believe to be
reasonable under the circumstances. The estimates
or assumptions related to the impacts of the conflict
on economic conditions also require our significant
judgment. We have identified the following accounting
policies as the most critical to an understanding of our
financial position and results of operations, because
the application of these policies requires significant
and complex management estimates, assumptions
and judgment, and the reporting of materially
different amounts could result if different estimates or
assumptions were used or different judgments were
made.
Principles of Consolidation
A subsidiary is an entity in which (i) we directly or
indirectly control more than 50% of the voting power;
or (ii) we have the power to appoint or remove the
majority of the members of the board of directors
or to cast a majority of votes at the meetings of
the board of directors or to govern the financial
and operating policies of the investee pursuant
to a statute or under an agreement among the
shareholders or equity holders. However, there are
situations in which consolidation is required even
though these usual conditions of consolidation do
not apply. Generally, this occurs when an entity holds
an interest in another business enterprise that was
achieved through arrangements that do not involve
voting interests, which results in a disproportionate
relationship between the entity’s voting interests in,
and its exposure to the economic risks and potential
rewards of, the other business enterprise. This
disproportionate relationship results in what is known
as a variable interest, and the entity in which we
have the variable interest is referred to as a variable
interest entity. We consolidate a variable interest entity
if we are determined to be the primary beneficiary of
the variable interest entity for accounting purposes
only. The primary beneficiary has both (i) the power
to direct the activities of the variable interest entity
that most significantly impact the entity’s economic
performance, and (ii) the obligation to absorb losses
or the right to receive benefits from the variable
interest entity that could potentially be significant to
the variable interest entity.
For the entities that we invested in or are associated
with but in which the usual conditions of consolidation
mentioned above do not apply, we continuously
re-assess whether these entities possess any of the
characteristics of a variable interest entity and whether
we are the primary beneficiary.
Management Discussion and Analysis
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Alibaba Group Holding Limited
We consolidate our subsidiaries and the variable
interest entities of which we are the primary
beneficiary. On a periodic basis, we reconsider the
initial determination of whether a legal entity is a
consolidated entity upon the occurrence of certain
events provided in Accounting Standards Codification
(“ASC”) 810 “Consolidation.” We also continuously
reconsider whether we are the primary beneficiary
of our affiliated entities as facts and circumstances
change.
Recognition of Revenue
Revenue is principally generated from customer
management services, membership fees and value-
added services, logistics services, cloud services, sales
of goods and other revenue. Revenue represents the
amount of consideration we are entitled to upon the
transfer of promised goods or services in the ordinary
course of our activities and is recorded net of VAT.
Consistent with the criteria of ASC 606 “Revenue from
Contracts with Customers,” we recognize revenue
when performance obligations are satisfied by
transferring control of a promised good or service
to a customer. For performance obligations that
are satisfied at a point in time, we also consider
the following indicators to assess whether control
of a promised good or service is transferred to the
customer: (i) right to payment, (ii) legal title, (iii)
physical possession, (iv) significant risks and rewards
of ownership and (v) acceptance of the good or
service. For performance obligations satisfied over
time, we recognize revenue over time by measuring
the progress toward complete satisfaction of a
performance obligation.
The application of various accounting principles
related to the measurement and recognition
of revenue requires us to make judgments and
estimates. Specifically, complex arrangements with
non-standard terms and conditions may require
relevant contract interpretation to determine the
appropriate accounting treatment, including whether
the promised goods and services specified in a
multiple element arrangement should be treated as
separate performance obligations. Other significant
judgments include determining whether we are acting
as the principal or the agent from an accounting
perspective in a transaction.
For multiple element arrangements with customers,
which primarily relate to the provision of non-public
cloud services, which include hardware, software
licenses, software installation services, application
development and maintenance services, significant
judgment is required to determine whether each
good and service element is a distinct performance
obligation and is separately accounted for. To
determine whether a performance obligation
is distinct, we consider its level of integration,
customization, interdependence and interrelation
with other elements within the arrangement. If an
arrangement involves multiple distinct performance
obligations, each distinct performance obligation is
separately accounted for and the total consideration
is allocated to each performance obligation based
on the relative standalone selling prices at contract
inception. If directly observable standalone selling
prices are not available, we need to apply significant
judgment and perform assessments on market
conditions and entity-specific factors to estimate the
standalone selling prices for each element. Changes
in the estimated standalone selling price may
cause the amount of revenue to be recognized for
each performance obligation to differ, but the total
amount of revenue to be recognized within a contract
should not be affected. We periodically re-assess the
standalone selling price of the elements as a result of
changes in market conditions. Revenue recognition for
customer management services on our marketplaces
does not require us to exercise significant judgment or
estimate.
For certain arrangements, we apply significant
judgment in determining whether we are acting as
the principal or agent in a transaction. We are acting
as the principal if we obtain control over the goods
and services before they are transferred to customers.
Generally, when we are primarily obligated in a
transaction and are subject to inventory risk or have
latitude in establishing prices, or have several but not
all of these indicators, we act as the principal and
record revenue on a gross basis. We act as the agent
and record the net amount as revenue earned if we do
not obtain control over the goods and services before
they are transferred to the customers. We record
customer management revenue generated through
third-party marketing affiliate programs on a gross
basis when we act as the principal. In addition, we
report revenue from the sales of goods and revenue
generated from certain platforms in which we operate
as a principal on a gross basis.
Management Discussion and Analysis
123
Fiscal Year 2024 Annual Report
Share-based Compensation Expense and
Valuation of the Underlying Awards
Share-based awards relating to our ordinary
shares
We account for various types of share-based awards
granted to the employees, consultants and directors
of our company, our affiliates and/or certain other
companies in accordance with the authoritative
guidance on share-based compensation expense. All
share-based awards granted including RSUs, share
options and restricted shares are measured at the
grant date based on the fair value of the awards and
were recognized as an expense over the requisite
service period, which is generally the vesting period of
the respective award, using the accelerated attribution
method. Under the accelerated attribution method,
each vesting installment of a graded vesting award
is treated as a separate share-based award, and
accordingly each vesting installment is separately
measured and attributed to expense, resulting in
accelerated recognition of share-based compensation
expense.
Determining the fair value of share-based awards
requires significant judgment. The fair values of RSUs
and restricted shares are determined based on the
fair value of our ordinary shares. The market price of
our publicly traded ADSs is used as an indicator of fair
value for our ordinary shares.
We generally estimate the fair value of share options
using the Black-Scholes valuation model, which
requires inputs such as the fair value of our ordinary
shares, risk-free interest rate, expected dividend yield,
expected life and expected volatility.
If the fair value of the underlying equity and any of
the assumptions used in the Black-Scholes model
changes significantly, share-based compensation
expense for future awards may differ materially
compared with the awards granted previously.
Share-based awards relating to Ant Group
Prior to 2023, Junhan and Ant Group granted share-
based awards to our employees, and the awards
are settled by Junhan or Ant Group respectively. See
“Major Shareholders and Related Party Transactions
— Related Party Transactions — Agreements and
Transactions Related to Ant Group and Its Subsidiaries
— Our Commercial Arrangements with Ant Group and
Alipay — Share-based Award Arrangements.”
These awards meet the definition of a financial
derivative. The cost relating to these awards
is recognized by us and the related expense is
recognized over the requisite service period in the
consolidated income statements with a corresponding
credit to additional paid-in capital. Subsequent
changes in the fair value of these awards are recorded
in the consolidated income statements. The expenses
relating to these awards are remeasured at the fair
value on each reporting date until their settlement
dates. See note 8(b) to our audited consolidated
financial statements included in this annual report.
Share-based compensation expense will be affected
by changes in the fair value of awards granted to
our employees by Junhan and Ant Group. The fair
value of the underlying equity is primarily determined
based on the contemporaneous valuation report,
external information and information obtained from
Ant Group. Given that the determination of the fair
value of underlying equity requires judgment and
such fair value is beyond our control, the magnitude
of the related accounting impact is unpredictable
and may affect our consolidated income statements
significantly.
Share-based compensation expense of awards
relating to our ordinary shares and Ant Group
is recorded net of estimated forfeitures in our
consolidated income statements and accordingly is
recorded only for those share-based awards that are
expected to vest. We estimate the forfeiture rate based
on historical forfeitures of share-based awards and
adjust the rate to reflect changes when necessary. We
revise our estimated forfeiture rate if actual forfeitures
significantly differ from the initial estimates.
To the extent the actual forfeiture rate is different from
what we have anticipated, share-based compensation
expense related to these awards will be different.
The expenses associated with these awards will be
recognized across the functions in which the award
recipients are employed and may continue to be
significant in future periods.
Recognition of Income Taxes and Deferred
Tax Assets/Liabilities
We are mainly subject to income tax in China, but are
also subject to taxation on profit arising in or derived
from the tax jurisdiction where our subsidiaries are
domiciled and operate outside of China. Income taxes
are assessed and determined on an entity basis. There
are transactions (including entitlement to preferential
tax treatment and deductibility of expenses) where the
ultimate tax determination is uncertain until the final
Management Discussion and Analysis
124
Alibaba Group Holding Limited
tax position is confirmed by relevant tax authorities.
In addition, we recognize liabilities for anticipated tax
audit issues based on estimates of whether additional
taxes could be due. Where the final tax outcome
of these matters is different from the amounts that
were initially recorded, the differences will impact the
income tax and deferred tax provisions in the period in
which the determination is made.
Deferred income tax is recognized for all temporary
differences, carry forward of unused tax credits and
unused tax losses, to the extent that it is probable
that taxable profit will be available in the future
against which the temporary differences, the carry
forward of unused tax credits and unused tax losses
could be utilized. Deferred income tax is provided
in full, using the liability method. The deferred
tax assets recognized are mainly related to the
temporary differences arising from amortization of
licensed copyrights and accrued expenses, which
are not deductible until paid under the applicable
PRC tax laws. We have also recognized deferred tax
liabilities on the undistributed earnings generated
by our subsidiaries in China, which are subject to
withholding tax when the subsidiaries resolve to
distribute dividends to us. We have also recognized
deferred tax for temporary differences in relation
to certain investments in equity method investees,
equity securities and other investments and share-
based awards. As of March 31, 2024, we have
accrued the withholding tax on substantially all of the
distributable earnings of the PRC subsidiaries, except
for those undistributed earnings that we intend to
invest indefinitely in the PRC. If the plan to invest the
undistributed earnings indefinitely in the PRC changes
or if these funds are in fact distributed outside of
China, we would be required to accrue or pay the
withholding tax on some or all of these undistributed
earnings and our effective tax rate would be adversely
affected.
Fair Value Determination Related to the
Accounting for Business Combinations
A component of our growth strategy has been to
acquire and integrate complementary businesses into
our ecosystem. We complete business combinations
from time to time that require us to perform purchase
price allocations. In order to recognize the acquisition
date amounts of assets acquired and liabilities
assumed, mainly consisting of intangible assets and
goodwill, as well as the fair value of any contingent
consideration to be recognized, we use valuation
techniques such as discounted cash flow analysis
and ratio analysis with reference to comparable
companies in similar industries under the income
approach, market approach and cost approach. Major
assumptions used in determining the fair value of
these intangible assets include future growth rates
and weighted average cost of capital. Most of the
valuations of our acquired businesses have been
performed by independent valuation specialists under
our management’s supervision. We believe that the
estimated fair value assigned to the assets acquired
and liabilities assumed are based on reasonable
assumptions and estimates that market participants
would use. However, these assumptions are inherently
uncertain and actual results could differ from those
estimates.
Fair Value Determination Related to Financial
Instruments Accounted for at Fair Value
We have a significant amount of financial instruments
that are categorized within Level 2 and Level 3
according to ASC 820 “Fair Value Measurement.” The
valuations for certain financial instruments categorized
within Level 2, such as interest rate swap contracts
and certain option agreements, are performed based
on inputs derived from or corroborated by observable
market data. Convertible and exchangeable bonds
that do not have a quoted price are categorized
within Level 2 or Level 3, of which the valuations are
generally performed using valuation models such
as the binomial model with unobservable inputs
including risk-free interest rate and expected volatility.
The valuation of contingent consideration categorized
within Level 3 is performed using an expected cash
flow method with unobservable inputs including the
probability to achieve the contingencies in connection
with the contingent consideration arrangements.
Significant judgment is required to determine the
appropriateness of those unobservable inputs.
Investments in privately held companies for which we
elected to record using the measurement alternative
are recorded at cost, less impairment, with subsequent
adjustments for observable price changes resulting
from orderly transactions for identical or similar
investments of the same issuer. The valuations of
these investments are categorized within Level 3, and
are estimated based on valuation methods using the
observable transaction price at the transaction date
and considering the rights and obligations of the
securities and other unobservable inputs including
volatility. The determination of whether an observable
transaction is orderly and whether the investment
involved is identical or similar to our investment,
and the amount of fair value adjustment requires
significant judgment.
Management Discussion and Analysis
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Fiscal Year 2024 Annual Report
Impairment Assessment on Goodwill and
Intangible Assets
We test annually, or whenever events or circumstances
indicate that the carrying value of assets exceeds
the recoverable amounts, whether goodwill and
intangible assets have suffered any impairment in
accordance with the accounting policy stated in note
2 to our audited consolidated financial statements
included in this annual report. For the impairment
assessment on goodwill, we may first perform
a qualitative assessment to determine whether
quantitative impairment testing of goodwill is
necessary. In this assessment, we identify the reporting
units, consider factors such as macroeconomic
conditions, industry and market considerations, overall
financial performance of the reporting units, and
other specific information related to the operations,
business plans and strategies of the reporting units.
Based on the qualitative assessment, if it is more likely
than not that the fair value of a reporting unit is less
than the carrying amount, the quantitative impairment
test is performed. We may also bypass the qualitative
assessment and proceed directly to perform the
quantitative impairment test. For the quantitative
assessment of goodwill impairment, we compare
the fair value of each reporting unit to its carrying
amount, including goodwill. If the fair value of the
reporting unit exceeds its carrying amount, goodwill is
not considered to be impaired. If the carrying amount
of a reporting unit exceeds its fair value, the amount
by which the carrying amount exceeds the reporting
unit’s fair value is recognized as impairment.
For intangible assets other than licensed copyrights,
we perform an impairment assessment whenever
events or changes in circumstances indicate the
carrying value of an asset may not be recoverable.
These assessments primarily use cash flow
projections based on financial forecasts prepared by
management and an estimated terminal value. The
expected growth in revenues and operating margin,
timing of future capital expenditures, an estimate of
weighted average cost of capital and terminal growth
rate are based on actual and prior year performance
and market development expectations. The periods of
the financial forecasts generally range from three to
five years or a longer period if necessary. Judgment is
required to determine key assumptions adopted in the
cash flow projections and changes to key assumptions
can significantly affect these cash flow projections and
the results of the impairment tests.
Impairment Assessment on Licensed
Copyrights
We evaluate the program usefulness of licensed
copyrights pursuant to the guidance in ASC 920
“Entertainment — Broadcasters,” which provides that
the rights be reported at the lower of unamortized
cost or fair value. When there is a change in the
expected usage of licensed copyrights, we estimate
the fair value of licensed copyrights to determine if any
impairment exists. The fair value of licensed copyrights
is determined by estimating the expected cash flows
from advertising and membership fees, less any costs
and expenses, over the remaining useful lives of the
licensed copyrights at the film-group level. Estimates
that impact these cash flows include anticipated
levels of demand for our advertising services and the
expected selling prices of advertisements. Judgment is
required to determine the key assumptions adopted
in the cash flow projections and changes to key
assumptions can significantly affect these cash flow
projections and the results of the impairment tests.
Impairment Assessment on Investments in
Equity Method Investees
We continually review our investments in equity
method investees to determine whether a decline in
fair value below the carrying value is “other-than-
temporary.” The primary factors that we consider
include:
•
the severity and length of time that the fair value
of the investment is below its carrying value;
•
the stage of development, the business plan, the
financial condition, the sufficiency of funding, the
operating performance and the prospects of the
investee companies;
•
the geographic region, market and industry in
which the investee companies operate; and
•
other entity specific information such as recent
financing rounds completed by the investee
companies and post balance sheet date fair
value of the investment.
Fair value of listed securities is subject to volatility and
may be materially affected by market fluctuations.
Judgment is required to determine the weighting and
impact of the abovementioned factors and changes to
this determination can significantly affect the results of
the impairment tests.
Management Discussion and Analysis
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Alibaba Group Holding Limited
Impairment Assessment on Equity Securities
Equity securities without readily determinable fair
values that are accounted for using the measurement
alternative are subject to periodic impairment reviews.
Our impairment analysis considers both qualitative
and quantitative factors that may have a significant
effect on the fair value of these equity securities.
Qualitative factors considered may include market
environment and conditions, financial performance,
business prospects, and other relevant events and
factors. When indicators of impairment exist, we
perform quantitative assessments of the fair value,
which may include the use of market and income
valuation approaches and the use of estimates,
which may include discount rates, investees’ liquidity
and financial performance, and market data of
comparable companies in similar industries. Judgment
is required to determine the appropriateness of the
valuation approaches and the weighting and impact
of the abovementioned factors. Changes to this
determination can significantly affect the results of the
quantitative assessments.
Depreciation and Amortization
The costs of property and equipment and intangible
assets are charged ratably as depreciation and
amortization expenses, respectively, over the
estimated useful lives of the respective assets using
the straight-line method. We periodically review
changes in technology and industry conditions, asset
retirement activity and residual values to determine
adjustments to estimated remaining useful lives and
depreciation and amortization rates. Actual economic
lives may differ from estimated useful lives. Periodic
reviews could result in a change in estimated useful
lives and therefore depreciation and amortization
expenses in future periods.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04,
“Reference Rate Reform (Topic 848): Facilitation of
the Effects of Reference Rate Reform on Financial
Reporting” and issued subsequent amendments
within ASU 2021-01 and ASU 2022-06 (collectively,
including ASU 2020-04, “ASC 848”) in January 2021
and December 2022 respectively. ASC 848 provides
optional expedients and exceptions for applying
U.S. GAAP on contract modifications and hedge
accounting to contracts, hedging relationships, and
other transactions that reference LIBOR or another
reference rate expected to be discontinued because
of reference rate reform, if certain criteria are met.
These optional expedients and exceptions provided
in ASC 848 are effective for us from January 1, 2020
through December 31, 2024. We have elected the
optional expedients for certain existing interest rate
swaps that are designated as cash flow hedges,
which did not have a material impact on the financial
position, results of operations and cash flows. We are
evaluating the effects, if any, of the potential election
of the other optional expedients and exceptions
provided in this guidance on our financial position,
results of operations and cash flows.
In June 2022, the FASB issued ASU 2022-03, “Fair Value
Measurement (Topic 820): Fair Value Measurement
of Equity Securities Subject to Contractual Sale
Restrictions”, which clarifies that a contractual
restriction on the sale of an equity security is not
considered part of the unit of account of the equity
security and, therefore, is not considered in measuring
fair value. The amendments also clarify that an entity
cannot, as a separate unit of account, recognize and
measure a contractual sale restriction. This guidance
also requires certain disclosures for equity securities
subject to contractual sale restrictions. The new
guidance is required to be applied prospectively
with any adjustments from the adoption of the
amendments recognized in earnings and disclosed
on the date of adoption. This guidance is effective
for us for the year ending March 31, 2025 and interim
reporting periods during the year ending March 31,
2025. Early adoption is permitted. We do not expect
that the adoption of this guidance will have a material
impact on the financial position, results of operations
and cash flows.
In November 2023, the FASB issued ASU 2023-07,
“Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures”, which improves
reportable segment disclosure requirements. The
amendments require the disclosure of (1) significant
segment expenses that are regularly provided
to the CODM and included within each reported
measure of segment profit or loss; (2) an amount for
other segment items by reportable segment and a
description of its composition; and (3) the title and
position of the CODM and an explanation of how the
CODM uses the reported measure(s). The amendments
also provide disclosure requirements for interim
periods and entities that have a single reportable
segment. The new guidance is required to be applied
retrospectively to all prior periods presented in the
financial statements. This guidance is effective for
us for the year ending March 31, 2025 and interim
reporting periods during the year ending March 31,
Management Discussion and Analysis
127
Fiscal Year 2024 Annual Report
2026. Early adoption is permitted. We are evaluating
the impact of the adoption of this guidance.
In December 2023, the FASB issued ASU 2023-
09, “Income Taxes (Topic 740): Improvements to
Income Tax Disclosures”, which improves income tax
disclosures. The amendments require the disclosure
of specific categories in the rate reconciliation and
additional information for reconciling items that
meet a quantitative threshold. The amendments also
require disaggregated information about the amount
of income taxes paid (net of refunds received), Income
(or loss) from continuing operations before income
tax expense (or benefit) and Income tax expense
(or benefit) from continuing operations. The new
guidance is required to be applied either prospectively
or retrospectively. This guidance is effective for us
for the year ending March 31, 2026. Early adoption
is permitted. We are evaluating the impact of the
adoption of this guidance.
Research and
Development, Patents
and Licenses, etc.
Research and Development
We have built our core technologies for our online and
mobile commerce and cloud businesses in-house.
We employ research and development personnel to
build our technology platform and develop new online
and mobile products. We recruit top and experienced
talent locally and overseas, and we have advanced
training programs designed specifically for new
campus hires.
Intellectual Property
We believe the protection of our trademarks,
copyrights, domain names, trade names, trade secrets,
patents and other proprietary rights is critical to our
business. We rely on a combination of trademark, fair
trade practice, copyright and trade secret protection
laws and patent protection in China and other
jurisdictions, as well as confidentiality procedures
and contractual provisions to protect our intellectual
property and our trademarks. We also enter into
confidentiality and invention assignment agreements
with all of our employees, and we rigorously control
access to our proprietary technology and information.
As of March 31, 2024 we had 14,339 issued patents
and 12,036 publicly filed patent applications in
China and 6,047 issued patents and 2,709 publicly
filed patent applications in various other countries
and jurisdictions globally. We do not know whether
any of our pending patent applications will result in
the issuance of patents or whether the examination
process will require us to narrow our claims.
Trend Information
Other than as disclosed in this annual report, we are
not aware of any trends, uncertainties, demands,
commitments or events for the current fiscal year
that are reasonably likely to have a material effect
on our net revenues, income, profitability, liquidity or
capital reserves, or that caused the disclosed financial
information to be not necessarily indicative of future
operating results or financial conditions.
Quantitative and
Qualitative Disclosures
About Market Risk
Interest Rate Risk
Our main interest rate exposure relates to our
indebtedness and interest-bearing assets, including
cash and cash equivalents, short-term investments,
restricted cash and other treasury investments. We
manage our interest rate exposure with a focus
on reducing our overall cost of debt and exposure
to changes in interest rates. When considered
appropriate, we use derivatives, such as interest rate
swaps, to manage our interest rate exposure.
As of March 31, 2024, approximately 35% of our total
debt (including bank borrowings and unsecured
senior notes) carries floating interest rates and the
remaining 65% carries fixed interest rates. We have
entered into various agreements with various financial
institutions as counterparties to swap a certain portion
of our floating interest rate debt to effectively become
fixed interest rate debt. After taking these interest
rate swaps into consideration, approximately 33%
of our total debt carries floating interest rates and
the remaining 67% carries fixed interest rates as of
March 31, 2024. All of the abovementioned interest
rate derivatives are designated as cash flow hedges
and we expect these hedges to be highly effective.
Certain of our indebtedness carries floating interest
rates based on SOFR. As a result, the interest expenses
associated with these indebtedness will be subject
Management Discussion and Analysis
128
Alibaba Group Holding Limited
to the potential impact of any fluctuation in SOFR.
An increase in SOFR could raise our financing costs,
which could adversely affect our operating results and
financial condition, as well as our cash flows. See “Risk
Factors — Risks Related to Our Business and Industry —
We are subject to interest rate risk in connection with
our indebtedness.”
As of March 31, 2023 and 2024, if interest rates
increased/decreased by 1%, with all other variables
having remained constant, and assuming the amount
of interest-bearing assets and debts that bear floating
interest were outstanding for the entire respective
years, our profit attributable to equity owners would
have been RMB5,473 million and RMB6,010 million
(US$832 million) higher/lower, respectively, mainly
as a result of higher/lower interest income from our
cash and cash equivalents, short-term investments
and other treasury investments. The analysis does not
include floating interest rate debts whose interests are
hedged by interest rate swaps.
Foreign Exchange Risk
Foreign currency risk arises from future commercial
transactions, recognized assets and liabilities and
net investments in foreign operations. Although we
operate businesses in different countries and regions,
most of our revenue-generating transactions, and
a majority of our expense-related transactions, are
denominated in Renminbi, which is the functional
currency of our major operating subsidiaries and
the reporting currency of our financial statements.
When considered appropriate, we enter into hedging
activities with regard to exchange rate risk.
The value of the Renminbi against the U.S. dollar
and other currencies may fluctuate and is affected
by, among other things, changes in political and
economic conditions and the foreign exchange policy
adopted by the PRC government. It is difficult to
predict how market forces or PRC or U.S. government
policy may impact the exchange rate between the
Renminbi and the U.S. dollar in the future. There
remains significant international pressure on the
PRC government to adopt a more flexible currency
policy, which could result in greater fluctuations of the
Renminbi against the U.S. dollar.
To the extent that we need to convert U.S. dollars
into Renminbi for our operations, appreciation of the
Renminbi against the U.S. dollar would reduce the
Renminbi amount we receive from the conversion.
Conversely, if we decide to convert Renminbi into
U.S. dollars for the purpose of making payments for
dividends on our ordinary shares or ADSs, servicing
our outstanding debts, or for other business purposes,
appreciation of the U.S. dollar against the Renminbi
would reduce the U.S. dollar amounts available to us.
As of March 31, 2023, we had Renminbi-denominated
cash and cash equivalents, short-term investments
and other treasury investments of RMB351,195
million and U.S. dollar-denominated cash and
cash equivalents, short-term investments and other
treasury investments of US$29,171 million. Assuming
we had converted RMB351,195 million into U.S. dollars
at the exchange rate of RMB6.8676 for US$1.00 as
of March 31, 2023, our total balance of cash and
cash equivalents, short-term investments and other
treasury investments in U.S. dollar would have been
US$80,309 million. If the Renminbi had depreciated by
10% against the U.S. dollar, the balance in U.S. dollar
would have been US$75,660 million.
As of March 31, 2024, we had Renminbi-denominated
cash and cash equivalents, short-term investments
and other treasury investments of RMB381,326
million and U.S. dollar-denominated cash and
cash equivalents, short-term investments and other
treasury investments of US$30,166 million. Assuming
we had converted RMB381,326 million into U.S. dollars
at the exchange rate of RMB7.2203 for US$1.00 as
of March 29, 2024, our total balance of cash and
cash equivalents, short-term investments and other
treasury investments in U.S. dollar would have been
US$82,979 million. If the Renminbi had depreciated by
10% against the U.S. dollar, the balance in U.S. dollar
would have been US$78,178 million.
Market Price Risk
We are exposed to market price risk primarily with
respect to equity securities carried at fair value that
are publicly traded. A substantial portion of our
investments in equity method investees are held for
long-term appreciation or for strategic purposes,
which are accounted for under equity method and are
not subject to market price risk. We are not exposed
to commodity price risk. The sensitivity analysis is
determined based on the exposure of equity securities
and certain other financial instruments that are carried
at fair value on a recurring basis to market price risk at
the end of each reporting period.
In fiscal years 2023 and 2024, if the market price of
the respective financial instruments held by us had
been 1% higher/lower as of March 31, 2023 and 2024,
these instruments would have been approximately
RMB1,233 million and RMB762 million (US$106 million)
higher/lower, respectively, all of which would be
recognized as income or loss during the respective
period.
Management Discussion and Analysis
129
Fiscal Year 2024 Annual Report
Change in our Certifying
Accountant
On August 8, 2023 and August 9, 2023, our
audit committee and board of directors
respectively approved the engagement of
PricewaterhouseCoopers Zhong Tian LLP,
or PwC Zhong Tian, and the dismissal of
PricewaterhouseCoopers, or PwC HK, as our
independent registered public accounting firm
for the fiscal year ended March 31, 2024 for U.S.
financial reporting purposes. The engagement of
PwC Zhong Tian became effective on August 9, 2023.
The decision to change our independent registered
public accounting firm was not made due to any
disagreements between PwC HK and us. PwC HK
remains our auditor for the fiscal year ended March 31,
2024 for Hong Kong financial reporting purposes.
The audit reports of PwC HK on our consolidated
financial statements as of and for each of the fiscal
years ended March 31, 2022 and 2023 did not contain
an adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit
scope, or accounting principles.
During each of the fiscal years ended March 31, 2022
and 2023 and the subsequent interim period through
August 9, 2023, there were (i) no disagreements (as
defined in Item 16F(a)(1)(iv) of Form 20-F and the
related instructions thereto) between PwC HK and us
on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or
procedures, which disagreements, if not resolved
to the satisfaction of PwC HK, would have caused
PwC HK to make reference thereto in their reports on
the financial statements for such years, and (ii) no
“reportable events” (as set forth in Item 16F(a)(1)(v) of
Form 20-F).
During each of the fiscal years ended March 31, 2022
and 2023 and the subsequent interim period through
August 9, 2023, neither we nor anyone acting on our
behalf consulted PwC Zhong Tian regarding either (i)
the application of accounting principles to a specified
transaction, either completed or proposed, or the
type of audit opinion that might be rendered on our
financial statements (and neither a written report nor
oral advice was provided to us by PwC Zhong Tian
that PwC Zhong Tian concluded was an important
factor considered by us in reaching a decision as to
any accounting, auditing or financial reporting issue),
or (ii) any matter that was either the subject of a
disagreement or a reportable event.
We provided a copy of the foregoing disclosure to
PwC HK and requested that PwC HK furnish us with a
letter addressed to the SEC stating whether it agrees
with the statements made above, and if not, stating
the respects in which it does not agree. A copy of the
letter from PwC HK is filed as Exhibit 16.1 to our annual
report on Form 20-F.
Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
We maintain disclosure controls and procedures
designed to provide reasonable assurance that
information required to be disclosed in reports filed
under the U.S. Exchange Act is recorded, processed,
summarized and reported within the specified time
periods and accumulated and communicated to our
management, including our chief executive officer and
chief financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
Our management, under the supervision and with the
participation of our principal executive officer and our
principal financial officer, evaluated the effectiveness
of our disclosure controls and procedures, as defined
in Rules 13a-15(e) or 15d-15(e) promulgated under
the U.S. Exchange Act, as of March 31, 2024. Based
on that evaluation, our principal executive officer and
principal financial officer have concluded that our
disclosure controls and procedures are effective in
ensuring that information required to be disclosed
in the reports that we file or submit under the U.S.
Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
SEC’s rules and forms, and that information required
to be disclosed in the reports that we file or submit
under the U.S. Exchange Act is accumulated and
communicated to our management, including our
chief executive officer and chief financial officer, to
allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal
Control over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the U.S. Exchange Act. As
required by Rule 13a-15(c) of the U.S. Exchange Act,
our management conducted an evaluation of our
company’s internal control over financial reporting as
of March 31, 2024 based on the framework in Internal
Management Discussion and Analysis
130
Alibaba Group Holding Limited
Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, our
management concluded that our internal control over
financial reporting was effective as of March 31, 2024.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation
of effectiveness of our internal control over financial
reporting to future periods are subject to the risks that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Our independent registered public accounting firm,
PricewaterhouseCoopers Zhong Tian LLP has audited
the effectiveness of our internal control over financial
reporting as of March 31, 2024, as stated in their
report, which appears in our annual report on Form
20-F.
Changes in Internal Control over
Financial Reporting
There were no changes in our internal control over
financial reporting that occurred during the period
covered by our annual report on Form 20-F that
have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
Principal Accountant Fees and Services
The following table sets forth the aggregate fees by categories specified below in connection with certain
professional services rendered by our principal accountant for the respective period including any associated or
affiliated organizations or entities. We did not pay any other fees to our auditors during the periods indicated below.
Year ended
2023
2024
(in thousands of RMB)
Audit Fees(1)
109,122
147,521
Audit-related Fees(2)
10,882
8,982
Tax Fees(3)
7,078
2,114
All Other Fees(4)
3,429
6,129
Total
130,511
164,746
(1) “Audit Fees” represents the aggregate fees billed or to be
billed for each of the fiscal years listed for professional
services rendered by our auditors for the audit of our annual
financial statements, as well as assistance with and review
of documents filed with the SEC and other statutory and
regulatory filings.
(2) “Audit related Fees” represents the aggregate fees billed in
each of the fiscal years listed for the assurance and related
services rendered by our auditors that are reasonably related
to the performance of the audit or review of our financial
statements and not reported under “Audit Fees.”
(3) “Tax Fees” represents the aggregate fees billed in each
of the fiscal years listed for the professional tax services
rendered by our auditors.
(4) “All Other Fees” represents the aggregate fees billed in each
of the fiscal years listed for services rendered by our auditors
other than services reported under “Audit Fees,” “Audit
related Fees” and “Tax Fees.”
The policy of our audit committee is to pre-approve all
audit and non-audit services provided by our principal
accountant for the respective period including any
associated or affiliated organizations or entities,
including audit services, audit-related services, tax
services and other services as described above, other
than those for de minimis services that are approved
by the audit committee prior to the completion of the
audit. Certain service fees for the fiscal year ended
March 31, 2023 have been reclassified to conform with
the current fiscal year’s presentation.
Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements
included in this annual report.
Management Discussion and Analysis
131
Fiscal Year 2024 Annual Report
Directors,
Senior Management
and Employees
134
Alibaba Group Holding Limited
Directors, Senior Management and Employees
Directors and Senior Management
The following table sets forth certain information relating to our directors and executive officers.
Name
Age
Position/Title
Joseph C. TSAI†(2)(a)
60
Chairman
Chairman, Cainiao Smart Logistics Network Limited
Eddie Yongming WU†(1)(b)
49
Director and Chief Executive Officer
Chairman and Chief Executive Officer, Taobao and Tmall Group
Chairman and Chief Executive Officer, Cloud Intelligence Group
J. Michael EVANS†(2)(a)
66
Director and President
Co-Chairman, Alibaba International Digital Commerce Group
Maggie Wei WU†(2)(c)
56
Director
Jerry YANG(2)(b)
55
Independent director
Wan Ling MARTELLO(2)(b)
66
Independent director
Weijian SHAN(2)(a)
70
Independent director
Irene Yun-Lien LEE(2)(a)
70
Independent director
Albert Kong Ping NG(2)(b)
66
Independent director
Kabir MISRA(2)(c)
54
Independent director
Toby Hong XU(1)
51
Chief Financial Officer
Jane Fang JIANG(1)
50
Chief People Officer
Sara Siying YU(1)
49
General Counsel
Fan JIANG(1)
38
Co-Chairman and Chief Executive Officer, Alibaba International Digital
Commerce Group
Lin WAN(1)
49
Chief Executive Officer, Cainiao Smart Logistics Network Limited
Luyuan FAN(1)
51
Chairman and Chief Executive Officer, Digital Media and Entertainment
Group
†
Director nominated by the Alibaba Partnership.
(a) Group I directors. Current term of office will expire at our 2024 annual general meeting.
(b) Group II directors. Current term of office will expire at our 2025 annual general meeting.
(c) Group III directors. Current term of office will expire at our 2026 annual general meeting.
(1) 969 West Wen Yi Road, Yu Hang District, Hangzhou 311121, the People’s Republic of China.
(2) 26/F Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong S.A.R., the People’s Republic of China.
Directors, Senior Management and Employees
135
Fiscal Year 2024 Annual Report
Biographical Information
Joseph C. TSAI (蔡崇信) joined our company in 1999
as a member of the Alibaba founding team and has
served on our board of directors since our inception.
He was chief financial officer until 2013, our executive
vice chairman until September 2023 and is currently
our chairman. Joe is a founding member of the
Alibaba Partnership. He is chairman of Cainiao Smart
Logistics Network Limited, a board member of Taobao
and Tmall Group and Alibaba International Digital
Commerce Group, and a board member of our affiliate
Ant Group. From 1995 to 1999, Joe was a private
equity investor based in Hong Kong with Investor AB,
the main investment vehicle of Sweden’s Wallenberg
family. Prior to that, he was general counsel of
Rosecliff, Inc., a management buyout firm based in
New York. From 1990 to 1993, Joe was an associate
attorney in the tax group of Sullivan & Cromwell LLP, a
New York-based international law firm. Joe is qualified
to practice law in the State of New York. Joe received
his bachelor’s degree in Economics and East Asian
Studies from Yale College and a juris doctor degree
from Yale Law School.
Eddie Yongming WU (吳泳銘) has served as our
Chief Executive Officer and director since September
2023. Eddie is one of our co-founders and a member
of the Alibaba Partnership. He has served as chairman
of Taobao and Tmall Group since May 2023 and CEO
since December 2023. He has been the chairman and
chief executive officer of Cloud Intelligence Group
since September 2023. He is also a director of Local
Services Group and Alibaba International Digital
Commerce Group. Eddie was technology director
of Alibaba at the company’s inception in 1999. He
served as chief technology officer of Alipay from
December 2004, and became business director of
our monetization platform, Alimama, in November
2005 and was promoted to its general manager in
December 2007. In September 2008, he became
chief technology officer of Taobao, and in October
2011 he took on the role of head of Alibaba Group’s
search, advertising and mobile business. Eddie
served as a non-executive director of Alibaba Health
Information Technology Limited, a company listed on
the Main Board of the Hong Kong Stock Exchange,
from April 2015 to October 2021 and chairman of
Alibaba Health from April 2015 to March 2020. From
September 2014 to September 2019, Eddie was a
special assistant to Alibaba Group’s chairman. In
August 2015, Eddie founded Vision Plus Capital, a
venture capital firm focused on investing in the areas
of advanced technologies, enterprise services and
digital healthcare. Eddie graduated from the College
of Information Engineering of Zhejiang University of
Technology in June 1996.
J. Michael EVANS has been our president since
August 2015 and our director since September 2014.
Mike is also co-chairman of Alibaba International
Digital Commerce Group. Mike served as Vice
Chairman of The Goldman Sachs Group, Inc. from
February 2008 until his retirement in December 2013.
He served as chairman of Asia operations at Goldman
Sachs from 2004 to 2013 and was the global head of
Growth Markets at Goldman Sachs from January 2011
to December 2013. He also co-chaired the Business
Standards Committee of Goldman Sachs from 2010 to
2013. Mike joined Goldman Sachs in 1993, became a
partner of the firm in 1994 and held various leadership
positions within the firm’s securities business while
based in New York and London, including global
head of equity capital markets and global co-head
of the equities division, and global co-head of the
securities business. Mike is a trustee of the Asia
Society and a member of the Advisory Council for the
Bendheim Center for Finance at Princeton University.
Mike received his bachelor’s degree in politics from
Princeton University in 1981.
Maggie Wei WU (武衛) has been our director since
September 2020 and is a founding member of the
Alibaba Partnership. Maggie is also a director of
Digital Media and Entertainment Group. Maggie joined
our company in July 2007 as chief financial officer
of Alibaba.com. She served as our chief financial
officer from May 2013 to March 2022 and our head
of strategic investments from June 2019 to March
2022. She was voted the best CFO in FinanceAsia’s
annual poll for Asia’s Best Managed Companies in
2010. In 2018, she was named as one of the world’s
100 most powerful women by Forbes. Before joining
Alibaba, Maggie was an audit partner at KPMG in
Beijing. Maggie is a member of the Association of
Chartered Certified Accountants (ACCA). She received
a bachelor’s degree in accounting from Capital
University of Economics and Business.
Jerry YANG (楊致遠) has been our director since
September 2014. Jerry previously served as our
director from October 2005 to January 2012. Since
March 2012, Jerry has served as the founding partner
of AME Cloud Ventures, a venture capital firm. Jerry
is a co-founder of Yahoo! Inc., and served as Chief
Yahoo! and as a member of its board of directors from
March 1995 to January 2012. In addition, he served
as Yahoo!’s Chief Executive Officer from June 2007
to January 2009. From January 1996 to January 2012,
Jerry served as a director of Yahoo! Japan. Jerry also
served as an independent director of Cisco Systems,
Inc. from July 2000 to November 2012 and Lenovo
Group Limited, a company listed on the Hong Kong
Directors, Senior Management and Employees
136
Alibaba Group Holding Limited
Stock Exchange, from November 2014 to November
2023. He is currently an independent director of
Workday Inc., a company listed on the NYSE. He also
serves as a director of various private companies
and foundations. Jerry received a bachelor’s degree
and a master’s degree in electrical engineering from
Stanford University, where he has been currently
serving on the university’s Board of Trustees since
October 2017. Jerry was appointed Chair of Stanford’s
Board of Trustees in July 2021. He was previously
on Stanford’s Board of Trustees from 2005 to 2015,
including being a vice chair.
Wan Ling MARTELLO has been our director since
September 2015. She is a founding partner of BayPine,
a private equity firm based in Boston, U.S.A., a role she
has held since February 2020. She is also on the board
of portfolio companies of BayPine. She served as the
executive vice president and chief executive officer
of the Asia, Oceania, and sub-Saharan Africa region
for Nestlé SA from May 2015 to December 2018. She
was Nestlé’s global chief financial officer from April
2012 to May 2015, and executive vice president from
November 2011 to March 2012. Prior to Nestlé, Wan
Ling was a senior executive at Walmart Stores Inc., a
global retailer, from 2005 to 2011. Her roles included
executive vice president and chief operating officer
for Global eCommerce, and senior vice president,
chief financial officer and strategy for Walmart
International. Before Walmart, she was president,
U.S.A. at NCH Marketing Services Inc. She was with the
firm from 1998 to 2005. She also worked at Borden
Foods Corporation and Kraft Inc. where she held
various senior management positions. She is currently
a director of Uber Technologies, Inc., a company listed
on the NYSE and Stellantis N.V., a company listed on
the NYSE, the Italian Stock Exchange and Euronext,
Paris. Wan Ling received a master’s degree in business
administration (management information systems)
from the University of Minnesota and a bachelor’s
degree in business administration and accountancy
from the University of the Philippines.
Weijian SHAN (單偉建) has been our director since
March 2022. He is the executive chairman and a
founder of PAG, a leading private equity firm in Asia.
He has been with PAG since 2010. Between 1998 and
2010, he was a partner of the private equity firm TPG
and co-managing partner of TPG Asia (formerly known
as Newbridge Capital). Previously, he was a managing
director of JP Morgan, where he was concurrently the
chief representative for China between 1993 and 1998.
He was an assistant professor at the Wharton School
of the University of Pennsylvania between 1987 and
1993. Shan is a Trustee of the British Museum. He is
also a member of the International Advisory Council
of Hong Kong Exchanges and Clearing Limited. He
served as an independent director of Singapore-listed
Wilmar International Limited between 2018 and 2021.
He holds an M.A. and a Ph.D. from the University of
California, Berkeley, and an M.B.A. from the University
of San Francisco. He graduated with a major in English
from the Beijing Institute of Foreign Trade (currently
the Beijing University of International Business and
Economics).
Irene Yun-Lien LEE (利蘊蓮) has been our director
since August 2022. Irene is the executive chairman of
Hysan Development Limited and is the independent
non-executive chairman of Hang Seng Bank Limited,
both companies listed on the Hong Kong Stock
Exchange. She is an independent non-executive
director of Hong Kong and Shanghai Banking
Corporation Limited. Irene was on the board of
many listed and unlisted companies in Hong Kong,
Singapore, UK and Australia, including CLP Holdings
Limited, Cathay Pacific Airways Limited, QBE Insurance
Group Limited, ING Bank (Australia) Limited, Noble
Group Limited, amongst others. She was a member
of the Australian Takeovers Panel, a member of the
Advisory Council of JP Morgan Australia, and a member
of the Exchange Fund Advisory Committee of the Hong
Kong Monetary Authority. Until April 2022, she was an
independent non-executive director of HSBC Holdings
plc. Irene had a long career in financial services and
held senior positions at Citibank in New York, London
and Sydney. She was the global head of corporate
finance at the Commonwealth Bank of Australia and
she held other senior positions in investment banking
and funds management in a number of international
financial institutions. Irene received a Bachelor of Arts
degree from Smith College, United States of America,
and is a Barrister-at-Law in England and Wales and
a member of the Honourable Society of Gray’s Inn,
United Kingdom. She was awarded the degree of
Doctor of Social Science, honoris causa from the
Chinese University of Hong Kong in November 2022.
Directors, Senior Management and Employees
137
Fiscal Year 2024 Annual Report
Albert Kong Ping NG (吳港平) has been our
director since August 2022 and chairman of our audit
committee since December 2022. Albert currently
serves as an independent non-executive director
and chairman of the audit committee of a number
of public companies, including Ping An Insurance
(Group) Company of China, Ltd., a company listed on
the Shanghai Stock Exchange and the Hong Kong
Stock Exchange, Beijing Airdoc Technology Co., Ltd.,
a company listed on the Hong Kong Stock Exchange,
and China International Capital Corporation Limited,
a company listed on the Shanghai Stock Exchange
and the Hong Kong Stock Exchange. Albert is also an
independent non-executive director and member of
the audit and risk committee of Shui On Land Limited,
a company listed on the Hong Kong Stock Exchange.
Albert worked at Ernst & Young China from April 2007
to June 2020, where he was the chairman of Ernst
& Young China and a member of Ernst & Young’s
Global Executive Board. Prior to joining Ernst & Young,
he was Greater China Managing Partner of Arthur
Andersen, Managing Partner – China Operation of
PricewaterhouseCoopers and Managing Director
of Citigroup – China Investment Banking. Albert is a
member of the Hong Kong Institute of Certified Public
Accountants (HKICPA), Chartered Accountants of
Australia and New Zealand (CAANZ), CPA Australia
(CPAA) and Association of Chartered Certified
Accountants (ACCA). He received a bachelor’s degree
in business administration and a master’s degree in
business administration from the Chinese University of
Hong Kong.
Kabir MISRA has been our director since September
2020, redesignated as our independent director since
February 2023, and is currently managing partner at
RPS Ventures, a venture capital firm in Palo Alto, CA.
Prior to October 2018, Kabir was a managing partner
at SoftBank Investment Advisors (which manages
the SoftBank Vision Fund) and SoftBank Capital. He
worked with SoftBank from 2006 to 2022 (as advisor
from 2018 to 2022) and has assisted Mr. Masayoshi
Son with our company, and his duties as one of our
directors, since before our IPO. Kabir also represented
SoftBank at various points on the boards of its
investee companies, including other e-commerce
and payments companies Flipkart, Paytm, Tokopedia,
Coupang and BigCommerce. Prior to joining SoftBank,
Kabir worked as an investment banker in the U.S. and
Hong Kong. Kabir is currently also an independent
director of PayActiv and Cargomatic. He received a
Bachelor of Arts degree in Economics from Harvard
University and a master’s degree in business
administration from the Stanford Graduate School of
Business.
Toby Hong XU (徐宏) has been our chief financial
officer since April 2022. He joined Alibaba Group in July
2018 and was our deputy chief financial officer from
July 2019 to March 2022. Before joining Alibaba Group,
Toby was a partner at PricewaterhouseCoopers for 11
years, where he joined in 1996. Toby graduated from
Fudan University in Shanghai, China, with a bachelor’s
degree in Physics in 1996. He is a member of the
Chinese Institute of Certified Public Accountants.
Jane Fang JIANG (蔣芳) has served as our chief
people officer since April 2023 and is a founding
member of the Alibaba Partnership. Jane is also a
director of Taobao and Tmall Group, Cloud Intelligence
Group and Cainiao Smart Logistics Network Limited.
Prior to her current position, she served as deputy chief
people officer since 2017. Jane joined our company
in 1999 as a member of our founding team. Over the
years, Jane has held a number of senior management
roles in different departments within the company,
at different times leading China TrustPass product
planning, business analysis, global operations,
website operations and marketing for Alibaba.com,
as well as credit system development. Jane received a
bachelor’s degree in industry and foreign trade from
the Hangzhou Institute of Electrical Engineering.
Sara Siying YU (俞思瑛) has been our general
counsel since April 2020. Sara joined our company
in April 2005 and became one of the first partners
of the Alibaba Partnership. Sara is also a director of
Digital Media and Entertainment Group. Prior to her
current role, she served as deputy general counsel,
responsible for domestic legal affairs. Before joining
Alibaba Group, she worked in various law firms and
government departments. Sara received a bachelor’s
degree in law from East China University of Political
Science and Law.
Fan JIANG (蔣凡) currently serves as co-chairman and
chief executive officer of Alibaba International Digital
Commerce Group and is a member of the Alibaba
Partnership. He is also a director of Taobao and Tmall
Group and Cainiao Smart Logistics Network Limited.
He served as president of Alibaba International
Directors, Senior Management and Employees
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Alibaba Group Holding Limited
Digital Commerce since January 2022. He had been
responsible for the Taobao app since joining our
company in August 2013, and prior to his current
role, he has served as president of Taobao, president
of Tmall and president of Alimama. Previously, he
founded and served as the chief executive officer of
Umeng, a provider of mobile app analytics solutions
for developers which we acquired. Before founding
Umeng in 2010, he worked in product development at
Google China. Jiang Fan received a bachelor’s degree
in computer science from Fudan University.
Lin WAN (萬霖) currently serves as director and
chief executive officer of Cainiao Smart Logistics
Network Limited, a global smart logistics company
and the logistics arm of Alibaba Group, overseeing
the company’s strategic planning and business
operations. He is also a member of the Alibaba
Partnership. Since joining the company in 2014,
he has spearheaded the creation of the industrial
Internet structure for logistics, and Cainiao’s core
capability building through globalization, operation
and digitalization. Under his leadership, Cainiao
has advanced in global logistics, smart supply chain
and express, community delivery, logistics parks and
technologies, leading the digital transformation of
the entire logistics industry through cooperation.
Prior to joining Cainiao, he was a senior executive at
Amazon’s global logistics division. Lin holds a Ph.D. in
operational research from The University of Texas in
Austin.
Luyuan FAN (樊路遠) currently serves as chairman
and chief executive officer of Digital Media and
Entertainment Group and is a member of the Alibaba
Partnership. He has served as president of Digital
Media and Entertainment Group since November
2018. He has been an executive director of Alibaba
Pictures, a company listed on the Main Board of the
Hong Kong Stock Exchange, since January 2016, and
currently serves as the chairman and chief executive
officer of Alibaba Pictures. He joined Alipay in 2007
where he served in a number of senior management
positions, including the president of Alipay and
the president of Ant Group’s wealth management
business. Fan holds an executive master’s degree in
business administration from Cheung Kong Graduate
School of Business.
Alibaba Partnership
Since our founders first gathered in Jack Ma’s
apartment in 1999, they and our management have
acted in the spirit of partnership. We view our culture
as fundamental to our success and our ability to serve
our customers, develop our employees and deliver
long-term value to our shareholders. In July 2010,
in order to preserve this spirit of partnership and to
ensure the sustainability of our mission, vision and
values, we decided to formalize our partnership as
Lakeside Partners, named after the Lakeside Gardens
residential community where Jack Ma and our other
founders started our company. We refer to the
partnership as the Alibaba Partnership.
We believe that our partnership approach has helped
us to better manage our business, with the peer
nature of the partnership enabling senior managers to
collaborate and override bureaucracy and hierarchy.
As of the date of this annual report, the Alibaba
Partnership has a total of 26 members. The number of
partners in the Alibaba Partnership may change from
time to time due to the election of new partners, the
retirement of partners and the departure of partners
for other reasons.
Our partnership is a dynamic body that rejuvenates
itself through admission of new partners each year,
which we believe enhances our excellence, innovation
and sustainability. Unlike dual class ownership
structures that employ a high vote class of shares to
concentrate control in a few founders, our approach
is designed to embody the vision of a large group of
management partners. This structure is our solution
for preserving the culture shaped by our founders
while at the same time accounting for the fact that
founders will inevitably retire from the company.
Consistent with our partnership approach, all
partnership votes are made on a one-partner-one-
vote basis.
The partnership is governed by a partnership
agreement and operates under principles, policies
and procedures that have evolved with our business
and are further described below.
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Fiscal Year 2024 Annual Report
Nomination and Election of Partners
The Alibaba Partnership elects new partners annually
after a nomination process whereby existing partners
propose candidates to the partnership committee
as described below. The partnership committee
reviews the nominations and determines whether
the nomination of a candidate will be proposed to
the entire partnership for election. Election of new
partners requires the approval of at least 75% of all of
the partners. Partners should be employed by Alibaba
Group.
To be eligible for election, a partner candidate must
have demonstrated the following attributes:
•
a high standard of personal character and
integrity;
•
continued service with Alibaba Group for not less
than five years;
•
a track record of contribution to the business of
Alibaba Group; and
•
being a “culture carrier” who shows a consistent
commitment to, and traits and actions consonant
with, our mission, vision and values.
We believe the criteria and process of the Alibaba
Partnership applicable to the election promote
accountability among the partners as well as to our
customers, employees and shareholders. In order to
align the interests of partners with the interests of our
shareholders, we require that each partner maintain
a meaningful level of equity interests in our company
during his or her tenure as a partner. Since a partner
nominee must have been employed by us for at
least five years, as of the time he or she becomes a
partner, he or she will typically already own or have
been awarded a personally meaningful level of equity
interest in our company through our equity incentive
and share purchase or investment plans.
Duties of Partners
The main duty of partners in their capacity as partners
is to embody and promote our mission, vision and
values. We expect partners to be evangelists for
our mission, vision and values, both within our
organization and externally to customers, business
partners and other participants in our ecosystem.
Partnership Committee
The partnership committee must consist of at least
five but no more than seven partners, including
partnership committee continuity members, and is
currently comprised of Jack Ma, Joe Tsai, Lucy Peng,
Xiaofeng Shao and Eddie Wu. The partnership
committee is responsible for administering partner
elections and managing the relevant portion of the
deferred cash bonus pool, with any amounts payable
to partners who are our executive officers or directors
or members of the partnership committee subject
to approval of the compensation committee of our
board of directors. Either one or two partners may
be designated as partnership committee continuity
partners, and currently the partnership committee
continuity members consist of Jack Ma and Joe
Tsai. Other than partnership committee continuity
members, the partnership committee members serve
for a term of five years and may serve multiple terms.
Elections of partnership committee members are
held once every five years. Partnership committee
continuity members are not subject to election, and
may serve until they cease to be partners, retire from
the partnership committee or are unable to discharge
duties as partnership committee members as a result
of illness or permanent incapacity. A replacement
partnership committee continuity partner is either
designated by a retiring or, as the case may be, the
remaining, partnership committee continuity member.
Prior to each election, the partnership committee
will nominate a number of partners equal to the
number of partnership committee members that will
serve in the next partnership committee term plus
three additional nominees less the number of the
serving partnership committee continuity members.
Each partner votes for a number of nominees equal
to the number of partnership committee members
that will serve in the next partnership committee
term less the number of the serving partnership
committee continuity members, and all except the
three nominees who receive the least votes from the
partners are elected to the partnership committee.
Directors, Senior Management and Employees
140
Alibaba Group Holding Limited
Director Nomination and Appointment Rights
Pursuant to our Articles of Association, the Alibaba
Partnership has the exclusive right to nominate or, in
limited situations, appoint up to a simple majority of
the members of our board of directors.
The election of each director nominee of the Alibaba
Partnership will be subject to the director nominee
receiving a majority vote from our shareholders voting
at an annual general meeting of shareholders. If an
Alibaba Partnership director nominee is not elected by
our shareholders or after election departs our board of
directors for any reason, the Alibaba Partnership has
the right to appoint a different person to serve as an
interim director of the class in which the vacancy exists
until our next scheduled annual general meeting of
shareholders. At the next scheduled annual general
meeting of shareholders, the appointed interim
director or a replacement Alibaba Partnership director
nominee (other than the original nominee) will stand
for election for the remainder of the term of the class
of directors to which the original nominee would have
belonged.
If at any time our board of directors consists of less
than a simple majority of directors nominated or
appointed by the Alibaba Partnership for any reason,
including because a director previously nominated by
the Alibaba Partnership ceases to be a member of our
board of directors or because the Alibaba Partnership
had previously not exercised its right to nominate or
appoint a simple majority of our board of directors,
the Alibaba Partnership will be entitled (in its sole
discretion and without the need for any additional
shareholder action) to appoint such number of
additional directors to the board as necessary to
ensure that the directors nominated or appointed by
the Alibaba Partnership comprise a simple majority of
our board of directors.
In determining the Alibaba Partnership director
nominees who will stand for election to our board, the
partnership committee will propose director nominees
who will be voted on by all of the partners, and those
nominees who receive a simple majority of the votes
of the partners will be selected for these purposes. The
director nominees of the Alibaba Partnership may be
partners of the Alibaba Partnership or other qualified
individuals who are not affiliated with the Alibaba
Partnership.
The Alibaba Partnership’s right to nominate or appoint
up to a simple majority of our directors is conditioned
on the Alibaba Partnership being governed by the
partnership agreement in effect as of the completion
of our initial public offering in September 2014, or as
may be amended in accordance with its terms from
time to time. Any amendment to the provisions of
the partnership agreement relating to the purpose
of the partnership, or to the manner in which the
Alibaba Partnership exercises its right to nominate a
simple majority of our directors, will be subject to the
approval of the majority of our directors who are not
nominees or appointees of the Alibaba Partnership
and are “independent directors” within the meaning
of Section 303A of the NYSE Listed Company Manual.
The provisions relating to nomination rights and
procedures described above are incorporated in
our Articles. Pursuant to our Articles, the Alibaba
Partnership’s nomination rights and related provisions
of our Articles may only be changed upon the vote
of shareholders representing 95% of the votes
present in person or by proxy at a general meeting of
shareholders.
Alibaba Partnership has not fully exercised its director
nomination right. Our board of directors currently
consists of ten members, six are independent
directors nominated by our nominating and corporate
governance committee, four are Alibaba Partnership
nominees.
Directors, Senior Management and Employees
141
Fiscal Year 2024 Annual Report
Current Partners
The following table sets forth the names, in alphabetical order by surname, and other information regarding the
current partners of the Alibaba Partnership as of the date of this annual report.
Name
Age Gender
Year
Joined
Alibaba
Group
Current position with Alibaba Group
Trudy Shan DAI (戴珊)
47
F
1999
Partner, Alibaba Partnership
Luyuan FAN (樊路遠)
51
M
2007
Chairman and Chief Executive Officer, Digital Media
and Entertainment Group
Yongxin FANG (方永新)
50
M
2000
President, Ele.me
Fan JIANG (蔣凡)
38
M
2013
Co-Chairman and Chief Executive Officer, Alibaba
International Digital Commerce Group
Director, Taobao and Tmall Group
Director, Cainiao Smart Logistics Network Limited
Jane Fang JIANG (蔣芳)
50
F
1999
Group Chief People Officer
Director, Taobao and Tmall Group
Director, Cloud Intelligence Group
Director, Cainiao Smart Logistics Network Limited
Jiangwei JIANG (蔣江偉)
42
M
2008
Vice President, Cloud Intelligence Group
Zhenfei LIU (劉振飛)
52
M
2006
Co-Chairman, Local Services Group
Chairman, Amap
Jack Yun MA (馬雲)†
59
M
1999
Partner, Alibaba Partnership
Lucy Lei PENG (彭蕾)†
50
F
1999
Partner, Alibaba Partnership
Director, Local Services Group
Director, Alibaba International Digital Commerce
Group
Xiaofeng SHAO (邵曉鋒)†
58
M
2005
Group Executive Vice President
Chairman, Group Risk Management Committee
Jie SONG (宋潔)
45
F
2000
Vice President, Alibaba International Digital Commerce
Group
Lijun SUN (孫利軍)
47
M
2002
Director-General, Alibaba Foundation
Judy Wenhong TONG (童文紅)
53
F
2000
Partner, Alibaba Partnership
Director, Digital Media and Entertainment Group
Joseph C. TSAI (蔡崇信)†
60
M
1999
Group Chairman
Chairman, Cainiao Smart Logistics Network Limited
Director, Taobao and Tmall Group
Director, Alibaba International Digital Commerce
Group
†
Member of the partnership committee.
Directors, Senior Management and Employees
142
Alibaba Group Holding Limited
Name
Age Gender
Year
Joined
Alibaba
Group
Current position with Alibaba Group
Lin WAN (萬霖)
49
M
2014
Director and Chief Executive Officer, Cainiao Smart
Logistics Network Limited
Lei WANG (王磊)
44
M
2003
Senior Vice President, Cloud Intelligence Group
Winnie Jia WEN (聞佳)
47
F
2007
President, Group Public Affairs
Director, Digital Media and Entertainment Group
Maggie Wei WU (武衛)
56
F
2007
Group Director
Director, Digital Media and Entertainment Group
Eddie Yongming WU (吳泳銘)†
49
M
1999
Group Director and Chief Executive Officer
Chairman and Chief Executive Officer, Taobao and
Tmall Group
Chairman and Chief Executive Officer, Cloud
Intelligence Group
Director, Local Services Group
Director, Alibaba International Digital Commerce
Group
Zeming WU (吳澤明)
43
M
2004
Group Chief Technology Officer
Deputy Head of Alibaba DAMO Academy
Co-Chairman, Local Services Group
Chairman, Ele.me
Director, Taobao and Tmall Group
Director, Cloud Intelligence Group
Sara Siying YU (俞思瑛)
49
F
2005
Group General Counsel
Director, Digital Media and Entertainment Group
Yongfu YU (俞永福)
47
M
2007
Partner, Alibaba Partnership
Jeff Jianfeng ZHANG (張建鋒)
50
M
2004
Head of Alibaba DAMO Academy
Daniel Yong ZHANG (張勇)
52
M
2007
Partner, Alibaba Partnership
Jessie Junfang ZHENG (鄭俊芳)
50
F
2010
Director and Chief Financial Officer, Cloud Intelligence
Group
Shunyan ZHU (朱順炎)
53
M
2014
Chairman, Alibaba Health
Director, Local Services Group
†
Member of the partnership committee.
Directors, Senior Management and Employees
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Fiscal Year 2024 Annual Report
Retirement and Removal
Partners may elect to retire from the partnership at
any time. All partners except continuity partners are
required to retire upon reaching the age of sixty or
upon termination of their qualifying employment. Jack
Ma and Joe Tsai are designated as continuity partners,
who may remain partners until they reach the age
of seventy (and this age limit may be extended by a
majority votes of all partners), elect to retire from the
partnership, die or are incapacitated or are removed
as partners. Any partner, including continuity partners,
may be removed upon the vote of a simple majority
of all partners present at a duly-called meeting of
partners for violations of certain standards set forth
in the partnership agreement, including failure to
actively promote our mission, vision and values,
fraud, gross misconduct or gross negligence. As with
other partners, continuity partners must maintain
the shareholding levels required by us of all partners
as described below. Partners who retire from the
partnership upon meeting certain age and service
requirements may be designated as honorably retired
partners by the partnership committee. Honorably
retired partners may not act as partners, but may be
entitled to allocations from the deferred portion of the
annual cash bonus pool described below as post-
retirement payments. Continuity partners will not be
eligible to receive allocations from the annual cash
bonus pool if they cease to be our employees even if
they remain partners, but may be entitled to receive
allocations from the deferred bonus pool if they are
honorably retired partners.
Restrictive Provisions
Under our Articles of Association, in connection with
any change of control, merger or sale of our company,
the partners and other holders of our ordinary shares
shall receive the same consideration with respect
to their ordinary shares in connection with any of
these types of transactions. In addition, our Articles
provide that the Alibaba Partnership may not transfer
or otherwise delegate or give a proxy to any third-
party with respect to its right to nominate directors,
although it may elect not to exercise its rights in full. In
addition, as noted above, our Articles also provide that
the amendment of certain provisions of the Alibaba
Partnership agreement relating to the purpose of the
partnership or the manner in which the partnership
exercises its rights to nominate or appoint a majority
of our board of directors will require the approval of
a majority of directors who are not appointees of the
Alibaba Partnership and are “independent directors”
within the meaning of Section 303A of the NYSE Listed
Company Manual.
Amendment of Alibaba Partnership
Agreement
Pursuant to the partnership agreement, amendment
of the partnership agreement requires the approval of
75% of the partners in attendance at a meeting of the
partners at which not less than 75% of all the partners
are in attendance, except that the general partner
may effect certain administrative amendments. In
addition, certain amendments relating to the purposes
of the Alibaba Partnership or the manner in which
it exercises its nomination rights with respect to our
directors require the approval of a majority of our
independent directors not nominated or appointed by
the Alibaba Partnership.
Alibaba Group Equity Interest Holding
Requirements for Partners
Each of the partners holds his or her equity interests in
our company directly as an individual or through his
or her affiliates. Each partner is required to enter into
share retention agreement with us. These agreements
provide that a period of three years from the date on
which a person becomes a partner, which ranges from
January 2014 to June 2023 for our existing partners,
we require that each partner retain at least 60% of the
equity interests (including shares underlying vested
and unvested awards) that he or she held on the
starting date of the three-year period. Following the
initial three-year holding period and for so long as he
or she remains a partner, we require that the partner
retain at least 40% of the equity interests (including
shares underlying vested and unvested awards) that
he or she held on the starting date of the initial three-
year holding period. Exceptions to the holding period
rules described in the share retention agreements
must be approved by a majority of the independent
directors.
Weighted Voting Rights (WVR) Structure
We have one class of Shares, and each holder of our
Shares is entitled to one vote per Share. Pursuant to
our Articles of Association, the Alibaba Partnership has
the exclusive right to nominate or, in limited situations,
appoint, up to a simple majority of the members of
our board of directors. These rights are categorized as
a weighted voting rights structure, or WVR structure,
under the Hong Kong Listing Rules. As a result, we
are deemed as a company with a WVR structure. For
further information about the risks associated with our
WVR structure, see “Risk Factors — Risks Related to Our
Corporate Structure.”
Directors, Senior Management and Employees
144
Alibaba Group Holding Limited
Compensation
Compensation of Directors and Executive
Officers
For fiscal year 2024, we paid and accrued aggregate
fees, salaries and benefits (excluding share-based
awards) of approximately RMB245 million (US$34
million) and granted share-based awards to acquire
an aggregate of 24,828,800 ordinary shares of our
company (equivalent to 3,103,600 ADSs) as well as
share-based awards of our subsidiaries with an
aggregate value of approximately RMB44 million
(US$6 million) to our directors and executive officers.
Our board of directors, acting on the recommendation
of our compensation committee, approves an annual
cash bonus pool for our management, calculated
based on a percentage of our adjusted pretax
operating profits. Once the annual cash bonus
pool is calculated, our compensation committee
determines the proportion allocated and payable
to our management for the year, and approves the
amount of individual cash bonus payable to our
executive officers and directors and members of the
partnership committee. The remaining portion of the
annual cash bonus pool is available for the partners
and may, upon the approval of our compensation
committee, be deferred, and used as determined by
the partnership committee, with any amounts payable
to our executive officers or directors or members of the
partnership committee individually be also subject to
approval of the compensation committee of our board
of directors.
The board, acting on the recommendation of our
compensation committee, may determine the
remuneration to be paid to non employee directors.
We do not provide employee directors with any
additional remuneration for serving as directors other
than their remuneration as our employees. Pursuant to
our service agreements with our directors, neither we
nor our subsidiaries provide benefits to directors upon
termination of employment. We do not separately set
aside any amounts for pensions, retirement or other
benefits for our executive officers, other than pursuant
to relevant statutory requirements. Management
members who are partners of the Alibaba Partnership
may receive retirement payments from the deferred
portion of the annual cash bonus pool available to the
Alibaba Partnership.
For information regarding share-based awards
granted to our directors and executive officers, see “—
Equity Incentive Plan” below.
Employment Agreements
We have entered into employment agreements with
each of our executive officers. We may terminate
their employment at any time, with cause, and we
are not required to provide any prior notice of the
termination. We may also terminate their employment
in circumstances prescribed under and in accordance
with the requirements of applicable labor law,
including but not limited to notice and payment
in lieu of notice. Executive officers may terminate
their employment with us at any time upon written
notice. Although our employment agreements with
our executive officers do not provide for severance
pay, where severance pay is mandated by law, our
executive officers will be entitled to severance pay in
the amount mandated by law or in accordance with
our policy when his or her employment is terminated.
We have been advised by our PRC counsel, Fangda
Partners, that we may be required to make severance
payments upon termination without cause to comply
with the PRC Labor Law, the PRC Labor Contract Law
and other relevant PRC regulations, which entitle
employees to severance payments in case of early
termination of “de facto employment relationships”
by PRC entities without statutory cause regardless of
whether there exists a written employment agreement
with these entities.
Our award agreements under our equity incentive
plan also contain, among other rights, restrictive
covenants that enable us to terminate grants, forfeit
and cancel shares or, if applicable, repurchase shares
at the original purchase price or the exercise price paid
for the shares in the event of a grantee’s termination
for cause or for breaching of these covenants. See “—
Equity Incentive Plan” below.
Equity Incentive Plan
Our 2014 Post-IPO Equity Incentive Plan, or the
2014 Plan (which we adopted in September 2014,
amended and restated in February 2020 to reflect the
Share Split and other administrative changes, and
further amended and restated in May 2022 to reflect
administrative changes) provides for the granting of
share-based awards to eligible grantees. We believe
share-based awards are vital to attract, motivate
Directors, Senior Management and Employees
145
Fiscal Year 2024 Annual Report
and retain the grantees, and are the appropriate
tool to align their interests with our shareholders.
Accordingly, we will continue to grant share-based
awards to the employees, consultants and directors
of our company, our affiliates and/or certain other
companies as an important part of their compensation
packages. Share-based awards granted are generally
subject to a four-year vesting schedule as determined
by the plan administrator, or a vesting period of up to
ten years for certain management members.
Under the 2014 Plan, starting from April 1, 2015 and
on each anniversary thereof, an additional amount
equal to the lesser of 200,000,000 ordinary shares
(equivalent to 25,000,000 ADSs) and such lesser
number of ordinary shares as is determined by our
board of directors will be included in the shares
available for issuance under the 2014 Plan.
As of March 31, 2024, under the 2014 Plan, there were:
•
515,571,688 ordinary shares (equivalent to
64,446,461 ADSs) issuable upon vesting of
outstanding RSUs;
•
54,677,336 ordinary shares (equivalent to
6,834,667 ADSs) issuable upon exercise of
outstanding options; and
•
286,838,192 ordinary shares (equivalent to
35,854,774 ADSs) authorized for issuance but
unissued.
The following paragraphs summarize other key terms
of the 2014 Plan:
Plan Administration
Subject to certain limitations, the 2014 Plan is generally
administered by the compensation committee of
the board (or a subcommittee thereof), or another
committee of the board to which the board has
delegated power to act; provided that, in the absence
of any committee, the 2014 Plan will be administered
by the board. Grants to any executive directors of the
board must be approved by the disinterested directors
of our board.
Types of Awards
RSUs, incentive and non-statutory stock options,
restricted shares, dividend equivalents, share
appreciation rights, share payments and other rights
or interests may be granted under the 2014 Plan.
Award Agreements
Generally, awards granted under the 2014 Plans are
evidenced by an award agreement providing for the
number of ordinary shares subject to the award, and
the terms and conditions of the award, which must be
consistent with the plan.
Eligibility
Any employee, consultant or director of our company,
our affiliates or certain other companies, is eligible
to receive awards under the 2014 Plan, but only
employees of our company, our affiliates and/
or certain other companies, are eligible to receive
incentive stock options.
Term of Awards
The term of awards granted under the 2014 Plan are
generally not to exceed ten years from the date of
grant.
Acceleration, Waiver and Restrictions
The plan administrator has sole discretion in
determining the terms and conditions of any award,
any vesting acceleration or waiver of forfeiture
restrictions, and any restrictions regarding any award
or the ordinary shares relating thereto.
Directors, Senior Management and Employees
146
Alibaba Group Holding Limited
Clawback
Our award agreements generally provide that, in the
event of a grantee’s termination for cause (including
any commission of an act of fraud, dishonesty or
ethical breach) or violation of a non-competition
undertaking, we will have the right to terminate or
cancel grants, forfeit the shares acquired by the
grantee or, if applicable, repurchase the shares
acquired by the grantee, generally at the original
purchase price or the exercise price paid for the
shares.
Change in Control
If a change in control of our company occurs, the plan
administrator may, in its sole discretion:
•
accelerate the vesting, in whole or in part, of any
award;
•
purchase any award for an amount of cash or
ordinary shares of our company equal to the
value that could have been attained upon the
exercise of the award or the realization of the
plan participant’s rights had the award been
currently exercisable or payable or fully vested;
or
•
provide for the assumption, conversion or
replacement of any award by the successor
corporation, or a parent or subsidiary of the
successor corporation, with other rights or
property selected by the plan administrator
in its sole discretion, or the assumption or
substitution of the award by the successor or
surviving corporation, or a parent or subsidiary
of the surviving or successor corporation, with
appropriate adjustments as to the number
and kind of shares and prices as the plan
administrator deems, in its sole discretion,
reasonable, equitable and appropriate.
Amendment and Termination
Unless earlier terminated, the 2014 Plan continues in
effect for a term of ten years. The board may at any
time terminate or amend the 2014 Plan in any respect,
including amendment of any form of any award
agreement or instrument to be executed, provided,
however, that to the extent necessary and desirable
to comply with applicable laws or stock exchange
rules, shareholder approval of any amendment to the
2014 Plan shall be obtained in the manner and to the
degree required.
Directors, Senior Management and Employees
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Fiscal Year 2024 Annual Report
Share-based Awards Held by Our Directors and Officers
The following table summarizes the outstanding RSUs and options held as of March 31, 2024 by our directors and
executive officers, as well as by their affiliates, under our equity incentive plan.
Name
Number of
outstanding
RSUs/options
granted
Exercise
price
(US$ per
RSU/option
granted)
Shares
underlying
outstanding
RSUs/options
granted
Date of grant
Date of expiration
Joseph C. TSAI
2,000(1)
—
16,000(1)
July 24, 2018
July 24, 2026
2,667(1)
—
21,336(1)
August 16, 2019
August 16, 2027
Eddie Yongming WU
*(2)
78.37
*(2)
November 25, 2023
November 25, 2033
*(1)
—
*(1)
November 25, 2023
November 25, 2030
J. Michael EVANS
*(2)
79.96
*(2)
July 31, 2015
July 31, 2027
*(1)
—
*(1)
June 15, 2020
June 15, 2026
*(1)
—
*(1)
May 24, 2021
May 24, 2027
*(1)
—
*(1)
June 8, 2022
June 8, 2028
*(1)
—
*(1)
May 20, 2023
May 20, 2029
Maggie Wei WU
*(1)
—
*(1)
July 24, 2018
July 24, 2026
*(1)
—
*(1)
August 16, 2019
August 16, 2027
*(1)
—
*(1)
May 27, 2020
May 27, 2028
*(1)
—
*(1)
June 15, 2020
June 15, 2028
*(1)
—
*(1)
May 24, 2021
May 24, 2029
Toby Hong XU
*(1)
—
*(1)
May 27, 2020
May 27, 2026
*(1)
—
*(1)
May 24, 2021
May 24, 2027
*(1)
—
*(1)
June 8, 2022
June 8, 2028
*(1)
—
*(1)
May 20, 2023
May 20, 2029
Jane Fang JIANG
*(1)
—
*(1)
July 30, 2018
July 30, 2026
*(1)
—
*(1)
September 1, 2019
September 1, 2027
*(1)
—
*(1)
June 15, 2020
June 15, 2028
*(1)
—
*(1)
May 24, 2021
May 24, 2029
*(1)
—
*(1)
June 8, 2022
June 8, 2030
*(1)
—
*(1)
May 20, 2023
May 20, 2031
Directors, Senior Management and Employees
148
Alibaba Group Holding Limited
Name
Number of
outstanding
RSUs/options
granted
Exercise
price
(US$ per
RSU/option
granted)
Shares
underlying
outstanding
RSUs/options
granted
Date of grant
Date of expiration
Sara Siying YU
*(1)
—
*(1)
July 30, 2018
July 30, 2026
*(1)
—
*(1)
September 1, 2019
September 1, 2027
*(1)
—
*(1)
March 2, 2020
March 2, 2028
*(1)
—
*(1)
June 15, 2020
June 15, 2028
*(1)
—
*(1)
May 24, 2021
May 24, 2029
*(1)
—
*(1)
May 20, 2023
May 20, 2031
Fan JIANG
*(1)
—
*(1)
August 16, 2019
August 16, 2027
*(1)
—
*(1)
May 24, 2021
May 24, 2027
*(1)
—
*(1)
September 5, 2021
September 5, 2027
*(1)
—
*(1)
June 8, 2022
June 8, 2028
*(1)
—
*(1)
May 20, 2023
May 20, 2029
*(1)
—
*(1)
August 9, 2023
August 9, 2033
Lin WAN
*(1)
—
*(1)
May 27, 2020
May 27, 2026
*(1)
—
*(1)
May 24, 2021
May 24, 2027
*(1)
—
*(1)
June 8, 2022
June 8, 2028
*(1)
—
*(1)
May 20, 2023
May 20, 2029
*(1)
—
*(1)
August 9, 2023
August 9, 2033
Luyuan FAN
*(1)
—
*(1)
July 30, 2018
July 30, 2026
*(1)
—
*(1)
August 16, 2019
August 16, 2027
*(1)
—
*(1)
June 15, 2020
June 15, 2028
*(1)
—
*(1)
May 24, 2021
May 24, 2029
*(1)
—
*(1)
June 8, 2022
June 8, 2030
*(1)
—
*(1)
May 20, 2023
May 20, 2031
*
The shares underlying the outstanding RSUs and options held by each of these directors and executive officers and their affiliates
represent less than 1% of our total outstanding shares.
(1) Represents RSUs.
(2) Represents options.
Directors, Senior Management and Employees
149
Fiscal Year 2024 Annual Report
Board Practices
Nomination and Terms of Directors
Pursuant to our Articles of Association, our board of
directors is classified into three classes of directors
designated as Group I, Group II and Group III, each
generally serving a three-year term unless earlier
removed. The Group I directors currently consist of Joe
Tsai, J. Michael Evans, Weijian Shan and Irene Yun-Lien
Lee; the Group II directors currently consist of Eddie
Wu, Jerry Yang, Wan Ling Martello and Albert Kong
Ping Ng; and the Group III directors currently consist
of Maggie Wu and Kabir Misra. The terms of office of
the current Group I, Group II and Group III directors
will expire, respectively, at our 2024 annual general
meeting, 2025 annual general meeting and 2026
annual general meeting. Unless otherwise determined
by the shareholders in a general meeting, our board
will consist of not less than nine directors. The Alibaba
Partnership has the exclusive right to nominate up to
a simple majority of our board of directors. If at any
time our board of directors consists of less than a
simple majority of directors nominated or appointed
by the Alibaba Partnership for any reason, including
because a director previously nominated by the
Alibaba Partnership ceases to be a member of our
board of directors or because the Alibaba Partnership
had previously not exercised its right to nominate or
appoint a simple majority of our board of directors,
the Alibaba Partnership shall be entitled (in its sole
discretion) to appoint such number of additional
directors to the board as necessary to ensure that
the directors nominated or appointed by the Alibaba
Partnership comprise a simple majority of our board
of directors. The remaining members of the board
of directors will be nominated by the nominating
and corporate governance committee of the board.
