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Alibaba Donates a Third of Its Cash to Chinese Initiatives. The Stock Is Falling.

Barrons | Jack Denton | Sep 3, 2021

Alibaba donates 15 billion to government tech initiatives for common prosperity - Alibaba Donates a Third of Its Cash to Chinese Initiatives. The Stock Is Falling.

Alibaba stock tumbled in Hong Kong trading, with the company’s U.S.-listed shares set for similar declines, as the Chinese internet giant confirmed Friday a large donation to social and economic programs in its home country.

The stock fell 3.5% in Hong Kong and Alibaba’s American Depositary Receipts were down more than 1% in U.S. premarket trading. The decline weighed down the Hang Seng Tech Index, of which Alibaba is one of the largest constituents, which underperformed the wider Hang Seng to fall 1.1%. Stocks in Shanghai and Hong Kong were broadly lower on Friday amid the release of weak economic data.

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The donation of 100 billion yuan ($15.5 billion) represents more than a third of Alibaba’s $45.2 billion cash pile, as reported in the e-commerce company’s latest quarterly statements up to June 30.

The company will pour money into Chinese initiatives across technology innovation, economic development, job creation, social care, and establishing a “common prosperity” development fund, Alibaba said in a press release on Friday.

The news first broke on Thursday in the state-backed Zhejiang News, Reuters reported.

“Alibaba is a beneficiary of the strong social and economic progress in China over the past 22 years,” said Daniel Zhang, the group’s chair and chief executive, in a statement. “We are eager to do our part to support the realization of common prosperity through high-quality development.”

Alibaba follows in the footsteps of fellow Chinese tech behemoth Tencent , which has announced similarly-sized donations to local initiatives this year. Tech platforms Pinduoduo and auto maker Geely have also recently pledged to take part in a push for common prosperity, as has the founder of e-commerce group Meituan.

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