Alibaba's 1 million American jobs promise isn't realistic

Jack Ma: President Trump must work with China
Jack Ma: President Trump must work with China

Alibaba founder Jack Ma met with Donald Trump Monday and pledged to create one million jobs in the U.S. over the next five years through the company's e-commerce platform.

That is a vague and misleading promise.

Ma is not going to build factories. He is not planning to set up Alibaba operations centers that would employ tech savvy Americans. And he is not touting a big investment in the U.S.

In other words, Ma isn't promising what most experts and economists would define as job creation. He's talking about stimulating trade by helping one million small businesses sell American goods to consumers in China and Asia.

To create one million jobs would require each of those businesses to hire one new worker. So far so good. But U.S. trade on Alibaba's Taobao and Tmall shopping sites is relatively small at the moment.

More than 7,000 U.S. brands sold $15 billion worth of goods to Chinese consumers last year, according to Alibaba spokesperson Rico Ngai. (Alibaba did $17.8 billion in sales in 24 hours during its online shopping bonanza in November.)

Ma has been pushing since 2015 to increase U.S. sales to China on Alibaba. But getting one million American brands onto its platforms would require a 142-fold increase in business.

Related: Alibaba's Jack Ma met with Trump to talk jobs

Realistically, what will likely happen is Mom and Pop stores will set up e-commerce stores on Alibaba as a side business to tap into the China market, says Ben Cavender, director with China Market Research Group.

"I don't see a lot of job creation happening," Cavender said.

While Ma did not present any concrete plans for job creation, his meeting with Trump was a good "lobby photo opp," says Duncan Clark, chairman of consultancy firm BDA China and author of "Alibaba: The House That Jack Ma Built".

It could also be seen as a way to curry favor with U.S. regulators. The U.S. Trade Representative put Taobao back on its "notorious markets" list last month, citing an "unacceptably high" level of fake goods.

Related: Alibaba's Singles Day: World's biggest shopping bonanza sets new record

Analysts say sophisticated, middle class Chinese consumers have a growing appetite for foreign goods that are more trustworthy than Asian products. Small U.S. companies that specialize in nutrition, supplements, and baby products should do well on Alibaba's platforms, said Cavender.

Milk and milk formula products from Australia, New Zealand and Germany were extremely popular during Alibaba's Singles Day shopping blitz last November, said Clark.

Ma's reported focus on America's Midwest "makes me think of opportunities for, say, Wisconsin dairy farmers," Clark said.

But unless those farmers understand Chinese, they would have to hire a third party to help them set up shop on Taobao or Tmall. Alibaba could also open warehouses in the U.S. where companies could deliver their products, and Alibaba would take care of listing and shipping them to Asia.

That would create a few jobs, but Alibaba warehouses are for the most part heavily automated logistics hubs.

Correction: An earlier version of this story misstated the total value of goods sold by U.S. brands on Alibaba sites last year.

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