Alibaba Group Holding Limited

Alibaba Group Holding Limited
NYSE: BABAHKEX:	9988 (HKD Counter) 89988 (RMB Counter)

Alibaba Group Holding Limited

Fiscal Year

Fiscal Year 2023 Annual Report2023
Annual ReportDrive Progress throughTransformation for Our Future
Contents2

Our Mission

3

Our Vision

5

Our Values

6

Our Vibrant Culture and People

8

Key Events in Fiscal Year 2023

10

Letter from our Chairman and CEO

15

Business Overview

95

Management Discussion
and Analysis

149

Directors, Senior Managementand Employees

169

Major Shareholders andRelated Party Transactions

185

Other Information for Shareholders

199

Exemptions and Waivers

201

Risk Factors

265

Definitions

273

Financial Statements

364

Further Information

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Our Mission

To make it easy to dobusiness anywhere
Our founders started our company to champion small businesses, in the belief
that the Internet would level the playing field by enabling small enterprises toleverage innovation and technology to grow and compete more effectively indomestic and global economies. We believe that concentrating on customer
needs and solving their problems – whether those customers are consumers,
merchants or enterprises – ultimately will lead to the best outcome for ourbusiness. In the digital era, we are staying true to our mission by helping ourcustomers and business partners harness the power of digital technology. We
have developed a large ecosystem powered by technology infrastructure thatenables participants to create and share value on our platforms. Our decisions
are guided by how they serve our mission over the long term, not by the
pursuit of short-term gains.

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Alibaba Group Holding Limited

Our VisionYears
We do not pursue size or power;
we aspire to be a good company that will last for 102 years.
For a company that was founded in 1999, lasting for 102 years means we will havespanned three centuries, an achievement that few companies can claim. Our culture,business models and systems are built to last, so that we can achieve sustainability inthe long run.
We are proactively transforming our organization through a new organizational andgovernance structure to strengthen the competitiveness of our businesses throughgreater independence to address the evolving needs of different customers andcapture new opportunities. We believe this transformation will help us achieve our longterm vision of serving a global consumer base, enabling more businesses to become
profitable and creating more jobs.

Fiscal Year 2023 Annual Report3

We aim to build the future infrastructure of commerce.
We envision that our customers will meet, work and liveat Alibaba, and that we will be a good company thatlasts for 102 years.

Our Values
Our values are fundamental to
the way we operate and how werecruit, evaluate and compensate
our people.

Customers
First,
Employees Second,
Shareholders Third

Trust

Makes
Everything
SimpleIf Not Now,

@ Alibaba
We enable commercial and social
interactions among hundreds of millions ofusers, between consumers and merchants,
and among businesses every day.

Today’s Best
Performance Is
Tomorrow’s@ Alibaba

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Alibaba Group Holding Limited

If Not Me,

Who?
Work Happily

Trust makes everything simple

Change is the only constantTrust is both the most precious
and fragile thing in the world.
The story of Alibaba is a story ofbuilding and cherishing trust.
Complexity begets complexity, andsimplicity breeds simplicity. Aliren
are straightforward – what you seeis what you get. With trust, there isno second-guessing or suspicion,and the result is simplicity andefficiency.

Whether you change or not, theworld is changing, our customers
are changing and the competitive
landscape is changing. We must
face change with respect andhumility. Otherwise, we will failto see it, fail to respect it, fail tounderstand it and fail to catch
up with it. Whether you change
yourself or create change, bothare the best kinds of change.
Embracing change is the mostunique part of our DNA.

Today’s best performance istomorrow’s baseline

If not now, when?
If not me, who?

Live seriously, work happily

In Alibaba’s most challenging
times, this spirit has helped us
overcome difficulties and survive.
In bad times, we know how tomotivate ourselves; in good times,
we dare to set “dream targets”(stretch goals). Face the future,
or we regress. We must shoot forthe moon, challenge ourselves,motivate ourselves and exceed
ourselves.

This was a tagline in Alibaba’s firstjob advertisement and became ourfirst proverb. It is not a question,
but a call of duty. This proverb
symbolizes the sense of ownershipthat each Aliren must possess.

This reflects our choice of what’s
important, in order of priority. Only
by creating sustained customer
value can employees grow andshareholders achieve long-term
benefit.

We empower our customers
with the fundamental infrastructure forcommerce and new technology, so that they
can build businesses and create value that canbe shared among our ecosystem participants.

We strive to expand our products
and services to become central
to the everyday lives of ourcustomers.

Is The Only
Constant

Live Seriously,

Baseline

Customers first, employees
second, shareholders third@ Alibaba

When?

ChangeWork is now, life is forever. What
you do in your job is up to you, but
you have responsibility to the ones
who love you. Enjoy work as you
enjoy life; treat life seriously as you
do work. If you live with purpose,
you will find reward. You make
Alibaba different and make yourloved ones proud. Everyone has
their own view of work and life;
we respect each person’s choice.
Whether you live by this value
depends on how you live your life.
Fiscal Year 2023 Annual Report5Our Vibrant Culture and People
Alibaba Group values every single employee. We hope torealize our commitment to “live seriously, work happily”
through employee engagement activities, big and small!

Rich, Multi-Dimensional
Employee Engagement
Initiatives
Our management seeks to understand employees’
viewpoints and regularly engages with staff
worldwide through online channels and in-person
events. This allows management to gain visibility
into the interests and thoughts of employees, whichhelps contribute to the company’s vitality andhealthy organizational development.

AliDayMay 10th is our annual AliDay,an employee-appreciation day
introduced in 2005 to celebrate
the spirit of determination,unity, dedication, and lovethat Aliren showcased during
the Severe Acute Respiratory
Syndrome (SARS) epidemic. On
AliDay, employees are invited to bring theirfamilies and loved ones to our main campus
in Hangzhou, China and offices worldwide
to experience our vibrant culture firsthand.

9.10 Customer Day
September 10th, the day Alibaba was founded, hasbeen the company’s annual Customer Day since 2015.
This day was established to encourage all employees
to remember that customers are our number one
priority and to uphold our “customer first” value. No
matter how the world changes, Alibaba will always
remain committed to its founding purpose of serving
our customers. Daniel Zhang, Chairman and Chief
Executive Officer of Alibaba Group, and other senior
executives have direct in-person engagements withcustomer representatives to understand their thoughts
and suggestions.

Culture of Philanthropy
Ali-versary
At Alibaba, employee tenure is likened tothe aging of fine wine, symbolizing thetransition from acceptance, integration, thenculture carrier. “One Year Aromatic,” “Three
Years Mellow,” “Five Years Mature” and “TenYears Fragrant” are how we characterize
employees who have been with the company
for one year, three years, five years and ten
years, respectively. Alibaba hosts a special
ceremony to present customized rings to our“Five Years Mature” employees.

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Alibaba Group Holding Limited

In 2015, Alibaba launched an initiative to encourage all employees to volunteer at least three hours of community
service per year. This initiative has become part of the company’s unique culture. Alibaba has hosted its
Philanthropy Week every year since 2017 to champion charitable causes with partners across its ecosystem.
Another initiative is the Alibaba
Philanthropy Award, anannual ceremony recognizing
outstanding charity projects,
teams and individuals. In thefiscal year 2023, ten charity
projects were rewarded,
including those which offeredsupport to people with visual
impairment, children in rural
areas, and patients with rarediseases.

Fiscal Year 2023 Annual Report

7

2023

Key Events in Fiscal Year 2023

2022

January

April

June

November

Alibaba Group joined Low Carbon Patent Pledge toaccelerate adoption of green technology and foster
collaborative innovation and made nine key patents
for green data center technology available for free.

Alibaba Cloud announced the global launchof Energy Expert, a sustainability platform tohelp customers worldwide measure, analyze
and manage the carbon emissions of theirbusiness activities and products.

Alibaba equipped merchantswith tools and solutions togrow their brand loyalty
membership programs andunveil new products, to help
them succeed during andbeyond the 11.11 Global
Shopping Festival.

During the COVID-19 resurgence, Freshippo andEle.me supported the supply and delivery ofessential goods to residents in Shanghai. Cainiao
also established an emergency logistics system
including disaster preparedness
management, emergency
transportation and transit
deployment.

May
Alibaba Cloud launched new
data centers in Thailand andGermany to bolster local
businesses’ digital innovation
capabilities and to support thegrowing digital transformation demands
from customers.
Alibaba ranked second in the Language Use
Case in the Gartner® “Critical Capabilities for
Cloud AI Developer Services” report(1).
Note:

Alibaba Group Holding Limited

February
In response to the earthquake thatstruck Türkiye, Trendyol mobilized
its resources to provide aid in therelief effort including the procurementof urgently needed supplies to theaffected areas as delivered by Cainiao,
and working with local NGOs to raise
funds from the international community.
Alibaba helped deliver winter supplies
from China to victims in Türkiye.

AugustMarch

Alibaba Group issued its 2022 Environmental, Socialand Governance (ESG) Report, announcing seven action
dimensions of its long-term ESG plan for the first time.

Alibaba Group announced a neworganizational and governancestructure to empower all its businesses
to become more agile in response
to market changes and better
positioned to seize market andindustry opportunities. The company
would establish six main businessgroups – including Cloud Intelligence
Group, Taobao and Tmall Group, Local
Services Group, Alibaba International
Digital Commerce Group, Cainiao
Smart Logistics Network Limited andDigital Media and Entertainment
Group – and various businesses withindependent management andoperations.

September

December

2022 marked the fifth
anniversary of Tmall Luxury
Pavilion. In the twelve
months ended September
30, 2022, international luxury brands launched over
30,000 new products each month on average and morethan 500 new product series made their debut on Tmall
Luxury Pavilion during the period.

In response to the urgent need for online andoffline merchants, factories and foreign tradeenterprises to resume operations, Taobao,
Tmall, Alibaba.com and AliExpress introduced
support measures to alleviate their problems
such as shortage of operating capital andchallenges in digital transformation.

(1) Gartner, Critical Capabilities for Cloud AI Developer Services, Updated 30 March 2023, Published 23 May 2022.
Critical Capabilities reference provided for historical purposes only and does not reflect current market recognition.

8

Alibaba Cloud hosted its
annual Apsara Conference
and launched ModelScopemodel-as-a-service platform,
hosting open-source AI
models, including pretrained models, and a seriesof serverless data products
and upgraded data analytics
platform.

Alibaba, represented by the Alibaba
Foundation, donated RMB125 million
for the procurement of oximeters toalleviate the problems of medicalcare and resource limitations in therural villages in China. The equipment
was promptly dispatched to the rural
areas by Cainiao.

Fiscal Year 2023 Annual Report9Letter from our Chairman and CEO

Letter from our Chairman and CEO

Dear Shareholders,

2023 is destined to be ayear filled with significancein Alibaba history. Ourorganizational transformation
is an unprecedented journeyin the history of businessin China and a daring
experiment for a large-scaleorganization. We believe themarket is the best litmus test,
and time will prove its worth.

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Alibaba Group Holding Limited

Thank you for your continued trust, support, andrecognition. Over the past year, we have collectively
witnessed and experienced many significant events– we finally moved on from the pandemic, work andlife got back on track, and the world reopened. New
disruptive AI technology is changing how we view
the world and understand reality, and there are highhopes for it to drive fundamental change across all
aspects of the human experience.
During this time of big transformations, I appreciate
the opportunity to share with you the series ofimportant changes at Alibaba over the past year,
along with our thoughts and outlook for the future.
2023 is destined to be a year filled with significance in
Alibaba history. Just before the end of the fiscal year,
we announced a decision with far-reaching impact– after 24 years, Alibaba is evolving from a single

company into a new governance model of “1+6+N” inwhich major business groups and various companies
have independent operations. “1” represents Alibaba
Group’s holding company, “6” refers to six major
business groups – Cloud Intelligence Group, Taobao
and Tmall Group, Local Services Group, Alibaba
International Digital Commerce (AIDC) Group, Cainiao
Smart Logistics Network Limited, and Digital Mediaand Entertainment Group, and “N” refers to various
businesses such as Alibaba Health, Sun Art Retail,and Freshippo. Each entity in the “6+N” will establish
its own board of directors that will provide oversightand support to the chief executive officer of thebusiness. Moving forward, Alibaba Group will focus on
implementing good capital management, supporting
the healthy development of our major businessgroups and various companies, and fostering thedevelopment of new innovative businesses.

