(Adds context, detail)

SHANGHAI, Sept 9 (Reuters) - Chinese e-commerce giant Alibaba Group Holding Ltd said on Tuesday it expected its total value of transactions in the second-quarter to be lower than previously thought, a fresh signal that Chinas slowdown is taking a bite out of consumer spending.

Alibaba is not the first company to flag the negative impact on sales of a weakening Chinese economy, but its sheer size makes it a bellwether. The company dominates e-commerce in China, where online spending is expected to hit $1 trillion by 2019, according to a report by research firm Forrester earlier this year.

At a tech conference in New York, Alibabas head of investor relations, Jane Penner, said consumers were still willing and able to spend but the company had been seeing a negative impact of the magnitude of the spending.

Alibaba now expects GMV, or gross merchandise volume, to be mid-single digits lower than its initial estimates in the quarter ending in September. GMV is the total value of transactions made on Alibabas platforms and is one of the most closely watched metrics for e-commerce companies.

We are still seeing actually high engagement by buyers on our platforms...but lower average order values, for example, Penner told Citis Global Tech Conference, according to an online playback of the comments.

In August, Alibaba reported GMV growth of 34 percent in the three months through June to 673 billion yuan ($106 billion), the slowest growth in more than three years.

Alibabas shares slumped 4.7 percent to end at $60.91 on Tuesday after earlier rising as much as 4.5 percent. The share price has halved since its peak in mid-November.

The Chinese government has been trying in fits and starts to transition the worlds second largest economy from being investment-dependent to a consumption-based model.

But there have been mixed signals as to whether that effort is bearing fruit. On Monday, the state planning agency said power usage, rail freight and the property market had all shown improvement since August, indicating that the economy was stabilising.

But the next day the government reported that imports shrank far more than expected in August, adding to global investors concerns that the worlds second largest economy may be slowing more sharply than earlier expected.

Global financial markets have been rattled in recent weeks by fears that Chinas slowdown could drag on already sluggish global growth, while adding to deflationary pressures by depressing prices.

Alibaba also said it expected growth in its AliExpress business to slow to low double-digits for the quarter ending September, due to weakening currencies in markets such as Russia and Brazil.

The AliExpress business is a global online marketplace for shoppers to buy directly from China. A majority of Alibabas international commerce retail business revenue is generated by AliExpress.

Alibaba listed on the New York Stock Exchange in the worlds biggest share offering in September last year. But worries on margins, slower growth in China and a sell-off in tech ADRs have all weighed on its shares, which now trade firmly below the IPO price of $68. ($1 = 6.3726 yuan) (Reporting By Arathy S Nair in Bengaluru, Vikram Subhedar in London and John Ruwitch in Shanghai; Editing by Sriraj Kalluvila and Alex Richardson)



By Amanda Proscia

The water-dependent economy of the Great Lakes states grew much faster than other sectors of the domestic economy in 2012, according to a recent report by the National Oceanic and Atmospheric Administration (NOAA).

The report broke water-based industries into marine construction, living resources, offshore mineral extraction, ship and boat building, tourism and recreation and marine transportation. It examined the number of employees, wages, and gross domestic product (GDP) created from each.

Michigan was the top state in the US for water-dependent employment growth. It grew 8 percent in 2012, nearly four times the national average, the report said.

"There was significant job loss in Michigan during the recession, more so than other Great Lakes states, and I think that this report just shows the resilience of these water-based sectors of the economy and their importance to the state's overall economy," said Emily Finnell, Great Lakes policy specialist for the Michigan Department of Environmental Quality.

One in five Michigan jobs are tied to water or water innovation, according to John Austin, director of the Michigan Economic Center, a network focused on increasing Michigan's role in the US's economic growth.

Michigan's overall Gross Domestic Product increased $238 million from 2011 to 2012, about 10 percent. Economic experts point to tourism as the key to the state's water-related economic growth.

"Michigan's GDP increase is linked to the tourism and recreation sector," said Jeffrey Adkins, an economist for NOAA's Office for Coastal Management. "It's a matter of that sector being affected so adversely by the economic downturn and then recovering so well."

Illinois led the Great Lakes states in total water-related GDP increase, about $315 million or 5.3 percent from 2011 to 2012. The GDP was measured by the monetary value of all goods and services in the various water-based industry sectors.

Economists say the water-based economic growth in the Great Lakes region reflect the ecology of the water.