Director nominees will be elected by the simple
majority vote of shareholders at our annual general
meeting. Alibaba Partnership has not fully exercised
its director nomination right. Our board of directors
currently consists of ten members, six are independent
directors nominated by our nominating and corporate
governance committee, four are Alibaba Partnership
nominees.
If a director nominee is not elected by our
shareholders or departs our board of directors for any
reason, the party or group entitled to nominate that
director has the right to appoint a different person to
serve as an interim director of the class in which the
vacancy exists until our next scheduled annual general
meeting of shareholders. At the next scheduled annual
general meeting of shareholders, the appointed
interim director or a replacement director nominee
(who, in the case of Alibaba Partnership nominees,
cannot be the original nominee) will stand for election
for the remainder of the term of the class of directors
to which the original nominee would have belonged.
For additional information, see “— Directors and Senior
Management — Alibaba Partnership.”
Code of Ethics and Corporate Governance
Guidelines
We have adopted a code of ethics, which is applicable
to all of our directors, executive officers and
employees. Our code of ethics is publicly available on
our website.
In addition, our board of directors has adopted a
set of corporate governance guidelines covering
a variety of matters, including approval of related
party transactions. Our corporate governance
guidelines also provide that any adoption of a new
equity incentive plan and any material amendments
to those plans will be subject to the approval of
our non-executive directors. The guidelines reflect
certain guiding principles with respect to our board’s
structure, procedures and committees. The guidelines
are not intended to change or interpret any applicable
law, rule or regulation or our Articles of Association.
Duties of Directors
Under Cayman Islands law, all of our directors owe
us fiduciary duties, including a duty of loyalty, a duty
to act honestly and a duty to act in good faith and
in a manner they believe to be in our best interests.
Our directors also have a duty to exercise the skill
they actually possess and the care and diligence
that a reasonably prudent person would exercise in
comparable circumstances. In fulfilling their duty of
care to us, our directors must ensure compliance with
our Articles of Association, as amended and restated
from time to time. We have the right to seek damages
if a duty owed by any of our directors is breached.
Directors, Senior Management and Employees
150
Alibaba Group Holding Limited
Board Committees
Our board of directors has established an audit
committee, a compensation committee, a nominating
and corporate governance committee, a sustainability
committee, a compliance and risk committee and
a capital management committee. A majority of
the members of our compensation committee,
nominating and corporate governance committee and
compliance and risk committee shall be independent
directors within the meaning of Section 303A of the
NYSE Listed Company Manual. At least one member of
our sustainability committee shall be an independent
director within the meaning of Section 303A of the
NYSE Listed Company Manual. All members of our
audit committee are independent within the meaning
of Section 303A of the NYSE Listed Company Manual
and meet the criteria for independence set forth in
Rule 10A-3 of the U.S. Exchange Act.
Audit Committee
Our audit committee currently consists of Albert Ng,
Wan Ling Martello and Weijian Shan. Mr. Ng is the
chairman of our audit committee. Mr. Ng satisfies the
criteria of an audit committee financial expert as set
forth under the applicable rules of the SEC. Mr. Ng, Ms.
Martello and Mr. Shan satisfy the requirements for an
“independent director” within the meaning of Section
303A of the NYSE Listed Company Manual and meet
the criteria for independence set forth in Rule 10A-3 of
the U.S. Exchange Act.
The audit committee oversees our accounting and
financial reporting processes and the audits of
our financial statements. Our audit committee is
responsible for, among other things:
•
selecting, and evaluating the qualifications,
performance and independence of, the
independent auditor;
•
pre-approving or, as permitted, approving
auditing and non-auditing services permitted to
be performed by the independent auditor;
•
considering the adequacy of our internal
accounting controls and audit procedures;
•
reviewing with the independent auditor any
audit problems or difficulties and management’s
response;
•
reviewing and approving related party
transactions between us and our directors, senior
management and other persons specified in
Item 6.B. of Form 20-F as required by the U.S.
Exchange Act;
•
reviewing and discussing the quarterly
financial statements and annual audited
financial statements with management and the
independent auditor;
•
establishing procedures for the receipt, retention
and treatment of complaints received from
our employees regarding accounting, internal
accounting controls or auditing matters and
the confidential, anonymous submission by our
employees of concerns regarding questionable
accounting or auditing matters;
•
meeting separately, periodically, with
management, internal auditors and the
independent auditor; and
•
reporting regularly to the full board of directors.
Compensation Committee
Our compensation committee currently consists of
Jerry Yang, Albert Ng and Kabir Misra. Mr. Yang is the
chairman of our compensation committee. Mr. Yang,
Mr. Ng and Mr. Misra satisfy the requirements for an
“independent director” within the meaning of Section
303A of the NYSE Listed Company Manual.
Our compensation committee is responsible for,
among other things:
•
determining the proportion of annual cash bonus
pool allocated and payable to our management
for the year and determining the amount of
cash bonus payable to our executive officers
and directors and members of the partnership
committee;
•
reviewing, evaluating and, if necessary, revising
our overall compensation policies;
Directors, Senior Management and Employees
151
Fiscal Year 2024 Annual Report
•
reviewing and evaluating the performance of our
directors and executive officers and determining
the compensation of our directors and executive
officers;
•
reviewing and approving our executive officers’
employment agreements with us;
•
determining performance targets for our
executive officers with respect to our incentive
compensation plan and share-based
compensation plans;
•
administering our share-based compensation
plans in accordance with the terms thereof; and
•
carrying out other matters that are specifically
delegated to the compensation committee by
our board of directors from time to time.
Nominating and Corporate Governance
Committee
Our nominating and corporate governance committee
currently consists of Irene Lee, Joe Tsai and Jerry
Yang. Ms. Lee is the chairman of our nominating and
corporate governance committee. Ms. Lee and Mr.
Yang satisfy the “independence” requirements of
Section 303A of the NYSE Listed Company Manual.
Our nominating and corporate governance committee
is responsible for, among other things:
•
selecting the board nominees (other than
the director nominees to be nominated by
the Alibaba Partnership) for election by the
shareholders or appointment by the board;
•
periodically reviewing with the board the
current composition of the board with regards
to characteristics such as independence,
knowledge, skills, experience and diversity;
•
making recommendations on the frequency and
structure of board meetings and monitoring the
functioning of the committees of the board; and
•
advising the board periodically with regards
to significant developments in corporate
governance law and practices as well as
our compliance with applicable laws and
regulations, and making recommendations to
the board on corporate governance matters.
Sustainability Committee
Our sustainability committee currently consists of
Jerry Yang, Joe Tsai and Maggie Wu. Mr. Yang is the
chairman of our sustainability committee. Mr. Yang
satisfies the “independence” requirements of Section
303A of the NYSE Listed Company Manual.
Our sustainability committee is responsible for, among
other things:
•
assisting the board in identifying and evaluating
the company’s ESG opportunities and risks;
•
overseeing an evaluating the implementation
and performance of ESG initiatives and projects;
and
•
advising the board on ESG-related legal,
regulatory and compliance developments and
public policy trends.
Compliance and Risk Committee
Our compliance and risk committee currently consists
of Irene Lee, Albert Ng, Kabir Misra, Eddie Wu and
J. Michael Evans. Ms. Lee is the chairman of our
compliance and risk committee. Ms. Lee, Mr. Ng and
Mr. Misra satisfy the “independence” requirements of
Section 303A of the NYSE Listed Company Manual.
Our compliance and risk committee is responsible for,
among other things:
•
overseeing our overall compliance and risk
management requirements and issuing overall
compliance and risk management framework;
•
evaluating key risk exposures and vulnerabilities
and oversee the implementation of compliance
and risk policies and procedures; and
•
assessing the performance of members of
management responsible for compliance and
risk, and advise our compensation committee
to align the compensation of the chief executive
officers of our subsidiary businesses with
performance on compliance and risk.
Directors, Senior Management and Employees
152
Alibaba Group Holding Limited
Capital Management Committee
Our capital management committee currently consists
of Joe Tsai, Eddie Wu, J. Michael Evans and Maggie Wu.
Mr. Tsai is the chairman of our capital management
committee.
Our capital management committee is responsible for,
among other things:
•
establishing and overseeing the implementation
of our overall capital management and
allocation plan; and
•
reviewing and advising our board, or approving,
based on authorization by our board, significant
capital-related transactions and undertakings by
us and our subsidiary businesses.
Employees
As of March 31, 2022, 2023 and 2024, we had a total
of 254,941, 235,216 and 204,891 full-time employees,
respectively. A substantial majority of our employees
are based in China.
We believe that we have a good working relationship
with our employees and we have not experienced any
significant labor disputes.
Share Ownership
For information regarding the share ownership of our
directors and officers, see “Major Shareholders and
Related Party Transactions — Major Shareholders.”
For information as to stock options granted to our
directors, executive officers and other employees, see
“— Compensation — Equity Incentive Plan.”
Insider Trading Policies
Our board of directors has established insider trading
policies and procedures to provide guidance on
the purchases, sales, and other dispositions of our
securities by our directors, officers, employees and
other relevant persons, with the goal of promoting
compliance with applicable insider trading laws, rules
and regulations, and the listing standards of the NYSE
and the Hong Kong Stock Exchange.
153
Fiscal Year 2024 Annual Report
Major Shareholders and Related Party Transactions
Major Shareholders
The following table sets forth information with respect
to beneficial ownership of our ordinary shares as of
May 20, 2024, except otherwise noted, by:
•
each of our directors and executive officers;
•
our directors and executive officers as a group;
and
•
each person known to us to beneficially own 5%
or more of our ordinary shares.
Beneficial ownership is determined in accordance
with the rules and regulations of the SEC and includes
the power to direct the voting or the disposition of
the securities or to receive the economic benefit of
the ownership of the securities. In computing the
number of shares beneficially owned by a person and
the percentage ownership of that person, we have
included Shares underlying the ADSs and Shares in
CCASS held by the person. We have also included
Shares that the person has the right to acquire within
60 days of this annual report, including through the
vesting of RSUs and options. These Shares, however,
are not included in the computation of the percentage
ownership of any other person. The calculations of
percentage ownership in the table below are based
on 19,345,485,396 ordinary shares (equivalent to
2,418,185,675 ADSs) outstanding as of May 20, 2024.
Name
Beneficial
ownership
(Ordinary shares)
Beneficial
ownership
(ADSs)(3)
Percent
Directors and Executive Officers:
Joseph C. TSAI(1)
275,302,416
34,412,802
1.4%
Eddie Yongming WU
*
*
*
J. Michael EVANS
*
*
*
Maggie Wei WU
*
*
*
Jerry YANG
*
*
*
Wan Ling MARTELLO
*
*
*
Weijian SHAN
*
*
*
Irene Yun-Lien LEE
*
*
*
Albert Kong Ping NG
*
*
*
Kabir MISRA
*
*
*
Toby Hong XU
*
*
*
Jane Fang JIANG
*
*
*
Sara Siying YU
*
*
*
Fan JIANG
*
*
*
Lin WAN
*
*
*
Luyuan FAN
*
*
*
All directors and executive officers as a group
355,606,738
44,450,842
1.8%
Greater than 5% Beneficial Owners:
SoftBank(2)
2,743,375,976
342,921,997
14.2%
Major Shareholders and Related Party Transactions
154
Alibaba Group Holding Limited
Notes:
*
This person beneficially owns less than 1% of our
outstanding ordinary shares.
(1) Does not include 15,660,000 ordinary shares held by a
vehicle managed by Blue Pool Capital Limited, Joe Tsai’s
family office. Represents (i) 470,400 ordinary shares held
directly by Joe Tsai, (ii) 13,907,176 ordinary shares held by Joe
and Clara Tsai Foundation Limited, a company incorporated
under the law of the Island of Guernsey with its registered
address at PO Box 186, Royal Chambers, St Julian’s Avenue,
St Peter Port, Guernsey GY1 4HP, that has granted Joe Tsai
a revocable proxy over these shares and which is wholly-
owned by Joe and Clara Tsai Foundation, (iii) 147,385,672
ordinary shares held by Parufam Limited, a Bahamas
corporation with its registered address at 303 Shirley Street,
P.O. Box N-492, Nassau, The Bahamas, and over which, Joe
Tsai, as a director of Parufam Limited, has been delegated
sole voting and disposition power and (iv) 113,539,168
ordinary shares held by PMH Holding Limited, a British Virgin
Islands corporation with its registered address at Kingston
Chambers, PO Box 173, Road Town, Tortola, British Virgin
Islands, and over which, Joe Tsai, as sole director of PMH
Holding Limited, has voting and dispositive power. Joe Tsai
does not have any pecuniary interests in the 13,907,176
ordinary shares held by Joe and Clara Tsai Foundation
Limited. Joe Tsai’s business address is 26/F Tower One, Times
Square, 1 Matheson Street, Causeway Bay, Hong Kong S.A.R.,
the People’s Republic of China.
(2) Represents ordinary shares owned indirectly by SoftBank
Group Corp., with its registered office at 1-7-1, Kaigan,
Minato-Ku, Tokyo, 105-7537, Japan. These ordinary shares
are beneficially owned via direct or indirect subsidiaries
of SoftBank Group Corp. As of May 20, 2024, none of the
subsidiaries of SoftBank Group Corp. holding our ordinary
shares beneficially owned more than 5% of our outstanding
ordinary shares. According to public disclosure by SoftBank,
SoftBank has entered into forward contracts using our
shares.
(3) Each ADS represents eight Shares.
We have one class of ordinary shares, and each holder
of our ordinary shares is entitled to one vote per share.
As of May 20, 2024, 19,345,485,396 of our ordinary
shares (equivalent to 2,418,185,675 ADSs) were
outstanding. To our knowledge, 6,722,077,128
ordinary shares (equivalent to 840,259,641 ADSs),
representing approximately 34.7% of our total
outstanding shares, were held by 171 record
shareholders with registered addresses in the
United States, including brokers and banks that hold
securities in street name on behalf of their customers.
We are not aware of any arrangement that may at a
subsequent date, result in a change of control of our
company.
Related Party Transactions
Our Related Party Transaction Policy
In order to prevent risks of conflicts of interest or the
appearance of conflicts of interest, all of our directors
and employees are subject to our code of business
conduct and other policies which require, among
other things, that any potential transaction between us
and an employee or director, their relatives and closely
connected persons and certain entities in which they,
their relatives or closely connected persons have an
interest be approved in writing by an appropriate
supervisor or compliance officer.
We have also adopted a related party transaction
policy to which all of our directors, senior
management and other key management personnel,
all close family members (as defined in the policy)
of the foregoing individuals, Ant Group and its
subsidiaries as well as the Alibaba Partnership and
certain other related entities are subject. Related party
transactions defined under this policy, as required
by Form 20-F, include transactions with our directors,
senior management and major shareholders and
their affiliates, as well as transactions with parties
that do not pose risks of conflicts of interest, such as
transactions with our investee companies that are
not otherwise affiliated with any of the foregoing
individuals. This policy is intended to supplement the
procedures set forth in our code of business conduct
and our other corporate governance policies and
does not exempt any person from more restrictive
provisions that may exist in our existing procedures
and policies.
This related party transaction policy provides, among
other things, that, unless otherwise pre-approved by
our board of directors:
•
each related party transaction, and any material
amendment or modification to a related party
transaction, shall be adequately disclosed to,
and reviewed and approved or ratified by, our
audit committee or any committee composed
solely of disinterested independent directors or
by the disinterested members of such committee;
and
Major Shareholders and Related Party Transactions
155
Fiscal Year 2024 Annual Report
•
any employment relationship or similar
transaction involving our directors or senior
management and any related compensation
shall be approved by the disinterested
members of our compensation committee or
recommended by the disinterested members of
the compensation committee to our board for its
approval.
Our related party transaction policy, code of business
conduct and our other corporate governance policies
are subject to periodic review and revision by our
board.
Summary of Major Related Party Transactions
We have entered into various commercial arrangements with certain of our investees, Ant Group and its affiliates,
pursuant to which we receive and provide certain services to these parties. See “— Commercial Arrangements with
Investees and Ant Group and Its Affiliates.” In addition, as disclosed in greater detail in the following paragraphs,
we have entered into or continued certain major related party transactions in fiscal years 2022, 2023 and 2024,
which are summarized in the table below.
Related Party
Transaction Description
Ant Group and its affiliates
•
The SAPA, which was amended in 2018, 2019, 2020 and 2022, pursuant
to which we received a 33% equity interest (on a fully diluted basis) in Ant
Group, and which sets forth, among other things, our rights in Ant Group.
•
The Alipay commercial agreement, pursuant to which Alipay provides
payment and escrow services to us.
•
The 2014 IPLA, an amendment to which was subsequently entered into in
2019 upon our receipt of the 33% equity interest (on a fully diluted basis)
in Ant Group, or the Amended IPLA, provides that we and our subsidiaries
license to Ant Group and/or its subsidiaries certain intellectual property
rights and provide various software technology services, and, prior to our
receipt of the 33% equity interest (on a fully diluted basis) in Ant Group, Ant
Group paid us profit share payments; pursuant to the SAPA, a cross-license
agreement was entered into in September 2019 upon our receipt of the 33%
equity interest (on a fully diluted basis) in Ant Group.
•
We and Ant Group cooperate with each other with respect to the enforcement
of each other’s rights and the provision of certain financial services to our
customers and merchants in connection with the SME loan business.
•
We granted Ant Group a license for it to continue to use certain trademarks
and domain names.
•
Various investments involving Ant Group.
•
Prior to 2023, we granted share-based awards to employees of Ant Group;
Junhan, a major equity holder of Ant Group, and Ant Group granted share-
based awards to our employees. We, Junhan and Ant Group agreed to
settle with each other the cost associated with certain share-based awards
granted to each other’s employees upon vesting.
Major Shareholders and Related Party Transactions
156
Alibaba Group Holding Limited
Related Party
Transaction Description
Entities affiliated with
our directors and officers
•
We agreed to assume the cost of maintenance, crew and operation of
personal aircraft of our chairman where the cost is allocated for business
purposes.
•
Investments in and various investments involving the Vision Plus Capital
Funds, investment funds affiliated with our director and chief executive
officer.
Investment funds affiliated
with Jack Ma
•
Various investments involving the Yunfeng Funds, investment funds
affiliated with Jack Ma.
Jack Ma
•
Jack Ma, formerly one of our directors made certain commitments to us
relating to his interest in Ant Group, the Yunfeng Funds and other entities.
Investees
•
We extended loans to and provided a guarantee for certain of our investees.
•
We have made co-investments with certain of our investees.
Variable interest entities and
variable interest entity
equity holders
•
We operate certain of our businesses in China through contractual
arrangements between our relevant subsidiaries, the variable interest
entities and variable interest entity equity holders.
Directors and executive
officers
•
We entered into indemnification agreements with our directors and
executive officers.
•
We entered into employment agreements with our directors and executive
officers.
•
We grant equity incentive awards to our directors and executive officers.
Commercial Arrangements with Investees and Ant Group and Its Affiliates
The following table summarizes the services fees paid to Ant Group and its affiliates in fiscal years 2022, 2023 and
2024.
Year ended March 31,
2022
2023
2024
Related Party
Transaction
RMB
RMB
RMB
US$
(in millions)
Ant Group and
its affiliates
Payment processing and escrow
services fee
11,824
12,484
13,164
1,823
Marketplace software technology
services fee and others(1)
3,542
2,271
3,050
422
Note:
(1) Marketplace software technology services fee and others primarily relates to marketing support services in connection with our
retail marketplaces.
Major Shareholders and Related Party Transactions
157
Fiscal Year 2024 Annual Report
Certain of our investees have entered into commercial
arrangements with us in connection with certain
logistics services they provide to us. In fiscal years
2022, 2023 and 2024, we incurred costs and expenses
of RMB13,120 million, RMB14,750 million and
RMB14,864 million (US$2,059 million), respectively, for
these logistics services. In fiscal year 2024, these costs
and expenses accounted for 1.8% of our costs and
expenses.
Certain of our investees have also entered into
commercial arrangements with us in connection
with certain marketing services they provide to our
business. In fiscal years 2022, 2023 and 2024, we
incurred costs and expenses of RMB976 million,
RMB382 million and RMB736 million (US$102 million),
respectively, for these marketing services. In fiscal year
2024, these costs and expenses accounted for 0.1% of
our costs and expenses.
Other than the foregoing, the aggregate service fees
we paid to other related parties accounted for less
than 1% of total costs and expenses in each of fiscal
years 2022, 2023 and 2024.
The following table summarizes the services fees received from Ant Group and its affiliates in fiscal years 2022,
2023 and 2024.
Year ended March 31,
2022
2023
2024
Related Party
Transaction
RMB
RMB
RMB
US$
(in millions)
Ant Group and
its affiliates
Annual fee for SME loan
business(1)
708
—
—
—
Administrative and support
services
1,165
565
807
112
Cloud services fee
5,536
8,409
8,814
1,221
Marketplace software technology
services fee and others
2,358
2,831
3,244
449
Note:
(1) Pursuant to our agreement with Ant Group, we received these annual fees for a term of seven years, which commenced in 2015
and ended in 2021.
We have entered into commercial arrangements with
certain of our investees related to logistics services.
In fiscal years 2022, 2023 and 2024, we recognized
revenue of RMB1,728 million, RMB1,140 million and
RMB2,540 million (US$352 million), respectively, in
connection with these logistics services. In fiscal year
2024, this revenue accounted for 0.3% of our revenue.
We have also entered into commercial arrangements
with certain of our investees related to cloud services.
In fiscal years 2022, 2023 and 2024, we recognized
revenue of RMB1,826 million, RMB1,462 million and
RMB984 million (US$136 million), respectively, for
these cloud services. In fiscal year 2024, this revenue
accounted for 0.1% of our revenue.
Other than the related party transactions summarized
above, the aggregate payments we received from
other related parties accounted for less than 1% of
total revenue in each of the fiscal years 2022, 2023
and 2024.
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Agreements and Transactions Related to
Ant Group and Its Subsidiaries
Ownership of Ant Group and Alipay
We originally established Alipay in December 2004
to operate our payment services business. In June
2010, the PBOC issued new regulations that required
non-bank payment companies to obtain a license in
order to operate in China. These regulations provided
specific guidelines for license applications only for
domestic PRC-owned entities. These regulations
stipulated that, in order for any foreign-invested
payment company to obtain a license, the scope of
business, the qualifications of any foreign investor
and any level of foreign ownership would be subject
to future regulations to be issued, which in addition
would require approval by the State Council of the
PRC. Furthermore, these regulations required that any
payment company that failed to obtain a license must
cease operations by September 1, 2011. Although
Alipay was prepared to submit its license application
in early 2011, at that time the PBOC had not issued
any guidelines applicable to license applications for
foreign-invested payment companies. In light of the
uncertainties relating to the license qualification and
application process for a foreign-invested payment
company, our management determined that it
was necessary to restructure Alipay as a company
wholly-owned by PRC citizens in order to avail Alipay
of the specific licensing guidelines applicable only
to domestic PRC-owned entities. Accordingly, we
divested all of our interest in and control over Alipay in
2011, which resulted in deconsolidation of Alipay from
our financial statements. This action enabled Alipay
to obtain a payment business license in May 2011
without delay and without any detrimental impact to
our China retail marketplaces or to Alipay.
Following the divestment of our interest in and control
over Alipay, effective in the first calendar quarter
of 2011, the ownership structure of Alipay’s parent
entity, Ant Group, was changed so that Jack Ma
held a substantial majority of the equity ownership
interest in Ant Group. The ownership structure of
Ant Group subsequently was further restructured.
Ant Group also completed several rounds of equity
financing. In September 2019, we received a newly
issued 33% equity interest (on a fully diluted basis)
in Ant Group following the satisfaction of the closing
conditions set forth in the SAPA, as amended in 2018
and 2019. As of March 31, 2024, Junhan and Junao
held approximately 31% and 22% of Ant Group’s
equity interest, respectively, we held 33% and other
shareholders held the remaining equity interest. The
general partner of Junhan and Junao is an entity that
was previously wholly-owned by Jack Ma. In August
2020, Jack Ma transferred 66% of the equity interest in
such general partner entity but retained control over
the equity interests in Ant Group held by Junhan and
Junao. Through an agreement with the transferees
as well as the articles of association of the general
partner entity then in effect, Jack Ma had control over
resolutions passed at general meetings of the general
partner entity that would relate to the exercise of rights
by Junhan and Junao as shareholders of Ant Group.
On January 7, 2023, Ant Group announced that Junhan
and Junao agreed to undergo certain changes in their
voting structures, pursuant to which this agreement
among Jack Ma and the other shareholders of the
general partner entity of Junhan and Junao were to
be terminated. In addition, Junhan were to change its
general partner to a newly established entity while
Junao would keep the existing general partner entity.
The changes were completed in December 2023. As a
result of the changes, (i) Jack Ma no longer controls the
majority voting interests in Ant Group held by Junhan
and Junao, (ii) each of Junhan and Junao is controlled
by a separate general partner entity that is not
controlled by any single person, (iii) our equity interest
in Ant Group remains unchanged, and (iv) neither we
nor any other shareholder has control over Ant Group.
Economic interests of Ant Group through Junhan are
owned by Jack Ma, Simon Xie and other employees
and former employees of us and Ant Group and its
affiliates and investee companies. These economic
interests are in the form of limited partnership interests
and interests similar to share appreciation rights tied
to potential appreciation in the value of Ant Group.
The economic interests in Junao are held in the form of
limited partnership interests by certain members of the
Alibaba Partnership and Ant Group’s management.
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We understand that it is the intention of the
shareholders of Ant Group that:
•
Jack Ma’s direct and indirect economic interest
in Ant Group (for the avoidance of doubt, other
than the equity stake in Ant Group held by
our company) will be reduced over time to a
percentage that does not exceed his and his
affiliates’ interest in our company as of the time
immediately prior to the completion of our initial
public offering (the percentage of our ordinary
shares Jack Ma and his affiliates beneficially
owned immediately prior to the completion of
our initial public offering was 8.8%) and that
this reduction will be caused in a manner by
which neither Jack Ma nor any of his affiliates
would receive any economic benefit thereby. See
“— Commitments of Jack Ma to Alibaba Group”
below. We have been informed by Ant Group that
the proposed reduction of Jack Ma’s economic
interest is expected to be accomplished through
a combination of future share-based awards to
employees and dilutive issuances of equity in Ant
Group, among others;
•
from time to time, additional economic interests
in Ant Group in the form of interests similar to
share appreciation rights issued by Junhan will
be transferred to employees of Ant Group and
our employees; and
•
Ant Group may raise equity capital from investors
in the future in order to finance its business
expansion, with the effect that the shareholding
of Junao and Junhan in Ant Group will be reduced
through dilution (the amount of dilution would
depend on future valuations and the amount of
equity capital to be raised).
In July 2023, we received notice from Ant Group that
a shareholder meeting held on July 23, 2023 had
approved, among other things, a proposal by Ant
Group to repurchase from all of its shareholders up
to 7.6% of its equity interest. We did not participate
in such share repurchase. We understand the
repurchased shares were transferred into Ant Group’s
equity incentive pool.
Our Commercial Arrangements with Ant
Group and Alipay
After the divestment of our interest in and control
over Alipay, we entered into a framework agreement
in July 2011, or the 2011 framework agreement, with
SoftBank, Altaba Inc. (formerly known as Yahoo! Inc.),
Alipay, Ant Group, Jack Ma and Joe Tsai and certain of
their affiliates. At the same time, we also entered into
various implementation agreements that included
a commercial agreement, or the Alipay commercial
agreement, an intellectual property license and
software technology service agreement, or the 2011
IPLA, and a shared services agreement, which together
governed our financial and commercial relationships
with Ant Group and Alipay.
Restructuring of Our Relationship with Ant Group
and Alipay, 2019 Equity Issuance, and Related
Amendments
On August 12, 2014, we entered into a share and
asset purchase agreement, which we refer to as
the SAPA, and entered into or amended certain
ancillary agreements including an amendment
and restatement of the 2011 IPLA, or the 2014 IPLA.
Pursuant to these agreements, we restructured
our relationships with Ant Group and Alipay and
terminated the 2011 framework agreement. On
February 1, 2018, we amended both the SAPA and the
Alipay commercial agreement, and agreed with Ant
Group and certain other parties on forms of certain
ancillary agreements. On September 23, 2019, we
further amended the SAPA. The relevant amendments
were entered into or agreed to facilitate our
acquisition of a 33% equity interest (on a fully diluted
basis) in Ant Group. On August 24, 2020, we further
amended the SAPA, the Alipay commercial agreement
and certain other agreements, referred to as the 2020
Amendments. The 2020 Amendments were made
primarily to facilitate Ant Group’s planned IPO on
the Science and Technology Innovation Board of the
Shanghai Stock Exchange and on the Main Board of
the Hong Kong Stock Exchange.
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On July 25, 2022, we and Ant Group further amended
the SAPA and the Alipay commercial agreement (such
further amendments, the “2022 Amendments”), with
certain amendments that took effect on August 13,
2022. The 2022 Amendments were made primarily
to improve our ability to maximize our competitive
advantage, enhance the economic benefit from
our equity interest in Ant Group and help us better
manage related party and other risks arising
from changes in the regulatory and operational
environment.
Apart from the 2018, 2019, 2020 and 2022
amendments to our agreements with Ant Group
described below, the key terms of our agreements
with Ant Group and Alipay from the 2014 restructuring
remain substantially unchanged.
Sale of SME Loan Business and Certain Other Assets
Pursuant to the SAPA, we sold certain securities and
assets primarily relating to our SME loan business
and other related services to Ant Group in February
2015. In addition, pursuant to software system use
and service agreements relating to the know-how
and related intellectual property that we agreed to
sell together with the SME loan business and related
services, we received annual fees for a term of seven
years, commencing in 2015 and ending in 2021. These
fees, which were recognized as other revenue, were
determined as follows: for calendar years 2015 to
2017, the entities operating the SME loan business
paid an annual fee equal to 2.5% of the average daily
balance of the SME loans provided by these entities,
and in calendar years 2018 to 2021, these entities paid
an annual fee equal to the amount of the fees paid
in calendar year 2017. In fiscal years 2022, 2023 and
2024, the annual fees we received from Ant Group and
its affiliates in connection with the SME loan business
amounted to RMB708 million, nil and nil, respectively.
For regulatory reasons, we retained approximately
RMB1,225 million of the existing SME loan portfolio
upon the completion of the transfer of the SME loan
business. These loans have been repaid. We do not
intend to conduct any new SME loan business going
forward.
Issuance of Equity Interest
In September 2019, following the satisfaction of the
closing conditions, we received through an onshore
PRC subsidiary the issuance of a 33% equity interest
(on a fully diluted basis) in Ant Group pursuant to the
SAPA, as amended in 2018 and 2019, or the Issuance.
We believe that the acquisition of the 33% equity
interest (on a fully diluted basis) in Ant Group has
strengthened our strategic relationship pursuant to the
series of agreements initially reached with Ant Group
in 2014.
Pursuant to the SAPA, as amended in 2018 and 2019,
the consideration we paid to receive the newly issued
33% equity interest (on a fully diluted basis) in Ant
Group was fully funded by payments from Ant Group
and its subsidiaries to us in consideration for certain
intellectual property and assets that we transferred
under the SAPA, as amended in 2018 and 2019.
In connection with the receipt of the Issuance, we
entered into a cross license agreement with Ant Group
providing for a license by each of Ant Group and us to
each other of certain patents, trademarks, software
and other technologies (including but not limited
to patents and software transferred at the Issuance
closing). The cross license agreement also contains
provisions relating to cooperation and coordination
between Ant Group and us on various intellectual
property matters, including prosecution, enforcement,
acquisition, and joint defense arrangements, among
other matters.
Upon closing of the Issuance, we entered into
the previously agreed form of amendment and
restatement of the 2014 IPLA, or the Amended IPLA,
and the profit share payment arrangement under
the 2014 IPLA automatically terminated. For more
information, see “— Alipay Intellectual Property License
and Software Technology Services Agreement” below.
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Financial and Accounting Treatment upon Issuance
of Equity Interest in Ant Group
There was no material operational and economic
impact on us as a result of our receipt of the 33%
equity interest (on a fully diluted basis) in Ant Group
in 2019, but we changed our accounting for our
relationship with Ant Group as a result of the Issuance.
Upon the Issuance, and our transfer of certain
intellectual property to Ant Group and its subsidiaries,
the profit share arrangement under the 2014 IPLA
was terminated, and we no longer received any
profit share payments from Ant Group. Following
the Issuance, we accounted for our equity interest
in Ant Group under the equity method and recorded
it in “Investments in equity method investees” on
our consolidated balance sheet. Subsequent to the
Issuance, we record our proportionate share of results
of Ant Group in “Share of results of equity method
investees” in our consolidated income statements on a
one quarter in-arrears basis.
Regulatory Unwind
Prior to the 2020 Amendments, the SAPA as amended
in 2018 and 2019, provided that, if a relevant
governmental authority prohibits us from owning all or
a portion of our equity interest in Ant Group after the
equity issuance has occurred through enactment of a
law, rule or regulation, or explicitly requires Ant Group
to redeem this equity interest, and the prohibition
or request is not subject to appeal and cannot
otherwise be resolved, then to the extent necessary,
Ant Group will redeem the equity interest; the related
intellectual property and asset transfers, and ancillary
transactions under the SAPA will be unwound; and the
terms of the SAPA, the 2014 IPLA, and other related
agreements will be restored, including the prior profit
share payments and liquidity event payment (which
would be payable to us in the event of a qualified IPO
of Ant Group or Alipay, in an amount equal to 37.5% of
the equity value of Ant Group as a whole, immediately
prior to the qualified IPO). If there is a partial unwind
where we retain a portion of our equity interest in
Ant Group, but less than the full 33%, then pursuant
to the terms of the SAPA and the 2014 IPLA, the prior
profit share payment arrangement and liquidity event
payment amount will be proportionately reduced
based on the amount of equity interest retained by us.
Pursuant to the 2020 Amendments, these provisions
would terminate upon the completion of a qualified
IPO of Ant Group. However, pursuant to the 2020
Amendments and the 2022 Amendments, if a qualified
IPO of Ant Group has not been completed within the
prescribed period of time, the foregoing rights will no
longer be subject to termination upon the completion
of a qualified IPO of Ant Group.
In 2011, Jack Ma and Joe Tsai contributed 280,000,000
and 120,000,000 of our Shares, respectively, after
having accounted for the Share Split, held by them
to APN Ltd. (“APN”), a vehicle they established to
hold these shares. Prior to June 2, 2022, the shares of
APN, as well as the 400,000,000 Shares, after having
accounted for the Share Split, held by APN, were
pledged to us to secure certain obligations of Ant
Group under the SAPA and the Alipay commercial
agreement, as well as the direct liability of APN for up
to US$500 million of the liquidity event payment if any
liquidity event payment becomes due. On June 2, 2022,
we agreed with Jack Ma, Joe Tsai and APN to terminate
the pledges in relation to the shares of APN and the
400,000,000 Shares, in consideration of personal
guarantees provided to us by Jack Ma and Joe Tsai in
connection with Ant Group’s remaining contingent
payment obligations to us. We believe this transaction
reasonably reflects the reduction in Ant Group’s
contingent payment obligations to us since 2011
when the pledges were first created, the valuation of
which was conducted with help from an independent
financial advisor, and the increased financial strength
and creditworthiness of Ant Group.
Pre-emptive Rights
Following our receipt of equity interest in Ant Group,
we have pre-emptive rights to participate in other
issuances of equity securities by Ant Group and certain
of its affiliates prior to a qualified IPO of Ant Group.
These pre-emptive rights entitle us to maintain the
equity ownership percentage we hold in Ant Group
immediately prior to any such issuances. In connection
with our exercise of our pre-emptive rights we are
also entitled to receive certain payments from Ant
Group, effectively funding our subscription for these
additional equity interests, up to a value of US$1.5
billion, subject to certain adjustments, or the pre-
emptive rights funded payments. In addition to these
pre-emptive rights and the pre-emptive rights funded
payments, under the SAPA, in certain circumstances
we are permitted to exercise pre-emptive rights
through an alternative arrangement that will further
protect us from dilution.
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Certain Restrictions on the Transfer of Ant Group
Equity Interests
Under the SAPA, certain parties thereto, including us in
some cases, are subject to restrictions on the transfer
of equity interests in Ant Group, including:
•
following our receipt of the Issuance and until
the earlier of the completion of a qualified IPO of
Ant Group or the termination of the independent
director rights provided in the SAPA, without the
prior written consent of our company, none of
Jack Ma, Joe Tsai (if he holds any equity interest
at that time), Junao, Junhan or Ant Group may
knowingly transfer any equity in Ant Group to
a third-party who would thereby acquire more
than 50% of the voting or economic rights in, or
assets of, Ant Group; and
•
following our receipt of the Issuance and until the
completion of a qualified IPO of Ant Group, any
transfer of equity interests in Ant Group by Junao
or Junhan, on the one hand, or our company, on
the other hand, will be subject to a right of first
refusal by the other party.
Non-competition Undertakings
Under the SAPA, subject to certain limitations and
unless both parties agree, Ant Group may not engage
in any business conducted by us from time to time
or logical extensions thereof, and we are restricted
from engaging in specified business activities within
the scope of business of Ant Group, including the
provision and distribution of credit and insurance, the
provision of investment management and banking
services, payment transaction processing and
payment clearing services for third parties, leasing,
lease financing and related services, trading, dealing
and brokerage with respect to foreign exchange
and financial instruments, distribution of securities,
commodities, funds, derivatives and other financial
products and the provision of credit ratings, credit
profiles and credit reports. Each party may, however,
make passive investments in competing businesses
below specified thresholds, in some cases after
offering the investment opportunity to the other party.
The 2020 Amendments allow Ant Group to engage in
the sale and placement of advertisements by financial
institutions solely in connection with financial services
on publicly available mobile applications and end-
user interfaces majority-owned and operated by Ant
Group, an activity that falls within the scope of our
business but which Ant Group is permitted to engage
in as an exception to the non-compete provisions,
subject to certain qualifications. Pursuant to the
2022 Amendments, we have agreed to expand Ant
Group’s ability to engage in such sale and placement
of advertisements on publicly available mobile
applications and end-user interfaces majority-owned
and operated by Ant Group. We have also agreed
to permit Ant Group to provide technology services
in facilitation of the operations of any payment or
financial services business to financial institutions and
merchants using Ant Group’s payment services, except
that Ant Group may not provide any IaaS-related cloud
services, and we are allowed to provide services and
products relating to payment accounts outside of
Chinese mainland that Ant Group is unable to provide
to us or our customers and to provide and distribute
credit and insurance in cooperation with financial
services business operators to facilitate businesses on
our platforms, among other things.
Corporate Governance Provisions
The SAPA provides that we and Ant Group will
recommend one independent nominee who, subject
to the vetting by the nomination and remuneration
committee of the board of Ant Group, to the extent
required by such committee’s charter (subject to
any amendments required by any applicable law or
requested by any applicable governmental authority),
and subject further to the vetting by applicable
governmental authorities, as required by applicable
law, will be nominated as a member of its board and
serve on the board’s audit committee, and Jack Ma,
Joe Tsai (in case he holds any equity interest in Ant
Group), Junhan and Junao will agree to vote the equity
interests in Ant Group controlled by them in favor of
the nomination. If this independent director resigns
or the director’s seat otherwise becomes vacant, so
long as SoftBank owns at least 20% of our outstanding
ordinary shares, and certain other conditions are
satisfied, SoftBank and Jack Ma, acting jointly, will
select on our behalf the individual to be designated
as a replacement director, subject to the approval of
the Independent Committee. We are not permitted to
approve certain actions to be taken under the SAPA
and related agreements before we obtain the consent
from the Independent Committee.
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Upon the Issuance in September 2019, we nominated
two of our officers who have been elected to the
board of Ant Group pursuant to our rights under the
SAPA.
In each case, these director nomination rights will
continue unless we cease to own a certain amount
of our post-issuance equity interests in Ant Group, or
upon the completion of a qualified IPO of Ant Group,
whichever is earlier.
Additional Alibaba Rights
In addition to the rights discussed above, the SAPA, as
amended in 2018 and 2019, provides us with certain
other rights with respect to Ant Group. These include,
among others:
•
customary information rights;
•
approval rights over certain Ant Group or Alipay
actions;
•
rights to ensure our ability to participate in any
qualified IPO of Ant Group;
•
approval rights (with the consent of the
Independent Committee) over increases to the
size of Ant Group board resulting in the number
of board seats exceeding a certain specific
number; and
•
approval rights (with the consent of the
Independent Committee) over any Alipay IPO.
Pursuant to the 2020 Amendments, the foregoing
rights requiring the Independent Committee’s consent
will terminate upon the completion of a qualified
IPO of Ant Group. However, pursuant to the 2020
Amendments and the 2022 Amendments, if a qualified
IPO of Ant Group has not been completed within the
prescribed period of time, these rights will no longer
be subject to termination upon the completion of a
qualified IPO of Ant Group. For more information, see
“— Termination of Alibaba Rights” below.
Termination of Alibaba Rights
Under the SAPA, as amended in 2018 and 2019,
certain of our rights with respect to Ant Group were
terminated upon our receipt of the Issuance.
In addition, the SAPA, as amended in 2018 and 2019,
provides that, in connection with Ant Group or Alipay
commencing an IPO process, we and Ant Group will
discuss in good faith the amendment or termination
of our rights to the extent necessary or advisable to
achieve an efficient and successful IPO. Certain of our
rights that would be incremental to the rights of other
shareholders of Ant Group as of the consummation
of the IPO (excluding, among other things, our
information rights) will terminate if required by a
relevant stock exchange or governmental authority,
or if necessary to obtain a legal opinion in connection
with the IPO application. If the IPO application is
withdrawn or rejected by the relevant authorities, or
if the IPO is not consummated within a certain period
of time, then any of our rights that were terminated or
amended in anticipation of the IPO will be restored.
Pursuant to the 2020 Amendments, the following
rights under the SAPA, as amended in 2018 and 2019,
will terminate upon the completion of a qualified IPO
of Ant Group:
•
our rights to participate in any qualified IPO of
Ant Group or Alipay;
•
the Independent Committee’s approval rights
over:
•
voluntary transfers of any equity securities
of Alipay;
•
increases to the size of Ant Group board
resulting in the number of board seats
exceeding a certain number; and
•
any Alipay IPO.
If the IPO of Ant Group has not been completed within
the prescribed period of time, it is expected that the
foregoing Independent Committee’s approval rights
will, pursuant to the 2020 Amendments and the 2022
Amendments, no longer be subject to termination
upon the completion of a qualified IPO of Ant Group.
Alipay Commercial Agreement
Under the Alipay commercial agreement among us,
Alipay and Ant Group, which agreement still remains
in place following the 2014 restructuring and the
2018, 2019, 2020 and 2022 amendments to our
agreements with Ant Group, each as described above,
Alipay provides payment processing and escrow
services to us. These services enable settlement of
transactions on our marketplaces through a secure
payment platform and escrow process. Given the
significant transaction volume on our platforms,
we pay Alipay a fee for these services on terms
that are preferential to us. These preferential terms
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enable us, with certain exceptions, to make available
basic payment processing and escrow services to
consumers and merchants on our marketplaces free
of charge. We believe that these services provide us
with a competitive advantage that otherwise would be
diminished without the preferential terms of the Alipay
commercial agreement.
The fees that we pay Alipay are based on fee rates
and actual payment volumes processed on our
marketplaces. The fee rates reflect, among other
things, Alipay’s bank-processing costs and operating
costs allocable to the services provided to us, and
accordingly are subject to adjustment on an annual
basis to the extent these costs increase or decline.
In connection with the 2014 restructuring, the Alipay
commercial agreement was amended to provide
that a special independent committee formed by our
independent directors and the director designated
by SoftBank, or the Independent Committee, must
approve the fee rates in advance on an annual basis.
The fee rates for the immediately preceding year
remain in effect until such time as the annual approval
by the Independent Committee has been obtained.
In fiscal years 2022, 2023 and 2024, service fees in
connection with the payment services provided by
Alipay under this agreement amounted to RMB11,824
million, RMB12,484 million and RMB13,164 million
(US$1,823 million), respectively. The Alipay commercial
agreement has an initial term of 50 years, and is
automatically renewable for further periods of 50
years, subject to our right to terminate at any time
upon one year’s prior written notice. Prior to the 2020
Amendments, if the Alipay commercial agreement
was required by applicable regulatory authorities,
including under stock exchange listing rules, to
be modified in certain circumstances, a one-time
payment may have been payable to us by Ant Group
to compensate us for the impact of the adjustment.
Certain conforming amendments were made to the
Alipay commercial agreement as part of the relevant
amendments to our agreements with Ant Group
and Alipay described above. Pursuant to the 2020
Amendments, we no longer have the right to receive
such one-time payment. This change was made to
facilitate the IPO of Ant Group. If the IPO of Ant Group
is withdrawn or rejected by governmental authority or
is not completed within a certain period of time, the
change will be unwound and our right will be restored.
Pursuant to the 2022 Amendments, our right to such
one-time payment will no longer be restored. We have
considered the probability of such one-time payment
becoming payable, the changes in the regulatory
and operational environment of our and Ant Group’s
businesses and the resultant uncertainty to the two
businesses if Ant Group were to remain subject to
the obligation to make such one-time payment. We
believe that an amendment to the Alipay commercial
agreement to remove Ant Group’s obligation to pay
such one-time payment will ultimately enhance the
economic benefit that we may receive from Ant Group
as a result of our equity interest in Ant Group and help
us better manage related party and other risks arising
from changes in the regulatory and operational
environment.
Pursuant to the 2022 Amendments, from August
13, 2023, with respect to any payment processing
and escrow services to be provided by Ant Group to
us outside of Chinese mainland, the fee rates and
payment-related terms for such services will no longer
be governed by the Alipay commercial agreement and
will instead be agreed upon between Ant Group and
us separately.
Ancillary Agreements
In connection with our entry into the original SAPA in
2014, we also entered into the 2014 IPLA, an amended
and restated shared services agreement, a SME loan
cooperation framework agreement and a trademark
agreement, each of which is described below. We
also entered into a data sharing agreement, which
was subsequently terminated on July 25, 2022. It is
intended that we and Ant Group will, to the extent
necessary for each party to provide services to our
respective customers, instead negotiate the terms of
data sharing arrangements on a case-by-case basis
and as permitted by applicable laws and regulations.
Pursuant to the SAPA, as amended in 2018 and
2019, upon the Issuance we also entered into the
Amended IPLA, a cross license agreement and
various intellectual property transfer agreements in
connection with, and to implement, the contemplated
intellectual property and asset transfers described in
“— Issuance of Equity Interest” above.
Alipay Intellectual Property License and Software
Technology Services Agreement
2014 IPLA
Pursuant to the original 2011 framework agreement,
we entered into the 2011 IPLA, pursuant to which
we and our subsidiaries licensed to Alipay certain
intellectual property rights and provided various
software technology services to Alipay and its
subsidiaries. In August 2014, we entered into the 2014
IPLA.
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Under the 2011 IPLA, Alipay paid us a royalty and
software technology services fee equal to the
sum of an expense reimbursement plus 49.9% of
the consolidated pre-tax income of Alipay and its
subsidiaries until a liquidity event of Alipay or Ant
Group. The calculation of the profit share percentage
was subject to downward adjustments upon certain
dilutive equity issuances by Alipay or Ant Group. Under
the 2014 IPLA, we received, in addition to a software
technology service fee, royalty streams related to
Alipay and other current and future businesses of
Ant Group, which we refer to collectively as the profit
share payments. The profit share payments were paid
at least annually and equal the sum of an expense
reimbursement plus 37.5% of the consolidated pre-tax
income of Ant Group (subject to certain adjustments),
including not only Alipay but all of Ant Group’s
subsidiaries.
Upon our receipt of the Issuance in September 2019,
we entered into the Amended IPLA and terminated the
2014 IPLA, and accordingly, the profit share payment
arrangement under the 2014 IPLA automatically
terminated.
Amended IPLA
Pursuant to the SAPA, as amended in 2018 and 2019,
we, Ant Group and Alipay entered into the Amended
IPLA upon our receipt of the Issuance, at which time
we also transferred certain intellectual property and
assets to Ant Group and its subsidiaries and the profit
share payment arrangement was terminated, as
described in “— Issuance of Equity Interest” above.
While the profit share payments have terminated
under the Amended IPLA, Ant Group may in certain
circumstances continue to make certain royalty
payments to us (as agreed to by Ant Group and the
Independent Committee), which may be used as pre-
emptive rights funded payments under the SAPA, as
described in “— Pre-emptive Rights” above.
Additionally, pursuant to the Amended IPLA, Ant Group
and its subsidiaries will receive expanded rights to
apply for, register and manage certain intellectual
property related to their businesses, subject to certain
continuing restrictions and our rights, and we will
cease to provide certain software technology services
to Ant Group and its subsidiaries.
The Amended IPLA will terminate upon the earliest of:
•
the full payment of all pre-emptive rights funded
payments under the SAPA;
•
the closing of a qualified IPO of Ant Group or
Alipay; and
•
our transfer to Ant Group of any remaining
intellectual property we own that is exclusively
related to the business of Ant Group.
SME Loan Cooperation Framework Agreement
We and Ant Group entered into a SME loan
cooperation framework agreement in August 2014,
pursuant to which each party agreed to cooperate
with, and provide certain services with respect to,
the other party’s enforcement of certain rights of
the other party against users of its platforms and
services and with respect to the provision of certain
financial services to our customers and merchants.
In particular, we agreed, upon Ant Group’s request,
to close down or suspend online storefronts and
restrict marketing activities on our platforms of
persons defaulting on loans made by Ant Group and
persons in violation of Alipay rules and regulations,
and to publish notices on our platforms and provide
information regarding these persons, in each case
in a manner to be further agreed upon from time to
time. Ant Group agreed, upon our request, to make
loans and/or extensions of credit and related financial
services available to our users, freeze and pay over to
us funds in accounts of users violating our rules and
regulations or agreements with us, accelerate loans
and terminate credit facilities of these users, restrict
marketing activities on its platforms by these users,
and provide information regarding these users, in
each case in a manner to be further agreed upon from
time to time. Neither party is required to pay any fees
in consideration for the services provided by the other
party, and apart from the provision of these services,
there will be no other exchange of value in connection
with this agreement. The cooperation agreement has
an initial term of five years, with automatic renewals
upon expiry for additional five-year periods.
From time to time, we expect to enter into similar
commercial arrangements with respect to cooperation
matters and the provision of services between us and
Ant Group and to our respective customers.
Trademark Agreement
We and Ant Group entered into a trademark
agreement in August 2014, pursuant to which
we granted Ant Group a non-transferable, non-
assignable and non-sublicensable (except to
its subsidiaries) license for it and its sublicensed
subsidiaries to continue to use certain trademarks and
Major Shareholders and Related Party Transactions
166
Alibaba Group Holding Limited
domain names based on trademarks owned by us,
in connection with their payment services business
and the SME loan business transferred by us to them,
and in the same manner of use as in August 2014,
and a non-transferable, non-assignable and non-
sublicensable (except to its subsidiaries) license to
use other trademarks and domain names based
on trademarks owned by us, and in that manner,
as we may agree to allow in the future. Pursuant
to the trademark agreement, each of the parties
further agreed to the rights and limitations that each
would have to use the “Ali” name or prefix and the
“e-commerce” (and its Chinese equivalent) name,
prefix or logo as part of a trademark or domain
name in each party’s and its subsidiaries’ respective
businesses. Neither party is required to pay any fees
under this agreement, and, apart from the licenses
and rights set forth in the agreement, there will be
no other exchange of value in connection with this
agreement. Pursuant to the SAPA, following our receipt
of the Issuance, we transferred and are in the process
of transferring to Ant Group ownership of several of
the trademarks and domain names licensed by us to
Ant Group. However, the trademark agreement will
remain in effect in accordance with its terms following
the transaction to provide for a continued license of
other trademarks that we will continue to own.
Shared Services Agreement and Other
Commercial Arrangements with Ant Group
We and Ant Group entered into a shared services
agreement, which was amended and restated in
August 2020 in connection with the 2020 Amendments
to the SAPA. Pursuant to the shared services
agreement, we and Ant Group provide certain
administrative and support services to each other
and our respective affiliates. We also provide Ant
Group and its affiliates with cloud computing services,
marketplace software technology services and other
services. See “— Commercial Arrangements with
Investees and Ant Group and Its Affiliates.”
Agreements Entered into in 2020
Arrangements to Acquire Further Shares in an IPO
of Ant Group
In 2020, we entered into certain agreements with
Ant Group, pursuant to which we may subscribe for
additional shares in Ant Group as part of an IPO of Ant
Group, such that we may continue to hold an equity
interest not exceeding 33% in Ant Group upon the
completion of such IPO of Ant Group.
Documents to Implement Transfers of IP
Contemplated by SAPA
In connection with the 2020 Amendments, we entered
into a number of agreements pursuant to which we
transferred to Ant Group certain intellectual property
exclusively relating to the business of Ant Group in
connection with the IPO of Ant Group, which transfers
were contemplated by the SAPA, as amended in 2018
and 2019. Ant Group would be required to transfer
such intellectual property back to us if the IPO of Ant
Group is not completed within a certain period of time.
Pursuant to the 2022 Amendments, having considered
the relevant insignificance of such intellectual property
to us and the uncertainties associated with any such
requirements to transfer such intellectual property
back to us in light of the regulatory and operational
changes, we agreed that Ant Group would no longer
be required to transfer such intellectual property
to us regardless of whether the IPO of Ant Group is
completed.
Investments Involving Ant Group
We have invested in businesses in which Ant Group is
a shareholder or co-invested with Ant Group in other
businesses.
Share-based Award Arrangements
Prior to 2023, certain of our employees were granted
share-based awards by Junhan and Ant Group, and
certain employees of Ant Group were granted share-
based awards by us. These awards are settled by
respective grantors upon disposal of these awards
by the holders, vesting or exercise of these awards,
depending on the forms of these awards. In addition,
Junhan and Ant Group have the right to repurchase
the vested awards (or any underlying equity for the
settlement of the vested awards) granted by them,
as applicable, from the holders upon an initial public
offering of Ant Group or the termination of the holders’
employment with us at a price to be determined based
on the then fair market value of Ant Group.
Starting from April 2020, the parties agreed to settle
with each other the cost associated with certain share-
based awards granted to each other’s employees
upon vesting. The settlement amounts under this
arrangement depend on the values of Ant Group
share-based awards granted to our employees and
our share-based awards granted to employees of Ant
Group. It is expected that the net settlement amount
would be insignificant to us.
Major Shareholders and Related Party Transactions
167
Fiscal Year 2024 Annual Report
Transactions with Entities Affiliated with
Our Directors and Officers
Joe Tsai, our chairman, has purchased his own
aircraft for both business and personal use. He has
waived any leasing fees for the use of such aircraft in
connection with the performance of his duties as our
chairman, and we have agreed to assume the cost of
maintenance, crew and operation of the aircraft where
the cost is allocated for business purposes.
Eddie Wu, our director and chief executive officer, is
the founding partner of Vision Plus Capital, a venture
capital firm that has focused since 2015 on investing in
the areas of advanced technology, enterprise services
and digital healthcare. He currently holds interests in
the general partners of a number of funds of Vision
Plus Capital and certain management companies
of Vision Plus Capital. He has also committed, or is
expected to commit funds, to the general partners
or as limited partners of certain funds of Vision Plus
Capital. We refer to these funds collectively as Vision
Plus Capital Funds.
We have invested in certain Vision Plus Capital Funds,
with a total commitment of approximately US$240
million, and certain Vision Plus Capital Funds have
entered into, and from time to time may enter into
co-investment transactions with us and third parties.
We have also invested in other portfolio companies of
which Vision Plus Capital Funds are shareholders.
Relationship with Investment Funds
Affiliated with Jack Ma
Jack Ma currently holds minority interests in the
general partners of a number of Yunfeng investment
funds that were established prior to his retirement
from our company in 2020, in which he is entitled
to receive a portion of carried interest proceeds. We
refer to these funds collectively as the Yunfeng Funds.
He also holds minority interests in certain investment
advisor entities of certain Yunfeng Funds. In addition,
Jack Ma, his wife and certain entities controlled by
them have committed, or are expected to commit,
funds to the general partners or as limited partners of
certain Yunfeng Funds.
Jack Ma has either non-voting interests or has waived
the exercise of his voting power with respect to his
interests in each of the investment advisor entities and
the managing entities of certain Yunfeng Funds. Jack
Ma has also agreed to donate all distributions of (x)
carried interest proceeds he may receive in respect
of the Yunfeng Funds and (y) dividends he may
receive with respect to his holdings of shares in any
investment advisor entity of the Yunfeng Funds, which
we collectively refer to as the Yunfeng GP Distributions,
to, or for the benefit of, the Alibaba Group Charitable
Fund or other entities identified by Jack Ma that serve
charitable purposes. In addition, Jack Ma has agreed
that, other than his income tax obligations arising from
recognition of income from Yunfeng GP Distributions,
he will not claim any charitable deductions with
respect to donations of his Yunfeng GP Distributions
against his other income tax obligations. See “—
Commitments of Jack Ma to Alibaba Group” below. We
believe that, through its expertise, knowledge base
and extensive network of contacts in private equity in
China, Yunfeng will assist us in developing a range of
relevant strategic investment opportunities.
The Yunfeng Funds have historically entered into co-
investment transactions with us and third parties. We
have also invested in other businesses in which the
Yunfeng Funds are shareholders.
Commitments of Jack Ma to Alibaba
Group
Jack Ma, formerly one of our directors, has confirmed
the following commitments to our board of directors:
•
He intends to reduce and thereafter limit his
direct and indirect economic interest in Ant Group
over time (for the avoidance of doubt, other
than the equity stake in Ant Group held by our
company), to a percentage that does not exceed
his and his affiliates’ interest in our company
immediately prior to our initial public offering
and that the reduction will occur in a manner
by which neither Jack Ma nor any of his affiliates
would receive any economic benefit;
•
He will donate all of his Yunfeng GP Distributions
to, or for the benefit of, the Alibaba Group
Charitable Fund or other entities identified by him
that serve charitable purposes;
•
Other than his income tax obligations arising
from recognition of income from Yunfeng GP
Distributions, he will not claim any charitable
deductions with respect to donations of his
Yunfeng GP Distributions against his other
income tax obligations; and
Major Shareholders and Related Party Transactions
168
Alibaba Group Holding Limited
•
If required by us, while he remains an Alibaba
executive, he will assume for our benefit legal
ownership of investment vehicles, holding
companies and variable interest entities that
further our business interests in Internet, media
and telecom related businesses and, in this case,
he will disclaim all economic benefits from his
ownership and enter into agreements to transfer
any benefits to us (or as we may direct) when
permitted by applicable law.
Other Transactions with Investees
We have extended loans to certain of our investees
for working capital and other uses in conjunction with
our investments. As of March 31, 2024, the aggregate
outstanding balance of these loans was RMB2,628
million (US$364 million), with remaining terms of up to
two years and interest rates of up to 10% per annum.
We have agreed to provide a guarantee for a term
loan facility of HK$7.7 billion (US$1.0 billion) in favor
of Cingleot, a company that is partially owned by
us, in connection with a logistic center development
project at the Hong Kong International Airport. In May
2024, the loan facility was modified to a revolving loan
facility and the facility amount was reduced to HK$6.5
billion. As of the date of this annual report, HK$4,875
million was drawn down by that entity under this
facility.
Also, we co-invested and may from time to time co-
invest with certain of our investees in other businesses.
Other than the transactions disclosed above, we also
have commercial arrangements with certain of our
investees and other related parties in which:
•
we recorded cost and expenses paid to investees
for cloud computing services, content acquisition,
purchase of inventory and various other services;
and
•
we recorded income generated from investees
for providing marketing, commission and other
services.
The amounts relating to these services provided and
received represent less than 1% of our revenue and
total costs and expenses, respectively, for the years
ended March 31, 2022, 2023 and 2024.
Contractual Arrangements among
Our Subsidiaries, the Variable Interest
Entities and Variable Interest Entity
Equity Holders
Chinese law restricts foreign ownership in enterprises
that provide value-added telecommunications
services, which includes the ICPs. As a result, we
operate our Internet businesses and other businesses
in which foreign investment is restricted or prohibited
in China through contractual arrangements between
our relevant subsidiaries, the variable interest entities,
which, where applicable, hold the ICP licenses and
other regulated licenses and generally operate our
Internet businesses and other businesses in which
foreign investment is restricted or prohibited, and the
variable interest entity equity holders. For a description
of these contractual arrangements, see “Business
Overview — Organizational Structure — Contractual
Arrangements among Our Subsidiaries, the Variable
Interest Entities and Variable Interest Entity Equity
Holders.”
Indemnification Agreements
We have entered into indemnification agreements
with our directors and executive officers. These
agreements require us to indemnify these individuals,
to the fullest extent permitted by law, for certain
liabilities to which they may become subject as a result
of their affiliation with us.
Employment Agreements
See “Directors, Senior Management and Employees —
Compensation — Employment Agreements.”
Share Options
See “Directors, Senior Management and Employees —
Compensation — Equity Incentive Plan.”
Description Of Securities Other Than Equity Securities
American Depositary Shares
Fees Paid by Our ADS Holders
As an ADS holder, you will be required to pay the following service fees to the depositary, Citibank, N.A.:
Persons depositing or withdrawing
shares or ADS holders must pay:
For:
Up to US$5.00 per 100 ADSs (or fraction thereof)
•
Issuance of ADSs upon deposit of Shares
(excluding issuances as a result of distributions
of ADSs pursuant to (i) stock dividends or other
free stock distributions, or (ii) exercise of rights to
purchase additional ADSs).
•
Delivery of Shares against surrender of ADSs.
•
Distribution of cash dividends or other cash
distributions.
•
Distribution of ADSs pursuant to (i) stock dividends
or other free stock distributions, or (ii) exercise of
rights to purchase additional ADSs.
•
Distribution of securities other than ADSs or rights
to purchase additional ADSs.
Up to US$5.00 per 100 ADS (or fraction thereof) per
calendar year
•
ADS services.
As an ADS holder you will also be responsible to pay
certain fees and expenses incurred by the depositary
and certain taxes and governmental charges such as:
•
taxes (including applicable interest and penalties)
and other governmental charges;
•
fees for the transfer and registration of Shares
charged by the registrar and transfer agent for the
Shares in the Cayman Islands (i.e., upon deposit
and withdrawal of Shares);
•
expenses incurred for converting foreign currency
into U.S. dollars;
•
expenses for cable, telex and fax transmissions
and for delivery of securities;
•
fees and expenses as are incurred by the
depositary in connection with compliance with
applicable exchange control regulations;
•
cable, telex and facsimile transmission and delivery
expenses as expressly provided in the Deposit
Agreement; and
•
fees and expenses incurred in connection with the
delivery or servicing of Shares on deposit.
Depositary fees payable upon the issuance and
cancellation of ADSs are typically paid to the
depositary bank by the brokers (on behalf of their
clients) receiving the newly issued ADSs from the
depositary bank and by the brokers (on behalf of their
clients) delivering the ADSs to the depositary bank for
cancellation. The brokers in turn charge these fees to
their clients. Depositary fees payable in connection
with distributions of cash or securities to ADS holders
and the depositary services fee are charged by the
depositary bank to the holders of record of ADSs as of
the applicable ADS record date.
The Depositary fees payable for cash distributions are
generally deducted from the cash being distributed.
In the case of distributions other than cash (e.g.,
stock dividend, rights), the depositary bank charges
the applicable fee to the ADS record date holders
concurrent with the distribution. In the case of ADSs
registered in the name of the investor (whether
certificated or uncertificated in direct registration),
the depositary bank sends invoices to the applicable
record date ADS holders. In the case of ADSs held
in brokerage and custodian accounts (via DTC), the
depositary bank generally collects its fees through
the systems provided by DTC (whose nominee is the
169
Fiscal Year 2024 Annual Report
Other Information to Shareholders
registered holder of the ADSs held in DTC) from the
brokers and custodians holding ADSs in their DTC
accounts. The brokers and custodians who hold their
clients’ ADSs in DTC accounts in turn charge their
clients’ accounts the amount of the fees paid to the
depositary banks.
In the event of refusal to pay the depositary fees, the
depositary bank may, under the terms of the Deposit
Agreement, refuse the requested service until payment
is received or may set off the amount of the depositary
fees from any distribution to be made to the ADS
holder.
Note that the fees and charges you may be required
to pay may vary over time and may be changed by us
and by the depositary. You will receive prior notice of
these changes.
Fees and Payments from the Depositary
to Us
Our depositary has agreed to share with us certain
fees payable to the depositary by holders of ADSs. For
fiscal year 2024, the depositary shared with us US$30
million, after deduction of applicable U.S. taxes.
Conversion between ADSs and Shares
Dealings and Settlement of Shares in Hong
Kong
Our Shares trade on the Hong Kong Stock Exchange
in board lots of 100 Shares. Dealings in our Shares on
the Hong Kong Stock Exchange are conducted in Hong
Kong dollars. Following the launch of Hong Kong
Dollar — Renminbi Dual Counter Model by the Hong
Kong Stock Exchange, our shares are also traded in
Renminbi (RMB) with stock code “89988” under the
RMB counter since June 19, 2023.
The transaction costs of dealings in our Shares on the
Hong Kong Stock Exchange include:
•
Hong Kong Stock Exchange trading fee of
0.00565% of the consideration of the transaction,
charged to each of the buyer and seller;
•
SFC transaction levy of 0.0027% of the
consideration of the transaction, charged to each
of the buyer and seller;
•
Accounting and Financial Reporting Council
transaction levy of 0.00015% of the consideration
of the transaction, charged to each of the buyer
and seller;
•
transfer deed stamp duty of HK$5.00 per transfer
deed (if applicable), payable by the seller;
•
ad valorem stamp duty at a total rate of 0.2%
of the consideration for, or (if greater) the value
of, the Shares transferred, with 0.1% payable by
each of the buyer and seller;
•
stock settlement fee, which is currently 0.002%
of the gross transaction value, subject to a
minimum fee of HK$2.00 and a maximum fee of
HK$100.00 per side per trade;
•
brokerage commission, which is freely
negotiable with the broker; and
•
the Hong Kong Share Registrar will charge
between HK$2.50 to HK$20.00, depending on
the speed of service (or such higher fee as may
from time to time be permitted under the Hong
Kong Listing Rules), for each transfer of Shares
from one registered owner to another, each
share certificate canceled or issued by it and any
applicable fee as stated in the share transfer
forms used in Hong Kong.
Investors must settle their trades executed on the
Hong Kong Stock Exchange through their brokers
directly or through custodians. For an investor who
has deposited his or her Shares in his or her stock
account or in his or her designated Central Clearing
and Settlement System participant’s stock account
maintained with the Central Clearing and Settlement
System, or CCASS, settlement will be effected in
CCASS in accordance with the General Rules of CCASS
and CCASS Operational Procedures in effect from
time to time. For an investor who holds the physical
certificates, settlement certificates and the duly
executed transfer forms must be delivered to his or her
broker or custodian before the settlement date.
Other Information to Shareholders
170
Alibaba Group Holding Limited
Conversion between Shares Trading in Hong
Kong and ADSs
In connection with the listing of our Shares on the
Hong Kong Stock Exchange, we have established
a branch register of members in Hong Kong, or the
Hong Kong share register, which is maintained by
our Hong Kong Share Registrar, Computershare
Hong Kong Investor Services Limited. Our principal
register of members, or the Cayman share register, is
maintained by our Principal Share Registrar.
All Shares offered in our Hong Kong public offering
are registered on the Hong Kong share register in
order to be listed and traded on the Hong Kong
Stock Exchange. As described in further detail below,
holders of Shares registered on the Hong Kong share
register are able to convert these Shares into ADSs,
and vice versa.
In connection with the Hong Kong public offering, and
to facilitate fungibility and conversion between ADSs
and Shares and trading between the NYSE and the
Hong Kong Stock Exchange, we moved a portion of
our issued Shares that are represented by ADSs from
our Cayman share register to our Hong Kong share
register.
Our ADSs
Our ADSs are traded on the NYSE. Dealings in our ADSs
on the NYSE are conducted in U.S. Dollars.
ADSs may be held either:
•
directly, by having a certificated ADS, or an
American Depositary Receipt, or ADR, registered
in the holder’s name, or by holding in the
direct registration system, pursuant to which
the depositary may register the ownership of
uncertificated ADSs, which ownership shall be
evidenced by periodic statements issued by the
depositary to the ADS holders entitled thereto; or
•
indirectly, through the holder’s broker or other
financial institution.
The depositary for our ADSs is Citibank, N.A., whose
office is located at 388 Greenwich Street, New York,
New York 10013, United States. The depositary’s
custodian in Hong Kong is Citibank, N.A. — Hong Kong
branch, whose office is located at 9/F Citi Tower, One
Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon,
Hong Kong.
Converting Shares Trading in Hong Kong into
ADSs
An investor who holds Shares registered in Hong Kong
and who intends to convert them to ADSs to trade
on the NYSE must deposit or have his or her broker
deposit the Shares with the depositary’s Hong Kong
custodian, Citibank, N.A. — Hong Kong branch, or the
custodian, in exchange for ADSs.
A deposit of Shares trading in Hong Kong in exchange
for ADSs involves the following procedures:
•
If Shares have been deposited with CCASS, the
investor must transfer Shares to the depositary’s
account with the custodian within CCASS by
following the CCASS procedures for transfer
and submit and deliver a duly completed
and signed conversion form to the depositary
(hkadroperations@citi.com) via his or her broker.
•
If Shares are held outside CCASS, the investor
must arrange to deposit his or her Shares into
CCASS for delivery to the depositary’s account
with the custodian within CCASS, submit and
deliver a request for conversion form to the
custodian and after duly completing and signing
such conversion form, deliver such conversion
form to the custodian.
•
Upon payment of its fees and expenses and of
any taxes or charges, such as stamp taxes or
stock transfer taxes or fees, if applicable, the
depositary will issue the corresponding number
of ADSs in the name(s) requested by an investor
and will deliver the ADSs to the designated
DTC account of the person(s) designated by an
investor or his or her broker.
•
The investor (or one of its agents) must
deliver a certification to the depositary that
(i) the shareholder is not the company or an
affiliate of the company, or acting on behalf
of the company or one of its affiliates, (ii) the
deposited shares are not “restricted securities”
(as defined in the Deposit Agreement), and (iii)
the deposited shares were acquired in either
(a) an open market transaction executed on,
or in a “direct business” transaction between a
broker and its client reported to, the Hong Kong
Stock Exchange, (b) a transaction registered
with the SEC under the U.S. Securities Act, or
(c) a transaction exempt from registration with
the SEC (and the applicable restricted period or
distribution compliance period has elapsed).
Other Information to Shareholders
171
Fiscal Year 2024 Annual Report
For Shares deposited in CCASS, under normal
circumstances, the above steps generally require
two business days. For Shares held outside CCASS in
physical form, the above steps may take 14 business
days, or more, to complete. Temporary delays
may arise. For example, the transfer books of the
depositary may from time to time be closed to ADS
issuances. The investor will be unable to trade the
ADSs until the procedures are completed.
Converting ADSs to Shares Trading in Hong Kong
An investor who holds ADSs and who intends to
convert his or her ADSs into Shares to trade on the
Hong Kong Stock Exchange must cancel the ADSs the
investor holds and withdraw Shares from our ADS
program and cause his or her broker or other financial
institution to trade such Shares on the Hong Kong
Stock Exchange.
An investor that holds ADSs indirectly through a broker
should follow the broker’s procedure and instruct
the broker to arrange for cancelation of the ADSs,
and transfer of the underlying Shares from Citibank’s
account on the CCASS system to the investor’s Hong
Kong stock account. The broker, upon receiving
instructions from its client, should surrender the ADSs
to Citibank and said instructions to Citibank
(drcerts@citi.com/citiadr@citi.com/
drbrokerservices@citi.com ) to cancel the ADSs with
share delivery instructions in CCASS.
For investors holding ADSs directly, the following steps
must be taken:
•
To withdraw Shares from our ADS program, an
investor who holds ADSs may turn in such ADSs
at the office of the depositary (and the applicable
ADR(s) if the ADSs are held in certificated form),
and send an instruction to cancel such ADSs to
the depositary.
•
Upon payment or net of its fees and expenses
and of any taxes or charges, such as stamp taxes
or stock transfer taxes or fees, if applicable, the
depositary will instruct the custodian to deliver
Shares underlying the canceled ADSs to the
CCASS account designated by an investor.
•
If an investor prefers to receive Shares outside
CCASS, he or she must receive Shares in CCASS
first and then arrange for withdrawal from
CCASS. Investors can then obtain a transfer
form signed by HKSCC Nominees Limited (as
the transferor) and register Shares in their own
names with the Hong Kong Share Registrar.
For Shares to be received in CCASS, under normal
circumstances, the above steps generally require
two business days. For Shares to be received outside
CCASS in physical form, the above steps may take 14
business days, or more, to complete. The investor will
be unable to trade the Shares on the Hong Kong Stock
Exchange until the procedures are completed.
Temporary delays may arise. For example, the transfer
books of the depositary may from time to time be
closed to ADS cancellations. In addition, completion
of the above steps and procedures is subject to there
being a sufficient number of Shares on the Hong
Kong share register to facilitate a withdrawal from the
ADS program directly into the CCASS system. We are
not under any obligation to maintain or increase the
number of Shares on the Hong Kong share register to
facilitate such withdrawals.
Depositary Requirements
Before the depositary issues ADSs or permits
withdrawal of Shares, the depositary may require:
•
production of satisfactory proof of the identity
and genuineness of any signature or other
information it deems necessary; and
•
compliance with procedures it may establish,
from time to time, consistent with the Deposit
Agreement, including presentation of transfer
documents.
The depositary may refuse to deliver, transfer, or
register issuances, transfers and cancelations of ADSs
generally when the transfer books of the depositary
or our Hong Kong Share Registrar are closed or at any
time if the depositary or we determine it advisable
to do so or it would violate any applicable law or the
depositary’s policies or procedures.
All costs attributable to the transfer of Shares to effect
a withdrawal from or deposit of Shares into our ADS
program will be borne by the investor requesting the
transfer. In particular, holders of Shares and ADSs
should note that the Hong Kong Share Registrar will
charge between HK$2.50 to HK$20.00, depending on
the speed of service (or such higher fee as may from
time to time be permitted under the Hong Kong Listing
Rules), for each transfer of Shares from one registered
owner to another, each share certificate canceled or
issued by it and any applicable fee as stated in the
share transfer forms used in Hong Kong. In addition,
holders of Shares and ADSs must pay US$5.00 (or less)
per 100 ADSs for each issuance of ADSs and for each
cancelation of ADSs, as the case may be, in connection
with the deposit of Shares into, or withdrawal of
Shares from, our ADS program.
Other Information to Shareholders
172
Alibaba Group Holding Limited
Purchases of Equity
Securities by the Issuer
and Affiliated Purchasers
In May 2019, our board of directors authorized a share
repurchase program for an amount of up to US$6.0
billion over a period of two years. In December 2020,
our board of directors authorized an upsize of our
share repurchase program from US$6.0 billion to
US$10.0 billion, for a two-year period through the
end of 2022. In August 2021, our board of directors
authorized an upsize of our share repurchase program
from US$10.0 billion to US$15.0 billion. In March 2022,
our board of directors authorized an upsize of our
share repurchase program from US$15.0 billion to
US$25.0 billion, through the end of March 2024. In
November 2022, our board of directors authorized a
further upsize of our share repurchase program from
US$25.0 billion to US$40.0 billion, which is effective
through the end of March 2025. In February 2024,
our board of directors authorized a further increase
of US$25.0 billion to our share repurchase program
through the end of March 2027.
During the year ended March 31, 2024, we
repurchased approximately 1,249 million of our
ordinary shares (equivalent to 156 million of our ADSs)
for a total of US$12.5 billion. These purchases were
made in both the U.S. and Hong Kong markets under
the share repurchase program. As of March 31, 2024,
we had 19.5 billion ordinary shares (equivalent to 2.4
billion ADSs) issued and outstanding.
In addition, our equity incentive award agreements
generally provide that, in the event of a grantee’s
termination for cause (including any commission of an
act of fraud, dishonesty or ethical breach) or violation
of a non competition undertaking, we will have the
right to terminate grants, forfeit and cancel shares or,
if applicable, repurchase the shares acquired by the
grantee, generally at the original purchase price or
the exercise price paid for these shares. See “Directors,
Senior Management and Employees — Compensation
— Equity Incentive Plan.”
The table below summarizes the repurchases we made in the periods indicated.
Month
Total Number of
Ordinary
Shares
Purchased as
Part of Share
Repurchase
Program
Total Price
Paid
(US$, in millions)
Average Price
Paid Per
Ordinary
Share(1)
(US$)
Approximate
Dollar Value of
Ordinary Shares
that May Yet
Be Purchased
Under Share
Repurchase
Program(2)
(US$, in millions)
April 2023
116,367,488
1,347
11.57
18,053
May 2023
119,361,624
1,250
10.47
16,803
June 2023
48,684,480
525
10.79
16,278
July 2023
40,080,824
460
11.48
15,817
August 2023
40,850,304
465
11.37
15,353
September 2023
67,474,352
742
11.00
14,611
October 2023
84,148,984
880
10.45
13,731
November 2023
97,682,016
980
10.03
12,751
December 2023
110,888,776
1,018
9.18
11,733
January 2024
136,521,752
1,227
8.99
10,506
February 2024
174,923,148
1,616
9.24
33,890
March 2024
212,098,384
1,942
9.16
31,948
(1) Each ADS represents eight Shares.
(2) In February 2024, our board of directors authorized an increase of US$25.0 billion to our share repurchase program through the
end of March 2027.
Other Information to Shareholders
173
Fiscal Year 2024 Annual Report
Taxation
The following is a general summary of certain Cayman
Islands, Chinese mainland, Hong Kong S.A.R. and
United States federal income tax consequences
relevant to an investment in our ADSs and ordinary
shares. The discussion is not intended to be, nor
should it be construed as, legal or tax advice to any
particular prospective purchaser. The discussion is
based on laws and relevant interpretations thereof in
effect as of the date of this annual report, all of which
are subject to change or different interpretations,
possibly with retroactive effect. The discussion does
not address U.S. state or local tax laws, or tax laws of
jurisdictions other than the Cayman Islands, Chinese
mainland, Hong Kong S.A.R. and the United States.