Fiscal Year 2023 Annual Report11Letter from our Chairman and CEO

Over the last 24 years, the Alibaba family became
quite diverse, with increasingly more creative anddynamic units. Our consumer-focused businesses in
China served over one billion Chinese consumers lastyear. Cloud Intelligence Group is currently the world’s
third largest and Asia Pacific’s largest cloud computing
service provider. As of March 31, 2023, CloudIntelligence Group has 86 availability zones across
28 regions worldwide, serving more than four million
global customers, including 80% of China’s scienceand technology innovation enterprises, 60% of China’s
national-level specialized “little giant” enterprises,
and 55% of listed companies on the Chinese stock
exchanges. AIDC Group served hundreds of millionsof overseas consumers with a comprehensive
selection of local and global products and holistic
consumption experience, and reached over 47 million
active SME buyers worldwide. Cainiao celebrated its
tenth anniversary earlier this year, and is developing
a world-class smart logistics network within China
and across international markets. It processed overfour million cross-border and international parcels
daily in fiscal year 2023 and is working to offer afive-day delivery service for cross-border parcels in
the future, starting from its main markets. The Local
Services Group’s platform businesses have provided
convenient “to-home” and “to-destination” services
to hundreds of millions of Chinese consumers. On
October 1, 2022, the digital map navigation platform
Amap registered a peak record of 220 million daily
active users. The Digital Media and Entertainment
Group has focused on delivering “ordinary people,
powerful feelings, positive energy” content, andseveral releases have generated wide influence.
Under the new governance structure, these businessgroups will independently cater to their respective
markets, become self-reliant, and find unique paths togreater growth. Except for Taobao and Tmall Group,
all business groups and companies can raise external
capital and potentially seek their own independent
public offerings, subject to meeting the necessary
conditions. To date, we have announced plans for thefollowing transactions:•

Cloud Intelligence Group will pursue a full spinoff from Alibaba Group via a stock dividend
distribution to our shareholders and become an
independent publicly listed company;•

Cainiao Smart Logistics Network and Freshippo willseek independent public offerings, respectively;•

AIDC Group will seek external capital.

Letter from our Chairman and CEO

Our organizational transformation is an
unprecedented journey in the history of businessin China and a daring experiment for a large-scaleorganization. As early as 2015, we introduced the“middle platform” strategy, then built the “large
middle platform, small front office” organizationalmodel, which supported our front line teams
and became the industry benchmark. In 2020,
we championed the development of an agileorganization and gradually introduced greater
management independence across our businesses.
Internally we established a number of independently
operated companies, including Cainiao Smart
Logistics Network, Freshippo, and Local Services. In
this latest development, we have progressed to thenext stage of our transformation, which is the latest
organizational governance structure of “1+6+N”.
Our robust balance sheet was instrumental in such amonumental transformation. Despite the challenges
created by the global macroeconomic landscape,market fluctuations, and the pandemic, our businessesdelivered solid progress. We generated approximately
US$25 billion in free cash flow during the fiscal year.
We used our abundant cash reserves to invest in
new technologies, businesses, and great talent while
continuing to execute our share repurchase program.
During the fiscal year, we repurchased approximately
130 million ADSs (the equivalent of one billion
ordinary shares) for approximately US$10.9 billion andcontinued to explore different ways to create value forour shareholders.
At the beginning of 2023, I proposed “progress” as
the keyword to set the tone for Alibaba’s development
plans. “Progress” was necessary not only for themacro-environment changes and cyclical trends but
also for Alibaba’s development trajectory. We believe
the market is the best litmus test, and time will prove
its worth. As we face a new era of unknowns, we hopeto unleash our internal dynamism and creative forces
through radical self-transformation that can withstandthe test of the market and be positioned to capture
the generational opportunities ahead. We believe our
new governance structure will benefit the discovery
and creation of value for our customers, business, andshareholders, and, hopefully, a chance to contribute
greater value to the broader society.

Alibaba is unwavering in its commitment tofocusing on the long-term, value creation, andthe three strategies of consumption, cloudcomputing, and globalization. As we face a newera of unknowns, we hope to unleash our internal
dynamism and creative forces through radical
self-transformation that can withstand thetest of the market and be positioned
to capture the generational
opportunities ahead.

Of course, some things will not change. Alibaba isunwavering in its commitment to focusing on thelong-term, value creation, and the three strategies ofconsumption, cloud computing, and globalization.
Over the last 20 years, we captured two historical
opportunities: e-commerce in China’s consumerfocused Internet and cloud computing in China’s
industrial Internet. Looking ahead, we will continue
to serve hundreds of millions of households andsupport hundreds of thousands of industries throughour two engines catering to the consumer Internet
and industrial Internet, respectively. As the digital era
begins its transition to the intelligent era, we must
capture the generational opportunities associatedwith technology driving business transformation andthe rapid changes in AI to create a larger runway forour businesses. We believe that AI’s contributions are
not limited to efficiency improvements. We think it will
create brand-new value.

As we begin this new chapter, Alibaba Group will
welcome a new management team on September
10th. Joe will succeed me as the chairman of Alibaba
Group, and Eddie as the chief executive officer of
Alibaba Group. As for myself, I will be fully dedicatedto my role as chairman and chief executive officerof our Cloud Intelligence Group and take on the
new challenge of exploring the immense futurein transforming and innovating with hundreds ofthousands of industries through cloud computing, bigdata and AI.
The future is born out of our creations. Thank you
again for your trust and support for Alibaba. I hope I
will have the privilege of your companionship on the
new journey, and may our future be extraordinary andfull of miracles.

Daniel Zhang
Alibaba Group Chairman and Chief Executive Officer
Cloud Intelligence Group Chairman and Chief Executive Officer
July 2023

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Alibaba Group Holding Limited

Fiscal Year 2023 Annual Report

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Business
Overview

Business Overview

The 11.11 Global Shopping Festival is a large-scale global festival held by Alibaba Group annually.

Company Overview

China Commerce

To fulfill our mission “to make it easy to do business
anywhere,” we enable businesses to transform theway they market, sell and operate and improve theirefficiencies. We provide the technology infrastructure
and marketing reach to help merchants, brands,
retailers and other businesses to leverage the powerof new technology to engage with their users andcustomers and operate in a more efficient way. We
also empower enterprises with our leading cloudinfrastructure and services and enhanced work
collaboration capabilities to facilitate their digitaltransformation and to support the growth of theirbusinesses.

China Commerce RetailFor fiscal year 2023, our businesses are comprisedof China commerce, International commerce, Local
consumer services, Cainiao, Cloud, Digital media
and entertainment, and Innovation initiatives andothers. An ecosystem has developed around ourplatforms and businesses that consists of consumers,
merchants, brands, retailers, third-party service
providers, strategic alliance partners and otherbusinesses.

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Alibaba Group Holding Limited

We are the largest retail commerce business in theworld in terms of GMV in the twelve months ended
March 31, 2023, according to Analysys. Our China
commerce retail businesses primarily include Taobao
and Tmall, which together constitute the world’s
largest digital retail business in terms of GMV for thetwelve months ended March 31, 2023, according
to Analysys, Taobao Deals which offers consumers
value-for-money products, Taocaicai which provides
next-day pick-up services for groceries and fresh
goods at neighborhood pick-up points, as well as
our direct sales businesses which offer upgradedconsumer experiences with integrated online andoffline capabilities, including Tmall Supermarket,
Freshippo and Sun Art. During the same period, we
generated approximately 65% of our revenue from ourretail commerce business in China.

Business Overview

We have also developed a digital commerce
infrastructure that offers an upgraded consumer
experience by seamlessly integrating online andoffline capabilities for our marketplaces and direct
sales businesses. Leveraging our product and supply
chain capabilities as well as fulfillment and delivery
expertise, our consumers can enjoy a broad variety ofquality products at different price points with a wide
selection of delivery options that satisfy their varying
needs.
China Commerce Wholesale
1688.com, China’s largest integrated domestic
wholesale marketplace in 2022 by net revenue,
according to Analysys, connects wholesale buyers andsellers across a wide range of categories.

International Commerce

one of the leading e-commerce logistics networks
in Southeast Asia, which provides reliable, quality
and convenient logistics services to its consumers
and merchants. AliExpress, one of our international
retail marketplaces, enables global consumers to buy
directly from manufacturers and distributors in China
and around the world. During the first quarter of 2023,
AliExpress launched a new service Choice, which offers
global consumers a curated selection of great value
products across an extensive range of categories.
Consumers in selected countries enjoy free shipping,
free returns and quality delivery guarantees whenplacing orders on Choice. By leveraging chartered
flights and utilizing overseas warehouses, AliExpress
is able to offer these value-added services withshortened delivery time in key strategic countries.
Trendyol, which we believe is by far the leading

International Commerce Retail
Our International commerce retail businesses,
including Lazada, AliExpress, Trendyol and Daraz,
empower brands and merchants with local market
insights and critical commerce infrastructure, inturn serving local consumers through wide productselection and differentiated customer experience.
Lazada, a leading and fast-growing e-commerce
platform in Southeast Asia, serves one of the largest
user bases among the global e-commerce platforms
by providing consumers with access to a broad
range of offerings from local SMEs, and regionaland global brands. Additionally, Lazada operates

Largestretail commercebusiness in theworld (1)Largestintegrated
domestic wholesalemarketplacein China (2)Notes:(1) Our China commerce retail business is the largest retail commerce business in the world in terms of GMV in the twelve months
ended March 31, 2023, according to Analysys.
(2) 1688.com is China’s largest integrated domestic wholesale marketplace in 2022 by net revenue, according to Analysys.

Fiscal Year 2023 Annual Report17Business Overview

e-commerce platform in Türkiye in terms of both GMV
and order volume in 2022, serves consumers witha broad selection of products and services throughits e-commerce business as well as local consumer
services for food and groceries. Consumers also enjoy
the quality and convenient delivery services provided
by Trendyol’s fulfillment and logistics networks.
Beyond Türkiye, Trendyol has expanded internationallyby leveraging its product sourcing capabilities andsupply chain advantages in Türkiye. We also operate
Daraz, a leading e-commerce platform across South
Asia with key markets in Pakistan and Bangladesh.
Additionally, in November 2022, we launched Miravia,
an e-commerce platform in Spain that connects
brands and content creators with consumers
by providing consumers with an innovative andentertaining shopping experience.
International Commerce Wholesale
We operate Alibaba.com, China’s largest integrated
international online wholesale marketplace in 2022
by revenue, according to Analysys. During fiscal year
2023, buyers who sourced business opportunities orcompleted transactions on Alibaba.com were locatedacross over 190 countries.

Local Consumer Services
We use mobile and online technology to enhancethe efficiency, effectiveness and convenience ofconsumer services for both service providers and theircustomers in two distinct scenarios: “To-Home” and“To-Destination.”
Our “To-Home” business enables consumers to orderfood and beverages, groceries, FMCG, flowers andpharmaceutical products anytime and anywhere
through Ele.me, a leading local services and ondemand delivery platform.
Our “To-Destination” businesses, including Amap,
Fliggy and Koubei, provide consumers with convenient
access to quality services at their destinations. Amap,a leading provider of mobile digital map, navigation
and real-time traffic information in China, provides
users with a simple one-stop access point to services
such as navigation, local services and ride-hailing.
Fliggy, a leading online travel platform, provides
comprehensive services to meet consumers’ travelneeds. Koubei, our restaurant and local services
guide platform for in-store consumption, provides
merchants with targeted marketing solutions, digital
operation capabilities and analytics tools and allows
consumers to discover local services content on theplatform.
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Alibaba Group Holding Limited

Cainiao
Leveraging our self-developed and our logistics
partners’ capacities and capabilities, Cainiao offers
domestic and international one-stop-shop logistics
services and supply chain management solutions,addressing various logistics needs of merchants andconsumers at scale. Cainiao also uses data insights
and technology to digitalize the entire logistics process
and enhance the capabilities of our logistics partners,
thereby improving consumer experience and efficiency
across the logistics value chain. For consumers,
Cainiao offers parcel pick-up services throughCainiao Post, our neighborhood logistics solutionthat operates a network of neighborhood, campus
and rural village stations and residential self pick-up
lockers. Consumers can also enjoy parcel pick-up at
the doorstep and time-guaranteed delivery service
through Cainiao. For merchants, Cainiao has built
a full-fledged fulfillment network at provincial, city,and county levels in China, which offers customized
fulfillment solutions to different types of merchantson our platforms. Globally, Cainiao has developed a
network of assets and partners to support merchantson our cross-border and international commerce
retail platforms such as AliExpress, Tmall Global and
Lazada.