"A lot of the Great Lake-dependent sectors, tourism and recreation and commercial fishing for instance, are really dependent on the health of the Great Lakes," Adkins said. "The Great Lakes economic growth in 2012 could not have happened if the Lakes were ecologically unhealthy."

"The two go together," Austin said. "When you clean the water and make it available to public use, it enhances the demand to be on the water."

Every dollar spent on Great Lakes restoration creates three dollars in economic impact for Great Lakes states, Austin said.

Overall, the Great Lakes region's water-dependent GDP increased almost $2 billion, with the highest increase coming from the water-based tourism and recreation sector.

"Great Lakes dependent jobs account for about 300,000 employees and over $16 billion in GDP," said Adkins, noting that the Great Lakes dependent economic sector has more value than the electric power generation, telecommunication and home construction industries combined.

Other Great Lakes states overall water-based GDP increase from 2011 to 2012:

  • Indiana: $79.1 million, or 10 percent
  • Minnesota: $79.2 million or 7.7 percent
  • Ohio: $101 million or 5.4 percent
  • Pennsylvania: $74.5 million or 2.9 percent
  • Wisconsin: $32.5 million or 1.9 percent

Read the full report here.

Related story: Water activity in Great Lakes States



As more bad economic news continues to filter out of China, most eyes have been fixated on the volatile fluctuations of the nations equity markets and the potential spillover effects reverberating throughout the United States and Europe.

Chinas crashing stock market comes as the result of its slowing economy, and it will compound the nations problems as its incipient investing class has been losing a lot of money with each successive market tumble. But its important to remember that while stock market shifts may grab headlines, it is the debt markets that truly determine the fate of an economy.

In the United States, the financial system nearly collapsed after the nations most systemically important financial institutions bet on the idea that real estate prices would continue to rise forever, or that financial engineering would save them when prices finally did fall. In China, the real estate market works much differently, but it remains the driving force behind a massive debt explosion that now threatens its entire economy.

In the US, it was collateralized debt obligations that helped create the demand to invest in residential mortgages, with debt being issued to homeowners, many of whom would end up not being able to repay after the bubble burst. In China, there is no private land ownership like there is in the United States, and so there isnt a problem of average citizens taking out mortgages they cant pay back. Instead, local governments, motivated by their inability to levy taxes, have increasingly relied on local government financing vehicles (LGFVs) to finance infrastructure projects. As Liao Fan, a professor at the Chinese Academy of Social Sciences has written:

Though dressed up as business corporations, LGFVs have been more of a disguised arm of local governments. Their most--or even only--reliable asset is land. Often empowered by local governments as land banks, they use land as the main collateral to secure long-term loans from China Development Bank (CDB), originally a policy bank but has gone far beyond that over the years. With this initial funding, LGFVs are able to start operation and borrow further by seeking short-term loans from the state-owned commercial banks or selling bonds on the inter-bank bond market. Since the proceeds from selling or developing land are the main source to repay such debts, local governments behind LGFVs have all the reason and incentive to expropriate more land and keep the property price at a high level, so as to continue the cycle.

Local governments have borrowed this money with the blessing of Chinas central government. In fact, Chinas much-lauded $570 billion stimulus package in 2008, which dwarfed the American response to its crisis relative to each countrys respective GDP was funded mostly by local government debt. That program helped power Chinas economic growth since 2008, but the dividends are now drying up. As Chinese growth slows, the central government is worried about the local governments abilities to finance the debt.

China could continue to kick the can down the road by bailing out its insolvent local governments. But this would run counter to President Xi Jinpings efforts to curb the power of local officials and shift Chinas growth model from investment led to consumption led. Last week, Beijing placed a $16 trillion yuan cap on Chinese government debt, up $600 million yuan from a cap it set last year. And this is after the government has been swapping debt with local governments, buying up real estate-financed local debt in place of government debt officially backed by the Chinese government.



If China is a bellwether for the global economy then perhaps South Korea might be an insightful bellwether for China. That could meaning trouble.

Unlike Japan, South Korea hasnt had the yawning chasm of quantitative and qualitative easing to alter its trade balances. Its level of shipments, particularly to China, offer perhaps a purer view of activity inside that country from a useful external perspective.

Unfortunately for those expecting to see the Chinese miracle reassert itself, South Korean data for August were just ghastly.

South Korea said exports posted their sharpest fall in six years as shipments to its largest export destination, China, slumped amid concerns about a slowdown in the worlds second-largest economy.