You should consult your own tax advisors with respect
to the consequences of acquisition, ownership and
disposition of our ADSs and ordinary shares. To
the extent that this discussion relates to matters of
Cayman Islands tax law, it is the opinion of Maples
and Calder (Hong Kong) LLP, our Cayman Islands
legal counsel. To the extent that the discussion states
definitive legal conclusions under PRC tax laws and
regulations, it is the opinion of Fangda Partners, our
PRC counsel.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on
individuals or corporations based upon profits,
income, gains or appreciation and there is no taxation
in the nature of inheritance tax or estate duty or
withholding tax applicable to us or to any holder of
our ADSs or ordinary shares. There are no other taxes
likely to be material to us levied by the Government of
the Cayman Islands except for stamp duties that may
be applicable on instruments executed in, or after
execution brought into, the jurisdiction of the Cayman
Islands. No stamp duty is payable in the Cayman
Islands on the issue of shares by, or any transfer of
shares of, Cayman Islands companies (except those
which hold interests in land in the Cayman Islands).
The Cayman Islands is not party to any double tax
treaties that are applicable to any payments made
to or by our company. There are no exchange control
regulations or currency restrictions in the Cayman
Islands.
Payments of dividends and capital in respect of
our ADSs and ordinary shares will not be subject to
taxation in the Cayman Islands and no withholding will
be required on the payment of a dividend or capital to
any holder of our ADSs or ordinary shares, as the case
may be, nor will gains derived from the disposal of our
ADSs or ordinary shares be subject to Cayman Islands
income or corporation tax.
People’s Republic of China Taxation
We are a holding company incorporated in the
Cayman Islands and we gain substantial income
by way of dividends from our PRC subsidiaries. The
EIT Law and its implementation rules, both of which
became effective on January 1, 2008 and were most
recently amended on December 29, 2018 and April
23, 2019, respectively, provide that China sourced
income of foreign enterprises, such as dividends
paid by a PRC subsidiary to its equity holders that are
non-resident enterprises, will normally be subject
to PRC withholding tax at a rate of 10%, unless any
non-resident enterprise’s jurisdiction of incorporation
has a tax treaty with China that provides for a lower
withholding tax rate for which the foreign investor is
eligible.
Under the EIT Law, an enterprise established outside
of China with a “de facto management body”
within China is considered a “resident enterprise,”
which means that it is treated in the same manner
as a Chinese enterprise for enterprise income tax
purposes. Although the implementation rules of the
EIT Law define “de facto management body” as a
managing body that exercises substantive and overall
management and control over the production and
business, personnel, accounting books and assets
of an enterprise, the only official guidance for this
definition currently available is set forth in Circular
82 issued by the STA, which provides guidance on
the determination of the tax residence status of a
Chinese-controlled offshore incorporated enterprise,
defined as an enterprise that is incorporated under
the laws of a foreign country or territory and that has
a PRC enterprise or enterprise group as its primary
controlling shareholder. Although Alibaba Group
Holding Limited does not have a PRC enterprise
or enterprise group as our primary controlling
shareholder and is therefore not a Chinese-controlled
offshore incorporated enterprise within the meaning
of Circular 82, in the absence of guidance specifically
applicable to us, we have applied the guidance set
forth in Circular 82 to evaluate the tax residence status
of Alibaba Group Holding Limited and its subsidiaries
outside the PRC.
Other Information to Shareholders
174
Alibaba Group Holding Limited
According to Circular 82, a Chinese-controlled offshore
incorporated enterprise will be regarded as a PRC tax
resident by virtue of having a “de facto management
body” in China and will be subject to PRC enterprise
income tax on its worldwide income only if all of the
following criteria are met:
•
the primary location of the day-to-day
operational management is in the PRC;
•
decisions relating to the enterprise’s financial
and human resource matters are made or
are subject to approval by organizations or
personnel in the PRC;
•
the enterprise’s primary assets, accounting books
and records, company seals, and board and
shareholders meeting minutes are located or
maintained in the PRC; and
•
50% or more of voting board members or senior
executives habitually reside in the PRC.
We do not believe that we meet any of the conditions
outlined in the immediately preceding paragraph.
Alibaba Group Holding Limited and its offshore
subsidiaries are incorporated outside the PRC. As
a holding company, our key assets and records,
including the resolutions and meeting minutes
of our board of directors and the resolutions and
meeting minutes of our shareholders, are located
and maintained outside the PRC. In addition, we are
not aware of any offshore holding companies with
a corporate structure similar to ours that has been
deemed a PRC “resident enterprise” by the PRC tax
authorities. Accordingly, we believe that Alibaba Group
Holding Limited and our offshore subsidiaries should
not be treated as a “resident enterprise” for PRC tax
purposes if the criteria for “de facto management
body” as set forth in Circular 82 were deemed
applicable to us. However, as the tax residency status
of an enterprise is subject to determination by the
PRC tax authorities and uncertainties remain with
respect to the interpretation of the term “de facto
management body” as applicable to our offshore
entities, we will continue to monitor our tax status.
The implementation rules of the EIT Law provide
that, (i) if the enterprise that distributes dividends is
domiciled in the PRC or (ii) if gains are realized from
transferring equity interests of enterprises domiciled in
the PRC, then the dividends or capital gains are treated
as China sourced income. It is not clear how “domicile”
may be interpreted under the EIT Law, and it may be
interpreted as the jurisdiction where the enterprise
is a tax resident. Therefore, if we are considered a
PRC tax resident enterprise for PRC tax purposes,
any dividends we pay to our overseas shareholders
or ADS holders that are non-resident enterprises as
well as gains realized by those shareholders or ADS
holders from the transfer of our shares or ADSs may
be regarded as China-sourced income and as a result
become subject to PRC withholding tax at a rate of
10%, unless any of the non-resident enterprises’
jurisdictions has a tax treaty with China that provides
for a preferential treatment.
Furthermore, if we are considered a PRC resident
enterprise and the competent PRC tax authorities
consider dividends we pay with respect to our shares
or ADSs and the gains realized from the transfer of
our shares or ADSs to be income derived from sources
within the PRC, the dividends we pay to our overseas
shareholders or ADS holders who are non-resident
individuals, and gains realized by those shareholders
or ADS holders from the transfer of our shares or ADSs,
may be subject to PRC individual income tax at a rate
of 20%, unless any of the non-resident individuals’
jurisdictions has a tax treaty with China that provides
for a preferential tax rate or a tax exemption. It is also
unclear whether, if we are considered a PRC resident
enterprise, holders of our shares or ADSs would be
able to claim the benefit of income tax treaties or
agreements entered into between China and other
countries or areas.
See “Risk Factors — Risks Related to Doing Business in
the People’s Republic of China — We may be treated as
a resident enterprise for PRC tax purposes under the
PRC Enterprise Income Tax Law, and we may therefore
be subject to PRC income tax on our global income”
and “Risk Factors — Risks Related to Doing Business in
the People’s Republic of China — Dividends payable
to foreign investors and gains on the sale of our ADSs
and/or ordinary shares by our foreign investors may
become subject to PRC taxation.”
Other Information to Shareholders
175
Fiscal Year 2024 Annual Report
Hong Kong Taxation
Our subsidiaries incorporated in Hong Kong were
subject to Hong Kong profits tax at a rate of 16.5% in
the fiscal years ended March 31, 2022, 2023 and 2024.
Our principal register of members is maintained by our
Principal Share Registrar in the Cayman Islands, and
our Hong Kong register of members is maintained by
the Hong Kong Share Registrar in Hong Kong.
Dealings in our Shares registered on our Hong Kong
share register are subject to Hong Kong stamp duty.
The stamp duty is charged to each of the seller and
purchaser at the rate of 0.1% of the consideration for,
or (if greater) the value of, our Shares transferred. In
other words, a total of 0.2% is currently payable on a
typical sale and purchase transaction of our Shares. In
addition, a fixed duty of HK$5.00 is charged on each
instrument of transfer (if required).
To facilitate ADS-ordinary share conversion and
trading between the NYSE and the Hong Kong Stock
Exchange, we have moved a portion of our issued
ordinary shares from our Cayman share register to our
Hong Kong share register. It is unclear whether, as a
matter of Hong Kong law, the trading or conversion of
ADSs constitutes a sale or purchase of the underlying
Hong Kong-registered ordinary shares that is subject
to Hong Kong stamp duty. We advise investors to
consult their own tax advisors on this matter. See “Risk
Factors — Risks Related to Our ADSs and Shares —
There is uncertainty as to whether Hong Kong stamp
duty will apply to the trading or conversion of our
ADSs.”
Material United States Federal Income
Tax Considerations
The following summary describes the material United
States federal income tax consequences of the
ownership and disposition of our ADSs and ordinary
shares. The discussion set forth below is applicable
only to United States Holders that hold ADSs or
ordinary shares as capital assets (generally, property
held for investment). As used herein, the term “United
States Holder” means a beneficial owner of an ADS or
ordinary share that is for United States federal income
tax purposes:
•
an individual who is a citizen or resident of the
United States;
•
a corporation (or other entity treated as a
corporation for United States federal income tax
purposes) created or organized in or under the
laws of the United States, any state thereof or the
District of Columbia;
•
an estate the income of which is subject to United
States federal income taxation regardless of its
source; or
•
a trust if it is subject to the primary supervision of
a court within the United States and one or more
United States persons has or have the authority
to control all substantial decisions of the trust, or
if it has a valid election in effect under applicable
United States Treasury regulations to be treated
as a United States person.
Other Information to Shareholders
176
Alibaba Group Holding Limited
This summary does not represent a detailed
description of the United States federal income tax
consequences applicable to you if you are subject
to special treatment under the United States federal
income tax laws, including if you are:
•
a dealer in securities or currencies;
•
a financial institution;
•
a regulated investment company;
•
a real estate investment trust;
•
an insurance company;
•
a tax exempt organization;
•
a person holding our ADSs or ordinary shares
as part of a hedging, integrated or conversion
transaction, a constructive sale or a straddle;
•
a trader in securities that has elected the mark-
to-market method of accounting for your
securities;
•
a person liable for alternative minimum tax;
•
a person who owns or is deemed to own 10% or
more of our stock (by vote or value);
•
a person required to accelerate the recognition
of any item of gross income with respect to
our ADSs or ordinary shares as a result of such
income being recognized on an applicable
financial statement;
•
a partnership or other pass through entity for
United States federal income tax purposes; or
•
a person whose “functional currency” is not the
U.S. dollar.
The discussion below is based upon the provisions
of the Internal Revenue Code of 1986, as amended,
or the Code, and regulations, rulings and judicial
decisions thereunder as of the date of this annual
report, as well as the current income tax treaty
between the United States and the PRC, which is
hereinafter referred to as the Treaty. Those authorities
may be replaced, revoked or modified, perhaps
retroactively, so as to result in United States federal
income tax consequences different from those
discussed below. In addition, this summary assumes
that the Deposit Agreement, and all other related
agreements, will be performed in accordance with
their terms.
If a partnership (or other entity or arrangement treated
as a partnership for United States federal income tax
purposes) holds our ADSs or ordinary shares, the tax
treatment of a partner will generally depend upon
the status of the partner and the activities of the
partnership. If you are a partnership or a partner of a
partnership holding our ADSs or ordinary shares, you
should consult your tax advisors.
This summary does not contain a detailed
description of all the United States federal income
tax consequences to you in light of your particular
circumstances and does not address the Medicare
tax on net investment income, United States federal
estate and gift taxes or the effects of any state, local
or non United States tax laws. If you are considering
the purchase of our ADSs or ordinary shares, you
should consult your own tax advisors concerning
the United States federal income tax consequences
to you in light of your particular situation as well as
any consequences arising under other United States
federal tax laws and the laws of any other taxing
jurisdiction.
ADSs
If you hold ADSs, for United States federal income tax
purposes, you generally will be treated as the owner
of the underlying ordinary shares that are represented
by the ADSs. Accordingly, deposits or withdrawals of
ordinary shares for ADSs will not be subject to United
States federal income tax.
Taxation of Dividends
Subject to the discussion under “— Passive Foreign
Investment Company” below, the gross amount
of distributions on the ADSs or ordinary shares
(including any amounts withheld to reflect PRC
withholding taxes) will be taxable as dividends, to
the extent paid out of our current or accumulated
earnings and profits, as determined under United
States federal income tax principles. The dividends
(including withheld taxes) will be includable in your
gross income as ordinary income on the day actually
or constructively received by you, in the case of the
ordinary shares, or by the depositary, in the case
of ADSs. Such dividends will not be eligible for the
dividends received deduction generally allowed to
corporations under the Code. The following discussion
assumes that all dividends will be paid in U.S. dollars.
Other Information to Shareholders
177
Fiscal Year 2024 Annual Report
Subject to applicable limitations (including a minimum
holding period requirement), certain dividends
received by non-corporate United States investors
from a qualified foreign corporation may be treated
as “qualified dividend income” that is subject to
reduced rates of taxation. A foreign corporation is
generally treated as a qualified foreign corporation
with respect to dividends paid by that corporation
on ordinary shares (or ADSs backed by such shares)
that are readily tradable on an established securities
market in the United States. United States Treasury
Department guidance indicates that our ADSs (which
are listed on the NYSE) are readily tradable on an
established securities market in the United States.
Thus, subject to the discussion under “— Passive
Foreign Investment Company” below, we believe that
any dividends we pay on our ordinary shares that are
represented by ADSs will be potentially eligible for
these reduced tax rates. Since we do not expect that
our ordinary shares will be listed on an established
securities market in the United States, we believe that
any dividends that we pay on our ordinary shares that
are not represented by ADSs do not currently meet the
conditions required for these reduced tax rates. There
also can be no assurance that our ADSs will continue
to be readily tradable on an established securities
market in the United States in subsequent years. A
qualified foreign corporation also generally includes
a foreign corporation that is eligible for the benefits of
certain income tax treaties with the United States. In
the event that we were deemed to be a PRC resident
enterprise under the EIT Law, although no assurance
can be given, we might be eligible for the benefits
of the Treaty. If we were eligible for such benefits,
subject to the discussion under “— Passive Foreign
Investment Company” below, dividends we pay on our
ordinary shares, regardless of whether the shares are
represented by ADSs, would be potentially eligible for
the reduced rates of taxation. See “— People’s Republic
of China Taxation” above.
However, notwithstanding the foregoing, we will
not be treated as a qualified foreign corporation,
and non-corporate United States Holders will not be
eligible for reduced rates of taxation, for any dividends
that we pay if we are a passive foreign investment
company, or PFIC, with respect to such holders in the
taxable year in which the dividends are paid or in
the preceding taxable year. See “— Passive Foreign
Investment Company” below.
In the event that we were deemed to be a PRC resident
enterprise under the EIT Law, you might be subject
to PRC withholding taxes on dividends paid to you
with respect to the ADSs or ordinary shares. See “—
People’s Republic of China Taxation” above. In that
case, subject to certain conditions and limitations
(including a minimum holding period requirement),
PRC withholding taxes on dividends may be treated
as foreign taxes eligible for credit against your United
States federal income tax liability. For purposes of
calculating the foreign tax credit, dividends paid on
the ADSs or ordinary shares will be treated as foreign
source income and will generally constitute passive
category income. However, if you are eligible for
Treaty benefits, any PRC taxes on dividends will not be
creditable against your United States federal income
tax liability to the extent withheld at a rate exceeding
the applicable Treaty rate.
In addition, United States Treasury regulations
addressing foreign tax credits, or the Foreign Tax
Credit Regulations, impose additional requirements
for foreign taxes to be eligible for a foreign tax credit,
and unless you are eligible for and elect to claim the
benefits of the Treaty, there can be no assurance that
those requirements will be satisfied. The Department
of the Treasury and the IRS are considering proposing
amendments to the Foreign Tax Credit Regulations.
In addition, recent notices from the IRS provide
temporary relief by allowing taxpayers that comply
with applicable requirements to apply many aspects
of the foreign tax credit regulations as they previously
existed (before the release of the current Foreign Tax
Credit Regulations) for taxable years ending before
the date that a notice or other guidance withdrawing
or modifying the temporary relief is issued (or any
later date specified in such notice or other guidance).
Alternatively, instead of claiming a foreign tax credit,
you may be able to deduct any PRC withholding taxes
on dividends in computing your taxable income,
subject to generally applicable limitations under
United States law (including that a United States
Holder is not eligible for a deduction for otherwise
creditable foreign income taxes paid or accrued in
a taxable year if such United States Holder claims
a foreign tax credit for any foreign income taxes
paid or accrued in the same taxable year). The rules
governing the foreign tax credit and deductions for
foreign taxes are complex. You are urged to consult
your tax advisors regarding the availability of the
foreign tax credit or a deduction under your particular
circumstances.
Other Information to Shareholders
178
Alibaba Group Holding Limited
To the extent that the amount of any distribution
exceeds our current and accumulated earnings and
profits for a taxable year, as determined under United
States federal income tax principles, the distribution
will first be treated as a tax free return of capital,
causing a reduction in the adjusted basis of the ADSs
or ordinary shares (thereby increasing the amount
of gain, or decreasing the amount of loss, to be
recognized by you on a subsequent disposition of the
ADSs or ordinary shares), and the balance in excess of
adjusted basis will be taxed as capital gain recognized
on a sale or exchange, as described under “—
Taxation of Capital Gains” below. Consequently, any
distributions in excess of our current and accumulated
earnings and profits will generally not give rise to
foreign source income and you will generally not be
eligible for a foreign tax credit for any PRC withholding
tax imposed on those distributions unless the credit
can be applied (subject to applicable limitations)
against United States federal income tax due on other
foreign source income in the appropriate category
for foreign tax credit purposes. However, we do not
expect to keep earnings and profits in accordance with
United States federal income tax principles. Therefore,
you should expect that a distribution will generally be
reported as a dividend (as discussed above).
Distributions of ADSs, ordinary shares or rights
to subscribe for ADSs or ordinary shares that are
received as part of a pro rata distribution to all of
our shareholders generally will not be subject to
United States federal income tax. Consequently, these
distributions will generally not give rise to foreign
source income and you will generally not be eligible
for a foreign tax credit for any PRC withholding tax
imposed on these distributions unless the credit can
be applied (subject to applicable limitations) against
United States federal income tax due on other foreign
source income in the appropriate category for foreign
tax credit purposes.
Passive Foreign Investment Company
Based on the composition of our income and assets,
and the valuation of our assets, including goodwill,
we do not believe we were a PFIC for our most recent
taxable year ended March 31, 2024, although there
can be no assurance in this regard.
The determination of whether or not we are a PFIC
is made on an annual basis and will depend on
the composition of our income and assets and the
valuation of our assets from time to time. Specifically,
we will be classified as a PFIC for United States federal
income tax purposes for any taxable year if either:
(i) 75% or more of our gross income for that taxable
year is passive income, or (ii) at least 50% of the value
(generally determined on a quarterly basis) of our
assets for that taxable year is attributable to assets
that produce or are held for the production of passive
income, or the asset test.
For this purpose, passive income generally includes
dividends, interest, royalties and rents (other than
royalties and rents derived in the active conduct of
a trade or business and not derived from a related
person). In addition, cash and other assets readily
convertible into cash are generally treated as assets
that produce or are held for the production of passive
income. Goodwill and other unbooked intangibles
associated with active business activity are generally
taken into account as non-passive assets. If we
own at least 25% (by value) of the stock of another
corporation, we will be treated, for purposes of
the PFIC tests, as owning our proportionate share
of the other corporation’s assets and receiving our
proportionate share of the other corporation’s income.
However, it is not entirely clear how the contractual
arrangements between us and the VIEs will be treated
for purposes of the PFIC rules. If it were determined
that we do not own the stock of the VIEs for United
States federal income tax purposes (for example,
because the relevant PRC authorities do not respect
these arrangements), we may be treated as a PFIC.
In addition, there is uncertainty with respect to the
value of our assets that should be taken into account
for purposes of the asset test, and the significant
volatility and decline in the trading prices of our ADSs
and ordinary shares in recent years have increased
the risk that we were or could be treated as a PFIC for
our most recent taxable year. There also can be no
assurance that we will not be a PFIC for the current
or any future taxable year. In particular, any further
decline in the trading prices of our ADSs and ordinary
shares may result in our becoming a PFIC. If we are a
PFIC for any taxable year during which you hold our
ADSs or ordinary shares, you will be subject to special
tax rules discussed below.
If we are a PFIC for any taxable year during which you
hold our ADSs or ordinary shares and you do not make
a timely mark-to-market election (as discussed below),
you will be subject to special tax rules with respect
to any “excess distribution” received and any gain
realized from a sale or other disposition, including
Other Information to Shareholders
179
Fiscal Year 2024 Annual Report
a pledge, of ADSs or ordinary shares. Distributions
received in a taxable year that are greater than 125%
of the average annual distributions received during
the shorter of the three preceding taxable years or
your holding period for the ADSs or ordinary shares
will be treated as excess distributions. Under these
special tax rules:
•
the excess distribution or gain will be allocated
ratably over your holding period for the ADSs or
ordinary shares;
•
the amount allocated to the current taxable year,
and any taxable year prior to the first taxable
year in which we were a PFIC, will be treated as
ordinary income; and
•
the amount allocated to each other year will
be subject to tax at the highest tax rate in effect
for that year for individuals or corporations, as
applicable, and the interest charge generally
applicable to underpayments of tax will be
imposed on the resulting tax attributable to each
relevant year.
Although the determination of whether we are a PFIC
is made annually, if we are a PFIC for any taxable year
in which you hold our ADSs or ordinary shares, you will
generally be subject to the special tax rules described
above for that year and for each subsequent year in
which you hold the ADSs or ordinary shares (even if
we do not qualify as a PFIC in such subsequent years).
However, if we cease to be a PFIC, you can avoid
the continuing impact of the PFIC rules by making a
special election to recognize gain as if your ADSs or
ordinary shares had been sold on the last day of the
last taxable year during which we were a PFIC. You
are urged to consult your own tax advisors about this
election.
In certain circumstances, in lieu of being subject
to the special tax rules discussed above, you may
make a mark-to-market election with respect to
your ADSs or ordinary shares, provided such ADSs or
ordinary shares are treated as “marketable stock.”
The ADSs or ordinary shares generally will be treated
as marketable stock if the ADSs or ordinary shares,
as applicable, are regularly traded on a “qualified
exchange or other market” (within the meaning of the
applicable United States Treasury regulations). Under
current law, the mark-to-market election may be
available to holders of ADSs since the ADSs are listed
on the NYSE, which constitutes a qualified exchange,
although there can be no assurance that the ADSs
will be “regularly traded” for purposes of the mark-
to-market election or that the ADSs will continue to
be listed on the NYSE. Our ordinary shares are listed
on the Hong Kong Stock Exchange, which must meet
certain trading, listing, financial disclosure and other
requirements to be treated as a qualified exchange
for these purposes, and no assurance can be given
that our ordinary shares will be “regularly traded” for
purposes of the mark-to-market election.
If you make an effective mark-to-market election, for
each taxable year that we are a PFIC you will include
as ordinary income the excess of the fair market
value of your ADSs or ordinary shares at the end of
the year over your adjusted tax basis in the ADSs or
ordinary shares. You will be entitled to deduct as an
ordinary loss in each such year the excess of your
adjusted tax basis in the ADSs or ordinary shares
over their fair market value at the end of the year,
but only to the extent of the net amount previously
included in income as a result of the mark-to-market
election. If you make an effective mark-to-market
election, in each year that we are a PFIC: (i) any gain
you recognize upon the sale or other disposition
of your ADSs or ordinary shares will be treated as
ordinary income and (ii) any loss will be treated as
ordinary loss, but only to the extent of the net amount
previously included in income as a result of the mark-
to-market election. If you make an effective mark-to-
market election, the general tax rules that apply to
distributions by corporations that are not PFICs would
apply to distributions by us, except that the reduced
rates of taxation for qualified dividend income of
non-corporate U.S. holders (as discussed above under
“— Taxation of Dividends”) would not be available if we
are a PFIC in the taxable year in which the dividends
are paid or in the preceding taxable year.
Your adjusted tax basis in the ADSs or ordinary shares
will be increased by the amount of any income
inclusion and decreased by the amount of any
deductions under the mark-to-market rules. If you
make a mark-to-market election, it will be effective for
the taxable year for which the election is made and all
subsequent taxable years unless the ADSs or ordinary
shares are no longer regularly traded on a qualified
exchange or other market or the Internal Revenue
Service, or the IRS, consents to the revocation of the
election. You are urged to consult your tax advisors
about the availability of the mark-to-market election,
and whether making the election would be advisable
in your particular circumstances.
Other Information to Shareholders
180
Alibaba Group Holding Limited
Alternatively, U.S. taxpayers can sometimes avoid
the rules described above by electing to treat a PFIC
as a “qualified electing fund” under Section 1295
of the Code. However, this option is not available to
you because we do not intend to comply with the
requirements necessary to permit you to make this
election.
If we are a PFIC for any taxable year during which you
hold our ADSs or ordinary shares and any of our non-
U.S. subsidiaries is also a PFIC or we otherwise have
any investment in a non-U.S. company that is treated
as an equity interest in a PFIC for United States federal
income tax purposes (any such non-U.S. subsidiary
or non-U.S. company, a “lower-tier PFIC”), you will be
treated as owning a proportionate amount (by value)
of the shares of the lower-tier PFIC for purposes of
the application of the PFIC rules. Because a mark-to-
market election cannot be made for any lower-tier
PFICs unless the shares in such lower-tier PFICs are
themselves treated as marketable stock, if you make
a mark-to-market election with respect to our ADSs
or ordinary shares, you may continue to be subject
to the special tax rules discussed above (rather than
the mark-to-market rules) with respect your indirect
interest in any such lower-tier PFIC. You are urged to
consult your tax advisors about the application of the
PFIC rules to any lower-tier PFIC.
In addition, as described under “— Taxation of
Dividends” above, non-corporate United States
Holders will not be eligible for reduced rates of
taxation on any dividends received from us if we are
a PFIC with respect to such holders in the taxable year
in which the dividends are paid or in the preceding
taxable year. You will generally be required to file IRS
Form 8621 if you hold our ADSs or ordinary shares in
any year in which we are classified as a PFIC.
You are urged to consult your tax advisors concerning
the United States federal income tax consequences of
holding ADSs or ordinary shares if we are considered a
PFIC in any taxable year.
Taxation of Capital Gains
For United States federal income tax purposes, you will
recognize taxable gain or loss on any sale, exchange
or other taxable disposition of our ADSs or ordinary
shares in an amount equal to the difference between
the amount realized for the ADSs or ordinary shares
(net of any Hong Kong stamp duty imposed on such
proceeds) and your tax basis in the ADSs or ordinary
shares (which should similarly take into account any
Hong Kong stamp duty paid in connection with the
acquisition of the ADSs or ordinary shares), both
determined in U.S. dollars. Subject to the discussion
under “— Passive Foreign Investment Company”
above, such gain or loss will generally be capital gain
or loss and will generally be long-term capital gain or
loss if you have held the ADSs or ordinary shares for
more than one year. Long-term capital gains of non-
corporate United States Holders (including individuals)
are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations.
Any gain or loss recognized by you will generally be
treated as United States source gain or loss. However,
if we were treated as a PRC resident enterprise for
EIT Law purposes and PRC tax were imposed on any
gain, and if you are eligible for the benefits of the
Treaty, you may elect to treat such gain as PRC source
gain under the Treaty. If you are not eligible for the
benefits of the Treaty or you fail to make the election
to treat any gain as PRC source, then you generally
would not be able to use a foreign tax credit for any
PRC tax imposed on the disposition of our ADSs or
ordinary shares unless the credit can be applied
(subject to applicable limitations) against United
States federal income tax due on other foreign source
income in the appropriate category for foreign tax
credit purposes. However, pursuant to the Foreign
Tax Credit Regulations, unless you are eligible for
and elect to claim the benefits of the Treaty, any such
PRC tax would generally not be a foreign income tax
eligible for a foreign tax credit (regardless of any other
income that you may have that is derived from foreign
sources). In such case, the non-creditable PRC tax may
reduce the amount realized on the disposition of our
ADSs or ordinary shares. As discussed above, however,
recent notices from the IRS provide temporary relief
by allowing taxpayers that comply with applicable
requirements to apply many aspects of the foreign
tax credit regulations as they previously existed
(before the release of the current Foreign Tax Credit
Regulations) for taxable years ending before the
date that a notice or other guidance withdrawing or
modifying the temporary relief is issued (or any later
date specified in such notice or other guidance). If any
PRC tax is imposed upon the disposition of ADSs or
ordinary shares and you apply such temporary relief,
such PRC tax may be eligible for a foreign tax credit or
deduction, subject to the applicable conditions and
limitations.
Other Information to Shareholders
181
Fiscal Year 2024 Annual Report
You will be eligible for the benefits of the Treaty if,
for purposes of the Treaty, you are a resident of the
United States, and you meet other requirements
specified in the Treaty. Because the determination
of whether you qualify for the benefits of the Treaty
is fact intensive and depends upon your particular
circumstances, you are specifically urged to consult
your tax advisors regarding your eligibility for the
benefits of the Treaty. You are also urged to consult
your tax advisors regarding the tax consequences in
case any PRC tax is imposed on gain on a disposition
of our ADSs or ordinary shares, including the
availability of the foreign tax credit or a deduction and
the election to treat any gain as PRC source, under
your particular circumstances.
Information Reporting and Backup
Withholding
In general, information reporting will apply to
dividends in respect of our ADSs or ordinary shares
and the proceeds from the sale, exchange or other
disposition of our ADSs or ordinary shares that
are paid to you within the United States (and in
certain cases, outside the United States), unless you
establish that you are an exempt recipient. A backup
withholding tax may apply to these payments if you
fail to provide a taxpayer identification number or,
in the case of dividend payments, if you fail to make
certain certifications or to report in full dividend and
interest income.
Backup withholding is not an additional tax and any
amounts withheld under the backup withholding rules
will be allowed as a refund or a credit against your
United States federal income tax liability provided the
required information is furnished to the IRS in a timely
manner.
Certain United States Holders are required to report
information relating to ADSs or ordinary shares,
subject to certain exceptions (including an exception
for ADSs or ordinary shares held in accounts
maintained by certain financial institutions), by
attaching a complete IRS Form 8938, Statement of
Specified Foreign Financial Assets, with their tax return
for each year in which they hold the ADSs or ordinary
shares. You are urged to consult your own tax advisors
regarding information reporting requirements relating
to your ownership of the ADSs or ordinary shares.
Dividend Policy
For fiscal year 2023, we declared a cash dividend in
the amount of US$0.125 per Share or US$1.00 per
ADS, for a total amount of approximately US$2.5
billion. For fiscal year 2024, we declared a cash
dividend in the amount of US$0.2075 per Share or
US$1.66 per ADS, consisting of (i) a regular dividend
in the amount of US$0.125 per Share or US$1.00 per
ADS and (ii) a one-time extraordinary dividend in
the amount of US$0.0825 per Share or US$0.66 per
ADS as a distribution of proceeds from disposition of
certain financial investments, for a total amount of
approximately US$4 billion.
Any future determination to pay dividends will be
made at the discretion of our board of directors and
may be based on a number of factors, including
without limitation our future operations and expected
earnings, capital requirements and surplus, general
financial condition, contractual restrictions and
other considerations required under applicable laws
and regulations and other factors that the board of
directors may deem relevant. If we pay any dividends,
the depositary will pay our ADS holders to the same
extent as holders of our ordinary shares, subject to the
terms of the Deposit Agreement, including the fees
and expenses payable thereunder.
We are a holding company incorporated in the
Cayman Islands. In order for us to distribute any
dividends to our shareholders and ADS holders, we
rely on dividends, loans, and other distributions on
equity paid by our operating subsidiaries in China
and on remittances, including loans, from variable
interest entities in China. Dividend distributions from
our PRC subsidiaries to us are subject to PRC taxes,
such as withholding tax. In addition, regulations in the
PRC currently permit payment of dividends of a PRC
company only out of accumulated distributable after
tax profits as determined in accordance with its articles
of association and the accounting standards and
regulations in China. See “Risk Factors — Risks Related
to Doing Business in the People’s Republic of China —
We rely to a significant extent on dividends, loans and
other distributions on equity paid by our operating
subsidiaries in China.”
Other Information to Shareholders
182
Alibaba Group Holding Limited
New York Stock Exchange
Listed Compliance Manual
We are a “foreign private issuer” (as such term is
defined in Rule 3b 4 under the U.S. Exchange Act), and
our ADSs, each representing eight ordinary shares,
are listed on the NYSE. Under Section 303A of the
NYSE Listed Company Manual, NYSE listed companies
that are foreign private issuers are permitted to
follow home country practice in lieu of the corporate
governance provisions specified by the NYSE with
limited exceptions. The following summarizes some
significant ways in which our corporate governance
practices differ from those followed by domestic
companies under the listing standards of the NYSE.
Under the NYSE Listed Company Manual, U.S.
domestic listed companies are required to have a
majority independent board, which is not required
under the Companies Act (As Revised) of the Cayman
Islands (the “Companies Act”), our home country.
Currently, our board of directors is composed of ten
members, six of whom are independent directors.
All of our independent directors are independent
within the meaning of Section 303A of the NYSE
Listed Company Manual. We have also received
from each independent director a confirmation of
his or her independence and we consider them to
be independent pursuant to the Hong Kong Listing
Rules. In addition, the NYSE Listed Company Manual
requires U.S. domestic listed companies to have
a compensation committee and a nominating/
corporate governance committee, each composed
entirely of independent directors, which are not
required under the Companies Act. Currently, our
compensation committee is composed of three
members, all of whom are independent directors. Our
nominating and corporate governance committee is
composed of three members, only two of whom are
independent directors. In addition, the NYSE Listed
Company Manual requires shareholder approval for
certain matters, such as requiring that shareholders
must be given the opportunity to vote on all equity
compensation plans and material revisions to those
plans, which is not required under the Cayman Islands
law. We intend to comply with the requirements of
Cayman Islands law only in determining whether
shareholder approval is required.
Hong Kong Listing Rules
Under Rule 19C.11 of the Hong Kong Listing Rules,
we are exempt from certain corporate governance
requirements of the Hong Kong Stock Exchange,
including Appendix C1 to the Hong Kong Listing Rules
(Corporate Governance Code) and Appendix D2 to
the Hong Kong Listing Rules (Disclosure of Financial
Information).
In connection with our listing on the Hong Kong Stock
Exchange, the Hong Kong Stock Exchange and the SFC
granted certain waivers and exemptions from strict
compliance with the relevant provisions of the Hong
Kong Listing Rules and the SFO, respectively, and the
SFC also granted a ruling under the Takeovers Codes.
Not a Public Company in Hong Kong
Section 4.1 of the Takeovers Codes provides that the
Takeovers Codes applies to takeovers, mergers and
share repurchases affecting public companies in
Hong Kong and companies with a primary listing in
Hong Kong. According to the Note to Section 4.2 of the
Introduction to the Takeovers Codes, a Grandfathered
Greater China Issuer within the meaning of Rule 19C.01
of the Hong Kong Listing Rules with a secondary listing
on the Hong Kong Stock Exchange will not normally
be regarded as a public company in Hong Kong under
Section 4.2 of the Introduction to the Takeovers Codes.
The SFC granted a ruling that we are not a “public
company in Hong Kong” for the purposes of Section
4.2. Therefore, the Takeovers Codes does not apply to
us. This ruling may be reconsidered by the SFC in the
event that the bulk of trading in our Shares migrates to
Hong Kong such that we would be treated as having
a dual-primary listing pursuant to Rule 19C.13 of the
Hong Kong Listing Rules or in the event of a material
change in information provided to the SFC.
Disclosure of Interests under Part XV of
SFO
Part XV of the SFO imposes duties of disclosure of
interests in Shares. Under the U.S. Exchange Act,
which we are subject to, any person (including
directors and officers of the company concerned)
who acquires beneficial ownership, as determined in
accordance with the rules and regulations of the SEC
and which includes the power to direct the voting or
the disposition of the securities, of more than 5% of a
class of equity securities registered under Section 12
of the U.S. Exchange Act must file beneficial owner
183
Fiscal Year 2024 Annual Report
Exemptions and Waivers
reports with the SEC, and such person must report
any material change in the information provided
(including any acquisition or disposition of 1% or more
of the class of equity securities concerned), within two
business days after the date of a triggering event,
unless exceptions apply. Therefore, compliance with
Part XV of the SFO would subject our corporate insiders
to a second level of reporting, which would be unduly
burdensome to them, would result in additional costs
and would not be meaningful, since the statutory
disclosure of interest obligations under the U.S.
Exchange Act that apply to us and our corporate
insiders would provide our investors with sufficient
information relating to the shareholding interests of
our significant shareholders.
The SFC granted a partial exemption under section
309(2) of the SFO from the provisions of Part XV of the
SFO (other than Divisions 5, 11 and 12 of Part XV of
the SFO), on the conditions that (i) the bulk of trading
in the Shares is not considered to have migrated to
Hong Kong on a permanent basis in accordance
with Rule 19C.13 of the Hong Kong Listing Rules; (ii)
the disclosures of interest filed in the SEC are also
filed with the Hong Kong Stock Exchange as soon as
practicable, which will then publish such disclosure
in the same manner as disclosures made under Part
XV of the SFO; and (iii) we will advise the SFC if there
is any material change to any of the information
which has been provided to the SFC, including any
significant changes to the disclosure requirements in
the U.S. and any significant changes in the volume of
our worldwide share turnover that takes place on the
Hong Kong Stock Exchange. This exemption may be
reconsidered by the SFC in the event there is a material
change in information provided to the SFC.
The U.S. Exchange Act and the rules and regulations
promulgated thereunder require disclosure of interests
by shareholders that are broadly equivalent to Part
XV of the SFO. For relevant disclosure in respect of
the substantial shareholder’s interests, see “Major
Shareholders and Related Party Transactions — Major
Shareholders.”
We undertook to file with the Hong Kong Stock
Exchange, as soon as practicable, any declaration of
shareholding and securities transactions filed with the
SEC. We further undertook to disclose in future listing
documents any shareholding interests as disclosed
in an SEC filing and the relationship between our
directors, officers, members of committees and their
relationship to any controlling shareholder.
Corporate Communication
Rule 2.07A of the Hong Kong Listing Rules provides
that a listed issuer may (i) send or otherwise make
available to the relevant holders of its securities any
corporate communication by electronic means, or (ii)
make the corporate communication available on its
website and the Hong Kong Stock Exchange’s website.
Since our listing on the Hong Kong Stock Exchange, we
made the following arrangements:
•
We issue all corporate communications as
required by the Hong Kong Listing Rules on our
own website in English and Chinese, and on the
Hong Kong Stock Exchange’s website in English
and Chinese.
•
We continue to provide printed copies of notice
including the proxy materials to our shareholders
at no costs.
•
We have added to the “Investor Relations” page
of our website which directs investors to all of our
filings with the Hong Kong Stock Exchange.
The Hong Kong Stock Exchange granted us a waiver
from strict compliance with the requirements under
Rule 2.07A of the Hong Kong Listing Rules.
Monthly Return
Rule 13.25B of the Hong Kong Listing Rules requires
a listed issuer to publish a monthly return in relation
to movements in its equity securities, debt securities
and any other securitized instruments, as applicable,
during the period to which the monthly return relates.
Pursuant to the Joint Policy Statement Regarding
the Listing of Overseas Companies, or Joint Policy
Statement, we sought a waiver from Rule 13.25B
subject to satisfying the waiver condition that the
SFC has granted a partial exemption from strict
compliance with Part XV of the SFO (other than
Divisions 5, 11 and 12 of Part XV of the SFO) in respect
of disclosure of shareholders’ interests. As we have
obtained a partial exemption from the SFC, the
Hong Kong Stock Exchange granted a waiver from
strict compliance with Rule 13.25B of the Hong Kong
Listing Rules. We disclose information about share
repurchases, if any, in our quarterly announcements,
quarterly earnings releases and annual reports on
Form 20-F which are furnished or filed with the SEC in
accordance with applicable U.S. rules and regulations.
Exemptions and Waivers
184
Alibaba Group Holding Limited
Summary of Risk
Factors
Investing in our company may involve significant
risks. Alibaba Group Holding Limited is a Cayman
Islands holding company. It does not directly engage
in business operations itself. Due to PRC legal
restrictions on foreign ownership and investment in
certain industries, we, similar to all other entities with
foreign-incorporated holding company structures
operating in our industry in China, operate through
VIEs our Internet businesses and other businesses in
which foreign investment is restricted or prohibited in
the PRC. The VIEs are incorporated and owned by PRC
citizens or by PRC entities owned and/or controlled
by PRC citizens, and not by our company. We have
entered into certain contractual arrangements which
collectively enable us to exercise effective control over
the VIEs and realize substantially all of the economic
risks and benefits arising from the VIEs. As a result,
we include the financial results of each of the VIEs in
our consolidated financial statements in accordance
with U.S. GAAP. Investors in our ADSs and Shares are
purchasing equity securities of a Cayman Islands
holding company rather than equity securities issued
by our consolidated subsidiaries and the VIEs. See
“Business Overview — Organizational Structure” for
more details. See “— Risks Related to Our Corporate
Structure” for risks involving the VIE structure.
In addition, we face various legal and operational
risks and uncertainties as a company based in and
primarily operating in China. The PRC government
has significant authority to oversee and regulate
the business operations of a China-based company
like us, including overseas listing and overseas
fundraisings. See “— Risks Related to Doing Business in
the People’s Republic of China.”
A summary of the risk factors is set forth below, you
should read this summary together with the detail risk
factors set forth in this annual report.
Risks and uncertainties related to our business and
industry include risks and uncertainties associated
with the following:
•
our ability to achieve the intended benefits of our
reorganization;
•
our ability to maintain the trusted status of our
ecosystem, and to maintain and improve the
network effects of our ecosystems;
•
our ability to maintain or grow our business, as
well as the impact of sustained investment in our
business on our margins and net income;
•
our ability to compete effectively and continue to
innovate and adapt to changes in our industry;
•
our ability to manage the significant
management, operational and financial
challenges in growing our business and
operations, and our ability to maintain our
culture;
•
economic conditions, geopolitical tensions and
the impact of natural disasters or widespread
health epidemics;
•
national trade or investment policies, barriers to
trade or investment and geopolitical conflicts,
as well as export control, economic or trade
sanctions and the trend towards trade and
technology “de-coupling” and “de-risking”;
•
reputational harm, liabilities and other risks
due to business dealings by, or connections of,
merchants or consumers on our marketplaces
with sanctioned countries or persons;
•
challenges in expanding our international and
cross-border businesses and operations;
•
risks relating to our acquisitions, investments and
alliances, as well as regulatory approval and
review requirements for acquisitions;
•
risks arising from the broad range of evolving
laws and regulations that affect our business,
including but not limited to, regulations of digital
platforms, regulations regarding privacy, data
protection and cybersecurity, competition laws,
content regulations, and consumer protection
laws;
•
security breaches and cyber-attacks;
•
alleged pirated, counterfeit or illegal items
or content, allegations of infringements of
intellectual property rights, and our ability to
protect our intellectual property rights;
•
material litigation and regulatory proceedings;
•
our ability to maintain or improve our
technology infrastructure, risks relating to the
performance, reliability and security of the
Internet infrastructure and the effect of network
interruptions;
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Fiscal Year 2024 Annual Report
Risk Factors
•
risks relating to Ant Group and Alipay, including
our reliance on Alipay to conduct substantially all
of the payment processing and all of the escrow
services on our marketplaces for a significant
majority of our commerce business and our
potential conflicts of interests with them;
•
risks relating to third-party service providers
and ecosystem participants, and the quality of
logistics services provided by logistics service
providers and Cainiao;
•
natural disasters or epidemic;
•
our ability to attract, motivate and retain
our staff, including key management and
experienced and capable personnel;
•
fraudulent or illegal activities by our employees,
business partners and service providers, and the
effect of any fraud perpetuated and fictitious
transactions conducted in our ecosystem;
•
tax compliance efforts that may affect our
merchants;
•
effects of public scrutiny, or aggressive
marketing and communication strategies of our
competitors;
•
quarter-to-quarter fluctuations of our results of
operations;
•
our ability to comply with the terms of our
indebtedness and to raise additional capital, as
well as interest rate risks; and
•
the potential insufficiency of insurance coverage.
Risks and uncertainties related to our corporate
structure that may arise from the following:
•
our shareholders’ limited ability to nominate and
elect directors;
•
differences between the interests of the Alibaba
Partnership and our shareholders;
•
anti-takeover provisions in our Articles of
Association;
•
our shareholders do not hold equity securities
of our subsidiaries and the VIEs that have
substantive business operations in China; and
•
risks and uncertainties relating to the VIE
structure, including regulatory risks and
uncertainties; limitations of contractual
arrangements in providing control over the VIEs;
potential failure by the VIEs or their equity holders
to perform their obligations; potential loss of
the ability to use, or otherwise benefit from,
the licenses, approvals and assets held by the
VIEs; potential conflicts of interests between us
and the equity holders, directors and executive
officers of the VIEs; as well as potential scrutiny
of the contractual arrangements with the VIEs by
the PRC tax authority.
Risks and uncertainties related to doing business in
the PRC include risks and uncertainties associated with
the following:
•
changes and developments in the political
and economic policies of the PRC government,
including but not limited to that the PRC
government may intervene in or influence our
operations through adopting and enforcing rules
and regulatory requirements, which may evolve
quickly with little advance notice;
•
uncertainties regarding the interpretation and
enforcement of PRC laws, rules and regulations,
including but not limited to actions the PRC
government may take to exert more oversight
and control over offerings that are conducted
overseas and/or foreign investment in China-
based issuers, which could significantly limit
or completely hinder our and our subsidiaries’
ability to offer securities to investors and cause
our securities to decline in value or become
worthless;
Risk Factors
186
Alibaba Group Holding Limited
•
PCAOB’s ability to inspect our auditors in relation
to their audit work performed for our financial
statements and potential delisting of our ADSs
from the U.S. pursuant to the HFCA Act;
•
PRC regulations relating to investments in
offshore companies and employee equity
incentive plans;
•
our reliance on dividends, loans and other
distributions on equity paid by our operating
subsidiaries in China, the risk that interventions
in or the imposition of restrictions and limitations
on the ability of us or our subsidiaries, or the VIEs
by the PRC government to transfer cash or assets
that are in a business in the PRC or in a PRC entity
may limit our ability to fund operations or for
other use outside of the PRC and fluctuations in
exchange rates;
•
the potential impact of PRC laws and regulations
related to Internet advertisement;
•
the possibility that we may be subject to PRC
income tax on our global income, and potential
discontinuation of preferential tax treatments we
currently enjoy;
•
the possibility that dividends payable to foreign
investors and gains on the sale of our securities
by our foreign investors may become subject
to PRC taxation, and uncertainties with respect
to indirect transfers of equity interests in PRC
resident enterprises or other assets attributed to
a PRC establishment of a non-PRC company; and
•
risks relating to the approval, filing or other
requirements of PRC regulatory authorities in
connection with future issuance of securities
overseas.
Risks related to our ADSs and Shares include risks and
uncertainties associated with the following:
•
volatilities in the trading prices of our securities,
the substantial future sales or perceived potential
sales of our securities, and the sustainability of
active trading markets for our securities;
Risk Factors
187
Fiscal Year 2024 Annual Report
•
changes to our shareholder return initiatives;
•
different characteristics of the capital markets in
Hong Kong and the U.S., and the possibility of a
public offering and listing of our equity securities
in Shanghai or Shenzhen;
•
the limited ability of our shareholders and U.S.
authorities to bring actions against us;
•
our exemptions from certain NYSE corporate
governance standards and certain disclosure
requirements, as well as our different practices
as to certain matters compared with many other
companies listed in Hong Kong;
•
potential limitations on the ability of ADS holders
to vote, transfer ADSs and receive distributions
on our ordinary shares, and our discretionary
proxy from the depositary of our ADSs;
•
the exchange between our Shares and our ADSs
that may affect liquidity and/or trading prices of
our securities and cause delays;
•
the possibility that we may be or may become a
passive foreign investment company; and
•
uncertainty as to whether Hong Kong stamp duty
will apply to the trading or conversion of our
ADSs.
We discuss the various risks and uncertainties we are
subject to in detail below.
Risks Related to Our Business and
Industry
We may not achieve the intended benefits of our
reorganization.
We have substantially completed the implementation
of a new organizational and governance structure
with six major business groups and various other
businesses, or the Reorganization. We believe our new
organizational and governance structure places more
focus on our core businesses, infuses more agility
into our decision-making process and further unlocks
value for our shareholders. However, whether our
new structure will in fact yield the expected strategic
benefits are subject to uncertainties and various
factors, many of which may be out of our control,
including without limitations, successful restructuring
of assets, liabilities and contracts and implementation
of equity incentive plans. We cannot assure you that
the expected benefits of our Reorganization will be
reflected in the price of our securities. Moreover,
our Reorganization could have a material adverse
effect on our business, financial condition, results
of operations and prospects. We are dedicating
significant time, resources and efforts into establishing
the new organizational and governance structure and
may incur substantial costs as a result. These efforts
may divert our management’s attention away from
our day-to-day operations and may be disruptive
to our business. As our businesses operate more
independently, the network effect, synergies and
economic of scale among our businesses may also be
negatively affected.
Maintaining the trusted status of our ecosystem is
critical to our success and growth, and any failure
to do so could severely damage our reputation
and brand, which would have a material adverse
effect on our business, financial condition, results of
operations and prospects.
We have established a strong brand name and
reputation for our ecosystem. Any loss of trust in our
ecosystem or platforms could harm our reputation and
the value of our brand, and could result in consumers,
merchants, brands, retailers and other participants
reducing their levels of activity in our ecosystem, which
could materially reduce our revenue and profitability.
Our ability to maintain trust in our ecosystem and
platforms is based in large part upon:
•
our success in developing and leveraging
cutting-edge technology to serve our consumers,
users and customers;
•
our ability to attract and retain consumers with
superior user experience and the quality, safety,
value and functionality of products, services and
content available through our ecosystem;
•
our ability to deliver value to brands, merchants
and enterprises and empower them to thrive on
our platforms;
•
the reliability and integrity of our company and
our platforms, as well as of the merchants,
software developers, logistics providers,
service providers and other participants in our
ecosystem;
•
the safety, security and integrity of the data on
our systems, and those of other participants in
our ecosystem;
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•
the manner in which we and other participants in
our ecosystem collect, process, store and utilize
user data, and changes in the related regulations
and user expectations;
•
the effectiveness and fairness of rules governing
our marketplaces, various platforms and overall
ecosystem;
•
the strength of our measures to protect
consumers and intellectual property rights
owners; and
•
our ability to provide reliable and trusted
services, such as the payment and escrow
services operated by us or through our
arrangements with Alipay or other partners.
As our businesses operate more independently, failure
by any of our businesses to establish and maintain its
own trusted brand could also harm the value of our
brand name and reputation of our ecosystem.
We may not be able to maintain or grow our
business.
Our ability to continue to grow in the future depends
on a number of factors, including the number and
engagement of consumers on our platforms, the
value that our businesses are able to offer to our
customers and our data and technology capabilities
and infrastructure. See “Management Discussion and
Analysis — Operating Results — Factors Affecting Our
Results of Operations — Our Ability to Create Value for
Our Users and Generate Revenue.” Our growth is also
affected by competition and other factors that may not
be within our control, including the macroeconomic
environment, inflation, disruptions to the economy
and business operations from pandemics, natural
disasters, armed conflicts or other events, as well as
the geopolitical landscape and government policies.
Furthermore, due to the size and scale we have
achieved, our businesses may not continue to grow as
quickly or at all.
We are exploring and will continue to explore in
the future new business initiatives, including in
industries and markets in which we have limited or no
experience, as well as new business models, that may
be untested. Developing new businesses, initiatives
and models requires significant investments of time
and resources, and may increase our costs and
present new and difficult technological, operational
and regulatory challenges. We may encounter
difficulties or setbacks in the execution of various
growth strategies and our growth strategies may not
generate the returns we expect within the timeframe
we anticipate, or at all. For example, we are making
significant investments in artificial intelligence (AI)
technologies, including generative AI, to further
improve shopping experience for our consumers,
enable our merchants to improve efficiency, enhance
our cloud service offerings and improve our own
operating efficiencies, among other things. The
development and use of AI technologies are complex
and involve significant costs and risks. There can
be no assurance that our investments in and usage
of AI will achieve the benefits we anticipated. AI
systems may have limitations, including biases and
errors, and there are also risks of system failures and
disruptions and risks relating to cybersecurity, privacy,
intellectual property and ethics. Furthermore, the legal
regulatory regime relating to AI is developing in many
jurisdictions, and new rules and regulations could
significantly increase our compliance costs, require
us to modify our technologies and business practices,
prevent or limit our use of AI in certain circumstances
or result in regulatory investigations, fines and
penalties.
Growing our existing and new businesses also involves
risks and challenges that may materially and adversely
affect our business and financial condition. For
example, our direct sales and local consumer services
businesses face risks relating to inventory procurement
and management, such as failure to stock sufficient
inventory to meet demands or additional costs or
write-offs resulting from overstocking, supply chain
management, relationships with suppliers, accounts
receivable and related potential impairment charges,
potential labor disputes, worker safety, minimum
wage and social insurance requirements, including
offering minimum wage and providing social
insurance for delivery workers. Since 2023, our AIDC
Group has launched new consignment models where
our platform is involved in price setting, marketing,
payment, logistics, customer support and returns for
products provided by the merchants. It is likely that
our platform, by adopting this model, will be subject
to increased scrutiny by international regulators and
they may view our platform as jointly liable with the
merchants if the products provided by the merchants
on our platforms fail to meet regulatory requirements
or otherwise infringe upon consumers’ legitimate
rights. Moreover, this new model may not be well
received by our merchants and may lead to loss of
merchants on our platforms, which could adversely
affect our business and results of operations. Our
cloud business also faces technology challenges and
challenges related to supply of advanced chips, data
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center capacity, data privacy and systems security,
service disruptions, delays, failures or other service
quality issues.
If we are unable to compete effectively, our business,
financial condition and results of operations would
be materially and adversely affected.
Our businesses face increasingly intense competition
in different industries, principally from established
Chinese Internet companies and their respective
affiliates, global and regional e-commerce players,
cloud computing service providers, logistics service
providers and digital media and entertainment
providers. These areas of our business are subject to
rapid market change, the introduction of new business
models, and the entry of new and well-funded
competitors. Increased investments made and lower
prices offered by our competitors may require us to
divert significant managerial, financial and human
resources in order to remain competitive or to give up
business opportunities to maintain our profitability,
and ultimately may reduce our market share and
negatively impact the revenue and profitability of our
business. See also “Business Overview — Competition.”
Our ability to compete depends on a number of
other factors as well, some of which may be beyond
our control, including alliances, acquisitions or
consolidations within our industries that may result in
stronger competitors, technological advances, shifts in
customer preferences and changes in the regulatory
environment in the markets we operate. Existing
and new competitors may leverage their experience,
client relationships or resources in ways that could
affect our competitive position, including by making
acquisitions, continuing to invest heavily in research
and development and in talent, introducing innovative
business models or technologies, and launching
highly engaging content, products or services to
attract a large user base, increase user engagement,
monetize traffic and achieve rapid growth, which
may make it more challenging for us to acquire,
retain and engage consumers, users and customers
and materially and adversely affect our business
expansion and results of operations.
In addition, if international players gain greater access
to the China market, certain of our businesses, such as
our e-commerce business, cloud business and digital
media and entertainment business, could be subject
to greater competition and pricing pressure, which
could reduce our margins or otherwise negatively
affect our results of operations. For example, starting
from April 2024, international cloud service providers
are able to apply for IDC in China, which may
introduce greater competition in the cloud industry
in China. As we acquire new businesses and expand
into new industries and sectors, we face competition
from major players in these industries and sectors.
Moreover, as we continue to expand into markets
outside of China, we increasingly face competition
from domestic and international players operating
in these markets, as well as potential geopolitical
tensions, regulatory challenges and protectionist
policies that may support domestic players in those
markets. See “— We face challenges in expanding
our international and cross-border businesses and
operations.”
If we are not able to compete effectively, the level
of economic activity and user engagement in our
ecosystem may decrease and our market share and
profitability may be negatively affected, which could
materially and adversely affect our business, financial
condition and results of operations, as well as our
reputation and brand.
If we are not able to continue to innovate or if we
fail to adapt to changes in our industry, our business,
financial condition and results of operations would
be materially and adversely affected.
Our industries are characterized by rapidly changing
technology, evolving industry standards, new mobile
apps and protocols, new products and services, new
media and entertainment content, including user-
generated content, and changing user demands and
trends. Furthermore, our domestic and international
competitors are continuously developing innovations
in personalized search and recommendation,
online shopping and marketing, communications,
social networking, entertainment, logistics and
other services, to enhance user experience. As a
result, we continue to invest significant resources
in our infrastructure, research and development
and other areas in order to enhance our businesses
and operations, as well as to explore new growth
strategies and introduce new high-quality products
and services.
Our investments in innovations and new technologies,
which may be significant, may not increase our
competitiveness or generate financial returns in the
short term, or at all, and we may not be successful
in adopting and implementing new technologies,
such as generative AI which has recently attracted
prominent attention. The changes and developments
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Alibaba Group Holding Limited
taking place in our industry may also require us to
re-evaluate our business model and adopt significant
changes to our long-term strategies and business
plans. Our failure to innovate and adapt to these
changes and developments in a timely manner could
have a material adverse effect on our business,
financial condition and results of operations. Even
if we timely innovate and adopt changes in our
strategies and plans, we may nevertheless fail to
realize the anticipated benefits of these changes or
even generate lower levels of revenue as a result.
Sustained investment in our businesses and our focus
on long-term performance and maintaining the
health of our ecosystem may negatively affect our
margins and our net income.
We focus on the long-term interests of the participants
in our ecosystem. Our businesses may continue
to increase spending and investments, including
investing in organic development and incubating new
businesses, enhancing consumer experience and user
engagement, supporting merchants and acquiring
users, as well as enhancing our technology, logistics,
supply chain and other long-term capabilities.
Although we believe these investments are crucial
to our success and future growth, they will have
the effect of increasing our costs and lowering our
margins and profit, and this effect may be significant
in the short term and potentially over longer periods.
Certain of our businesses may have negative margins
or margins that are lower than what our China
commerce retail business has enjoyed in the past.
For example, certain of our businesses, including
direct sales, international commerce, Cainiao,
local consumer services and digital media and
entertainment, have incurred, and may continue to
incur, losses. There can be no assurance that these
investments will be able to generate the growth,
monetization enhancement or profitability that we
expect. Many of our businesses that are currently loss
making may not turn profitable at our expected timing
or at our expected scale, or at all.
We may not be able to maintain and improve the
network effects of our ecosystem, which could
negatively affect our business and prospects.
Our ability to maintain a healthy and vibrant
ecosystem that creates strong network effects among
consumers, merchants, brands, retailers and other
participants is critical to our success. The extent to
which we are able to maintain and strengthen these
network effects depends on our ability to:
•
offer secure and open platforms for all
participants and balance the interests of these
participants;
•
provide a wide range of high-quality product,
service and content offerings to consumers;
•
attract and retain a wide range of consumers,
merchants, brands and retailers;
•
provide effective technologies, infrastructure
and services that meet the evolving needs of
consumers, merchants, brands, retailers and
other ecosystem participants;
•
arrange secure and trusted payment settlement
and escrow services;
•
comply with legal requirements and address
user concerns with respect to data security and
privacy;
•
improve our logistics data platform and
coordinate fulfillment and delivery services with
logistics service providers;
•
attract and retain third-party service providers
that are able to provide quality services
on commercially reasonable terms to our
merchants, brands, retailers and other ecosystem
participants;
•
maintain the quality of our customer service and
user experience; and
•
continue adapting to the changing demands of
the market.
In addition, changes we make to our current
operations to enhance and improve our ecosystem
or to comply with regulatory requirements may
be viewed positively from one participant group’s
perspective, such as consumers, but may have
negative effects from another group’s perspective,
such as merchants. If we fail to balance the interests
of all participants in our ecosystem, consumers,
merchants, brands, retailers and other participants
may spend less time, mind share and resources on our
platforms and may conduct fewer transactions or use
alternative platforms, any of which could result in a
material decrease in our revenue and net income.
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As our businesses operate more independently,
including making independent business decisions
regarding customers and service providers, the
network effect of our ecosystem may be adversely
affected.
Our failure to manage the significant management,
operational and financial challenges involved in
growing our business and operations could harm us.
Our businesses have become increasingly complex
as the scale, diversity and geographic coverage of
our businesses and our workforce continue to expand
through both organic growth and acquisitions. The
complexity and scale of our operations places a
significant strain on our management, operational
and financial resources. Our Reorganization may
also pose new risks and challenges, requiring us
to effectively allocate resources among our various
businesses and oversee the operations of our
various businesses, including in the areas of capital
management, compliance and risk management.
Moreover, the current and planned staffing,
systems, policies, procedures and controls of our
businesses may not be adequate to support their
future operations. To effectively manage continuing
expansion and growth of their operations and
workforce, our businesses will need to continue to
improve their personnel management, transaction
processing, operational and financial systems,
policies, procedures and controls, particularly as
our businesses operate more independently. These
efforts will require significant managerial, financial
and human resources. If we are not able to effectively
oversee our businesses or if any of our businesses fails
to manage its expansion and growth effectively, our
business, financial condition, results of operations and
prospects may be materially and adversely affected.
We may not be able to maintain our culture, which
has been a key to our success.
Since our founding, our culture has been defined by
our mission, vision and values, and we believe that our
culture has been critical to our success. In particular,
our culture has helped us serve the long-term
interests of our customers, attract, retain and motivate
employees and create value for our shareholders. We
face a number of challenges that may affect our ability
to sustain our corporate culture, including:
•
failure to identify, attract, promote and retain
people who share our culture, mission, vision
and values in leadership positions;
•
retirements and departures of founders,
executives and members of the Alibaba
Partnership, and failure to execute an effective
management succession plan;
•
challenges of effectively incentivizing and
motivating employees, including members of
senior management, and in particular those who
have gained a substantial amount of personal
wealth related to share-based awards;
•
the increasing size, complexity, geographic
coverage and cultural diversity of our businesses
and workforce;
•
challenges in managing an expansive, diverse
and changing workforce, in providing effective
training to this workforce, and in promoting a
culture of compliance with laws and regulations
and preventing misconduct among our
employees and participants in our ecosystem;
•
competitive pressures to move in directions
that may divert us from our mission, vision and
values;
•
the pressure from the public markets to focus
on short-term results instead of long-term value
creation; and
•
the increasing need to develop expertise in new
growth areas, such as AI-driven technology and
global e-commerce.
If we are not able to maintain our culture or if our
culture fails to deliver the long-term results we
expect to achieve, our reputation, business, financial
condition, results of operations and prospects
could be materially and adversely affected. As our
businesses operate more independently, if they are
not able to develop and sustain their independent and
cohesive culture, their ability to recruit talents, their
business operations and financial performance could
be negatively affected.
Our business operations and financial position may
be materially and adversely affected by economic
conditions in China and globally.
Our revenue and net income are impacted to a
significant extent by economic conditions in China
and globally, as well as economic conditions specific
to our business. The global economy, markets and
levels of spending by businesses and consumers
are influenced by many factors beyond our control,
including geopolitical tension and conflicts, inflation
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Alibaba Group Holding Limited
risk, instability in the financial system, energy crisis and
pandemics and other natural disasters.
There have been concerns about the relationships
among China and other Asian countries, the
relationship between China and the United States,
as well as the relationship between the United States
and certain other Asian countries such as North
Korea, which may result in or intensify potential
conflicts in relation to territorial, regional security
and trade disputes. See “— Changes in national
trade or investment policies and barriers to trade or
investment, and any ongoing geopolitical conflict, may
have an adverse effect on our business and expansion
plans, and could lead to the delisting of our securities
from U.S. exchanges and/or other restrictions or
prohibitions on investing in our securities.” The Russia-
Ukraine conflict has resulted in significant disruptions
to supply chains, logistics and business activities in the
region that have negatively affected our international
commerce business and Cainiao’s international
logistics business, negatively impacting the number
of orders and revenue of AliExpress and Cainiao and
increasing the operating costs of Cainiao. The conflict
has also caused, and continues to intensify, significant
geopolitical tensions in Europe and across the globe.
The resulting sanctions imposed are expected to have
significant impacts on the economic conditions of the
countries and markets targeted by such sanctions,
and may have unforeseen, unpredictable secondary
effects on global energy prices, supply chains and
other aspects of the global economy, which increases
logistics costs and negatively affects our business
operations, such as Cainiao. Any disruptions or
continuing or worsening slowdown, whether as a
result of trade conflicts, the Russia-Ukraine conflict,
the Israel-Hamas conflict or other reasons, could
significantly reduce commerce activities in China and
globally, which could lead to significant reduction in
merchants’ demand for and spending on the various
services we offer, such as our marketing services,
logistics services and cloud computing services.
Moreover, rising inflation could result in higher costs
of services and supplies and a decrease in consumer
spending, which could negatively affect our business
operations and financial results. An economic
downturn, whether actual or perceived, a further
decrease in economic growth rates or an otherwise
uncertain economic outlook in any market in which
we operate could have a material adverse effect on
business and consumer spending and, as a result,
adversely affect our business, financial condition and
results of operations.
In addition, because we hold a significant amount of
cash and cash equivalents, short-term investments
and other treasury investments, if financial institutions
and issuers of financial instruments that we hold
become insolvent or sanctioned or if the market for
these financial instruments become illiquid as a result
of a severe economic downturn, our business and
financial condition could be materially and adversely
affected. For example, in March 2023, Silicon Valley
Bank was closed by the California Department of
Financial Protection and Innovation, and in the
same month, each of Signature Bank and Silvergate
Capital Corp. were swept into receivership, followed
by the Federal Deposit Insurance Corporation’s
announcement of the closing of First Republic Bank
in May 2023. The failure of these banks resulted in
an insignificant amount of asset impairment on our
balance sheet for fiscal year 2023.
Changes in national trade or investment policies and
barriers to trade or investment, and any ongoing
geopolitical conflict, may have an adverse effect on
our business and expansion plans, and could lead to
the delisting of our securities from U.S. exchanges
and/or other restrictions or prohibitions on investing
in our securities.
In recent years, international market conditions
and the international regulatory environment have
been increasingly affected by competition among
countries and geopolitical frictions. In particular, the
U.S. government has advocated for and taken steps
towards restricting trade in certain goods, particularly
from China. The progress of trade talks between China
and the United States is subject to uncertainties, and
there can be no assurance as to whether the United
States will maintain or reduce tariffs, or impose
additional tariffs on Chinese products in the near
future. For example, on May 14, 2024, the United
States announced tariff increases on certain goods
and technologies imported from China, including
electric vehicles, chips, battery technologies and other
goods. The United States may take further actions to
eliminate perceived unfair competitive advantages
created by alleged manipulating actions. Changes
to national trade or investment policies, treaties
and tariffs, fluctuations in exchange rates or the
perception that these changes could occur, and could
adversely affect the financial and economic conditions
in the jurisdictions in which we operate, as well as
our international and cross-border operations, our
financial condition and results of operations.
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In addition, the United States has been considering
ways to limit U.S. investment portfolio flows into
China. For example, in May 2020, under pressure from
U.S. government officials from both the legislative
and executive branches, the independent Federal
Retirement Thrift Investment Board suspended its
implementation of plans to change the benchmark of
one of its retirement asset funds to an international
index that includes companies in emerging markets,
including China. China-based companies, including
us and our related entities, may become subject
to executive orders or other regulatory actions that
may, among other things, prohibit U.S. investors from
investing in these companies or delist the securities
of these companies from U.S. exchanges. As a result,
U.S. and certain other persons may be prohibited
from investing in the securities of our company or
our related entities, whether or not they are listed on
U.S. exchanges, and holders of our debt and equity
securities may be required or forced to divest, which
could result in significant loss to them. For example,
in November 2020, the U.S. administration issued
U.S. Executive Order 13959, prohibiting investments
by any U.S. persons in publicly traded securities of
certain Chinese companies that are deemed owned
or controlled by the Chinese military. In May 2021,
the American depositary shares of China Telecom
Corporation Limited, China Mobile Limited and China
Unicom (Hong Kong) Limited were delisted from
the NYSE to comply with this executive order. In June
2021, the U.S. administration expanded the scope of
the executive order to include Chinese defense and
surveillance technology companies. In April 2023,
certain U.S. senators also called for the imposition
of sanctions on Chinese cloud companies, including
Alibaba Cloud. Furthermore, the U.S. government
is also considering, by new legislation or further
executive action, measures that may place outbound
investment restrictions on U.S. persons investing in
certain technology sectors in certain international
markets that would be deemed critical to U.S. national
security. Geopolitical tensions between China and the
United States may intensify and the United States may
adopt even more drastic measures in the future.
China and other countries have retaliated and may
further retaliate in response to new trade policies,
treaties and tariffs implemented by the United States.
For instance, in response to the tariffs announced by
the United States, in 2018 and 2019, China announced
it would stop buying U.S. agricultural products and
imposed tariffs on over US$185 billion worth of U.S.
goods. Although China subsequently granted tariff
exemptions for certain U.S. products as a result of
trade talks and the phase one trade deal agreed with
the United States, it is uncertain whether there will be
any further material changes to China’s tariff policies.
Any further actions to increase existing tariffs or
impose additional tariffs could result in an escalation
of the trade conflict, which would have an adverse
effect on manufacturing, trade and a wide range of
industries that rely on trade, including logistics, retail
sales and other businesses and services, which could
adversely affect our business operations and financial
results.
Additionally, China has issued regulations to give
itself the ability to unilaterally nullify the effects of
certain foreign restrictions that are deemed to be
unjustified to Chinese individuals and entities. The
Rules on Counteracting Unjustified Extra-territorial
Application of Foreign Legislation and Other Measures
promulgated by the MOFCOM on January 9, 2021,
provide that, among other things, Chinese individuals
or entities are required to report to the MOFCOM
within 30 days if they are prohibited or restricted from
engaging in normal business activities with third-
party countries or their nationals or entities due to
non-Chinese laws or measures; and the MOFCOM,
following the decision of the relevant Chinese
authorities, may issue prohibition orders contravening
such non-Chinese laws or measures. Furthermore,
on June 10, 2021, the Standing Committee of the
National People’s Congress of China promulgated
the Anti-foreign Sanctions Law. The Anti-foreign
Sanctions Law prohibits any organization or individual
from implementing or providing assistance in
implementation of discriminatory restrictive measures
taken by any foreign state against the citizens or
organizations of China. In addition, all organizations
and individuals in China are required to implement the
retaliatory measures taken by relevant departments
of the State Council of the PRC. There exist high
uncertainties as to how such regulations will be
interpreted and implemented and how they would
affect our business, results of operations or the trading
prices of our ADSs, Shares and/or other securities.
Changes in national trade laws and policies and
barriers to trade by the United States, China or other
countries where Alibaba’s businesses operate could
negatively affect, for example, the cross-border
business on AliExpress and Alibaba.com, as well
as Tmall and Tmall Global. Conflicting regulatory
requirements could also increase our compliance
costs and subject us to regulatory scrutiny. Any
further escalation in geopolitical tensions or a trade
war, or news and rumors of any escalation, could
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affect activity levels within our ecosystem and have a
material and adverse effect on our business, results
of operations, and/or the trading prices of our ADSs,
Shares and/or other securities. Changes in national
investment laws and policies and barriers to cross-
border investment, such as any restrictions imposed
by the United States or other countries on capital flows
into China or China-based companies, may prevent
potential investors from investing in us, and the
trading prices and liquidity of our ADSs, Shares and/or
other securities may suffer as a result.
Geopolitical tensions and policy changes have also
led to measures that could have adverse effects
on China-based issuers, including the U.S. Holding
Foreign Companies Accountable Act, which requires
companies listed in the United States whose audit
reports and/or auditors are not subject to review
by the PCAOB to be subject to enhanced disclosure
obligations and be subject to delisting if they do not
comply with the requirements. See “— Risks Related
to Doing Business in the People’s Republic of China
— Our ADSs will be delisted and our ADSs and shares
prohibited from trading in the United States under
the Holding Foreign Companies Accountable Act,
as amended, if the PCAOB is unable to inspect or
investigate completely auditors located in China.”
Export control, economic or trade sanctions and a
heightened trend towards trade and technology “de-
coupling” and “de-risking” could negatively affect
our business operations and subject us to regulatory
investigations, fines, penalties or other actions and
reputational harm, which could materially and
adversely affect our competitiveness and business
operations, as well as the trading prices of our ADSs,
Shares and/or other securities.
The United Nations and a number of countries and
jurisdictions, including China, the United States and
the EU, have adopted various export control and
economic or trade sanction regimes. In particular,
the U.S. government and other governments have
increasingly threatened and/or imposed export
control, economic trade and other sanctions, trade
embargoes, investment prohibitions or restriction
and other heightened regulatory requirements on a
number of China-based companies through various
entity or sanction lists or other manners for a number
of reasons, such as engagement or involvement
in sale, transfer or development of cutting-edge
or emerging technologies, “dual-use” commercial
technologies, advanced computing chips or in other
activities that could be used for surveillance, military
or adversarial purposes or otherwise harm or threaten
such jurisdictions’ national security or interests. It is
possible that the United States or other jurisdictions
may further impose, or threaten to impose similar
or heightened measures against more China-based
companies including us for similar or other reasons.
These regulatory measures and requirements could
(1) prohibit or restrict firms from selling, exporting,
re-exporting or transferring certain technology,
components, software and other items to China-
based companies, (2) prohibit or restrict persons
from entering into transactions with China-based
companies, or (3) prohibit or restrict China-based
companies from acquiring advanced computing chips,
accessing, transferring or storing data, providing
services in or operating in the sanctioning jurisdiction,
or (4) prohibit purchases and sale of securities of
Chinese firms, among other prohibitions or restrictions.
For example, in October 2022, the U.S. Department
of Commerce’s Bureau of Industry and Security
released a broad set of export control measures
with respect to China, including new regulations
restricting the export to China of advanced computing
chips, advanced semiconductors, supercomputer
technology, equipment for the manufacturing of
advanced semiconductors, and components and
technology for the manufacturing in China of certain
semiconductor manufacturing equipment. In October
2023, the U.S. Department of Commerce’s Bureau of
Industry and Security released additional rules that
became effective in November 2023, expanding and
strengthening export control measures to further
restrict China’s access to advanced computing chips
and semiconductor manufacturing equipment.
Japan and the Netherlands issued similar regulations
restricting the export of advanced chip-manufacturing
equipment, which further curbed China’s and China-
based companies’ access to chip technologies. The
United States and other countries may impose other
and more expansive restrictions on the sales of chips
or other technologies to China and China-based
companies, including us, in the future. Any restrictions
on the sales of chips or other technologies that may
apply to us could materially and adversely affect
Cloud Intelligence Group’s ability to offer products
and services based on advanced computing chips
and perform under existing contracts, and affect
our businesses more generally by limiting our ability
to upgrade our technological capabilities and to
maintain our competitive edge, thereby negatively
affecting our results of operations, financial condition
and growth potential. On the other hand, in May 2023,
the Cyberspace Administration of China stated that
certain U.S. memory chip manufacturer posed national
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security risks and banned the use of its products from
key infrastructure projects in China.
In addition, Chinese companies, if targeted under
U.S. economic sanctions, may lose access to the U.S.
markets and the U.S. financial system, including the
ability to use U.S. dollars to conduct transactions, settle
payments or to maintain correspondent accounts with
U.S. financial institutions. U.S. entities and individuals
may not be permitted to do business with sanctioned
companies and persons, and international banks
and other companies may as a matter of law and/or
policy decide not to engage in transactions with such
companies. Moreover, certain reports have suggested
that the U.S. government may use its influence to block
Chinese financial institutions from using the SWIFT
network that enables financial institutions to send
and receive information about financial transactions,
which may in turn adversely affect the ability of
Chinese companies to access international payment,
clearance and settlement networks.
These restrictions or sanctions, and similar or more
expansive restrictions or sanctions that may be
imposed by the United States or other jurisdictions in
the future, whether directed against us, our affiliates,
including Ant Group, or our business partners,
may materially and adversely affect our and our
technology partners’ abilities to acquire technologies,
systems, devices or components that may be critical
to our technology infrastructure, service offerings
and business operations, and thereby negatively
affecting our ability to offer products and services
(including those based on advanced computing
chips and AI technologies) as well as our ability to
continue to enhance our technological capabilities.
As a result of heightened restrictions, we and our
technology partners may be forced to develop
equivalent technologies or components, or obtain
equivalent technologies or components from sources
outside the United States. We and they may not be
able to do so in a timely manner and on commercially
favorable or acceptable terms, or at all. These
restrictions, sanctions, or other prohibitions could
negatively affect our and our technology partners’
abilities to recruit research and development talent
or conduct technological collaboration with scientists
and research institutes in the United States, Europe
or other countries, which could significantly harm our
competitiveness, as well as increase our compliance
costs and risks. These restrictions, sanctions, or other
prohibitions could also require us to divest certain
of our businesses and assets and restrict our ability
to operate in the United States or other jurisdictions.
For example, U.S. entities and individuals with whom
we have existing contractual or other relationships
may be prohibited from continuing to do business
with us, including performing their obligations under
agreements involving our supply chain, logistics,
software development, cloud services and other
products and services.
In December 2023, the MOFCOM and the Ministry of
Science and Technology of the PRC published the
amended Catalogue for Prohibited and Restricted
Export Technologies, which stipulates that certain
technologies, including technologies related to
personalized information push services based on data
analysis, are restricted from export outside the PRC
without approval. Some of our technologies could fall
within the scope of technologies subject to such export
restriction. In addition, according to the PRC Export
Control Law which came into effect in December 2020,
we, our affiliates and business partners may also be
required to obtain licenses, permits and governmental
approvals to export certain goods, technologies and
services. These and additional regulatory restrictions
and requirements that may become effective from
time to time may increase our compliance burden
and affect our ability and efficiency in expanding to
international markets.
Our business and results of operations, as well as
the trading prices of our ADSs, Shares and/or other
securities may be materially and negatively affected
by current or future export control or economic and
trade sanctions or developments. Export control
and economic sanctions laws and regulations are
complex and likely subject to frequent changes, and
the interpretation and enforcement of the relevant
regulations involve substantial uncertainties, which
may be driven by political and/or other factors that are
out of our control or heightened by national security
concerns. The high level of uncertainty relating to
potential actions, such as export control measures,
sanctions, investment prohibitions and others, and
their timing and scope, as well as market rumors or
speculation on such potential actions, could also
negatively and materially affect the trading prices of
our ADSs, Shares and/or other securities.