Cloud
Our Cloud segment is comprised of Alibaba Cloud and
DingTalk. Alibaba Group is the world’s third largest
and Asia Pacific’s largest Infrastructure-as-a-service
provider by revenue in 2022 in U.S. dollars, according
to Gartner’s April 2023 report (Source: Gartner®,“Market Share: IT Services, Worldwide, 2022”, Neha
Sethi et al., 14 April 2023, Sorted by Infrastructure-asa-Service, Vendor Revenue Basis) (Asia Pacific refers
to Mature Asia/Pacific, Greater China, Emerging Asia/
Pacific and Japan, and market share refers to that ofinfrastructure-as-a-service ). Alibaba Group is also
China’s largest provider of public cloud services byrevenue in 2022, including PaaS and IaaS services,
according to IDC (Source: IDC Quarterly Public Cloud
Services Tracker, 2022H2&2022Q4). Alibaba Cloudoffers a complete suite of cloud services, including
proprietary servers, computing, storage, network,
security, database, big data, container, machinelearning, and model training and inference, serving
our ecosystem and beyond. We leverage thesecapabilities and technologies to provide our customers
across various verticals with industry-specificsolutions, enabling intelligent business decisions
and operations. In addition, we offer Alibaba Cloud’s
enterprise customers a number of DingTalk’s solutions

Business Overview

to empower them with enhanced work collaboration
capabilities and easy access to Alibaba Cloud’s big
data analytics and AI capabilities, further facilitating
their digital transformation. We believe our cloudservices’ added value translates into direct andtangible results, and these services have become acritical foundation for our customers, many of whom
are reputable industry leaders in their respective
verticals. In April 2023, Alibaba Cloud unveiled its
latest large language model (LLM), Tongyi Qianwen.
The new LLM will be integrated into all businessapplications across Alibaba’s ecosystem in the near
future to further enhance user experience. To enable
enterprise customers to reap the benefits of AI-driven
innovation, Alibaba Cloud will offer its clients accessto Tongyi Qianwen on the cloud and enable them todevelop customized LLM for their business scenarios.
DingTalk is our intelligent collaboration workplace
and application development platform that offers
new ways of working, sharing and collaboration formodern enterprises and organizations. Equippedwith our cloud capabilities and big data analytics,
DingTalk aims to facilitate the digital transformation ofenterprises and organizations. Millions of enterprises
and users use DingTalk to stay connected and work
remotely. According to QuestMobile, DingTalk is thelargest business efficiency mobile app in China bymonthly active users in March 2023.

Digital Media and Entertainment
Digital media and entertainment is a natural extensionof our strategy to capture consumption beyond ourcommerce businesses. Insights we gain from ourcommerce businesses and our proprietary datatechnology enable us to deliver relevant digital
media and entertainment content to consumers. Thissynergy delivers a superior entertainment experience,increases customer loyalty and improves monetization
for content providers across the ecosystem.
Youku, a leading online long-form video platform in
China, serves as one of our key distribution platforms
for digital media and entertainment content. Quark,
our one-stop platform for information search,storage and consumption, helps young users access,process and manage a variety of digital content
and information for learning and work purposes.
In addition, Alibaba Pictures, driven by high-quality

content and technology, is an integrated platformthat provides content production, promotion anddistribution, intellectual property-related licensing andcommercial operation, cinema ticketing management
and Internet data services for the entertainment
industry. Youku, Quark, Alibaba Pictures and our otherplatforms, such as newsfeed and literature platforms,
allow users to discover and consume content as wellas interact with each other. In addition, we develop,
operate and distribute mobile games through Lingxi
Games.

Innovation Initiatives and Others
We continue to innovate and develop new service
and product offerings with the goals of meetingthe needs of our customers, improving efficiency intheir daily lives and creating synergies among ourecosystem participants. DAMO Academy, our global
research program in cutting-edge technologies, aims
to integrate and speed up knowledge exchange
between science and industry. DAMO Academy
encourages a collaborative environment thatfacilitates the application of scientific discoveries toreal-life circumstances. Tmall Genie smart speaker, aleading smart speaker in China, provides an interactive
interface for our customers to easily access services
offered by our ecosystem participants.

Our Ecosystem
An ecosystem has developed around our platforms
and businesses, consisting of consumers, merchants,
brands, retailers, third-party service providers,strategic alliance partners and other businesses.
At the nexus of this ecosystem are our technology
platform, our marketplace rules and the role we playin connecting these participants to make it possible
for them to discover, engage and transact with eachother and manage their businesses anytime andanywhere. Much of our effort, time and energy isspent on initiatives that are for the greater good of
the ecosystem and on balancing the interests of its
participants. We feel a strong responsibility for thecontinued development of the ecosystem and wetake ownership in this development. Accordingly, we
refer to this as “our ecosystem.” Our ecosystem has
strong self-reinforcing network effects benefitting its
various participants, who are in turn invested in our
ecosystem’s growth and success.

Fiscal Year 2023 Annual Report19

Alibaba Ecosystem
The following chart sets forth our main businesses for fiscal year 2023 by segment:

China Commerce

International
Commerce

Local Consumer
Services

RetailRetail

To HomeCainiao

Cloud

Digital MediaandEntertainment

Innovation
Initiatives
and Others(Ele.me)(Taobao Deals)(Taocaicai)

To Destination(Xianyu)(Amap)

Wholesale

20

Alibaba Group Holding Limited

Wholesale

Fiscal Year 2023 Annual Report21

Business Overview

Our Strategies
In an increasingly complex world, digital adoption
and transformation of our customers are accelerating
across different industries. On the consumer retailside, online shopping is no longer simply a purchasebehavior for more consumers but has also becomea necessary rather than an optional channel of sales
to brick-and mortar retailers. For enterprises andorganizations, digital transformation is accelerating
as technology changes the way people live and work.
Recently, generative AI, an innovative technology
product enabled by large language models, or
LLMs, excited the world with possibilities of elevatingproductivity and efficiency to a new level, and further
accelerating the digital transformation of enterprises
and organizations.
We believe such transformation presents tremendous
opportunities and requires us to be more focused,
innovative and agile in establishing our strategic
capabilities and priorities. To this aim, we areproactively transforming our organization througha new organizational and governance structure tostrengthen the competitiveness of our businesses
through greater independence and further unlock
value for our shareholders. We believe our new
structure will empower all of our businesses tobecome more agile and nimble in decision making,responding to market changes and promoting
innovations.
With our environmental, social and governanceresponsibilities as the foundation of our long-term
strategy, we strive to strengthen our leadershipand build core capabilities in three strategic areas:
consumption, cloud, and globalization.

Consumption
Consumption continues to present significant
opportunities in China and globally.
In China, while we believe that our annual active
consumer base already captures the vast majority
of Internet users with meaningful consumption
power, there remains significant opportunities for
us in wallet share expansion. We aim to capture
these opportunities by providing differentiated value

services to our customers with different consuming
power, needs and mindset. We offer a multidimensional matrix of consumer apps with clearly
differentiated value propositions that aim to meet thevarious consumer demands across metropolitan andless-developed regions, differing time sensitivities,
and different income levels and consumption models.
We will continue to enhance and enrich our portfolioof consumer apps, and enable new consumption
models and formats to better serve the evolving needsof consumers. We are also further strengthening
our supply chain capabilities, including throughdirect sales model and integrated online and offline
solutions, to strengthen the competitiveness of our
products and services and enhance our penetration in
categories that are essential to our consumers’ daily
lives.
In addition, to enhance the positioning of our Taobao
app, China’s largest digital retail platform, from atransaction-focused marketplace to a consumer
destination for discovery and shopping, we continue
to focus on creating personalized, immersive andinteractive experience through relevant and highly
engaging consumption-related content and our apps’
rich interfaces and features. We are also actively
exploring new consumption models, formats andtechnologies to create better shopping experience forour users.
Over the years, we have established a comprehensive
infrastructure for digital commerce with diversified
fulfillment models. Through Cainiao, we aim toestablish a hybrid delivery network covering intracity,intercity and supply chain services. We are building
instant delivery and same-city express delivery
capabilities in key cities in China to fulfill a reliableneighborhood shopping experience. We are also
investing to establish a nationwide express delivery
network with cold-chain, bulky and large appliancedelivery capabilities to provide merchants withcomprehensive delivery options in key categories
such as fresh produce, FMCG and electronics. We willcontinue to invest in these capabilities to enhance
our core competitiveness and value creation to ourmerchants and consumers, achieving sustainable andhigh-quality growth.
We will discuss the consumption opportunity outsideof China under the globalization strategy.

22

Alibaba Group Holding Limited

Business Overview

Cloud
We believe that digitalization presents the biggest
opportunity of our time, and cloud computing plays
a fundamental role in the digital transformation
across various industries. Cloud is rapidly replacing
traditional IT infrastructure with much higher efficiency
at lower cost. It enables traditionally unstructured,
undiscovered and underutilized data to be captured,activated and harnessed as a new source ofintelligence to help businesses make decisions,improve operating efficiency and grow. With theonset of generative AI, digital transformation ofenterprises and organizations will further accelerate
to achieve higher level of operating efficiency andbusiness growth. In order to capture the tremendous
opportunities of enterprise digitalization, we willcontinue to strengthen our market leadership as a
global cloud service provider, and focus on highquality growth through improving operating efficiency,
enhancing core products and technologies, investing
in innovative technology and products to empower
next-generation entrepreneurs and advancing ourCloud-DingTalk integration strategy.
We strive to empower our customers and ecosystem
partners with powerful digital infrastructure to support
the growth of their businesses. We will continue
to work with industry partners to develop verticalspecific solutions to facilitate digital transformation ofvarious industries. Our strategic initiative to integrate
DingTalk with Alibaba Cloud has enabled enterprisecustomers to digitalize their organization and businesscollaboration through DingTalk’s open platform,
with data generated and accumulated to cloud. We
will continue to expand the user base of DingTalk’s
core applications and strengthen its open-platform
ecosystem of industry solutions to enable further
digitalization of business operations within and acrossorganizations. We will also cultivate new business
opportunities in industrial digitalization and nextgeneration Internet through investments in cloudbased industry solutions and frontier technologies.

Globalization

We strive to make diversified offerings available to ourusers worldwide by empowering our local merchants
and partners, supported by our supply chain
advantages in China and cross-border capabilities.
Stemming from Southeast Asia, we strive to serve
consumers and merchants around the world throughboth localized and cross-border offerings. We willcontinue to develop our local and cross-border retailcommerce in key strategic markets, such as Southeast
Asia and Europe, while exploring business model
innovations. To support the globalization initiativesof our commerce businesses, we plan to continue
developing critical international infrastructure andcapabilities, including logistics and payment, in orderto drive differentiated and superior experience for ourusers in key strategic markets.
In addition, as the largest IaaS service provider in
Asia Pacific, we continue to expand our international
cloud infrastructure and strengthen local cloud service
capabilities, especially in Southeast Asia. We have
set up data centers in 28 regions globally, including
Singapore, Indonesia, Malaysia, the Philippines
and Thailand, among others. We aim to empower
local customers with our strong cloud capabilities,
customized vertical-specific solutions and localized
services to better serve industrial digitalization
demands globally. We also strive to work with our local
partners to build up ecosystems of cloud computing,further driving the digital transformation acrossvarious industries.

Environmental, Social and Governance
Responsibilities
ESG, as the foundation of our long-term strategy,
not only provides a framework for solving a seriesof global challenges, but also serves as the bridge
to carry Alibaba to 102 years. We believe we canonly create and sustain a profitable and prosperous
business by bringing positive change to the society.
We are committed to assuming greater responsibility
while pursuing business excellence as the operator ofa platform economy. See “— Environmental, Social andGovernance (ESG).”

