GUANGDONG COURTS ALIBABA TO BE THE CANTON TRADE FAIR THAT

UNCLAS SECTION 01 OF 02 GUANGZHOU 000285

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E.O. 12958: N/A
TAGS: EINT ECON PGOV CH
SUBJECT: GUANGDONG COURTS ALIBABA TO BE THE CANTON TRADE FAIR THAT
NEVER CLOSES

REF: GUANGZHOU 249

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1. (SBU) Summary: After heavy lobbying from Guangdong's Party
Secretary, E-commerce giant Alibaba, the largest B2B portal in
China, recently announced it would set up its South China regional
headquarters in Guangzhou, an investment that could bolster the
province's efforts to upgrade local industries. An Alibaba
executive told us that Party Secretary Wang Yang's proactive
courting and guarantees of government support were instrumental in
the firm's decision to expand in Guangzhou. In addition, she
pointed out that Guangdong is home to tens of thousands of
small-to-medium enterprises (SME's),the company's target customers,
and that Guangdong entrepreneurs are already relatively tech-savvy
and should take easily to using Alibaba's online marketing tools.
End Summary.


Alibaba to Pump Money and People into Guangdong
-------------- --


2. (SBU) Alibaba will invest USD 200 million in Guangdong over the
next three years and increase the size of its local staff from 700
to over 1,000 within two, according to Guangdong Marketing Manager
Luo Yun. Major initiatives on its agenda include building a data
center; expanding its Guangdong call center to cover Hong Kong and
Macao; and rapidly expanding its training session program, which
aims to teach Guangdong's tens of thousands of SME's how to
participate in its online marketplace.

Wang Yang Was the Key Proponent in Courting Alibaba
-------------- --------------


3. (SBU) Ms. Luo confirmed that Party Secretary Wang played a key
role in persuading Alibaba founder Jack Ma to set up his company's
South China headquarters in Guangdong, and said Wang provided the
all-important guarantees of government support. In addition to
Wang, Luo noted, several other prominent Guangdong government
officials were also strong advocates, including Governor Huang
Huahua, Guangzhou Vice Mayor Xu Zhibiao, and Foshan Party Secretary
Lin Yuanhe. She explained that Wang's lobbying campaign began in
February 2008, when he visited Alibaba headquarters in Hangzhou,
Zhejiang and invited Ma to develop the e-commerce industry in
Guangdong, offering guarantees of support. Wang and other delegates
from Guangdong also met with Alibaba's CEO, Ma Yun, during the
National People's Congress (NPC) in early March in Beijing. Local
officials from Foshan and Zhongshan municipalities have also been
active in the lobbying effort, signing separate cooperative
agreements with the firm.


4. (SBU) Luo said that Wang believes Alibaba's business and
marketing strategies harmonize with his own strategies for
increasing Guangdong SME's access to domestic and international
markets through e-commerce. She described how Alibaba currently
conducts 40 training sessions per month in Guangdong aimed at
familiarizing SME's with its e-commerce marketing tools. In these
sessions, Alibaba invites entrepreneurs who already benefit from the
company's services to give presentations on their experiences aimed
at teaching SME's how to expand their customer base and market
access using the Internet. In the process, Alibaba secures more
paying members. (Members pay a minimum of 50,000 RMB to have their
product pictures and video clips of their factories uploaded to
Alibaba.com). Luo said Alibaba is planning to dramatically expand
its training session program in Guangdong.


5. (SBU) Luo further explained that Alibaba markets itself as "a
trade fair that never closes." It should be no surprise then that
Wang and other government officials in Guangdong -- home to the
Canton Trade Fair, China's largest and oldest trade gathering
(reftel) -- should be interested in expanding its marketing efforts
into the virtual marketplace. Luo was careful to add, however, that
Alibaba would not usurp the Canton Trade Fair or similar events in
its importance. She asserted that many buyers rely on Alibaba's
services to narrow the field of suppliers down to a few candidates
that they then meet with at the Canton Trade Fair before making
their final purchasing decisions. Luo described it as old-world and
new-world commerce working in harmony.

Numerous SME's and Tech-Savvy Populace Also Attractive
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GUANGZHOU 00000285 002 OF 002




6. (SBU) Luo commented that the market potential for Alibaba's
services throughout Guangdong is huge, another key factor in its
decision to expand here. Guangdong has tens of thousands of
export-oriented SME's, Alibaba's target customers, and Luo's market
research shows only about 2 percent of them currently market their
products online. To summarize her views of Guangdong's market
potential, Luo quoted Ma as saying, "Alibaba started business in
Zhejiang, but will prosper in Guangdong."


7. (SBU) Luo also highlighted a third selling point: many of
Guangdong's entrepreneurs already have a basic understanding of the
Internet and e-commerce. This minimizes the need for Alibaba to
nurture the market and educate Guangdong's SME's on how to use the
company's online marketing tools. Indeed, according to the "2007
Internet Development Statistic Report" issued by the China Internet
Network Information Center, there are 30 million Internet users in
Guangdong alone, which accounts for 15.9 percent of the total
Internet users in China. (Note: much of the recent growth in
Internet usage in Guangdong is due to WAP network development and
the associated growth in mobile Internet users. End note.) Nearby
Fujian and Shanghai rank second and third respectively among China's
provincial-level jurisdictions, each with about 8 million Internet
users and about 4 percent of the total Internet users in China.


GOLDBERG