Furthermore, if we, any of our expanding network
of investee companies, global business partners,
joint venture partners or other parties that have
collaborative relationships with us or our affiliates,
including Ant Group, were to become subject to
sanctions or export control restrictions, this might
result in significant negative publicity, governmental
investigations and reputational harm, as well as
losses from impairments or write-offs. Some of such
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Alibaba Group Holding Limited
companies, partners and other parties, including
some of our investee companies and joint venture
partners, have become subject to sanctions or export
control restrictions. For example, in connection
with the Russia-Ukraine conflict, certain Russian
shareholders of our AliExpress Russia joint venture (in
which we are a minority shareholder) have become
subject to varying degrees of sanctions. There is no
assurance that the scope of sanctions will not expand
to include AliExpress Russia or us.
Media reports on alleged violation of export control
or economic and trade sanctions laws, or on uses
of the technologies, systems or innovations that we
develop, such as biometrics data analysis and artificial
intelligence, for purposes which could be perceived
as inappropriate or controversial, by us, our clients,
business partners, investees or other parties not
affiliated with or controlled by us, even on matters not
involving us, could damage our reputation and lead to
regulatory investigations, fines and penalties against
us. Such fines and penalties may be significant,
and if we were publicly named or investigated by
any regulator on the basis of suspected or alleged
violations of export control or economic and trade
sanctions laws and rules, even in situations where the
potential amount or fine involved may be relatively
small, and even in these instances where we would be
cleared of any wrongdoing, our reputation could be
significantly harmed. Any of these circumstances may
cause the trading prices of our ADSs, Shares and/or
other securities to decline significantly, and materially
reduce the value of your investment in our ADSs,
Shares and/or other securities.
We may suffer reputational harm or incur liabilities
and the trading prices of our ADSs, Shares and/or
other securities may decrease significantly due to
business dealings by, or connections of, merchants
or consumers on our marketplaces with sanctioned
countries or persons.
The U.S. government imposes broad economic and
trade restrictions on dealings with certain countries
and regions, including the Crimea, certain regions
affected by the Russia-Ukraine conflict, Cuba, Iran,
North Korea and Syria, or the Sanctioned Countries,
and numerous individuals and entities, including
those designated as having engaged in activities
relating to terrorism, drug trafficking, cybercrime,
the rough diamond trade, proliferation of weapons
of mass destruction or human rights violations,
or the Sanctioned Persons. The U.S. government’s
economic sanctions programs evolve or threaten
to change frequently, including with respect to the
Sanctioned Countries and other countries, such as
Russia and Venezuela, and there are risks of further
enhanced economic sanctions concerning these
countries, among others. It is not, however, possible
to predict with a reasonable degree of certainty how
the regulatory environment concerning U.S. economic
sanctions may develop. The United Nations, the EU,
the UK, and other countries also impose economic
and trade restrictions, including on certain Sanctioned
Countries and Sanctioned Persons. The Russia-Ukraine
conflict has resulted in additional sanctions imposed
on Russia by the U.S., the EU, the UK, and other
countries.
As a Cayman Islands company with the substantial
majority of our subsidiaries and operations outside
of the U.S., the UK and the EU, we are generally
not required to comply with U.S., UK, and EU
sanctions to the same extent as U.S., UK or EU
entities. However, for companies like us, our U.S.,
UK, and EU subsidiaries, employees who are U.S.
persons or UK or EU nationals, activities in the U.S.,
the UK, or the EU, activities involving U.S.-origin
goods, technology or services, and certain conduct
or dealings, among other activities, are subject to
applicable sanctions requirements. We do not have
employees or operations in any of the Sanctioned
Countries, and, although our retail and wholesale
marketplaces are open and available worldwide, we
do not actively solicit business from the Sanctioned
Countries or Sanctioned Persons. For instance, in the
case of AliExpress, Taobao and Tmall, an insignificant
percentage of orders have been placed by consumers
from the Sanctioned Countries, with a negligible
amount of aggregate GMV in the fiscal year ended
March 31, 2024 through transactions conducted
voluntarily among merchants and consumers on
these marketplaces. As all transaction fees on
AliExpress, Taobao and Tmall are paid by merchants,
primarily based in China, we do not earn any fees or
commission from consumers in Sanctioned Countries
in respect of transactions conducted on these
platforms.
We have established a compliance program that aims
to ensure our compliance with these economic and
trade restrictions, as well as export control regimes.
However, these laws and regulations are complex and
subject to frequent change, including with respect to
jurisdictional reach and the lists of countries, entities,
individuals and technologies subject to sanctions
and other regulatory controls. For example, the U.S.
Congress passed the Uyghur Forced Labor Prevention
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Fiscal Year 2024 Annual Report
Act, or the UFLP Act, which was signed into law on
December 23, 2021 and became effective on June
21, 2022. The UFLP Act prohibits from importation
into the United States any goods, wares, articles, and
merchandise mined, produced, or manufactured
wholly or in part in Xinjiang, or by certain entities
within Xinjiang. We may incur significant costs related
to current, new or changing sanctions, embargoes,
export controls programs or other restrictions and
disclosure requirements, as well as negative publicity,
investigations, fines, fees or settlements, which may
be difficult to predict. In addition, if our compliance
program is determined to have failed to detect and
halt any business dealings that are prohibited under
economic or trade sanctions or export control regimes,
we could be subject to civil or criminal penalties and
negatively affect our reputation, business, results
of operations and financial condition, which may
materially and adversely affect the trading prices of
our ADSs, Shares and/or other securities. We also
could face increased compliance costs and risks as we
expand our e-commerce, cloud and other businesses
globally and into additional businesses.
Certain institutional investors, including state and
municipal governments in the United States and
universities, as well as financial institutions, have
proposed or adopted divestment or similar initiatives
regarding investments in companies that do business
with Sanctioned Countries. Accordingly, as a result of
activities on our marketplaces or in connection with
other business we operate that may involve users
based in the Sanctioned Countries or Sanctioned
Persons, certain investors may not wish to invest or
may divest their investment in us, certain financial
institutions may not wish to lend, extend credit or
offer ordinary banking services to us, or seek early
repayment of loans made to us, and certain financial
institutions and other businesses with which we
partner or may partner may seek to avoid business
relationships with us. These divestment initiatives
and terminations of business services may negatively
impact our reputation, business and results of
operations, and may materially and adversely affect
the trading prices of our ADSs, Shares and/or other
securities.
We face challenges in expanding our international
and cross-border businesses and operations.
We face risks associated with expanding into an
increasing number of markets where we have limited
or no experience, we may be less well-known or have
fewer local resources and we may need to localize
our business practices, culture and operations. We
also face protectionist or national security policies
that could, among other things, hinder our ability
to execute our business strategies and put us at
a competitive disadvantage relative to domestic
companies in other jurisdictions. The expansion of
our international and cross-border businesses will
also expose us to risks and challenges inherent in
operating businesses globally, including:
•
challenges in replicating or adapting our
company policies and procedures to operating
environments different from that of China,
including technology and logistics infrastructure;
•
challenges of maintaining efficient and
consolidated internal systems, including IT
infrastructure, and of achieving customization
and integration of these systems with the other
parts of our ecosystem;
•
lack of acceptance of our product and service
offerings, and challenges of localizing our
offerings to appeal to local tastes;
•
failure to understand cultural differences, local
consumer behaviors and preferences and local
business practices;
•
protectionist or national security policies that
restrict our ability to:
•
invest in or acquire companies;
•
develop, import or export certain
technologies, such as the national AI
initiative proposed by the U.S. government;
•
utilize technologies that are deemed by
local governmental regulators to pose a
threat to their national security; or
•
obtain or maintain the necessary licenses
and authorizations to operate our
businesses;
•
the need for increased resources to
manage regulatory compliance across our
international businesses;
•
failure to attract and retain capable talent
with international perspectives who can
effectively manage and operate local
businesses;
•
compliance with local laws and regulations,
including those relating to e-commerce
marketplaces and platforms, digital
services, privacy and data security, such as
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Alibaba Group Holding Limited
the Digital Markets Act, the Digital Services
Act and the General Data Protection
Regulation of the EU, consumer and labor
protection, and environmental regulations,
and increased compliance costs across
different legal systems;
•
changes in applicable cross-border
e-commerce tax laws, such as the EU’s
removal of value-added tax exemption
for cross-border parcels valued below €22
and similar laws in the U.S., which could
negatively affect transactions conducted
through our international and cross-border
platforms, increase our compliance costs
and subject us to additional risks;
•
heightened restrictions and barriers
on the transfer of data across different
jurisdictions;
•
differing, complex and potentially adverse
customs, import/export laws, tax rules
and regulations or other trade barriers or
restrictions, including significant delays in
or even suspensions of customs clearance,
which may be applicable to transactions
conducted through our international and
cross-border platforms, related compliance
obligations and consequences of non-
compliance, and any new developments in
these areas;
•
availability, reliability and security of
international and cross-border payment
systems and logistics infrastructure;
•
exchange rate fluctuations, which may have
a material adverse effect on cross-border
commerce businesses and businesses in
the affected countries or regions; and
•
political instability and general economic
or political conditions in particular countries
or regions, including territorial or trade
disputes, war and terrorism, such as the
Russia-Ukraine conflict and the Israel-
Hamas conflict.
We are regularly subject to regulatory investigations
overseas. For example, in May 2024, the European
Commission issued a formal request for information
in connection with its formal proceeding against
AliExpress to assess whether AliExpress may
have breached the Digital Services Act. The more
stringent obligations and the proceedings under
the Digital Services Act create additional operational
requirements with increased compliance costs
for us, and we may be subject to significant
regulatory penalties for failure to comply with these
requirements. Our AliExpress platform also faces
regulatory investigations in data security, personal
information protection, consumer protection, fair
competition and other areas in South Korea. Failure to
manage these risks and challenges could negatively
affect our ability to expand our international and
cross-border businesses and operations as well as
materially and adversely affect our business, financial
condition and results of operations.
We face risks relating to our acquisitions, investments
and alliances.
We have acquired and invested in a large number
and a diverse range of businesses, including those
in different countries and regions, technologies,
services and products in recent years. We have also
made investments of varying sizes in joint ventures.
From time to time, we may have a number of pending
investments and acquisitions that are subject to
closing conditions and risks of failure to close. See
“Management Discussion and Analysis — Operating
Results — Recent Investment, Acquisition and Strategic
Alliance Activities.” As we continue to invest in
our ecosystem, we expect to continue to evaluate
and consider a wide array of potential strategic
transactions as part of our overall business strategy,
including business combinations, acquisitions and
dispositions of businesses, technologies, services,
products, real properties and other assets, as well as
strategic investments, joint ventures and alliances. At
any given time we may be engaged in discussing or
negotiating a range of these types of transactions.
These transactions involve significant challenges and
risks, including:
•
difficulties in, and significant and unanticipated
additional costs and expenses resulting from,
integrating into our business the large number
of personnel, operations, products, services,
technology, internal controls and financial
reporting of the businesses we acquire;
•
disruption of our ongoing business, distraction of
and significant time and attention required from
our management and employees and increases
in our expenses;
•
departure of skilled professionals and proven
management teams of acquired businesses, as
well as the loss of established client relationships
of those businesses we invest in or acquire;
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Fiscal Year 2024 Annual Report
•
for investments over which we may not obtain
management and operational control, we may
lack influence over the controlling partners or
shareholders, or may not have aligned interests
with those of our partners or other shareholders;
•
additional or conflicting regulatory requirements,
heightened restrictions on and scrutiny of
investments, acquisitions and foreign ownership
in other jurisdictions, on national security
grounds or for other reasons, regulatory
requirements (such as filings and approvals
under the anti-monopoly and competition laws,
rules and regulations, and review of investments
and acquisitions of large Internet platforms
under certain policies), the risk that acquisitions
or investments may fail to close, due to political
and regulatory challenges, as well as related
compliance and publicity risks;
•
actual or alleged misconduct, unscrupulous
business practices or non-compliance by us
or any company we acquire or invest in or by
its affiliates or current or former employees,
whether before, during or after our acquisition or
investments;
•
difficulties in identifying and selecting
appropriate targets and strategic partners,
including potential loss of opportunities for
strategic transactions with competitors of our
investee companies and strategic partners;
•
difficulties in conducting sufficient and
effective due diligence on potential targets and
unforeseen or hidden liabilities or additional
incidences of non-compliance, operating losses,
costs and expenses that may adversely affect us
following our acquisitions or investments or other
strategic transactions;
•
negative impact on our cash and credit profile
from loans to or guarantees for the benefit of
equity method investees;
•
losses arising from disposal of investments or
de-consolidation of businesses; and
•
actual or potential impairment charges or
write-offs of investments in equity method
investees, intangible assets (including intellectual
property we acquire) or real properties, and
goodwill recorded in connection with invested
businesses, particularly investments in publicly
traded companies, in the event that a decline in
fair value below the carrying value of our equity
method investments is other-than-temporary,
or the carrying amount of a reporting unit to
which goodwill is allocated exceeds its fair value.
See “Management Discussion and Analysis
— Liquidity and Capital Resources — Critical
Accounting Policies and Estimates — Impairment
Assessment on Investments in Equity Method
Investees” and “—Impairment Assessment on
Goodwill and Intangible Assets.”
These and other risks could lead to negative publicity,
increased regulatory scrutiny, litigation, government
inquiries, investigations, actions or penalties against
us and the companies we invest in or acquire on
the ground of non-compliance with policy and
regulatory requirements, or even against our other
businesses, and may force us to incur significant
additional expenses and allocate significant
management and human resources to rectify or
improve these companies’ corporate governance
standards, disclosure controls and procedures or
internal controls and systems. Due to business or
financial underperformance, regulatory scrutiny or
compliance reasons, we may need to divest interests
in, or terminate business cooperation with, businesses
and entities in which we have invested capital and
other resources. See also “— PRC regulations regarding
acquisitions impose significant regulatory approval
and review requirements, which could make it more
difficult for us to pursue growth through acquisitions
and subject us to fines or other administrative
penalties.” As a result, we may experience significant
difficulties and uncertainties carrying out investments
and acquisitions, and our growth strategy, reputation
and/or the trading prices of our ADSs, Shares and/
or other securities may be materially and adversely
affected.
In addition, our strategic investments and acquisitions
may adversely affect our financial results, at least
in the short term. For example, acquisitions of, and
continued investments in lower margin or loss-making
businesses and the integration of our local consumer
services business, have negatively affected our
margins and net income. Acquired businesses that
are loss-making may continue to sustain losses and
may not become profitable in the near future or at
all. The performance of our current and future equity
method investees may also adversely affect our net
income. There can be no assurance that we will be
able to grow our acquired or invested businesses,
or realize returns, benefits of synergies and growth
opportunities we expect in connection with these
investments and acquisitions.
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Alibaba Group Holding Limited
We are subject to a broad range of laws and
regulations, and future laws and regulations
may impose additional requirements and other
obligations that could materially and adversely
affect our business, financial condition and results of
operations, as well as the trading prices of our ADSs,
Shares and/or other securities.
The industries in which we operate, including online
and mobile commerce, local consumer services,
logistics, cloud computing, digital media and
entertainment and other online content offerings, as
well as certain of our important business processes,
including those that may be deemed as relating
to payment and settlement of funds, are subject
to government regulations in the PRC and other
countries. These requirements may evolve quickly, and
may include requirements or restrictions relating to,
among other things, the provision of certain regulated
products or services through platforms, new and
additional licenses, permits and approvals, renewals
and amendments of licenses, or governance or
ownership structures. Failure to obtain and maintain
such required licenses or approvals may require us
to adjust our business practices, increase our costs
or subject us to fines, which materially and adversely
affect our business and the trading prices of our ADSs,
Shares and/or other securities.
We are subject to regulations in a wide range of
areas, including, among others, data privacy and
personal data protection, anti-monopoly and anti-
unfair competition and content. For example, many
of our business, such as livestreaming and marketing
services provided by Alimama, may face quickly
evolving regulations and increasing compliance risk
in a wide range of areas, including platform liability,
content, data security, consumer protection and
taxation. As operators of direct sales businesses, we
are subject to additional regulatory requirements,
including those relating to consumer protection,
customs and permits and licenses, and allegations of
unfair business practices, such as alleged favorable
treatment of our own services and products, including
those offered by our direct sales business and cloud
business, over third-party services and products on
our platforms. Failure to comply with applicable
regulations may subject us to regulatory scrutiny or
investigations and penalties and liabilities that may
materially and adversely affect our business and
financial conditions, damage our reputation and
negatively affect the price of our ADSs, Shares and/or
other securities.
In particular, regulators in the PRC and other countries
are increasingly focused on regulating digital
platforms. For example, the PRC E-commerce Law, or
the E-commerce Law, the Measures for the Supervision
and Administration of Online Trading, or the Online
Trading Measures, and the Interim Provisions for
Regulating Promotional Activities, impose a series of
requirements on e-commerce platform operators,
including requiring e-commerce platform operators to
verify and update each merchant’s profile on a regular
basis, monitor their market participant registration
status and design rules and procedures to foster fair
and transparent merchandise promotional activities.
Other laws also impose obligations and limitations on
network platform operators, including, among others,
taking measures to prevent and stop false and illegal
advertisements and marketing information, improving
technical measures for discovering and dealing with
illegal or criminal activities on the platforms, and
limiting and regulating an e-commerce platform
operator’s personalized shopping recommendations
service to consumers. PRC regulators are also
promoting the development of laws and regulations
on AI and may further strengthen AI governance,
especially in areas of risks and liabilities of AI-
generated content. Substantial uncertainties exist
with respect to the content and timetable of these
laws and regulations. Large Internet platforms,
including us, are likely to be subject to complex and
evolving requirements on the adoption and use of AI
technologies.
Large-scale Internet platforms, including us, are
subject to more responsibilities and obligations than
smaller platforms. For example, the PRC Personal
Information Protection Law stipulates that personal
information processors that provide important Internet
platform services and have a large user base and
complex business models shall establish independent
agencies to oversee their personal information
protection measures. Similarly, the Regulations on
the Protection of Minors on the Network which came
into effect on January 1, 2024 stipulate that network
service providers with large number of minor users
and significant influence among minors shall also
establish independent agencies to oversee the
protection of minors online. As of the date of this
annual report, we have not received any regulatory
notice that we are deemed as the above-mentioned
personal information processor or network service
provider. Nevertheless, these requirements could
result in significant additional compliance costs
and require us to adjust our existing compliance
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Fiscal Year 2024 Annual Report
measures. In addition, the draft Guidelines for
Implementing Subject Responsibilities of Internet
Platforms, or the Responsibilities Guidelines, set forth
additional responsibilities for operators of super
platforms, as defined in the draft Guidelines for
Classification and Grading of Internet Platforms, or
the Draft Classification Guidelines. These additional
responsibilities include promoting interoperability
between the services they provide and those provided
by other platforms. The above guidelines have not
been formally adopted, and substantial uncertainties
still exist with respect to the enactment timetable,
final content, interpretation and implementation of
these guidelines and how they will affect our business
operation. If adopted, certain of our platforms
may be deemed as an operator of super platforms
under the Classification Guidelines and will need
to comply with additional requirements under the
Responsibilities Guidelines. These requirements
could result in significant additional compliance
costs, subject us to higher liabilities or require us to
change our business practices. Failure to comply with
these requirements may subject us to suspension
of business, rectification orders and fines, while our
strict platform governance measures in response to
these requirements may lead to loss of merchants
to those platforms, or to complaints or claims made
against us by merchants on our platforms. We face
scrutiny and are regularly subject to inquiries and
investigations from both PRC and foreign governments
in a wide range of areas, including online content,
alleged third-party intellectual property infringement,
cybersecurity, data protection and privacy laws,
competition laws and regulations, securities laws
and regulations, cross-border trade, tax, investment
activities, human rights, platform liability and
allegedly fraudulent or other criminal transactions.
As we further expand into international markets, we
will also increasingly become subject to additional
legal and regulatory compliance requirements as
well as political and regulatory challenges, including
scrutiny on data privacy and security, tax compliance
and anti-money laundering compliance, on national
security grounds or for other reasons, in foreign
countries in which we conduct business or investment
activities. Government authorities in the PRC and
other countries or regions are likely to continue to
issue new laws, rules and regulations and enhance
enforcement of existing laws, rules and regulations
in these industries, and the perception that new laws
and regulations will be implemented or that more
stringent enforcement may be put in place may
further negatively impact the trading prices of our
ADSs, Shares and/or other securities. Any failure, or
perceived failure, by us to comply with such local
laws and regulations could result in reputational
damages, regulatory investigations, sanctions or
court proceedings and subject us to legal liabilities,
including criminal liabilities. As we continue to grow
in scale and significance, we expect to face increased
scrutiny, which will, at a minimum, result in our having
to continue to increase our investment in compliance
and related capabilities and systems, which could
adversely affect our business, financial condition and
results of operations.
We are subject to complex and evolving laws and
regulations regarding privacy and data protection
and cybersecurity. Complying with these laws and
regulations increases our cost of operations, limits
our business opportunities and may require changes
to our data collection, use and other practices or
negatively affect our user growth and engagement.
Failure to comply with these laws and regulations
could result in claims, regulatory investigations,
litigation or penalties, or otherwise negatively affect
our business.
We collect, utilize and store a large quantity of
personal data, including consumers’ personal data,
in our business operations, and face a number of
challenges relating to data from transactions and
other activities on our platforms, including:
•
protecting the data in and hosted on our system,
including against attacks on our system or
unauthorized use by outside parties or fraudulent
behavior or improper use by our employees;
•
addressing concerns, challenges, negative
publicity and litigation related to data privacy,
collection, use and actual or perceived sharing
for promotional and other purposes (including
cooperation and sharing among our own
businesses, cooperation with business partners
or mandatory disclosure to regulators), and
concerns among the public about the alleged
discriminatory treatment adopted by Internet
platforms based on user profiles, safety, security
and other factors that may arise from our existing
businesses or new businesses and technologies,
such as new forms of data (for example,
biometric data, location information and other
information); and
•
complying with applicable laws, rules and
regulations relating to the collection (from users
and other third-party systems or sources), use,
storage, access, transfer, disclosure and security
of personal data, including requests from data
subjects and regulatory authorities.
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Improper use or disclosure of our user data by any
party could result in a loss of users, businesses
and other participants from our ecosystem, loss
of confidence or trust in our platforms and has a
material adverse effect on our business and prospects.
Moreover, we are subject to numerous laws and
regulations in many markets relating to the protection
of personal information, cybersecurity, data security
and cross-border data transmission. These laws and
regulations can be complex and the interpretation and
application of these laws and regulations are often
uncertain, in flux and complicated.
Personal Information and Privacy Protection
Regulatory authorities in China and around the
world have recently implemented, and may in the
future continue to implement, further legislative and
regulatory proposals concerning data privacy and
personal data protection. For instance, PRC regulatory
authorities have promulgated a number of laws
and regulations, including the Personal Information
Protection Law and the Provisions on the Scope of
Necessary Personal Information Required for Common
Types of Mobile Internet Applications, that stipulate
requirements and limitations on the collection,
processing and handling of personal information.
See “Business Overview — Regulation — Regulation
of Data and Privacy Protection” and “Business
Overview — Regulation — Regulation of Mobile Apps.”
In the course of our business operations, we collect
information of our customers and users, including
personal information. Therefore, we are required
to comply with applicable laws and regulations
relating to personal data and privacy protection.
To ensure our compliance with these laws and
regulations, we have established relevant protocols
and mechanisms, such as obtaining consent from
users before collecting their personal information,
notifying them of the information collected and the
purpose of collecting the information, explaining
to them what, how and why the information may
be shared with third parties. These personal data
privacy protection procedures have increased our
compliance and operating costs. The data privacy
laws and regulations also impose penalties and
liability on information processors for non-compliant
information collection and processing activities,
including correction, suspension or termination
of their services, confiscation of illegal income, as
well as significant fines of up to 5% of revenue and
other penalties. PRC regulatory authorities have
also put forward regular inspections and reporting
on the compliance of mobile apps, mini-programs,
software development kits and other applications
with applicable personal data and privacy protection
laws and regulations. Moreover, we as a large Internet
platform may be subject to more frequent regulatory
inspections. We believe that our business operations
are compliant with the currently effective PRC laws
relating to personal data and privacy protection in all
material respects. Nevertheless, as the interpretation
and implementation of these laws and regulations are
evolving and that PRC regulatory authorities has been
enhancing compliance requirements or may require
us to adopt recommended compliance practices,
we may be required to continuously adjust and
upgrade our applications. PRC regulatory agencies
have previously named certain of our mobile apps
for rectification in compliance with privacy and data
security regulations. We have rectified these mobile
apps’ data collection and use practices to bring
them into compliance. Nevertheless, there can be no
assurance that our mobiles apps will not be named or
that we will not be subject to regulatory investigations
in the future.
Furthermore, the use of algorithms and generative
AI in recommendation services has raised additional
data protection concerns, and PRC regulatory
authorities have enhanced their regulation in
these areas. According to the Administrative
Provisions on Internet Information Service Algorithm
Recommendation, or the Algorithm Recommendation
Provisions, which came into effect on March 1,
2022, algorithm recommendation service providers
shall fulfil filing obligations according to regulatory
requirements as applicable, clearly inform users
of their provision of algorithm recommendation
services, and make public the basic principles,
intentions and main operating mechanisms of the
algorithm recommendation services, and shall also
ensure that users may conveniently terminate the
algorithm recommendation services. Moreover,
algorithm recommendation service providers selling
goods or providing services to consumers shall
protect consumers’ rights of fair trade, and are
prohibited from carrying out illegal conduct such
as unreasonable differentiated treatment based on
consumers’ preferences, purchase behavior, or such
other characteristics. In addition, the Administrative
Provisions on Deep Synthesis of Internet Information
Services, which took effect in January 2023, impose
obligations on providers, technology supporters
and users of deep synthesis technology, including
verification of user identity, implementing measures
to protect data security and personal information,
content moderation, labelling content generated
using deep synthesis technology, and conducting
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Fiscal Year 2024 Annual Report
security assessments and completing filings for
provision of certain services. Moreover, the Cyberspace
Administration of China, together with other relevant
authorities, released the Interim Measures on
Generative AI Services, which came into effect on
August 15, 2023 and impose compliance requirements
on providers of generative AI services. According to the
Interim Measures on Generative AI Services, individuals
or organizations that provide generative AI services
of text, image, audios, videos and other content shall
be responsible as the producers of such network
information content and as the personal information
processors to protect any personal information
involved. Providers of generative AI services shall
also conduct security assessment and complete
certain filings in accordance with the Administrative
Provisions on Internet Information Service Algorithm
Recommendation. Non-compliance with the Interim
Measures on Generative AI Services may subject
generative AI services providers to penalties, including
warning, public denouncement, rectification orders
and suspension of the provision of relevant services.
We use algorithmic recommendation, deep synthesis
technology and generative AI services in a wide range
of our businesses. Accordingly, we need to comply
with the Algorithm Recommendation Provisions,
the Administrative Provisions on Deep Synthesis of
Internet Information Services, the Interim Measures on
Generative AI Services and other applicable laws and
regulations governing algorithm recommendation
services, and we may be subject to penalties and
liability for non-compliance, which may include
administrative liabilities, including warnings, public
denouncement, fines, enforcement orders requiring
us to correct, or suspending us from posting new
information, suspension of business or even criminal
liabilities. Complying with PRC regulations relating to
algorithm recommendation services has increased
our compliance costs, changed our data use and
business practices, and could negatively affect user
activities on our platforms. See “Business Overview
— Regulation — Regulation of Internet Security.” We
believe that our business operations are compliant
with currently effective PRC laws relating to algorithm
recommendation services in all material respects.
As we further expand our operations into international
markets, we have become and will be subject to
additional laws in other jurisdictions where we
operate and where our consumers, users, merchants,
customers and other participants are located. Such
laws, rules and regulations of other jurisdictions
may be more comprehensive, detailed and nuanced
in their scope, and may impose requirements and
penalties that conflict with, or are more stringent than,
those in China. For example, the European Union
has adopted the Digital Markets Act and the Digital
Services Act and proposed the European Data Act
since 2020, which impose various requirements on
data use, data sharing and data protection, among
other matters. AliExpress has been designated as a
“very large online platform” under the Digital Services
Act, and thus is required to fulfil more stringent
obligations, including algorithm transparency,
content moderation, mandatory reporting of incidents
and measures to tackle illegal content, regular risk
assessment, annual independent audit, data sharing
with relevant regulators and annual supervisory fee.
These requirements will create additional operational
burdens and compliance costs for us, and we may
be subject to significant regulatory penalties for
failure to comply with these requirements. Complying
with laws and regulations for an increasing number
of jurisdictions could require significant resources
and costs. Our continued expansion into the cloud
business, both in China and elsewhere, will also
increase the amount of data hosted on our system, as
well as increase the number of jurisdictions in which
we have data centers. This, as well as the increasing
number of new legal requirements in various
jurisdictions, such as the GDPR, present increased
challenges and risks in relation to policies and
procedures relating to data collection, local storage,
access, cross-border transfer, disclosure, protection
and privacy, and will impose significant penalties for
non-compliance. For example, penalties calculated
as a percentage of global revenue may be imposed
under the GDPR. The compliance requirements of
the GDPR affect a number of our businesses, such as
AliExpress, Alibaba.com, Alibaba Cloud and Cainiao.
Any failure, or perceived failure, by us to comply
with the above and other applicable regulatory
requirements or data and privacy protection-related
laws, rules and regulations could result in suspension
of the relevant business or blockage of access to
mobile app services, reputational damages or
proceedings or actions against us by governmental
entities, consumers or others or even criminal
liabilities. These proceedings or actions could subject
us to significant penalties and negative publicity,
require us to change our data and other business
practices, increase our costs and severely disrupt our
business, hinder our global expansion or negatively
affect the trading prices of our ADSs, Shares and/or
other securities, our business and prospects.
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Alibaba Group Holding Limited
Cybersecurity and Data Security
The PRC Cybersecurity Law, which generally governs
the construction, operation, maintenance and use
of networks in China, subjects network operators,
including us, to various security protection-related
obligations. In addition, the PRC Cybersecurity Law
provides that personal information and important
data collected and generated by operators of critical
information infrastructure in the course of their
operations in the PRC should be stored in the PRC,
and imposes heightened regulation and additional
security obligations on operators of critical information
infrastructure. See “Business Overview — Regulation
— Regulation of Internet Security.” We believe that we
are compliant with PRC Cybersecurity Law, including
requirements relating to security protection, user
identity verification, cybersecurity emergency response
planning and technical assistance, in all material
respects. Failure to comply could subject us to fines,
suspension of businesses, shutdown of websites and
revocation of business licenses.
PRC regulatory authorities have also promulgated
laws and regulations relating to cybersecurity review.
According to the Revised Cybersecurity Review
Measures, which became effective in February
2022, operators of critical information infrastructure
who purchase network products and services and
network platform operators who carry out data
processing activities that affect or may affect national
security shall be subject to cybersecurity review. See
“Business Overview — Regulation — Regulation of
Internet Security.” Moreover, in November 2021, the
Cyberspace Administration of China promulgated
the Draft Regulations on Network Data Security
Management, or the Draft Cyber Data Security
Regulations, for public comments, which set forth
different scenarios where data processors are
required to apply for cybersecurity review and
require data policies and rules and any material
amendments thereof of large Internet platforms
with over 100 million daily active users be evaluated
by a third-party organization designated by the
Cyberspace Administration of China and approved
by the respective local branch of the Cyberspace
Administration of China. There is no definite timetable
as to when the Draft Cyber Data Security Regulations
will be enacted. See “Business Overview — Regulation
— Regulation of Data and Privacy Protection.”
PRC laws and regulations relating to cybersecurity
review are relatively new, and the applicable scope
of these laws and regulations remain subject to
uncertainties and further clarifications from PRC
regulators. In 2021, the PRC government launched
cybersecurity reviews on a number of mobile apps
operated by several US-listed Chinese companies and
prohibited relevant apps from registering new users
during the review period. As of the date of this annual
report, we have not received any notice from the
Cyberspace Administration of China of a cybersecurity
review on us under the Revised Cybersecurity Review
Measures. Based on advice from Fangda Partners, our
PRC counsel, we do not believe that we are required
to undergo cybersecurity review by the Cyberspace
Administration of China for our previous securities
offerings. However, given the scale of our business
and the number of users on our platforms, we believe
that we may be subject to a cybersecurity review in the
future. If we are subject to a cybersecurity review, we
may incur significant costs and face challenges, both
in the review process and in making enhancements to
our cybersecurity measures that may be required. If we
are unable to manage these risks, we may be subject
to penalties, including fines, suspension of business,
prohibition against new user registration (even for
a short period of time) and revocation of required
licenses, and our reputation and results of operations
could be materially and adversely affected.
Moreover, the Data Security Law which took effect
in September 2021 imposes additional regulatory
requirements on processors of important data,
including specifying the persons and management
bodies responsible for data security and implementing
regular data security risk assessment and other data
protection measures. If we are unable to manage
these risks, we may be subject to penalties, including
fines, suspension of business, revocation of required
licenses and civil or even criminal liabilities. As of
the date of this annual report, we have not received
any regulatory notice that we are a processor of
important data as mentioned above. We believe that
our business operations are compliant with PRC laws
and regulations relating to data security in all material
respects.
Cross-border Data Transmission
Regulatory authorities in China and around the world
have enhanced supervision and regulation of cross-
border data transmission. As our business operations
expand across jurisdictions and we collect, process
and utilize personal data of our users worldwide, we
are subject to and are likely to be required to expend
significant capital to ensure ongoing compliance
with these laws and regulations on cross-border
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Fiscal Year 2024 Annual Report
data transfers. The Data Security Law prohibits
entities and individuals in China from providing any
foreign judicial or law enforcement authority with
any data stored in China without approval from a
competent PRC authority, and sets forth the legal
liabilities of entities and individuals found to be in
violation of their data protection obligations, including
rectification order, warning, fines, suspension of
relevant business, and revocation of business permits
or licenses. The Measures for the Security Assessment
of Cross-border Data Transmission promulgated
by the Cybersecurity Administration of China came
into effect on September 1, 2022. According to these
measures, personal data processors are subject to
security assessment conducted by the Cyberspace
Administration of China prior to any cross-border
transfer of important data and personal information.
See “Business Overview — Regulation — Regulation
of Data and Privacy Protection.” Furthermore, the
Cyberspace Administration of China promulgated the
Provisions on the Prescribed Agreement on Cross-
border Data Transfer, or the Provisions on Prescribed
Agreement, which came into effect on June 1, 2023.
We have implemented control procedures to comply
with the new requirements. Complying with PRC
laws and regulations relating to cross-border data
transmission increases our compliance costs and
could affect our ability to transfer data across borders.
We believe that our business operations are compliant
with PRC laws and regulations relating to cross-border
data transmission in all material respects.
In addition, laws, rules and regulations in other
jurisdictions where we operate may restrict the
transfer of data across jurisdictions, which could
impose additional and substantial operational,
administrative and compliance burdens on us, and
may also restrict our business activities and expansion
plans, as well as impede our data-driven business
strategies. For example, the GDPR requires companies
to take appropriate safeguard measures and satisfy
specific conditions when transferring data outside
Europe. On February 28, 2024, the United States
released the Executive Order on Preventing Access to
Americans’ Bulk Sensitive Personal Data and United
States Government-Related Data by Countries of
Concern, which will place restrictions on the transfer
of certain data from the U.S. to countries of concern.
Failure to comply with GDPR requirements and other
laws relating to cross-border data transfers may result
in suspension of the relevant business, significant
amounts of fines and other administrative penalties,
regulatory investigations and actions against us,
significant damage to our reputation or even criminal
liabilities.
As permitted by applicable laws and regulations,
our privacy policies and user agreements, we grant
expressly limited access to specified data on our data
platform to certain participants in our ecosystem that
provide services to consumers, merchants, brands,
retailers and other ecosystem participants. In addition,
we and Ant Group may negotiate the terms of data
sharing arrangements on a case-by-case basis,
to the extent necessary for each party to provide
services to our respective customers and as permitted
by applicable laws and regulations. Participants in
our ecosystem, including Ant Group, face the same
challenges inherent in handling and protecting large
volumes of data. Any actual or perceived improper
use of data by us or them, and any systems failure or
security breach or lapse on our or their part that results
in the release of user data could harm our reputation
and brand and, consequently, our business, in
addition to exposing us to potential legal liability or
regulatory actions. This could also attract negative
publicity from media outlets, privacy advocates, our
competitors or others and could adversely affect
the trading prices of our ADSs, Shares and/or other
securities.
While we believe we are compliant with laws and
regulations on privacy and data protection and
cybersecurity in all material respects, there are
uncertainties with respect to how these laws and
regulations will be interpreted, implemented and
enforced in practice, especially since many of these
laws and regulations only came into effect recently
or have not come into effect yet. We expect that
data security and personal information protection
will continue to attract public scrutiny and receive
greater attention and focus from regulators. Future
interpretation and implementation of these laws
and regulations, or additional laws and regulations
that may come into effect, may further increase our
compliance costs, force us to change our business
practices, adversely affect our business performance
as well as subject us to administrative and legal
liabilities, which could harm our reputation and
negatively affect the trading prices of our ADSs, Shares
and/or other securities.
On the other hand, regulators in China and other
jurisdictions in which we operate may implement
measures to ensure that encryption of user data does
not hinder law enforcement agencies’ access to that
data. For example, according to the PRC Cybersecurity
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Alibaba Group Holding Limited
Law and relevant regulations, network operators,
including us, are obligated to provide assistance
and support in accordance with the law for public
security and national security authorities to protect
national security or assist with criminal investigations.
Non-compliance or compliance with these laws
and requirements in manners that are perceived as
harming privacy could lead to significant damages to
our reputation and proceedings and actions against
us by regulators and private parties.
Security breaches and attacks against our systems
and network, and any potentially resulting breach
or failure to otherwise protect personal, confidential
and proprietary information, could damage our
reputation and negatively impact our business, as
well as materially and adversely affect our financial
condition and results of operations.
Our cybersecurity measures may not detect, prevent or
control all attempts to compromise our systems or risks
to our systems, including distributed denial-of-service
attacks, viruses, Trojan horses, malicious software,
break-ins, phishing attacks, third-party manipulation,
security breaches, employee misconduct or
negligence or other attacks, risks, data leakage and
similar disruptions that may jeopardize the security
of data stored in and transmitted by our systems or
that we otherwise maintain. Moreover, if we fail to
implement adequate encryption of data transmitted
through the networks of the telecommunications
and Internet operators we rely upon, there is a risk
that telecommunications and Internet operators or
their business partners may misappropriate our data.
Breaches or failures of our cybersecurity measures
could result in unauthorized access to our systems,
misappropriation of information or data, deletion or
modification of user information, or denial-of-service
or other interruptions to our business operations. If
the security of domain names is compromised, we will
be unable to use the domain names in our business
operations.
We may not have the resources or technical
sophistication to anticipate or prevent rapidly
evolving cyber-attacks. As techniques used to obtain
unauthorized access to or sabotage systems change
frequently and may not be known until launched
against us, there can be no assurance that we will be
able to anticipate, or implement adequate measures
to protect against, these attacks. We could also be
subject to an attack, breach or leakage, which we
do not discover at the time or the consequences of
which are not apparent until a later point in time.
We only carry limited cybersecurity insurance, and
actual or anticipated attacks and risks may cause us
to incur significantly higher costs, including costs to
deploy additional personnel and network protection
technologies, train employees, and engage third-party
experts and consultants.
Cyber-attacks may target us, our merchants,
consumers, users, customers, key service providers
or other participants in our ecosystem, or the
communication infrastructure on which we depend.
In particular, breaches or failures of our third-party
service providers’ systems and cybersecurity measures
could also result in unauthorized access to our
data, our consumers’ and customers’ data and user
information and business interruptions. In addition,
we develop systems for customers through our cloud
or other services. If these systems suffer attacks,
breaches and data leakage, whether or not we are
involved in managing or operating such systems,
we could be subject to negative publicity, potential
liabilities and regulatory investigations, including
extensive cybersecurity review, which could result in
significant losses to us, and materially and adversely
affect our reputation, business growth and prospects.
We, our third-party service providers and customers
that use systems we have developed have been in the
past and are likely again in the future to be subject to
these types of attacks, breaches and data leakage.
For example, in October 2020, Lazada reported a
data breach of a legacy RedMart database hosted
by a third-party service provider, which resulted in
the leakage of certain personal information of 1.1
million RedMart user accounts. Further, in May 2021, a
court in China ruled in a criminal case that a software
developer illegally collected approximately 1.2 billion
pieces of user log-in IDs, alias and phone numbers
from the Taobao website using a web crawler, which
we discovered and reported to law enforcement in
August 2020.
Cyber-attacks and security breaches, whether or not
related to our systems or attributable to us, could
result in business interruptions and subject us to
negative publicity, regulatory investigations and
significant legal and financial liability, harm our
reputation and result in substantial revenue loss from
lost sales and customer dissatisfaction, materially
decrease our revenue and net income, and negatively
affect the trading prices of our ADSs and Shares.
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Fiscal Year 2024 Annual Report
Claims or regulatory actions under competition
laws against us may result in our being subject to
fines, constraints on our business and damage to our
reputation.
Since 2020, the PRC government has enhanced
anti-monopoly and anti-unfair competition laws
and regulations and guidance and stepped up
enforcement against concentration of undertakings,
cartel activities, monopoly agreements, unfair
pricing, abusive behaviors by companies with market
dominance and other anti-competitive activities. The
Online Trading Measures which took effect on May
1, 2021, the amended Anti-monopoly Law which
came into effect on August 1, 2022, as well as the
Provisions on the Prohibition of Monopoly Agreements,
the Provisions on the Prohibitions of Acts of Abuse of
Dominant Market Positions and the Provisions on the
Review of Concentration of Undertakings, all of which
came into effect on April 15, 2023, among others,
impose liabilities on cartel facilitators who aid others in
the summation of anti-competitive agreements, clarify
that data, algorithms, technologies, platform rules and
other measures may not be used for consummation
of monopoly agreements, and prohibit platform
operators from abuse of dominant market positions.
On November 22, 2022, the SAMR published the Draft
Amendment to the PRC Anti-unfair Competition Law
for public comments, which introduced prohibition
against the misuse of a relatively dominant market
position and set significant administrative penalties
specifically for unfair competitive practices in digital
economy. On May 11, 2024, the SAMR published the
Interim Measures on Online Anti-unfair Competition,
which will come into effect on September 1, 2024,
which lists unfair competition practices implemented
through the Internet and other information networks.
Such laws and regulations:
•
provide guidelines for the implementation of
anti-monopoly and anti-unfair competition
laws and regulations, including (i) prohibition
against the abuse of dominant market positions,
especially in terms of unreasonable restrictions
on transactions, price manipulation, interference
with merchants’ independent business
operations, false or misleading marketing and
the use of technical means to disrupt the normal
operations of network products or services
legally provided by other business operators,
(ii) details of the review of concentration of
undertakings, and (iii) specifying the unfair
competition practices in digital economy and the
Internet industry, including fictitious transactions
and reviews, ads blocking, exclusive partnership
arrangements, data crawling and big data-
enabled price discrimination;
•
strengthen enforcement of anti-monopoly and
anti-unfair competition laws and regulations,
including the regulation of monopolistic
behaviors and monopoly agreements and
price-related violations as well as assistance in
the consummation of monopoly agreements,
such as below-cost pricing, price discrimination,
manipulation of market prices, fraudulent
pricing, entering into monopoly agreements and
abuse of dominant market positions through
data, algorithms, technology or platform rules,
as well as supervision of concentration of
undertakings; and
•
increase legal liabilities, including greater
penalties and criminal liabilities for violations
of anti-monopoly and anti-unfair competition
laws and regulations, and setting up certain
regulatory inspection mechanisms, such
as allowing expert observers to assist in
investigations of novel and complex cases.
See “Business Overview — Regulation — Regulation
of Monopoly and Unfair Competition,” “Business
Overview — Regulation — Regulation of Online
and Mobile Commerce” and “Business Overview —
Regulation — Regulation of Pricing.”
The SAMR, together with certain other PRC government
authorities have been active in their oversight and
the establishment of long-term mechanisms for
fair market competition in the sharing consumption
industry. While we have conducted self-inspections
and undergone self-rectifications, we may still make
further changes to our business practices, which may
increase our compliance costs and adversely affect
our business performance.
To comply with existing laws and regulations and
new laws and regulations that may be enacted
in the future, as well as administrative guidance
and requirements by regulators from time to time,
we may need to devote significant resources and
efforts, including changing our business and pricing
practices, restructuring our businesses and adjusting
our investment activities, which may materially and
adversely affect our business, growth prospects,
reputation and the trading prices of our ADSs, Shares
and/or other securities. We may also be subject to
regulatory investigations, fines and other penalties,
which could materially and adversely affect our
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Alibaba Group Holding Limited
business and reputation. The consequences of
violating anti-monopoly and anti-unfair competition
laws and regulations could be significant, including,
for example, fines of up to 50% of the previous year’s
revenue, suspension of business and revocation
of business licenses. Due to the expansive scope
of business activities the anti-monopoly and anti-
unfair competition laws and regulations target to
regulate, many of our businesses and practices,
including our business models, pricing practices,
promotional activities and cooperation with business
partners, may be subject to regulatory scrutiny and
significant penalties. Certain long-standing practices,
such as upstream and downstream investments
and mergers as well as horizontal investments and
mergers, our cross-platform user ID system, data
and algorithm applications, our traffic allocation
approach, platform protocols and the manners in
which we offer payment, logistics and other services
to consumers may be subject to challenges by
regulators, consumers, merchants and other parties.
On December 24, 2020, the SAMR commenced
an investigation on us pursuant to the PRC Anti-
monopoly Law. Following the investigation, on April
10, 2021, the SAMR issued an administrative penalty
decision finding that we violated provisions of the
PRC Anti-monopoly Law prohibiting a business
operator with a dominant market position from
restricting business counterparties through exclusive
arrangements without justifiable cause, and imposed
a fine of RMB18.2 billion. The SAMR also issued an
administrative guidance, instructing us to implement
a comprehensive rectification program, and to file a
self-assessment and compliance report to the SAMR
for three consecutive years. In addition, the SAMR
has imposed and in the future may further impose
administrative penalties on various companies
including us for failing to duly make filings as to their
transactions subject to merger control review by the
SAMR. See “— PRC regulations regarding acquisitions
impose significant regulatory approval and review
requirements, which could make it more difficult for us
to pursue growth through acquisitions and subject us
to fines or other administrative penalties.”
The PRC Anti-monopoly Law and Anti-unfair
Competition Law also provide a private right of action
for competitors, business partners or customers to
bring anti-monopoly and anti-unfair competition
claims against companies. In recent years, an
increased number of companies have been exercising
their right to seek relief under the PRC Anti-monopoly
Law, Anti-unfair Competition Law and related judicial
interpretations. Some of these companies, including
our competitors, business partners and customers,
have resorted to and may continue making public
allegations or launching media campaigns against
us, submitting complaints to regulators or initiating
private litigation that targets our and our business
partners’ prior and current business practices. For
example, another e-commerce player in China has
brought suit against us under the PRC Anti-monopoly
Law in connection with certain alleged exclusive
arrangements and claimed a substantial amount of
damages, and there may be other similar litigation
in the future. See “Business Overview — Legal and
Administrative Proceedings — JD.com Lawsuit.” There
may be other similar litigation in the future, and we
may face increased challenges in defending ourselves
in existing and future lawsuits brought against us
pursuant to the PRC Anti-monopoly Law. The litigation
process of defending against such lawsuits, including
any appeals, may divert resources and management’s
attention away from our day-to-day operations, and if
we fail to successfully defend ourselves against these
claims, we may be required to pay damages, which
may be significant and could materially and adversely
affect our business operations, financial results and
reputation.
Allegations, claims, investigations, regulatory
interviews, unannounced inspections, or other actions
or proceedings under the anti-monopoly and anti-
unfair competition laws and regulations, regardless of
their merits, have caused, and may continue to cause,
us to be subject to regulatory actions, such as profit
disgorgement and heavy fines, significant amounts of
damage payments or settlements, and constraints on
our investments and acquisitions. We may be required
to make further changes to some of our business
practices and divest certain businesses, which could
decrease the popularity of our businesses, products
and services and cause our revenue and net income to
decrease materially. Any of the above circumstances
could materially and adversely affect our business,
operations, reputation, brand, the trading prices of our
ADSs, Shares and/or other securities.
PRC regulations regarding acquisitions impose
significant regulatory approval and review
requirements, which could make it more difficult for
us to pursue growth through acquisitions and subject
us to fines or other administrative penalties.
Under the PRC Anti-monopoly Law, companies
undertaking certain investments and acquisitions
relating to businesses in China must notify and
obtain approval from the SAMR, before completing
any transaction where the parties’ revenues in China
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exceed certain thresholds and the buyer would
obtain control of, or decisive influence over, the other
party or any transaction that would otherwise trigger
merger control filing obligations. In addition, we
need to notify other PRC regulatory authorities if the
investment or acquisition is in certain industries. The
SAMR, the Cyberspace Administration of China and
other regulatory agencies in China have enhanced
merger control review in key areas, including national
interest and people’s livelihood, finance, technology
and media. On August 8, 2006, six PRC regulatory
agencies, including the MOFCOM, the State-owned
Assets Supervision and Administration Commission
of the State Council of the PRC, or the SASAC, the STA,
the SAIC, the CSRC, and the SAFE, jointly adopted the
M&A Rules, which came into effect on September 8,
2006 and were amended on June 22, 2009. Under
the M&A Rules, the approval of the MOFCOM must be
obtained in circumstances where overseas companies
established or controlled by PRC enterprises or
residents acquire domestic companies affiliated with
PRC enterprises or residents. Applicable PRC laws,
rules and regulations also require certain merger
and acquisition transactions to be subject to security
review.
Under the currently effective PRC Anti-monopoly
Law, due to the level of our revenues, our proposed
acquisition of control of, or decisive influence over,
any company with revenues within China of more
than RMB400 million in the year prior to any proposed
acquisition, would be subject to SAMR merger control
review. In addition, a proposed transaction would
be subject to SAMR merger control review if we have
joint control of or joint decisive influence over any
company with another party and where such other
party has revenues within China of more than RMB400
million in the year prior to such transaction. Many of
the transactions we undertook and may undertake
could be subject to SAMR merger review. We have
been fined, and expect to be subject to additional
fines, which may be significant, for failing to obtain
merger control approval for past acquisitions. Under
the PRC Anti-monopoly Law, we may also be required
to make divestitures or be subject to limitations on our
business practices and other administrative penalties
if regulators determine that we have failed to obtain
the required approvals in relation to investments and
acquisitions, which could materially and adversely
affect our business operations and financial results as
well as the trading prices of our ADSs, Shares and/or
other securities.
The Provisions of the State Council of the PRC on the
Thresholds for Filing of Concentration of Undertakings
most recently amended by the State Council on
January 22, 2024 significantly raise the filing thresholds
with respect to revenue, but at the same time
subjecting certain transactions that do not meet the
revenue threshold to filing obligations. See “Business
Overview — Regulation — Regulation of Monopoly and
Unfair Competition.” Substantial uncertainties exist
with respect to the interpretation and implementation
of such newly amended provisions. The amended
PRC Anti-monopoly Law, which became effective
on August 1, 2022, significantly raises the maximum
fines for failure to file for merger control review,
and introduces a “stop-clock mechanism” which
may prolong the merger control review process.
Furthermore, the Provisions on the Review of
Concentration of Undertakings, which came into effect
on April 15, 2023, provide detailed rules on how to
implement the “stop-clock mechanism,” which allow
the SAMR to suspend the calculation of time period for
merger control review under various circumstances.
See “Business Overview — Regulation — Regulation
of Monopoly and Unfair Competition.” Complying
with the requirements of the relevant regulations
to complete these transactions could be time-
consuming, and any required approval processes,
including approval from SAMR, may be uncertain and
could delay or inhibit our ability to complete these
transactions, which could affect our ability to expand
our business, maintain our market share or otherwise
achieve the goals of our acquisition strategy.
According to the Regulations on Enterprise Outbound
Investment issued by the NDRC in December 2017,
which came into effect on March 1, 2018, we may
also need to report to the NDRC relevant information
on overseas investments with an amount of US$300
million or more in non-sensitive areas, and obtain
the NDRC’s approval for our overseas investments
in sensitive areas, if any, before the closing of the
investments. According to the Overseas Listing Trial
Measures, if a Chinese overseas listed company,
such as us, issues overseas listed securities to
acquire assets, such issuance shall be subject
to filing requirements. If we fail to properly and
timely complete such filings, we may be subject
to penalties, sanctions and fines imposed by the
CSRC and relevant departments of the State Council
of the PRC. See “— Risks Related to Doing Business
in the People’s Republic of China — The approval,
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filing or other requirements of the CSRC or other PRC
regulatory authorities may be required under PRC law
in connection with any future issuance of securities
overseas, and, if required, we cannot predict whether
or for how long we or our subsidiaries will be able
to obtain such approval or complete such filing.”
Accordingly, these regulations may restrict our ability
to make investments in some regions and industries
overseas, and may subject any proposed investments
to additional delays and increased uncertainty, as well
as heightened scrutiny, including after the investments
have been made.
Our ability to carry out our investment and acquisition
strategy may be materially and adversely affected
due to significant regulatory uncertainty as to the
timing of receipt of relevant approvals or completion
of relevant filings and whether transactions that we
may undertake would subject us to fines or other
administrative penalties and negative publicity and
whether we will be able to complete investments and
acquisitions in the future in a timely manner or at all.
We may be subject to liability for content available
in our ecosystem that is alleged to be obscene,
defamatory, libelous, fraudulent, socially
destabilizing or otherwise unlawful.
Under PRC law and the laws of certain other
jurisdictions in which we operate, we are required
to monitor our websites and the websites hosted on
our servers, cloud computing services and mobile
apps or interfaces, as well as our services and devices
that generate or host content, for items or content
deemed to be obscene, superstitious, defamatory,
libelous, fraudulent or socially destabilizing, as well
as for items, content or services that are illegal to
sell online or otherwise in jurisdictions in which we
operate our marketplaces and other businesses,
and to promptly take appropriate action with respect
to the relevant items, content or services. We may
also be subject to potential liability in China or other
jurisdictions for any unlawful actions of our merchants,
marketing customers or users of our websites, cloud
computing services or mobile apps or interfaces, or
for content we distribute or that is linked from our
platforms that is deemed inappropriate. It may be
difficult for us to determine the type of content that
may result in liability to us. The nature and scale of
our websites, mobile apps and platforms, such as
our cloud computing services, which allow users to
upload and save massive data on our cloud data
centers, social communities on our marketplaces and
DingTalk, such as livestreams and other interactive
media content on Taobao and Tmall, and Youku,
which allow users to upload videos and other
content to our websites, mobile apps and platforms,
generally referred to as user-generated content,
and the increasing widespread use of AI to generate
content may make this even more difficult. Due to the
significant amount of content uploaded by our users,
including those generated through AI technologies,
we may not be able to identify all the videos or
other content that may violate relevant laws and
regulations. If any of the information disseminated
through our marketplaces, websites, mobile apps or
other businesses we operate, including videos and
other content (including user-generated content),
or any content that we have produced or acquired,
are deemed by the PRC government to violate any
content restrictions, we would not be able to continue
to display or distribute this content and could suffer
losses or become subject to penalties, including
confiscation of income, fines, suspension of business
and revocation of required licenses, which could
materially and adversely affect our business, financial
condition and results of operations. Our livestreaming,
short-form videos and interactive content businesses
are subject to heightened risks and challenges
associated with content liability. Moreover, PRC
regulators have enhanced enforcement against illegal
content and information on Internet platforms and
have imposed more stringent obligations on Internet
platforms, such as us. For example, the Cyberspace
Administration of China has launched a series of
“Cleaning Up the Internet” campaigns with special
focus on livestreaming, short-form videos, content
for minors, fandom culture, personal media, Internet
rumors, cyberviolence, cyber environment and Internet
account operations. As a result, our compliance
costs may increase and we may be subject to
regulatory actions and penalties. If we are unable
to manage these risks, we could become subject to
penalties, including regulatory actions, significant
fines, suspension of business, revocation of required
licenses and prohibition against new user registration,
and our reputation, results of operations and financial
condition could be materially and adversely affected.
Furthermore, compliance requirements are
complicated and evolving, and may require us to
implement different protections based on the type
of content and intended audience. For example, the
Regulations on the Administration of Minors Program,
or the Minors Program Regulation, promulgated by the
National Radio and Television Administration of China,
or the NRTA, which came into effect on April 30, 2019
and amended on October 8, 2021, provides that radio
and television broadcasters and online audiovisual
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program service providers shall establish relevant
protocols and review content of minor-oriented
programs to ensure that they do not contain violence,
obscenity, superstition, social disruption, drug abuse
or other prohibited elements. The Opinions on
Standardizing the Virtual Gifting of Livestreaming and
Strengthening the Protection of Minors issued by the
Cyberspace Administration of China and several other
PRC governmental authorities require platforms not to
provide livestreaming hosting services to minors under
the age of 16 and adopt “teenager modes” to prevent
minors from obsession, block unsuitable content
to minors and refrain from providing virtual gift
purchase services to minors. We may incur significant
compliance costs and be subject to significant
regulatory penalty for failure to comply with these
requirements. If we are found to be liable for content
displayed or hosted on or even hyperlinked to our
services and platforms, we may be subject to negative
publicity, fines, have our relevant business operation
licenses revoked, or be prevented temporarily or for an
extended period of time from operating our websites,
mobile apps, interfaces or businesses in China or other
jurisdictions, which could materially and adversely
affect our business and results of operations.
Certain consolidated entities of our digital media
and entertainment business brought in state-owned
minority strategic investors. Such shareholder
has the right to appoint a director of the relevant
consolidated entity and other rights including certain
veto rights over the content review processes. Market
perception of this and other similar arrangements
may affect the trading prices of our ADSs, Shares
and/or other securities. In the future, our businesses
that generate or distribute content may be subject to
greater governmental oversight or comply with other
regulatory requirements.
In addition, claims may be brought against us for
defamation, libel, negligence, copyright, patent
or trademark infringement, tort (including death
and personal injury), other unlawful activity or
other theories and claims based on the nature and
content of information posted on our platforms,
including user-generated content, product reviews
and message boards, by our consumers, merchants
and other participants. Regardless of the outcome of
any dispute or lawsuit, we may suffer from negative
publicity and reputational damage as a result of these
actions.
We may be subject to claims under consumer
protection laws, including health and safety claims
and product liability claims, if property or people are
harmed by the products and services sold through
our platforms.
Government authorities in the PRC and other countries
where we operate, media outlets and public advocacy
groups are increasingly focused on consumer
protection. Operators of e-commerce platforms are
subject to certain provisions of consumer protection
laws even where the operator is not the merchant of
the product or service purchased by the consumer.
For example, under the E-commerce Law, we may
be held jointly liable with the merchants if we fail to
take necessary actions when we know or should have
known that the products or services provided by the
merchants on our platforms do not meet personal
and property security requirements, or otherwise
infringe upon consumers’ legitimate rights. Applicable
consumer protection laws in China, including the
recently released Implementing Rules of the Consumer
Rights Protection Law that will come into effect on July
1, 2024, also hold that trading platforms, including
livestreaming marketing platforms, will be held
liable for failing to meet certain undertakings that
the platforms make to consumers with regard to
products listed on their websites, provide appropriate
dispute resolution mechanisms for consumers or
otherwise protect consumer rights. Furthermore, we
are required to report to the SAMR or its local branches
any violation of applicable laws, regulations or SAMR
rules by merchants or service providers, such as sales
of goods without proper license or authorization,
and we are required to take appropriate remedial
measures, including ceasing to provide services to the
relevant merchants or service providers. According to
the Online Trading Measures, we are also required to
verify and update each merchant’s profile on a regular
basis and monitor their market participant registration
status. Therefore, we may be held liable if we fail to
verify the licenses or qualifications of merchants, or
fail to safeguard consumers with respect to products
or services affecting consumers’ health or safety. On
September 2, 2022, the Standing Committee of the
National People’s Congress promulgated the Anti-
Telecom and Online Fraud Law of PRC, effective on
December 1, 2022, which stipulates that Internet
service providers may not provide assistance to
telecom and online fraud and must strengthen
internal control mechanisms to prevent and curb
telecom and online fraud, including verifying user
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identities, timely and proper handling of abnormal
accounts, enhancing protection of key information
vulnerable to fraud and enhancing risk and security
assessment for new businesses. Furthermore, under
the PRC Minors’ Protection Law, network product
and service providers shall not provide products
or services that induce minors to obsession, or
otherwise may be subject to rectification, warning
or penalties including confiscation of income, fines,
suspension of business, shutdown of websites and
revocation of relevant licenses. The Regulations on
the Protection of Minors on the Network stipulate that
important Internet platforms with large number of
minor users and significant influence among minors
must fulfill their obligations, including but not limited
to establishing a protocol to oversee the protection
of minors online and carrying out periodic impact
assessment, adopting “teenager modes” for minors,
and suspending services to providers of products or
services on the platform who seriously violate laws
and regulations and harm minors’ rights and interests.
Failure to comply with these requirements may subject
us to warnings, public denouncement, confiscation
of illegal income, fines, suspension of business,
rectification orders, shutdown of websites and
applications and revocation of relevant licenses, which
could materially and adversely affect our business,
financial condition and results of operations.
Moreover, our businesses provide food, food delivery,
food supplements and beverages, mother care,
cosmetics, baby care, pharmaceutical and healthcare
products and services, as well as electronics products,
both as a platform operator and as part of our
directly operated business. We have also invested in
companies involved in these sectors. These activities
pose increasing challenges to our internal control and
compliance systems and procedures, including our
control over and management of third-party service
personnel, and expose us to substantial increasing
liability, negative publicity and reputational damage
arising from consumer complaints, harm to personal
health or safety or accidents involving products or
services offered through our platforms or provided
by us. For example, China’s Supreme People’s Court
issued its interpretation of certain laws, including
food safety laws and consumer protection laws,
on December 8, 2020, and issued the Provisions on
Issues Concerning the Application of Law for the
Trial of Cases on Online Consumption Disputes (I)
on March 1, 2022, which took effect on March 15,
2022. According to these judicial interpretations,
livestreaming platform operators and online catering
service platform operators are responsible for verifying
the qualifications and licenses of livestreamers selling
food product and online food operators, respectively,
and they may be held jointly liable with the merchants
on their respective platforms for damages incurred
by consumers caused by defects in foods purchased
on their platforms, if these operators fail to fulfill
certain requirements and obligations. In addition,
e-commerce platform operators shall be held liable
as the product seller or service provider if the labels
used mislead consumers to believe that the product or
service is provided by the e-commerce platform, even
if such product or service is in fact provided by third
parties. See also “Business Overview — Regulation —
Regulation of Online and Mobile Commerce.”
New laws and regulations on consumer protection
may be introduced in China and other jurisdictions
where we operate and impose more requirements
on operators of e-commerce and livestreaming
platforms. For example, PRC regulatory authorities
promulgated several regulations on livestreaming
activities, including the Administrative Measures on
Online Livestreaming Marketing (Trial) that came into
effect on May 25, 2021, which require livestreaming
platforms to take actions such as limiting traffic and
suspending livestreaming involving illegal high-risk
marketing activities, and prominently alert users of
the risks involved in transactions that are conducted
outside livestreaming platforms. See also “Business
Overview — Regulation — Regulation of Online and
Mobile Commerce.” These regulations on e-commerce
and livestreaming activities may impose additional
operational burdens on us, result in increased
compliance costs and liability to us and subject us to
negative publicity.
In addition, we face activist litigation in China by
plaintiffs claiming damages based on consumer
protection laws. This type of activist litigation could
increase in the future, and if it does, we could face
increased costs defending these suits and damages
should we not prevail, which could materially and
adversely affect our reputation and brand and our
results of operations.
We may also face increasing scrutiny from consumer
protection regulators and activists, as well as
increasingly become a target for litigation, in the
United States, Europe and other jurisdictions. For
example, our AliExpress platform faces claims
related to consumer protection in the United States,
and member groups of the European Consumer
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Organization’s BEUC network have expressed
concerns about certain consumer rights related to
product returns and dispute resolution with respect
to transactions conducted on our AliExpress platform
and requested a review of these consumer rights
by their national consumer protection agencies. We
only maintain product liability insurance for certain
businesses we operate, and do not maintain product
liability insurance for products and services transacted
on our marketplaces, and our rights of indemnity from
the merchants in our ecosystem may not adequately
cover us for any liability we may incur. Consumer
complaints and associated negative publicity could
materially and adversely harm our reputation and
affect our business expansion. Claims brought
against us under consumer protection laws, even if
unsuccessful, could result in significant expenditure
of funds and diversion of management time and
resources, which could materially and adversely affect
our business operations, net income and profitability.
We are regularly subject to allegations,
investigations, lawsuits, liabilities and negative
publicity claiming that items listed and content
available in our ecosystem infringe intellectual
property rights of third parties or are illegal.
We have been and expect to continue to be the subject
of allegations that products or services offered, sold
or made available through our online marketplaces
by third parties or that content made available on
our platforms, including content available through
our digital media and entertainment business,
search business, online reading platform, online
music platform, news feed features and IoT devices
or our technology, infringe third-party copyrights,
trademarks and patents or other intellectual property
rights or are provided beyond the authorized
scope. Our use or adoption of AI technologies
in our businesses may increase our exposure to
copyright infringement or other intellectual property
misappropriation claims by third parties, which may
require us to pay compensation or license fees to
third parties. At the same time, there is increasing
focus on investigating, preventing and taking action
against alleged misappropriation of intellectual
property, which has resulted in increased scrutiny,
investigations, enforcement actions and litigation
relating to intellectual property infringement.
Although we have adopted and continue to optimize
measures to proactively verify the products sold on
our marketplaces for infringement and to minimize
potential infringement of third-party intellectual
property rights through our intellectual property
infringement complaint and take-down procedures,
these measures may not always be successful.
In the event that alleged counterfeit or infringing
products are listed or sold on our marketplaces or
allegedly infringing content are made available
through our other services, we could face claims
and negative publicity relating to these activities or
for our alleged failure to act in a timely or effective
manner in response to infringement or to otherwise
restrict or limit these activities. We may also choose
to compensate consumers for any losses, although
we are currently not legally obligated to do so. If, as
a result of regulatory developments, we are required
to compensate consumers, we would incur additional
expenses.
We have also acquired businesses, such as Youku,
Lazada and Ele.me, that have been, and may continue
to be, subject to liabilities for infringement of third-
party intellectual property rights or other allegations
and lawsuits based on the content available on
their websites and mobile apps or the products and
services they provide. Other companies that we may
acquire in the future may be subject to similar risks.
In addition, we expect our ecosystem to involve
more and more user-generated content, including
the entertainment content on Youku and our smart
speakers, the interactive media content displayed
on Taobao and Tmall, including livestreams and
short-form videos, as well as the data generated,
uploaded and saved by users of our cloud services,
over which we have limited control. Such content may
subject us to claims for infringement of third-party
intellectual property rights, or subject us to additional
scrutiny by the relevant government authorities. These
claims or scrutiny, whether or not having merit, may
result in our expenditure of significant financial and
management resources, injunctions against us or
payment of damages. We may need to obtain licenses
from third parties who allege that we have infringed
their rights, but these licenses may not be available
on terms acceptable to us or at all. These risks have
been amplified by the increase in the number of third
parties whose sole or primary business is to assert
these claims.
Measures we take to protect against these potential
liabilities could require us to spend substantial
additional resources and/or result in reduced
revenues. In addition, these measures may reduce
the attractiveness of our ecosystem to consumers,
merchants, brands, retailers and other participants.
A merchant, brand, retailer, online marketer,
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Alibaba Group Holding Limited
livestreamer, music or video service provider or
other content provider whose content is removed or
whose services are suspended or terminated by us,
regardless of our compliance with the applicable laws,
rules and regulations, may dispute our actions and
commence action against us for damages based on
breach of contract or other causes of action, make
public complaints or allegations or organize group
protests and publicity campaigns against us or seek
compensation. Any costs incurred as a result of liability
or asserted liability relating to the sale of unlawful
goods or other infringement could harm our business.
Regulators in China and other jurisdictions, including
the United States, are increasingly focused on
platform liabilities and seeking to hold Internet
platforms liable for product liability, illegal listings
and inappropriate content. We are regularly subject
to significant negative publicity, regulatory scrutiny,
investigations and allegations of civil or criminal
penalties based on allegedly unlawful activities or
unauthorized distribution of products or content,
such as pharmaceuticals, carried out by third parties
through our online marketplaces. Due to our role as an
operator of online marketplaces, we will also become
subject to criminal liabilities or civil liabilities if we are
found to have provided assistance or support, such
as Internet access, server escrow or online storage
services, commerce facilitation services, payment
services or logistics services, or were negligent in not
preventing, a third party from using our marketplaces
and services to commit certain illegal activities, such as
unauthorized sale of pharmaceuticals. The outcome
of any claims, investigations and proceedings is
inherently uncertain, and in any event defending
against these claims is both costly and time-
consuming, and will significantly divert the efforts and
resources of our management and other personnel.
An adverse determination in any of these proceedings
could result in suspension of the relevant business or
blockage of access to our platforms and services and
cause us to pay penalties or damages, incur legal and
other costs, limit our ability to conduct business, or
subject us to supervision by a third-party government
appointed monitor or require us to change the
manner in which we operate and harm our reputation.
In addition, we have been and may continue to be
subject to significant negative publicity in China, the
United States and other countries based on similar
claims and allegations. For example, in past years,
the USTR identified Taobao and AliExpress each
as a “notorious market.” While the USTR removed
AliExpress from the “notorious market” list in January
2024, Taobao remains on the list, and there can be no
assurance that the USTR or other relevant authorities
in the United States or other countries will not identify
Taobao or any of our other businesses as “notorious
markets” in the future. In addition, government
authorities regularly accuse us of perceived problems
and failures of our platforms, including alleged
failures to crack down on the sale of counterfeit goods,
unauthorized and illegal goods and other alleged
illegal activities on our marketplaces. As a result of
any claims or accusations by government authorities,
by industry watchdog organizations, including the
U.S. Commission on the Theft of American Intellectual
Property, by brand and intellectual property rights
holders or by enterprises, there may be a public
perception that counterfeit or pirated items are
commonplace on our marketplaces or that we delay
the process of removing these items. This perception,
even if factually incorrect, and existing or new
litigation as well as regulatory pressure or actions
related to intellectual property rights protection, could
damage our reputation, harm our business, diminish
the value of our brand name and negatively affect
the trading prices of our ADSs, Shares and/or other
securities.
We may be subject to material litigation and
regulatory proceedings.
We have been involved in a high volume of litigation
in China and a small volume of potentially high-
value litigation outside of China relating principally to
securities law class actions, third-party and principal
intellectual property infringement claims, contract
disputes involving merchants and consumers on our
platforms, consumer protection claims, claims relating
to data and privacy protection, employment-related
cases and other matters in the ordinary course of
our business. As our ecosystem expands, including
across jurisdictions and through the addition of new
businesses, we have encountered and may face
an increasing number and a wider variety of these
claims, including those brought against us pursuant
to anti-monopoly or anti-unfair competition laws,
arising out of investment transactions or other
claims involving high amounts of alleged damages.
Laws, rules and regulations may vary in their scope
and overseas laws and regulations may impose
requirements that are more stringent than, or which
conflict with, those in China. We have acquired and
may acquire companies that have been subject to or
may become subject to litigation, as well as regulatory
proceedings. In addition, in connection with litigation
or regulatory proceedings we may be subject to
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in various jurisdictions, we may be prohibited by
laws, regulations or government authorities in one
jurisdiction from complying with subpoenas, orders
or other requests from courts or regulators of other
jurisdictions, including those relating to data held in
or with respect to persons in these jurisdictions. Our
failure or inability to comply with the subpoenas,
orders or requests could subject us to fines, penalties
or other legal liability, which could have a material
adverse effect on our reputation, business, results
of operations, the trading prices of our ADSs, Shares
and/or other securities.
As publicly listed companies, we and certain of our
subsidiaries face additional exposure inside and
outside China to claims lawsuits and regulatory
proceedings, including threatened claims lawsuits
and regulatory proceedings, relating to securities
laws and regulations. For example, we and certain
of our current and former officers and directors have
been named as defendants in certain shareholder
class action lawsuits in the United States, asserting
claims related to our alleged failure to disclose non-
compliance with certain Chinese antitrust laws and
regulations. See “Business Overview — Legal and
Administrative Proceedings — Shareholder Class Action
Lawsuits” for more details about the shareholder class
action lawsuits. The litigation process of defending
against such lawsuits and regulatory proceedings,
including any appeals, may utilize a material portion
of our cash resources and divert management’s
attention away from our day-to-day operations, all
of which could harm our business. There can be no
assurance that we will prevail in any of these cases,
and any adverse outcome of these cases could
have a material adverse effect on our reputation,
business and results of operations. In addition,
although we have obtained directors’ and officers’
liability insurance, the insurance coverage may not be
adequate to cover our obligations to indemnify our
directors and officers, fund a settlement of litigation
in excess of insurance coverage or pay an adverse
judgment in litigation.
The existence of litigation, claims, investigations
and proceedings may harm our reputation, limit our
ability to conduct our business in the affected areas
and adversely affect the trading prices of our ADSs,
Shares and/or other securities. The outcome of any
claims, investigations and proceedings is inherently
uncertain, and in any event defending against these
claims could be both costly and time-consuming, and
could significantly divert the efforts and resources of
our management and other personnel. An adverse
determination in any litigation, investigation or
proceeding could cause us to pay damages, incur
legal and other costs, limit our ability to conduct
business or require us to change the manner in which
we operate.
Failure to maintain or improve our technology
infrastructure could harm our business and
prospects.
We are continuously upgrading our platforms to
provide increased scale, improved performance,
additional capacity and additional built-in
functionality, including functionality related to
security. Adopting new products and maintaining
and upgrading our technology infrastructure require
significant investments of time and resources. Any
failure to maintain and improve our technology
infrastructure stability could result in inadequate
capacity, unanticipated service outages, system crash,
system disruptions, product malfunction, slower
response times and other service quality issues,
which may impair user and customer experience
and result in loss of business and market share. Such
technology infrastructure failures could also result in
delays in reporting accurate operating and financial
information. The risks of these events occurring are
even higher during certain periods of peak usage
and activity, such as on or around the 11.11 Global
Shopping Festival or other promotional events,
when user activity and the number of transactions
are significantly higher on our marketplaces
compared to other days of the year. In addition,
much of the software and interfaces we use are
internally developed and proprietary technology. If
we experience problems with the functionality and
effectiveness of our software, interfaces or platforms,
or are unable to maintain and continuously improve
our technology infrastructure to handle our business
needs, our business, financial condition, results of
operations and prospects, as well as our reputation
and brand, could be materially and adversely
affected.
In addition, our technology infrastructure and services,
including our cloud product and service offerings,
incorporate third-party-developed software, systems
and technologies, as well as hardware purchased
or commissioned from third-party and overseas
suppliers. As our technology infrastructure and
services expand and become increasingly complex,
we face increasingly serious risks to the performance
and security of our technology infrastructure and
services that may be caused by these third-party-
developed components, including risks relating to
incompatibilities with these components, service
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Alibaba Group Holding Limited
failures or delays or difficulties in integrating back-
end procedures on hardware and software. We also
need to continuously enhance our existing technology.
Otherwise, we face the risk of our technology
infrastructure becoming unstable and susceptible to
security breaches. This instability or susceptibility could
create serious challenges to the security and operation
of our platforms and services, which would materially
and adversely affect our business and reputation.
The successful operation of our business depends
upon the performance, reliability and security of the
Internet infrastructure in China and other countries in
which we operate.
Our business depends on the performance, reliability
and security of the telecommunications and Internet
infrastructure in China and other countries in which we
operate. Substantially all of our computer hardware
and a majority of our cloud computing services
are currently located in China. Almost all access to
the Internet in China is maintained through state-
owned telecommunication operators under the
administrative control and regulatory supervision of
the MIIT. In addition, the national networks in China
are connected to the Internet through state-owned
international gateways, which are the only channels
through which a domestic user can connect to the
Internet outside of China. We may face similar or other
limitations in other countries in which we operate. We
may not have access to alternative networks in the
event of disruptions, failures or other problems with
the Internet infrastructure in China or elsewhere. In
addition, the Internet infrastructure in the countries
in which we operate may not support the demands
associated with continued growth in Internet usage.
The failure of telecommunications network operators
to provide us with the requisite bandwidth could
also interfere with the speed and availability of
our websites and mobile apps. We have no control
over the costs of the services provided by the
telecommunications operators. If the prices that we
pay for telecommunications and Internet services rise
significantly, our margins could be adversely affected
and the development and growth of our business
could also be materially and adversely affected. In
addition, if Internet access fees or other charges to
Internet users increase, our user base may decrease,
which in turn may significantly decrease our revenues.
Our ecosystem could be disrupted by network
interruptions.
Our ecosystem depends on the efficient and
uninterrupted operation of our computer, storage and
communications systems. System interruptions and
delays may prevent us from efficiently processing the
large volume of transactions on our marketplaces
and other businesses we operate. In addition, a
large number of merchants and customers maintain
their important systems, such as enterprise resource
planning and customer relationship management
systems, on our cloud computing platform, which
contains substantial quantities of data that enable
them to operate and manage their businesses.
System failures, disruptions and delays may adversely
affect the availability and quality of our cloud service
offerings. Increasing media and entertainment content
on our platforms also requires additional network
capacity and infrastructure to process. Consumers
expect our media and entertainment content to
be readily available online, and any disruptions
or delay to the delivery of content could affect the
attractiveness and reputation of our media and
entertainment platforms.
We and other participants in our ecosystem, including
Ant Group, have experienced in recent years, and
may experience in the future, system interruptions,
delays and outages that render websites, mobile apps
and services (such as cloud services and payment
services) temporarily unavailable or slow to respond.
Although we have prepared for contingencies through
redundancy measures and disaster recovery plans
and also carry business interruption insurance, these
preparations and insurance coverage may not be
sufficient. Despite any precautions we may take, the
occurrence of natural disasters, including the effects
of climate change (such as extreme weather events,
droughts, floods and increased storm severity), or
other unanticipated problems at our facilities or
the facilities of Ant Group and other participants in
our ecosystem, including structural defects, power
outages, system failures, telecommunications delays
or failures, construction accidents, break-ins to IT
systems, computer viruses or human errors, could
result in delays in or outages of our platforms or
services, loss of our, consumers’ and customers’ data
and business interruption for us and our customers.
Any of these events could damage our reputation,
significantly disrupt our operations and the operations
of our customers and other participants in our
ecosystem and subject us to significant liability,
heightened regulatory scrutiny and increased costs,
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which could materially and adversely affect our
business, financial condition and results of operations.
We rely on Alipay to conduct substantially all of the
payment processing and all of the escrow services
on our marketplaces for a significant majority of
our commerce business. If services and products
provided by Alipay or Ant Group’s other businesses
are limited, restricted, curtailed or degraded in any
way, or become unavailable to us or our users for
any reason, our business may be materially and
adversely affected.