Despite the uncertainties and complexities in
the global macro environment, we remain firmly
committed to our globalization strategy. We will takefull advantage of the vast opportunities in the global
market to serve customers in and outside of China.
Our globalization strategy has two components:
globalization of consumption and globalization ofcloud. Both of these can only be sustained with thesupport of local ecosystems of consumption andtechnology.
Fiscal Year 2023 Annual Report23Business Overview

Our Businesses

Taocaicai provides consumers with next-day
pick-up services for a wide range of groceries
and fresh goods at neighborhood pick-up points.

China Commerce
China Commerce Retail

In addition, our ability to offer and deliver value
has driven increased consumer engagement
over time. Generally, the longer consumers
have been with us, the more orders they tend toplace across a more diverse range of productcategories. Consumers on Taobao and Tmall
continue to exhibit high retention. In fiscal year
2023, there were more than 124 million annual
active consumers who each spent more than
RMB10,000 on purchasing physical goods on
Taobao and Tmall. For fiscal year 2023, theretention rate of annual active consumers whoeach spent over RMB10,000 on purchasing
physical goods on Taobao and Tmall in the priorfiscal year stayed at a similar level compared tothat of fiscal year 2022.

We operate the largest retail commerce businessin the world in terms of GMV in the twelve months
ended March 31, 2023, according to Analysys. Ourretail commerce businesses in China, primarily
consisting of Taobao, Tmall and our various direct
sales businesses which offer upgraded consumer
experiences with integrated online and offline
capabilities, have become an important part of theeveryday lives of consumers in China. Empowered byour commerce technologies and services, we appeal
to a massive base of consumers by connecting themwith diversified and comprehensive offerings in highly
engaging and social formats.

•Consumers. We serve a large and diversified
consumer base in China, across both large
cities and less-developed areas. We believe ourplatforms continue to appeal to consumers at
various income levels and address their evolving
consumption needs. For example, Taobao Deals
offers consumers value-for-money products and•Products and Services. We believe our ecosystem
offers the most comprehensive range of
products and services among global commerce
platforms to meet the diverse demands of our
massive and diversified consumer base acrossdifferent segments. We have developed adigital commerce infrastructure that offers an
upgraded consumer experience by seamlessly
integrating online and offline capabilities forour marketplaces and direct sales businesses.

124 million+
AACs spent over
RMB10,000 (1)Note:(1) In fiscal year 2023, there were more than 124 million annual active consumers who each spent more than RMB10,000 onpurchasing physical goods on Taobao and Tmall.

24

Alibaba Group Holding Limited

Business Overview

Xianyu enables consumers in China to find a wide variety of idle goods, recycled goods, consignment, items for rent, and other long-tail products.

Consumers can enjoy a broad variety of quality
products at different price levels with a wide
selection of delivery options that satisfy theirvarying needs. The core capabilities that form
the critical foundation of our digital commerce
infrastructure include the following:—

Product and supply chain capabilities.
We believe our ecosystem provides
the most comprehensive product andservice offerings. Our platforms, throughcollaboration with our merchants andecosystem partners, offer products ranging
from branded products and imported
goods to products sourced directlyfrom manufacturers and farms and toother long-tail products. For example,
consumers may look for branded products,
including luxury brands, trendy fashion
brands and new brands, on Tmall, andimported products from around the world
on Tmall Global. Taobao Deals enables
manufacturers and merchants to sell
directly to consumers to meet their needsfor value-for-money products. In fiscal

year 2023, paid GMV of manufacturer-toconsumer products grew more than 40%.
Taocaicai satisfies consumers’ needs for
quality and affordable groceries and fresh
goods with its next-day pick-up services.
Xianyu, our consumer-to-consumer
community and marketplace in China,
enables consumers to find a wide variety ofidle goods, recycled goods, consignment,
items for rent, and other long-tail products.
In addition, we continue to expand our
proprietary supply chain through our direct
sales businesses to further enhance our
product supply and service capabilities. For
example, we leverage Sun Art’s, Freshippo’s
and their retail partners’ supply chain
networks to provide greater selection of
fresh goods and FMCG. We also continue togo upstream to source agricultural products
directly to enhance our product selection
as well as provide more local and seasonal
specialties to our consumers. These
extensive supply chain networks and our
in-house sourcing capabilities enable us tofurther penetrate into various verticals.

Fiscal Year 2023 Annual Report25

Business Overview—

26

Fulfillment and delivery expertise. We
have developed logistics expertise andcapabilities that allow us to offer a fullrange of high-frequency fulfillment
services to satisfy consumer demand. Our
comprehensive delivery options include ondemand delivery, half-day delivery, sameor-next-day delivery and next-day pick-up
services, which capture the varying needs ofconsumers living in large cities and lessdeveloped areas. For example, Freshippo’s
proprietary fulfillment system enables
30-minute store-to-door delivery for
consumers living within a three-kilometerradius of a Freshippo Supermarket store;
we provide groceries and fresh goods
to consumers with Taocaicai’s next-day
pick-up services; and Tmall Supermarket
offers daily necessities, FMCG and generalmerchandise through Taobao app withsame-or-next-day delivery services.

Alibaba Group Holding Limited•

Engagement. The massive amount of user andmerchant activities taking place every day on our
China commerce platforms generate significant
consumer insights. By leveraging proprietary
AI and data technologies, we are able toaggregate and build on deep consumer insights
to provide more accurate search results andrelevant recommendation feeds that enhance
the shopping experience for our consumers.
Our various commerce platforms also enablemerchants to engage with consumers through avariety of formats, including livestreaming, shortform videos, interactive games and microblogs.
We continue to introduce interactive features andinnovative formats to facilitate user engagementwith brands, merchants and content creators.
Along with these features and formats, ourrelevant and engaging entertainment content
plays an important role in consumers’ productdiscovery process and shopping journey byproviding an immersive and personalized
shopping experience, and driving user stickinessand retention on our various platforms.

“I joined the Taobao
craftsmanship initiative and‘recreated our tradition’ withmy peers. I believe ‘driving
trends with tradition’ can goa long way.”
Chao Xiong
Owner,
Guguangaoya Cloth Shoes# Creating Possibilities  # Innovation

China’s largest
digital retailplatform(1)Generation Z Taobao
entrepreneur reinterprets the
traditional culture of handmade
cloth shoes with new ideas
Chao Xiong, a Taobao store owner born after 1995 who studied fashion design, believes that‘driving trends with tradition’ can go a long way. Therefore, she taught herself the traditional
soling technique of handmade cloth shoes and started her own business. She was inspired by lion
dance teams that did performance tours in the villages every Chinese New Year, so she came up
with the idea of sewing dancing lion patterns on the shoes as her signature product. Chao Xiong
joined the Taobao craftsmanship initiative with fellow detailed-focused craftspeople, and together,
they spearhead a fashionable trend of “recreating tradition,” which reinterprets traditional culture
through creativity and focus among young entrepreneurs.
Note:(1) In terms of GMV for the twelve months ended March 31, 2023, according to Analysys.

Fiscal Year 2023 Annual Report27

“Leveraging TMIC’s uniqueinsights, together with our
professionalism and yearsof experience in fragrance
development, we create a
new fragrance-based trendthat explores a new direction
in fragrance productdevelopment.”
Jeff Yao
Northeast Asia Vice President,
Symrise AG# Creating Possibilities  # Quality Life

The world’s largest
third-party online
and mobilecommerce
platform forbrands andretailers(1)German fragrance company
leverages TMIC’s consumer
insights to launch its first unisex
fragrance brand
Symrise AG, a German fragrance company with over 220 years of history, collaborated with Tmall
Innovation Centre (TMIC)’s industrial innovation lab named TLAB to explore the market potentialof unisex fragrances through market analysis, brand positioning, trend insights, raw ingredients
R&D, and new product launch and incubation. They jointly launched Symrise’s first unisex fragrance
brand, UNTAGGED, a free, label-free, and gender-neutral concept designed to appeal to its targeted
audience. The company not only pioneered a brand new fragrance trend in the China market, it also
has successfully built a brand that offers a unique value proposition.

Note:(1) In terms of GMV for the twelve months ended March 31, 2023, according to Analysys.

28

Alibaba Group Holding Limited

Business Overview

TaobaoTmall

Taobao means “search for treasure” in Chinese.
Taobao serves as the starting point and destination
portal for many users’ shopping journey. Consumers
from both large cities and less-developed areas cometo Taobao to enjoy an engaging and personalized
shopping experience, optimized by our data analytics
and technology. Through highly relevant content,
engaging and interactive formats and real-time
updates from merchants, consumers can learn about
products and new trends. They can also interact witheach other and their favorite merchants and KOLs
through a broad range of interactive features suchas livestreaming and short-form videos. Taobao
is China’s largest digital retail platform, in terms of
GMV for the twelve months ended March 31, 2023,
according to Analysys.

Tmall caters to consumers’ ever-growing demandfor high-quality products and premium shopping
experience. A large number of international andChinese brands and retailers have establishedstorefronts on Tmall. We have positioned Tmall
as a trusted platform for consumers in China andoverseas to buy both homegrown and internationalbranded products as well as products not available intraditional retail outlets. As the brands and offerings
on Tmall continue to grow and diversify, we continue
to improve our ability to accurately target and meetdifferent consumer demands. In the twelve months
ended March 31, 2023, Tmall is the largest third-party
online and mobile commerce platform for brands andretailers in the world in terms of GMV, according to
Analysys.

Taobao provides a top-level traffic funnel that directs
users to the various marketplaces, channels andfeatures within our ecosystem. For example, a search
result on Taobao displays listings not only from
Taobao merchants but also from Tmall merchants andbrands, thereby generating traffic for Tmall. ThroughTaobao, consumers can also find long-tail productson Xianyu, our consumer-to-consumer community
and marketplace in China, as well as other products
and consumer services, which may also be accessed
through their respective independent mobile apps.

Tmall is the partner of choice for brands. Brands
and retailers operate their own storefronts on Tmall
with unique brand identities and look and feel,accompanied by full control over their own branding
and merchandising. Because of the presence of alarge number of brands and the stringent standards
required for merchants, brands and retailers to join
and operate on Tmall, a presence on Tmall has
become a validation of quality, allowing merchants,
brands and retailers to take advantage of oursignificant traffic to extend and build brand awarenessand customer engagement. Major international
brands that have physical operations in China are well
represented on Tmall.

Merchants on Taobao are primarily individuals andsmall businesses. Merchants can create storefronts
and listings on Taobao free of charge. The escrow
payment services provided by Alipay are free ofcharge to consumers and merchants unless payment
is funded through a credit product such as a credit
card, in which case Alipay charges a fee to themerchant based on the related bank fees charged to
Alipay. Taobao merchants can purchase P4P, in-feedmarketing and display marketing services to directtraffic to their storefronts. In addition, merchants canacquire additional traffic from third-party marketing
affiliates. Taobao merchants can also pay foradvanced storefront software that helps upgrade,decorate and manage their online storefronts.

Brands and retailers turn to Tmall not only for its broaduser base, but also for its consumer insights andtechnology. Tmall has driven the digitalization andtransformation of brands and retailers by enablingthem to digitalize their operations, engage, acquire
and retain consumers, increase brand recognition,
innovate product offerings, manage supply chainsand enhance operating efficiency. In particular, Tmall
offers a variety of one-stop brand marketing andpromotional products to help brands and retailers
quickly acquire new users, enhance brand awarenessand launch new products.
We also continue to position Tmall as the premier
shopping destination for everyday items, highlighting
value and convenience. Consumer electronics,
apparel and accessories, and FMCG are among
Tmall’s most popular product categories. We have

Fiscal Year 2023 Annual Report29Business Overview

Taobao Maker Festival champions creativity and entrepreneurship by giving visitors a fun and interactive way to explore products from Taobao’s
innovative storefronts.

also strengthened consumer recognition of Tmall’svalue proposition in consumer electronics and home
appliances through promotional events and strategic
partnerships.
Like merchants on Taobao, brands and merchants
on Tmall have access to P4P, in-feed marketingand display marketing services as well as storefront
software, which they can use to fully engineer,customize, and even code the software behind theirstorefronts.
Taobao Deals
Taobao Deals offers value-for-money products byenabling merchants and manufacturers to sell directly
to consumers, including those in less-developed
areas and large cities. Taobao Deals has enriched
product supply capabilities to optimize logistics costs
and improve delivery experience for consumers, andenhanced digital consumption experience for pricesensitive consumers. During fiscal year 2023, Taobao
Deals continued to enrich product supply and the paid
GMV of products sold directly from manufacturers to
consumers on Taobao Deals grew over 40% yearover-year.