Yuan Devaluation

The South Korean data provide the first picture of trade for the full month of August in the region after a China devalued its currency on August 11. That was followed by wild financial market gyrations and jitters about sputtering Chinese growth.

South Korean exports shrank 14.7 percent from a year earlier in August to $39.33 billion, according to provisional data from the Ministry of Trade, Industries and Energy. The August reading missed a market expectation for a decline of 10 percent. Exports have been in decline for eight months in a row.

Given Chinas economic malignancy, the state of Asian trade and thus the Asian portion of the global economy has been thrown further into turmoil. In that sense, the dollar once more acts as catalyst and signal for the crosscurrents of finance and actual activity.
It may give off appearances like that of 1997, but the downfall of China suggests far more than that. South Korea suggests more for China.

The Chinese this week confirmed not just the dragging nature of the decline but once more its severity. On the import side, data had been more inspiring in June and July (again, coinciding, lagged, with the pause in the dollar waves) as imports only declined by 6.3 percent and 8.2 percent in those months, respectively.

Compared with earlier in the year, those rates seemed almost downright growth particularly to economists hungry to extrapolate even the most minor and short run variations. August, however, pushed China (and thus Asia) back into the this cant be happening column.

Lower Trade Forecast

Export weakness last month was broad-based, ANZ economist Li-Gang Liu said, with shipments to the US, European Union, Japan and Southeast Asia all down. Earlier this year, the World Trade Organization lowered its 2015 global trade forecast to 3.3 percent from 4 percent.

Imports in August fell 13.8 percent in dollar terms from a year earlier, compared with an 8.1 percent decrease in July, fueling another significant trade gap, Customs said. Chinas trade surplus widened in August to $60.2 billion from $43.03 billion in July.

As for the export numbers, there isnt any mistaking what they mean as even mainstream media recognizes, finally, this is not a problem for China alone.

China is hogging the headlines once again, with trade data the latest evidence that the worlds second-largest economy is slowing. Imports and exports dropped in August, highlighting tepid demand at home and abroad.

The problem with the convention of tepid demand isnt actually arguing about the degree to which contraction may have set in. At -5.5 percent, exports arent crashing like in the worst parts of the Great Recession but there doesnt appear anything to signal a turnaround.

Lingering Contraction

So tepid is really a static description of an ongoing issue that not only lingers, the more it does so at this level risks amplifying into what would actually be worse than 2008 something like Brazil where, due to the strong dollar interaction, there just is no sense of any bottom even after more than two years of straight contraction.

Somehow, markets were enthused by the Chinese data not as a commentary on being better than hoped (which it wasnt) but rather that the Peoples Bank of China will now have no choice but to stop dragging itself into stimulus.

I dont get that sentiment at all given that stimulus has been plentiful globally to the point of overabundance, to which it has been received in almost proportional but inverse economic fashion; the more central banks seek to induce aggregate demand the less of it that arrives.

Again, that was the main component of these bellwethers, that global growth is and has been tepid already and turning once again in the wrong direction.

That last part is certainly the view of the dollar especially upon China in late July/August. It hasnt really let up though it does seem to have relented in terms of acute pressure. The PBOC has been able to allow a tighter, appreciative yuan fix for most days since August 24 (so much for devaluation) until last night.

Accompanying depreciation in the yuan was the usual internal illiquidity, as the PBOC unleashed yet again CNY150 billion in reverse repos; which means, in global wholesale language, the dollar still has China in its crosshairs even if that fact is obscured by the lack of open disorder and chaos.

Unrealistic Expectations

It is under these terms that such stimulus expectations are not just unrealistic but simply absurd. The PBOC itself has cut interest rates (benchmark deposit rate) five times going back to November last year. What is most interesting about that is how the last three, including the latest on August 25, have simply underwhelmed in every possible manner.

Not only has the Chinese economy failed to respond even slightly, the internal liquidity mechanics (which is what stimulus is supposed to render) are likewise subjugated to the dollars continuing run of whatever dynamic intensity. Again, we get a good sense of what trouble the dollar is causing by what is being driven into yuan.

The whole sense of this Chinese decline offends orthodox sensibilities in every possible direction which is why they cant seem to make sense of any of it. Not only do you have an impossible Chinese economic recession persisting, it is itself not just Chinese. And where the yuan is supposed to make Chinas problems its own, the wholesale reality of the dollar and yuan combines and unifies all of it where economics takes just discrete parcels into consideration.