Ant Group offers a variety of services and products
that have become essential parts of the services and
experience we offer to consumers and merchants
on our platforms. These services and products are
critical to our marketplaces and the development
of our ecosystem. In particular, given the significant
transaction volume on our platforms, Alipay provides
convenient payment processing and escrow services
to us on preferential terms. We also leverage the
convenience, availability and ease of use of Alipay
and Ant Group’s other products and services, such as
consumer loans and insurance, to provide high quality
experience and services to users, merchants and
other participants in our ecosystem. If the availability,
quality, utility, convenience or attractiveness of
Alipay’s and Ant Group’s other services and products
declines or changes for commercial, regulatory,
compliance or any other reason, the attractiveness
of our marketplaces and the level of activities on
our marketplaces could be materially and adversely
affected.
Particularly, Alipay’s business is subject to a number
of risks that could materially and adversely affect its
ability to provide payment processing and escrow
services to us, including:
•
dissatisfaction with Alipay’s services or lower use
of Alipay by consumers, merchants, brands and
retailers;
•
increasing competition, including from other
established Chinese Internet companies,
payment service providers and companies
engaged in other financial technology services;
•
changes to rules or practices applicable to
payment systems that link to Alipay;
•
breach of users’ privacy and concerns over the
use and security of information collected from
customers and any related negative publicity
relating thereto;
•
service outages, system failures or failure to
effectively scale the system to handle large and
growing transaction volumes;
•
increasing costs to Alipay, including fees charged
by banks to process transactions through Alipay,
which would also increase our cost of revenues;
•
negative news about and social media coverage
on Alipay, its business, its product and service
offerings or matters relating to Alipay’s data
security and privacy; and
•
failure to manage user funds accurately or loss
of user funds, whether due to employee fraud,
security breaches, technical errors or otherwise.
In addition, certain commercial banks in China impose
limits on the amounts that may be transferred by
automated payment from users’ bank accounts
to their linked accounts with third-party payment
services. Although we believe the impact of these
restrictions has not been and will not be significant in
terms of the overall volume of payments processed for
Taobao and Tmall, and automated payment services
linked to bank accounts represent only one of many
payment mechanisms that consumers may use to
settle transactions, we cannot predict whether these
and any additional restrictions that could be put in
place would have a material adverse effect on our
marketplaces.
Alipay’s and Ant Group’s other businesses are highly
regulated and are required to comply with numerous
complex and evolving laws, rules and regulations,
including in the areas of online and mobile payment
services, wealth management, financing, cross-
border money transmission, anti-money laundering,
consumer protection and insurance. As Alipay and
Ant Group’s other businesses expand their businesses
and operations into more international markets,
they will become subject to additional legal and
regulatory risks and scrutiny. For example, Alipay or
Ant Group’s other affiliates are required to maintain
payment business licenses in the PRC and are also
required to obtain and maintain other applicable
payment, money transmitter or other related licenses
and approvals in other countries or regions where
they operate. In certain jurisdictions where Ant Group
currently does not have the required licenses, Ant
Group provides payment processing and escrow
services through third-party service providers. If
Ant Group or any of its partners fails to obtain and
maintain all required licenses and approvals or
otherwise fails to manage the risks relating to their
businesses, if new laws, rules or regulations come
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Alibaba Group Holding Limited
into effect that impact Ant Group or its partners’
businesses, or if any of Ant Group’s partners ceases
to provide services to Ant Group, its services could
be suspended or severely disrupted, and its ability
to continue to deliver payment services to us on
preferential terms and other services and products
to our consumers, merchants and other ecosystem
participants may be undermined.
We do not control Ant Group or Alipay. There can
be no assurance that we will be able to maintain or
negotiate commercial terms that are no less favorable
than those we currently enjoy or are commercially
acceptable. Furthermore, our commercial
arrangements with Alipay and Ant Group may be
subject to anti-competition challenges. If we need
to migrate to another third-party payment service or
significantly expand our relationship with other third-
party payment services, the transition would require
significant time and management resources, and the
third-party payment service may not be as effective,
efficient or well-received by consumers, merchants,
brands and retailers on our marketplaces. These
third-party payment services also may not provide
escrow services, and we may not be able to receive
commissions based on GMV settled through these
systems. We would also receive less, or lose entirely,
the benefit of the commercial agreement with Ant
Group and Alipay and may be required to pay more
for payment processing and escrow services than
we currently pay. There can be no assurance that
we would be able to reach an agreement with an
alternative payment service provider on acceptable
terms or at all, and our business, financial condition
and results of operations may be materially and
adversely affected.
Other conflicts of interest between us, on the one
hand, and Alipay and Ant Group, on the other
hand, may arise relating to commercial or strategic
opportunities or initiatives. Although we and Ant
Group have each agreed to certain non-competition
undertakings, Ant Group may from time to time
provide services to our competitors or engage in
certain businesses that fall within our scope, and
there can be no assurance that Ant Group would not
pursue other opportunities that would conflict with
our interests. See “Major Shareholder and Related
Party Transactions — Related Party Transactions —
Agreements and Transactions Related to Ant Group
and Its Subsidiaries — Our Commercial Arrangements
with Ant Group and Alipay — Restructuring of Our
Relationship with Ant Group and Alipay, 2019
Equity Issuance, and Related Amendments — Non-
competition Undertakings.”
Because of our equity interest in Ant Group, Ant
Group’s financial results and valuation may materially
affect our financial results and the trading prices of
our ADSs, Shares and/or other securities. Moreover,
because of our close association with Ant Group and
overlapping user bases, regulatory developments,
litigation or proceedings, media and other reports,
whether or not true, and other events that affect
Ant Group could also negatively affect customers’,
regulators’, investors’ and other third parties’
perception of us. For example, shortly after Ant Group’s
announcement of the suspension of its proposed
dual-listing and IPO in November 2020, the trading
prices of our ADSs and Shares declined significantly. In
addition, Ant Group has been in discussions with PRC
regulators about its business rectification plan, and
on April 12, 2021, Ant Group announced that it would
apply to set up a financial holding company to ensure
its financial-related businesses are fully regulated.
To implement the rectification plan and comply with
applicable new measures and rules, Ant Group may
be required to spend significant time and resources
and make changes to its businesses, which could
materially and adversely affect its business operations
and growth prospects. On July 7, 2023, PRC regulators
announced a RMB7.07 billion fine for Ant Group and
Ant Group has completed the related work on the
rectification. Changes in Ant Group’s business and
future prospects, or speculation of such changes, as
well as additional regulatory requirements placed on
Ant Group, could in turn have a material adverse effect
on us and the trading prices of our ADSs, Shares and/
or other securities.
If third-party service providers and other participants
in our ecosystem fail to provide reliable or
satisfactory services or comply with applicable
laws or regulations, our reputation, business,
financial condition and results of operations may be
materially and adversely affected.
We rely on a wide range and large number of third-
party service providers, including retail operating
partners, logistics service providers, mobile app
developers, independent software vendors, or
ISVs, cloud-based developers, marketing affiliates,
livestreaming hosts and key opinion leaders, or KOLs,
financial institutions, accountants and auditors, legal
counsel and other professional service providers,
to provide services to us as well as to users on our
platforms, including consumers, merchants, brands,
retailers and users of our cloud computing services.
To the extent these ecosystem participants and service
providers are unable to provide satisfactory services
to us as well as our users on or off our platforms, on
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Fiscal Year 2024 Annual Report
commercially acceptable terms, or at all, or if we fail to
retain existing or attract new quality service providers
to our platforms, our business, financial condition and
results of operations may be materially and adversely
affected. In addition, we share our user data with
certain of these third-party service providers in our
ecosystem in accordance with our privacy policies,
agreements and applicable laws. Third-party service
providers and ecosystem participants may engage
in a broad range of other business activities on and
outside of our platforms, and may have broad user
bases and social influence that create substantial
business opportunities and economic returns to
themselves and our business. If our third-party service
providers and ecosystem participants engage in
activities that are negligent, fraudulent, illegal or
otherwise harm the trustworthiness and security of
our ecosystem, including, for example, the leakage
or negligent use of data, the handling, transport and
delivery of prohibited or restricted content or items,
inappropriate use or ineffective implementation of
AI technologies, cease their business relationship
with us or fail to perform their contractual obligations
or professional duties, fail to comply with any laws,
regulations, professional code of conduct and practice
standards or government requirements, become
subject to regulatory investigations, enforcement
actions, fines or penalties, or cause any property
damage or personal injuries, their ability to provide
services to us or our ecosystem more broadly could be
materially and adversely affected, which could cause
us to suffer loss of business and revenue, reputational
harm, liabilities, or be subject to regulatory scrutiny,
investigation or actions, and could have a material
adverse effect on the trading prices of our ADSs,
Shares or other securities, even if these activities are
not related to, attributable to or caused by us, or
within our control.
If logistics service providers used by our merchants
fail to provide reliable logistics services, or the
logistics data platform operated by Cainiao were
to malfunction, suffer an outage or otherwise
fail, our business and prospects, as well as our
financial condition and results of operations, may be
materially and adversely affected.
Our merchants use third-party logistics service
providers as well as Cainiao to fulfill and deliver their
orders. Cainiao cooperates with a number of third-
party logistics service providers and leverages its
proprietary logistics services to help merchants on
our platforms fulfill orders and deliver their products
to consumers. We operate Cainiao’s logistics data
platform that links our information system and those
of logistics service providers. Because of our platform
model, interruptions to or failures in logistics services,
or in Cainiao’s logistics data platform, could prevent
the timely or proper delivery of products to consumers,
which would negatively impact our competitive
position as well as harm the reputation of our
ecosystem and the businesses we operate. In addition,
certain of our businesses, including Lazada, operate
and provide logistics services to merchants within
our ecosystem and may experience interruptions or
failures to timely and properly deliver products to
consumers. These interruptions or failures may be due
to events that are beyond the control of any of our
companies, Cainiao or these logistics service providers,
such as inclement weather, natural disasters including
the effects of climate change (such as extreme
weather events, droughts, floods and increased
storm severity), pandemics or epidemics (such as
COVID-19), armed conflicts, accidents, transportation
disruptions, including special or temporary restrictions
or closings of facilities or transportation networks
due to regulatory or political reasons, or labor unrest
or shortages. These logistics services could also be
affected or interrupted by business disputes, industry
consolidation, insolvency or government shut-downs.
The merchants in our ecosystem may not be able to
find alternative logistics service providers to provide
logistics services in a timely and reliable manner, or
at all. We do not have agreements with third-party
logistics service providers that require them to offer
services to our merchants. If the logistics data platform
operated by Cainiao were to fail for any reason, the
logistics service providers would be severely hindered
from connecting or unable to connect with our
merchants, and their services and the functionality
of our ecosystem could be severely affected. If the
products sold by merchants in our ecosystem are not
delivered in proper condition, on a timely basis or at
shipping rates that are commercially acceptable to
marketplace participants, our business and prospects,
as well as our financial condition and results of
operations could be materially and adversely affected.
An occurrence of natural disasters or a widespread
health epidemic or other outbreaks could have a
material adverse effect on our business, financial
condition and results of operations.
Our business could be materially and adversely
affected by natural disasters, such as earthquakes,
snowstorms, storm surges, floods, fires, droughts
and other extreme weather events and other effects
of climate change; the outbreak of a widespread
health epidemic, such as COVID-19, swine flu, avian
influenza, severe acute respiratory syndrome, Ebola
and Zika; or other events, such as wars, acts of
Risk Factors
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Alibaba Group Holding Limited
terrorism, environmental accidents, power shortages
or communication interruptions. The occurrence
of a natural disaster or a prolonged outbreak of
an epidemic illness or other adverse public health
developments in China or elsewhere in the world
could materially disrupt our industry and our business
and operations, and have a material adverse effect
on our business, financial condition and results of
operations. For example, these events could cause
a temporary closure of the facilities we use for our
operations, affect the health of our employees and
their work efficiency, significantly disrupt supply chains
and logistics services or severely impact consumer
behaviors and the operations of merchants, business
partners and other participants in our ecosystem.
Our operations could also be disrupted if any of our
employees or employees of our business partners
are suspected of contracting an epidemic disease,
since this could require us or our business partners to
quarantine some or all of these employees or disinfect
the facilities used for our operations. In addition, our
revenue and profitability could be materially reduced
to the extent that a natural disaster, health epidemic
or other outbreak or any change in regulatory,
corporate and public actions in response to such event
harms the global or PRC economy in general.
We depend on key management as well as
experienced and capable personnel generally, and
any failure to attract, motivate and retain our staff
could severely hinder our ability to maintain and
grow our business.
Our future success is significantly dependent upon
the continued service of our key executives and other
key employees. Retirements and successions could
result in disruptions, or perceived disruptions, in our
operations and the execution of our strategy. If we
lose the services of any member of management or
key personnel for any reason, we may not be able to
locate suitable or qualified replacements, and may
incur additional expenses to recruit and train new
staff.
As our business develops and evolves, it may become
difficult for us to continue to retain our employees.
Changes that we make to our organizational and
governance structures may negatively affect our
ability to retain key talents and result in reduction in
our workforce. A number of our employees, including
many members of management, may choose to
pursue other opportunities outside of us. If we are
unable to motivate or retain these employees, our
business may be severely disrupted and our prospects
could suffer.
The size and scope of our ecosystem also require
us to hire and retain a wide range of capable
and experienced personnel who can adapt to a
dynamic, competitive and challenging business
environment. We will need to continue to attract and
retain experienced and capable personnel at all
levels, including members of management, as we
expand our business and operations. Our various
incentive initiatives may not be sufficient to retain
our management and employees. Competition for
talent in our industry is intense, and the availability
of suitable and qualified candidates in China and
elsewhere is limited. Competition for these individuals
could cause us to offer higher compensation and
other benefits to attract and retain them. Even if we
were to offer higher compensation and other benefits,
there can be no assurance that these individuals will
choose to join or continue to work for us. Any failure to
attract or retain key management and personnel could
severely disrupt our business and growth.
Failure to deal effectively with fraudulent or illegal
activities by our employees, business partners or
service providers would harm our business.
Illegal, fraudulent, corrupt or collusive activities or
misconduct, whether actual or perceived, by our
employees, representatives, agents, business partners
or service providers could subject us to liability or
negative publicity, which could severely damage
our brand and reputation. We have a zero-tolerance
policy towards fraudulent and illegal conduct, and
have dismissed and assisted in the investigations,
arrests and prosecutions of employees who engaged
such conduct. We have implemented and continue
to improve internal controls and policies with regard
to the review and approval of merchant accounts,
interactions with business partners and government
officials, account management, sales activities,
data security and other relevant matters. However,
there can be no assurance that our controls and
policies will prevent fraud, corrupt or illegal activity
or misconduct by our employees, representatives,
agents, business partners or service providers or
that similar incidents will not occur in the future.
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Fiscal Year 2024 Annual Report
As we expand our operations in China and other
jurisdictions, in particular our businesses that provide
services to governments and public institutions, we are
subject to additional internal control and compliance
requirements relating to corrupt and other illegal
practices by our employees, representatives or agents,
and we may also be held liable for such misconduct
or other misconduct by our business partners and
service providers. Alleged or actual failure to comply
or ensure our employees, representatives, agents,
business partners and service providers to comply
with these requirements could subject us to regulatory
investigations and liabilities, which would materially
and adversely affect our business operations,
customer relationships, reputation and the trading
prices of our ADSs and/or Shares.
Failure to deal effectively with any fraud
perpetrated and fictitious transactions conducted
in our ecosystem, and other sources of customer
dissatisfaction, could harm our business.
We face risks with respect to fraudulent activities
on our marketplaces and in connection with
other businesses we operate, and we periodically
receive complaints from consumers who may not
have received the goods that they had purchased,
complaints from merchants who have not received
payment for the goods that a consumer had
contracted to purchase, as well as other types of
actual and alleged fraudulent activities. Although we
have implemented various measures to detect and
reduce the occurrence of fraudulent activities on our
marketplaces and in connection with other businesses
we operate, there can be no assurance that these
measures will be effective in combating fraudulent
transactions or improving overall satisfaction among
our consumers, merchants and other participants.
Additional measures that we take to address fraud
could also negatively affect the attractiveness of
our marketplaces and other businesses we operate
to consumers or merchants. In addition, merchants
on our marketplaces contribute to a fund to provide
consumer protection guarantees. If our merchants do
not perform their obligations under these programs,
we may use funds that have been deposited
by merchants in a consumer protection fund to
compensate consumers. If the amounts in the fund
are not sufficient, we may choose to compensate
consumers for losses, although currently we are not
legally obligated to do so. If, as a result of regulatory
developments, we are required to compensate
consumers, we would incur additional expenses.
Although we have recourse against our merchants for
any amounts we incur, there can be no assurance that
we would be able to collect these amounts from our
merchants.
In addition to fraudulent transactions with legitimate
consumers, merchants may also engage in fictitious
or “phantom” transactions with themselves or
collaborators in order to artificially inflate their own
ratings on our marketplaces, reputation and search
results rankings, an activity sometimes referred to as
“brushing.” This activity may harm other merchants by
enabling the perpetrating merchant to be favored over
legitimate merchants, and may harm consumers by
deceiving them into believing that a merchant is more
reliable or trusted than the merchant actually is.
Government authorities, industry watchdog
organizations or other third parties may issue reports
or engage in other forms of public communications
concerning alleged fraudulent or deceptive conduct
on our platforms. Negative publicity and user
sentiment generated as a result of these reports
or allegations could severely diminish consumer
confidence in and use of our services, reduce our
ability to attract new or retain current merchants,
consumers and other participants, damage our
reputation, result in shareholder or other litigation,
diminish the value of our brand, and materially and
adversely affect our business, financial condition and
results of operations.
We may not be able to protect our intellectual
property rights.
We rely on a combination of trademark, patent,
copyright, trade secret protection and fair trade
practice laws in China and other jurisdictions, as
well as confidentiality procedures and contractual
provisions, to protect our intellectual property rights.
We also enter into confidentiality agreements with
our employees and any third parties who may access
our proprietary information, and we rigorously control
access to our proprietary technology and information.
In addition, as our business expands and we increase
our acquisition of and management of content, we
expect to incur greater costs to acquire, license and
enforce our rights to content.
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Alibaba Group Holding Limited
Intellectual property protection may not be sufficient
in the jurisdictions in which we operate. Confidentiality
agreements may be breached by counterparties,
and there may not be adequate remedies available
to us for these breaches. Accordingly, we may not be
able to effectively protect our intellectual property
rights or to enforce our contractual rights in China or
elsewhere. In addition, policing any unauthorized use
of our intellectual property is difficult, time-consuming
and costly and the steps we have taken may be
inadequate to prevent the misappropriation of our
intellectual property. In the event that we resort to
litigation to enforce our intellectual property rights,
this litigation could result in substantial costs and a
diversion of our managerial and financial resources.
There can be no assurance that we will prevail in any
litigation. In addition, our trade secrets may be leaked
or otherwise become available to, or be independently
discovered by, our competitors. Any failure in
protecting or enforcing our intellectual property rights
could have a material adverse effect on our business,
financial condition and results of operations.
Tightening of tax compliance efforts that affect our
merchants could materially and adversely affect
our business, financial condition and results of
operations.
Tax legislation relating to the ecosystem is still
developing. Governments, both in China and in
other jurisdictions, may promulgate or strengthen
the implementation of tax regulations that impose
obligations on e-commerce companies, which could
increase the costs to consumers and merchants
and make our platforms less competitive in these
jurisdictions. Governments may require operators of
marketplaces, such as us, to assist in the enforcement
of tax registration requirements and the collection of
taxes with respect to the revenue or profit generated
by merchants from transactions conducted on
their platforms. We may also be requested by tax
authorities to supply information about our merchants,
such as transaction records and bank account
information, and assist in the enforcement of other
tax regulations, including payment and withholding
obligations against our merchants. As a result of more
stringent tax compliance requirements and liabilities,
we may lose existing merchants and potential
merchants might not be willing to open storefronts on
our marketplaces, which could in turn negatively affect
us. Stricter tax enforcement by tax authorities may also
reduce the activities by merchants on our platforms
and increase our liabilities and obligations.
Any heightened tax law enforcement against
participants in our ecosystem (including imposition of
reporting or withholding obligations on operators of
marketplaces with respect to VAT of merchants and
stricter tax enforcement against merchants generally)
could have a material adverse effect on our business,
financial condition and results of operations.
We may increasingly become a target for public
scrutiny, including complaints to regulatory
agencies, negative media coverage, including
social media and malicious reports, and aggressive
marketing and communications strategies of our
competitors, all of which could severely damage our
reputation and brand and materially and adversely
affect our business and prospects.
We process an extremely large number of transactions
on a daily basis on our marketplaces and other
businesses we operate, and the high volume of
transactions taking place in our ecosystem and
publicity about our business creates the possibility of
heightened attention from the public, regulators, the
media and participants in our ecosystem. Changes in
our services or policies have resulted and could result
in objections by members of the public, the media,
including social media, participants in our ecosystem
or others. We may also become subject to public
scrutiny relating to our workplace environment, work
culture and other practices. From time to time, these
objections, complaints and negative media coverage,
regardless of their veracity, may result in negative
publicity or public relations crisis, which could result in
regulatory inquiry or harm our reputation and brand,
and adversely affect the price of our ADSs, Shares
and/or other securities.
Corporate transactions we or our related parties
undertake, such as changes to our corporate
structures, our transactions with Ant Group, initiatives
to grow our businesses, develop new business models
and expand into international markets, our various
business practices as well as our capital markets
transactions, such as potential IPOs, spin-offs and
other financings of certain of our subsidiaries, and
dividends and share repurchases may also subject
us to increased media exposure and public scrutiny.
There can be no assurance that we would not become
a target for regulatory or public scrutiny in the future or
that scrutiny and public exposure would not severely
damage our reputation and brand as well as our
business and prospects.
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Fiscal Year 2024 Annual Report
In addition, our founders, directors, management and
employees have been, and continue to be, subject to
scrutiny by the media and the public regarding their
activities in and outside of Alibaba Group, which may
result in negative, unverified, inaccurate or misleading
information about them being reported by the press.
Negative publicity about our founders, directors,
management or employees, even if unrelated to the
products or services we offer, or even if untrue or
inaccurate, may harm our reputation and brand, and
adversely affect the price of our ADSs, Shares and/or
other securities.
Furthermore, due to intense competition in our
industry, we have been and may be the target of
incomplete, inaccurate and false statements and
complaints about us and our products and services
that could damage our reputation and brand and
materially deter consumers and customers from
spending in our ecosystem. Competitors have used,
and may continue to use, methods such as lodging
complaints with regulators, initiating intellectual
property and competition claims (whether or not
meritorious) or frivolous and nuisance lawsuits, and
other forms of attack litigation and “lawfare” that
attempt to harm our reputation and brand, hinder
our operations, force us to expend resources on
responding to and defending against these claims,
and otherwise gain a competitive advantage over us
by means of litigious and accusatory behavior. Our
ability to respond on share price-sensitive information
to our competitors’ misleading marketing efforts,
including lawfare, may be limited during our self-
imposed quiet periods around quarter ends consistent
with our internal policies or due to legal prohibitions
on permissible public communications by us during
certain other periods.
Our results of operations fluctuate significantly from
quarter to quarter which may make it difficult to
predict our future performance.
Our results of operations generally are characterized
by seasonal fluctuations due to various reasons,
including seasonal buying patterns and economic
cyclical changes, as well as promotions on our
marketplaces. Historically, the fourth quarter of
each calendar year generally contributes the largest
portion of our annual revenues due to a number of
factors, such as merchants allocating a significant
portion of their online marketing budgets to the fourth
calendar quarter, promotions, such as the 11.11
Global Shopping Festival, and the impact of seasonal
buying patterns in respect of certain categories such
as apparel. The first quarter of each calendar year
generally contributes the smallest portion of our
annual revenues, primarily due to a lower level of
allocation of marketing budgets by merchants at the
beginning of the calendar year and the Chinese New
Year holiday, during which time consumers generally
spend less and businesses in China are generally
closed. We may also introduce new promotions or
change the timing of our promotions in ways that
further cause our quarterly results to fluctuate and
differ from historical patterns. In addition, seasonal
weather patterns may affect the timing of buying
decisions. The performance of our equity method
investees, including Ant Group, may also result in
fluctuations in our results of operations. Fluctuations
in our results of operations related to our investments
may also be because of accounting implication
of remeasurement of fair values of certain equity
investments and financial instruments, particularly
those that are publicly traded, share-based awards
and previously held equity interests upon step
acquisitions, as well as accounting implication arising
from loss of control of subsidiaries. Fluctuations in fair
value and the magnitude of the related accounting
impact are unpredictable, and may significantly affect
our results of operations.
Our results of operations will likely fluctuate due to
these and other factors, some of which are beyond
our control. In addition, our growth in the past may
have masked the seasonality that might otherwise be
apparent in our results of operations. As the rate of
growth of our business declines in comparison to prior
periods, we expect that the seasonality in our business
may become more pronounced. Moreover, as our
business grows, our fixed costs and expenses may
continue to increase, which will result in operating
leverage in seasonally strong quarters but can
significantly pressure operating margins in seasonally
weak quarters.
To the extent our results of operations do not meet the
expectations of public market analysts and investors in
the future, or if there are significant fluctuations in our
financial results, the market price of our ADSs, Shares
and/or other securities could fluctuate significantly.
Failure to comply with the terms of our indebtedness
or enforcement of our obligations as a guarantor of
other parties’ indebtedness could have an adverse
effect on our cash flow and liquidity.
As of March 31, 2024, we had US$14.25 billion in
aggregate principal amount of unsecured senior notes
and a US$4.0 billion term loan outstanding. As of the
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Alibaba Group Holding Limited
date of this annual report, we also have a US$6.5
billion revolving credit facility that we have not yet
drawn down. Under the terms of our indebtedness
and under any debt financing arrangement that we
may enter into in the future, we are, and may be in
the future, subject to covenants that could, among
other things, restrict our business and operations. If
we breach any of these covenants, our lenders under
our credit facilities and holders of our unsecured
senior notes will be entitled to accelerate our debt
obligations. Any default under our credit facilities
or unsecured senior notes could require that we
repay these debts prior to maturity as well as limit
our ability to obtain additional financing, which in
turn may have a material adverse effect on our cash
flow and liquidity. We also provide a guarantee for
a credit facility of HK$6.5 billion (US$0.8 billion) in
favor of Hong Kong Cingleot Investment Management
Limited, a company that is partially owned by us,
in connection with a logistics center development
project at the Hong Kong International Airport. As of
the date of this annual report, this entity has drawn
down approximately HK$4.9 billion (US$0.6 billion)
under this facility. In the event of default by this entity
under the loan facility, we may be required to repay
the full amount or a portion of the outstanding loan
and interests and undertake the borrower’s other
obligations under the loan facility. Enforcement
against us under this guarantee and other similar
arrangements we may enter into in the future could
materially and adversely affect our cash flow and
liquidity.
We may need additional capital but may not be able
to obtain it on favorable terms or at all.
We may require additional cash resources due to
future growth and development of our business,
including any investments or acquisitions we may
decide to pursue, and for other general corporate
purposes. If our cash resources are insufficient to
satisfy our cash requirements, we may seek to issue
additional equity or debt securities or obtain new or
expand credit facilities. Our ability to obtain external
financing in the future is subject to a variety of
uncertainties.
On January 5, 2023, the NDRC promulgated the
Administrative Measures for Examination and
Registration of Medium and Long-term Foreign Debts
of Enterprises, or the Foreign Debts Measures, which
became effective on February 10, 2023. According
to the Foreign Debts Measures, PRC enterprises and
overseas enterprises or branches controlled by them,
including holding companies with a VIE structure
like us, are required to complete application for
registration of foreign debts with the NDRC prior to the
borrowing of foreign debts with a term of over one
year. See “Business Overview — Regulation — Other
Regulations — Regulation of Foreign Investment.” If
we fail to complete such filing on a timely manner
or at all, we may miss the best market windows for
debt issuances or loan applications. In addition,
according to the Overseas Listing Trial Measures, we
have to complete filing procedures with the CSRC for
any follow-on equity offerings within three working
days after conducting such offerings, and comply
with relevant reporting requirements within three
business days upon the occurrence of any specified
circumstances provided under these measures. If
we fail to complete such filing and reporting on
a timely manner or at all, we may be subject to
penalties, sanctions and fines imposed by the CSRC
and relevant departments of the State Council of
the PRC. See also “— Risks Related to Doing Business
in the People’s Republic of China — The approval,
filing or other requirements of the CSRC or other PRC
regulatory authorities may be required under PRC law
in connection with any future issuance of securities
overseas, and, if required, we cannot predict whether
or for how long we or our subsidiaries will be able
to obtain such approval or complete such filing.” In
addition, incurring indebtedness would subject us to
increased debt service obligations and could result in
operating and financial covenants that would restrict
our operations.
Our ability to access international capital and lending
markets may be restricted at a time when we would
like, or need, to do so, especially during times of
increased volatility and reduced liquidity in global
financial markets and stock markets, including due to
policy changes and regulatory restrictions, which could
limit our ability to raise funds. For example, capital
markets transactions we undertake, such as potential
IPOs, spin-offs and other financings of certain of our
subsidiaries, are subject to market and economic
conditions in China and globally. In addition, in
response to increasing inflation, the United States
Federal Reserve, along with central banks around
the world, has adopted tightened monetary policies
through raising interest rates or signaling expected
interest hikes, which could significantly increase
borrowing costs for companies. While we have been
able to secure financing at similar cost range, there
can be no assurance that financing will be available in
a timely manner or in amounts or on terms acceptable
to us, or at all in the future. Any failure to raise needed
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Fiscal Year 2024 Annual Report
funds on terms favorable to us, or at all, could
severely restrict our liquidity as well as have a material
adverse effect on our business, financial condition
and results of operations. Moreover, any issuance of
equity or equity-linked securities, including issuances
of share-based awards under our equity incentive
plans, could result in significant dilution to our existing
shareholders.
We are subject to interest rate risk in connection with
our indebtedness.
We are exposed to interest rate risk related to our
indebtedness. The interest rates under certain of our
offshore credit facilities are based on forward-looking
Secured Overnight Financing Rate, or SOFR. As a result,
the interest expenses under our bank borrowings will
be subject to the potential impact of any fluctuation in
SOFR. Any increase in SOFR could raise our financing
costs, which could adversely affect our operating
results and financial condition, as well as our cash
flows. Our Renminbi-denominated bank borrowings
are also subject to interest rate risk. Although from
time to time, we use hedging transactions in an effort
to reduce our exposure to interest rate risk, these
hedges may not be effective.
We may not have sufficient insurance coverage to
cover our business risks.
We have obtained insurance to cover certain potential
risks and liabilities, such as property damage, business
interruptions, public liabilities and product liability
insurance for certain businesses we operate. However,
insurance companies in China and other jurisdictions
in which we operate may offer limited business
insurance products or we may not be able to obtain
such insurance on favorable terms. As a result, we do
not maintain insurance for all types of risks we face
in our operations in China and elsewhere, and our
coverage may not be adequate to compensate for all
losses that may occur, particularly with respect to loss
of business or operations. We do not maintain product
liability insurance for products and services transacted
on our marketplaces or other businesses we operate,
and our rights of indemnity from the merchants in
our ecosystem may not adequately cover us for any
liability we may incur.
We also do not maintain key-man life insurance. This
potentially insufficient coverage could expose us to
potential claims and losses. Any business disruption,
litigation, regulatory action, outbreak of epidemic
disease or natural disaster could also expose us to
substantial costs and diversion of resources. There
can be no assurance that our insurance coverage is
sufficient to prevent us from any loss or that we will be
able to successfully claim our losses under our current
insurance policy on a timely basis, or at all. If we incur
any loss that is not covered by our insurance policies,
or the compensated amount is significantly less than
our actual loss, our business, financial condition and
results of operations could be materially and adversely
affected.
Risks Related to Our Corporate Structure
The Alibaba Partnership limits the ability of our
shareholders to nominate and elect directors.
Our Articles of Association allow the Alibaba
Partnership to nominate or, in limited situations,
appoint a simple majority of our board of directors.
If at any time our board of directors consists of less
than a simple majority of directors nominated or
appointed by the Alibaba Partnership for any reason,
including because a director previously nominated
by the Alibaba Partnership ceases to be a member
of our board of directors or because the Alibaba
Partnership had previously not exercised its right to
nominate or appoint a simple majority of our board of
directors, the Alibaba Partnership will be entitled (in its
sole discretion) to nominate or appoint such number
of additional directors to the board as necessary to
ensure that the directors nominated or appointed by
the Alibaba Partnership comprise a simple majority of
our board of directors.
This governance structure limits the ability of our
shareholders to influence corporate matters,
including any matters determined at the board
level. In addition, the nomination right granted to
the Alibaba Partnership will remain in place for the
life of the Alibaba Partnership unless our Articles
are amended to provide otherwise by a vote of
shareholders representing at least 95% of shares
that vote at a shareholders meeting. The nomination
rights of the Alibaba Partnership will remain in place
notwithstanding a change of control or merger of our
company. These provisions could have the effect of
delaying, preventing or deterring a change in control
and could limit the opportunity of our shareholders to
receive a premium for the ADSs and/or Shares they
hold, and could also materially decrease the price that
some investors are willing to pay for our ADSs and/or
Shares.
Risk Factors
226
Alibaba Group Holding Limited
The interests of the Alibaba Partnership may conflict
with the interests of our shareholders.
The nomination and appointment rights of the Alibaba
Partnership limit the ability of our shareholders to
influence corporate matters, including any matters
to be determined by our board of directors. The
interests of the Alibaba Partnership may not coincide
with the interests of our shareholders, and the
Alibaba Partnership or its director nominees may
make decisions with which they disagree, including
decisions on important topics such as compensation,
management succession, acquisition strategy
and our business and financial strategy. Since the
Alibaba Partnership will continue to be largely
comprised of members of our management team,
the Alibaba Partnership and its director nominees,
consistent with our operating philosophy, may focus
on the long-term interests of participants in our
ecosystem at the expense of our short-term financial
results, which may differ from the expectations
and desires of shareholders unaffiliated with the
Alibaba Partnership. To the extent that the interests
of the Alibaba Partnership differ from the interests
of any of our shareholders, our shareholders may
be disadvantaged by any action that the Alibaba
Partnership may seek to pursue.
Our Articles of Association contain anti-takeover
provisions that could adversely affect the rights of
holders of our ordinary shares and ADSs.
Our Articles of Association contain certain provisions
that could limit the ability of third parties to acquire
control of our company, including:
•
a provision that grants authority to our board of
directors to establish from time to time one or
more series of preferred shares without action by
our shareholders and to determine, with respect
to any series of preferred shares, the terms and
rights of that series;
•
a provision that a business combination, if it
may adversely affect the right of the Alibaba
Partnership to nominate or appoint a simple
majority of our board of directors, including
the protective provisions for this right under
our Articles, shall be approved upon vote of
shareholders representing at least 95% of
the votes in person or by proxy present at a
shareholders meeting; and
•
a classified board with staggered terms that
will prevent the replacement of a majority of
directors at one time.
These provisions could have the effect of delaying,
preventing or deterring a change in control and could
limit the opportunity for our shareholders to receive a
premium for their ADSs and/or Shares, and could also
materially decrease the price that some investors are
willing to pay for our ADSs and/or Shares.
Our ADSs and ordinary shares are equity securities
of a Cayman Islands holding company rather than
equity securities of our subsidiaries and the VIEs that
have substantive business operations in China.
We are incorporated in the Cayman Islands with no
business operations. We conduct substantially all of
our operations in China through our subsidiaries and
the VIEs. We do not and are not, and holders of our
ADSs and ordinary shares do not and are not, legally
permitted to have any, or more than the permitted
percentage of, equity interest in the VIEs due to
current PRC laws and regulations restricting foreign
ownership and investment. As a result, we provide
services that may be subject to such restrictions
in the PRC through the VIEs, and we operate our
businesses in the PRC through certain contractual
arrangements with the VIEs. For a summary of such
contractual arrangements, see “Business Overview —
Organizational Structure — Contractual Arrangements
among Our Subsidiaries, the Variable Interest Entities
and Variable Interest Entity Equity Holders.” Our ADSs
and ordinary shares are equity securities of a Cayman
Islands holding company rather than equity securities
of our subsidiaries and the VIEs.
If the PRC government deems that the contractual
arrangements in relation to the VIEs do not comply
with PRC regulations on foreign investment, or if
these regulations or the interpretation of existing
regulations change in the future, we could be subject
to penalties, or be forced to relinquish our interests in
the operations of the VIEs, which would materially
and adversely affect our business, financial results,
trading prices of our ADSs, Shares and/or other
securities.
Due to legal restrictions on foreign ownership and
investment in, among other areas, value-added
telecommunication services, which include the
operations of ICPs, we, similar to all other entities with
foreign-incorporated holding company structures
operating in our industry in China, operate our Internet
businesses and other business in China, including
Internet information services, which are critical to our
business, through a number of PRC incorporated VIEs.
See “Business Overview — Regulation — Regulation of
Telecommunications and Internet Information Services
Risk Factors
227
Fiscal Year 2024 Annual Report
— Regulation of Telecommunications Services” and
“Business Overview — Regulation — Other Regulations
— Regulation of Foreign Investment.”
We and, through us, our shareholders do not own
any equity interests in these VIEs. The equity interests
of the VIEs are generally held by PRC limited liability
companies, which in turn are indirectly held (through a
layer of PRC limited partnerships) by selected members
of the Alibaba Partnership or our management who
are PRC citizens. Please also see “Business Overview —
Organizational Structure.” Contractual arrangements
between us and the VIEs and their equity holders give
us effective control over each of the VIEs and enable
us to obtain substantially all of the economic benefits
arising from the VIEs as well as to consolidate the
financial results of the VIEs in our results of operations.
Although we believe the structure we have adopted is
consistent with longstanding industry practice, the PRC
government may not agree that these arrangements
comply with PRC licensing, registration or other
regulatory requirements, with existing policies or with
requirements or policies that may be adopted in the
future.
In the opinion of Fangda Partners, our PRC counsel,
the ownership structures of our representative VIEs
and the corresponding subsidiaries in China do not
and will not violate any applicable PRC law, regulation
or rule currently in effect; and the contractual
arrangements between the representative VIEs,
the corresponding subsidiaries and the respective
equity holders of the representative VIEs governed
by PRC law are valid, binding and enforceable in
accordance with their terms and applicable PRC laws
and regulations currently in effect and will not violate
any applicable PRC law, rule or regulation currently
in effect. However, Fangda Partners has also advised
us that there are substantial uncertainties regarding
the interpretation and application of current PRC laws,
rules and regulations. Accordingly, the possibility that
the PRC regulatory authorities and PRC courts may in
the future take a view that is contrary to the opinion of
our PRC legal counsel cannot be ruled out. In addition,
such laws, rules and regulations could change or be
interpreted differently in the future.
Contractual arrangements in relation to VIEs have
not been tested in a court of law, and it is uncertain
whether any new PRC laws, rules or regulations
relating to VIE structures will be adopted or if
adopted, what they would provide. Please also see
“— Substantial uncertainties exist with respect to the
interpretation and implementation of the PRC Foreign
Investment Law and its implementing rules and other
regulations and how they may impact the viability of
our current corporate structure, business, financial
condition and results of operations.”
If we or any of the VIEs are found to be in violation of
any existing or future PRC laws, rules or regulations, or
fail to obtain or maintain any of the required permits
or approvals, we could be subject to severe penalties.
The relevant PRC regulatory authorities would have
broad discretion to take action in dealing with these
violations or failures, including revoking the business
and operating licenses of our PRC subsidiaries or
the VIEs, requiring us to discontinue or restrict our
operations, restricting our right to collect revenue,
blocking one or more of our websites, requiring us to
restructure our operations or taking other regulatory or
enforcement actions against us. The imposition of any
of these measures could result in a material adverse
effect on our ability to conduct all or any portion of
our business operations. In addition, it is unclear
what impact the PRC government actions would have
on us and on our ability to consolidate the financial
results of any of the VIEs in our consolidated financial
statements, if the PRC government authorities were to
find our legal structure and contractual arrangements
to be in violation of PRC laws, rules and regulations.
If the imposition of any of these government actions
causes us to lose our right to direct the activities of
any of the VIEs or otherwise separate from any of
these entities and if we are not able to restructure our
ownership structure and operations in a satisfactory
manner, we would no longer be able to consolidate
the financial results of the VIEs in our consolidated
financial statements. Any of these events would have
a material adverse effect on our business, financial
condition and results of operations, as well as
cause the trading prices of our ADSs and Shares to
significantly decline or become worthless.
Substantial uncertainties exist with respect to the
interpretation and implementation of the PRC
Foreign Investment Law and its implementing rules
and other regulations and how they may impact the
viability of our current corporate structure, business,
financial condition and results of operations.
The VIE structure has been adopted by many China-
based companies, including us and certain of our
equity method investees, to obtain and maintain
licenses and permits necessary to operate in
industries that currently are subject to restrictions
on or prohibitions for foreign investment in China.
The MOFCOM published a discussion draft of the
proposed Foreign Investment Law in January 2015,
or the 2015 Draft PRC Foreign Investment Law,
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228
Alibaba Group Holding Limited
according to which, VIEs that are controlled via
contractual arrangements would be deemed as
foreign-invested enterprises, if they are ultimately
“controlled” by foreign investors. In March 2019, the
National People’s Congress promulgated the 2019 PRC
Foreign Investment Law. In December 2019, the State
Council of the PRC promulgated the Implementing
Rules of the Foreign Investment Law of the People’s
Republic of China, or the Implementing Rules, to
further clarify and elaborate upon relevant provisions
of the 2019 PRC Foreign Investment Law. The 2019
PRC Foreign Investment Law and the Implementing
Rules both became effective on January 1, 2020
and replaced major former laws and regulations
governing foreign investment in the PRC. See
“Business Overview — Regulation — Other Regulations
— Regulation of Foreign Investment.” As the 2019 PRC
Foreign Investment Law has a catch-all provision
that broadly defines “foreign investments” as those
made by foreign investors in China through methods
as specified in laws, administrative regulations, or as
stipulated by the State Council of the PRC, relevant
government authorities may promulgate additional
rules and regulations as to the interpretation and
implementation of the 2019 PRC Foreign Investment
Law. In particular, there can be no assurance that
the concept of “control” as reflected in the 2015 Draft
PRC Foreign Investment Law, will not be reintroduced,
or that the VIE structure adopted by us will not be
deemed as a method of foreign investment by other
laws, regulations and rules.
Furthermore, on December 19, 2020, the NDRC and the
MOFCOM promulgated the Foreign Investment Security
Review Measures, which took effect on January 18,
2021. Under the Foreign Investment Security Review
Measures, investments in military, national defense-
related areas or in locations in proximity to military
facilities, or investments that would result in acquiring
the actual control of assets in certain key sectors, such
as critical agricultural products, energy and resources,
equipment manufacturing, infrastructure, transport,
cultural products and services, IT, Internet products
and services, financial services and technology
sectors, are required to be approved by designated
governmental authorities in advance. Although the
term “investment through other means” is not clearly
defined under the Foreign Investment Security Review
Measures, we cannot rule out the possibility that
control through contractual arrangement may be
regarded as a form of actual control and therefore
require approval from the competent governmental
authority. There are great uncertainties with respect to
the interpretation and implementation of the Foreign
Investment Security Review Measures. Accordingly,
there are substantial uncertainties as to whether
the VIE structure adopted by us may be deemed as
a method of foreign investment in the future. If the
VIE structure adopted by us were to be deemed as a
method of foreign investment under any future laws,
regulations and rules, and if any of our business
operations were to fall under the “Negative List” for
foreign investment, we would need to take further
actions in order to comply with these laws, regulations
and rules, which may materially and adversely affect
our current corporate structure, business, financial
condition and results of operations.
Our contractual arrangements may not be as
effective in providing control over the VIEs as direct
ownership.
We rely on contractual arrangements with the
VIEs to operate part of our Internet businesses
in China and other businesses in which foreign
investment is restricted or prohibited. We and,
through us, our shareholders do not own any equity
interests in these VIEs. For a description of these
contractual arrangements, see “Business Overview —
Organizational Structure — Contractual Arrangements
among Our Subsidiaries, the Variable Interest Entities
and Variable Interest Entity Equity Holders.” These
contractual arrangements may not be as effective as
direct ownership in providing us with control over the
VIEs.
If we had direct ownership of the VIEs, we would
be able to exercise our rights as an equity holder
directly to effect changes in the boards of directors
of those entities, which could effect changes at
the management and operational level. Under our
contractual arrangements, we may not be able to
directly change the members of the boards of directors
of these entities and would have to rely on the VIEs
and the VIE equity holders to perform their obligations
in order to exercise our control over the VIEs. The VIE
equity holders may have conflicts of interest with us
or our shareholders, and they may not act in our best
interests or may not perform their obligations under
these contracts. Pursuant to the call options, we may
replace the equity holders of the VIEs at any time
pursuant to the contractual arrangements. However, if
any equity holder is uncooperative in the replacement
of the equity holders or there is any dispute relating
to these contracts that remains unresolved, we will
have to enforce our rights under the contractual
arrangements through the operations of PRC law and
arbitral or judicial agencies, which may be costly and
time-consuming and will be subject to uncertainties in
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Fiscal Year 2024 Annual Report
the PRC legal system. See “— Any failure by the VIEs or
their equity holders to perform their obligations under
the contractual arrangements would have a material
adverse effect on our business, financial condition and
results of operations.” Consequently, the contractual
arrangements may not be as effective in ensuring
our control over the relevant portion of our business
operations as direct ownership.
Any failure by the VIEs or their equity holders to
perform their obligations under the contractual
arrangements would have a material adverse effect
on our business, financial condition and results of
operations.
If the VIEs or their equity holders fail to perform
their respective obligations under the contractual
arrangements, we may have to incur substantial
costs and expend additional resources to enforce
the arrangements. Although we have entered into
call option agreements in relation to each VIE, which
provide that we may exercise an option to acquire,
or nominate a person to acquire, ownership of the
equity in that entity or, in some cases, its assets, to
the extent permitted by applicable PRC laws, rules
and regulations, the exercise of these call options is
subject to the review and approval of the relevant PRC
governmental authorities. We have also entered into
equity pledge agreements with the equity holders with
respect to each VIE, including the general partners
and limited partners of the PRC limited partnerships
that indirectly hold the VIEs under the Enhanced
VIE Structure, to secure certain obligations of the
VIE or its equity holders to us under the contractual
arrangements. In addition, the enforcement of these
agreements through arbitral or judicial agencies,
if any, may be costly and time-consuming and will
be subject to uncertainties in the PRC legal system.
Moreover, our remedies under the equity pledge
agreements are primarily intended to help us collect
debts owed to us by the VIEs or the VIE equity holders
under the contractual arrangements and may not help
us in acquiring the assets or equity of the VIEs.
In addition, with respect to the VIEs that are directly
owned by individuals, although the terms of the
contractual arrangements provide that they will be
binding on the successors of the VIE equity holders, as
those successors are not a party to the agreements,
it is uncertain whether the successors in case of the
death, bankruptcy or divorce of a VIE equity holder will
be subject to or will be willing to honor the obligations
of the VIE equity holder under the contractual
arrangements. If the relevant VIE or its equity holder
(or its successor), as applicable, fails to transfer the
shares of the VIE according to the respective call
option agreement or equity pledge agreement,
we would need to enforce our rights under the call
option agreement or equity pledge agreement, which
may be costly and time-consuming and may not be
successful.
The contractual arrangements are governed by PRC
law and provide for the resolution of disputes through
arbitration or court proceedings in China. Accordingly,
these contracts would be interpreted in accordance
with PRC law and any disputes would be resolved in
accordance with PRC legal procedures. Uncertainties
regarding the interpretation and enforcement of
the relevant PRC laws and regulations could limit
our ability to enforce the contractual arrangements.
Under PRC law, if the losing parties fail to carry out
the arbitration awards or court judgments within a
prescribed time limit, the prevailing parties may only
enforce the arbitration awards or court judgments in
PRC courts, which would require additional expense
and delay. In the event we are unable to enforce the
contractual arrangements, we may not be able to
exert effective control over the VIEs, and our ability
to conduct our business, as well as our financial
condition and results of operations, may be materially
and adversely affected.
We may lose the ability to use, or otherwise benefit
from, the licenses, approvals and assets held by
the VIEs, which could severely disrupt our business,
render us unable to conduct some or all of our
business operations and constrain our growth.
The VIEs hold licenses and approvals and assets for
regulated activities that are necessary for our business
operations, as well as equity interests in a series of
our portfolio companies, to which foreign investments
are typically restricted or prohibited under applicable
PRC law. The contractual arrangements contain terms
that specifically obligate VIE equity holders to ensure
the valid existence of the VIEs and restrict the disposal
of material assets of the VIEs. However, in the event
the VIE equity holders breach the terms of these
contractual arrangements and voluntarily liquidate
the VIEs, or any of the VIEs declares bankruptcy
and all or part of its assets become subject to liens
or rights of third-party creditors, or are otherwise
disposed of without our consent, we may be unable
to conduct some or all of our business operations or
otherwise benefit from the assets held by the VIEs,
which could have a material adverse effect on our
business, financial condition and results of operations.
Furthermore, if any of the VIEs undergoes a voluntary
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Alibaba Group Holding Limited
or involuntary liquidation proceeding, its equity holder
or unrelated third-party creditors may claim rights to
some or all of the assets of the VIE, thereby hindering
our ability to operate our business as well as constrain
our growth.
The equity holders, directors and executive officers of
the VIEs may have potential conflicts of interest with
us.
PRC laws provide that a director and an executive
officer owes a fiduciary duty to the company he or
she directs or manages. On one hand, the directors
and executive officers of the VIEs, including the
relevant members of the Alibaba Partnership or our
management, must act in good faith and in the best
interests of the VIEs and must not use their respective
positions for personal gain. On the other hand, as a
director or management of our company, the relevant
individuals have a duty of care and loyalty to us
and to our shareholders as a whole under Cayman
Islands law. We control the VIEs through contractual
arrangements and the business and operations of
the VIEs are closely integrated with the business and
operations of our subsidiaries. Nonetheless, conflicts
of interests for these individuals may arise due to dual
roles both as equity holders, directors and executive
officers of the VIEs and as our directors or employees.
There can be no assurance that these individual
shareholders of the VIEs will always act in our best
interests should any conflicts of interest arise, or that
any conflicts of interest will always be resolved in
our favor. There also can be no assurance that these
individuals will ensure that the VIEs will not breach
the existing contractual arrangements. If we cannot
resolve any of these conflicts of interest or any related
disputes, we would have to rely on legal proceedings
to resolve these disputes and/or take enforcement
action under the contractual arrangements. There is
substantial uncertainty as to the outcome of any of
these legal proceedings. See “— Any failure by the VIEs
or their equity holders to perform their obligations
under the contractual arrangements would have a
material adverse effect on our business, financial
condition and results of operations.”
The contractual arrangements with the VIEs may be
subject to scrutiny by the PRC tax authorities. Any
pricing adjustment of a related party transaction
could lead to additional taxes, and therefore
substantially reduce our consolidated net income
and the value of your investment.
The tax regime and practices in China are evolving
and PRC tax laws may be interpreted in significantly
different ways. The PRC tax authorities may assert
that we or our subsidiaries or the VIEs or their equity
holders are required to pay additional taxes on
previous or future revenue or income. In particular,
under applicable PRC laws, rules and regulations,
arrangements and transactions among related
parties, such as the contractual arrangements with
the VIEs, may be subject to audit or challenge by the
PRC tax authorities. If the PRC tax authorities determine
that any contractual arrangements were not entered
into on an arm’s length basis and therefore constitute
favorable transfer pricing, the PRC tax liabilities of the
relevant subsidiaries and/or VIEs and/or VIE equity
holders could be increased, which could increase
our overall tax liabilities. In addition, the PRC tax
authorities may impose late payment interest. Our net
income may be materially reduced if our tax liabilities
increase.
Risks Related to Doing Business in the
People’s Republic of China
Changes and developments in the political and
economic policies of the PRC government may
materially and adversely affect our business,
financial condition and results of operations and
may result in our inability to sustain our growth and
expansion strategies.
Although we have operating subsidiaries located
in various countries and regions, our operations in
China currently contribute the large majority of our
revenue. The PRC government has significant oversight
and discretion over the conduct of our business,
and may intervene in or influence our operations
through adopting and enforcing rules and regulatory
requirements. Accordingly, our financial condition
and results of operations are affected to a significant
extent by economic, political and legal developments
in the PRC.
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Fiscal Year 2024 Annual Report
The PRC economy differs from the economies of most
developed countries in many respects, including
the level of development, growth rate, extent of
government involvement, control of foreign exchange
and allocation of resources. A substantial portion
of productive assets in China is still managed by
the government. In addition, the PRC government
regulates industry development by imposing industrial
policies. The PRC government also plays a significant
role in China’s economic growth by allocating
resources, controlling payment of foreign currency-
denominated obligations, setting monetary policy and
regulating financial services and institutions.
While the PRC economy has experienced significant
growth in the past four decades, growth has been
uneven, both geographically and among various
sectors of the economy. The PRC government has
implemented various measures to encourage
economic growth and guide the allocation of
resources. Some of these measures may benefit the
overall PRC economy, but may also have a negative
effect on us. Our financial condition and results of
operations could be materially and adversely affected
by government control over capital investments or
changes in tax regulations that are applicable to us.
In addition, the PRC government has implemented
in the past certain measures, including interest
rate increases, to manage the pace of economic
growth and prevent the economy from overheating.
Any prolonged slowdown in the economy could
lead to a reduction in demand for our services and
consequently have a material adverse effect on
our businesses, financial condition and results of
operations.
There are uncertainties regarding the interpretation
and enforcement of PRC laws, rules and regulations,
and changes in policies, laws, rules and regulations
in the PRC could adversely affect us.
Most of our operations are conducted in the PRC, and
are governed by PRC laws, rules and regulations.
Our PRC subsidiaries are subject to laws, rules and
regulations applicable to foreign investment in China.
The PRC legal system is a civil law system based on
written statutes. Unlike the common law system, prior
court decisions may be cited for reference but have
limited precedential value.
China has not developed a fully integrated legal
system, and enacted laws, rules and regulations
may not sufficiently cover all aspects of economic
activities in China or may be subject to a significant
degree of interpretation by PRC regulatory agencies
and courts. In particular, because these laws, rules
and regulations are relatively new and quickly
evolving, and because of the limited number of
published decisions and the non-precedential nature
of these decisions, and because the laws, rules and
regulations often give the relevant regulator certain
discretion in how to enforce them, the interpretation
and enforcement of these laws, rules and regulations
involve uncertainties and can be inconsistent and
unpredictable. Therefore, it is possible that our existing
operations may be found not to be in full compliance
with relevant laws and regulations in the future. In
addition, the PRC legal system is based in part on
government policies and internal rules, some of which
are not published on a timely basis or at all, and which
may have a retroactive effect. As a result, we may not
be aware of our violation of these policies and rules
until after the occurrence of the violation.
Any administrative and court proceedings in China
may be protracted, resulting in substantial costs and
diversion of resources and management attention.
Since PRC administrative and court authorities have
certain discretion in interpreting and implementing
statutory and contractual terms, it may be more
difficult to predict the outcome of administrative and
court proceedings and the level of legal protection
than in more developed legal systems. These
uncertainties may impede our ability to enforce the
contracts we have entered into and could materially
and adversely affect our business, financial condition
and results of operations.
In addition, the PRC government has significant
influence over business activities and, to further
regulatory and societal goals, has become more
involved in regulating China-based companies,
including us. For example, in recent years the PRC
government, has enhanced regulation in areas
such as anti-monopoly, anti-unfair competition,
cybersecurity and data privacy. In addition, the
PRC government has also published policies that
significantly affected the Internet industries and
certain other industries, including industries that we
operate in, and in the future it may implement other
policies or regulations that may have a significant
adverse impact on us or industries that we operate
in. Moreover, the PRC government has strengthened
the administration over illegal securities activities
and the supervision on overseas listings by China-
based companies and issued new filing obligations
and approval requirements in connection with
offshore offerings, which will increase our regulatory
compliance costs and may limit or hinder our ability
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Alibaba Group Holding Limited
and the ability of our subsidiaries to offer or continue
to offer securities to investors and cause the value
of our securities, including our ADSs, to significantly
decline or become worthless. See “— Risks Related to
Doing Business in the People’s Republic of China —
The approval, filing or other requirements of the CSRC
or other PRC regulatory authorities may be required
under PRC law in connection with any future issuance
of securities overseas, and, if required, we cannot
predict whether or for how long we or our subsidiaries
will be able to obtain such approval or complete
such filing.” The Chinese government may further
promulgate relevant laws, rules and regulations that
may impose additional and significant obligations
and liabilities on Chinese companies. These laws and
regulations can be complex and stringent, and many
are subject to change and uncertain interpretation,
which could result in claims, change to our data and
other business practices, regulatory investigations,
penalties, increased cost of operations, or declines in
user growth or engagement, or otherwise affect our
business. It is uncertain whether or how these new
laws, rules and regulations and the interpretation
and implementation thereof may affect us, but
among other things, our ability and the ability of our
subsidiaries to obtain external financing through
the issuance of equity securities overseas could be
negatively affected and as a result, the trading prices
of our ADSs and Shares to could significantly decline
or become worthless.
The PCAOB had historically been unable to inspect
our auditor in relation to their audit work performed
for our financial statements, and the inability of the
PCAOB to conduct inspections over our auditor in the
future may deprive our investors of the benefits of
such inspections.
PricewaterhouseCoopers Zhong Tian LLP, our
auditor, is required under U.S. law to undergo regular
inspections by the PCAOB. Prior to 2022, the PCAOB
was unable to conduct inspections of the audit
work and practices of PCAOB-registered audit firms
within the PRC on a basis comparable to other non-
U.S. jurisdictions without approval from the Chinese
government authorities, and as we have substantial
operations in the PRC, the PCAOB was unable to
fully inspect our auditor and its audit work. As a
result, investors of our ADSs, Shares and/or other
securities did not have the benefit of such inspections.
Inspections of auditors conducted by the PCAOB
outside of China have at times identified deficiencies
in those auditors’ audit procedures and quality control
procedures, which may be addressed as part of the
inspection process to improve future audit quality.
The inability of the PCAOB to conduct full inspections
of auditors in China in the past made it more difficult
for it to evaluate the effectiveness of our auditor’s
audit procedures or quality control procedures as
compared to auditors outside of China that are subject
to PCAOB inspections, which could cause investors
of our ADSs, Shares and/or other securities to lose
confidence in the audit procedures of our auditor and
our reported financial information and the quality
of our financial statements. On December 15, 2022,
the PCAOB announced that it was able to secure
complete access to inspect and investigate PCAOB-
registered public accounting firms headquartered
in Chinese mainland and Hong Kong in 2022. Over
the past year, PCAOB has increased its scrutiny over
the audit work of China-based accounting firms, and
imposed penalties on several accounting firms based
in mainland China and Hong Kong. Specifically, on
May 10, 2023, the PCAOB released inspection reports
for two accounting firms in mainland China and Hong
Kong, both reports show deficiencies that PCAOB
staff believe the audit firms failed to obtain sufficient
appropriate audit evidence to support their work on
their clients’ financial statements or internal control
over financial reporting. Any regulatory scrutiny,
penalty or actions to which our auditors are subject,
particularly by regulators in the United States, Chinese
Mainland or Hong Kong SAR may negatively affect us
and cause investors of our ADSs, Shares and/or other
securities to lose confidence in the audit procedures
of our auditor and our reported financial information
and the quality of our financial statements. Moreover,
it is uncertain whether the PCAOB will continue to be
able to satisfactorily conduct inspections of PCAOB-
registered public accounting firms headquartered in
Chinese mainland and Hong Kong in the future, which
ability depends on a number of factors beyond our,
and our auditor’s, control, including the uncertainties
surrounding the relationship between China and the
United States.
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Fiscal Year 2024 Annual Report
Our ADSs will be delisted and our ADSs and shares
prohibited from trading in the United States under
the Holding Foreign Companies Accountable Act,
as amended, if the PCAOB is unable to inspect or
investigate completely auditors located in China.
In recent years, U.S. regulators have continued to
express concerns about challenges in their oversight
of financial statement audits of U.S.-listed companies
with significant operations in China. As part of the
increased regulatory focus in the United States
on access to audit information, the United States
originally enacted the HFCA Act in December 2020. The
HFCA Act includes requirements for the SEC to identify
issuers whose audit reports are prepared by auditors
that the PCAOB is unable to inspect or investigate
completely because of a restriction imposed by a
non-U.S. authority in the auditor’s local jurisdiction.
The HFCA Act also requires public companies on
this SEC list to certify that they are not owned or
controlled by a foreign government and make certain
additional disclosures in their SEC filings. In addition,
if the auditor of a U.S. listed company is not subject
to PCAOB inspections for three consecutive “non-
inspection” years after the law becomes effective,
the SEC is required to prohibit the securities of such
issuer from being traded on a U.S. national securities
exchange, such as the NYSE, or in U.S. over-the-
counter markets. On December 29, 2022, the United
States enacted the Consolidated Appropriations Act,
2023, which amended the HFCA Act to require the
SEC to prohibit an issuer’s securities from trading in
the United States if its auditor is not subject to PCAOB
inspections for two consecutive “non-inspection” years
instead of three. On December 16, 2021, the PCAOB
issued its report notifying the SEC of its determination
that it was unable to inspect or investigate completely
registered public accounting firms headquartered in
Chinese mainland or Hong Kong. Subsequently on
August 22, 2022, the SEC added us to its conclusive
list of issuers identified under the HFCA Act, or
Commission-Identified Issuers, following the filing
of our annual report on Form 20-F with the SEC on
July 26, 2022, indicating that it has determined that
Alibaba Group filed an annual report with an audit
report by a registered public accounting firm, whose
audit work papers cannot be fully inspected or
investigated by the PCAOB for the fiscal year ended
March 31, 2022. With the above identification, 2022
was a “non-inspection” year for our company.
On August 26, 2022, the PCAOB signed a Statement
of Protocol with the CSRC and the Ministry of Finance,
taking the first step towards opening access for the
PCAOB to inspect and investigate registered public
accounting firms headquartered in Chinese mainland
and Hong Kong. Following that, on December 15,
2022, the PCAOB announced that it was able to secure
complete access to inspect and investigate PCAOB-
registered public accounting firms headquartered in
Chinese mainland and Hong Kong in 2022. The PCAOB
vacated its previous 2021 determinations that the
PCAOB was unable to inspect or investigate completely
registered public accounting firms headquartered in
Chinese mainland and Hong Kong. For this reason, we
were not identified as a Commission-Identified Issuer
following the filing of our annual report in 2023, and
we do not expect to be identified as a Commission-
Identified Issuer following the filing of this annual
report in 2024. However, it is uncertain whether the
PCAOB will continue to be able to satisfactorily conduct
inspections of PCAOB-registered public accounting
firms headquartered in Chinese mainland and
Hong Kong in the future, which ability depends on
a number of factors beyond our, and our auditor’s,
control, including the uncertainties surrounding the
relationship between China and the United States.
If in the future the PCAOB finds that it is unable to
completely inspect and investigate registered public
accounting firms headquartered in Chinese mainland
or Hong Kong, the PCAOB may act immediately
to consider the need to issue new determinations
consistent with the HFCA Act, and we may be
identified as a Commission-Identified Issuer again.
In accordance with the HFCA Act as amended by the
Consolidated Appropriations Act, 2023, if the PCAOB is
unable to continue to inspect or investigate completely
registered public accounting firms headquartered
in Chinese mainland or Hong Kong, including our
independent registered public accounting firm, for
two consecutive years, our securities (including our
ADSs and Shares) would be delisted from the NYSE
and will be prohibited from trading on other U.S.
stock exchanges and “over-the-counter” in the U.S.
Delisting of our ADSs would force our U.S.-based
shareholders to sell their ADSs or convert them into
Shares listed in Hong Kong. Although we are listed in
Hong Kong, investors may face difficulties in migrating
their underlying ordinary shares to Hong Kong, or may
have to incur increased costs or suffer losses in order
to do so. The risk and uncertainty associated with
delisting of our securities or other anticipated negative
impacts of the HFCA Act upon and investor sentiment
towards China-based companies listed in the United
States would have a negative impact on the price of
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Alibaba Group Holding Limited
our ADSs and Shares, and may significantly affect our
ability to raise capital in the future, which would have
a material adverse impact on our business, financial
condition, and prospects.
PRC regulations relating to investments in offshore
companies by PRC residents may subject our PRC-
resident beneficial owners or our PRC subsidiaries
to liability or penalties, limit our ability to inject
capital into our PRC subsidiaries or limit our PRC
subsidiaries’ ability to increase their registered
capital or distribute profits.
SAFE promulgated the SAFE Circular 37 on July 4, 2014,
which replaced the former circular commonly known
as “SAFE Circular 75” promulgated by SAFE on October
21, 2005. SAFE Circular 37 and its implementing
rules require PRC residents to register with banks
designated by local branches of SAFE in connection
with their direct establishment or indirect control of an
offshore entity, for the purpose of overseas investment
and financing, with the PRC residents’ legally owned
assets or equity interests in domestic enterprises or
offshore assets or interests, referred to in SAFE Circular
37 as a “special purpose vehicle.”
We notified substantial beneficial owners of ordinary
shares who we know are PRC residents of their
filing obligation, and pursuant to the former SAFE
Circular 75, we filed the above-mentioned foreign
exchange registration on behalf of certain employee
shareholders who we know are PRC residents.
However, we may not be aware of the identities of
all of our beneficial owners who are PRC residents.
We do not have control over our beneficial owners,
and there can be no assurance that all of our PRC-
resident beneficial owners will comply with relevant
SAFE regulations. The failure of our beneficial owners
who are PRC residents to register or amend their
SAFE registrations in a timely manner or the failure of
future beneficial owners of our company who are PRC
residents to comply with the registration procedures
set forth in SAFE Circular 37 and subsequent
implementation rules, may subject the beneficial
owners or our PRC subsidiaries to fines and legal
sanctions.
Furthermore, since it is unclear how those SAFE
regulations, and any future regulation concerning
offshore or cross-border transactions, will be further
interpreted, amended and implemented by the
relevant PRC government authorities, we cannot
predict how these regulations will affect our business
operations or future strategy. Failure to register or
comply with relevant requirements may also limit
our ability to contribute additional capital to our PRC
subsidiaries and limit our PRC subsidiaries’ ability
to distribute dividends to our company. These risks
may have a material adverse effect on our business,
financial condition and results of operations.
Any failure to comply with PRC regulations
regarding our or our subsidiaries’ employee equity
incentive plans may subject the PRC participants in
the plans, us or our overseas and PRC subsidiaries to
fines and other legal or administrative sanctions.
Pursuant to SAFE Circular 37, PRC residents who
participate in share incentive plans in overseas non-
publicly-listed companies may, prior to the exercise
of an option, submit applications to SAFE or its local
branches for the foreign exchange registration with
respect to offshore special purpose companies. In
the meantime, our directors, executive officers, other
employees and those of our subsidiaries’ who are
PRC citizens or who are non-PRC citizens residing
in the PRC for a continuous period of not less than
one year, subject to limited exceptions, and whom
we or our overseas listed subsidiaries have granted
RSUs, options or restricted shares, may follow the
Notice on Issues Concerning the Foreign Exchange
Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly Listed
Company, issued by SAFE in February 2012, to apply
for the foreign exchange registration. According to
those regulations, employees, directors and other
management members participating in any stock
incentive plan of an overseas publicly listed company
who are PRC citizens or who are non-PRC citizens
residing in China for a continuous period of not less
than one year, subject to limited exceptions, are
required to register with SAFE through a domestic
qualified agent, which may be a PRC subsidiary of the
overseas listed company, and complete certain other
procedures. Failure to complete the SAFE registrations
may subject them to fines and legal sanctions and
may also limit their ability to make payment under the
relevant equity incentive plans or receive dividends or
sales proceeds related thereto in foreign currencies, or
may limit our ability and the ability of our subsidiaries
to contribute additional capital into the domestic
subsidiaries in China and limit the ability of the
domestic subsidiaries of us and our subsidiaries to
distribute dividends to us and our subsidiaries. We
and our subsidiaries also face regulatory uncertainties
under PRC law that could restrict our ability or the
ability of our overseas listed subsidiaries to adopt
additional equity incentive plans for our directors and
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Fiscal Year 2024 Annual Report
employees who are PRC citizens or who are non-PRC
citizens residing in the PRC for a continuous period of
not less than one year, subject to limited exceptions.
In addition, the State Taxation Administration of
the PRC, or the STA, has issued circulars concerning
employee RSUs, share options or restricted shares.
Under these circulars, employees working in the PRC
whose RSUs or restricted shares vest, or who exercise
share options, will be subject to PRC individual
income tax. The PRC subsidiaries of an overseas listed
company have obligations to file documents related
to employee RSUs, share options or restricted shares
with relevant tax authorities and to withhold individual
income taxes of those employees related to their RSUs,
share options or restricted shares. Although we and
our overseas listed subsidiaries currently withhold
individual income tax from our PRC employees in
connection with the vesting of their RSUs and restricted
shares and their exercise of options, if the employees
fail to pay, or the PRC subsidiaries fail to withhold, their
individual income taxes according to relevant laws,
rules and regulations, the PRC subsidiaries may face
sanctions imposed by the tax authorities.
We rely to a significant extent on dividends, loans
and other distributions on equity paid by our
operating subsidiaries in China.
We are a holding company and rely to a significant
extent on dividends, loans and other distributions
on equity paid by our operating subsidiaries for our
cash and financing requirements, including the funds
necessary to repurchase shares, to pay dividends
and other cash distributions to our shareholders,
fund inter-company loans, service outstanding debt
and pay our expenses. If our operating subsidiaries
incur additional debt on their own, the instruments
governing the debt may restrict their ability to pay
dividends or make other distributions or remittances,
including loans, to us. Furthermore, the laws, rules
and regulations applicable to our PRC subsidiaries
and certain other subsidiaries permit payments of
dividends only out of their retained earnings, if any,
determined in accordance with applicable accounting
standards and regulations.
Under PRC laws, rules and regulations, each of our
subsidiaries incorporated in China is required to set
aside a portion of its net income each year to fund
certain statutory reserves. These reserves, together
with the registered equity, are not distributable as
cash dividends. As a result of these laws, rules and
regulations, our subsidiaries incorporated in China
are restricted in their ability to transfer a portion of
their respective net assets to their shareholders as
dividends. In addition, registered share capital and
capital reserve accounts are also restricted from
withdrawal in the PRC, up to the amount of net assets
held in each operating subsidiary. As of March 31,
2024, these restricted net assets totaled RMB317.0
billion (US$43.9 billion).
P4P services are considered, in part, to involve
Internet advertisement, which subjects us to other
laws, rules and regulations as well as additional
obligations.
The Administrative Measures for Internet Advertising
promulgated by the SAMR apply to any commercial
advertising that directly or indirectly promotes goods
or services through Internet media in any form
including paid-for search results. See “Business
Overview — Regulation — Regulation of Advertising
Services.”
There exist substantial uncertainties with respect to
the interpretation and implementation in practice of
the Administrative Measures for Internet Advertising
by various government authorities. We derive a
significant amount of our revenue from P4P services
and other related services. Our P4P services and other
related services may be considered to, in part, involve
Internet advertisement. We may incur additional
taxes in connection with our P4P and other related
services. Moreover, PRC advertising laws, rules and
regulations require advertisers, advertising operators
and advertising distributors to ensure that the content
of the advertisements they prepare or distribute is fair
and accurate and is in full compliance with applicable
law. Violation of these laws, rules or regulations may
result in penalties, including fines, confiscation of
advertising fees and orders to cease dissemination of
the advertisements. In circumstances involving serious
violations, the PRC government may suspend or revoke
a violator’s business license or license for operating an
advertising business. In addition, the Administrative
Measures for Internet Advertising require paid-
for search results to be clearly distinguished from
organic search results so that consumers will not
misunderstand the nature of these search results.
Therefore, we are obligated to distinguish from others
the merchants who purchase the above-mentioned
P4P and related services or the relevant listings by
these merchants. Complying with these requirements,
including any penalties or fines for any failure to
comply, may significantly reduce the attractiveness of
our platforms and increase our costs, and could have
a material adverse effect on our business, financial
condition and results of operations.
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236
Alibaba Group Holding Limited
In addition, for advertising content related to specific
types of products and services, advertisers, advertising
operators and advertising distributors must confirm
that the advertisers have obtained requisite
government approvals, including the advertiser’s
operating qualifications, proof of quality inspection of
the advertised products, and, with respect to certain
industries, government approval of the content of the
advertisement and filing with the local authorities.
Pursuant to the Administrative Measures for Internet
Advertising, we are required to take steps to monitor
the content of advertisements displayed on our
platforms. This requires considerable resources and
time, and could significantly affect the operation of
our business, while also subjecting us to increased
liability under the relevant laws, rules and regulations.
The costs associated with complying with these laws,
rules and regulations, including fines or any other
penalties for our failure to so comply if required,
could have a material adverse effect on our business,
financial condition and results of operations. Any
further change in the classification of our P4P and
other related services by the PRC government may also
significantly disrupt our operations and materially and
adversely affect our business and prospects.
We may be treated as a resident enterprise for PRC
tax purposes under the PRC Enterprise Income Tax
Law, and we may therefore be subject to PRC income
tax on our global income.
Under the PRC Enterprise Income Tax Law, as
amended, enterprises established under the laws
of jurisdictions outside of China with “de facto
management bodies” located in China may be
considered PRC tax resident enterprises for tax
purposes and may be subject to the PRC enterprise
income tax at the rate of 25% on their global income.
The STA issued Circular 82 on April 22, 2009, which
was further amended on December 29, 2017. Circular
82 specifies certain criteria for determining whether
the “de facto management body” of a Chinese-
controlled, offshore-incorporated enterprise is located
in China. Although Circular 82 applies only to offshore
enterprises controlled by PRC enterprises, and does
not apply to offshore enterprises controlled by foreign
enterprises or individuals, the determining criteria set
forth in Circular 82 may reflect the PRC tax authorities’
general position on how the “de facto management
body” test should be applied in determining the tax
resident status of offshore enterprises, regardless
of whether they are controlled by PRC enterprises. If
we were to be considered a PRC resident enterprise,
we would be subject to PRC enterprise income tax at
the rate of 25% on our global income. In this case,
our profitability and cash flow may be materially
reduced as a result of our global income being taxed
under the PRC Enterprise Income Tax Law. We believe
that none of our entities outside of China is a PRC
resident enterprise for PRC tax purposes. However,
the tax resident status of an enterprise is subject
to determination by the PRC tax authorities and
uncertainties remain with respect to the interpretation
of the term “de facto management body.”
Dividends payable to foreign investors and gains
on the sale of our ADSs and/or ordinary shares by
our foreign investors may become subject to PRC
taxation.
Under the PRC Enterprise Income Tax Law and its
implementation regulations, a 10% PRC withholding
tax is applicable to dividends payable by a resident
enterprise to investors that are non-resident
enterprises, which do not have an establishment
or place of business in the PRC or which have an
establishment or place of business but the dividends
are not effectively connected with the establishment
or place of business, to the extent these dividends
are derived from sources within the PRC, subject to
any reduction set forth in applicable tax treaties.
Similarly, any gain realized on the transfer of shares
of a PRC resident enterprise by these investors is also
subject to PRC tax at a current rate of 10%, subject
to any exemption set forth in relevant tax treaties. If
we are deemed a PRC resident enterprise, dividends
paid on our ordinary shares or ADSs, and any gain
realized by the non-resident enterprise investors from
the transfer of our ordinary shares or ADSs, may be
treated as income derived from sources within the
PRC and as a result be subject to PRC taxation. See
“Business Overview — Regulation — Other Regulations
— Tax Regulations — PRC Enterprise Income Tax.”
Furthermore, if we are deemed a PRC resident
enterprise, dividends payable to individual investors
who are non-PRC residents and any gain realized on
the transfer of our ADSs and/or ordinary shares by
these investors may be subject to PRC tax at a current
rate of 20%, subject to any reduction or exemption set
forth in applicable tax treaties. It is unclear if we or any
of our subsidiaries established outside of China are
considered a PRC resident enterprise, whether holders
of our ADSs and/or ordinary shares would be able to
claim the benefit of income tax treaties or agreements
entered into between China and other countries or
areas and claim foreign tax credit if applicable. If
dividends payable to our non-PRC investors, or gains
from the transfer of our ADSs and/or ordinary shares
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by these investors are subject to PRC tax, the value of
your investment in our ADSs and/or ordinary shares
may decline significantly.
Discontinuation of preferential tax treatments we
currently enjoy or other unfavorable changes in tax
law could result in additional compliance obligations
and costs.
Chinese companies operating in the high-technology
and software industry that meet relevant requirements
may qualify for three main types of preferential
treatment, which are high and new technology
enterprises, software enterprises and key software
enterprises within the scope of the PRC national plan.
For a qualified high and new technology enterprise,
the applicable enterprise income tax rate is 15%. The
high and new technology enterprise qualification is re-
assessed by the relevant authorities every three years.
Moreover, a qualified software enterprise is entitled to
a tax holiday consisting of a two-year tax exemption
beginning from the first profit-making calendar year
and a 50% tax reduction for the subsequent three
consecutive calendar years. The software enterprise
qualification is subject to an annual assessment.
A qualified encouraged key software enterprise is
entitled to a five-year enterprise income tax exemption
beginning from the first profit-making calendar year
and its applicable enterprise income tax rate for the
following calendar year is 10%. The key software
enterprise qualification is subject to an annual
assessment.
A number of our China operating entities enjoy
these preferential tax treatments. There is no
guarantee that these entities will be able to renew
or maintain the above-mentioned qualifications
when such qualifications expire or be able to meet
new requirements under continuously evolving rules
concerning preferential tax treatments, and if any
of our China operating entities fails to do so, it will
not be able to continue to enjoy the preferential tax
treatments. For example, certain of our subsidiaries
did not obtain the key software enterprise status for
calendar years 2022 and 2023. The discontinuation of
any of the various types of preferential tax treatment
we enjoy could materially and adversely affect our
results of operations. See “Management Discussion
and Analysis — Operating Results — Taxation — PRC
Income Tax.”
We and our shareholders face uncertainties with
respect to indirect transfers of equity interests in PRC
resident enterprises or other assets attributed to a
PRC establishment of a non-PRC company.
On February 3, 2015, the STA issued Bulletin 7, which
has been further amended by Bulletin 37, issued by
the STA on October 17, 2017 and amended on June 15,
2018. Pursuant to these bulletins, an “indirect transfer”
of assets, including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises may be re-
characterized and treated as a direct transfer of PRC
taxable assets, if the arrangement does not have a
reasonable commercial purpose and was established
for the purpose of avoiding payment of PRC enterprise
income tax. As a result, gains derived from this indirect
transfer may be subject to PRC enterprise income tax.