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Alibaba Group Holding Limited

Taocaicai
Taocaicai is our community marketplace that offers
consumers next-day pick-up services for daily
consumer groceries and fresh goods at neighborhood
pick-up points. Leveraging the strong product andsupply chain capabilities of Sun Art, Taobao Deals andLingshoutong, Taocaicai provides consumers with abroad selection of quality groceries and fresh produce
at competitive prices. In fiscal year 2023, Taocaicai
has rapidly established solid market presence inregions that have large population with meaningful
consumption power, generating strong GMV growth.
At the same time, Taocaicai’s unit economics per order
has continued to improve, benefitting from higher
regional order density, and improving gross margin
from enhanced supply chain capabilities.
Tmall Supermarket
Tmall Supermarket offers daily necessities, FMCG
and general merchandise through Taobao app withsame-or-next-day delivery services. By leveraging ourtechnology capabilities and consumer insights, Tmall
Supermarket facilitates the digital transformationof its offline partners, enhancing their supply chain
management capabilities.

“180 The Concept values the
feedback from our Chinese
customers, and we hope to
use this insight as the basis for
future product development
to meet the demand of moreconsumers.”
Gema Cabanero,
Founder,
180 The Concept# Creating Possibilities   # Quality LifeA leadingimporte-commerce
platform in
China

Spanish anti-aging brand
explores Chinese consumer
market through Tmall Global
180 The Concept, a Spanish beauty and wellness brand focusing on nutrition and anti-aging, hastransformed its brand by leveraging Tmall Global’s new brand incubation program. It became more
attuned to the preferences of the new generation of Chinese consumers and its products have been
well received. Tmall Global provided marketing, new trend incubation, and cross-border supply
chain support that helped the company overcome development challenges as a new brand entering
China as part of Tmall Global’s new brands, new categories, and new products incubation initiative.
This enabled the brand to achieve efficient and high-quality development by fulfilling the needs ofChinese consumers.

Fiscal Year 2023 Annual Report31Business Overview

Tmall Global
Tmall Global addresses increasing demand of
consumers in China for international products andbrands. Tmall Global serves as the premier platform
through which overseas brands and retailers reachconsumers in China, build brand awareness and gain
valuable consumer insights to form their overall China
strategies, without the need for physical operationsin China. We believe Tmall Global is a leading import
e-commerce platform in China.
Digital Healthcare and Pharmaceutical E-commerce
Alibaba Health is our flagship vehicle that offers
one-stop solutions to consumers through integrating
online and offline resources of the pharmaceuticaland healthcare industries. We prioritize the needs ofthe customers through leveraging the strength of theexisting pharmaceutical e-commerce business alongwith exploring innovative business models of Internet
healthcare services.
Freshippo
Freshippo, our new retail platform for groceries andfresh goods, seamlessly integrates the online andoffline retail experiences, providing consumers witha new shopping experience. Consumers visit over
300 Freshippo Supermarket stores for the touchand feel of quality fresh goods, join tasting events
for new products, and shop for private label or

32

Alibaba Group Holding Limited

exclusive products that are not available elsewhereor simply spend time with family. Many of Freshippo’s
consumers also place orders online and have fresh
goods delivered to door as quickly as within 30
minutes. In fiscal year 2023, online transactions
contributed more than 65% of Freshippo’s GMV. The
creation of a new shopping experience is attributable
to Freshippo’s significant retail expertise, including
supply chain management, proprietary technology,
and robust multi-layer and multi-temperature logistics
and fulfillment infrastructure, all specifically designed
for Freshippo’s offerings. Freshippo demonstrates
scalability and sustainability with Freshippo’s overall
GMV reaching over RMB55 billion (US$8.0 billion) in
fiscal year 2023. More than 90% of self-operated
Freshippo Supermarket stores that have been
operating more than one year achieved positive
cashflow during the same period.
Sun ArtSun Art, a leading retailer in China with multi-formats
and omni-channels, continues to focus on target
customers, and create diversified shopping scenarios,and endeavor to improve online and offline shopping
experience. Sun Art continues to meet consumers’
needs for offline shopping and home delivery service,
thereby creating opportunities for revenue growth,through store remodeling and digitalization andbuilding commodity power and fresh produce supply
chain capability.

Business Overview

Consumers visit Freshippo’s offline stores to touch and feel quality fresh goods, to join tasting events for new products, to shop for private label
or exclusive products that are not available elsewhere or to spend time with family.

Over

65%

of GMV contributed byonline transactions (1)More than90%of self-operated Freshippo Supermarket
stores achieved positive cashflow (2)Notes:(1) In fiscal year 2023, online transactions contributed more than 65% of Freshippo’s GMV.
(2) In fiscal year 2023, more than 90% of self-operated Freshippo Supermarket stores operating more than one year achieved positive
cashflow.

Fiscal Year 2023 Annual Report

33

“By partnering with Alibaba’s
rural commissioners andFreshippo’s Fuping yellow
peach project manager, we
are working to standardize theproduction of yellow peaches
in the village and increase
our income through technicalplantation.”
Tong Niu,
A second-generation farmer at
a peach orchard in Fuping# Creating Possibilities  # Digital Transformation

A new retailplatform forgroceries andfresh goods

Alibaba and the second-generationof yellow peach farmers who
studied aboard bring new business
opportunities to the village by enhancing
production digitally and selling directly on FreshippoTong Niu is a young man who returned to China after studying abroad. His father develops
peach orchards in Baiya Village, Fuping County, Baoding, Hebei Province. Tong Niu, who had
no experience with planting, learned the process along with three classmates who had also
returned from Australia to help his father. Tong Niu subsequently worked with Alibaba’s ruralcommissioners and Freshippo’s Fuping yellow peach project manager to digitally transform yellow
peach cultivation in his village by introducing automatic irrigation systems and drones to water andfertilize the peaches, and sensors to monitor the orchards in real-time. The quality of yellow peachhas been standardized by applying these new technologies. The yellow peaches are now sold in
Freshippo across major cities and this new source of economic activity has helped improve thevillagers’ living quality.
34

Alibaba Group Holding Limited

Business Overview

Branding and Monetization Platforms
Alimama, our proprietary monetization platform
Alimama is our monetization platform. Using our
proprietary technology, this platform matches themarketing demands of merchants, brands andretailers on all of the platforms in our ecosystemwith the media resources on our own platforms andthird-party properties, and enables us to monetize
our China commerce, International commerce,
Local consumer services, Cainiao, Digital media andentertainment and other businesses in our ecosystem.
The platform supports P4P marketing services basedon keyword search rankings, in-feed marketingtargeting different groups of consumers, or display
marketing at fixed positions that are bid on throughauctions, as well as cost per thousand impression(CPM)-based, time-based marketing formats, orindividual campaigns at fixed cost, through the displayof photos, graphics, videos and livestreaming.
The ranking of P4P search results on our marketplaces
is based upon proprietary algorithms that take into
account the bid price of keywords, the popularity andquality of an item, service or merchant, as well as
customer feedback rankings of the merchant or service
provider. Our in-feed and display marketing services
take these factors into consideration, along with otherconsumer insights generated across our ecosystem,
to further deliver an engaging and relevant content
discovery process and shopping experience to ourconsumers through livestreaming, short-form videos,interactive games and other formats. The relevanceand comprehensiveness of insights based oncommercial activity and user activity in our ecosystem
as well as our AI capabilities provide a uniqueadvantage for Alimama to deliver the most relevant
information to users through highly engaging content
and effective format, which in turn enables merchants
to improve their efficiency.
Alimama also has an affiliate marketing programthat places marketing displays on third-party apps
and websites, thereby enabling marketers, if they sochoose, to extend their marketing and promotionalreach to properties and users beyond our own
platforms. Our affiliate marketing program not only
provides additional traffic to our marketplaces, butalso generates revenue to us.

Alimama operates Taobao Ad Network and Exchange,or TANX, one of the largest real-time online bidding
marketing exchanges in China. TANX helps publishers
monetize their media inventories both on mobile apps
and web properties. TANX automates the buying andselling of tens of billions of marketing impressions ona daily basis.
Participants on TANX include publishers, marketersand demand-side platforms operated by agencies.
Marketing Partner of Choice for Brands
Drawing on our proprietary technology, capabilities
and consumer insights, we have developed
an approach that digitalizes consumer-brandrelationships and enables brands to build robust
relationships with consumers throughout theirlifecycles in our ecosystem. We aim to help brands
reach consumers by leveraging our platforms as wellas other major third-party Internet media in China. We
intend to become the key partner for brand building
by creating an open, inclusive and transparent
platform where brands and marketing agencies
can design, execute, track and optimize their brandbuilding activities using our consumer insights andtools.
Leading Commerce Technologies and Integrated
Merchant Services Platform
We provide merchants, brands and retailers witha comprehensive suite of commerce technologies,
consumer insights and innovative online and offline
services through a unified and intuitive platform, tobetter engage with their customers, build mindshareand optimize their operating efficiency. By leveraging
the power of our ecosystem, merchants, brands andretailers on Taobao and Tmall can acquire, retain andfurther deepen their engagement with consumers
in an efficient and effective manner, build brandawareness and deliver seamless consumer experience
with our logistics and fulfillment capabilities. Thisenhances merchants’, brands’ and retailers’ loyalty
to our platforms. Our commerce technologies
and merchant services include the following key
components:

Fiscal Year 2023 Annual Report35

Business Overview

Effective Consumer Engagement Platform

China Commerce Wholesale

Our merchants, brands and retailers can leverage
our proprietary technology, consumer insights, andcloud services to optimize their marketing strategies.
We equip brands on our secure cloud-based platform
with integrated online and offline capabilities
and solutions, and provide them with access tosophisticated analytics services. These services help
merchants, brands and retailers gain insights into
each stage of the consumer journey and enable themto provide personalized and seamless online andoffline shopping experience that fulfills consumers’
evolving consumption needs.

1688.com

Cloud-based Smart Operation Dashboard
We provide a cloud-based integrated smart operation
dashboard that enables merchants, brands andretailers to digitalize their daily operations. Throughour online dashboard, our merchants, brands andretailers can easily manage their storefronts andproduct listings, source products, process orders andpayments, fulfill orders and provide customer services.
Leveraging the capabilities of our third-party service
providers, we also provide our merchants, brands
and retailers with access to various types of businesssoftware, content creators, credit financing, IT services
and market data analytics. In addition, our merchants,
brands and retailers can access our smart operation
dashboard through mobile devices to manage theirbusiness on the go.
Enabled by our analytics capabilities and consumer
insights, our smart operation dashboard also provides
merchants with recommendations on the mosteffective approaches to improve their respective
performance and to deliver differentiated services totheir customers.

36

Alibaba Group Holding Limited

1688.com, China’s largest integrated domestic
wholesale marketplace in 2022 by net revenue,
according to Analysys, provides sourcing and onlinetransaction services by connecting manufacturers
and wholesale sellers to wholesale buyers in China.
These manufacturers, wholesale sellers and wholesalebuyers typically trade in apparel, accessories,
packaging materials, office supplies, home decorationand furnishing materials, electronics and computers,
among others. Sellers may purchase a China TrustPassmembership for an annual subscription fee tolist items on 1688.com, reach customers, provide
quotations and transact on the marketplace without
any additional charges. As of March 31, 2023, 1688.
com had over 960,000 paying members. Paying
members may also pay for value-added services, suchas premium data analytics and upgraded storefront
management tools, as well as customer management
services, such as P4P marketing services from thewebsite and app. In the twelve months ended March
31, 2023, value-added services contributed the
majority of 1688.com’s total revenue.

