Economic slowdown, rapid e-commerce adoption is changing the way Chinese firms do business, says Alibaba’s Jack Ma

Alibaba Group executive chairman Jack Ma Yun sees a shift in the relationship between major brands and their contract manufacturers in mainland China amid the lingering economic slowdown and increased e-commerce adoption worldwide.

It is a situation that “may challenge the business model of some established brands”, Ma said in a published media commentary on Thursday.

“Chinese manufacturers face declining exports because demand from Western markets is not what it used to be,” he said. “Everyday, I see small businesses in China suffer because orders from their longtime customers are half of what they once were.”

With investments made in factories, equipment and workers, these manufacturers have been forced to look for new ways to ring in business, according to Ma.

“Manufacturers in China are increasingly using the internet to tap into the vast domestic market. Many of these firms have developed their own online-only brands with quality products for Chinese consumers,” he said.

On the Chinese mainland, which is the world’s largest e-commerce market, the efforts of those manufacturers may have helped online retail sales in the lower-tier cities and rural areas to overtake those in the country’s largest cities for the first time last year.

A report by global management consulting McKinsey in April estimated the mainland’s online retail market last year to have recorded a gross merchandise volume – the total value of goods sold on e-commerce platforms – of US$630 billion, 50.1 per cent of which were transactions made in the country’s vast lower-tier cities and rural areas.