There are uncertainties as to the application of Bulletin
7 and Bulletin 37. Bulletin 7 may be determined by
the tax authorities to be applicable to some of our
offshore restructuring transactions or sale of the
shares of our offshore subsidiaries or investments
where PRC taxable assets are involved. The transferors
and transferees may be subject to the tax filing and
the transferees may be subject to withholding or tax
payment obligation, while our PRC subsidiaries may
be requested to assist in the filing. Furthermore, we,
our non-resident enterprises and PRC subsidiaries may
be required to spend valuable resources to comply
with Bulletin 7 or to establish that we and our non-
resident enterprises should not be taxed under Bulletin
7, for our previous and future restructuring or disposal
of shares of our offshore subsidiaries, which may have
a material adverse effect on our financial condition
and results of operations.
The PRC tax authorities have the discretion under
Bulletin 7 to make adjustments to the taxable
capital gains based on the difference between the
fair value of the taxable assets transferred and the
cost of investment. If the PRC tax authorities make
adjustments to the taxable capital gains of the
transactions under Bulletin 7, our income tax costs
associated with potential acquisitions or disposals will
increase, which may have an adverse effect on our
financial condition and results of operations.
Regulations on currency exchange or outbound
capital flows may limit our ability to utilize our PRC
revenue effectively.
Substantially all of our revenue is denominated in
Renminbi. The Renminbi is currently convertible under
the “current account,” which includes dividends, trade
and service-related foreign exchange transactions,
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Alibaba Group Holding Limited
but requires approval from or registration with
appropriate government authorities or designated
banks under the “capital account,” which includes
foreign direct investment and loans, including loans
we may secure from our onshore subsidiaries or
VIEs. Currently, our PRC subsidiaries, that are foreign
invested enterprises, may purchase foreign currency
for settlement of “current account transactions,”
including payment of dividends to us, without
the approval of SAFE by complying with certain
procedural requirements. However, the relevant PRC
governmental authorities may limit or eliminate our
ability to purchase foreign currencies in the future for
current account transactions.
Since 2016, PRC governmental authorities have
imposed more stringent regulations on outbound
capital flows, including heightened scrutiny over
“irrational” overseas investments for certain industries,
as well as over four kinds of “abnormal” offshore
investments, which are:
•
investments through enterprises established
for only a few months without substantive
operations;
•
investments with amounts far exceeding the
registered capital of onshore parent and not
supported by its business performance shown on
financial statements;
•
investments in targets that are unrelated to the
onshore parent’s main business; and
•
investments with abnormal sources of Renminbi
funding suspected to involve illegal transfer
of assets or illegal operation of underground
banking.
On January 18, 2017, SAFE promulgated the Circular
on Further Improving Reform of Foreign Exchange
Administration and Optimizing Genuineness and
Compliance Verification, or Circular 3, which, among
other things, requires stricter authenticity and
compliance verification of outbound investment
transactions. In addition, the Outbound Investment
Sensitive Industry Catalog (2018) lists certain sensitive
industries that are subject to NDRC pre-approval
requirements prior to remitting investment funds
offshore, which subjects us to increased approval
requirements and restrictions with respect to our
overseas investment activity. Since a significant
amount of our PRC revenue is denominated in
Renminbi, any existing and future regulations on
currency exchange or outbound capital flows may limit
our ability to utilize revenue generated in Renminbi to
fund our business activities outside of the PRC, make
investments, service any debt we have incurred or
may incur outside of China, including our outstanding
senior notes and other debt securities we may offer
in the future, repurchase shares or pay dividends
in foreign currencies to our shareholders, including
holders of our ADSs.
Fluctuations in exchange rates could result in foreign
currency exchange losses to us.
The value of the Renminbi against the U.S. dollar
and other currencies may fluctuate and is affected
by, among other things, changes in political and
economic conditions and the foreign exchange policy
adopted by the PRC government. It is difficult to predict
how market forces or PRC or U.S. government policy,
including any interest rate increases by the Federal
Reserve, may impact the exchange rate between
the Renminbi and the U.S. dollar in the future. There
remains significant international pressure on the
PRC government to adopt a more flexible currency
policy, including from the U.S. government. In August
2019, the U.S. Treasury Department announced that
it labelled China a “currency manipulator,” which
label was officially dropped by the U.S. Treasury
Department in January 2020. However, it is uncertain
whether the U.S. government may issue any similar
announcement in the future. As a result of such
announcement, the United States may take further
actions to eliminate perceived unfair competitive
advantages created by alleged manipulating actions.
Any actions taken by the U.S. Treasury Department in
this regard as well as China’s possible responses could
result in greater fluctuation of the Renminbi against
the U.S. dollar.
A substantial percentage of our revenues and costs
are denominated in Renminbi, and a significant
portion of our financial assets are also denominated
in Renminbi while the majority of our debt is
denominated in U.S. dollars. We are a holding
company and we rely on dividends, loans and
other distributions on equity paid by our operating
subsidiaries in China. Any significant fluctuations
in the value of the Renminbi may materially and
adversely affect our liquidity and cash flows. If we
decide to convert our Renminbi into U.S. dollars for
the purpose of repaying principal or interest expense
on our outstanding U.S. dollar-denominated debt,
repurchasing shares, making payments for dividends
on our ordinary shares or ADSs or other business
purposes, appreciation of the U.S. dollar against
the Renminbi would have a negative effect on the
U.S. dollar amount we would receive. Conversely,
to the extent that we need to convert U.S. dollars
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Fiscal Year 2024 Annual Report
into Renminbi for our operations, appreciation of
the Renminbi against the U.S. dollar would have an
adverse effect on the Renminbi amount we would
receive. In addition, the revenues and costs of certain
of our international businesses are denominated
in local currencies. Fluctuations in exchange rates
of these currencies against our reporting currency
Renminbi will have a material adverse effect on
our financial condition and results of operations.
From time to time we enter into hedging activities
with regard to exchange rate risk. There can be no
assurance that our hedging activities will successfully
mitigate these risks adequately or at all or that
our counterparties will be able to perform their
obligations, and in addition hedging activities may
result in greater volatility in our financial results.
The approval, filing or other requirements of the
CSRC or other PRC regulatory authorities may
be required under PRC law in connection with
any future issuance of securities overseas, and, if
required, we cannot predict whether or for how long
we or our subsidiaries will be able to obtain such
approval or complete such filing.
PRC laws and regulations in relation to the share
issuance and listing of Chinese companies overseas
have been evolving. On July 6, 2021, the relevant PRC
authorities issued the Opinions on Intensifying Crack
Down on Illegal Securities Activities, which called
for strengthening the administration over illegal
securities activities and enhancing the supervision on
overseas listings by Chinese companies. As a follow-
up, on February 17, 2023, the CSRC promulgated the
Trial Administrative Measures of Overseas Securities
Offering and Listing by Domestic Companies and five
supporting relevant guidelines, or collectively, the
Overseas Listing Trial Measures, which took effect on
March 31, 2023. The Overseas Listing Trial Measures
clarify the scope of overseas offerings and listings
by Chinese domestic companies which are subject
to the filing and reporting requirements thereunder.
Pursuant to the Overseas Listing Trial Measures, an
overseas offering and listing by a Chinese company,
including any follow-on offering, secondary listings
or other equivalent offering activities, whether directly
or indirectly, shall be filed with the CSRC. Specifically,
a Chinese company whose securities had already
been listed overseas prior to the effectiveness of
the Overseas Listing Trial Measures is required to
file with the CSRC with respect to any follow-on
offering in the same overseas market where its
securities are listed within three business days after
completion of such follow-on offering. The Overseas
Listing Trial Measures have also imposed additional
reporting obligations on listed companies upon the
occurrence of certain circumstances, including but
not limited to change of controlling interest and
delisting. See “Business Overview — Regulation — Other
Regulations — Regulation of Overseas Listing.” There
are substantial uncertainties as to the interpretation
and implementation of these recently promulgated
laws and regulations. If we fail to properly or timely
complete the reporting procedures with the CSRC
upon the occurrence of the circumstances stipulated
in the Overseas Listing Trial Measures, or the filing
procedures with the CSRC for our future securities
offerings and listings outside of Chinese mainland,
we may be subject to penalties, sanctions and fines
imposed by the CSRC and relevant departments of the
State Council.
PRC regulatory authorities have also promulgated
laws and regulations relating to cybersecurity review
of Chinese companies listing overseas. According
to the Revised Cybersecurity Review Measures, any
network platform operator possessing over one
million users’ individual information must apply
for cybersecurity review before listing abroad, and
the Draft Cyber Data Security Regulations, also set
forth different scenarios where data processors are
required to apply for cybersecurity review, including,
among others, overseas listing while processing over
one million users’ personal information, Hong Kong
listing that affects or may affect national security,
and other data processing activities that affect or
may affect national security. There is no definite
timetable as to when the Draft Cyber Data Security
Regulations will be enacted. PRC laws and regulations
relating to cybersecurity review are relatively
new, and the applicable scope of these laws and
regulations remains uncertain and is subject to further
clarifications from PRC regulators. As we may conduct
follow-on offerings and our subsidiaries may seek
listing overseas in the future, we and our subsidiaries
may be required to apply for cybersecurity review in
accordance with the Revised Cybersecurity Review
Measures or the Draft Cyber Data Security Regulations,
if adopted, before offerings and listings, as applicable.
Failure to comply with these laws and regulations may
subject us or our subsidiaries to penalties including
fines, suspension of business, prohibition against new
user registration and revocation of required licenses.
These new and evolving regulatory requirements
could significantly increase our regulatory compliance
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Alibaba Group Holding Limited
costs, and it is uncertain whether we can, or how
long it will take us to, obtain the relevant approval
or complete the relevant reviews and filings for any
offshore offerings, which would limit or hinder our
ability to continue to offer securities to investors and
the ability of our subsidiaries to seek IPOs or continue
to offer securities to investors. Any uncertainties or
negative publicity regarding such approval, reviews
and filings could materially and adversely affect our
business, prospects, reputation, and the trading prices
of our ADSs and/or Shares.
In addition, on February 24, 2023, the CSRC and other
PRC governmental authorities jointly issued the revised
Provisions on Strengthening Confidentiality and
Archives Administration of Overseas Securities Offering
and Listing by Domestic Companies, or the Revised
Confidentiality Provisions, which took effect on March
31, 2023. According to the Revised Confidentiality
Provisions, Chinese companies that directly or
indirectly conduct overseas offerings and listings,
shall strictly abide by the laws and regulations on
confidentiality when providing or publicly disclosing,
either directly or through their overseas listed entities,
materials to securities service providers. In the event
that such materials contain state secrets or working
secrets of government agencies, companies shall first
obtain approval from and file with relevant authorities.
Any enterprise or individual that violates laws and
regulations governing the protection of state secrets
and archives administration in overseas securities
offering and listing activities by Chinese enterprises
may be subject to administrative or criminal liabilities.
See “Business Overview — Regulation — Other
Regulations — Regulation of Overseas Listing.”
Risks Related to Our ADSs and Shares
The trading prices of our ADSs and Shares have been
and are likely to continue to be volatile, which could
result in substantial losses to holders of our ADSs
and/or Shares.
The trading prices of our ADSs and Shares have
been and is likely to continue to be volatile and
could fluctuate widely in response to a variety of
factors, many of which are beyond our control. For
example, the high and low closing prices of our ADSs
on the NYSE in fiscal year 2024 were US$102.74 and
US$68.05, respectively. Likewise, the high and low
closing prices of our Shares on the Hong Kong Stock
Exchange during fiscal year 2024 were HK$99.30 and
HK$65.45, respectively. In addition, the performance
and fluctuation of the market prices of other
companies with business operations located mainly
in China that have listed their securities in Hong Kong
and/or the United States may affect the volatility in
the prices of and trading volumes for our ADSs and/or
Shares. Some of these companies have experienced
significant volatility. The trading performances of
these companies’ securities may affect the overall
investor sentiment towards other companies with
business operations located mainly in China and
listed in Hong Kong and/or the United States and
consequently may impact the trading performance
of our ADSs and/or Shares. In addition to market and
industry factors, the prices and trading volumes for our
ADSs and/or Shares may be highly volatile for specific
reasons, including:
•
variations in our results of operations or earnings
that are not in line with market or securities
research analyst expectations or changes
in financial estimates by securities research
analysts;
•
regulatory developments, including new laws
and regulations issued and the overall trend of
government enforcement actions;
•
publication of operating or industry metrics by
third parties, including government statistical
agencies, that differ from expectations of
industry or securities research analysts;
•
announcements made by us or our
competitors of new product and service
offerings, technologies, acquisitions, strategic
relationships, joint ventures or capital
commitments;
•
media and other reports, whether or not
comprehensive or true, about our business,
our lead founder Jack Ma or other directors
and management, Ant Group or our ecosystem
participants, changes in our corporate structure,
capital markets and other financing transactions,
planned conversion to primary listing in Hong
Kong, including negative reports published
by short sellers, regardless of their veracity or
materiality to us;
•
timing of our planned conversion to primary
listing in Hong Kong;
•
litigation and regulatory allegations, inspections,
investigations, proceedings or enforcements
that involve us or our ecosystem participants,
including our third-party service providers, such
as our professional service providers including
financial institutions, accountants, auditors, legal
counsel and other professional service providers;
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241
Fiscal Year 2024 Annual Report
•
changes in pricing we or our competitors adopt;
•
additions to or departures of our management or
other key personnel;
•
actual or perceived general industry, regulatory,
economic and business conditions and trends
in China and globally, due to various reasons,
including changes in geopolitical landscape;
•
some investors or analysts may invest in or
value our ADSs and/or Shares based on the
economic performance of the Chinese economy,
which may not be correlated to our financial
performance;
•
the inclusion, exclusion, or removal of our ADSs
and/or Shares from market indices;
•
political or market instability or disruptions,
pandemics or epidemics and other disruptions
to China’s economy or the global economy, and
actual or perceived social unrest in the United
States, Hong Kong or other jurisdictions;
•
fluctuations of exchange rates among the
Renminbi, the Hong Kong dollar and the U.S.
dollar; and
•
sales or perceived potential sales or other
dispositions of existing or additional ADSs and/or
Shares or other equity or equity-linked securities.
Any of these factors may result in large and sudden
changes in the volume and trading prices of our ADSs
and/or Shares. In addition, the stock market has from
time to time experienced significant price and volume
fluctuations that are unrelated to the operating
performance of particular companies and industries.
These fluctuations may include a so-called “bubble
market” in which investors temporarily raise the price
of the stocks of companies in certain industries, such
as the technology industry, to unsustainable levels.
These market fluctuations may significantly affect
the trading prices of our ADSs and/or Shares. In the
past, following periods of volatility in the market price
of a company’s securities, shareholders have often
instituted securities class action litigation against that
company. We were named as a defendant in certain
purported shareholder class action lawsuits described
in “Business Overview — Legal and Administrative
Proceedings — Shareholder Class Action Lawsuits.” The
litigation process may utilize a material portion of our
cash resources and divert management’s attention
from our day-to-day operations, all of which could
harm our business. If adversely determined, the class
action suits may have a material adverse effect on our
financial condition and results of operations.
Substantial future sales or perceived potential sales
of our ADSs, Shares, or other equity or equity-linked
securities in the public market could cause the price
of our ADSs and/or Shares to decline significantly.
Sales of our ADSs, Shares, or other equity or equity-
linked securities in the public market, or the perception
that these sales could occur, could cause the
market price of our ADSs and/or Shares to decline
significantly. All of our Shares trading on the Hong
Kong Stock Exchange and Shares represented by
ADSs are freely transferable by persons other than our
affiliates without restriction or additional registration
under the U.S. Securities Act. The Shares held by our
affiliates and other shareholders are also available
for sale, subject to volume and other restrictions as
applicable under Rules 144 and 701 under the U.S.
Securities Act, under sales plans adopted pursuant to
Rule 10b5-1 or otherwise.
According to public disclosure by SoftBank, SoftBank
has monetized a significant amount of the Shares it
owns in us through forward contracts. The amount
of our shares that SoftBank owns could decrease
upon settlement of forward contracts. SoftBank could
continue to pledge, monetize or sell more of our ADSs
or Shares in the future. If SoftBank divests significant
amounts of our ADSs, or further engages in derivative
or other financing arrangements with respect to a
significant amount of our ADSs or Shares, the price of
our ADSs and/or Shares could decline significantly.
News, market rumors or speculations about any
SoftBank’s plans to divest our shares could also
negatively affect the price of our ADS and/or Shares.
Additional divestitures in the future of our ADSs and/or
Shares by shareholders, announcements of any plan
to divest our ADSs and/or Shares, or hedging activities
by third-party financial institutions in connection with
similar derivative or other financing arrangements
entered into by shareholders, could also cause the
price of our ADSs and/or Shares to decline.
Changes to our shareholder return initiatives may
adversely affect the trading prices of our ADSs and
Shares.
We have implemented shareholder return initiatives
through share repurchases and dividends.
We continually assess our shareholder return
initiatives based on a number of factors, including
without limitation, business fundamentals, capital
requirements and financial conditions, and may adjust
our shareholder return initiatives from time to time.
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Alibaba Group Holding Limited
Adjustments to our shareholder return initiatives
that result in any reduction in share repurchases or
dividends may harm our reputation and investor
confidence in us, which could adversely affect the
trading prices of our ADSs, Shares or other securities.
An active trading market for our ordinary shares
on the Hong Kong Stock Exchange, our ADSs on
the NYSE and/or our other securities might not be
sustained and trading prices of our ordinary shares,
ADSs and/or our other securities might fluctuate
significantly.
Since our listing in Hong Kong in 2019, we have
consistently been one of the most actively-traded
companies on the Hong Kong Stock Exchange.
However, we cannot assure you that an active trading
market for our ordinary shares on the Hong Kong
Stock Exchange will be sustained. In addition, we
cannot assure you that an active trading market for
our ADSs on the NYSE or for our other securities will
be sustained. For example, since our listing in Hong
Kong in 2019, investors have been converting our
ADSs into Shares listed in Hong Kong and vice versa. If
our investors convert a significant portion of our ADSs
into Shares listed in Hong Kong or if such conversions
happen suddenly or at a rapid pace, the price and
liquidity of our ADSs could be severely impacted. The
trading price or liquidity for our ADSs on the NYSE and
the trading price or liquidity for our ordinary shares on
the Hong Kong Stock Exchange in the past might not
be indicative of those of our ADSs on the NYSE and
our ordinary shares on the Hong Kong Stock Exchange
in the future. In addition, legislation, executive orders
and other regulatory actions, such as the HFCA Act and
U.S. Executive Order 13959, may cause our ADSs to be
delisted from the NYSE. See “— Risks Related to Doing
Business in the People’s Republic of China — Our ADSs
will be delisted and our ADSs and shares prohibited
from trading in the United States under the Holding
Foreign Companies Accountable Act, as amended,
if the PCAOB is unable to inspect or investigate
completely auditors located in China.” See also “—
Risks Related to Our Business and Industry — Changes
in national trade or investment policies and barriers
to trade or investment, and any ongoing geopolitical
conflict, may have an adverse effect on our business
and expansion plans, and could lead to the delisting
of our securities from U.S. exchanges and/or other
restrictions or prohibitions on investing in our
securities.” If an active trading market of our ordinary
shares on the Hong Kong Stock Exchange, our ADSs
on the NYSE or our other securities is not sustained,
the market price and liquidity of our ordinary shares,
our ADSs or our other securities, could be materially
and adversely affected, and there may be difficulties
in enforcing obligations with respect to our other
securities.
In 2014, the Hong Kong, Shanghai and Shenzhen
Stock Exchanges collaborated to create an inter-
exchange trading mechanism called Stock Connect
that allows international and mainland Chinese
investors to trade eligible equity securities listed in
each other’s markets through the trading and clearing
facilities of their home exchange. Stock Connect allows
certain mainland Chinese investors to trade directly
in eligible equity securities listed on the Hong Kong
Stock Exchange, known as Southbound Trading.
If a company’s shares are not considered eligible,
they cannot be traded through Stock Connect. It is
unclear whether and when the ordinary shares of
our company will be eligible to be traded through
Stock Connect, if at all. The ineligibility of our ordinary
shares for trading through Stock Connect will affect
certain mainland Chinese investors’ ability to trade our
ordinary shares.
The different characteristics of the capital markets in
Hong Kong and the U.S. may negatively affect the
trading prices of our ADSs and Shares.
As a dual-listed company, we are subject to Hong
Kong and NYSE listing and regulatory requirements
concurrently. The Hong Kong Stock Exchange and
the NYSE have different trading hours, trading
characteristics (including trading volume and
liquidity), trading and listing rules, transaction costs
and investor bases (including different levels of
retail and institutional participation). As a result of
these differences, the trading prices of our ADSs and
our Shares may not be the same, even allowing for
currency differences. Fluctuations in the price of our
ADSs due to circumstances peculiar to the U.S. capital
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Fiscal Year 2024 Annual Report
markets could materially and adversely affect the price
of the Shares, or vice versa. Certain events having
significant negative impact specifically on the U.S.
capital markets may result in a decline in the trading
price of our Shares notwithstanding that such event
may not impact the trading prices of other securities
listed in Hong Kong generally or to the same extent, or
vice versa.
We may in the future conduct a public offering
and listing of our equity securities in Shanghai or
Shenzhen, which may result in increased regulatory
scrutiny and compliance costs as well as increased
fluctuations in the prices of our ADSs and Shares.
We may conduct a public offering and/or listing of
our equity securities on a stock exchange in Shanghai
or Shenzhen in the future. We have not set a specific
timetable or decided on any specific form for an
offering in Shanghai or Shenzhen and may not
ultimately conduct an offering and listing. The precise
timing of the offering and/or listing of our equity
securities in Shanghai or Shenzhen would depend
on a number of factors, including relevant regulatory
developments and market conditions. If we complete
a public offering or listing in Shanghai or Shenzhen,
we would become subject to the applicable laws,
rules and regulations governing public companies
listed in Shanghai or Shenzhen, in addition to the
various laws, rules and regulations that we are
subject to in the United States and Hong Kong as a
dual-listed company. The listing and trading of our
equity securities in multiple jurisdictions and multiple
markets may lead to increased compliance costs for
us, and we may face the risk of significant intervention
by regulatory authorities in these jurisdictions and
markets.
In addition, under current PRC laws, rules and
regulations, the ADSs and Shares, will not be
interchangeable or fungible with any equity securities
we may decide to list on a stock exchange in Shanghai
or Shenzhen, and there is no trading or settlement
between either the NYSE or the Hong Kong Stock
Exchange and stock exchanges in Shanghai or
Shenzhen. Furthermore, the NYSE, the Hong Kong
Stock Exchange and stock exchanges in Shanghai
or Shenzhen have different trading characteristics
and investor bases, including different levels of
retail and institutional participation. As a result of
these differences, the trading prices of our ADSs and
Shares, accounting for the ADS ratio, may not be the
same as the trading prices of any equity securities
we may decide to offer and/or list in Shanghai or
Shenzhen. The issuance of a separate class of shares
and fluctuations in its trading price may also lead to
increased volatility in, and may otherwise materially
decrease, the prices of our ADSs and Shares.
Our shareholders may face difficulties in protecting
their interests, and the ability of our shareholders,
the SEC, the U.S. Department of Justice, and other
U.S. authorities to bring actions against us may be
limited in the foreign jurisdictions where we operate.
We are incorporated in the Cayman Islands and
conduct a substantial portion of our operations in
China through our subsidiaries and the VIEs. Most of
our directors and substantially all of our executive
officers reside outside the United States and Hong
Kong and a substantial portion of their assets are
located outside of the United States and Hong Kong.
As a result, it may be difficult or impossible for our
shareholders (including holders of our ADSs and
Shares) to bring an action against us or against these
individuals in the Cayman Islands or in China in the
event that they believe that their rights have been
infringed under the securities laws of the United
States, Hong Kong or otherwise. Even if shareholders
are successful in bringing an action of this kind, the
laws of the Cayman Islands and China may render
them unable to enforce a judgment against our assets
or the assets of our directors and officers. There is
no statutory recognition in the Cayman Islands of
judgments obtained in the United States, Hong Kong
or Chinese mainland, although the courts of the
Cayman Islands will generally recognize and enforce
a non-penal judgment of a foreign court of competent
jurisdiction without retrial on the merits.
Our corporate affairs are governed by our
Memorandum and Articles of Association, and by the
Companies Act as well as common law of the Cayman
Islands. The rights of shareholders to take legal action
against us and our directors, actions by minority
shareholders and the fiduciary duties of our directors
are to a large extent governed by the common law of
the Cayman Islands. The common law of the Cayman
Islands is derived in part from comparatively limited
judicial precedent in the Cayman Islands as well as
from English common law, which provides persuasive,
but not binding, authority in a court in the Cayman
Islands. The rights of our shareholders and the
fiduciary duties of our directors under Cayman Islands
law are not as clearly established as they would be
under statutes or judicial precedents in the United
States and Hong Kong. In particular, the Cayman
Islands has a less-developed body of securities laws
than the United States and Hong Kong and provides
significantly less protection to investors. In addition,
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Alibaba Group Holding Limited
shareholders in Cayman Islands companies may not
have standing to initiate a shareholder derivative
action in U.S. federal courts or Hong Kong courts.
Our Articles provide that in the event that any
shareholder initiates or asserts any claim or
counterclaim against us, or joins, offers substantial
assistance to or has a direct financial interest in any
claim or counterclaim against us, and does not obtain
a judgment on the merits in which the initiating or
asserting party prevails, then the shareholder will
be obligated to reimburse us for all fees, costs and
expenses (including, but not limited to, all reasonable
attorneys’ fees and other litigation expenses) that
we may incur in connection with such claim or
counterclaim. These fees, costs and expenses that may
be shifted to a shareholder under this provision are
potentially significant and this fee-shifting provision
is not limited to specific types of actions, but is rather
potentially applicable to the fullest extent permitted by
law.
Our fee-shifting provision may dissuade or discourage
our shareholders (and their attorneys) from initiating
lawsuits or claims against us or may impact the fees,
contingency or otherwise, required by attorneys to
represent our shareholders. Fee-shifting provisions
such as ours are relatively new and untested. There
can be no assurance that we will or will not invoke our
fee-shifting provision in any particular dispute, or that
we will be successful in obtaining fees if we choose to
invoke the provision.
In addition, our Articles are specific to us and include
certain provisions that may be different from common
practices in Hong Kong, such as the absence of
requirements that the appointment, removal and
remuneration of auditors must be approved by a
majority of our shareholders, and the minimum
shareholding required to requisition an extraordinary
general meeting is one-third of the voting rights of
our issued shares which are entitled to vote at general
meetings, as opposed to the threshold of 10% voting
rights in Hong Kong.
Furthermore, due to jurisdictional limitations, matters
of comity and various other factors, the ability
of U.S. authorities, such as the SEC and the U.S.
Department of Justice, or the DOJ, to investigate and
bring enforcement actions against companies may
be limited in foreign jurisdictions, including China.
Local laws may constrain our and our directors’ and
officers’ ability to cooperate with such an investigation
or action. For example, according to Article 177 of the
PRC Securities Law, which became effective in March
2020, no overseas securities regulator is allowed to
directly conduct investigations or evidence collection
activities within the territory of the PRC. Accordingly,
without the consent of the competent PRC securities
regulators and relevant authorities, no organization
or individual may provide documents or materials
relating to securities business activities to overseas
parties. As a result of the foregoing, our public
shareholders may have more difficulty in protecting
their interests through actions against us, our
management, our directors, our officers or our major
shareholders, than they otherwise would with respect
to a corporation incorporated in a jurisdiction in the
United States or Hong Kong. Shareholder protection
through actions by the SEC, the DOJ and other U.S.
authorities also may be limited.
As a foreign private issuer in the United States, we
are permitted to and we will, rely on exemptions
from certain NYSE corporate governance standards
applicable to domestic U.S. issuers. This may afford
less protection to holders of our ADSs.
We are exempted from certain corporate governance
requirements of the NYSE by virtue of being a foreign
private issuer in the United States. We are required
to provide a brief description of the significant
differences between our corporate governance
practices and the corporate governance practices
required to be followed by domestic U.S. companies
listed on the NYSE. The standards applicable to us
are considerably different than the standards applied
to domestic U.S. issuers. For instance, we are not
required to:
•
have a majority of the board be independent
(although all of the members of the audit
committee must be independent under the U.S.
Exchange Act);
•
have a compensation committee or a
nominating or corporate governance committee
consisting entirely of independent directors;
•
have regularly scheduled executive sessions for
non-management directors; or
•
have executive sessions of solely independent
directors each year.
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Fiscal Year 2024 Annual Report
We have relied on and intend to continue to rely on
some of these exemptions. As a result, holders of our
ADSs may not be provided with the benefits of certain
corporate governance requirements of the NYSE.
As a foreign private issuer in the United States, we
are exempt from certain disclosure requirements
under the U.S. Exchange Act, which may afford less
protection to holders of our ADSs than they would
enjoy if we were a domestic U.S. company.
As a foreign private issuer in the United States, we
are exempt from, among other things, the rules
prescribing the furnishing and content of proxy
statements under the U.S. Exchange Act and the
rules relating to selective disclosure of material
non-public information under Regulation FD under
the U.S. Exchange Act. In addition, our executive
officers, directors and principal shareholders are
exempt from the reporting and short-swing profit and
recovery provisions contained in Section 16 of the U.S.
Exchange Act. We are also not required under the U.S.
Exchange Act to file periodic reports and financial
statements with the SEC as frequently or as promptly
as domestic U.S. companies with securities registered
under the U.S. Exchange Act. For example, in addition
to annual reports with audited financial statements,
domestic U.S. companies are required to file with the
SEC quarterly reports that include interim financial
statements reviewed by an independent registered
public accounting firm and certified by the companies’
principal executive and financial officers. By contrast,
as a foreign private issuer, we are not required to
file such quarterly reports with the SEC or to provide
quarterly certifications by our principal executive and
financial officers. As a result, holders of our ADSs may
be afforded less protection than they would under the
U.S. Exchange Act rules applicable to domestic U.S.
companies.
We adopt different practices as to certain matters as
compared with many other companies listed on the
Hong Kong Stock Exchange.
We completed our public offering in Hong Kong in
November 2019 and the trading of our Shares on the
Hong Kong Stock Exchange commenced on November
26, 2019 under the stock code “9988.” On June 19,
2023, we announced the addition of a Renminbi
counter for trading our shares under the stock code
“89988.” As a company listed on the Hong Kong Stock
Exchange pursuant to Chapter 19C of the Hong Kong
Listing Rules, we are not subject to certain provisions
of the Hong Kong Listing Rules pursuant to Rule
19C.11, including, among others, rules on notifiable
transactions, connected transactions, share schemes,
content of financial statements as well as certain other
continuing obligations. In addition, in connection
with the listing of our Shares on the Hong Kong Stock
Exchange, we have been granted a number of waivers
and/or exemptions from strict compliance with the
Hong Kong Listing Rules, the Companies (WUMP)
Ordinance, the Takeovers Codes and the SFO. As
a result, we have adopted different practices as to
those matters, including with respect to the content
and presentation of our annual reports and interim
reports, as compared with other companies listed on
the Hong Kong Stock Exchange that do not enjoy those
exemptions or waivers.
Furthermore, if 55% or more of the total worldwide
trading volume, by dollar value, of our Shares and
ADSs over our most recent fiscal year takes place
on the Hong Kong Stock Exchange, the Hong Kong
Stock Exchange will regard us as having a dual
primary listing in Hong Kong. In addition, we have
announced our plan to voluntarily change our
secondary listing status on the Hong Kong Stock
Exchange to a primary listing, although the timetable
of our primary conversion remains uncertain. Once
we become dual primary listed in Hong Kong, we
will no longer enjoy certain exemptions or waivers
from strict compliance with the requirements under
the Hong Kong Listing Rules, the Companies (WUMP)
Ordinance, the Takeovers Codes and the SFO, which
could result in our needing to undertake additional
compliance activities, to devote additional resources
to comply with new requirements, and our incurring of
incremental compliance costs.
The voting rights of holders of our ADSs are limited
by the terms of the Deposit Agreement.
Holders of our ADSs may exercise their voting rights
with respect to the ordinary shares underlying
their ADSs only in accordance with the provisions
of the Deposit Agreement. Upon receipt of voting
instructions from them in the manner set forth in the
Deposit Agreement, the depositary for our ADSs will
endeavor to vote their underlying ordinary shares in
accordance with these instructions. Under our Articles
of Association, the minimum notice period required
for convening a general meeting is ten days. When
a general meeting is convened, holders of our ADSs
Risk Factors
246
Alibaba Group Holding Limited
may not receive sufficient notice of a shareholders’
meeting to permit them to withdraw their ordinary
shares to allow them to cast their votes with respect
to any specific matter at the meeting. In addition, the
depositary and its agents may not be able to send
voting instructions to holders of our ADSs or carry out
their voting instructions in a timely manner. We will
make all reasonable efforts to cause the depositary
to extend voting rights to holders of our ADSs in a
timely manner, but they may not receive the voting
materials in time to ensure that they can instruct the
depositary to vote the ordinary shares underlying
their ADSs. Furthermore, the depositary and its agents
will not be responsible for any failure to carry out any
instructions to vote, for the manner in which any vote
is cast or for the effect of any vote. As a result, holders
of our ADSs may not be able to exercise their rights to
vote and they may lack recourse if the ordinary shares
underlying their ADSs are not voted as they requested.
The depositary for our ADSs will give us a
discretionary proxy to vote our ordinary shares
underlying the ADSs if holders of these ADSs do not
give voting instructions to the depositary, except in
limited circumstances, which could adversely affect
the interests of holders of our ordinary shares and
ADSs.
Under the Deposit Agreement for our ADSs, the
depositary will give us a discretionary proxy to vote the
ordinary shares underlying the ADSs at shareholders’
meetings if holders of these ADSs do not give voting
instructions to the depositary, unless:
•
we have failed to timely provide the depositary
with our notice of meeting and related voting
materials;
•
we have instructed the depositary that we do not
wish a discretionary proxy to be given;
•
we have informed the depositary that there is
substantial opposition as to a matter to be voted
on at the meeting;
•
a matter to be voted on at the meeting would
have a material adverse impact on shareholders;
or
•
voting at the meeting is made on a show of
hands.
The effect of this discretionary proxy is that, if holders
of our ADSs fail to give voting instructions to the
depositary, they cannot prevent our ordinary shares
underlying their ADSs from being voted, absent
the situations described above, and it may make
it more difficult for shareholders to influence our
management. Holders of our ordinary shares are not
subject to this discretionary proxy.
Holders of our ADSs may be subject to limitations on
transfer of their ADSs.
ADSs are transferable on the books of the depositary.
However, the depositary may close its transfer books
at any time or from time to time when it deems
expedient in connection with the performance of
its duties. In addition, the depositary may refuse to
deliver, transfer or register transfers of ADSs generally
when our books or the books of the depositary are
closed, or at any time if we or the depositary deems it
advisable to do so because of any requirement of law
or of any government or governmental body, or under
any provision of the Deposit Agreement, or for any
other reason.
Holders of our ADSs may not receive distributions
on our ordinary shares or any value for them if it
is illegal or impractical to make them available to
them.
The depositary of our ADSs has agreed to pay holders
of our ADSs the cash dividends or other distributions it
or the custodian for our ADSs receives on our ordinary
shares or other deposited securities after deducting
its fees and expenses. Holders of our ADSs will receive
these distributions in proportion to the number of our
ordinary shares that their ADSs represent. However,
the depositary is not responsible for making these
payments or distributions if it is unlawful or impractical
to make a distribution available to any holders of
ADSs. For example, it would be unlawful to make
a distribution to a holder of ADSs if the distribution
consists of securities that require registration under the
U.S. Securities Act but that are not properly registered
or distributed pursuant to an applicable exemption
from registration. The depositary is not responsible for
making a distribution available to any holders of ADSs
if any government approval or registration required for
the distribution cannot be obtained after reasonable
efforts made by the depositary. We have no obligation
to take any other action to permit the distribution of
our ADSs, ordinary shares, rights or anything else to
holders of our ADSs. This means that holders of our
ADSs may not receive the distributions we make on
Risk Factors
247
Fiscal Year 2024 Annual Report
our ordinary shares or any value for them if it is illegal
or impractical for us to make them available. These
restrictions may materially reduce the value of the
ADSs.
Exchange between our Shares and our ADSs may
adversely affect the liquidity and/or trading price of
each other.
Our ADSs are currently traded on the NYSE. Subject
to compliance with U.S. securities law and the terms
of the Deposit Agreement, holders of our Shares may
deposit Shares with the depositary in exchange for
the issuance of our ADSs. Any holder of ADSs may also
withdraw the Shares underlying the ADSs pursuant
to the terms of the Deposit Agreement for trading on
the Hong Kong Stock Exchange. In the event that a
substantial number of Shares are deposited with the
depositary in exchange for ADSs or vice versa, the
liquidity and trading price of our Shares on the Hong
Kong Stock Exchange and our ADSs on the NYSE may
be adversely affected.
The time required for the exchange between ADSs
and Shares might be longer than expected and
investors might not be able to settle or effect any
sale of their securities during this period, and the
exchange of Shares into ADSs involves costs.
There is no direct trading or settlement between the
NYSE and the Hong Kong Stock Exchange on which
our ADSs and the Shares are respectively traded. In
addition, the time differences between Hong Kong
and New York and unforeseen market circumstances
or other factors may delay the deposit of Shares
in exchange of ADSs or the withdrawal of Shares
underlying the ADSs. Investors will be prevented
from settling or effecting the sale of their securities
during such periods of delay. In addition, there is no
assurance that any exchange of Shares into ADSs (and
vice versa) will be completed in accordance with the
timelines investors may anticipate.
Furthermore, the depositary for the ADSs is entitled
to charge holders fees for various services including
for the issuance of ADSs upon deposit of Shares,
cancelation of ADSs, distributions of cash dividends or
other cash distributions, distributions of ADSs pursuant
to share dividends or other free share distributions,
distributions of securities other than ADSs and annual
service fees. As a result, shareholders who exchange
Shares into ADSs, and vice versa, may not achieve
the level of economic return the shareholders may
anticipate.
We may be or may become a passive foreign
investment company, which could result in adverse
United States federal income tax consequences to
United States investors.
Based on the composition of our income and assets,
and the valuation of our assets, including goodwill, we
do not believe we were a passive foreign investment
company, or PFIC, for our most recent taxable year
ended March 31, 2024, although there can be no
assurance in this regard. The determination of
whether or not we are a PFIC is made on an annual
basis and will depend on the composition of our
income and assets and the valuation of our assets
from time to time. Specifically, we will be classified as
a PFIC for United States federal income tax purposes
for any taxable year if either: (i) 75% or more of our
gross income for that taxable year is passive income,
or (ii) at least 50% of the value (generally determined
on a quarterly basis) of our assets for that taxable year
is attributable to assets that produce or are held for
the production of passive income, or the asset test.
There is uncertainty with respect to the value of our
assets that should be taken into account for purposes
of the asset test, and the significant volatility and
decline in the trading prices of our ADSs and ordinary
shares in recent years have increased the risk that
we were or could be treated as a PFIC for our most
recent taxable year. There also can be no assurance
that we will not be a PFIC for the current or any future
taxable year. In particular, any further decline in the
trading price of our ADSs and ordinary shares may
result in our becoming a PFIC. See “Other Information
for Shareholders — Taxation — Material United States
Federal Income Tax Considerations — Passive Foreign
Investment Company.”
In addition, it is not entirely clear how the contractual
arrangements between us and the VIEs will be
treated for purposes of the PFIC rules. If it were
determined that we do not own the stock of the VIEs
for United States federal income tax purposes (for
example, because the relevant PRC authorities do
not respect these arrangements), we may be treated
Risk Factors
248
Alibaba Group Holding Limited
as a PFIC. See “Other Information for Shareholders
— Taxation — Material United States Federal Income
Tax Considerations — Passive Foreign Investment
Company.”
If we are or were to become a PFIC, there may
be adverse United States federal income tax
consequences to our shareholders and holders of our
ADSs that are United States investors. For example,
if we are a PFIC for any taxable year during which
any such United States investor holds our ADSs or
ordinary shares, such United States investor may
become subject to increased tax liabilities under
United States federal income tax laws and regulations,
and will become subject to burdensome reporting
requirements. See Other Information for Shareholders
— Taxation — Material United States Federal Income
Tax Considerations — Passive Foreign Investment
Company. You are urged to consult your own tax
advisors concerning the United States federal income
tax consequences of the application of the PFIC rules.
There is uncertainty as to whether Hong Kong stamp
duty will apply to the trading or conversion of our
ADSs.
We have established a branch register of members
in Hong Kong, or the Hong Kong share register. Our
ordinary shares that are traded on the Hong Kong
Stock Exchange are registered on the Hong Kong
share register, and the trading of these ordinary
shares on the Hong Kong Stock Exchange are subject
to the Hong Kong stamp duty.
Under the Hong Kong Stamp Duty Ordinance, any
person who effects any sale or purchase of Hong Kong
stock, defined as stock the transfer of which is required
to be registered in Hong Kong, is required to pay Hong
Kong stamp duty. To facilitate ADS-ordinary share
conversion and trading between the NYSE and the
Hong Kong Stock Exchange, we have moved a portion
of our issued ordinary shares from our Cayman share
register to our Hong Kong share register.
To the best of our knowledge, Hong Kong stamp
duty has not been levied in practice on the trading
or conversion of ADSs of companies that are listed in
both the United States and Hong Kong and that have
maintained all or a portion of their ordinary shares,
including ordinary shares underlying ADSs, in their
Hong Kong share registers. However, it is unclear
whether, as a matter of Hong Kong law, the trading
or conversion of ADSs of these dual-listed companies
constitutes a sale or purchase of the underlying Hong
Kong-registered ordinary shares that is subject to
Hong Kong stamp duty. We advise investors to consult
their own tax advisors on this matter. If Hong Kong
stamp duty is determined by the competent authority
to apply to the trading or conversion of our ADSs, the
trading price and the value of your investment in our
ADSs or ordinary shares may be affected.
Risk Factors
249
Fiscal Year 2024 Annual Report
Conventions that apply to this Annual Report
Unless the context otherwise requires, references in this annual report to:
•
“ADSs” are to the American depositary shares, each of which represents eight Shares;
•
“AI” is to artificial intelligence;
•
“Alibaba,” “Alibaba Group,” “company,” “our company,” “we,” “our” or “us” are to Alibaba Group
Holding Limited, a company incorporated in the Cayman Islands with limited liability on June 28, 1999 and,
where the context requires, its consolidated subsidiaries and its affiliated consolidated entities, including its
variable interest entities and their subsidiaries, from time to time;
•
“Alibaba Health” is to Alibaba Health Information Technology Limited, a company incorporated in
Bermuda on March 11, 1998, the shares of which are listed on the Main Board of the Hong Kong Stock
Exchange (Stock Code: 0241), and, except where the context otherwise requires, its consolidated
subsidiaries;
•
“Alibaba Pictures” is to Alibaba Pictures Group Limited, a company incorporated in Bermuda with
limited liability on January 6, 1994, the shares of which are listed on the Main Board of the Hong Kong
Stock Exchange (Stock Code: 1060) and, except where the context otherwise requires, its consolidated
subsidiaries;
•
“Alipay” is to Alipay.com Co., Ltd., a company incorporated under the laws of the PRC on December 8, 2004,
with which we have a long-term contractual relationship and which is a wholly-owned subsidiary of Ant
Group or, where the context requires, its predecessor entities;
•
“Analysys” is to Analysys, a research institution;
•
“annual active consumers” is to user accounts that placed one or more paid orders through the relevant
platform during the previous twelve months;
•
“Ant Group” is to Ant Group Co., Ltd. (formerly known as Ant Small and Micro Financial Services Group Co.,
Ltd.), a company organized under the laws of the PRC on October 19, 2000 and, as context requires, its
consolidated subsidiaries;
•
“Articles” or “Articles of Association” is to our Amended and Restated Articles of Association (as amended
and restated from time to time), adopted on September 30, 2020;
•
“board” or “board of directors” is to our board of directors, unless otherwise stated;
•
“business day” is to any day (other than a Saturday, Sunday or public holiday) on which banks in relevant
jurisdictions are generally open for business;
•
“Cainiao” or “Cainiao Smart Logistics Network Limited” is to Cainiao Smart Logistics Network Limited, a
company incorporated on May 20, 2015 under the laws of the Cayman Islands and our consolidated subsidiary,
together with its subsidiaries; where the context requires, also refers to our logistics business segment;
•
“CCASS” is to the Central Clearing and Settlement System established and operated by Hong Kong
Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchange and Clearing
Limited;
•
“China” and the “PRC” is to the People’s Republic of China;
•
“China commerce retail marketplaces” are to Taobao, Tmall and certain other marketplaces of Taobao
and Tmall Group;
•
“Companies (WUMP) Ordinance” is to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong), as amended or supplemented from time to time;
250
Alibaba Group Holding Limited
Definitions
•
“CSRC” is to the China Securities Regulatory Commission of the PRC;
•
“Deposit Agreement” is to the deposit agreement, dated as of September 24, 2014, as amended, among
us, Citibank, N.A. and our ADS holders and beneficial owners from time to time;
•
“director(s)” are to member(s) of our board, unless otherwise stated;
•
“DTC” is to The Depository Trust Company, the central book-entry clearing and settlement system for equity
securities in the United States and the clearance system for our ADSs;
•
“Ele.me” is to Rajax Holding, a company incorporated under the laws of the Cayman Islands on June 8, 2011
and our consolidated subsidiary, and Fengniao Investment Holding Limited, a company incorporated under
the laws of the British Virgin Islands on June 27, 2022 and our consolidated subsidiary, and, except where
the context otherwise requires, their consolidated subsidiaries and their affiliated consolidated entities,
including their variable interest entities and their subsidiaries; where the context requires, also refers to our
on-demand delivery and local services platform under the Ele.me brand;
•
“Enhanced VIE Structure” is to our enhanced structure for variable interest entities as described in
“Business Overview — Organizational Structure”;
•
“Enlightent” is to Enlightent, a research institution;
•
“EU” is to the European Union;
•
“FMCG” is to fast-moving consumer goods;
•
“foreign private issuer” is to such term as defined in Rule 3b-4 under the U.S. Exchange Act;
•
“Gartner” are to Gartner, Inc.; the Gartner content described herein (the “Gartner Content”) represent(s)
research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc.
(“Gartner”), and is not a representation of fact; Gartner Content speaks as of its original publication date
(and not as of the date of this annual report), and the opinions expressed in the Gartner Content are subject
to change without notice. Gartner does not endorse any vendor, product or service depicted in its research
publications, and does not advise technology users to select only those vendors with the highest ratings or
other designation. Gartner research publications consist of the opinions of Gartner’s research organization
and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied,
with respect to this research, including any warranties of merchantability or fitness for a particular purpose;
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and
internationally and is used herein with permission. All rights reserved;
•
“GDP” is to gross domestic product;
•
“GDPR” is to the EU General Data Protection Regulation;
•
“GMV” is to the value of paid orders of products and services on our marketplaces, including shipping
charges paid by buyers to sellers;
•
“HK$” or “Hong Kong dollars” or “HKD” are to Hong Kong dollars, the lawful currency of Hong Kong;
•
“Hong Kong” or “Hong Kong S.A.R.” is to the Hong Kong Special Administrative Region of the PRC;
•
“Hong Kong Listing Rules” are to the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited, as amended or supplemented from time to time;
•
“Hong Kong Share Registrar” is to Computershare Hong Kong Investor Services Limited;
•
“Hong Kong Stock Exchange” is to The Stock Exchange of Hong Kong Limited;
•
“IaaS” is to infrastructure-as-a-service;
•
“ICP(s)” are to Internet content provider(s);
•
“IDC” is to International Data Corporation, a research institution;
•
“IPO” is to initial public offering;
Definitions
251
Fiscal Year 2024 Annual Report
•
“IT” is to information technology;
•
“Junao” is to Hangzhou Junao Equity Investment Partnership (Limited Partnership), a limited liability
partnership incorporated under the laws of the PRC;
•
“Junhan” is to Hangzhou Junhan Equity Investment Partnership (Limited Partnership), a limited liability
partnership incorporated under the laws of the PRC;
•
“Lazada” is to Lazada South East Asia Pte. Ltd., a company incorporated under the laws of the Republic of
Singapore on January 19, 2012 and our consolidated subsidiary, and, except where the context otherwise
requires, its consolidated subsidiaries and affiliated consolidated entities;
•
“LLM” is to large language model;
•
“MaaS” is to model-as-a-service;
•
“major subsidiaries” are to the subsidiaries identified in our corporate structure chart in “Business
Overview — Organizational Structure”;
•
“major variable interest entities” or “major VIEs” are to the variable interest entities that account for a
significant majority of total revenue and assets of the variable interest entities as a group as described in
“Management Discussion and Analysis — Operating Results — Variable Interest Entity Financial Information”;
•
“Memorandum” is to our memorandum of association (as amended from time to time);
•
“MIIT” is to the Ministry of Industry and Information Technology of the PRC;
•
“MOF” is to the Ministry of Finance of the PRC;
•
“MOFCOM” is to the Ministry of Commerce of the PRC;
•
“NDRC” is to the National Development and Reform Commission of the PRC;
•
“NYSE” is to the New York Stock Exchange;
•
“online GMV” is to the GMV of China commerce retail marketplaces;
•
“orders” unless the context otherwise requires, are to each paid order from a transaction between a buyer
and a seller for products and services on the relevant platform, even if the order includes multiple items,
during the specified period;
•
our “wholesale marketplaces” are to 1688.com and Alibaba.com, collectively;
•
“P4P” is to pay-for-performance;
•
“PaaS” is to platform-as-a-service;
•
“PBOC” is to the People’s Bank of China;
•
“PCAOB” is to the Public Company Accounting Oversight Board;
•
“PRC government” or “State” is to the central government of the PRC, including all political subdivisions
(including provincial, municipal and other regional or local government entities) and its organs or, as the
context requires, any of them;
•
“Principal Share Registrar” is to Maples Fund Services (Cayman) Limited;
•
“QuestMobile” is to QuestMobile, a research institution;
•
“representative variable interest entities” or “representative VIEs” are to the variable interest entities
identified in our corporate structure chart in “Business Overview — Organizational Structure”;
•
“RMB” or “Renminbi” is to Renminbi, the lawful currency of the PRC;
Definitions
252
Alibaba Group Holding Limited
•
“RSU(s)” are to restricted share unit(s);
•
“SaaS” is to software-as-a-service;
•
“SAFE” is to the State Administration of Foreign Exchange of the PRC, the PRC governmental agency
responsible for matters relating to foreign exchange administration, including local branches, when
applicable;
•
“SAIC” is to State Administration for Industry and Commerce of the PRC, which has been merged into SAMR;
•
“SAMR” is to the State Administration for Market Regulation of the PRC;
•
“SAPA” is to a share and asset purchase agreement by and among us, Ant Group, Altaba Inc. (formerly
known as Yahoo! Inc.), SoftBank and the other parties named therein, dated August 12, 2014, together with
any subsequent amendments as the context requires;
•
“SEC” is to the United States Securities and Exchange Commission;
•
“Sensor Tower” is to Sensor Tower, a research institution;
•
“SFC” is to the Securities and Futures Commission of Hong Kong;
•
“SFO” is to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or
supplemented from time to time;
•
“Share Split” is to the subdivision of each ordinary share into eight Shares, pursuant to which the par value
of our Shares was correspondingly changed from US$0.000025 per Share to US$0.000003125 per Share,
with effect from July 30, 2019; immediately after the Share Split became effective, our authorized share
capital became US$100,000 divided into 32,000,000,000 Shares of par value US$0.000003125 per Share;
•
“shareholder(s)” are to holder(s) of Shares and, where the context requires, ADSs;
•
“Share(s)” or “ordinary share(s)” are to ordinary share(s) in our capital with par value of US$0.000003125
each;
•
“SMEs” are to small and medium-sized enterprises;
•
“SoftBank” is to SoftBank Group Corp. (formerly known as SoftBank Corp.), and, except where the context
otherwise requires, its consolidated subsidiaries;
•
“STA” is to the State Taxation Administration of the PRC;
•
“Sun Art” is to Sun Art Retail Group Limited, a company incorporated under the laws of Hong Kong on
December 13, 2000 with limited liability, the shares of which are listed on the Main Board of the Hong Kong
Stock Exchange (Stock Code: 6808), and except where the context requires, its consolidated subsidiaries;
•
“Takeovers Codes” are to Hong Kong’s Codes on Takeovers and Mergers and Share Buy-backs issued by
the SFC;
•
“take rate” is calculated by dividing customer management revenue of Taobao and Tmall Group by online
GMV, which represents revenue as a percentage of overall volume generated on our China commerce retail
marketplaces;
•
“UK” are to the United Kingdom of Great Britain and Northern Ireland;
•
“U.S.” or “United States” is to the United States of America, its territories, its possessions and all areas
subject to its jurisdiction;
•
“US$” or “U.S. dollars” are to the lawful currency of the United States;
•
“U.S. Exchange Act” is to the United States Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder;
Definitions
253
Fiscal Year 2024 Annual Report
•
“U.S. GAAP” is to accounting principles generally accepted in the United States;
•
“U.S. Securities Act” is to the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder;
•
“USTR” is to the Office of the U.S. Trade Representative;
•
“variable interest entities” or “VIE(s)” are to the variable interest entities that are incorporated and owned
by PRC citizens or by PRC entities owned and/or controlled by PRC citizens, where applicable, that hold the
ICP licenses, or other business operation licenses or approvals, and generally operate the various websites
and/or mobile apps for our Internet businesses or other businesses in which foreign investment is restricted
or prohibited, and are consolidated into our consolidated financial statements in accordance with U.S.
GAAP;
•
“VAT” is to value-added tax; all amounts are exclusive of VAT in this annual report except where indicated
otherwise;
•
“VIE structure” or “Contractual Arrangements” are to the variable interest entity structure;
•
“Youku” is to Youku Tudou Inc., a company incorporated under the laws of the Cayman Islands on
September 20, 2005 and our indirect wholly-owned subsidiary, and, except where the context otherwise
requires, its consolidated subsidiaries and its affiliated consolidated entities, including its variable interest
entities and their subsidiaries; where the context requires, Youku also refers to our online video platform
under the Youku brand; and
•
“Yunfeng Fund(s)” are to one or more Yunfeng investment funds established by Yunfeng Capital Limited or
its affiliates, in which Jack Ma currently holds minority interest in the general partners.
Exchange Rate Information
Our reporting currency is the Renminbi. This annual report contains translations of Renminbi and Hong Kong
dollar amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise stated,
all translations of Renminbi and Hong Kong dollars into U.S. dollars and from U.S. dollars into Renminbi in this
annual report were made at a rate of RMB7.2203 to US$1.00 and HK$7.8259 to US$1.00, the respective exchange
rates on March 29, 2024 set forth in the H.10 statistical release of the Federal Reserve Board. We make no
representation that any Renminbi, Hong Kong dollar or U.S. dollar amounts referred to in this annual report could
have been, or could be, converted into U.S. dollars, Renminbi or Hong Kong dollars, as the case may be, at any
particular rate or at all.
Language
The English version of this annual report prevail over the Chinese version.
The English names of the PRC entities, PRC laws or regulations, and the PRC governmental authorities referred to
in this annual report are translations from their Chinese names and are for identification purposes. If there is any
inconsistency, the Chinese names shall prevail.
Forward-Looking Statements
This annual report contains forward-looking statements. These statements are made under the “safe harbor”
provision under Section 21E of the U.S. Exchange Act, and as defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,”
“anticipate,” “future,” “aim,” “estimate,” “intend,” “seek,” “plan,” “believe,” “potential,” “continue,”
“ongoing,” “target,” “guidance,” “is/are likely to” or other similar expressions. The forward-looking statements
included in this annual report relate to, among others:
•
our new organizational and governance structure and strategic benefits of this new structure;
•
our growth strategies and business plans;
Definitions
254
Alibaba Group Holding Limited
•
our future business development, results of operations and financial condition;
•
trends and competition in commerce and cloud computing and the other industries in which we operate,
both in China and globally, as well as trends in technology innovation, research and development and
application, including AI technologies;
•
our continuing investments in our businesses;
•
expected changes in our revenues and certain cost and expense items and our margins;
•
fluctuations in general economic and business conditions, such as inflation and interest rates, in China and
globally;
•
geopolitical tensions and national trade, investment, protectionist and other policies (including those
relating to export control and economic or trade sanctions, such as export control of chips) that could place
restrictions on economic and commercial activities;
•
the regulatory environment in which we and companies integral to our ecosystem operate in China and
globally;
•
expected results of regulatory investigations, litigations and other proceedings;
•
our sustainability goals;
•
our plan to convert to primary listing in Hong Kong; and
•
assumptions underlying or related to any of the foregoing.
Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual
results to differ materially from those contained in any forward-looking statement. These factors include but
are not limited to the following: our corporate structure, including the VIE structure we use to operate certain
businesses in the PRC; the implementation of our new organizational and governance structure; our ability to
maintain the trusted status of our ecosystem; our ability to compete, innovate and maintain or grow our revenue
or business, including expanding our international and cross-border businesses and operations, adopting new
technologies and managing a large and complex organization; risks associated with sustained investments in
our businesses; fluctuations in general economic and business conditions in China and globally; uncertainties
arising from competition among countries and geopolitical tensions, including protectionist or national security
policies and export control, economic or trade sanctions; risks associated with our acquisitions, investments and
alliances; uncertainties and risks associated with a broad range of complex laws and regulations (including in
the areas of data security and privacy protection, anti-monopoly and anti-unfair competition, content regulation,
consumer protection and regulation of Internet platforms) in the PRC and globally; cybersecurity risks and
assumptions underlying or related to any of the foregoing. Please also see “Risk Factors.”
The forward-looking statements made in this annual report relate only to events or information as of the date
on which the statements are made in this annual report and are based on current expectations, assumptions,
estimates and projections. We undertake no obligation to update any forward-looking statements to reflect
events or circumstances after the date on which the statements are made or to reflect the occurrence of
unanticipated events. You should read this annual report and the documents that we have referred to in this
annual report completely and with the understanding that our actual future results may be materially different
from what we expect.
Definitions
255
Fiscal Year 2024 Annual Report
Financial
Statements
258
Alibaba Group Holding Limited
Independent Auditor’s Report
To the Shareholders of Alibaba Group Holding Limited
(incorporated in the Cayman Islands with limited liability)
Opinion
What we have audited
The consolidated financial statements of Alibaba Group Holding Limited and its subsidiaries (the “Company”),
which are set out on pages 263 to 343, comprise:
•
the consolidated balance sheet as of March 31, 2024;
•
the consolidated income statement for the year then ended;
•
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated statement of changes in shareholders’ equity for the year then ended;
•
the consolidated statement of cash flows for the year then ended; and
•
the notes to the consolidated financial statements, which include significant accounting policies and other
explanatory information.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial
position of the Company as of March 31, 2024, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Company in accordance with the International Code of Ethics for Professional
Accountants (including International Independence Standards) issued by the International Ethics Standards
Board for Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with
the IESBA Code.
259
Fiscal Year 2024 Annual Report
Independent Auditor’s Report
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matters identified in our audit are summarized as follows:
•
Impairment assessment on goodwill relating to a reporting unit under Digital Media and Entertainment
Group
•
Fair value determination related to investments in privately held companies accounted for using the
measurement alternative
Key Audit Matter
How our audit addressed the Key Audit Matter
Impairment assessment on goodwill relating
to a reporting unit under Digital Media and
Entertainment Group
Refer to Note 2(y) and Note 17 to the consolidated
financial statements.
As a result of the annual impairment test, the
Company recognized a goodwill impairment charge
of RMB8,490 million relating to a reporting unit
under Digital Media and Entertainment Group during
the year ended March 31, 2024. The fair value of
the reporting unit was determined based on the
discounted cash flow analysis using the assumptions
including the future growth rates and the weighted
average cost of capital.
We focus on this area because the impairment
assessment on goodwill relating to a reporting unit
under Digital Media and Entertainment Group is
subject to a high degree of estimation uncertainty.
The inherent risk in relation to the impairment
assessment on goodwill relating to the reporting unit
is considered significant due to significant judgement
involved.
We obtained an understanding of management’s
internal control and assessment process for the
impairment assessment on goodwill relating to a
reporting unit under Digital Media and Entertainment
Group and assessed the inherent risk of material
misstatements by considering the degree of
estimation uncertainty and level of other inherent risk
factors such as subjectivity.
We tested the effectiveness of controls relating to
management’s impairment assessment on goodwill
relating to a reporting unit under Digital Media and
Entertainment Group, including controls relating to
fair value determination of the reporting unit.
We evaluated the appropriateness of the valuation
method.
We tested the completeness, mathematical accuracy
and relevance of the key underlying data used in the
valuation.
We evaluated the reasonableness of the significant
assumptions related to the future growth rates and
the weighted average cost of capital used in the
valuation by considering (i) the past performance
of the reporting unit; (ii) the weighted average cost
of capital of comparable businesses; and (iii) the
consistency with external market, economic and
industry data.
260
Alibaba Group Holding Limited
Independent Auditor’s Report
Key Audit Matter
How our audit addressed the Key Audit Matter
Professionals with specialized skill and knowledge
were used to assist in evaluating the appropriateness
of the valuation method, and the reasonableness
of the future growth rate for terminal value and
the weighted average cost of capital used in the
valuation.
We found that the assumptions adopted and
estimations made by management were supported
by the evidence we gathered and were consistent
with our understanding.
Fair value determination related to investments in
privately held companies accounted for using the
measurement alternative
Refer to Note 2(t), Note 11 and Note 12 to the
consolidated financial statements.
The Group’s investments in privately held companies
accounted for using the measurement alternative
were RMB89,660 million as of March 31, 2024.
Management recorded these investments at cost,
less impairment, with subsequent adjustments for
observable price changes resulting from orderly
transactions for identical or similar investments of
the same issuer. Management recorded fair value
adjustments to a portion of these investments with
observable price changes during the year ended
March 31, 2024. The fair value of these investments
was determined based on valuation methods using
the observable transaction price at the transaction
date and considering the rights and obligations
of the securities and other unobservable inputs
including volatility.
We focus on this area because the fair value
determination related to investments in privately held
companies accounted for using the measurement
alternative is subject to a high degree of estimation
uncertainty. The inherent risk in relation to the fair
value determination related to these investments is
considered significant due to significant judgement
involved.
We obtained an understanding of management’s
internal control and assessment process for the
fair value determination related to investments in
privately held companies accounted for using the
measurement alternative and assessed the inherent
risk of material misstatements by considering the
degree of estimation uncertainty and level of other
inherent risk factors such as subjectivity.
We tested the effectiveness of controls relating to fair
value determination of these investments, including
controls over management’s assessment of whether
the observable transaction is orderly and whether
the investment involved is identical or similar to the
Group’s investment of the same issuer and controls
over the determination of the fair value adjustments.
We evaluated whether the observable transaction
is orderly and whether the investment involved is
identical or similar to the Group’s investment of the
same issuer.
We tested the completeness, mathematical accuracy
and relevance of key underlying data used in the
valuation.
We evaluated the rights and obligations of the
securities and other unobservable inputs including
volatility used in the valuation. The rights and
obligations of the securities were evaluated by
reading the investment agreements. The volatility
was evaluated by considering the external market
and industry data of comparable businesses.
261
Fiscal Year 2024 Annual Report
Independent Auditor’s Report
Key Audit Matter
How our audit addressed the Key Audit Matter
Professionals with specialized skill and knowledge
were used to assist in evaluating the rights and
obligations of the securities, and the reasonableness
of the volatility used in the valuation.
We found that the assumptions adopted and
estimations made by management were supported
by the evidence we gathered and were consistent
with our understanding.
Other Information
The directors of Alibaba Group Holding Limited are responsible for the other information. The other information
comprises all of the information included in the annual report other than the consolidated financial statements
and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors and the Audit Committee for the Consolidated Financial
Statements
The directors of Alibaba Group Holding Limited are responsible for the preparation of the consolidated financial
statements that give a true and fair view in accordance with U.S. GAAP, and for such internal control as the
directors determine is necessary to enable the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to
continue as a going concern for one year after the date the consolidated financial statements are available to be
issued.
The Audit Committee is responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not
assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
262
Alibaba Group Holding Limited
Independent Auditor’s Report
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast substantial doubt on the Company’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
From the matters communicated with the Audit Committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Shin Wai Kit Ricky.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, May 23, 2024
263
Fiscal Year 2024 Annual Report
Consolidated Income Statements
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(Note 2(a))
(in millions, except per share data)
Notes
Revenue
5, 22
853,062
868,687
941,168
130,350
Cost of revenue
22
(539,450)
(549,695)
(586,323)
(81,205)
Product development expenses
22
(55,465)
(56,744)
(52,256)
(7,237)
Sales and marketing expenses
22
(119,799)
(103,496)
(115,141)
(15,947)
General and administrative expenses
22
(31,922)
(42,183)
(41,985)
(5,815)
Amortization and impairment of
intangible assets
(11,647)
(13,504)
(21,592)
(2,990)
Impairment of goodwill
17
(25,141)
(2,714)
(10,521)
(1,457)
Income from operations
69,638
100,351
113,350
15,699
Interest and investment income, net
(15,702)
(11,071)
(9,964)
(1,380)
Interest expense
(4,909)
(5,918)
(7,947)
(1,101)
Other income, net
22
10,523
5,823
6,157
853
Income before income tax and share of
results of equity method investees
59,550
89,185
101,596
14,071
Income tax expenses
7
(26,815)
(15,549)
(22,529)
(3,120)
Share of results of equity method
investees
14,344
(8,063)
(7,735)
(1,072)
Net income
47,079
65,573
71,332
9,879
Net loss attributable to noncontrolling
interests
15,170
7,210
8,677
1,202
Net income attributable to Alibaba
Group Holding Limited
62,249
72,783
80,009
11,081
Accretion of mezzanine equity
(290)
(274)
(268)
(37)
Net income attributable to ordinary
shareholders
61,959
72,509
79,741
11,044
Earnings per share attributable to
ordinary shareholders
9
Basic
2.87
3.46
3.95
0.55
Diluted
2.84
3.43
3.91
0.54
Earnings per ADS attributable to
ordinary shareholders (one ADS
equals eight ordinary shares)
9
Basic
22.99
27.65
31.61
4.38
Diluted
22.74
27.46
31.24
4.33
Weighted average number of shares
used in computing earnings per share
(million shares)
9
Basic
21,558
20,980
20,182
Diluted
21,787
21,114
20,359
The accompanying notes form an integral part of these consolidated financial statements.
264
Alibaba Group Holding Limited
Consolidated Statements of Comprehensive Income
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(Note 2(a))
(in millions)
Net income
47,079
65,573
71,332
9,879
Other comprehensive (loss) income:
— Foreign currency translation:
Change in unrealized (losses) gains,
net of tax
(15,470)
22,332
13,502
1,870
— Share of other comprehensive income of
equity method investees:
Change in unrealized (losses) gains
(784)
1,493
980
136
— Interest rate swaps under hedge accounting
and others:
Change in unrealized gains (losses)
157
10
(97)
(13)
Other comprehensive (loss) income
(16,097)
23,835
14,385
1,993
Total comprehensive income
30,982
89,408
85,717
11,872
Total comprehensive loss attributable to
noncontrolling interests
17,361
6,480
8,364
1,158
Total comprehensive income attributable to
ordinary shareholders
48,343
95,888
94,081
13,030
The accompanying notes form an integral part of these consolidated financial statements.
265
Fiscal Year 2024 Annual Report
Consolidated Balance Sheets
The accompanying notes form an integral part of these consolidated financial statements.
As of March 31,
2023
2024
RMB
RMB
US$
(Note 2(a))
(in millions)
Notes
Assets
Current assets:
Cash and cash equivalents
2(p)
193,086
248,125
34,365
Short-term investments
2(q)
326,492
262,955
36,419
Restricted cash and escrow receivables
10
36,424
38,299
5,304
Equity securities and other investments
11
4,892
59,949
8,303
Prepayments, receivables and other assets
13
137,072
143,536
19,879
Total current assets
697,966
752,864
104,270
Equity securities and other investments
11
245,737
220,942
30,600
Prepayments, receivables and other assets
13
110,926
116,102
16,080
Investments in equity method investees
14
207,380
203,131
28,133
Property and equipment, net
15
176,031
185,161
25,645
Intangible assets, net
16
46,913
26,950
3,733
Goodwill
17
268,091
259,679
35,965
Total assets
1,753,044
1,764,829
244,426
Liabilities, mezzanine equity and shareholders’ equity
Current liabilities:
Current bank borrowings
20
7,466
12,749
1,766
Current unsecured senior notes
21
4,800
16,252
2,251
Income tax payable
12,543
9,068
1,256
Accrued expenses, accounts payable and
other liabilities
19
275,950
297,883
41,256
Merchant deposits
2(ac)
13,297
12,737
1,764
Deferred revenue and customer advances
18
71,295
72,818
10,085
Total current liabilities
385,351
421,507
58,378
Deferred revenue
18
3,560
4,069
564
Deferred tax liabilities
7
61,745
53,012
7,342
Non-current bank borrowings
20
52,023
55,686
7,712
Non-current unsecured senior notes
21
97,065
86,089
11,923
Other liabilities
19
30,379
31,867
4,414
Total liabilities
630,123
652,230
90,333
266
Alibaba Group Holding Limited
Consolidated Balance Sheets
As of March 31,
2023
2024
RMB
RMB
US$
(Note 2(a))
(in millions)
Notes
Commitments and contingencies
24, 25
Mezzanine equity
9,858
10,728
1,486
Shareholders’ equity:
Ordinary shares, US$0.000003125 par value;
32,000,000,000 shares authorized as of
March 31, 2023 and 2024; 20,526,017,712 and
19,469,126,956 shares issued and outstanding as
of March 31, 2023 and 2024 respectively
1
1
—
Additional paid-in capital
416,880
397,999
55,122
Treasury shares, at cost
2(af)
(28,763)
(27,684)
(3,834)
Subscription receivables
(49)
—
—
Statutory reserves
2(ag)
12,977
14,733
2,040
Accumulated other comprehensive (loss) income
Cumulative translation adjustments
(10,476)
3,635
503
Unrealized gains (losses) on interest rate swaps
and others
59
(37)
(5)
Retained earnings
599,028
597,897
82,809
Total shareholders’ equity
989,657
986,544
136,635
Noncontrolling interests
123,406
115,327
15,972
Total equity
1,113,063
1,101,871
152,607
Total liabilities, mezzanine equity and equity
1,753,044
1,764,829
244,426
The accompanying notes form an integral part of these consolidated financial statements.
267
Fiscal Year 2024 Annual Report
Consolidated Statements of Changes in Shareholders’ Equity
Ordinary shares
Accumulated other
comprehensive income (loss)
Share
Amount
Additional
paid-in
capital
Treasury
shares
Subscription
receivables
Statutory
reserves
Cumulative
translation
adjustments
Unrealized
gains (losses)
on interest
rate swaps
and others
Retained
earnings
Total
shareholders’
equity
Noncontrolling
interests
Total
equity
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
(in millions, except per share data)
Balance as of April 1, 2021
21,699,031,448
1
394,308
—
(47)
7,347
(18,930)
(133)
554,924
937,470
137,491
1,074,961
Foreign currency translation adjustment
—
—
—
—
1
—
(13,470)
3
—
(13,466)
(2,003)
(15,469)
Share of additional paid-in capital and other
comprehensive income of equity method investees
—
—
(445)
—
—
—
(784)
—
—
(1,229)
2
(1,227)
Change in fair value of interest rate swaps under hedge
accounting and others
—
—
—
—
—
—
—
157
—
157
—
157
Net income for the year
—
—
—
—
—
—
—
—
62,249
62,249
(15,358)
46,891
Acquisition of subsidiaries
—
—
—
—
—
—
—
—
—
—
59
59
Issuance of shares, including vesting of RSUs and early
exercised options and exercise of share options
177,096,968
—
109
—
—
—
—
—
—
109
—
109
Repurchase and retirement of ordinary shares
(518,805,304)
—
(8,567)
(2,221)
—
—
—
—
(51,124)
(61,912)
—
(61,912)
Transactions with noncontrolling interests
—
—
6,057
—
—
—
—
—
—
6,057
(38)
6,019
Amortization of compensation cost
—
—
19,334
—
—
—
—
—
—
19,334
4,670
24,004
Appropriation to statutory reserves
—
—
—
—
—
2,492
—
—
(2,492)
—
—
—
Others
—
—
(290)
—
—
—
—
—
—
(290)
(764)
(1,054)
Balance as of March 31, 2022
21,357,323,112
1
410,506
(2,221)
(46)
9,839
(33,184)
27
563,557
948,479
124,059
1,072,538
The accompanying notes form an integral part of these consolidated financial statements.
268
Alibaba Group Holding Limited
Consolidated Statements of Changes in Shareholders’ Equity
Ordinary shares
Accumulated other
comprehensive income (loss)
Share
Amount
Additional
paid-in
capital
Treasury
shares
Subscription
receivables
Statutory
reserves
Cumulative
translation
adjustments
Unrealized
gains (losses)
on interest
rate swaps
and others
Retained
earnings
Total
shareholders’
equity
Noncontrolling
interests
Total
equity
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
(in millions, except per share data)
Balance as of April 1, 2022
21,357,323,112
1
410,506
(2,221)
(46)
9,839
(33,184)
27
563,557
948,479
124,059
1,072,538
Foreign currency translation adjustment
—
—
—
—
(3)
—
21,236
1
—
21,234
1,095
22,329
Share of additional paid-in capital and other
comprehensive income of equity method investees
—
—
(1,031)
—
—
—
1,472
21
—
462
(4)
458
Change in fair value of interest rate swaps under hedge
accounting and others
—
—
—
—
—
—
—
10
—
10
—
10
Net income for the year
—
—
—
—
—
—
—
—
72,783
72,783
(7,575)
65,208
Acquisition of subsidiaries
—
—
—
—
—
—
—
—
—
—
38
38
Issuance of shares, including vesting of RSUs and early
exercised options and exercise of share options
201,547,520
—
11
—
—
—
—
—
—
11
—
11
Repurchase and retirement of ordinary shares
(1,039,252,920)
—
(13,990)
(26,542)
—
—
—
—
(34,174)
(74,706)
—
(74,706)
Transactions with noncontrolling interests
—
—
(3,987)
—
—
—
—
—
—
(3,987)
1,673
(2,314)
Amortization of compensation cost
—
—
25,134
—
—
—
—
—
—
25,134
5,462
30,596
Equity-settled donation
6,400,000
—
511
—
—
—
—
—
—
511
—
511
Appropriation to statutory reserves
—
—
—
—
—
3,138
—
—
(3,138)
—
—
—
Others
—
—
(274)
—
—
—
—
—
—
(274)
(1,342)
(1,616)
Balance as of March 31, 2023
20,526,017,712
1
416,880
(28,763)
(49)
12,977
(10,476)
59
599,028
989,657
123,406
1,113,063
The accompanying notes form an integral part of these consolidated financial statements.
269
Fiscal Year 2024 Annual Report
Consolidated Statements of Changes in Shareholders’ Equity
Ordinary shares
Accumulated other
comprehensive income (loss)
Share
Amount
Additional
paid-in
capital
Treasury
shares
Subscription
receivables
Statutory
reserves
Cumulative
translation
adjustments
Unrealized
gains (losses)
on interest
rate swaps
and others
Retained
earnings
Total
shareholders’
equity
Noncontrolling
interests
Total
equity
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
(in millions, except per share data)
Balance as of April 1, 2023
20,526,017,712
1
416,880
(28,763)
(49)
12,977
(10,476)
59
599,028
989,657
123,406
1,113,063
Foreign currency translation adjustment, net of tax
—
—
—
—
(3)
—
13,006
2
—
13,005
494
13,499
Share of additional paid-in capital and other
comprehensive income of equity method investees
—
—
(298)
—
—
—
981
(1)
—
682
—
682
Change in fair value of interest rate swaps under hedge
accounting and others
—
—
—
—
—
—
—
(97)
—
(97)
—
(97)
Net income for the year
—
—
—
—
—
—
—
—
80,009
80,009
(8,858)
71,151
Acquisition of subsidiaries
—
—
—
—
—
—
—
—
—
—
98
98
Deconsolidation of subsidiaries
—
—
—
—
—
—
124
—
—
124
24
148
Issuance of shares, including vesting of RSUs and early
exercised options and exercise of share options
192,305,904
—
842
—
—
—
—
—
—
842
—
842
Repurchase and retirement of ordinary shares
(1,249,196,660)
—
(29,313)
1,079
—
—
—
—
(60,842)
(89,076)
—
(89,076)
Transactions with noncontrolling interests
—
—
(1,375)
—
—
—
—
—
—
(1,375)
(5,349)
(6,724)
Amortization of compensation cost
—
—
11,531
—
—
—
—
—
—
11,531
5,862
17,393
Declaration of dividends
—
—
—
—
—
—
—
—
(18,542)
(18,542)
—
(18,542)
Appropriation to statutory reserves
—
—
—
—
—
1,756
—
—
(1,756)
—
—
—
Others
—
—
(268)
—
52
—
—
—
—
(216)
(350)
(566)
Balance as of March 31, 2024
19,469,126,956
1
397,999
(27,684)
—
14,733
3,635
(37)
597,897
986,544
115,327
1,101,871
The accompanying notes form an integral part of these consolidated financial statements.
270
Alibaba Group Holding Limited
Consolidated Statements of Cash Flows
The accompanying notes form an integral part of these consolidated financial statements.
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(Note 2(a))
(in millions)
Cash flows from operating activities:
Net income
47,079
65,573
71,332
9,879
Adjustments to reconcile net income to net cash
provided by operating activities:
Revaluation loss on previously held
equity interest
2
—
—
—
Loss on disposals of equity method investees
32
72
10
1
Loss related to equity securities and
other investments
20,479
14,911
23,480
3,252
Change in fair value of other assets and liabilities
1,478
(1,522)
(708)
(98)
Gain on disposals of subsidiaries
(1,163)
(14)
(1,550)
(215)
Depreciation and impairment of property and
equipment, and operating lease cost relating to
land use rights
27,808
27,799
26,640
3,690
Amortization of intangible assets and licensed
copyrights
20,257
19,139
17,864
2,474
Share-based compensation expense
23,971
30,831
18,546
2,569
Equity-settled donation expense
—
511
—
—
Impairment of equity securities and other
investments
8,922
13,327
12,244
1,696
Impairment of goodwill, intangible assets and
licensed copyrights
25,886
6,658
22,610
3,131
Loss (Gain) on disposals of property and equipment
132
(163)
(107)
(15)
Share of results of equity method investees
(14,344)
8,063
7,735
1,072
Deferred income taxes
(1,369)
(1,717)
(5,263)
(729)
Allowance for doubtful accounts
1,739
2,802
3,509
485
Changes in assets and liabilities, net of effects of
acquisitions and disposals:
Prepayments, receivables and other assets, and
long-term licensed copyrights
(32,496)
8,605
(37,621)
(5,209)
Income tax payable
(3,526)
(9,214)
(4,764)
(660)
Accrued expenses, accounts payable and
other liabilities
13,327
11,159
27,126
3,757
Merchant deposits
(270)
(1,450)
(560)
(78)
Deferred revenue and customer advances
4,815
4,382
2,070
287
Net cash provided by operating activities
142,759
199,752
182,593
25,289
271
Fiscal Year 2024 Annual Report
Consolidated Statements of Cash Flows
The accompanying notes form an integral part of these consolidated financial statements.