“Back then, I was justa university student withouta job looking for a stable
income. Lazada’s e-commerce
selling experience is such abreeze as it frees up more time
for me to focus on making
successful sales.”Natnicha Rojchanasom,
Owner, NIPPERISDABEST# Innovation  # Creating Possibilities

A leading andfast-growing
e-commerce
platform inSoutheast
Asia

Thai university student
leverages Lazada platform tocreate her own e-commerce
fashion business from scratch
The early stages of running a new business are always challenging due to a lack of funds andbusiness experience. As a university student, Natnicha Rojchanasom, a female entrepreneur inThailand, started her own e-commerce business selling jeans on Lazada. Without any prior retailsales experience, she launched a store on the Lazada platform. She tried to identify local market
demands by focusing on pre-orders and products that customers preferred the most. She also
leveraged Lazada Sponsored Solutions to attract more traffic to her store and increase the volume
of completed transactions. In addition, she participated in various sales campaigns on Lazada tocreate awareness and raise her brand’s profile among potential customers. Today, she is a successstory and continues growing her business.

Fiscal Year 2023 Annual Report37

Business Overview

International Commerce

AliExpress

International Commerce Retail

AliExpress is a global marketplace targeting
consumers around the world and enabling them tobuy directly from manufacturers and distributors in
China and around the world. Consumers can accessthe marketplace through AliExpress’ mobile app or
websites. In addition to the global English-language
version, AliExpress platform is also available in 17
other languages, including Portuguese, Spanish andFrench.

In the twelve months ended March 31, 2023, Lazada,
AliExpress, Trendyol and Daraz together achieved
positive order growth despite challenging macro
environment, driven by a broader range of local andglobal product offerings and enhanced consumer
experience.
LazadaLazada, a leading and fast-growing e-commerce
platform in Southeast Asia, serves one of the largest
user bases among the global e-commerce platforms,
by providing consumers with access to a broad range
of offerings from local SMEs, and regional and global
brands. Additionally, Lazada operates one of theleading e-commerce logistics network in Southeast
Asia, serving its consumers and merchants withreliable, quality and convenient logistics services thatare critical to online shopping experience in Southeast
Asia. During fiscal year 2023, Lazada maintained
positive year-over-year order growth despite achallenging economic environment. Lazada also
continues to improve monetization rate by offering
more value-added services, resulting in narrowing
losses per order year-over-year.

AliExpress continues to expand its regional merchantnetworks and supply chains to make available more
localized products and better services for consumers intheir respective regions. During fiscal year 2023, over
30% of orders were delivered within 15 days globally.
Since its launch, Choice covered 215 countries andregions during the fiscal year. Choice offers consumers
a curation of great-value products across an extensive
range of categories. Consumers in selected countries
can enjoy free shipping, free returns and quality
delivery guarantees. By leveraging chartered flights
and adopting overseas warehouses, AliExpress is able
to offer these value-added services with shorteneddelivery time in key strategic countries. Furthermore,
AliExpress continues to invest in new markets such as
South Korea. In fiscal year 2023, AliExpress recorded
over 30% order growth in South Korea.

Lazada is a leading and fast-growing e-commerce platform in Southeast Asia, providing consumers with access to a broad range of offerings
from local SMEs, and regional and global brands.

38

Alibaba Group Holding Limited

Business Overview

TrendyolInternational Commerce Wholesale

Trendyol, which we believe is by far the leading
e-commerce platform in Türkiye in terms of both GMV
and order volume in 2022, serves consumers witha broad selection of products and services throughits e-commerce business as well as local consumer
services for food and groceries. Consumers also enjoy
the quality and convenient delivery services provided
by Trendyol’s fulfillment and logistics networks,
namely Trendyol Express for e-commerce businessand Trendyol GO for local consumer services. Beyond
Türkiye, Trendyol has expanded internationallyby leveraging its product sourcing capabilities
and supply chain advantages in Türkiye, enabling
Turkish merchants to serve global consumers with 倉偡a wide selection of products through 80 third-party
e-commerce platforms across six continents. During
fiscal year 2023, Trendyol continued to grow rapidly,with approximately 47% order growth and more than
110% GMV growth in local currency year-over-year.

Alibaba.com is China’s largest integrated international
online wholesale marketplace in terms of revenue in
2022, according to Analysys. It connects Chinese andoverseas suppliers to overseas wholesale buyers,
who are typically trade agents, wholesalers, retailers,manufacturers and SMEs engaged in the import andexport business, and provides them with sourcing,
online transaction, digital marketing, digital supply
chain fulfillment and financial services.

羠炚

Sellers on Alibaba.com may purchase an annual Gold
Supplier membership to reach customers, provide
quotations and transact on the marketplace. As of
March 31, 2023, Alibaba.com
had over 220,000 paying
砎㡤穚宆
members from China and around the world. Sellers
may also purchase additional value-added services
to manage product listings and facilitate transaction
processes, such as upgraded storefront management
tools, customer relationship management SaaS
services, P4P marketing services, trade assurance
and fulfillment services, mainly including logistics
and custom clearance services. In the twelve months
ended March 31, 2023, value-added services
contributed the majority of Alibaba.com’s total
revenue. Additionally, over 47 million buyers fromover 190 countries sourcedor嵚㚼 business opportunities聧䃾completed transactions on Alibaba.com in the twelve
months ended March 31, 2023.

??

Choice covered

215

countries and regions (1)畝㓄蛷苵Trendyol continued to grow rapidly

110%+
~47%

GMV growth andorder growth (2)Notes:(1) Since its launch, Choice covered 215 countries and regions during fiscal year 2023.
(2) During fiscal year 2023, Trendyol recorded approximately 47% order growth and more than 110% GMV growth in local currency
year-over-year.

Fiscal Year 2023 Annual Report

39

“AliExpress provided lots ofsupport, helping us evaluate
our product advantage
and the market landscapeand identify supporting
policies, which eventuallyencouraged us to deploy
overseas warehousing andenter new markets.”
Kenny Zeng,
Founder, HiBREW# Creating Possibilities   # New Consumption Trend

AliExpress helps Chinese coffee
machine brands expand into
overseas market with its platform
capabilities and market insights

A globalmarketplace

你好

HiBREW, a coffee machine brand in Shunde Foshan, used to focus on several developed markets
overseas. Since engaging AliExpress in July 2019, it has expanded into new markets, including
the Middle East. Given that the coffee machine is a product with relatively heavy weight, HiBREW
relies on AliExpress’ platform capability to calculate shipping capacity precisely and improve cost生气
efficiency through container consolidation and warehouse sharing. Afterward, it took the platform’s
recommendation to deploy overseas warehouses in the Middle East to reduce logistics storage costs
and shorten the delivery time. Through AliExpress, brands can directly reach consumers and better
master their marketing channels and R&D direction, which helps small and medium-sized crossborder merchants like HiBERW seize more market opportunities.

40

Alibaba Group Holding Limited

“By leveraging Alibaba.com,
we turned challenge into
opportunity and accelerated
our digitalization progress.
We captured online global
buyers’ surging demandfor vitamins and other foodsupplements.”
Maria Francesca Aceti,
CEO, Deltha Pharma#Creating Possibilities  #New Consumption Trend

The largest
integrated
international
online wholesalemarketplace in
China(1)

Italian female entrepreneur
revives her business during the
pandemic through Alibaba.com
Deltha Pharma was founded in 2009 in Rome and became a popular Italian food supplement
manufacturer. Despite the ups and downs in business, Maria Francesca Aceti, CEO of Deltha Pharma,
decided to join Alibaba.com in 2019. Undoubtedly, the pandemic brought many challenges to Italiancompanies, and some were severely affected when offline sales were disrupted. However, Deltha
Pharma turned this challenge into opportunity by incorporating digitalization into its business modelthrough Alibaba.com. During the pandemic, there was a surge in demand for vitamins and healthsupplement products. Through Alibaba.com, the brand was able to sell these products worldwide. It
is now partnering with a local university to develop innovative supplements and continue growing its
businesses.
Note:(1) In terms of revenue in 2022, according to Analysys.

Fiscal Year 2023 Annual Report41

Business Overview

Local Consumer Services
We use mobile and online technology to enhancethe efficiency, effectiveness and convenience ofconsumer services for both service providers and theircustomers in two distinct scenarios: “To-Home” and“To-Destination.” In fiscal year 2023, Local consumer
services recorded healthy order volume growth yearover-year.
To-Home
Our “To-Home” business enables consumers to easily
access merchants’ services at home through Ele.me,a leading local services and on-demand delivery
platform in China. Ele.me enables consumers to use
Ele.me, Alipay, Taobao mobile apps to order meals,
food, groceries, FMCG, flowers and pharmaceuticalproducts online. In addition, Fengniao Logistics, Ele.
me’s on-demand delivery network, provides last-milelogistics services, including delivery of food, groceries,
FMCG and pharmaceutical products for Freshippo,
Sun Art, as well as Alibaba Health. Our strategy for
Ele.me is to leverage our China commerce platforms
and our data technology to expand our offerings
from shopping to services, further tapping into new
addressable markets for consumption in China.
In fiscal year 2023, Ele.me recorded healthy GMV
growth year-over-year and maintained positive andimproving unit economics per order, contributed by
the combination of increased average order size andreduced delivery cost per order.
To-Destination
Our “To-Destination” businesses, including Amap,
Fliggy and Koubei, provide consumers with convenient
access to quality services at their destinations. In
fiscal year 2023, the order volume of “To-Destination”
businesses grew rapidly year-over-year.

Fliggy integrated popular elements that appeal to the younger
generation, such as music, food, outdoor activities into travel
offerings. This has created an enriching and interesting new travel
experience, helping destinations attract visitors and enhancebranding effects.

42

Alibaba Group Holding Limited

Amap is a leading provider of mobile digital map,
navigation and real-time traffic information in China.
Amap empowers major mobile apps across different
industry verticals, including local services, ride-hailingand social networking, which end users can accessdirectly through Amap’s leading open platform. In
addition, Amap provides digital map data, navigation
software and real-time traffic information tointernational and domestic automobile manufacturers
as well as aftermarket consumers in China. Amap also
empowers major platforms and infrastructural service
providers, including our China commerce platforms,
Cainiao and Alipay. On October 1, 2022, the first dayof the week-long National Day holiday in China, Amap
achieved a record high of over 220 million daily active
users. In March 2023, the number of average daily
active users of Amap reached a new record high of
150 million, driven by increasing intra-city commuteand inter-city travel demand.
Fliggy, a leading online travel platform in China,
provides comprehensive reservation and fulfillment
services for domestic and international airline andtrain tickets, accommodation, car rental, package
tours, and local attraction tickets and other services.
Fliggy leverages its digital technology and products
to enable its partners to enhance the efficiency
of providing travel services, develop new productofferings, improve member engagement, andconduct data-driven marketing campaigns, providing
consumers with a diverse range of high-quality travel
options.
Koubei, our restaurant and local services guide
platform for in-store consumption, provides targeted,data-driven marketing tools and integrated digital
operational and store management services forrestaurants and local services providers.

“There is a higher riskin traveling alone as awheelchair user, but I don’t
want to inconvenienceothers, so I’m always uneasy
whenever I leave home. The“wheelchair navigation”
feature introduced by Amap
helps to identify the bestroutes for me so I am more atease when I travel, helping me
to regain my confidence.”
Cheng Ruan,
Bronze Medallist,
National Games for Persons with
Disabilities# Technological Innovation   # Social Responsibility

A leading provider
of mobile
digital map,
navigation andreal-time traffic
informationin China

Amap engineers develop
wheelchair navigation to
improve accessibility
To alleviate the inconvenience of travel experienced by the disabled population and vulnerable
groups, Amap developed a wheelchair-accessible navigation feature with the support of theZhejiang Provincial Disabled Person’s Federation. It has been launched in cities such as Beijing,
Shanghai, Hangzhou, Chengdu, and Shenzhen. The public service project of “Wheelchair
Navigation” was initiated by Alibaba staff volunteers, while engineers from Amap quickly joined
to support and launched the project three months later. “Wheelchair Navigation” was developed
to meet special travel needs based on the digitalization of accessible facilities. Together withcorresponding route planning and navigation strategies, it helps ease the anxiety of wheelchairusers and foster the development of an accessible environment.