That is why today markets might well be enthused about Europes second quarter GDP being revised from 0.3 percent to 0.4 percent at the same time of the PBOCs undoubted stimulus when instead it might better discount South Koreas exports to Europe falling 21 percent in August much worse than shipments to China.


No one talks about flipping burgers with anything but disdain. The term is shorthand for a dead-end, subsistence job with small economic reward and no psychic profits at all.

Flipping burgers can certainly be like that. It can also be a stopgap for someone in a tough financial spot. It can be a first taste of employment in a summer job. It can be a stepping stone to a business of your own.

The flipping burgers analogy is the right one for talking about the gig economy, the on-demand economy, the contingent labor force -- use whatever term you like. No one has an idea yet of how large a slice of the American economy the phenomenon comprises, although the term gigonomics has been around since at least 2009. In 2015, its a topic candidates from both major political parties feel obliged to discuss.

The gig discussion is usually binary. Contingent employment is either (A) a boon offering flexibility and autonomy to professionals, parents and aspiring entrepreneurs; or (B) a trap for desperate people offering a bare-bones existence, no career path and relieving employers of any obligation for the well-being of the people who work for them. Its sort of the way we talk about flipping burgers.

Faster than imagined. The gig in gigonomics can be understood in two ways -- as a short-term project and as the foundational measure of storage in information technologies. The project gig is enabled by the digital gig. Because of both, the barriers to entry in all kinds of business get lower all the time.

The gig economy is developing faster than anyone imagined. Jobs -- or, more specifically, tasks -- that no one imagined could be automated or made digital even five years ago are becoming commonplace. Who predicted that one day thered be a phone app for hailing a taxi and that it would upend an industry thats been around for centuries? Or that a graphic designer in Boston might compete for work with someone in Ukraine on both price and quality?

Companies feel pitiless pressure to drive out costs, and have felt it for a decade or more. Hiring a contractor without benefits or long-term security offers companies flexibility and less risk. Simultaneously, people working in those organizations have accustomed themselves to digital tools that allow them to work apart from one another--video conferencing, screen sharing, collaboration sites like Google docs, work planning sites like Trello, file sharing utilities like Dropbox. Into this mix is a growing comfort with flex-time arrangements and working remotely that has been developing for years. These phenomena create a cultural comfort with contingency--among employers especially.

A rough consensus about the exchange of obligation between employed and employer is struggling to be born. Employers feel little responsibility for contingent labor. Its a position that would once have been culturally unacceptable. But because the economics are so compelling, it assumes greater legitimacy -- especially in regard to people you will never meet. Legal battles over what defines a contractor versus an employee (like the one Uber fought and lost in California this year) will one day be understood as the first steps in rewriting that portion of labor law.

Tipping the balance toward talent. Contingency often works to the disadvantage of contingent labor because, for now, the demand side holds the best cards. That may soon change.

A gig economy works best for people who already have things. Digital sophistication is the first thing they own. Education is another. Even Uber drivers need to have things -- a drivers license and capital, to name two. Not everyone will be a coder or a designer, of course, but successful independent agents all need a skill thats in demand combined with something to make them stand apart. Without that extra its a buyers market for talent.

The beginning of the end for the buyers market for talent may already be happening inside organizations where people have conventional jobs. Digital innovations are giving enormous power to individuals and, in the process, potential thwarting conventional ideas of employment and intellectual property. A junior person, say, in a bank or inside a machine shop, could dream up a new product, research it and create a logo without asking anyones permission. Who owns the idea in that case? Instead of having an employee the organization may find it has a partner instead.

One can imagine a time when the gig economy has become more entrenched than it is and contingent labor affiliates rather as medieval guilds did -- setting a market price for labor, establishing professional standards and discovering all the other benefits of association.
Until then were feeling the absence of an agreed-upon center. Thats the source of the floating unease about the gig economy. Theres no shared sense of the futures possibilities until we work out the right level of complexity for thinking about gigonomics.

Photo credit: Flickr

Other featured articles by the authors:
Little Brothers Big Moment
Most of us are now accustomed to an idea of ourselves as collections of digital data that are tracked, packaged and turned into money by someone else. We are beginning to view our private behaviors and transactions as goods we can exchange-but for what?

Seeing Acquisitions as Power Transfers.
When an animal eats a vegetable it transfers the latters power to itself though they occupy different categories. Thats what good acquisitions do. Its what conventional mergers dont.