James Kynge in London and Henry Foy in Moscow
Alibaba is in “advanced stage negotiations” to form a joint venture ecommerce company with Russian partners, as China’s vision of a “digital silk road” across Eurasia takes shape.
Russian officials and other people involved in the deal said Alibaba was close to agreeing a partnership with Russian internet company, Mail.ru, and the Russian Direct Investment Fund, the sovereign wealth fund. The involvement of RDIF indicates the level of official backing for the planned venture.
“This is an important investment and it is very much part of the digital silk road,” said one Russian participant in the planned deal.
Last December, Kirill Dmitriev, RDIF’s head, told President Vladimir Putin that the fund planned to soon announce “investment in a number of our internet platforms with the aim of expanding their operations abroad as well as investment with Alibaba in internet logistics infrastructure in Russia”.
Jack Ma, Alibaba’s executive chairman, has visited Russia several times in recent years and last autumn shared a stage with Mr Putin. “We think Alibaba should join forces in developing Russia,” Mr Ma said at the time.
The size of the planned investment in the joint venture was unavailable, but the project is understood to be ambitious in scale, said a Russian official, who requested anonymity.
Mail.ru, which controls popular Russian social networking sites, including VKontakte, did not respond to a request for comment.
Increasing Chinese investment has become a key strategic focus for the Kremlin since western sanctions were imposed against Russia in 2014. Moscow has been seeking to strengthen its trade relations with Beijing and making a geopolitical pivot east.
Alibaba has long seen Russia as a key growth market, where major western online retail giants have little or no presence. Although ecommerce lags behind the rest of Europe, hampered by the preponderance of cash transactions, there is great potential. More than half the 140m population use the internet daily.
The country is already one of the biggest markets for AliExpress, Alibaba’s cross-border ecommerce business, which sells products from China overseas.
Last September, Alibaba launched Tmall, a trading platform for Russian customers. That came after a year of negotiations over a tie-up with state-owned Sberbank, the country’s largest lender, collapsed.
The RDIF and Mail.ru tie-up is seen as a replacement for that, delivering a large potential customer database and the tacit support of the state.
More broadly, a successful conclusion to the joint venture talks would herald progress for China’s goal to roll out a digital silk road. This programme, part of Beijing’s Belt and Road Initiative, envisages building telecoms infrastructure to facilitate the march of Chinese companies into the ecommerce, mobile phone and mobile payments markets overseas.
In south Asia and south-east Asia, digital silk road investments have been rapid, with Alibaba leading the way. In Indonesia, Alibaba has invested heavily to boost the growth of country’s two largest ecommerce companies, Lazada and Tokopedia, in a move driven in part by a desire to steal a march on Amazon, the US ecommerce giant.
Ant Financial, an affiliate of Alibaba that provides mobile payments, is already deeply embedded in the region. In March this year, it said it would invest $184m for a 45 per cent stake in Telenor Microfinance Bank, a subsidiary of the Telenor Group.
Other Chinese ecommerce and online companies such as Tencent, Didi Chuxing and JD.com are also making investments in south Asia and south-east Asia to boost their presence.