Fiscal Year 2023 Annual Report43Business Overview

Cainiao
We are committed to further strengthening thecapabilities of our global logistics network. Our vision
for our logistics services is to fulfill consumer orders
within 24 hours in China and within 72 hours anywhere
else in the world. To realize this vision, Cainiao
continues to build and operate a global fulfillment
network together with its logistics partners. It offers
domestic and international one-stop-shop logistics
services and supply chain management solutions,addressing various logistics needs of merchants andconsumers at scale.
Consumer Logistics
Cainiao uses data insights and technology todigitalize the entire logistics process and enhance thecapabilities of its logistics partners, thereby improving
consumer experience and efficiency across thelogistics value chain. As an important complement
to the last-mile delivery network of Cainiao’s expressdelivery partners, Cainiao has also incubated anddeveloped Cainiao Post, a neighborhood logistics
solution with a combination of neighborhood, campus
and rural village stations and residential self-pickup
lockers. We continue to build neighborhood logistics
solutions to cover both urban and rural areas,
allowing consumers to pick up their packages fromtheir nearest stations or residential self-pickup lockers
easily. We also continue to expand Cainiao Post’s
network by offering a variety of value-added services
to improve consumer experience. As of March 31,
2023, excluding those in rural areas and universities,
over 74% of Cainiao Posts offered door-step parcel
delivery service to consumers. Consumers can also
enjoy parcel pick-up at doorstep and time-guaranteed
delivery service through Cainiao.

44

Alibaba Group Holding Limited

Technology-driven integrated supply chain andfulfillment solutions for merchants
The vast geographical area of China and wide
distribution of consumers and merchants in China
require a large and distributed logistics infrastructure.
Cainiao has established a scalable fulfillment networkthat consists of fulfillment hubs at key strategic
locations and package sorting and distribution
centers, which are owned, leased or partneredwith logistics partners. The fulfillment network isconnected by Cainiao’s proprietary logistics data
platform. Cainiao has built a full-fledged fulfillment
network at provincial, city, and county levels, which
offers customized fulfillment solutions to different
types of merchants on our platforms. For mediumsized and large brands and merchants, we provide
digitalized and integrated supply chain management
solutions and logistics services, allowing them to placeinventory across multiple locations in advance basedon sales forecasts to optimize supply chain efficiency
and ensure timely delivery to consumers. In fiscal
year 2023, we further tailored our supply chain andfulfillment solutions to cater for key categories such as
FMCG and home furnishing. For small-sized merchants
in industrial belts, we provide highly competitive andcost-efficient fulfillment services.
Cainiao has developed a strong and expanding
network of assets and partners to support merchantson our cross-border and international commerce
retail businesses, mainly AliExpress, Tmall Global and
Lazada. Cainiao is positioned to provide diversified
services with unique customer value propositions. For
example, from a China import standpoint, Cainiao
is focused on developing cross-border fulfillment
solutions for Tmall Global, utilizing a combination ofbonded warehouses in China and direct shipmentfrom markets outside Chinese mainland. In terms of
China export, Cainiao serves businesses on AliExpress
platform by providing them with attractive value-formoney, convenient and direct logistics channels todeliver packages to consumers worldwide. As of March
31, 2023, Cainiao directly operated 15 overseas sorting
centers. Despite challenging macro environment andsupply chain disruption, Cainiao managed to achieve
daily average cross-border and international package
volume of over 4 million in the fiscal year ended March
31, 2023.

Business Overview

Cainiao leverages Liege eWTP Hub in Belgium as a hub to serve more cross-border cargo routes and help their partners improve air cargo capacity.

4 million+

Daily average cross-border andinternational package volume (1)15overseas sorting centers (2)Notes:(1) Cainiao managed to achieve daily average cross-border and international package volume of over 4 million for the fiscal year
ended March 31, 2023.
(2) As of March 31, 2023, Cainiao directly operated 15 overseas sorting centers.

Fiscal Year 2023 Annual Report45

“Cainiao Global Express’
logistics solutions areaffordable with stabledelivery. Among those,cross-border direct shippingand overseas last miledelivery solve the logistics
needs of merchants acrossproduct categories, andimprove our purchaseconversion rate on theAliExpress Choice channel.”
Jorge Sun,
Head of
AliExpress e-commerce,
AGM Outdoor Mobile# Logistics Capability   # Digital Transformation

A smartlogistics
network

Mobile phone brand leverages
Cainiao Global Express toenhance overseas competitiveness
AGM, a Chinese mobile phone brand specializing in designing, developing, and producing outdoor
products increased its consumer reach across more markets through Cainiao’s diverse logistics
services, including first-mile logistics, cross-border delivery, premium warehouses, and overseas
warehousing. Cainiao Global Express provides AGM with stable delivery and affordable logistics
services to enhance the Chinese brand’s competitiveness in the cross-border market. For example,
by leveraging on self-built express delivery network in Spain, it can better safeguard customers’
high-valued products while premium warehouses in China can shorten the delivery chain andimprove logistics timeliness, which help merchants and our platforms better serve overseas
consumers.

46

Alibaba Group Holding Limited

“This advanced Virtual
Queue technology has been
integrated into Genting
SkyWorlds’ mobile app so that
visitors can avoid the longqueue and plan their itinerary
as they wish.”
Aaron Soo,
Senior Vice President,
Attractions & Tenancy,
Genting Malaysia Berhad# Digital Transformation  # Creating Possibilities

The digitaltechnology
andintelligencebackbonebusiness

Genting SkyWorlds Theme Park
introduces Alibaba Cloud’s
AI solution to improve the guest
experience and reduce queuing times
Malaysia’s Genting SkyWorlds Theme Park partnered with Alibaba Cloud to launch an AI-powered
Virtual Queue solution that utilizes the latest cloud-based technology to deliver seamless andengaging visitor experiences. Alibaba Cloud’s virtual queue reservation leverages advanced AI
algorithms to analyze real-time intelligence from the waiting time and capacity of the facilities,
allowing operations teams to have better crowd control and capacity optimization. With the solution
designed by Alibaba Cloud, Genting SkyWorlds can reduce visitor waiting time flexibly and securely,
which handles a higher volume of visitors.

Fiscal Year 2023 Annual Report47

Business Overview

In April 2023, Alibaba Cloud unveiled its latest large language model, Tongyi Qianwen.

Cloud
Our Cloud segment is comprised of Alibaba Cloud and
DingTalk.
Alibaba Cloud
Alibaba Group is the world’s third largest and Asia
Pacific’s largest Infrastructure-as-a-service provider
by revenue in 2022 in U.S. dollars, according to
Gartner’s April 2023 report (Source: Gartner®,“Market
Share: IT Services, Worldwide, 2022”, Neha Sethi
et al., 14 April 2023, Sorted by Infrastructure-as-aService, Vendor Revenue Basis) (Asia Pacific refers to
Mature Asia/Pacific, Greater China, Emerging Asia/
Pacific and Japan, and market share refers to that ofinfrastructure-as-a-service). Alibaba Group is also
China’s largest provider of public cloud services byrevenue in 2022, including PaaS and IaaS services,
according to IDC (Source: IDC Quarterly Public Cloud
Services Tracker, 2022H2&2022Q4). China’s cloudcomputing industry is still at a nascent stage ofdevelopment. In 2022, the revenue of China’s public
cloud service market, including IaaS, PaaS and SaaS
markets, only accounted for 0.2% of China’s GDP
in 2022, significantly lower than that of the U.S.,
indicating tremendous room for growth. The industry
has experienced significant growth in recent years
with increasing adoption of both basic infrastructural
services and value-added services by enterprises.

48

Alibaba Group Holding Limited

The technologies that power Alibaba Cloud grew outof our own need to operate at a massive scale andto address the complexity of our China businesses,
including related commerce, payments and logistics
elements. Leveraging our full-stack cloud capabilities
and proprietary products portfolio, Alibaba Cloudoffers a comprehensive suite of cloud services basedon a three-tier architecture of infrastructure-as-aservice (IaaS), platform-as-a-service (PaaS) andmodel-as-a-service (MaaS) to customers worldwide.
These services not only enable our customers tobuild a flexible, scalable, affordable and securetechnology infrastructure, but also equip them withleading data capabilities that efficiently handle
complex management, analytics and machinelearning tasks, thereby generating significant businessinsights and enabling intelligent business decisions
and operations. We leverage these capabilities andtechnologies to support our ecosystem and provide
our customers across various verticals with industryspecific solutions, including those for commerce,
financial services, and industrial applications. In
addition, as part of our globalization strategy,
Alibaba Cloud continued to expand our international
cloud computing infrastructure to better serve ourcustomers’ needs in overseas markets. As of March 31,
2023, Alibaba Cloud offered computing services in 28
regions globally.

Business Overview

Leveraging Alibaba Cloud’s large scale and strong
foundation in IaaS and PaaS, our MaaS platform
provides enterprises with high-performance andlow-cost computing resources and machine learning
platform services for large-scale model training
and inference. Our services not only support our
self-developed foundation model, but also support
the training and services of other large models andvertical models in the market. In April 2023, Alibaba
Cloud unveiled our latest LLM, Tongyi Qianwen.
The new LLM will be integrated into all businessapplications across Alibaba’s ecosystem in the near
future to further enhance user experience. To enable
enterprise customers to reap the benefits of AI-driven
innovation, Alibaba Cloud will offer clients access to
Tongyi Qianwen on the cloud and enable them todevelop customized large language models for theirbusiness scenarios.

In addition, we offer solutions of DingTalk, an
intelligent collaboration workplace and application
development platform, to customers of Alibaba
Cloud. This platform offers enterprises enhanced
work collaboration capabilities and provides themwith easy access to Alibaba Cloud’s capabilities
and infrastructure to further facilitate their digitaltransformation.
Alibaba Cloud’s unique advantages lie in our
proprietary technology and continued commitment toinvest in research and development in new productofferings and industry-specific solutions for ourcustomers and partners. Alibaba Cloud continues toattract customers that are reputable and have thepotential to adopt cloud services at a meaningful
scale. In fiscal year 2023, Alibaba Cloud served 55%
of A-share listed companies in China. As digitaltransformation accelerates, our customers, especiallythose from traditional verticals, have increased theirusage of our services. We believe our cloud services
have become a critical foundation that many of
our customers increasingly depend on in their daily
operations.

China’s largest
provider of public cloud services (1)Offering computing services in

28 regions

globally (2)Notes:(1) Alibaba Group is China’s largest provider of public cloud services by revenue in 2022, including PaaS and IaaS services, according
to IDC (Source: IDC Quarterly Public Cloud Services Tracker, 2022H2&2022Q4).
(2) As of March 31, 2023, Alibaba Cloud offers computing services in 28 regions globally.

Fiscal Year 2023 Annual Report49

Business Overview

50

DingTalk

Digital Media and Entertainment

DingTalk is our intelligent collaboration workplace
and application development platform that offers
new ways of working, sharing and collaboration formodern enterprises and organizations. Millions ofenterprises and users use DingTalk to stay connected
and work remotely. In March 2023, DingTalk paying
daily active users reached 23 million. According
to QuestMobile, DingTalk is the largest businessefficiency mobile app in China by monthly active users
in March 2023.

Our digital media and entertainment businesses
leverage our deep consumer insights to serve thebroader interests of consumers through our key
distribution platforms, including Youku, and ourother diverse content platforms, including Alibaba
Pictures, that provide online videos, films, live events,
newsfeeds and literature, among others.

Our strategic initiative to integrate DingTalk with
Alibaba Cloud aims to empower DingTalk withour cloud capabilities and big data analytics tofacilitate the digital transformation of enterprises andorganizations. DingTalk provides a comprehensive
suite of solutions for enterprise collaboration,
including real-time communication, organizational
management and various network collaboration
tools such as data storage, calendars, workflow
management and shared documents. Enterprises
can also enjoy convenient access to a broad range ofapplications, including those offered by third-party
service providers, that are seamlessly integrated
with DingTalk’s platform. In addition, DingTalk has
launched a low-code development infrastructure thatenables enterprises to develop customized solutions ina more convenient and cost-efficient manner. During
the 2023 DingTalk Spring Summit in April, DingTalk
unveiled its product integration of launched intelligent
capabilities based on Alibaba’s Tongyi Qianwenlarge language model, which help customers
and ecosystem partners unlock the potential of AI
capabilities. Large-scale enterprises with complex
needs can also directly leverage DingTalk’s open
platform to develop fully customized digital solutions.
We believe DingTalk has become not only a tool
to help enterprises run their business digitally andefficiently, but also a platform empowered by Alibaba
Cloud’s capabilities that enables enterprises to achieve
fully customized digital transformation.

