Alibaba Re-Organization Reveals Dramatically Slowing Chinese Economy

In a very surprising move Chinese e-commerce giant Alibaba Group Holding Ltd is freezing hiring for the rest of the year because it has grown “too quickly”, according to Executive Chairman Jack Ma.

“Alibaba has really developed too quickly … this year our entire group headcount will not go up by one person,” Ma said, via Alibaba’s official messaging app Laiwang.

The company will replace employees who leave. “When one leaves, we’ll bring one in,” Ma stated.

The hiring freeze comes just a week ahead of Alibaba reporting March quarter earnings. In January, Alibaba, which handles more online business than American giants Amazon and eBay combined, reported slowing revenue growth.

Headcount had been growing fast at Alibaba. As of Dec. 31, 2014, the company reported a 63 percent increase from a year earlier.

Ma also announced a re-organization that would see the company consolidate its businesses into seven segments – e-commerce, Ant Financial, Cainiao logistics, big data and cloud computing, advertising, cross-border trade and other internet services.

The sudden turn of events shows just how much the Chinese economy is slowing. Some estimates peg GDP growth at under three percent, well shy of the six percent plus goal of the communist party. The current growth comes amid stimulus measures and questionable financing deals of state backed companies in order to spur growth.

The fact Alibaba is making such radical moves should give investors in China cause for concern. The company is a bellwether for the Chinese economy and if Alibaba is slowing down, in a sector that should be growing faster than the overall economy, the full economy could be deeply depressed.

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