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(Note 2(a))
(in millions)
Cash flows from investing activities:
(Increase) Decrease in short-term investments, net
(106,984)
(61,086)
71,426
9,892
Increase in other treasury investments, net
—
(40,794)
(64,392)
(8,918)
Settlement of forward exchange contracts, net
(448)
1,282
658
91
Acquisitions of equity securities and other
investments, and other assets
(39,378)
(17,818)
(15,240)
(2,111)
Disposals of equity securities and other
investments, and other assets
14,543
21,738
21,966
3,042
Acquisitions of equity method investees
(9,383)
(4,552)
(3,525)
(488)
Disposals of and distributions from equity
method investees
936
1,001
1,265
175
Acquisitions of:
Land use rights, property and equipment
(53,309)
(34,330)
(32,087)
(4,444)
Intangible assets
(15)
(22)
(842)
(116)
Disposals of property and equipment
—
644
373
52
Cash paid for business combinations, net of
cash acquired
(4,087)
(1,204)
(2,204)
(305)
Deconsolidation and disposal of subsidiaries, net
of cash proceeds
(11)
(5)
699
97
Loans to employees, net of repayments
(456)
(360)
79
10
Net cash used in investing activities
(198,592)
(135,506)
(21,824)
(3,023)
272
Alibaba Group Holding Limited
Consolidated Statements of Cash Flows
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
US$
(Note 2(a))
(in millions)
Cash flows from financing activities:
Issuance of ordinary shares
109
11
843
117
Repurchase of ordinary shares
(61,225)
(74,746)
(88,745)
(12,291)
Dividend distribution
—
—
(17,946)
(2,485)
Acquisition of additional equity interests in
non-wholly owned subsidiaries
(7,406)
(2,511)
(5,821)
(806)
Dividends paid by non-wholly owned subsidiaries
to noncontrolling interests
(881)
(489)
(546)
(76)
Contingent consideration payments made after
a business combination
—
(144)
(71)
(10)
Capital injection from noncontrolling interests
12,240
918
1,577
218
Proceeds from bank borrowings and other
borrowings, net of upfront fee payment for
a syndicated loan
9,427
22,790
20,570
2,848
Repayment of bank borrowings
(7,128)
(11,448)
(13,092)
(1,813)
Repayment of unsecured senior notes
(9,585)
—
(5,013)
(694)
Net cash used in financing activities
(64,449)
(65,619)
(108,244)
(14,992)
Effect of exchange rate changes on cash and
cash equivalents, restricted cash and
escrow receivables
(8,834)
3,530
4,389
608
(Decrease) Increase in cash and cash equivalents,
restricted cash and escrow receivables
(129,116)
2,157
56,914
7,882
Cash and cash equivalents, restricted cash and
escrow receivables at beginning of year
356,469
227,353
229,510
31,787
Cash and cash equivalents, restricted cash and
escrow receivables at end of year
227,353
229,510
286,424
39,669
The accompanying notes form an integral part of these consolidated financial statements.
273
Fiscal Year 2024 Annual Report
Consolidated Statements of Cash Flows
Supplemental disclosures of cash flow information:
Payment of income tax
Income tax paid was RMB31,733 million, RMB26,476 million and RMB32,486 million for the years ended March
31, 2022, 2023 and 2024, respectively.
Payment of interest
Interest paid was RMB4,886 million, RMB5,637 million and RMB7,832 million for the years ended March 31, 2022,
2023 and 2024, respectively.
Business combinations
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Cash paid for business combinations
(5,282)
(1,254)
(2,325)
Cash acquired in business combinations
1,195
50
121
(4,087)
(1,204)
(2,204)
The accompanying notes form an integral part of these consolidated financial statements.
274
Alibaba Group Holding Limited
Notes to Consolidated Financial Statements
(For the Years Ended March 31, 2022, 2023 and 2024)
1. Organization and principal activities
Alibaba Group Holding Limited (the “Company”) is a limited liability company, which was incorporated
in the Cayman Islands on June 28, 1999. The Company is a holding company and conducts its businesses
primarily through its subsidiaries. In these consolidated financial statements, where appropriate, the term
“Company” also refers to its subsidiaries as a whole. The Company provides the technology infrastructure
and marketing reach to help merchants, brands, retailers and other businesses to leverage the power of
new technology to engage with their users and customers and operate in a more efficient way.
The Company has six major business groups and various other businesses. The six major business groups
are Taobao and Tmall Group, Cloud Intelligence Group, Alibaba International Digital Commerce Group,
Cainiao Smart Logistics Network Limited, Local Services Group, and Digital Media and Entertainment
Group. An ecosystem has developed around the Company’s platforms and businesses that consists of
consumers, merchants, brands, retailers, third-party service providers, strategic alliance partners and
other businesses.
Taobao and Tmall Group is comprised of (i) China commerce retail business and (ii) China commerce
wholesale business. China commerce retail business mainly consists of Taobao and Tmall, the Company’s
digital retail business in China, Xianyu, a consumer-to-consumer community and marketplace in China for
second-hand goods, as well as direct sales businesses, including Tmall Supermarket and Tmall Global.
China commerce wholesale business mainly includes 1688.com, an integrated domestic wholesale
marketplace in China.
Cloud Intelligence Group offers a comprehensive suite of cloud services, based on a three-tier architecture
of infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) and model-as-a-service (MaaS) to
customers worldwide.
Alibaba International Digital Commerce Group is comprised of (i) International commerce retail business
and (ii) International commerce wholesale business. International commerce retail business mainly
includes AliExpress, a global e-commerce platform, Trendyol, an e-commerce platform in Türkiye, Lazada,
an e-commerce platform in Southeast Asia, Daraz, an e-commerce platform across South Asia with
key markets in Pakistan and Bangladesh, and Miravia, an e-commerce platform in Spain. International
commerce wholesale business mainly includes Alibaba.com, an integrated international online wholesale
marketplace.
Cainiao Smart Logistics Network Limited (“Cainiao”) has established a smart logistics network, with end-
to-end logistics capabilities, on a global scale. Cainiao controls the key nodes of the logistics network to
ensure service quality, efficiency and reliability, while leveraging trusted partners' capabilities to drive
scalability and capital efficiency. Cainiao provides a wide array of innovative logistics solutions in China
and around the world.
Local Services Group is comprised of (i) “To-Home” business which include Ele.me, a local services and on-
demand delivery platform in China and (ii) “To-Destination” businesses which mainly include Amap, the
provider of mobile digital map, navigation and real-time traffic information in China.
Digital Media and Entertainment Group is comprised of (i) Youku, an online long-form video platform in
China which produces and distributes high-quality video content and (ii) Alibaba Pictures, which provides
content production, promotion and distribution, performance and event ticketing management, IP-related
licensing and operations, cinema ticketing management, and data services for the entertainment industry.
All other businesses include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent
Information Platform, Fliggy, DingTalk and other businesses.
The Company’s American depositary shares (“ADSs”) have been listed on the New York Stock Exchange
(“NYSE”) under the symbol of “BABA” and the Company’s ordinary shares have been listed on the Hong
Kong Stock Exchange (“HKSE”) under the codes “9988 (HKD Counter)” and “89988 (RMB Counter).”
275
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies
(a) Basis of presentation
The accompanying consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”).
Translations of balances in the consolidated balance sheet, consolidated income statement,
consolidated statement of comprehensive income and consolidated statement of cash flows from
RMB into the US$ as of and for the year ended March 31, 2024 are solely for the convenience of the
readers and are calculated at the rate of US$1.00 = RMB7.2203, representing the exchange rate set
forth in the H.10 statistical release of the Federal Reserve Board on March 29, 2024. No representation
is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at
this rate, or at any other rate.
(b) Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires
the Company to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. The
Company bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable, the results of which form the basis for making judgments about the
carrying values of assets and liabilities.
(c) Consolidation
The consolidated financial statements include the financial statements of the Company and its
subsidiaries, which include the PRC-registered entities directly or indirectly owned by the Company
(“WFOEs”) and variable interest entities (“VIEs”) over which the Company is the primary beneficiary
for accounting purposes only. All transactions and balances among the Company, its subsidiaries and
the VIEs have been eliminated upon consolidation. The results of subsidiaries acquired or disposed of
are recorded in the consolidated income statements from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
A subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the
voting power; or (ii) the Company has the power to appoint or remove the majority of the members
of the board of directors or to cast a majority of votes at the meetings of the board of directors or
to govern the financial and operating policies of the investee pursuant to a statute or under an
agreement among the shareholders or equity holders. A VIE is required to be consolidated by the
primary beneficiary of the entity if the equity holders in the entity do not have the characteristics
of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
Due to legal restrictions on foreign ownership and investment in, among other areas, value-
added telecommunications services, which include the operations of Internet content providers,
the Company operates its Internet businesses and other businesses in which foreign investment
is restricted or prohibited in the PRC through various contractual arrangements with VIEs that are
incorporated and owned by PRC citizens or by PRC entities owned and/or controlled by PRC citizens.
Specifically, these representative PRC domestic companies are Zhejiang Taobao Network Co., Ltd.,
Zhejiang Tmall Network Co., Ltd., Hangzhou Ali Venture Capital Co., Ltd., Shanghai Rajax Information
Technology Co., Ltd., Alibaba Cloud Computing Ltd. and Alibaba Culture Entertainment Co., Ltd.
The registered capital of these PRC domestic companies was funded by the Company through loans
extended to the equity holders of these PRC domestic companies.
276
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
The Company has entered into certain exclusive services agreements with these PRC domestic
companies, which entitle it to receive substantially all of the profits of the VIEs. In addition, the
Company has entered into certain agreements with the equity holders of these PRC domestic
companies, including loan agreements that require them to contribute registered capital to those
PRC domestic companies, exclusive call option agreements to acquire the equity interests in these
companies when permitted by the PRC laws, rules and regulations, equity pledge agreements of
the equity interests held by those equity holders, and proxy agreements that irrevocably authorize
individuals designated by the Company to exercise the equity owner’s rights over these PRC domestic
companies.
Details of the typical structure of the Company’s representative VIEs are set forth below:
Loan agreements
Pursuant to the relevant loan agreements, the respective WFOEs have granted loans to the equity
holders of the VIEs, which may only be used for the purpose of its business operation activities
agreed by the WFOEs or the acquisition of the relevant VIEs. The WFOEs may require acceleration of
repayment at their absolute discretion. When the equity holders of the VIEs make early repayment
of the outstanding amount, the WFOEs or a third-party designated by the WFOEs may purchase the
equity interests in the VIEs at a price equal to the outstanding amount of the loan, subject to any
applicable PRC laws, rules and regulations. The equity holders of the VIEs undertake not to enter into
any prohibited transactions in relation to the VIEs, including the transfer of any business, material
assets or equity interests in the VIEs to any third party.
Exclusive call option agreements
The equity holders of the VIEs have granted the WFOEs exclusive call options to purchase their equity
interest in the VIEs at an exercise price equal to the higher of (i) the paid-in registered capital in the
VIEs; and (ii) the minimum price as permitted by applicable PRC laws. Each relevant VIE has further
granted the relevant WFOE an exclusive call option to purchase its assets at an exercise price equal
to the book value of the assets or the minimum price as permitted by applicable PRC laws, whichever
is higher. Certain VIEs and their equity holders will also jointly grant the WFOEs (A) exclusive call
options to request the VIEs to decrease their registered capital at an exercise price equal to the higher
of (i) the paid-in registered capital in the VIEs and (ii) the minimum price as permitted by applicable
PRC laws (the “Capital Decrease Price”), and (B) exclusive call options to subscribe for any increased
capital of the VIEs at a price equal to the Capital Decrease Price, or the sum of the Capital Decrease
Price and the unpaid registered capital, if applicable, as of the capital decrease. The WFOEs may
nominate another entity or individual to purchase the equity interest or assets, or to subscribe for
the increased capital, if applicable, under the call options. Execution of each call option shall not
violate the applicable PRC laws, rules and regulations. Each equity holder of the VIE has agreed that
the following amounts, to the extent in excess of the original registered capital that they contributed
to the VIE (after deduction of relevant tax expenses), belong to and shall be paid to the WFOEs: (i)
proceeds from the transfer of its equity interests in the VIE, (ii) proceeds received in connection with a
capital decrease in the VIE, and (iii) distributions or liquidation residuals from the disposal of its equity
interests in the VIE upon termination or liquidation. Moreover, any profits, distributions or dividends
(after deduction of relevant tax expenses) received by the VIEs also belong to and shall be paid to the
WFOEs. The exclusive call option agreements remain in effect until the equity interest or assets that
are the subject of these agreements are transferred to the WFOEs.
277
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
Proxy agreements
Pursuant to the relevant proxy agreements, the equity holders of the VIEs irrevocably authorize any
person designated by the WFOEs to exercise their rights of the equity holders of the VIEs, including
without limitation the right to vote and appoint directors.
Equity pledge agreements
Pursuant to the relevant equity pledge agreements, the equity holders of the VIEs have pledged
all of their interests in the equity of the VIEs as a continuing first priority security interest in favor of
the corresponding WFOEs to secure the outstanding amounts advanced under the relevant loan
agreements described above and to secure the performance of obligations by the VIEs and/or the
equity holders under the other structure contracts. Each WFOE is entitled to exercise its right to
dispose of the pledged interests in the equity of the VIE held by the equity holders and has priority in
receiving payment by the application of proceeds from the auction or sale of the pledged interests,
in the event of any breach or default under the loan agreement or other structure contracts, if
applicable. These equity pledge agreements remain in force until the later of (i) the full performance
of the contractual arrangements by the relevant parties, and (ii) the full repayment of the loans made
to the equity holders of the VIEs.
Exclusive services agreements
Each relevant VIE has entered into an exclusive services agreement with the respective WFOE,
pursuant to which the relevant WFOE provides exclusive services to the VIE. In exchange, the VIE
pays a service fee to the WFOE, the amount of which shall be determined, to the extent permitted by
applicable PRC laws as proposed by the WFOE, resulting in a transfer of substantially all of the profits
from the VIE to the WFOE.
Other arrangements
The exclusive call option agreements described above also entitle the WFOEs to all profits,
distributions or dividends (after deduction of relevant tax expenses) to be received by the equity
holder of the VIEs, and the following amounts, to the extent in excess of the original registered capital
that they contributed to the VIEs (after deduction of relevant tax expenses) to be received by each
equity holder of the VIEs: (i) proceeds from the transfer of its equity interests in the VIEs, (ii) proceeds
received in connection with a capital decrease in the VIEs, and (iii) distributions or liquidation
residuals from the disposal of its equity interests in the VIEs upon termination or liquidation.
Based on these contractual agreements, the Company believes that the PRC domestic companies as
described above should be considered as VIEs because the equity holders do not have significant
equity at risk nor do they have the characteristics of a controlling financial interest. Given that the
Company is the primary beneficiary of these PRC domestic companies, the Company believes that
these VIEs should be consolidated based on the structure as described above.
278
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
The following financial information of the consolidated VIEs and their subsidiaries was recorded in
the accompanying consolidated financial statements:
As of March 31,
2023
2024
RMB
RMB
(in millions)
Cash and cash equivalents and short-term investments
24,057
25,825
Investments in equity method investees and
equity securities and other investments
40,597
35,228
Accounts receivable and contract assets, net of allowance
19,023
16,884
Amounts due from non-VIE subsidiaries of the Company
26,863
36,405
Property and equipment, net and intangible assets, net
9,779
11,927
Others
25,207
33,276
Total assets
145,526
159,545
Amounts due to non-VIE subsidiaries of the Company
90,314
99,404
Accrued expenses, accounts payable and other liabilities
39,612
45,634
Deferred revenue and customer advances
14,051
15,586
Total liabilities
143,977
160,624
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Revenue (i)
111,498
112,270
117,686
Net income (loss)
5,944
2,442
(3,193)
Net cash provided by operating activities
19,932
4,378
12,053
Net cash used in investing activities
(16,710)
(2,044)
(11,772)
Net cash (used in) provided by financing activities
(9,904)
1,386
5,626
(i) Revenue generated by the VIEs are primarily from cloud services, digital media and entertainment services and others.
279
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
The VIEs did not have any material related party transactions except for the related party transactions
which are disclosed in Note 22 or elsewhere in these consolidated financial statements, and those
transactions with other subsidiaries that are not VIEs, which were eliminated upon consolidation.
Under the contractual arrangements with the VIEs, the Company has the power to direct activities of
the VIEs and can have assets transferred out of the VIEs under its control. Therefore, the Company
considers that there is no asset in any of the VIEs that can be used only to settle obligations of the
VIEs, except for registered capital and PRC statutory reserves. As all VIEs are incorporated as limited
liability companies under the Company Law of the corresponding jurisdictions, creditors of the VIEs do
not have recourse to the general credit of the Company for any of the liabilities of the VIEs.
Currently, there is no contractual arrangement which requires the Company to provide additional
financial support to the VIEs. However, as the Company conducts its businesses primarily based
on the licenses and approvals held by its VIEs, the Company has provided and will continue to
provide financial support to the VIEs considering the business requirements of the VIEs as well as the
Company’s own business objectives in the future.
Unrecognized revenue-producing assets held by the VIEs include certain Internet content provision
and other licenses, domain names and trademarks. The Internet content provision and other licenses
are required under relevant PRC laws, rules and regulations for the operation of Internet businesses
in the PRC, and therefore are integral to the Company’s operations. The Internet content provision
licenses require that core PRC trademark registrations and domain names are held by the VIEs that
provide the relevant services.
(d) Business combinations and noncontrolling interests
The Company accounts for its business combinations using the acquisition method of accounting
in accordance with ASC 805 “Business Combinations.” The cost of an acquisition is measured as
the aggregate of the acquisition date fair value of the assets transferred to the sellers, liabilities
incurred by the Company and equity instruments issued by the Company. Transaction costs directly
attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities
assumed are measured separately at their fair values as of the acquisition date, irrespective of the
extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of
the noncontrolling interests and acquisition date fair value of any previously held equity interest in
the acquiree over (ii) the acquisition date amounts of the identifiable net assets of the acquiree is
recorded as goodwill. If the cost of acquisition is less than the acquisition date amounts of the net
assets of the subsidiary acquired, the difference is recognized directly in the consolidated income
statements. During the measurement period, which can be up to one year from the acquisition
date, the Company may record adjustments to the assets acquired and liabilities assumed with the
corresponding offset to goodwill. Subsequent to the conclusion of the measurement period or final
determination of the values of assets acquired or liabilities assumed, whichever comes first, any
further adjustments are recorded in the consolidated income statements.
280
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(d) Business combinations and noncontrolling interests (Continued)
In a business combination achieved in stages, the Company remeasures the previously held equity
interest in the acquiree immediately before obtaining control at its acquisition date fair value and the
remeasurement gain or loss, if any, is recognized in the consolidated income statements.
When there is a change in ownership interests or a change in contractual arrangements that results in
a loss of control of a subsidiary, the Company deconsolidates the subsidiary from the date control is
lost. Any retained noncontrolling investment in the former subsidiary is measured at fair value and is
included in the calculation of the gain or loss upon deconsolidation of the subsidiary.
For the Company’s non-wholly owned subsidiaries, a noncontrolling interest is recognized to
reflect the portion of equity that is not attributable, directly or indirectly, to the Company. When the
noncontrolling interest is contingently redeemable upon the occurrence of a conditional event, which
is not solely within the control of the Company, the noncontrolling interest is classified as mezzanine
equity. The Company accretes changes in the redemption value over the period from the date that
it becomes probable that the mezzanine equity will become redeemable to the earliest redemption
date using the effective interest method. Consolidated net income in the consolidated income
statements includes net income or loss attributable to noncontrolling interests and mezzanine equity
holders when applicable.
Net income attributable to mezzanine equity holders is included in net loss attributable to
noncontrolling interests in the consolidated income statements, while it is excluded from the
consolidated statements of changes in shareholders’ equity. During the years ended March 31, 2022,
2023 and 2024, net income attributable to mezzanine equity holders amounted to RMB188 million,
RMB365 million and RMB181 million, respectively. The cumulative results of operations attributable to
noncontrolling interests, along with adjustments for share-based compensation expense arising from
outstanding share-based awards relating to subsidiaries’ shares, are also recorded as noncontrolling
interests on the Company’s consolidated balance sheets. Cash flows related to transactions with
noncontrolling interests are presented under financing activities in the consolidated statements of
cash flows.
(e) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker (the “CODM”), which is comprised of certain members of the
Company’s management team. Prior to the year ended March 31, 2024, the Company had seven
reportable segments, namely China commerce, International commerce, Local consumer services,
Cainiao, Cloud, Digital media and entertainment, and Innovation initiatives and others segments.
Starting from the year ended March 31, 2024, the Company has implemented a new organizational
and governance structure, which includes six major business groups and various other businesses.
Accordingly, the CODM started to review information under a new reporting structure, and segment
reporting has been updated to conform to this change. Consequently, the Company presents six
reportable segments as set out in Note 26 to reflect the change.
281
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(f) Foreign currency translation
The functional currency of the Company is US$. The Company’s subsidiaries with operations in
Chinese mainland, the Hong Kong Special Administrative Region of the PRC (“Hong Kong” or “Hong
Kong S.A.R.”), the United States and other jurisdictions generally use their respective local currencies
as their functional currencies. When the Company determines that a subsidiary is operating in
a highly inflationary economy, the financial statements of this subsidiary shall be remeasured
prospectively as if the functional currency were the functional currency of its immediate parent
company. The reporting currency of the Company is RMB as the major operations of the Company are
within the PRC. The financial statements of the Company’s subsidiaries, other than the subsidiaries
with the functional currency of RMB, are translated into RMB using the exchange rate as of the
balance sheet date for assets and liabilities and the average daily exchange rate for each month for
income and expense items. Translation gains and losses, including those arising from intra-entity
foreign currency transactions that are of a long-term-investment nature, are recorded in accumulated
other comprehensive income or loss as a component of shareholders’ equity.
In the financial statements of the Company’s subsidiaries, transactions in currencies other than the
functional currency are measured and recorded in the functional currency using the exchange rate
in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that
are denominated in currencies other than the functional currency are translated into the functional
currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign
currency transactions are recorded in the consolidated income statements during the year in which
they occur.
(g) Revenue recognition
Revenue is principally generated from customer management services, membership fees and
value-added services, logistics services, cloud services, sales of goods and other revenue. Revenue
represents the amount of consideration the Company is entitled to upon the transfer of promised
goods or services in the ordinary course of the Company’s activities and is recorded net of value-
added tax (“VAT”). Consistent with the criteria of ASC 606 “Revenue from Contracts with Customers”,
the Company recognizes revenue when performance obligations are satisfied by transferring control
of a promised good or service to a customer. For performance obligations that are satisfied at a point
in time, the Company also considers the following indicators to assess whether control of a promised
good or service is transferred to the customer: (i) right to payment, (ii) legal title, (iii) physical
possession, (iv) significant risks and rewards of ownership and (v) acceptance of the good or service.
For performance obligations satisfied over time, the Company recognizes revenue over time by
measuring the progress toward complete satisfaction of a performance obligation.
For revenue arrangements with multiple distinct performance obligations, each distinct performance
obligation is separately accounted for and the total consideration is allocated to each performance
obligation based on the relative standalone selling price at contract inception.
The Company evaluates if it is a principal or an agent in a transaction to determine whether revenue
should be recorded on a gross or net basis. The Company is acting as the principal if it obtains control
over the goods and services before they are transferred to customers. Generally, when the Company
is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices,
or has several but not all of these indicators, the Company acts as the principal and revenue is
recorded on a gross basis. Generally, when the Company is not primarily obligated in a transaction,
does not bear the inventory risk and does not have the ability to establish the price, the Company acts
as the agent and revenue is recorded on a net basis.
282
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
The Company may from time to time provide incentives in various forms to attract or retain
consumers. Under the circumstances where consumers are not considered as customers under ASC
606, the Company evaluates the features of different incentives provided to consumers to determine
whether they represent implicit or explicit obligations to consumers on behalf of merchants, which
are considered as payments to customers and are recorded as reduction of revenues. Incentives that
are not considered as payments to customers are recorded as sales and marketing expenses.
When services are exchanged or swapped for other services, revenue is recognized based on the
estimated standalone selling price of services promised to customer if the fair value of the services
received cannot be reasonably estimated. The amount of revenue recognized for barter transactions
was not material for each of the periods presented.
Practical expedients and exemptions
The Company applies the practical expedient to not disclose the value of unsatisfied performance
obligations for contracts with an original expected duration of one year or less and contracts for
which revenue is recognized at the amount to which the Company has the right to invoice for services
performed.
The Company applies the practical expedient to not adjust any of the transaction price for the time
value of money for contracts where the period between the transfer of the promised goods or services
to the customer and payment by the customer is within one year.
Revenue recognition policies by type are as follows:
(i)
Customer management services
The Company generates customer management revenue from merchants by offering an
integrated package and a comprehensive solution comprised of a diverse array of services to
enable them to attract, engage and retain consumers, complete transactions, improve their
branding and enhance operating efficiency. The customer management revenue are charged
primarily on cost-per-click basis, cost-per-thousand impressions basis, time basis and cost-
per-sale basis (e.g., fees charged based on the value of merchandise transacted, including
commission on transactions).
Cost-per-click ("CPC") marketing services
CPC marketing services allow merchants to bid for keywords or bid to market to groups of
consumers with similar profiles that match product or service listings appearing in search
results or browser results on the Company’s marketplaces. In general, merchants prepay for
CPC marketing services and the related revenue is recognized when a user clicks their product
or service listings as this is the point of time when the merchants benefit from the marketing
services rendered.
283
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
(i)
Customer management services (Continued)
Cost-per-thousand impressions ("CPM") and time-based marketing services
CPM and time-based marketing services allow merchants to place marketing content on the
Company’s marketplaces, at fixed prices or prices established by a market-based bidding
system and in particular formats. In general, merchants need to prepay for CPM and time-based
marketing services which are accounted for as customer advances and revenue is recognized
either ratably over the period in which the marketing content is displayed as the merchants
simultaneously consume the benefits as the marketing content is displayed or when an
marketing content is viewed by users, depending on the type of marketing services selected by
the merchants.
Cost-per-sale ("CPS") marketing services
The Company charges fees from merchants for transactions completed on Taobao, Tmall and
certain other major marketplaces of the Company. The fees are generally determined as a
percentage based on the value of merchandise sold by the merchants. Merchant deposits that
are expected to be non-refundable is accounted for as variable consideration (Note 2(ac)),
which is estimated at contract inception and updated at the end of each reporting period
if additional information becomes available. Revenue related to CPS marketing services is
recognized in the consolidated income statements based on the expected value when the
performance obligation is satisfied. Adjustments to the estimated variable consideration related
to prior reporting periods were not material for each of the periods presented.
The Company also places marketing content through the third-party marketing affiliate
program. Revenue generated on the Company’s marketplaces or through the third-party
marketing affiliate program are recorded on a gross basis when the Company is the principal to
the merchants in the arrangements. For third-party marketing affiliates with whom the Company
has an arrangement to share the revenue, traffic acquisition cost is also recognized at the
same time if the marketing content on the landing page clicked by the users is from merchants
participating in the third-party marketing affiliate program.
(ii)
Membership fees and value-added services
The Company earns membership fees revenue from wholesale sellers in respect of the sale of
membership packages and subscriptions that allow them to host premium storefronts on the
Company’s wholesale marketplaces, as well as the provision of other value-added services,
and from customers in respect of the sale of membership packages which allow them to access
premium content on Youku’s paid content platforms. These service fees are paid in advance
for a specific contracted service period. All these fees are initially deferred as deferred revenue
and customer advances when received and revenue is recognized ratably over the term of the
respective service contracts as the services are provided.
284
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
(iii) Logistics services
The Company earns logistics services revenue from express delivery and supply chain services
provided by Cainiao, on-demand delivery services provided by Ele.me and logistics services
provided by Lazada. Revenue is recognized over time when the logistics services are provided.
(iv) Cloud services
The Company earns cloud services revenue from the provision of public cloud services and non-
public cloud services to domestic and international enterprise customers:
•
Public cloud services, where the company generates revenue from a wide range of cloud
services, including, among others, elastic computing, storage, network, database, big data
and AI computing, security and proprietary servers. Enterprise customers can pay for these
services on a consumption or subscription basis, such as on-demand delivery of computing
services and storage capacities. Certain cloud services allow customers to use hosted
software over the contract period without taking possession of the software. Revenue
related to cloud services charged on a subscription basis is recognized ratably over the
contract period. Revenue related to cloud services charged on a consumption basis, such
as the quantity of storage or elastic computing services used in a period, is recognized
based on the customer utilization of the resources.
•
Non-public cloud services, where the company generates revenue through packaged cloud
services, including hardware, software license, software installation service, application
development and maintenance service. Each distinct performance obligation identified
is separately accounted for and the total consideration is allocated to each performance
obligation based on the relative standalone selling prices at contract inception. Revenue
for each performance obligation is recognized when the control of the promised goods or
services is transferred to the customer.
(v)
Sales of goods
Revenue from the sales of goods is mainly generated from Sun Art, Tmall Supermarket,
Freshippo and Alibaba Health’s direct sales businesses. Revenue from the sales of goods is
recognized when the control over the promised goods is transferred to customers. Receipts
of fees in respect of all other incidental goods or services provided by the Company that are
distinct performance obligations are recognized when the control of the underlying goods or
services is transferred to the customers. The amounts relating to these incidental services are not
material to the Company’s total revenue for each of the periods presented.
(h) Cost of revenue
Cost of revenue consists primarily of cost of inventories, logistics costs, expenses associated with the
operation of the Company’s mobile platforms and websites (such as depreciation and maintenance
expenses for servers and computers, call centers and other equipment, and bandwidth and co-
location fees), staff costs and share-based compensation expense, traffic acquisition costs, content
costs, payment processing fees and other related incidental expenses that are directly attributable to
the Company’s principal operations.
285
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(i)
Product development expenses
Product development expenses consist primarily of staff costs and share-based compensation
expense for research and development personnel and other expenses that are directly attributable to
the development of new technologies and products for the businesses of the Company, such as the
development of the Internet infrastructure, applications, operating systems, software, databases and
networks.
The Company expenses all costs that are incurred in connection with the planning and
implementation phases of development and costs that are associated with repair or maintenance
of the existing websites or the development of software and website content. Costs incurred in the
development phase are capitalized and amortized over the estimated product life. However, as
the amount of costs qualified for capitalization has been insignificant, all website and software
development costs have been expensed as incurred.
(j)
Sales and marketing expenses
Sales and marketing expenses consist primarily of online and offline advertising expenses, promotion
expenses, staff costs and share-based compensation expense, sales commissions and other related
incidental expenses that are incurred directly to attract or retain consumers and merchants.
The Company expenses the costs of producing advertisements at the time production occurs, and
expenses the costs of delivering advertisements in the period in which the advertising space or
airtime is used. Advertising and promotional expenses totaled RMB91,103 million, RMB76,818 million
and RMB88,217 million during the years ended March 31, 2022, 2023 and 2024, respectively.
(k) Share-based compensation
Share-based awards granted are measured at fair value on grant date and the value is recognized
as share-based compensation expense (i) immediately at the grant date if no vesting conditions
are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the
requisite service period. The fair values of restricted share units (“RSUs”) and restricted shares are
determined with reference to the fair value of the underlying shares and the fair value of share
options is generally determined using the Black-Scholes valuation model. Share-based compensation
expense, when recognized, is charged to the consolidated income statements with the corresponding
entry to additional paid-in capital, liability or noncontrolling interests as disclosed in Note 2(d).
On each measurement date, the Company reviews internal and external sources of information to
assist in the estimation of various attributes to determine the fair value of the share-based awards,
including the fair value of the underlying shares, expected life and expected volatility. The Company
recognizes the impact of any revisions to the original forfeiture rate assumptions in the consolidated
income statements, with a corresponding adjustment to equity or liability.
286
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(l)
Other employee benefits
The Company’s subsidiaries in the PRC participate in a government-mandated multi-employer
defined contribution plan pursuant to which certain retirement, medical and other welfare benefits
are provided to employees. The relevant labor regulations require the Company’s subsidiaries in
the PRC to pay the local labor and social welfare authorities monthly contributions based on the
applicable benchmarks and rates stipulated by the local government. The relevant local labor and
social welfare authorities are responsible for meeting all retirement benefits obligations and the
Company’s subsidiaries in the PRC have no further commitments beyond their monthly contributions.
The contributions to the plan are expensed as incurred. The Company also makes payments to other
defined contribution plans and defined benefit plans for the benefit of employees employed by
subsidiaries outside of the PRC.
During the years ended March 31, 2022, 2023 and 2024, contributions to the plans amounting to
RMB13,086 million, RMB13,953 million and RMB14,190 million, respectively, were charged to the
consolidated income statements. Amounts contributed to defined benefit plans during the years
ended March 31, 2022, 2023 and 2024 were insignificant.
(m) Income taxes
The Company accounts for income taxes using the liability method, under which deferred income tax
is recognized for future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax of a change in tax rates is recognized as income or expense in the period that includes the
enactment date. Valuation allowance is provided on deferred tax assets to the extent that it is more
likely than not that the asset will not be realizable in the foreseeable future.
Deferred tax is recognized on the undistributed earnings of subsidiaries, which are presumed to
be distributed to parent companies, unless there is sufficient evidence that the subsidiaries have
invested or will invest the undistributed earnings permanently in the domestic jurisdictions or the
earnings will not be subject to tax upon the subsidiaries’ liquidation. Deferred tax is recognized for
temporary differences in relation to certain investments in equity method investees, equity securities
and other investments.
The Company adopts ASC 740 “Income Taxes” which prescribes a more likely than not threshold
for financial statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. It also provides guidance on derecognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities, accounting for interest and
penalties associated with tax positions, accounting for income taxes in interim periods and income
tax disclosures. The Company did not have significant unrecognized uncertain tax positions or any
unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of and for
the years ended March 31, 2022, 2023 and 2024.
287
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(n) Government grants
Government grants, which mainly represent amounts received from central and local governments in
connection with the Company’s investments in local business districts and contributions to technology
development, are recognized as income in other income, net or as a reduction of specific costs
and expenses for which the grants are intended to compensate. Such amounts are recognized in
the consolidated income statements upon receipt and when all conditions attached to the grants
are fulfilled. For the years ended March 31, 2022, 2023 and 2024, government grants recorded as
a reduction of specific costs and expenses were RMB6,028 million, RMB5,889 million and RMB5,705
million, respectively. For the years ended March 31, 2022, 2023 and 2024, government grants
recorded as other income, net were RMB1,661 million, RMB1,857 million and RMB1,329 million,
respectively. As of March 31, 2023 and 2024, government grants recorded as other liabilities were
RMB1,687 million and RMB1,540 million, respectively.
Government grants related to assets are recognized as a reduction of the carrying amount of the
related asset when all conditions attached to the grants are fulfilled and are recognized in the
consolidated income statements as a reduction of related depreciation or amortization expense over
the estimated useful live of the related asset on a straight-line method.
In April 2022, the Company adopted ASU 2021-10, “Government Assistance (Topic 832): Disclosures
by Business Entities about Government Assistance”, which provides guidance on the disclosure of
transactions with a government that are accounted for by applying a grant or contribution accounting
model by analogy. The adoption of this guidance did not have a material impact on the financial
position, results of operations and cash flows.
(o) Leases
The Company determines if an arrangement is a lease at inception. Leases that transfer substantially
all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases
as if there was an acquisition of an asset and incurrence of an obligation at the inception of the
lease. All other leases are accounted for as operating leases. The Company has no significant finance
leases.
The Company recognizes lease liabilities and corresponding right-of-use assets on the balance
sheet for leases. Operating lease right-of-use assets are included in non-current prepayments,
receivables and other assets (Note 13), and operating lease liabilities are included in current accrued
expenses, accounts payable and other liabilities and other non-current liabilities (Note 19) on the
consolidated balance sheets. Operating lease right-of-use assets and operating lease liabilities are
initially recognized based on the present value of future lease payments at lease commencement.
The operating lease right-of-use asset also includes any lease payments made prior to lease
commencement and the initial direct costs incurred by the lessee and is recorded net of any lease
incentives received. As the interest rates implicit in most of the leases are not readily determinable,
the Company uses the incremental borrowing rates based on the information available at lease
commencement to determine the present value of the future lease payments. Operating lease
expenses are recognized on a straight-line basis over the term of the lease.
The Company elected to combine the lease and non-lease components for leases of certain asset
classes such as shops and malls and equipment leases. Lease and non-lease components for leases
of other asset classes are accounted for separately. The Company also elected not to recognize short-
term leases with an initial lease term of twelve months or less.
288
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(p) Cash and cash equivalents
The Company considers all short-term, highly liquid investments with an original maturity of three
months or less, when purchased, to be cash equivalents. Cash and cash equivalents primarily
represent bank deposits and fixed deposits with original maturities of less than three months.
(q) Short-term investments
Short-term investments consist primarily of investments in fixed deposits with original maturities
between three months and one year and certain investments in wealth management products,
certificates of deposits, marketable debt securities and other investments that the Company has the
intention to redeem within one year.
(r) Accounts receivable
Accounts receivable represent the amounts that the Company has an unconditional right to
consideration. The Company maintains an allowance for doubtful accounts to reserve for potentially
uncollectible receivable amounts which is estimated using the approach based on expected losses.
The allowance for doubtful accounts were RMB6,174 million and RMB8,042 million as of March
31, 2023 and 2024, respectively. The Company’s estimation of allowance for doubtful accounts
considers factors such as historical credit loss experience, age of receivable balances, current market
conditions, reasonable and supportable forecasts of future economic conditions, as well as an
assessment of receivables due from specific identifiable counterparties to determine whether these
receivables are considered at risk or uncollectible. The Company assesses collectibility by pooling
receivables that have similar risk characteristics and evaluates receivables individually when specific
receivables no longer share those risk characteristics. For receivables evaluated individually, when
it is determined that foreclosure is probable or when the debtor is experiencing financial difficulty at
the reporting date and repayment is expected to be provided substantially through the operation or
sale of collateral, expected credit losses are based on the fair value of the collateral at the reporting
date, adjusted for selling costs as appropriate.
(s) Inventories
Inventories mainly consist of merchandise available for sale. They are accounted for using the
weighted average cost method and stated at the lower of cost and net realizable value. Net realizable
value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
289
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(t) Equity securities and other investments
Equity securities and other investments represent the Company’s investments in equity securities that
are not accounted for under the equity method, as well as other investments which primarily consist
of debt investments.
(i)
Equity securities
Equity securities not accounted for using the equity method are carried at fair value with
unrealized gains and losses recorded in the consolidated income statements, according to ASC
321 “Investments — Equity Securities”.
The Company elected to record a majority of equity investments in privately held companies
using the measurement alternative at cost, less impairment, with subsequent adjustments for
observable price changes resulting from orderly transactions for identical or similar investments
of the same issuer.
Equity investments in privately held companies accounted for using the measurement
alternative are subject to periodic impairment reviews. The Company’s impairment analysis
considers both qualitative and quantitative factors that may have a significant effect on the fair
value of these equity securities.
In computing realized gains and losses on equity securities, the Company determines cost based
on amounts paid using the average cost method. Dividend income is recognized when the right
to receive the payment is established.
(ii)
Debt investments
Debt investments consist of investments in debt securities and loan investments which are
accounted for at amortized cost or under the fair value option, which the Company has elected
for certain investments including convertible and exchangeable bonds subscribed. The fair
value option permits the irrevocable election on an instrument-by-instrument basis at initial
recognition or upon an event that gives rise to a new basis of accounting for that instrument.
The investments accounted for under the fair value option are carried at fair value with
unrealized gains and losses recorded in the consolidated income statements. Interest income
from debt investments is recognized using the effective interest method which is reviewed and
adjusted periodically based on changes in estimated cash flows. Debt investments also include
other treasury investments which mainly consist of investments in fixed deposits, certificates
of deposits and marketable debt securities with original maturities over one year for treasury
purposes. The remaining maturities of these treasury investments held by the Company
generally range from one to three years.
290
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(u) Investments in equity method investees
The Company applies the equity method to account for equity investments in common stock or in-
substance common stock, according to ASC 323 “Investments — Equity Method and Joint Ventures”,
over which it has significant influence but does not own a controlling financial interest, unless the fair
value option is elected for an investment.
An investment in in-substance common stock is an investment in an entity that has risk and reward
characteristics that are substantially similar to that entity’s common stock. The Company considers
subordination, risks and rewards of ownership and obligation to transfer value when determining
whether an investment in an entity is substantially similar to an investment in that entity’s common
stock.
Under the equity method, the Company’s share of the post-acquisition profits or losses of the
equity method investee is recognized in the consolidated income statements and its share of
post-acquisition movements in accumulated other comprehensive income is recognized in other
comprehensive income. The Company records its share of the results of the equity method investees
on a one quarter in arrears basis. The excess of the carrying amount of the investment over the
underlying equity in net assets of the equity method investee generally represents goodwill and
intangible assets acquired. When the Company’s share of losses of the equity method investee equals
or exceeds its interest in the equity method investee, the Company does not recognize further losses,
unless the Company has incurred obligations or made payments or guarantees on behalf of the
equity method investee.
The Company continually reviews its investments in equity method investees to determine whether
a decline in fair value below the carrying value is other-than-temporary. The primary factors the
Company considers in its determination include the severity and the length of time that the fair value
of the investment is below its carrying value; the financial condition, the operating performance and
the prospects of the equity method investee; the geographic region, market and industry in which the
equity method investee operates; and other company specific information such as recent financing
rounds completed by the equity method investee. If the decline in fair value is deemed to be other-
than-temporary, the carrying value of the investment in the equity method investee is written down to
its fair value.
(v) Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and any impairment
loss. Depreciation is computed using the straight-line method with no residual value based on the
estimated useful lives of the various classes of assets, which range as follows:
Computer equipment and software
3–5 years
Furniture, office and transportation
equipment and others
3–10 years
Buildings and other property
10–50 years
Property improvements
shorter of remaining lease period or estimated useful life
291
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(v) Property and equipment, net (Continued)
Construction in progress represents buildings and related premises under construction, which is
stated at actual construction cost less any impairment loss. Construction in progress is transferred to
the respective category of property and equipment when completed and ready for its intended use.
Costs of repairs and maintenance are expensed as incurred and asset improvements are capitalized.
The cost and related accumulated depreciation of assets disposed of or retired are removed from the
accounts, and any resulting gain or loss is reflected in the consolidated income statements.
(w) Intangible assets other than licensed copyrights
Intangible assets mainly include those acquired through business combinations and purchased
intangible assets. Intangible assets acquired through business combinations are recognized as
assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion.
Intangible assets arising from business combinations are measured at fair value upon acquisition
using valuation techniques such as discounted cash flow analysis and ratio analysis with reference to
comparable companies in similar industries under the income approach, market approach and cost
approach. Major assumptions used in determining the fair value of these intangible assets include
future growth rates and weighted average cost of capital. Purchased intangible assets are initially
recognized and measured at cost upon acquisition. Separately identifiable intangible assets that
have determinable lives continue to be amortized over their estimated useful lives using the straight-
line method as follows:
User base and customer relationships
3–16 years
Trade names, trademarks and domain names
5–20 years
Developed technology and patents
2–10 years
Non-compete agreements
over the contracted term of up to 10 years
(x) Licensed copyrights
Licensed copyrights related to titles to movies, television series, variety shows, animations and other
video content acquired from external parties are carried at the lower of unamortized cost or fair
value. The amortization period for the licensed content vary depending on the type of content, which
typically ranges from six months to ten years. Licensed copyrights are presented on the consolidated
balance sheets as current assets under prepayments, receivables and other assets, or non-current
assets under intangible assets, net, based on estimated time of usage. Licensed copyrights are
generally amortized using an accelerated method based on historical viewership consumption
patterns. Estimates of the consumption patterns for licensed copyrights are reviewed periodically and
revised if necessary. For the years ended March 31, 2022, 2023 and 2024, amortization expenses in
connection with the licensed copyrights of RMB8,610 million, RMB8,446 million and RMB8,361 million
were recorded in cost of revenue within Digital Media and Entertainment Group.
292
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(x) Licensed copyrights (Continued)
On a periodic basis, the Company evaluates the program usefulness of licensed copyrights pursuant
to the guidance in ASC 920 “Entertainment — Broadcasters”, which provides that the rights be
reported at the lower of unamortized cost or fair value. When there is a change in the expected usage
of licensed copyrights, the Company estimates the fair value of licensed copyrights to determine if
any impairment exists. The fair value of licensed copyrights is determined by estimating the expected
cash flows from advertising and membership fees, less any costs and expenses, over the remaining
useful lives of the licensed copyrights at the film-group level. Estimates that impact these cash flows
include anticipated levels of demand for the Company’s advertising services and the expected selling
prices of advertisements. For the years ended March 31, 2022, 2023 and 2024, impairment charges in
connection with the licensed copyrights of RMB745 million, RMB1,133 million and nil were recorded in
cost of revenue within Digital Media and Entertainment Group.
(y) Goodwill
Goodwill represents the excess of the purchase consideration over the acquisition date amounts of
the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired
entity as a result of the Company’s acquisitions of interests in its subsidiaries. Goodwill is not
amortized but is tested for impairment on an annual basis, or more frequently if events or changes
in circumstances indicate that it might be impaired. In accordance with ASC 350, the Company
may first assess qualitative factors to determine whether it is necessary to perform the quantitative
goodwill impairment test. In the qualitative assessment, the Company considers factors such as
macroeconomic conditions, industry and market considerations, overall financial performance of
the reporting unit, and other specific information related to the operations, business plans and
strategies of the reporting unit. Based on the qualitative assessment, if it is more likely than not that
the fair value of a reporting unit is less than the carrying amount, the quantitative impairment test
is performed. The Company may also bypass the qualitative assessment and proceed directly to
perform the quantitative impairment test.
The Company performs the quantitative impairment test by comparing the fair value of each
reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds
its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting
unit exceeds its fair value, the amount by which the carrying amount exceeds the reporting unit’s fair
value is recognized as impairment. Application of a goodwill impairment test requires significant
management judgment, including the identification of reporting units, allocation of assets, liabilities
and goodwill to reporting units, and determination of the fair value of each reporting unit.
(z) Impairment of long-lived assets other than goodwill and licensed copyrights
The Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset or asset group to the
future undiscounted net cash flows expected to be generated by the asset or asset group. If the assets
are considered to be impaired, the impairment recognized is measured by the amount by which the
carrying amount of the assets or asset groups exceeds the fair value of the assets or asset groups.
Impairment of long-lived assets other than goodwill and licensed copyrights recognized for the years
ended March 31, 2022, 2023 and 2024 was RMB973 million, RMB1,922 million and RMB14,847 million,
respectively.
293
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(aa) Derivatives and hedging
All contracts that meet the definition of a derivative are recognized on the consolidated balance
sheets as either assets or liabilities and recorded at fair value. Changes in the fair value of derivatives
are either recognized periodically in the consolidated income statements or in other comprehensive
income depending on the use of the derivatives and whether they qualify for hedge accounting and
are so designated as cash flow hedges, fair value hedges or net investment hedges.
To qualify for hedge accounting, the hedge relationship is designated and formally documented
at inception, detailing the particular risk management objective and strategy for the hedge (which
includes the item and risk that is being hedged), the derivative that is being used and how hedge
effectiveness is being assessed. A derivative has to be effective in accomplishing the objective of
offsetting either changes in fair value or cash flows for the risk being hedged. The effectiveness of
the hedging relationship is evaluated on a prospective and retrospective basis using qualitative and
quantitative measures of correlation. Qualitative methods may include comparison of critical terms
of the derivative to those of the hedged item. Quantitative methods include a comparison of the
changes in the fair value or discounted cash flow of the hedging instrument to that of the hedged
item. A hedging relationship is considered initially effective if the results of the hedging instrument
are within a ratio of 80% to 125% of the results of the hedged item.
Interest rate swaps
Interest rate swaps designated as hedging instruments to hedge against the cash flows attributable
to recognized assets or liabilities or forecasted payments may qualify as cash flow hedges. The
Company entered into interest rate swap contracts to swap floating interest payments related to
certain borrowings for fixed interest payments to hedge the interest rate risk associated with certain
forecasted payments and obligations. All changes in the fair value of interest rate swaps that are
designated and qualify as cash flow hedges are recognized in accumulated other comprehensive
income. Amounts in accumulated other comprehensive income are reclassified into earnings in the
same period during which the hedged forecasted transaction affects earnings.
The Company has elected the optional expedients under ASC 848 “Reference Rate Reform” for certain
existing interest rate swaps that are designated as cash flow hedges in the hedging relationship
designation and the assessment of probability of forecasted transaction and hedge effectiveness.
(ab) Bank borrowings and unsecured senior notes
Bank borrowings and unsecured senior notes are recognized initially at fair value, net of upfront
fees, debt discounts or premiums, debt issuance costs and other incidental fees. Upfront fees, debt
discounts or premiums, debt issuance costs and other incidental fees are recorded as a reduction of
the proceeds received and the related accretion is recorded as interest expense in the consolidated
income statements over the estimated term of the facilities using the effective interest method.
294
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(ac) Merchant deposits
The Company collects deposits representing an annual upfront service fee from merchants on Tmall
before the beginning of each calendar year. These deposits are initially recorded as a liability by the
Company. The deposits are refundable to a merchant if the level of sales volume that is generated by
that merchant on Tmall meets the target during the period. If the transaction volume target is not met
at the end of each calendar year, the relevant deposits will become non-refundable. These merchant
deposits are accounted for as variable consideration at an amount that is estimated at contract
inception. The estimate is updated at the end of each reporting period and when there are changes
in circumstances during the reporting period. Merchant deposits are recognized as revenue in the
consolidated income statements when the likelihood of refund to the merchant is considered remote
based on the patterns of sales volume generated by the merchant during the reporting period.
(ad) Deferred revenue and customer advances
Deferred revenue and customer advances generally represent cash received from customers
that relate to goods or services to be provided in the future. Deferred revenue, mainly relating to
membership fees and cloud services revenue, is stated at the amount of service fees received less the
amount previously recognized as revenue upon the provision of the respective services to customers.
(ae) Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, such as legal proceedings
and claims arising out of its business, that cover a wide range of matters. Liabilities for the
contingencies are recorded when it is probable that a liability has been incurred and the amount of
the liability can be reasonably estimated.
Certain conditions may exist as of the date the consolidated financial statements are issued, which
may result in a loss to the Company, but which will only be resolved when one or more future events
occur or fail to occur. The Company assesses these contingent liabilities, which inherently involves
judgment. In assessing loss contingencies related to legal proceedings that are pending against the
Company or unasserted claims that may result in legal proceedings, the Company, in consultation
with its legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims
as well as the perceived merits of the amount of relief sought or expected to be sought therein. If
the assessment of a contingency indicates that it is probable that a material loss has been incurred
and the amount of the liability can be estimated, the estimated liability would be accrued in the
consolidated financial statements. If the assessment indicates that a potentially material loss
contingency is not probable, or is probable but cannot be estimated, the nature of the contingent
liability, together with an estimate of the range of the reasonably possible loss, if determinable and
material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in
which case the nature of the guarantee would be disclosed.
(af) Treasury shares
The Company accounts for treasury shares using the cost method. Under this method, the cost
incurred to purchase the shares is recorded in the treasury shares account on the consolidated
balance sheets. At retirement of the treasury shares, the ordinary shares account is charged only for
the aggregate par value of the shares. The excess of the acquisition cost of treasury shares over the
aggregate par value is allocated between additional paid-in capital and retained earnings.
295
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
2. Summary of significant accounting policies (Continued)
(ag) Statutory reserves
In accordance with the relevant regulations and their articles of association, subsidiaries of the
Company incorporated in the PRC are required to allocate at least 10% of their after-tax profit
determined based on the PRC accounting standards and regulations to the general reserve until
the reserve has reached 50% of the relevant subsidiary’s registered capital. Appropriations to the
enterprise expansion fund and staff welfare and bonus fund are at the discretion of the respective
board of directors of the subsidiaries. These reserves can only be used for specific purposes and are
not transferable to the Company in the form of loans, advances or cash dividends. During the years
ended March 31, 2022, 2023 and 2024, appropriations to the general reserve amounted to RMB2,492
million, RMB3,138 million and RMB1,756 million, respectively. No appropriations to the enterprise
expansion fund and staff welfare and bonus fund have been made by the Company.
(ah) Interest income
Interest income is recorded in the consolidated income statements as it accrues for the interest-
earning assets using the effective interest method. During the years ended March 31, 2022, 2023 and
2024, interest income of RMB13,602 million, RMB16,339 million and RMB24,868 million, respectively,
were recorded in interest and investment income, net in the consolidated income statements.
(ai) Newly adopted accounting standard updates
In April 2022, the Company adopted ASU 2020-06, “Debt — Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies
an issuer’s accounting for certain convertible instruments and the application of derivatives scope
exception for contracts in an entity’s own equity. This guidance also addresses how convertible
instruments are accounted for in the diluted earnings per share calculation and required enhanced
disclosures about the terms of convertible instruments and contracts in an entity’s own equity.
The adoption of this guidance did not have a material impact on the financial position, results of
operations and cash flows.
In April 2023, the Company adopted ASU 2021-08, “Business Combinations (Topic 805): Accounting
for Contract Assets and Contract Liabilities from Contracts with Customers”, which provides
guidance on the acquirer’s accounting for acquired revenue contracts with customers in a business
combination. The amendments require an acquirer recognizes and measures contract assets and
contract liabilities acquired in a business combination at the acquisition date in accordance with ASC
606 as if it had originated the contracts. This guidance also provides certain practical expedients for
acquirers when recognizing and measuring acquired contract assets and contract liabilities from
revenue contracts in a business combination. The Company adopted this guidance prospectively
and the adoption of this guidance did not have a material impact on the financial position, results of
operations and cash flows.
In April 2023, the Company adopted ASU 2022-04, “Liabilities — Supplier Finance Programs (Subtopic
405-50): Disclosure of Supplier Finance Program Obligations”, which require a buyer in a supplier
finance program disclose qualitative and quantitative information about the supplier finance
program. Rollforward information is effective for the Company for the year ending March 31, 2025.
Details of the key terms of the program and the outstanding obligations confirmed as valid are set out
in Note 19.
296
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
3. Recent accounting pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting” and issued subsequent amendments within ASU 2021-01
and ASU 2022-06 (collectively, including ASU 2020-04, “ASC 848”) in January 2021 and December 2022
respectively. ASC 848 provides optional expedients and exceptions for applying U.S. GAAP on contract
modifications and hedge accounting to contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be discontinued because of reference rate reform,
if certain criteria are met. These optional expedients and exceptions provided in ASC 848 are effective for
the Company from January 1, 2020 through December 31, 2024. The Company has elected the optional
expedients for certain existing interest rate swaps that are designated as cash flow hedges, which did
not have a material impact on the financial position, results of operations and cash flows. The Company
is evaluating the effects, if any, of the potential election of the other optional expedients and exceptions
provided in this guidance on the financial position, results of operations and cash flows.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement
of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction
on the sale of an equity security is not considered part of the unit of account of the equity security and,
therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot,
as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also
requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance
is required to be applied prospectively with any adjustments from the adoption of the amendments
recognized in earnings and disclosed on the date of adoption. This guidance is effective for the Company
for the year ending March 31, 2025 and interim reporting periods during the year ending March 31, 2025.
Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a
material impact on the financial position, results of operations and cash flows.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures”, which improves reportable segment disclosure requirements. The
amendments require the disclosure of (1) significant segment expenses that are regularly provided to
the CODM and included within each reported measure of segment profit or loss; (2) an amount for other
segment items by reportable segment and a description of its composition; and (3) the title and position
of the CODM and an explanation of how the CODM uses the reported measure(s). The amendments also
provide disclosure requirements for interim periods and entities that have a single reportable segment.
The new guidance is required to be applied retrospectively to all prior periods presented in the financial
statements. This guidance is effective for the Company for the year ending March 31, 2025 and interim
reporting periods during the year ending March 31, 2026. Early adoption is permitted. The Company is
evaluating the impact of the adoption of this guidance.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income
Tax Disclosures”, which improves income tax disclosures. The amendments require the disclosure of
specific categories in the rate reconciliation and additional information for reconciling items that meet
a quantitative threshold. The amendments also require disaggregated information about the amount of
income taxes paid (net of refunds received), Income (or loss) from continuing operations before income tax
expense (or benefit) and Income tax expense (or benefit) from continuing operations. The new guidance
is required to be applied either prospectively or retrospectively. This guidance is effective for the Company
for the year ending March 31, 2026. Early adoption is permitted. The Company is evaluating the impact of
the adoption of this guidance.
297
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
4. Significant mergers and acquisitions and investments
Mergers and acquisitions
(a) Acquisitions
Acquisitions that constitute business combinations are summarized in the following table:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Net assets
852
1
28
Identifiable intangible assets
1,000
285
602
Deferred tax liabilities
(170)
(68)
(199)
1,682
218
431
Noncontrolling interests and mezzanine equity
(1,884)
(38)
(98)
Net identifiable (liabilities) assets
(202)
180
333
Goodwill
3,283
583
1,782
Total purchase consideration
3,081
763
2,115
Fair value of previously held equity interests
(31)
—
—
Purchase consideration settled
(2,671)
(481)
(2,038)
Deferred consideration as of year end
379
282
77
Total purchase consideration is comprised of:
— cash consideration
3,050
763
2,115
— fair value of previously held equity interests
31
—
—
3,081
763
2,115
In relation to the revaluation of previously held equity interests, the Company recognized a loss of
RMB2 million, nil and nil in the consolidated income statements for the years ended March 31, 2022,
2023 and 2024, respectively, for the other acquisitions that constitute business combinations.
Pro forma results of operations for these acquisitions have not been presented because the effects
of these acquisitions are not material to the consolidated income statements for the year ended
March 31, 2022, 2023 and 2024, either individually or in aggregate.
Equity investments and others
(b) Investment in Moonshot AI Ltd (“Moonshot”)
Moonshot is an artificial intelligence company in the PRC. During the year ended March 31, 2024,
the Company invested a total of approximately US$0.8 billion (approximately RMB5.9 billion) for an
approximately 36% equity interest. The investment in preferred stocks of Moonshot is accounted for
using the measurement alternative.
298
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
4. Significant mergers and acquisitions and investments (Continued)
Equity investments and others (Continued)
(c)
Investment in Ant Group Co., Ltd. (“Ant Group”)
Ant Group provides comprehensive digital payment services and facilitates digital financial and
value-added services for consumers and merchants, in China and across the world. In September
2019, following the satisfaction of the closing conditions, the Company received the 33% equity
interest in Ant Group pursuant to the share and asset purchase agreement as amended from time to
time (the “SAPA”).
The Company accounts for its equity interest in Ant Group under the equity method. Upon the
completion, the Company recorded the 33% equity interest in Ant Group with a carrying value
amounting to RMB90.7 billion in investments in equity method investees. The difference between
the carrying value of the 33% equity interest in Ant Group and the Company’s share of the carrying
value of Ant Group’s net assets upon completion is a basis difference, which mainly represents the
fair value adjustments of amortizable intangible assets and equity investments. These adjustments
amounted to RMB24.5 billion and RMB5.3 billion, respectively, both of which were net of their
corresponding tax effects.
Subsequent to the receipt of the equity interest in Ant Group, the proportionate share of results of
Ant Group, adjusted for the effects of the basis difference as described above, is recorded in share
of results of equity method investees in the consolidated income statements on a one quarter in
arrears basis. Following the receipt of equity interest in Ant Group, the Company has pre-emptive
rights to participate in other issuances of equity securities by Ant Group and certain of its affiliates
prior to the time of Ant Group meeting certain minimum criteria for a qualified IPO set forth in the
SAPA. These pre-emptive rights entitle the Company to maintain the equity ownership percentage the
Company holds in Ant Group immediately prior to any such issuances. In connection with the exercise
of the pre-emptive rights, the Company is also entitled to receive certain payments from Ant Group,
effectively funding the subscription for these additional equity interest, up to a value of US$1.5 billion,
subject to certain adjustments. In addition, under the SAPA, in certain circumstances the Company
is permitted to exercise pre-emptive rights through an alternative arrangement which will further
protect the Company from dilution.
During the quarter ended September 30, 2023, Ant Group repurchased approximately 7% equity
interest from its existing shareholders and the shares repurchased were allocated to the employee
incentive plans of Ant Group. The number of shares held by the Company in Ant Group remains
unchanged from legal perspective, the Company’s equity interest in Ant Group on a fully diluted basis
remains unchanged at 33%.
For accounting purposes, the Company will take into consideration a proportionate share of equity
interest held by the employee incentive plans of Ant Group to account for its share of results from
its investment in Ant Group, subject to dilution as the equity interest under the employee incentive
plans of Ant Group is transferred out. During the year ended March 31, 2024, there was no material
change in the equity interest held by the employee incentive plans of Ant Group. While the Company’s
carrying value of the investment in Ant Group remain unchanged upon completion, the transactions
result in additional basis difference of RMB5.6 billion upon completion, which was mainly allocated
to amortizable intangible assets of RMB1.7 billion with a weighted average amortization period of 7
years, goodwill of RMB3.9 billion, equity investments of RMB0.5 billion and deferred tax liabilities of
RMB0.5 billion.
299
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
5. Revenue
Revenue by segment is as follows:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Taobao and Tmall Group:
China commerce retail (i)
— Customer management
316,029
291,541
304,009
— Direct sales and others (ii)
96,795
103,811
110,405
412,824
395,352
414,414
China commerce wholesale (iii)
17,106
17,854
20,479
Total Taobao and Tmall Group
429,930
413,206
434,893
Cloud Intelligence Group (iv)
102,016
103,497
106,374
Alibaba International Digital Commerce Group:
International commerce retail (v)
43,679
50,933
81,654
International commerce wholesale (vi)
18,506
19,573
20,944
Total Alibaba International Digital Commerce Group
62,185
70,506
102,598
Cainiao Smart Logistics Network Limited (vii)
66,808
77,512
99,020
Local Services Group (viii)
44,890
50,249
59,802
Digital Media and Entertainment Group (ix)
18,105
18,444
21,145
All others (x)
189,543
197,115
192,331
Total segment revenue
913,477
930,529
1,016,163
Unallocated
1,556
866
1,297
Inter-segment elimination (xi)
(61,971)
(62,708)
(76,292)
Consolidated revenue
853,062
868,687
941,168
300
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
5. Revenue (Continued)
(i) Revenue from China commerce retail is primarily generated from China commerce retail business and includes primarily
revenue from customer management services and sales of goods.
(ii) Revenue from direct sales and others under China commerce retail is primarily generated from direct sales businesses,
comprising mainly Tmall Supermarket and Tmall Global and primarily consists of revenue from sales of goods.
(iii) Revenue from China commerce wholesale is primarily generated from 1688.com and includes revenue from membership
fees and related value-added services and customer management services.
(iv) Revenue from Cloud Intelligence Group is primarily generated from the provision of cloud services, which include public
cloud services and non-public cloud services.
(v) Revenue from International commerce retail is primarily generated from AliExpress, Trendyol and Lazada and includes
revenue from customer management services, sales of goods and logistics services.
(vi) Revenue from International commerce wholesale is primarily generated from Alibaba.com and includes revenue from
membership fees and related value-added services and customer management services.
(vii) Revenue from Cainiao represents logistics services revenue from the domestic and cross-border fulfillment services.
(viii) Revenue from Local Services Group primarily represents platform commissions, logistics services revenue from the provision
of on-demand delivery services and revenue from other services provided by Ele.me, and revenue from software and
technology services provided by Amap.
(ix) Revenue from Digital Media and Entertainment Group is primarily generated from Youku and Alibaba Pictures, and includes
revenue from membership fees, content investment income, customer management services and ticketing services.
(x) Revenue from All others represented revenue from businesses including Sun Art, Freshippo, Alibaba Health, Lingxi Games,
Intime, Intelligent Information Platform, Fliggy, DingTalk and other businesses. The majority of revenue within All others
consist of direct sales revenue, which is recorded on a gross basis.
(xi) Inter-segment elimination consisted of revenue primarily from Cloud Intelligence Group and Cainiao.
(xii) For the year ended March 31, 2024, as a result of the change in segment reporting (Note 26), the Company reclassified
revenue by segment. Figures for the years ended March 31, 2022 and 2023 were reclassified to conform to this presentation.
Revenue by type is as follows:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Customer management services (i)
379,999
355,144
386,571
Membership fees and value-added services
35,739
40,078
41,956
Logistics services
71,279
89,214
114,073
Cloud services
74,123
76,648
76,459
Sales of goods
255,171
271,016
283,273
Other revenue (ii)
36,751
36,587
38,836
853,062
868,687
941,168
(i) Customer management services mainly include CPC, CPM, time-based and CPS marketing services.
(ii) Other revenue includes revenue from self-developed online games, other value-added services provided through various
platforms and businesses.
The amount of revenue recognized for performance obligations satisfied (or partially satisfied) in prior
periods for contracts with expected duration of more than one year during the years ended March 31, 2022,
2023 and 2024 were not material.
301
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
6. Leases
The Company entered into operating lease agreements primarily for shops and malls, offices, warehouses
and land. Certain lease agreements contain an option for the Company to renew a lease for a term of up to
five years or an option to terminate a lease early. The Company considers these options in determining the
classification and measurement of the leases.
The leases may include variable payments based on measures such as the level of sales at a physical store,
which are expensed as incurred.
Components of operating lease cost are as follows:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Operating lease cost
10,982
10,802
10,752
Variable lease cost
837
672
655
Total operating lease cost
11,819
11,474
11,407
For the years ended March 31, 2022, 2023 and 2024, cash payments for operating leases amounted to
RMB6,556 million, RMB8,050 million and RMB10,452 million, respectively. For the years ended March 31,
2023 and 2024, the operating lease assets obtained in exchange for operating lease liabilities amounted to
RMB5,030 million and RMB7,969 million, respectively.
As of March 31, 2023 and 2024, the Company’s operating leases had a weighted average remaining lease
term of 9.3 years and 9.2 years, respectively. As of the same dates, the Company’s operating leases had
a weighted average discount rate of 4.8% and 4.7%, respectively. Future lease payments under operating
leases as of March 31, 2024 are as follows:
Amounts
RMB
(in millions)
For the year ending March 31,
2025
7,297
2026
5,875
2027
5,034
2028
4,320
2029
3,687
Thereafter
18,429
44,642
Less: imputed interest
(9,804)
Total operating lease liabilities (Note 19)
34,838
302
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
7. Income tax expenses
Composition of income tax expenses
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Current income tax expense
28,184
17,266
27,792
Deferred taxation
(1,369)
(1,717)
(5,263)
26,815
15,549
22,529
Under the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital
gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands
withholding tax is imposed. The Company’s subsidiaries incorporated in Hong Kong were subject to the
Hong Kong profits tax rate at 16.5% for the years ended March 31, 2022, 2023 and 2024. The Company’s
subsidiaries incorporated in other jurisdictions were subject to income tax charges calculated according to
the tax laws enacted or substantially enacted in the countries where they operate and generate income.
Current income tax expense primarily includes the provision for PRC Enterprise Income Tax (“EIT”) for
subsidiaries operating in the PRC and withholding tax on earnings that have been declared for distribution
by PRC subsidiaries to offshore holding companies. Substantially all of the Company’s income before
income tax and share of results of equity method investees are generated by these PRC subsidiaries. These
subsidiaries are subject to EIT on their taxable income as reported in their respective statutory financial
statements adjusted in accordance with the relevant tax laws, rules and regulations in the PRC.
Under the PRC Enterprise Income Tax Law (the “EIT Law”), the standard enterprise income tax rate for
domestic enterprises and foreign invested enterprises is 25%. In addition, the EIT Law provides for,
among others, a preferential tax rate of 15% for enterprises qualified as High and New Technology
Enterprises. Further, certain subsidiaries were recognized as Software Enterprises and thereby entitled
to full exemption from EIT for two years beginning from their first profitable calendar year and a 50%
reduction for the subsequent three calendar years. In addition, a duly recognized Key Software Enterprise
(“KSE”) within China’s national plan can enjoy a preferential EIT rate of 10%. The KSE status is subject to
review by the relevant authorities every year and the timing of the annual review and notification by the
relevant authorities may vary from year to year. The related reduction in tax expense as a result of official
notification confirming the KSE status is accounted for upon the receipt of such notification.
303
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
7. Income tax expenses (Continued)
Composition of income tax expenses (Continued)
The tax status of the subsidiaries of the Company with major taxable profits is described below:
•
Alibaba (China) Technology Co., Ltd. (“Alibaba China”), Taobao (China) Software Co., Ltd. (“Taobao
China”), Zhejiang Tmall Technology Co., Ltd. (“Tmall China”) and Alibaba (China) Co., Ltd (“China
Co.”), entities primarily engaged in the operations of the Company’s wholesale marketplaces,
Taobao, Tmall, and technology, software research and development and relevant services,
respectively, were qualified as High and New Technology Enterprises. For the taxation years of 2021,
2022 and 2023, Alibaba China, Taobao China, Tmall China, and China Co. applied an EIT rate of 15%
as High and New Technology Enterprises.
•
Alibaba (Beijing) Software Services Co., Ltd (“Alibaba Beijing”), an entity primarily engaged in the
operations of technology, software research and development and relevant services, was recognized
as a High and New Technology Enterprise. Alibaba Beijing was also granted the Software Enterprise
status and was thereby entitled to an income tax exemption for two years beginning from its first
profitable taxation year of 2017, and a 50% reduction for the subsequent three consecutive years
starting from the taxation year of 2019. Accordingly, Alibaba Beijing was entitled to an EIT rate of
12.5% (50% reduction in the standard statutory rate) during the taxation years of 2019, 2020 and
2021. For the taxation years of 2022 and 2023, Alibaba Beijing applied an EIT rate of 15% as High and
New Technology Enterprise.
Most of the remaining PRC entities of the Company are subject to EIT at 25% for the years ended March 31,
2022, 2023 and 2024.
Pursuant to the EIT Law, a 10% withholding tax is levied on dividends declared by PRC companies to
their foreign investors. A lower withholding tax rate of 5% is applicable if direct foreign investors with
at least 25% equity interest in the PRC company are incorporated in Hong Kong and meet the relevant
requirements pursuant to the tax arrangement between Chinese mainland and Hong Kong S.A.R. Since
the equity holders of the major PRC subsidiaries of the Company are Hong Kong incorporated companies
and meet the relevant requirements pursuant to the tax arrangement between Chinese mainland and
Hong Kong S.A.R., the Company has used 5% to provide for deferred tax liabilities on retained earnings
which are anticipated to be distributed. As of March 31, 2024, the Company has accrued the withholding
tax on substantially all of the distributable earnings of the PRC subsidiaries, except for those undistributed
earnings that the Company intends to invest indefinitely in the PRC which amounted to RMB304.7 billion.
304
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
7. Income tax expenses (Continued)
Composition of deferred tax assets and liabilities
As of March 31,
2023
2024
RMB
RMB
(in millions)
Deferred tax assets
Licensed copyrights
4,438
5,527
Tax losses carried forward and others (i)
47,586
52,410
52,024
57,937
Valuation allowance (ii)
(36,530)
(46,576)
Total deferred tax assets
15,494
11,361
Deferred tax liabilities
Identifiable intangible assets
(18,751)
(14,176)
Withholding tax on undistributed earnings (iii)
(8,170)
(8,170)
Equity method investees and others (iv)
(34,824)
(30,666)
Total deferred tax liabilities
(61,745)
(53,012)
Net deferred tax liabilities
(46,251)
(41,651)
(i) Others primarily represents deferred tax assets for share-based awards, investments in equity method investees, equity
securities and other investments, as well as accrued expenses which are not deductible until paid under PRC tax laws.
(ii) Change in valuation allowances is mainly from the valuation allowances provided on the deferred tax assets related to the
tax losses carried forward due to the uncertainty surrounding their realization. Valuation allowances are also provided on
the deferred tax assets related to the investment in certain equity securities and other investments. If events occur in the
future that improve the certainty of realization, an adjustment to the valuation allowances will be made and consequently
income tax expenses will be reduced.
(iii) The related deferred tax liabilities as of March 31, 2023 and 2024 were provided on the assumption that substantially all
of the distributable earnings of PRC subsidiaries will be distributed as dividends, except for those undistributed earnings
that the Company intends to invest indefinitely in the PRC which amounted to RMB233.6 billion and RMB304.7 billion,
respectively.
(iv) Deferred tax liabilities for investments in equity method investees mainly includes the deferred tax effect on the gain in
relation to the receipt of the 33% equity interest in Ant Group of RMB19.7 billion. Others primarily represents deferred tax
liabilities for investments in equity securities and other investments.
As of March 31, 2024, the accumulated tax losses of subsidiaries incorporated in Singapore, Hong Kong
S.A.R. and Malaysia, subject to the agreement of the relevant tax authorities, of RMB36,711 million,
RMB9,787 million and RMB2,122 million, respectively, are allowed to be carried forward to offset against
future taxable profits. The carry forward of tax losses in Singapore and Hong Kong S.A.R. generally
has no time limit, while the tax losses in Malaysia will expire, if unused, in the years ending March 31,
2025 through 2034. The accumulated tax losses of subsidiaries incorporated in the PRC, subject to the
agreement of the PRC tax authorities, of RMB149,388 million as of March 31, 2024 will expire, if unused, in
the years ending March 31, 2025 through 2034.
305
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
7. Income tax expenses (Continued)
Composition of deferred tax assets and liabilities (Continued)
Reconciliation of the differences between the statutory EIT rate applicable to profits of the consolidated
entities and the income tax expenses of the Company:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions, except per share data)
Income before income tax and share of result of
equity method investees
59,550
89,185
101,596
Income tax computed at statutory EIT rate (25%)
14,888
22,296
25,399
Effect of different tax rates available to different
jurisdictions
(2,006)
(153)
(1,095)
Effect of tax holiday and preferential tax benefit on
assessable profits of subsidiaries incorporated in
the PRC
(7,367)
(13,679)
(14,135)
Non-deductible expenses and non-taxable
income, net (i)
13,518
16,870
11,006
Additional deductions of certain research and
development expenses incurred by subsidiaries in
the PRC (ii)
(10,052)
(8,282)
(9,415)
Withholding tax on the earnings distributed and
anticipated to be remitted
5,026
5,312
6,127
Change in valuation allowance and others (iii)
12,808
(6,815)
4,642
Income tax expenses
26,815
15,549
22,529
Effect of tax holidays inside the PRC on basic earnings
per share
0.34
0.65
0.70
Effect of tax holidays inside the PRC on basic earnings
per ADS
2.73
5.22
5.60
(i) Expenses not deductible for tax purposes and non-taxable income primarily represent impairment of goodwill, investment
income or loss and share-based compensation expense.
(ii) This amount represents tax incentives relating to the research and development expenses of certain major operating
subsidiaries in the PRC.
(iii) Change in valuation allowance primarily represents valuation allowance for temporary differences associated with tax
losses and investments in certain equity securities and other investments. Besides, others primarily represents other tax
benefits which were not previously recognized as well as deferred tax effect for temporary differences in relation to certain
investments in equity method investees.
306
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
8. Share-based awards
(a) Share-based awards relating to ordinary shares of the Company
Share-based awards such as RSUs, incentive and non-statutory stock options, restricted shares,
dividend equivalents, share appreciation rights and share payments may be granted to any directors,
employees and consultants of the Company or affiliated companies under equity incentive plans
adopted since the inception of the Company. Currently, the 2014 Post-IPO Equity Incentive Plan (the
“2014 Plan”), which was adopted in September 2014 and has a ten-year term, is in effect and governs
the terms of the awards. If an award terminates, expires or lapses, or is canceled for any reason,
ordinary shares subject to the award become available for the grant of a new award under the
2014 Plan. Starting from April 1, 2015 and on each anniversary thereof, an additional amount equal
to the lesser of (A) 200,000,000 ordinary shares, and (B) such lesser number of ordinary shares as
determined by the board of directors becomes available for the grant of a new award under the 2014
Plan. As of March 31, 2024, the number of shares authorized but unissued was 286,838,192 ordinary
shares. Eight ordinary shares are issuable upon the vesting or the exercise of one share-based award.
RSUs
A summary of the changes in the RSUs relating to ordinary shares granted by the Company during the
year ended March 31, 2024 is as follows:
Number
of RSUs
Weighted-
average
grant date
fair value
US$
Awarded and unvested as of April 1, 2023
61,288,204
155.49
Granted
33,687,624
83.93
Vested
(22,242,169)
168.18
Canceled/forfeited
(8,287,198)
131.05
Awarded and unvested as of March 31, 2024 (i)
64,446,461
116.85
Expected to vest as of March 31, 2024 (ii)
55,339,287
120.44
(i) No outstanding RSUs will be vested after the expiry of a period of up to ten years from the date of grant.
(ii) RSUs expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding RSUs.
As of March 31, 2024, there were RMB15,604 million of unamortized compensation costs related to all
outstanding RSUs, net of expected forfeitures. These amounts are expected to be recognized over a
weighted average period of 1.9 years.
During the years ended March 31, 2022, 2023 and 2024, the Company recognized share-based
compensation expense of RMB30,313 million, RMB24,410 million and RMB17,734 million, respectively,
in connection with the above RSUs.
307
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
8. Share-based awards (Continued)
(a) Share-based awards relating to ordinary shares of the Company (Continued)
Share options
A summary of the changes in the share options relating to ordinary shares granted by the Company
during the year ended March 31, 2024 is as follows:
Number
of share
options
Weighted
average
exercise
price
Weighted
average
remaining
contractual
life
US$
(in years)
Outstanding as of April 1, 2023
7,129,334
77.08
3.9
Granted
2,000,000
78.37
9.7
Exercised
(2,210,667)
53.33
—
Canceled/forfeited
(84,000)
26.00
—
Outstanding as of March 31, 2024
6,834,667
85.77
5.5
Vested and exercisable as of March 31, 2024 (i)
3,693,333
94.37
3.5
Vested and expected to vest as of
March 31, 2024 (ii)
6,777,267
86.28
5.5
(i) No outstanding share options will be vested or exercisable after the expiry of a period of up to twelve years from the
date of grant.
(ii) Share options expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total
outstanding share options.
As of March 31, 2024, the aggregate intrinsic value of all outstanding options was RMB401 million.
As of the same date, the aggregate intrinsic value of options that were vested and exercisable and
options that were vested and expected to vest was RMB124 million and RMB382 million, respectively.
During the years ended March 31, 2022, 2023 and 2024, the weighted average grant date fair value
of share options granted was US$103.72, nil and US$40.30, respectively, and the total grant date
fair value of options vested during the same years was RMB306 million, RMB327 million and RMB238
million, respectively. During the same years, the aggregate intrinsic value of share options exercised
was RMB137 million, RMB67 million and RMB382 million, respectively.
Cash received from option exercises under the share option plans for the years ended March 31, 2022,
2023 and 2024 was RMB109 million, RMB8 million and RMB843 million, respectively.
308
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
8. Share-based awards (Continued)
(a) Share-based awards relating to ordinary shares of the Company (Continued)
Share options (Continued)
No share options were granted during the year ended March 31, 2023. The fair value of each option
granted during the years ended March 31, 2022 and 2024 is estimated on the measurement date
using the Black-Scholes model by applying the assumptions below:
Year ended March 31,
2022
2024
Risk-free interest rate (i)
1.93%–2.00%
4.50%
Expected dividend yield (ii)
0%
0%
Expected life (years) (iii)
3.71–7.14
6.50
Expected volatility (iv)
35.7%
44.8%
(i) Risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the expected
life of the share options in effect on the measurement date.
(ii) For the share options granted during the year ended March 31, 2022, expected dividend yield is assumed to be nil as
the Company had no history or expectation of paying a dividend on its ordinary shares. For the share options granted
during the year ended March 31, 2024, expected dividend yield is nil as the Company decided to pay upon the exercise
of such share options in an amount equivalent to the dividends as detailed in Note 28 to the participants.
(iii) Expected life of share options is based on management’s estimate on timing of exercise of share options.
(iv) Expected volatility is assumed based on the historical volatility of the Company in the period equal to the expected life
of each grant.
As of March 31, 2024, there were RMB624 million of unamortized compensation costs related to these
outstanding share options, net of expected forfeitures. These amounts are expected to be recognized
over a weighted average period of 2.7 years.
During the years ended March 31, 2022, 2023 and 2024, the Company recognized share-based
compensation expense of RMB86 million, RMB490 million and RMB240 million, respectively, in
connection with the above share options.
Following the dividends as detailed in Note 28, the Company decided to pay upon vesting of certain
RSUs or exercise of certain share options in an amount equivalent to the dividends to the participants.
This arrangement has no impact to the classification and vesting condition of the awards.
(b) Share-based awards relating to Ant Group
Prior to 2023, certain employees of the Company were granted share-based awards by Ant Group
and Hangzhou Junhan Equity Investment Partnership (“Junhan”), a major equity holder of Ant Group.
These awards tied to the valuation of Ant Group and are settled by respective grantors upon disposal
of these awards by the holders, vesting or exercise of these awards, depending on the forms of these
awards. In addition, Junhan and Ant Group have the right to repurchase the vested awards (or any
underlying equity for the settlement of the vested awards) granted by them, as applicable, from the
holders upon an initial public offering of Ant Group or the termination of the holders’ employment
with the Company at a price to be determined based on the then fair market value of Ant Group.
309
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
8. Share-based awards (Continued)
(b) Share-based awards relating to Ant Group (Continued)
For accounting purposes, these awards meet the definition of a financial derivative. The cost
relating to these awards is recognized by the Company and the related expense is recognized over
the requisite service period in the consolidated income statements with a corresponding credit to
additional paid-in capital. Subsequent changes in the fair value of these awards are recorded in the
consolidated income statements. The expenses relating to these awards are remeasured at the fair
value on each reporting date until their settlement dates. The fair value of the underlying equity is
primarily determined based on the contemporaneous valuation report, external information and
information obtained from Ant Group.
During the years ended March 31, 2022, 2023 and 2024, the Company recognized a net reversal of
RMB11,585 million, expenses of RMB668 million and a net reversal of RMB6,691 million, respectively,
in respect of the share-based awards relating to Ant Group.
Starting from April 2020, the parties agreed to settle with each other the cost associated with certain
share-based awards granted to each other’s employees upon vesting. The settlement amounts under
this arrangement depend on the values of Ant Group share-based awards granted to the Company’s
employees and the Company’s share-based awards granted to employees of Ant Group, in which the
net settlement amount is insignificant to the Company.
Share-based awards relating to ordinary shares of the Company and Ant Group are generally subject
to a four-year vesting schedule as determined by the administrator of the plans, or a vesting period of
up to ten years for certain management members of the Company.
(c) Share-based compensation expense by function
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Cost of revenue
5,725
5,710
3,012
Product development expenses
11,035
13,514
7,623
Sales and marketing expenses
3,050
3,710
2,265
General and administrative expenses
4,161
7,897
5,646
23,971
30,831
18,546
310
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
9. Earnings per share/ADS
Each ADS represents eight ordinary shares.
Basic earnings per share is computed by dividing net income attributable to ordinary shareholders by the
weighted average number of outstanding ordinary shares, adjusted for treasury shares. Basic earnings per
ADS is derived from the basic earnings per share.
For the calculation of diluted earnings per share, net income attributable to ordinary shareholders for basic
earnings per share is adjusted by the effect of dilutive securities, including share-based awards, under the
treasury stock method. Potentially dilutive securities, of which the amounts are insignificant, have been
excluded from the computation of diluted net income per share if their inclusion is anti-dilutive. Diluted
earnings per ADS is derived from the diluted earnings per share.
The following table sets forth the computation of basic and diluted net income per share/ADS for the
following periods:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions, except per share data)
Earnings per share
Numerator:
Net income attributable to ordinary shareholders for
computing net income per ordinary share — basic
61,959
72,509
79,741
Dilution effect on earnings arising from share-based
awards operated by equity method investees
and subsidiaries
(37)
(38)
(228)
Net income attributable to ordinary shareholders for
computing net income per ordinary share — diluted
61,922
72,471
79,513
Shares (denominator):
Weighted average number of shares used in
calculating net income per ordinary share —
basic (million shares)
21,558
20,980
20,182
Adjustments for dilutive RSUs and share options
(million shares)
229
134
177
Weighted average number of shares used in
calculating net income per ordinary share —
diluted (million shares)
21,787
21,114
20,359
Net income per ordinary share — basic (RMB)
2.87
3.46
3.95
Net income per ordinary share — diluted (RMB)
2.84
3.43
3.91
Earnings per ADS
Net income per ADS — basic (RMB)
22.99
27.65
31.61
Net income per ADS — diluted (RMB)
22.74
27.46
31.24
311
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
10. Restricted cash and escrow receivables
As of March 31,
2023
2024
RMB
RMB
(in millions)
Buyer protection fund deposits from merchants on
the marketplaces (i)
32,962
30,924
Others
3,462
7,375
36,424
38,299
(i) The amount represents buyer protection fund deposits received from merchants on the Company’s marketplaces, which
are restricted for the purpose of compensating buyers for claims against merchants. A corresponding liability is recorded
in other deposits and advances received under accrued expenses, accounts payable and other liabilities (Note 19) on the
consolidated balance sheets.
11. Equity securities and other investments
As of March 31, 2023
Original
cost
Cumulative
net gains
(losses)
Carrying
value
RMB
RMB
RMB
(in millions)
Equity securities:
Listed equity securities
107,535
216
107,751
Investments in privately held companies
97,701
(10,664)
87,037
Debt investments:
Debt securities and loan investments
22,210
(7,105)
15,105
Other treasury investments
40,736
—
40,736
268,182
(17,553)
250,629
As of March 31, 2024
Original
cost
Cumulative
net losses
Carrying
value
RMB
RMB
RMB
(in millions)
Equity securities:
Listed equity securities
92,456
(25,275)
67,181
Investments in privately held companies
110,863
(14,385)
96,478
Debt investments:
Debt securities and loan investments
20,723
(9,641)
11,082
Other treasury investments
106,150
—
106,150
330,192
(49,301)
280,891
Details of the significant additions during the years ended March 31, 2022, 2023 and 2024 are set out in
Note 4.
312
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
11. Equity securities and other investments (Continued)
Equity securities
For equity securities which were still held as of March 31, 2022, 2023 and 2024, net unrealized losses,
including impairment losses, of RMB25,587 million, RMB29,481 million and RMB28,790 million, respectively,
were recognized in interest and investment income, net, for the years ended March 31, 2022, 2023 and
2024.
Investments in privately held companies include equity investments for which the Company elected to
account for using the measurement alternative (Note 2(t)), for which the carrying value as of March 31,
2023 and 2024 were RMB79,545 million and RMB89,660 million, respectively.
For equity investments accounted for using the measurement alternative as of March 31, 2023, the
Company recorded cumulative upward adjustments of RMB17,782 million and cumulative impairments
and downward adjustments of RMB26,922 million. For these investments, the Company recorded upward
adjustments of RMB4,205 million and impairments and downward adjustments of RMB13,266 million
during the year ended March 31, 2023.
For equity investments accounted for using the measurement alternative as of March 31, 2024, the
Company recorded cumulative upward adjustments of RMB20,965 million and cumulative impairments
and downward adjustments of RMB32,760 million. For these investments, the Company recorded upward
adjustments of RMB8,121 million and impairments and downward adjustments of RMB11,585 million
during the year ended March 31, 2024.
Debt investments
Debt investments include convertible and exchangeable bonds accounted for under the fair value option,
for which the fair value as of March 31, 2023 and 2024 were RMB7,167 million and RMB3,344 million,
respectively. The aggregate fair value of these convertible and exchangeable bonds was lower than their
aggregate unpaid principal balance as of March 31, 2023 and 2024 by RMB2,993 million and RMB4,607
million, respectively. Unrealized losses recorded on these convertible and exchangeable bonds in the
consolidated income statements were RMB3,112 million, RMB262 million and RMB1,225 million during the
years ended March 31, 2022, 2023 and 2024, respectively.
Debt investments also include debt investments accounted for at amortized cost, for which the allowance
for credit losses as of March 31, 2023 and 2024 were RMB4,085 million and RMB5,034 million, respectively.
During the years ended March 31, 2022, 2023 and 2024, impairment losses (reversal of impairment losses)
on these debt investments of RMB3,225 million, RMB(356) million and RMB872 million, respectively, were
recorded in interest and investment income, net in the consolidated income statements.
During the year ended March 31, 2023, there were modifications, including alignment of the maturity date
and adjustments of numbers of collateral, to loans provided to a shareholder of an equity method investee
with principal amount of RMB4,931 million. As of March 31, 2023, repayment of the modified loan is
expected to be provided substantially through the sale of collateral, while as of March 31, 2024, repayment
of another loan with principal amount of RMB596 million and the modified loan are expected to be
provided substantially through the sale of collateral. Expected credit losses for these loans were assessed
on an individual basis, based on the fair value of the corresponding shares pledged as collateral as of the
reporting date, adjusted for selling costs as appropriate. The fair value of the collateral as of March 31,
2023 and 2024 were RMB3,574 million and RMB3,304 million, respectively. There is no commitment to lend
additional funds.
The carrying amount of debt investments accounted for at amortized cost approximates their fair value
due to the fact that the related effective interest rates approximate rates currently offered by financial
institutions for similar debt instruments of comparable maturities.
Other treasury investments mainly comprise of investments in fixed deposits, certificates of deposits and
marketable debt securities with original maturities over one year for treasury purposes.
313
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
12. Fair value measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. To increase the comparability
of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to
measure fair value:
Level 1
—
Valuations based on unadjusted quoted prices for identical assets and liabilities in
active markets.
Level 2
—
Valuations based on observable inputs other than quoted prices included in Level 1,
such as quoted prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets and liabilities in markets that are not active, or other
inputs that are observable or can be corroborated by observable market data.
Level 3
—
Valuations based on unobservable inputs reflecting assumptions, consistent with
reasonably available assumptions made by other market participants. These
valuations require significant judgment.
Fair value of listed equity investments are based on quoted prices in active markets for identical assets or
liabilities. The valuation of unlisted equity investments that do not have a quoted price may include the
use of market and income valuation approaches and the use of estimates, which may include discount
rates, investees’ liquidity and financial performance, and market data of comparable companies in
similar industries. Certain other financial instruments, such as interest rate swap contracts and certain
option agreements, are valued based on inputs derived from or corroborated by observable market
data. Valuations of convertible and exchangeable bonds that do not have a quoted price are generally
performed using valuation models such as the binomial model with unobservable inputs including
risk-free interest rate and expected volatility. The valuation of contingent consideration is performed
using an expected cash flow method with unobservable inputs including the probability to achieve
the contingencies, which is assessed by the Company, in connection with the contingent consideration
arrangements. Investments in privately held companies for which the Company elected to record using
the measurement alternative are remeasured on a non-recurring basis, and are categorized within Level 3
under the fair value hierarchy. The values are estimated based on valuation methods using the observable
transaction price at the transaction date and considering the rights and obligations of the securities and
other unobservable inputs including volatility.
314
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
12. Fair value measurement (Continued)
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a
recurring basis and are categorized under the fair value hierarchy:
As of March 31, 2023
Level 1
Level 2
Level 3
Total
RMB
RMB
RMB
RMB
(in millions)
Assets
Time deposits and certificate of deposits (i)
—
332,971
—
332,971
Wealth management products (i)
—
34,257
—
34,257
Restricted cash and escrow receivables
36,424
—
—
36,424
Listed equity securities (ii)
107,751
—
—
107,751
Convertible and exchangeable bonds (ii)
—
775
6,392
7,167
Option agreements (iii)
—
646
290
936
Others (v)
162
1,762
6,142
8,066
144,337
370,411
12,824
527,572
Liabilities
Contingent consideration in relation to
investments and acquisitions (iv)
—
—
537
537
Others (iv)
—
182
132
314
—
182
669
851
As of March 31, 2024
Level 1
Level 2
Level 3
Total
RMB
RMB
RMB
RMB
(in millions)
Assets
Time deposits and certificate of deposits (i)
—
339,730
—
339,730
Wealth management products (i)
—
20,784
—
20,784
Marketable debt securities (i)
—
8,591
—
8,591
Restricted cash and escrow receivables
38,299
—
—
38,299
Listed equity securities (ii)
67,181
—
—
67,181
Convertible and exchangeable bonds (ii)
—
147
3,197
3,344
Option agreements (iii)
—
90
165
255
Others (v)
—
2,255
5,593
7,848
105,480
371,597
8,955
486,032
Liabilities
Contingent consideration in relation to
investments and acquisitions (iv)
—
—
713
713
Others (iv)
—
24
801
825
—
24
1,514
1,538
(i) Included in short-term investments and equity securities and other investments on the consolidated balance sheets.
(ii) Included in equity securities and other investments on the consolidated balance sheets.
(iii) Included in prepayments, receivables and other assets on the consolidated balance sheets.
(iv) Included in accrued expenses, accounts payable and other liabilities on the consolidated balance sheets.
(v) Others primarily represent other investments with underlying assets measured at fair value.
315
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
12. Fair value measurement (Continued)
Convertible and exchangeable bonds categorized within Level 3 under the fair value hierarchy:
Amounts
RMB
(in millions)
Balance as of March 31, 2022
7,272
Additions
785
Net decrease in fair value
(373)
Disposal
(35)
Conversion
(1,492)
Foreign currency translation adjustments
235
Balance as of March 31, 2023
6,392
Additions
730
Net decrease in fair value
(1,243)
Disposal
(2,645)
Conversion
(107)
Foreign currency translation adjustments
70
Balance as of March 31, 2024
3,197
Contingent consideration in relation to investments and acquisitions categorized within Level 3 under the
fair value hierarchy:
Amounts
RMB
(in millions)
Balance as of March 31, 2022
829
Additions
178
Net decrease in fair value
(34)
Payment
(445)
Foreign currency translation adjustments
9
Balance as of March 31, 2023
537
Additions
226
Net increase in fair value
7
Payment
(71)
Foreign currency translation adjustments
14
Balance as of March 31, 2024
713
316
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
13. Prepayments, receivables and other assets
As of March 31,
2023
2024
RMB
RMB
(in millions)
Current:
Accounts receivable and contract assets, net of allowance
32,134
30,686
Inventories
28,547
25,460
VAT receivables, net of allowance
17,497
19,904
Prepaid cost of revenue, sales and marketing and other expenses
16,794
17,784
Advances to/receivables from customers, merchants and others
14,499
11,508
Amounts due from related companies
9,042
8,257
Interest receivables
5,471
10,055
Deferred direct selling costs and cost of revenue (i)
4,771
6,482
Others
8,317
13,400
137,072
143,536
Non-current:
Operating lease right-of-use assets
77,428
76,927
Deferred tax assets (Note 7)
15,494
11,361
Film costs and prepayment for licensed copyrights and others
8,905
12,073
Prepayment for acquisition of property and equipment
3,976
11,345
Others
5,123
4,396
110,926
116,102
(i) The Company is obligated to pay certain costs upon the receipt of membership fees from merchants or other customers,
which primarily consist of sales commissions, and certain costs associated with cloud services. The membership fees and
cloud services revenue are initially deferred and recognized as revenue in the consolidated income statements in the period
in which the services are rendered. As such, the related costs are also initially deferred and recognized in the consolidated
income statements in the same period as the related service fees and revenue are recognized.
317
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
14. Investments in equity method investees
Amounts
RMB
(in millions)
Balance as of March 31, 2022
219,642
Additions
4,990
Share of results, other comprehensive income and other reserves (i)
677
Disposals
(1,192)
Distributions (ii)
(11,645)
Transfers
1,046
Impairment loss (iii)
(8,310)
Foreign currency translation adjustments
2,172
Balance as of March 31, 2023
207,380
Additions
3,605
Share of results, other comprehensive income and other reserves (i)
2,739
Disposals
(1,069)
Distributions
(1,258)
Transfers
32
Impairment loss (iii)
(9,895)
Foreign currency translation adjustments
1,597
Balance as of March 31, 2024
203,131
(i) Share of results, other comprehensive income and other reserves include the share of results of the equity method investees,
the gain or loss arising from the deemed disposal of the equity method investees and basis differences arising from equity
method investees. The amount excludes the expenses relating to the share-based awards underlying the equity of the
Company and Ant Group granted to employees of certain equity method investees.
(ii) Includes dividend declared by Ant Group amounting to RMB10,519 million for the year ended March 31, 2023.
(iii) Impairment loss recorded represents other-than-temporary decline in fair value below the carrying value of the investments
in equity method investees. The valuation inputs for the fair value measurement with respect to the impairments include
the stock price for equity method investees that are listed, as well as certain unobservable inputs that are not subject to
meaningful aggregation.
As of March 31, 2024, equity method investments with an aggregate carrying amount of RMB26,519 million
are publicly traded and the total market value of these investments amounted to RMB28,364 million. As
of March 31, 2024, the Company’s retained earnings included undistributed earnings from equity method
investees of RMB47,770 million.
318
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
14. Investments in equity method investees (Continued)
For the years ended March 31, 2022, 2023 and 2024, equity method investments held by the Company in
aggregate have met the significance criteria as defined under Rule 4-08(g) of Regulation S-X. As such, the
Company is required to present summarized financial information for all of its equity method investments
as a group as follows:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Operating data:
Revenue
541,712
441,495
451,861
Cost of revenue
(371,076)
(297,895)
(312,422)
Income from operations
38,006
27,163
56,646
Net income (loss)
113,970
(86,761)
75,820
As of March 31,
2023
2024
RMB
RMB
(in millions)
Balance sheet data:
Current assets
591,660
619,857
Non-current assets
803,288
788,137
Current liabilities
409,055
469,259
Non-current liabilities
115,399
83,997
Noncontrolling interests and mezzanine equity
14,023
13,863
15. Property and equipment, net
As of March 31,
2023
2024
RMB
RMB
(in millions)
Building, property improvements and other property
123,276
135,132
Computer equipment and software
100,563
117,458
Construction in progress
45,129
42,677
Furniture, office and transportation equipment and others
21,631
20,367
290,599
315,634
Less: accumulated depreciation and impairment
(114,568)
(130,473)
Net book value
176,031
185,161
Depreciation expenses recognized for the years ended March 31, 2022, 2023 and 2024 were RMB25,470
million, RMB24,654 million and RMB23,344 million, respectively.
319
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
16. Intangible assets, net
As of March 31,
2023
2024
RMB
RMB
(in millions)
User base and customer relationships
48,155
48,863
Trade names, trademarks and domain names
39,301
39,687
Non-compete agreements
12,636
11,815
Developed technology and patents
6,639
7,166
Licensed copyrights (Note 2(x)) and others
8,893
9,586
115,624
117,117
Less: accumulated amortization and impairment
(68,711)
(90,167)
Net book value
46,913
26,950
During the years ended March 31, 2022, 2023 and 2024, the Company acquired intangible assets
amounting to RMB1,000 million, RMB285 million and RMB602 million, respectively, in connection with
business combinations, which were measured at fair value upon acquisition. Details of intangible assets
acquired in connection with business combinations are included in Note 4.
During the year ended March 31, 2024, considered lower than expected profitability as a result of
uncertainties in the market environment, the Company recognized impairment on intangible assets of
RMB12,089 million primarily relating to trade names, trademarks and domain names originated from
the acquisition of Sun Art, an asset group under All others segment. The fair value of the asset group is
determined based on its market capitalization.
The estimated aggregate amortization expenses for each of the five succeeding fiscal years and thereafter
are as follows:
Amounts
RMB
(in millions)
For the year ending March 31,
2025
7,699
2026
3,974
2027
3,281
2028
2,854
2029
2,010
Thereafter
7,132
26,950
320
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
17. Goodwill
Changes in the carrying amount of goodwill by segment for the years ended March 31, 2023 and 2024 were
as follows:
Taobao and
Tmall Group
Cloud
Intelligence
Group
Alibaba
International
Digital
Commerce
Group
Cainiao
Smart
Logistics
Network
Limited
Local
Services
Group
Digital
Media and
Entertainment
Group
Innovation
Initiatives
and others
All
others
Total
Balance as of
March 31, 2022
174,947
3,063
17,461
16,346
20,292
33,532
3,940
—
269,581
Additions
—
394
97
85
—
7
—
—
583
Impairment
—
—
—
—
—
(2,714)
—
—
(2,714)
Foreign currency
translation adjustments
9
33
593
6
—
—
—
—
641
Balance as of
March 31, 2023
174,956
3,490
18,151
16,437
20,292
30,825
3,940
—
268,091
Transfer due to
segment changes
(9,937)
—
—
—
—
(10,734)
(3,940)
24,611
—
Additions
33
124
1,470
—
155
—
—
—
1,782
Deconsolidations
(107)
—
—
—
—
—
—
(7)
(114)
Impairment (i)
—
—
—
—
—
(8,490)
—
(2,031)
(10,521)
Foreign currency
translation adjustments
—
24
412
5
—
—
—
—
441
Balance as of
March 31, 2024
164,945
3,638
20,033
16,442
20,447
11,601
—
22,573
259,679
(i) As of the annual goodwill impairment assessment date, considered the changes in market conditions, the Company
performed a quantitative impairment test on Youku, a reporting unit under Digital Media and Entertainment Group and
recognized an impairment charge of RMB8,490 million. The fair value of the reporting unit was determined based on the
discounted cash flow analysis using the assumptions including the future growth rates and the weighted average cost of
capital.
Gross goodwill balances were RMB300,425 million and RMB302,534 million as of March 31, 2023 and 2024,
respectively. Accumulated impairment losses were RMB32,334 million and RMB42,855 million as of March
31, 2023 and 2024, respectively.
In the annual goodwill impairment assessment, the Company concluded that the carrying amounts of
certain reporting units exceeded their respective fair values and recorded impairment losses of RMB25,141
million, RMB2,714 million and RMB10,521 million during the years ended March 31, 2022, 2023 and 2024,
respectively. The goodwill impairment is presented as an unallocated item in the segment information
(Note 26) because the CODM of the Company does not consider this as part of the segment operating
performance measure.
321
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
18. Deferred revenue and customer advances
Deferred revenue and customer advances primarily represent service fees prepaid by merchants or
customers for which the relevant services have not been provided. The respective balances are as follows:
As of March 31,
2023
2024
RMB
RMB
(in millions)
Deferred revenue
35,350
37,142
Customer advances
39,505
39,745
74,855
76,887
Less: current portion
(71,295)
(72,818)
Non-current portion
3,560
4,069
All service fees received in advance are initially recorded as customer advances. These amounts are
transferred to deferred revenue upon commencement of the provision of services by the Company and
are recognized in the consolidated income statements in the period in which the services are provided. In
general, service fees received in advance are non-refundable after the amounts are transferred to deferred
revenue. Substantially all of the balances of deferred revenue and customer advances are generally
recognized as revenue within one year.
322
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
19. Accrued expenses, accounts payable and other liabilities
As of March 31,
2023
2024
RMB
RMB
(in millions)
Current:
Payables and accruals for cost of revenue and sales and
marketing expenses
103,369
118,057
Other deposits and advances received (i)
54,964
54,508
Payable to merchants and third party marketing affiliates
31,425
32,989
Accrued bonus and staff costs, including sales commission
29,000
29,631
Payables and accruals for purchases of property and equipment
15,625
19,840
Amounts due to related companies (ii)
10,383
9,503
Other taxes payable (iii)
6,997
7,934
Operating lease liabilities (Note 6)
5,667
5,871
Contingent and deferred consideration in
relation to investments and acquisitions
901
1,094
Escrow money payable
107
79
Others
17,512
18,377
275,950
297,883
Non-current:
Operating lease liabilities (Note 6)
28,548
28,967
Contingent and deferred consideration in
relation to investments and acquisitions
1,058
1,473
Others
773
1,427
30,379
31,867
(i) Other deposits and advances received as of March 31, 2023 and 2024 include buyer protection fund deposits received from
merchants on the Company’s marketplaces (Note 10).
(ii) Amounts due to related companies primarily represent balances arising from the transactions with Ant Group (Note 22). The
balances are unsecured, interest free and repayable within the next twelve months.
(iii) Other taxes payable primarily represent VAT and PRC individual income tax of employees withheld by the Company.
The Company enters into agreements with several financial institutions and offer supplier finance program
to the Company’s suppliers. Suppliers can sell one or more of the Company’s payment obligations at their
sole discretion to the financial institutions to receive funds prior to the scheduled due dates to meet their
cash flow needs. The Company’s rights and obligations are not impacted and the original payment terms,
timing or amount, remain unchanged. The Company did not provide assets pledged as security or other
forms of guarantees under the supplier finance program. As of March 31, 2023 and 2024, the outstanding
payment obligations under the supplier finance program were RMB1,962 million and RMB2,302 million,
respectively, and are recorded within accrued expenses, accounts payable and other liabilities on the
consolidated balance sheets.
323
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
20. Bank borrowings
Bank borrowings are analyzed as follows:
As of March 31,
2023
2024
RMB
RMB
(in millions)
Current portion:
Short-term other borrowings (i)
7,466
12,749
Non-current portion:
US$4.0 billion syndicated loan denominated in US$ (ii)
27,393
28,828
Long-term other borrowings (iii)
24,630
26,858
52,023
55,686
(i) As of March 31, 2023 and 2024, the Company had short-term borrowings from banks which were repayable within one year
or on demand and charged interest rates ranging from 1.6% to 12.5% and 1.4% to 4.6% per annum, respectively. As of March
31, 2023 and 2024, the weighted average interest rate of these borrowings was 2.7% and 2.6% per annum, respectively. The
borrowings are primarily denominated in RMB.
(ii) As of March 31, 2023 and 2024, the Company had a US$4.0 billion syndicated loan, which was initially entered into with
a group of eight lead arrangers. The loan was priced at 85 basis points over LIBOR with maturity in May 2024. During the
year ended March 31, 2024, the loan terms were modified such that the interest rate of the loan was adjusted to 80 basis
points over Secured Overnight Financing Rate (“SOFR”) with a credit adjustment spread and the maturity of the loan was
extended to May 2028. Certain related floating interest payments are hedged by certain interest rate swap contracts entered
into by the Company. The proceeds of the loan were used for general corporate and working capital purposes (including
acquisitions).
(iii) As of March 31, 2023 and 2024, the Company had long-term borrowings from banks with weighted average interest rates of
3.8% and 3.5% per annum, respectively. The borrowings are primarily denominated in RMB.
Certain other bank borrowings are collateralized by a pledge of certain buildings and property
improvements, construction in progress and land use rights in the PRC and receivables with carrying values
of RMB23,767 million and RMB34,056 million, as of March 31, 2023 and 2024, respectively. As of March 31,
2024, the Company is in compliance with all covenants in relation to bank borrowings.
As of March 31, 2023 and 2024, the Company had a revolving credit facility provided by certain financial
institutions for an amount of US$6.5 billion, which has not yet been drawn down. The interest rate on any
outstanding utilized amount under this credit facility was calculated based on LIBOR plus 80 basis points,
and was adjusted to SOFR with a credit adjustment spread plus 80 basis points in May 2023. This facility is
reserved for general corporate and working capital purposes (including acquisitions). The expiration date
of the credit facility was June 2026.
324
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
20. Bank borrowings (Continued)
As of March 31, 2024, the borrowings will be due according to the following schedule:
Principal amounts
RMB
(in millions)
Within 1 year
12,749
Between 1 to 2 years
4,807
Between 2 to 3 years
3,745
Between 3 to 4 years
5,242
Between 4 to 5 years
30,078
Beyond 5 years
11,894
68,515
21. Unsecured senior notes
In November 2014, the Company issued unsecured senior notes including floating rate and fixed rate notes
with varying maturities for an aggregate principal amount of US$8.0 billion (the “2014 Senior Notes”), of
which US$1.3 billion was repaid in November 2017, US$2.25 billion was repaid in November 2019 and
US$1.5 billion was repaid in November 2021. The 2014 Senior Notes are senior unsecured obligations
that are listed on the HKSE, and interest is payable in arrears, quarterly for the floating rate notes and
semiannually for the fixed rate notes.
In December 2017, the Company issued unsecured fixed rate senior notes with varying maturities for an
aggregate principal amount of US$7.0 billion (the “2017 Senior Notes”), of which US$0.7 billion was repaid
in June 2023. The 2017 Senior Notes are senior unsecured obligations that are listed on the Singapore Stock
Exchange, and interest is payable in arrears semiannually.
In February 2021, the Company issued unsecured fixed rate senior notes with varying maturities for an
aggregate principal amount of US$5.0 billion (the “2021 Senior Notes”). The 2021 Senior Notes are senior
unsecured obligations that are listed on the Singapore Stock Exchange, and interest is payable in arrears
semiannually.
325
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
21. Unsecured senior notes (Continued)
The following table provides a summary of the Company’s unsecured senior notes as of March 31, 2023
and 2024:
As of March 31,
Effective
2023
2024
interest rate
RMB
RMB
(in millions)
US$700 million 2.800% notes due 2023
4,800
—
2.90%
US$2,250 million 3.600% notes due 2024
15,410
16,252
3.68%
US$2,550 million 3.400% notes due 2027
17,397
18,352
3.52%
US$1,500 million 2.125% notes due 2031
10,234
10,791
2.20%
US$700 million 4.500% notes due 2034
4,754
5,013
4.60%
US$1,000 million 4.000% notes due 2037
6,807
7,176
4.06%
US$1,000 million 2.700% notes due 2041
6,761
7,129
2.80%
US$1,750 million 4.200% notes due 2047
11,898
12,540
4.25%
US$1,500 million 3.150% notes due 2051
10,206
10,757
3.19%
US$1,000 million 4.400% notes due 2057
6,795
7,161
4.44%
US$1,000 million 3.250% notes due 2061
6,803
7,170
3.28%
Carrying value
101,865
102,341
Unamortized discount and debt issuance costs
665
644
Total principal amounts of unsecured senior notes
102,530
102,985
Less: current portion of principal amounts of unsecured
senior notes
(4,801)
(16,261)
Non-current portion of principal amounts of unsecured
senior notes
97,729
86,724
The effective interest rates for the unsecured senior notes include the interest charged on the notes as well
as amortization of the debt discounts and debt issuance costs.
The unsecured senior notes contain covenants including, among others, limitation on liens, consolidation,
merger and sale of the Company’s assets. As of March 31, 2024, the Company is in compliance with all
these covenants. In addition, the unsecured senior notes rank senior in right of payment to all of the
Company’s existing and future indebtedness expressly subordinated in right of payment to the notes
and rank at least equally in right of payment with all of the Company’s existing and future unsecured
unsubordinated indebtedness (subject to any priority rights pursuant to applicable law).
326
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
21. Unsecured senior notes (Continued)
As of March 31, 2024, the future principal payments for the Company’s unsecured senior notes will be due
according to the following schedule:
Principal amounts
RMB
(in millions)
Within 1 year
16,261
Between 1 to 2 years
—
Between 2 to 3 years
—
Between 3 to 4 years
18,429
Between 4 to 5 years
—
Thereafter
68,295
102,985
As of March 31, 2023 and 2024, the fair values of the Company’s unsecured senior notes, based on
Level 2 inputs, were US$12,523 million (RMB85,886 million) and US$11,999 million (RMB86,719 million),
respectively.
22. Related party transactions
During the years ended March 31, 2022, 2023 and 2024, other than disclosed elsewhere, the Company had
the following material related party transactions:
Transactions with Ant Group and its affiliates
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Amounts earned by the Company
Cloud services revenue (i)
5,536
8,409
8,814
Administrative and support services (i)
1,165
565
807
Annual fee for SME loan business (ii)
708
—
—
Marketplace software technology services fee and
other amounts earned (i)
2,358
2,831
3,244
9,767
11,805
12,865
Amounts incurred by the Company
Payment processing and escrow services fee (iii)
11,824
12,484
13,164
Other amounts incurred (i)
3,542
2,271
3,050
15,366
14,755
16,214
327
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
22. Related party transactions (Continued)
Transactions with Ant Group and its affiliates (Continued)
(i) The Company has other commercial arrangements and cost sharing arrangements with Ant Group and its affiliates on
various sales and marketing, cloud, and other administrative and support services.
(ii) Pursuant to the SAPA, the Company entered into software system use and service agreements with Ant Group in 2014,
under which the Company would receive annual fees for SME loan business for a term of seven years. In calendar years
2018 to 2021, the Company received or will receive annual fees equal to the amount received in calendar year 2017, which
was equal to 2.5% of the average daily balance of the SME loans made by Ant Group and its affiliates during that year. The
annual fee payment by Ant Group in relation to SME loan business was terminated in December 2021.
(iii) The Company has a commercial agreement with Alipay whereby the Company receives payment processing and escrow
services in exchange for a payment for the services fee, which was recognized in cost of revenue.
As of March 31, 2023 and 2024, the Company had certain amounts of cash held in accounts managed by
Alipay in connection with the provision of online and mobile commerce and related services for a total
amount of RMB7,080 million and RMB9,848 million, respectively, which have been classified as cash and
cash equivalents on the consolidated balance sheets.
Transactions with other investees
The Company has commercial arrangements with certain investees of the Company related to cloud
services. In connection with these services provided by the Company, RMB1,826 million, RMB1,462 million
and RMB984 million were recorded in revenue in the consolidated income statements for the years ended
March 31, 2022, 2023 and 2024, respectively.
The Company has commercial arrangements with certain investees of the Company related to marketing
services. In connection with these services provided to the Company, RMB976 million, RMB382 million and
RMB736 million were recorded in cost of revenue and sales and marketing expenses in the consolidated
income statements for the years ended March 31, 2022, 2023 and 2024, respectively.
The Company has commercial arrangements with certain investees of the Company related to logistics
services. In connection with these services provided by the Company, RMB1,728 million, RMB1,140 million
and RMB2,540 million were recorded in revenue in the consolidated income statements for the years ended
March 31, 2022, 2023 and 2024, respectively. Costs and expenses incurred in connection with these services
provided to the Company of RMB13,120 million, RMB14,750 million and RMB14,864 million were recorded
in the consolidated income statements for the same periods, respectively.
The Company has extended loans to certain investees for working capital and other uses in conjunction
with the Company’s investments. As of March 31, 2023 and 2024, the aggregate outstanding balance of
these loans was RMB2,345 million and RMB2,628 million, respectively, with remaining terms of up to three
years and interest rates of up to 10% per annum as of March 31, 2023, and remaining terms of up to two
years and interest rates of up to 10% per annum as of March 31, 2024.
The Company provided a guarantee for a term loan facility of HK$7.7 billion (RMB7.0 billion) in favor of
Hong Kong Cingleot Investment Management Limited (“Cingleot”), a company that is partially owned by
the Company, in connection with a logistics center development project at the Hong Kong International
Airport. As of March 31, 2023 and 2024, HK$5,233 million (RMB4,581 million) and HK$5,233 million
(RMB4,744 million) was drawn down by Cingleot under this facility, respectively. In May 2024, the loan
facility was modified to a revolving loan facility and the facility amount was reduced to HK$6.5 billion
(RMB5.9 billion).
328
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
22. Related party transactions (Continued)
Transactions with other investees (Continued)
The Company’s ecosystem offers different platforms on which different enterprises operate and the
Company believes that all transactions on the Company’s platforms are conducted on terms determined
based on normal commercial negotiation with similar unrelated parties.
Other than the transactions disclosed above or elsewhere in the consolidated financial statements, the
Company has commercial arrangements with other investees and other related parties to provide and
receive certain marketing, cloud and other services and products. The amounts relating to these services
provided and received represent less than 1% of the Company’s revenue and total costs and expenses,
respectively, for the years ended March 31, 2022, 2023 and 2024.
In addition, the Company has made certain acquisitions and equity investments together with related
parties from time to time during the years ended March 31, 2022, 2023 and 2024. The agreements for
acquisitions and equity investments were entered into by the parties involved and conducted on fair value
basis. The significant acquisitions and equity investments together with related parties are included in Note
4.
23. Restricted net assets
PRC laws and regulations permit payments of dividends by the Company’s subsidiaries incorporated in the
PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards
and regulations. In addition, the Company’s subsidiaries incorporated in the PRC are required to annually
appropriate 10% of their net income to the statutory reserve prior to payment of any dividends, unless the
reserve has reached 50% of their respective registered capital. Furthermore, registered share capital and
capital reserve accounts are also restricted from distribution. As a result of the restrictions described above
and elsewhere under PRC laws and regulations, the Company’s subsidiaries incorporated in the PRC are
restricted in their ability to transfer a portion of their net assets to the Company in the form of dividends.
The restriction amounted to RMB316,968 million as of March 31, 2024. Except for the above or disclosed
elsewhere, there is no other restriction on the use of proceeds generated by the Company’s subsidiaries to
satisfy any obligations of the Company.
329
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
24. Commitments
(a) Capital commitments
The Company’s capital commitments primarily relate to capital expenditures contracted for purchase
of property and equipment, including the construction of corporate campuses. Total capital
commitments contracted but not provided for amounted to RMB21,924 million and RMB18,372 million
as of March 31, 2023 and 2024, respectively. The capital expenditures contracted for are analyzed as
follows:
As of March 31,
2023
2024
RMB
RMB
(in millions)
No later than 1 year
16,826
11,884
Later than 1 year and no later than 5 years
5,092
6,486
More than 5 years
6
2
21,924
18,372
(b) Investment commitments
The Company was obligated to pay up to RMB11,570 million and RMB11,166 million for business
combinations and equity investments under various arrangements as of March 31, 2023 and
2024, respectively. The commitment balance as of March 31, 2023 and 2024 primarily includes the
remaining committed capital of certain investment funds.
(c) Other commitments
The Company also has other commitments including commitments for co-location and bandwidth
fees, licensed copyrights and marketing expenses. These commitments are analyzed as follows:
As of March 31,
2023
2024
RMB
RMB
(in millions)
No later than 1 year
37,210
40,243
Later than 1 year and no later than 5 years
21,288
21,471
More than 5 years
3,559
4,366
62,057
66,080
As a marketing initiative, the Company entered into a framework agreement with the International
Olympic Committee (the “IOC”) and the United States Olympic Committee in January 2017 for a long-
term partnership arrangement through 2028. Joining in The Olympic Partner worldwide sponsorship
program, the Company has become the official “E-Commerce Services” Partner and “Cloud Services”
Partner of the IOC. In addition, the Company has been granted certain marketing rights, benefits
and opportunities relating to future Olympic Games and related initiatives, events and activities. The
Company committed to provide at least US$815 million worth of cash, cloud infrastructure services
and cloud computing services, as well as marketing and media support in connection with various
Olympic initiatives, events and activities, including the Olympic Games and the Winter Olympic Games
through 2028.
330
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
25. Risks and contingencies
(a)
The Company is incorporated in the Cayman Islands and considered as a foreign entity under PRC
laws. Due to legal restrictions on foreign ownership and investment in, among other areas, value-
added telecommunications services, which include the operations of Internet content providers,
the Company operates its Internet businesses and other businesses through various contractual
arrangements with VIEs that are incorporated and owned by PRC citizens or by PRC entities owned
and/or controlled by PRC citizens. The VIEs hold the licenses and approvals that are essential for
their business operations in the PRC and the Company has entered into various agreements with the
VIEs and their equity holders such that the Company has the right to benefit from their licenses and
approvals and generally has control of the VIEs. In the Company’s opinion, the current ownership
structure and the contractual arrangements with the VIEs and their equity holders as well as the
operations of the VIEs are in substantial compliance with all existing PRC laws, rules and regulations.
However, there may be changes and other developments in PRC laws, rules and regulations.
Accordingly, the Company gives no assurance that PRC government authorities will not take a view
in the future that is contrary to the opinion of the Company. If the current ownership structure of
the Company and its contractual arrangements with the VIEs and their equity holders were found
to be in violation of any existing or future PRC laws or regulations, the Company’s ability to conduct
its business could be impacted and the Company may be required to restructure its ownership
structure and operations in the PRC to comply with the changes in the PRC laws which may result in
deconsolidation of the VIEs.
(b)
The PRC market in which the Company operates poses certain macro-economic and regulatory risks
and uncertainties. These uncertainties extend to the ability of the Company to operate or invest
in online and mobile commerce or other Internet related businesses, representing the principal
services provided by the Company, in the PRC. The information and technology industries are highly
regulated. Restrictions are currently in place or are unclear regarding what specific segments of
these industries foreign owned enterprises, like the Company, may operate. If new or more extensive
restrictions were imposed on the segments in which the Company is permitted to operate, the
Company could be required to sell or cease to operate or invest in some or all of its current businesses
in the PRC. These uncertainties also extend to the PRC’s regulations relating to anti-monopoly and
anti-unfair competition. In December 2020, the State Administration for Market Regulation of the
PRC (the “SAMR”) commenced an investigation on the Company pursuant to the PRC Anti-monopoly
Law. Following the investigation, in April 2021, the SAMR issued an administrative penalty decision
of the anti-monopoly investigation into the Company and imposed a fine of RMB18.2 billion, which
was accrued for as of March 31, 2021. The amount had been paid as of March 31, 2022. The SAMR
also issued an administrative guidance, instructing the Company to implement a comprehensive
rectification program, and to file a self-assessment and compliance report to the SAMR for three
consecutive years.
(c)
Because of the Company’s equity interest in and close association with Ant Group and overlapping
user bases, regulatory developments, litigation or proceedings, media and other reports, whether or
not true, and other events that affect Ant Group could also negatively affect customers’, regulators’,
investors’ and other third parties’ perception of the Company. In April 2021, Ant Group announced
that it would apply to set up a financial holding company to ensure its financial-related businesses
are fully regulated. To implement the rectification plan and comply with applicable new measures
and rules, Ant Group may be required to spend significant time and resources and make changes
to its businesses, which could materially and adversely affect its business operations and growth
prospects. In July 2023, PRC regulators announced a RMB7.07 billion fine for Ant Group, which was
also reflected in the Company’s share of results of equity method investees during the year ended
March 31, 2024 and Ant Group has completed the related work on the rectification. Changes in
Ant Group’s business and future prospects, or speculation of such changes, as well as additional
regulatory requirements placed on Ant Group, could in turn have a material adverse effect on the
Company.
331
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
25. Risks and contingencies (Continued)
(d)
The Company’s sales, purchase and expense transactions are generally denominated in RMB and a
significant portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely
convertible into foreign currencies. In the PRC, foreign exchange transactions are required by law to
be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of
China (the “PBOC”).
Remittances in currencies other than RMB by the Company in the PRC must be processed through the
PBOC or other PRC foreign exchange regulatory bodies and require certain supporting documentation
in order to effect the remittance. If the foreign exchange control system prevents the Company from
obtaining sufficient foreign currencies to satisfy its currency demands, the Company may not be able
to pay dividends in foreign currencies and the Company’s ability to fund its business activities that are
conducted in foreign currencies could be adversely affected.
(e)
In the ordinary course of business, the Company makes strategic investments to increase the service
offerings and expand capabilities. The Company continually reviews its investments to determine
whether there is a decline in fair value below the carrying value. Fair value of the listed securities is
subject to volatility and may be materially affected by market fluctuations.
(f)
Financial instruments that potentially subject the Company to significant concentration of credit risk
consist principally of cash and cash equivalents, short-term investments, restricted cash and equity
securities and other investments. As of March 31, 2023 and 2024, substantially all of the Company’s
cash and cash equivalents, restricted cash, short-term investments and other treasury investments
were held by major financial institutions located worldwide, including Chinese mainland and Hong
Kong S.A.R. If the financial institutions and other issuers of financial instruments held by the Company
could become insolvent or if the markets for these instruments could become illiquid as a result of a
severe economic downturn, the Company could lose some or all of the value of its investments.
(g)
During the years ended March 31, 2022, 2023 and 2024, the Company offered a trade assurance
program on the international wholesale marketplaces at no charge to the wholesale buyers and
sellers. If the wholesale sellers who participate in this program do not deliver the products in their
stated specifications to the wholesale buyers on schedule, the Company may compensate the
wholesale buyers for their losses on behalf of the wholesale sellers up to a pre-determined amount
following a review of each particular case. In turn, the Company will seek a full reimbursement
from the wholesale sellers for the prepaid reimbursement amount, yet the Company is exposed
to a risk over the collectability of the reimbursement from the wholesale sellers. During the years
ended March 31, 2022, 2023 and 2024, the Company did not incur any material losses with respect
to the compensation provided under this program. Given that the maximum compensation for each
wholesale seller is pre-determined based on their individual risk assessments by the Company
considering their credit profile or other relevant information, the Company determined that the
likelihood of material default on the payments are not probable and therefore no provisions have
been made in relation to this program.
332
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
25. Risks and contingencies (Continued)
(h)
In the ordinary course of business, the Company is from time to time involved in legal proceedings
and litigations in relation to disputes relating to trademarks and other intellectual property, among
others. In 2017, Beijing Jingdong Shiji Trading Co., Ltd. and Beijing Jingdong 360 E-commerce Co., Ltd.
sued Tmall China, Zhejiang Tmall Network Co., Ltd. and Alibaba Group Holding Limited for abuse of
dominant market position. The plaintiffs requested the three defendants to cease relevant acts and
claimed a substantial amount of damages in the original complaint. In March 2021, the plaintiffs
amended their claim to seek higher damages. In December 2023, the Beijing High People’s Court
issued a judgment in favor of the plaintiffs, and the Company has appealed the court judgment. As
of March 31, 2024, the case is in second-instance stage. The Company has accrued for the potential
damages in connection with this lawsuit. Except for the above, there are no legal proceedings and
litigations that have in the recent past had, or to the Company’s knowledge, are probable to have, a
material impact on the Company’s financial positions, results of operations or cash flows. Except for
the above, the Company did not accrue any material loss contingencies in this respect as of March 31,
2023 and 2024.
(i)
The Russia-Ukraine conflict has resulted in significant disruptions to supply chains, logistics and
business activities in the region that has negatively affected our international commerce business
and Cainiao’s international logistics business. The conflict has also caused, and continues to intensify,
significant geopolitical tensions in Europe and across the globe. The resulting sanctions imposed
are expected to have significant impacts on the economic conditions of the countries and markets
targeted by such sanctions, and may have unforeseen, unpredictable secondary effects on global
energy prices, supply chains and other aspects of the global economy. The conflict may adversely
affect the Company’s business, financial condition and results of operations.
(j)
The United Nations and a number of countries and jurisdictions, including China, the United States
and the EU, have adopted various export control and economic or trade sanction regimes. In
particular, the United States government and other governments have increasingly threatened and/
or imposed export control, as well as economic trade and other sanctions on a number of China-
based companies. In October 2023, the United States Department of Commerce’s Bureau of Industry
and Security released additional rules that became effective in November 2023, expanding and
strengthening export control measures to further restrict China’s access to advanced computing chips
and semiconductor manufacturing equipment. The United States and other countries may impose
other and more expansive restrictions on the sales of chips or other technologies to China and China-
based companies, including the Company, in future.
333
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
26. Segment information
Starting from the year ended March 31, 2024, the CODM started to review information under a new
reporting structure. Accordingly, segment reporting has been updated to conform to these changes and
segment information has been updated to be presented before elimination of inter-segment transactions.
Comparative figures for the years ended March 31, 2022 and 2023 were updated to conform to the
segment presentation for the year ended March 31, 2024.
In general, revenue, cost of revenue and operating expenses are directly attributable, or are allocated, to
each segment. The Company allocates costs and expenses that are not directly attributable to a specific
segment, such as those that support infrastructure across different segments, to different segments mainly
on the basis of usage, revenue or headcount, depending on the nature of the relevant costs and expenses.
The Company does not allocate assets to its segments as the CODM does not evaluate the performance of
segments using asset information.
The following table presents the summary of adjusted earnings before interest, taxes and amortization
(“Adjusted EBITA”) for each segment which is considered as a segment operating performance measure,
for the years ended March 31, 2022, 2023 and 2024:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Taobao and Tmall Group
192,218
189,140
194,827
Cloud Intelligence Group
3,744
4,101
6,121
Alibaba International Digital Commerce Group
(8,614)
(4,944)
(8,035)
Cainiao Smart Logistics Network Limited
(1,465)
(391)
1,402
Local Services Group
(20,059)
(13,148)
(9,812)
Digital Media and Entertainment Group
(5,509)
(2,789)
(1,539)
All others
(16,295)
(9,388)
(9,160)
Total segments Adjusted EBITA (i)
144,020
162,581
173,804
334
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
26. Segment information (Continued)
The following table presents the reconciliation from the total segments Adjusted EBITA to the consolidated
net income for the years ended March 31, 2022, 2023 and 2024:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Total segments Adjusted EBITA
144,020
162,581
173,804
Unallocated (ii)
(12,672)
(12,143)
(6,190)
Inter-segment elimination
(951)
(2,527)
(2,586)
Share-based compensation expense
(23,971)
(30,831)
(18,546)
Amortization and impairment of intangible assets
(11,647)
(13,504)
(21,592)
Impairment of goodwill, and others
(25,141)
(3,225)
(11,540)
Consolidated income from operations
69,638
100,351
113,350
Interest and investment income, net
(15,702)
(11,071)
(9,964)
Interest expense
(4,909)
(5,918)
(7,947)
Other income, net
10,523
5,823
6,157
Income tax expenses
(26,815)
(15,549)
(22,529)
Share of results of equity method investees
14,344
(8,063)
(7,735)
Consolidated net income
47,079
65,573
71,332
335
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
26. Segment information (Continued)
The following table presents the consolidated depreciation and impairment of property and equipment,
and operating lease cost relating to land use rights by segment for the years ended March 31, 2022, 2023
and 2024:
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Taobao and Tmall Group
450
345
464
Cloud Intelligence Group
16,572
16,589
14,335
Alibaba International Digital Commerce Group
593
712
961
Cainiao Smart Logistics Network Limited
733
909
1,254
Local Services Group
137
106
113
Digital Media and Entertainment Group
58
55
45
All others
7,702
7,104
7,278
Total segments depreciation and impairment of
property and equipment, and operating lease
cost relating to land use rights
26,245
25,820
24,450
(i) Adjusted EBITA represents net income before interest and investment income, net, interest expense, other income, net,
income tax expenses, share of results of equity method investees, share-based compensation expense, amortization and
impairment of intangible assets, impairment of goodwill, and others, which the Company does not believe are reflective of
the Company’s core operating performance during the periods presented.
(ii) Unallocated primarily relates to certain costs incurred by corporate functions and other miscellaneous items that are not
allocated to individual segments.
Details of the Company’s revenue by segment are set out in Note 5. As substantially all of the Company’s
long-lived assets are located in the PRC and substantially all of the Company’s revenue is derived from
within the PRC, no geographical information is presented.
336
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
27. Parent company only condensed financial information
The Company performed a test on the restricted net assets of its consolidated subsidiaries and VIEs in
accordance with Rule 4-08(e)(3) of Regulation S-X and concluded that it was applicable for the Company to
disclose the financial information for the parent company (“Alibaba Group Holding Limited”) only.
Condensed Balance Sheets
As of March 31,
2023
2024
RMB
RMB
(in millions)
Cash and cash equivalents
576
1,114
Amounts due from subsidiaries
99,536
49,096
Prepayments and other assets
868
527
Interest in subsidiaries and VIEs
1,123,451
1,180,705
Total assets
1,224,431
1,231,442
Current unsecured senior notes
4,800
16,252
Amounts due to subsidiaries
103,507
110,867
Accrued and other liabilities
2,009
2,862
Non-current bank borrowings
27,393
28,828
Non-current unsecured senior notes
97,065
86,089
Total liabilities
234,774
244,898
Ordinary shares
1
1
Additional paid-in capital
416,880
397,999
Treasury shares, at cost
(28,763)
(27,684)
Subscription receivables
(49)
—
Statutory reserves
12,977
14,733
Accumulated other comprehensive (loss) income
(10,417)
3,598
Retained earnings
599,028
597,897
Total shareholders’ equity
989,657
986,544
Total liabilities and equity
1,224,431
1,231,442
337
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
27. Parent company only condensed financial information (Continued)
Condensed Statements of Comprehensive Income
For the year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Total cost and expenses
(444)
(846)
(327)
Income from subsidiaries and VIEs
63,745
84,000
86,057
Income from operations
63,301
83,154
85,730
Interest expense
(3,976)
(4,696)
(5,415)
Other income and expenses
2,634
(5,949)
(574)
Net income
61,959
72,509
79,741
Other comprehensive (loss) income
(13,616)
23,379
14,340
Total comprehensive income
48,343
95,888
94,081
Condensed Statements of Cash Flows
Year ended March 31,
2022
2023
2024
RMB
RMB
RMB
(in millions)
Net cash (used in) provided by operating activities
(4,739)
71,885
93,308
Cash flows from investing activities:
(Advances to and investments in) Repayments
from subsidiaries and VIEs, and others
(20,188)
(12,290)
11,838
Net cash (used in) provided by investing activities
(20,188)
(12,290)
11,838
Cash flows from financing activities:
Issuance of ordinary shares
109
11
843
Advances from subsidiaries
95,621
15,296
6,195
Repurchase of ordinary shares
(61,225)
(74,746)
(88,745)
Dividend distribution
—
—
(17,946)
Repayment of unsecured senior notes
(9,585)
—
(5,013)
Net cash provided by (used in) financing activities
24,920
(59,439)
(104,666)
Effect of exchange rate changes on cash and
cash equivalents
(36)
33
58
(Decrease) Increase in cash and cash equivalents
(43)
189
538
Cash and cash equivalents at the beginning of the year
430
387
576
Cash and cash equivalents at the end of the year
387
576
1,114
338
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
27. Parent company only condensed financial information (Continued)
For the parent company only condensed financial information, the Company accounted for the investments
in subsidiaries and VIEs under the equity method of accounting as prescribed in ASC 323. Such investments
are presented on the Condensed Balance Sheets as “Investments in subsidiaries and VIEs” and the shares
of profits or losses of the subsidiaries and VIEs are presented as “Income from subsidiaries and VIEs” on the
Condensed Statements of Comprehensive Income.
During the years ended March 31, 2022, 2023 and 2024, dividends paid to the parent company by the
subsidiaries amounted to nil, RMB75,355 million and RMB98,174 million, respectively.
The parent company did not have significant capital and other commitments, or guarantees as of March
31, 2023 and 2024, except for those disclosed in these consolidated financial statements.
Certain information and footnote disclosures generally included in financial statements prepared in
accordance with US GAAP have been condensed and omitted in the parent company only condensed
financial information. The parent company only condensed financial information is not the general-
purpose financial statements of the reporting entity and should be read in conjunction with the
consolidated financial statements of the Company.
28. Dividends
An annual dividend for the year ended March 31, 2023 of US$0.125 per ordinary share or US$1.00 per ADS
was declared on November 16, 2023. The annual dividend of RMB17,946 million was paid during the year
ended March 31, 2024.
A two-part dividend comprised of (i) an annual dividend for the year ended March 31, 2024 of US$0.125
per ordinary share or US$1.00 per ADS, and (ii) a one-time extraordinary dividend of US$0.0825 per
ordinary share or US$0.66 per ADS, was declared on May 14, 2024.
No dividend was declared for the year ended March 31, 2022.
339
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
29. Reconciliation between U.S. GAAP and International Financial Reporting
Standards
The consolidated financial statements are prepared in accordance with U.S. GAAP, which differ in certain
respects from International Financial Reporting Standards (“IFRS”). The effects of material differences
between the consolidated financial statements of the Company prepared under U.S. GAAP and IFRS are as
follows:
Reconciliation of Consolidated Balance Sheets (Extract)
As of March 31, 2023
Amounts as
reported
under
U.S. GAAP
Consolidation
and business
combinations
(i)
Equity
securities
without readily
determinable
fair value
(ii)
Equity method
investments
(iii)
Share-based
awards
(iv)
Leases
(v)
Redeemable
noncontrolling
interests
(vi)
Hyperinflation
(vii)
Amounts under
IFRS
(in millions of RMB)
Equity securities and other investments
245,737
—
3,609
5,537
—
—
—
—
254,883
Prepayments, receivables and other assets
110,926
(310)
—
(482)
(1,819)
(1,758)
—
712
107,269
Investments in equity method investees
207,380
(241)
—
(2,303)
—
—
—
—
204,836
Property and equipment, net
176,031
—
—
—
—
—
—
353
176,384
Intangible assets, net
46,913
(2,541)
—
—
—
—
—
432
44,804
Goodwill
268,091
(47,033)
—
—
—
—
—
2,400
223,458
Total assets
1,753,044
(50,125)
3,609
2,752
(1,819)
(1,758)
—
3,897
1,709,600
Deferred tax liabilities
61,745
(920)
450
84
—
—
—
—
61,359
Other liabilities
30,379
—
—
—
—
(2)
10,627
—
41,004
Total liabilities
630,123
(920)
450
84
—
(2)
10,627
—
640,362
Mezzanine equity
9,858
—
—
—
—
—
(9,858)
—
—
Total shareholders’ equity
989,657
(9,198)
2,860
2,668
(1,819)
(1,756)
(1,832)
1,560
982,140
Noncontrolling interests
123,406
(40,007)
299
—
—
—
1,063
2,337
87,098
Total equity
1,113,063
(49,205)
3,159
2,668
(1,819)
(1,756)
(769)
3,897
1,069,238
Total liabilities, mezzanine equity
and equity
1,753,044
(50,125)
3,609
2,752
(1,819)
(1,758)
—
3,897
1,709,600
340
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
29. Reconciliation between U.S. GAAP and International Financial Reporting
Standards (Continued)
Reconciliation of Consolidated Balance Sheets (Extract) (Continued)
As of March 31, 2024
Amounts as
reported
under
U.S. GAAP
Consolidation
and business
combinations
(i)
Equity
securities
without readily
determinable
fair value
(ii)
Equity method
investments
(iii)
Share-based
awards
(iv)
Leases
(v)
Redeemable
noncontrolling
interests
(vi)
Hyperinflation
(vii)
Amounts under
IFRS
(in millions of RMB)
Equity securities and other investments
220,942
—
3,245
5,163
—
—
—
—
229,350
Prepayments, receivables and other assets
116,102
(258)
—
(113)
(534)
(1,874)
—
161
113,484
Investments in equity method investees
203,131
(241)
—
(173)
—
—
—
—
202,717
Property and equipment, net
185,161
—
—
—
—
—
—
446
185,607
Intangible assets, net
26,950
(2,181)
—
—
—
—
—
377
25,146
Goodwill
259,679
(46,392)
—
—
—
—
—
2,455
215,742
Total assets
1,764,829
(49,072)
3,245
4,877
(534)
(1,874)
—
3,439
1,724,910
Deferred tax liabilities
53,012
(789)
487
10
195
—
—
(46)
52,869
Other liabilities
31,867
—
—
—
—
(1)
10,009
—
41,875
Total liabilities
652,230
(789)
487
10
195
(1)
10,009
(46)
662,095
Mezzanine equity
10,728
—
—
—
—
—
(10,728)
—
—
Total shareholders’ equity
986,544
(10,984)
2,164
4,867
(729)
(1,873)
(303)
1,469
981,155
Noncontrolling interests
115,327
(37,299)
594
—
—
—
1,022
2,016
81,660
Total equity
1,101,871
(48,283)
2,758
4,867
(729)
(1,873)
719
3,485
1,062,815
Total liabilities, mezzanine equity
and equity
1,764,829
(49,072)
3,245
4,877
(534)
(1,874)
—
3,439
1,724,910
341
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
29. Reconciliation between U.S. GAAP and International Financial Reporting
Standards (Continued)
Reconciliation of Consolidated Income Statements (Extract)
Year ended March 31, 2023
Amounts as
reported under
U.S. GAAP
Consolidation
and business
combinations
(i)
Equity
securities
without readily
determinable
fair value
(ii)
Equity method
investments
(iii)
Share-based
awards
(iv)
Leases
(v)
Redeemable
noncontrolling
interests
(vi)
Hyperinflation
(vii)
Amounts under
IFRS
(in millions of RMB)
Revenue
868,687
—
—
—
—
—
—
2,332
871,019
Cost of revenue
(549,695)
—
—
—
(53)
1,126
—
(2,309)
(550,931)
Product development expenses
(56,744)
—
—
—
(68)
—
—
(184)
(56,996)
Sales and marketing expenses
(103,496)
—
—
—
(34)
2
—
(708)
(104,236)
General and administrative expenses
(42,183)
—
—
—
51
82
—
(152)
(42,202)
Amortization and impairment of intangible
assets
(13,504)
463
—
—
—
—
—
(5)
(13,046)
Income from operations
100,351
463
—
—
(104)
1,210
—
(1,026)
100,894
Interest and investment income, net
(11,071)
—
(1,022)
849
—
—
73
734
(10,437)
Interest expense
(5,918)
—
—
—
—
(1,651)
(765)
(8)
(8,342)
Other income, net
5,823
—
—
—
—
—
—
2,294
8,117
Income tax expenses
(15,549)
(24)
56
(1,478)
542
71
—
(182)
(16,564)
Share of results of equity method investees
(8,063)
—
—
5,915
9
—
—
—
(2,139)
Net income
65,573
439
(966)
5,286
447
(370)
(692)
1,812
71,529
Net loss attributable to noncontrolling
interests
7,210
(207)
(107)
—
(7)
—
725
(480)
7,134
Accretion of mezzanine equity
(274)
—
—
—
—
—
274
—
—
Net income attributable to ordinary
shareholders
72,509
232
(1,073)
5,286
440
(370)
307
1,332
78,663
342
Alibaba Group Holding Limited
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
29. Reconciliation between U.S. GAAP and International Financial Reporting
Standards (Continued)
Reconciliation of Consolidated Income Statements (Extract) (Continued)
Year ended March 31, 2024
Amounts as
reported under
U.S. GAAP
Consolidation
and business
combinations
(i)
Equity
securities
without readily
determinable
fair value
(ii)
Equity method
investments
(iii)
Share-based
awards
(iv)
Leases
(v)
Redeemable
noncontrolling
interests
(vi)
Hyperinflation
(vii)
Amounts under
IFRS
(in millions of RMB)
Revenue
941,168
—
—
—
—
—
—
1,902
943,070
Cost of revenue
(586,323)
—
—
—
(1,361)
1,332
—
(2,152)
(588,504)
Product development expenses
(52,256)
—
—
—
(2,629)
—
—
(179)
(55,064)
Sales and marketing expenses
(115,141)
—
—
—
(779)
2
—
(1,129)
(117,047)
General and administrative expenses
(41,985)
—
—
—
(2,552)
128
—
(133)
(44,542)
Amortization and impairment of intangible
assets
(21,592)
360
—
—
—
—
—
74
(21,158)
Impairment of goodwill
(10,521)
650
—
—
—
—
—
—
(9,871)
Income from operations
113,350
1,010
—
—
(7,321)
1,462
—
(1,617)
106,884
Interest and investment income, net
(9,964)
—
(365)
(799)
—
—
1,160
1,427
(8,541)
Interest expense
(7,947)
—
—
—
—
(1,629)
(700)
(92)
(10,368)
Other income, net
6,157
—
—
—
—
—
—
477
6,634
Income tax expenses
(22,529)
(78)
(37)
(249)
874
50
—
(488)
(22,457)
Share of results of equity method investees
(7,735)
—
—
5,303
(64)
—
—
—
(2,496)
Net income
71,332
932
(402)
4,255
(6,511)
(117)
460
(293)
69,656
Net loss attributable to noncontrolling
interests
8,677
(748)
(295)
—
305
—
315
84
8,338
Accretion of mezzanine equity
(268)
—
—
—
—
—
268
—
—
Net income attributable to ordinary
shareholders
79,741
184
(697)
4,255
(6,206)
(117)
1,043
(209)
77,994
343
Fiscal Year 2024 Annual Report
(For the Years Ended March 31, 2022, 2023 and 2024)
Notes to Consolidated Financial Statements
29. Reconciliation between U.S. GAAP and International Financial Reporting
Standards (Continued)
(i) Consolidation and business combinations
The Company consolidates an entity when the Company obtains control over the entity. Under U.S. GAAP, control generally
exists when the Company obtains a controlling financial interest over an entity, whereby the usual condition is ownership
of over 50% of the voting shares. Under IFRS, de facto control exists when the Company has the practical ability to direct
the relevant activities of the entity, even if the Company owns less than 50% of the voting shares, which results in a
difference in the timing of consolidation between U.S. GAAP and IFRS.
The Company recognizes noncontrolling interests to reflect the portion of equity of a subsidiary that is not attributable
to the Company. Under U.S. GAAP, noncontrolling interests are measured at fair value and full goodwill in relation to the
acquiree is recognized in a business combination. Under IFRS, the Company can elect, on a transaction-by-transaction
basis, to measure noncontrolling interests at the noncontrolling interests’ proportionate share of the acquiree’s net
identifiable assets and partial goodwill is recognized to reflect the controlling interests only.
(ii) Equity securities without readily determinable fair value
Under U.S. GAAP, the Company can elect, on an instrument-by-instrument basis, to apply the measurement alternative
to record the investments in equity securities without readily determinable fair values at cost, less impairment, with
subsequent adjustments for observable price changes recognized in the consolidated income statements. Under IFRS,
these investments are measured at fair value with changes in fair value recognized in the consolidated income statements.
(iii) Equity method investments
The Company generally applies the equity method to account for equity investments over which it has significant influence.
Under U.S. GAAP, significant influence is presumed to exist for an investment in limited partnership or unincorporated
entity, unless the investment is so minor that the Company has virtually no influence over the entity’s operating and
financial policies. Under IFRS, significant influence is presumed to exist for an investment of over 20% of the voting rights of
an entity.
The Company records its share of the post-acquisition results of its equity method investees and adjusts for the basis
differences that exist between the carrying values of the equity method investments and the Company’s proportionate
share of the carrying value of the investee’s net assets. Adjustments are made to the financial statements of the equity
method investees prepared under U.S. GAAP in order to conform to the Company’s accounting policies under IFRS and to
reflect the basis differences of the equity method investments under IFRS, if different from those under U.S. GAAP.
(iv) Share-based awards
The employees of the Company hold share-based awards relating to an equity method investee of the Company that were
granted and will be settled by related parties or economic interest holders of the Company. Under U.S. GAAP, the cost
related to these awards is recognized over the requisite service period, with subsequent changes in fair value of these
awards recognized in the consolidated income statements. Under IFRS, these awards are not considered as share based
payments of the Company and the cost relating to these awards is not recognized.
The Company accounts for income tax effects of share-based awards that ordinarily give rise to tax deduction. Under
U.S. GAAP, deferred taxes for these awards are measured based on share-based compensation expenses recognized in
the consolidated financial statements. Under IFRS, deferred taxes for these awards are measured based on future tax
deduction estimated at the end of each reporting period.
(v) Leases
Under U.S. GAAP, the amortization of right-of-use assets and the interest expense related to lease liabilities are recorded
together as lease expense and recognized in the consolidated income statements on a straight-line basis. Under IFRS,
the right-of-use assets are amortized on a straight-line basis while the interest expense related to lease liabilities are
recognized in the consolidated income statements using effective interest method.
(vi) Redeemable noncontrolling interests
Equity interests issued by certain subsidiaries of the Company are redeemable. Under U.S. GAAP, redeemable equity
interests are classified as mezzanine equity if the redemption is outside the Company’s control and as noncontrolling
interests if equity interests issued by finite-lived subsidiaries are mandatorily redeemable only upon liquidation. Under
IFRS, these redeemable equity interests are generally classified as financial liabilities.
(vii) Hyperinflation
Under U.S. GAAP, when the Company determines that a subsidiary is operating in a highly inflationary economy, the
financial statements of this subsidiary are remeasured prospectively as if its functional currency was the functional
currency of its immediate parent company. Under IFRS, the financial statements of the subsidiary operating in a highly
inflationary economy are restated in terms of the measuring unit current at the end of the reporting period.
Our annual report is available for viewing on the websites of the Hong Kong Stock Exchange at w w w.hkexnews.hk
and our website at w w w.alibabagroup.com.
In addition, we will provide hard copies of our annual report to shareholders, including ADS holders, free of
charge upon request.
The following table sets out the exhibits filed with our annual report on the Form 20-F.
Exhibit Number
Description of Document
1.1
Amended and Restated Memorandum and Articles of Association of the Registrant as
currently in effect
2.1
Registrant’s Form of Ordinary Share Certificate
2.2
Deposit Agreement, dated as of September 24, 2014, between the Registrant, the
depositary and holders and beneficial holders of American Depositary Shares evidenced
by American Depositary Receipts issued thereunder, including the form of American
Depositary Receipt
2.3
Form of American Depositary Receipt evidencing American Depositary Shares (included in
Exhibit 2.2)
2.4
Indenture, dated as of November 28, 2014, between the Registrant and Bank of New York
Mellon as Trustee
2.5
Fifth Supplemental Indenture, dated as of November 28, 2014, between the Registrant
and Bank of New York Mellon as Trustee
2.6
Sixth Supplemental Indenture, dated as of November 28, 2014, between the Registrant
and Bank of New York Mellon as Trustee
2.7
Form of 3.600% Senior Notes Due 2024 (included in Exhibit 2.5)
2.8
Form of 4.500% Senior Notes Due 2034 (included in Exhibit 2.6)
2.9
Indenture, dated as of December 6, 2017, between the Registrant and Bank of New York
Mellon as Trustee
2.10
Second Supplemental Indenture, dated as of December 6, 2017, between the Registrant
and Bank of New York Mellon as Trustee
2.11
Third Supplemental Indenture, dated as of December 6, 2017, between the Registrant and
Bank of New York Mellon as Trustee
344
Alibaba Group Holding Limited
Further Information
Exhibit Number
Description of Document
2.12
Fourth Supplemental Indenture, dated as of December 6, 2017, between the Registrant
and Bank of New York Mellon as Trustee
2.13
Fifth Supplemental Indenture, dated as of December 6, 2017, between the Registrant and
Bank of New York Mellon as Trustee
2.14
Form of 3.400% Senior Notes Due 2027 (included in Exhibit 2.10)
2.15
Form of 4.000% Senior Notes Due 2037 (included in Exhibit 2.11)
2.16
Form of 4.200% Senior Notes Due 2047 (included in Exhibit 2.12)
2.17
Form of 4.400% Senior Notes Due 2057 (included in Exhibit 2.13)
2.18
Description of Securities Registered under Section 12 of the U.S. Exchange Act
2.19
Sixth Supplemental Indenture, dated as of February 9, 2021, between the Registrant and
Bank of New York Mellon as Trustee
2.20
Seventh Supplemental Indenture, dated as of February 9, 2021, between the Registrant
and Bank of New York Mellon as Trustee
2.21
Eighth Supplemental Indenture, dated as of February 9, 2021, between the Registrant and
Bank of New York Mellon as Trustee
2.22
Ninth Supplemental Indenture, dated as of February 9, 2021, between the Registrant and
Bank of New York Mellon as Trustee
2.23
Form of 2.125% Senior Notes Due 2031 (included in Exhibit 2.19)
2.24
Form of 2.700% Senior Notes Due 2041 (included in Exhibit 2.20)
2.25
Form of 3.150% Senior Notes Due 2051 (included in Exhibit 2.21)
2.26
Form of 3.250% Senior Notes Due 2061 (included in Exhibit 2.22)
4.1
Form of Indemnification Agreement between the Registrant and its directors and
executive officers
4.2
Form of Employment Agreement between the Registrant and its executive officers
Further Information
345
Fiscal Year 2024 Annual Report
Exhibit Number
Description of Document
4.3
Form of Share Retention Agreement between the Registrant and certain members of
management
4.4
Second Amended and Restated 2014 Post IPO Equity Incentive Plan
4.5
Schedules of Material Differences of Contractual Arrangements of Representative Variable
Interest Entities of the Registrant
4.6
English translation of Loan Agreement, between Hangzhou Zhenxi Investment
Management Co., Ltd. and Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018
4.7
English translation of Exclusive Call Option Agreement entered into by and among
Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd.
and Zhejiang Tmall Network Co., Ltd., dated January 10, 2018
4.8
English translation of Shareholder’s Voting Rights Proxy Agreement entered into by and
among Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology
Co., Ltd. and Zhejiang Tmall Network Co., Ltd., dated January 10, 2018
4.9
English translation of Equity Pledge Agreement entered into by and among Hangzhou
Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and
Zhejiang Tmall Network Co., Ltd., dated January 10, 2018
4.10
English translation of Exclusive Services Agreement entered into between Zhejiang Tmall
Network Co., Ltd. and Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018
4.11
Share and Asset Purchase Agreement by and among the Registrant, Zhejiang Ant Small
and Micro Financial Services Group Co., Ltd. (currently known as Ant Group), Yahoo! Inc.,
SoftBank Corp. and the other Parties named therein, dated August 12, 2014
4.12
Amendment to Share and Asset Purchase Agreement by and among the Registrant,
Ant Small and Micro Financial Services Group Co., Ltd. (currently known as Ant Group),
SoftBank Group Corp., Jack Ma, Joseph C. Tsai, and the other Parties named therein, dated
February 1, 2018
4.13
Second Amendment to Share and Asset Purchase Agreement by and among the
Registrant, Ant Small and Micro Financial Services Group Co., Ltd. (currently known as Ant
Group) and SoftBank Group Corp., dated September 23, 2019
4.14
Third Amendment to Share and Asset Purchase Agreement by and among the Registrant,
Ant Group Co., Ltd., SoftBank Group Corp. and the other parties named therein, dated
August 24, 2020
4.15
Fourth Amendment to Share and Asset Purchase Agreement by and among the
Registrant, Ant Group Co., Ltd., SoftBank Group Corp. and the other parties named therein,
dated July 25, 2022
Further Information
346
Alibaba Group Holding Limited
Exhibit Number
Description of Document
4.16
Amended and Restated Commercial Agreement by and among the Registrant, Ant Group
Co., Ltd. and Alipay.com Co., Ltd., dated July 25, 2022
4.17
Second Amended and Restated Intellectual Property License and Software Technology
Services Agreement by and among the Registrant, Ant Small and Micro Financial Services
Group Co., Ltd. (currently known as Ant Group) and Alipay.com Co., Ltd., dated September
23, 2019
4.18
Cross License Agreement by and between the Registrant and Ant Small and Micro
Financial Services Group Co., Ltd. (currently known as Ant Group), dated September 23,
2019
4.19
Third Amendment and Restatement Agreement, dated May 16, 2023, in respect of a
US$4,000,000,000 Facility Agreement dated March 9, 2016
4.20
Second Amendment and Restatement Agreement, dated May 16, 2023, in respect of a
US$6,500,000,000 Facility Agreement dated April 7, 2017
4.21
Second Amendment and Restatement Agreement, dated January 4, 2024, in respect of
a HK$7,653,750,000 Facility Agreement, dated May 17, 2019, between Alibaba Group
Services Limited, as Guarantor, and the other parties named therein
8.1
List of Subsidiaries and Consolidated Entities of the Registrant
11.1
Code of Ethics of the Registrant
11.2
Insider Trading Policy
12.1
Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes Oxley Act
of 2002
12.2
Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes Oxley Act
of 2002
13.1
Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes Oxley Act
of 2002
13.2
Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes Oxley Act
of 2002
15.1
Consent of PricewaterhouseCoopers Zhong Tian LLP — Independent Registered Public
Accounting Firm
15.2
Consent of PricewaterhouseCoopers — Independent Registered Public Accounting Firm
15.3
Consent of Fangda Partners
15.4
Consent of Maples and Calder (Hong Kong) LLP
Further Information
347
Fiscal Year 2024 Annual Report
Exhibit Number
Description of Document
16.1
Letter from PricewaterhouseCoopers to the Securities and Exchange Commission
97.1
Incentive Compensation Clawback Policy
101.INS
Inline XBRL Instance Document-the instance document does not appear in the Interactive
Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104
Cover Page formatted as Inline XBRL and contained in Exhibit 101
Further Information
348
Alibaba Group Holding Limited
AliExpress
Ayi
Alimama
Derdo
Alibaba.com
Aniu
Alibaba Cloud
Alibaba Cloud Bao
Alibaba Health
Xiaolu
Cainiao
Caixiaoniao
Amap
Gao xiaode
DingTalk
Ding Sanduo
Banma
Xiaogenban
Damai
Microphone
1688
YUAN
Youku
Sammi
Taobao
Taodoll
Tmall
Tmall Doll
Xianyu
Goofish
UC
UU
Tao Piao Piao
Piao Piao
Lingyang
Lingxiaoyang
Pingtouge
Ping Sanyong
Quark
Quark Baobao
Orange Lion Sports
Chengxiaoshi
Shuqi
Shu xiaoqi
Lazada
Lazzie
Lingxi Games
Lingxiaoxi
Freshippo
Mr.Freshippo
Ele.me
Exiaobao
Fliggy
Fliggy
Alibaba Group Holding Limited