Youku is a leading online long-form video platform
in China. It enables users to search, view and sharehigh-quality video content quickly and easily acrossmultiple devices. Our Youku brand is among the mostrecognized online video brands in China.

Alibaba Group Holding Limited

Key Distribution Platform
Youku

Insights we gain from our ecosystem and our
proprietary technology enable Youku to deliver
relevant digital media and entertainment content to
its users. In fiscal year 2023, total users’ viewing timeon our Youku mobile app increased by 13% year overyear. In addition, Youku’s total subscription revenue
grew over 15% from the prior fiscal year, primarily
driven by increasing average revenue per user, as well
as benefiting from our original and exclusive content.
We also operate a number of other AI-driven platforms
that effectively deliver relevant and engaging content
to our large and growing user base.
Quark
Quark provides young users with a one-stop platform
for information search, storage and consumption. It
offers tools and services, such as smart search, Quark
cloud drive, AI camera, Quark learning and Quark
documents, to help users better acquire and utilize avariety of digital content and information for learningand work purposes.
Key Content Platforms
We offer a diverse range of digital media andentertainment content using a sustainable production
and acquisition approach. First, we provide self-

Business Overview

produced content. Second, we jointly produce content
with studios, some of which is distributed exclusively
on our platforms. Third, we acquire rights to display
content on our digital media and entertainment
platforms pursuant to licensing agreements with rights
holders. Last, we offer an open platform on whichuser-generated content and professional-generated
content are produced and distributed. Our digital
media and entertainment offerings include online
videos, films, live events, newsfeeds and literature.

Innovation Initiatives and Others

Alibaba Pictures, driven by high-quality content andtechnology, is an integrated platform that provides
content production, promotion and distribution,
intellectual property-related licensing and commercial
management, cinema ticketing management andInternet data services for the entertainment industry.
During the twelve months ended March 31, 2023,
Alibaba Pictures participated in the production anddistribution of a total of 26 films, 12 of which ranked
among the top 20 films released during the same
period in terms of box office, including The Wandering
Earth 2 (流浪地球2), Moon Man (獨行月球) and Lighting
Up the Stars (人生大事), demonstrating our consistent
standards for selecting high-quality films. In addition,
Alibaba Pictures continues to diversify its businesses
to capture opportunities across the entertainment
value chain, including ticketing, digital services andplatforms. Through Damai, a leading online ticketing
platform for live events in China, we provide users
with ticketing services for popular concerts, plays andsporting events.

Tmall Genie

Lingxi Games is a leading digital interactive
entertainment service provider in China, specializing in
the development, operation and licensed publishingof mobile games and providing a professional
distribution and service platform for both players anddevelopers. Lingxi Games operates a number of highquality mobile games, such as Three Kingdoms Tactics(三國志‧戰略版) and Three Kingdoms Fantasy Land(三國志幻想大陸). In fiscal year 2023, Lingxi Games is
the 4th largest mobile gaming company in Chinese
mainland (iOS App Store) among global companies interms of grossing, according to Data.ai. In addition tooperating our flagship titles, Lingxi Games continues
to develop new high-quality and diversified content
to serve players from both Chinese mainland andoverseas markets, such as the recently launched Three
Kingdoms Tactics: Go (三國志‧戰棋版) and Ashes of
the Kingdom (代號鳶), which are greatly received in
the player community.

DAMO Academy
In October 2017, we established DAMO Academy, aglobal research program in cutting-edge technologies
that aim to integrate and speed up knowledge
exchange between science and industry. DAMO
Academy encourages a collaborative environmentthat facilitates the application of scientific discoveries
to real-life circumstances.

Tmall Genie provides a selection of IoT-enabled smart
home appliances, including smart speakers, lights
and remote controls. Specifically, Tmall Genie smart
speaker, a leading smart speaker in China in terms ofsales units, provides an interactive interface for ourcustomers to easily access services offered by our
ecosystem participants.

Customer Services and Protection
As our ecosystem caters to a wide range of consumers
in China, we view protection of consumer’s interest
as our top priority as we believe every consumer has
the right to be protected from false and misleading
claims and harmful products. To this aim, we require
merchants to sign merchant service agreementswith us, pay fund deposit and authorize us to directlydeduct fund deposit in the event of confirmed
consumer claims. Additionally, we are committed toprotecting intellectual property rights and eliminating
counterfeit merchandise and fictitious activities.
We combat the issue of intellectual property rights
infringement by collaborating with rights holders,
trade associations and governments around theworld. This is consistent with our ESG strategies of“Enabling a Sustainable Digital Life” and “Fueling
Small Businesses”.

Fiscal Year 2023 Annual Report51

“Our mobile app allows
older people to screen
for Alzheimer’s disease
anywhere and anytime. By
reducing barriers to screening
access and demands on time,
it is helping with prevention
through early detection.”
Yongan Sun,
Executive Vice Chairman
and Secretary General of the
Alzheimer’s Disease Chinese(ADC)# Technological Innovation   # Social Responsibility

A global research
program in
cutting-edge
technologies

Alibaba’s DAMO Academy uses
AI technology to help screen for
Alzheimer’s disease andearly-stage of esophageal cancer“Prevention is more effective than treatment” is a fundamental principle in addressing Alzheimer’s
and cancer. Alibaba’s DAMO Academy and Alzheimer’s Disease Chinese (ADC) collaborated toprovide artificial intelligence (AI)-powered screenings for older people through a mobile appthat offers customized analysis and suggestions based on screening results. It also recommends
specialists located nearby for follow-up consultations so that older people in rural areas andunderprivileged populations with insufficient medical resources can also access professional
services.
In addition, the medical AI team of DAMO Academy has partnered with several hospitals and medical
institutions in Chinese mainland to integrate AI and non-contrast CT scanning to identify early-stageesophageal cancer symptoms. To address the challenges of identifying early-stage tumors, theresearch team focused on improving the segmentation algorithm model, which helps AI learn andanalyze global characteristics and local details of the esophagus so that patients can be screened forearly-stage esophageal cancer through a general physical examination using non-contrast CT.
52

Alibaba Group Holding Limited

Business Overview

Sales and Marketing

Our Technology

Our sales and marketing efforts radiate from thecornerstone of our ecosystem, Taobao and Tmall,which constitute the world’s largest digital retailbusiness in terms of GMV for the twelve months
ended March 31, 2023, according to Analysys. We
have wide consumer recognition of our brands andenjoy significant organic traffic through word-ofmouth. We believe the reputation and ubiquitousawareness of our brands and platforms in China and,increasingly, abroad provide us with the best andmost cost-efficient marketing channel. In addition,
we also use other marketing initiatives to promote
our platforms. During the most recent fiscal year,
we increased our marketing efforts, such as a highly
coordinated marketing and promotional campaign
for the 11.11 Global Shopping Festival and dedicatedmarketing efforts to promote Taobao Deals, in order
to expand our user base across developed and lessdeveloped areas. We expect to continue to leverage
our resources in future marketing activities. We
also expect to enhance our monetization capability
through leveraging our data technologies to develop
and offer more personalized and innovative services,
so as to improve customer experience and walletshare. Furthermore, our major business segments
and other elements in our ecosystem provide
synergetic advantages and create cross-promotional
opportunities. For example, the large number ofconsumers on our marketplaces attracts a large
number of merchants who become customers of ouronline marketing services, while an increasing numberof KOLs, video bloggers and content creators areactively producing content to engage with consumers
and fans on our platforms, thereby driving revenue formerchants, brands and retailers.

Technology is key to our success in achieving
efficiency, improving user experience, and enabling
innovation. Our world-class proprietary technology
supports peak order volumes of up to hundreds ofthousands per second, delivers tens of billions of
online marketing impressions per day, and enables
millions of merchants, brands and other businesses to
conduct their operations efficiently and effectively. The
uniqueness of our technology lies in the unparalleledlarge-scale application environment due to thescale of our businesses as well as our diverse rangeof product and service offerings. By continuously
applying our technology across our businesses, we
generate knowledge and innovations that drive
improvements and further technological development.
Members of our research and development teamplay key roles in various international standardization
organizations in areas such as security and IoT, andactively participate in international open source
foundations focusing on areas such as software
engineering, cloud-native applications anddatabases. In October 2017, we established DAMO
Academy, a global research program in cuttingedge technology that aims to integrate and speed
up knowledge exchange between science andindustry. DAMO Academy encourages a collaborativeenvironment that facilitates the application of scientificdiscoveries to real-life circumstances.
Key components of our technology include thosedescribed below:

Technology Infrastructure
Our data centers utilize leading technologies in
distributed structure, innovative cooling techniques,
distributed power technology and intelligent
monitoring, and we believe our data centers areamong the most efficient in the world as indicated bytheir better power utilization rates. We operate data
centers in multiple countries around the world. The
multi-region availability of our transaction system data
centers provides scalability and stable redundancy.

Fiscal Year 2023 Annual Report53Business Overview

Cloud Operating System
Apsara (our proprietary general-purpose distributed
computing operating system), ShenlongCompute (ourhardware virtualization architecture), and Pangu (ourdistributed cloud storage system), together, provide
Alibaba Cloud’s customers and our core businesses
with enhanced computing power and storage
capabilities to support their and our business growthin the new technology era.

Database
We have developed a next-generation cloud-native
database, PolarDB, which enables our customers
to meet their requirements for on-demand storage,transaction processing and computation, elasticity
and scalability. PolarDB significantly increases thethroughput and performance of transaction andquery processing as compared to other open-source
relational database management systems. We havealso developed a cloud-native distributed analytics
database, AnalyticDB, which supports real-time
interactive and complex analytics over massive data.
Additionally, we have developed Lindorm, a cloudnative multi-model database, to support efficientstorage and fusion analyses of multi-model data.

Big Data Analytics Platform
We have developed a large-scale distributed data
analytics platform that can efficiently handle thecomplex computing tasks of hundreds of petabytes
of data per day, allowing us to build AI-powered
solutions and providing deep data insights capabilities
to our businesses and our cloud customers. Our
comprehensive big data analytics platform includes:
MaxCompute, a data storage and computing
platform; Blink, a real-time data computing platform;
Hologres, an interactive analysis engine; Dataworks, aone-stop development platform; and OneData, a data
integration and management system.

Artificial Intelligence
Our proprietary, distributed deep learning platform,
PAI, has access to insights across diverse businesses

54

Alibaba Group Holding Limited

involving a rich variety of consumer experiences aswell as real-time feedback from clients of Alibaba
Cloud. As a result, we believe we are in a uniqueposition to develop large-scale commercial use of
AI. We have applied various AI technologies acrossour ecosystem to enhance consumer experience andbusiness operational efficiency. These enhancements
include personalized search results and shopping
experiences as well as various interactive content
formats enabled by deep learning and data analytics
adopted in search functions, as well as intelligent
customer service, leveraging speech recognition,
image and video analysis technologies. In addition,
our AI capabilities enable us to introduce innovative
products, such as our AI-enabled Tmall Genie smart
speaker.
Our proprietary LLM, Tongyi Qianwen, will serve as anenabler for business integrations and applications
across our ecosystem, enhance user experience andaccelerate digitalization brought by the AI-driven
innovation.

Internet of Things
We are engaged in the development of an IoT
infrastructure, encompassing a wide range of
IoT technologies and products that can be fully
integrated with our cloud solutions, such as IoT
platform technologies, IoT wireless technologies,
edge AI computing, microchip design anddevelopment frameworks, operating systems andon-device AI technologies for digital retail, industrial
manufacturing, smart city, digital agriculture and otherapplications.

Security
We have established a comprehensive situationalawareness and security system that spans across ourentire infrastructure and business systems, covering
our hardware, systems, network, apps, data services
and end users. Our back-end security system handles
billions of instances of malicious attacks each day toprovide effective security for our ecosystem.

Business Overview

Environmental, Social and Governance(ESG)
Our ESG Strategy
ESG is part of the foundation of our business strategy
and long-term development. We are dedicated toaddressing society’s pressing issues by integrating
ESG objectives into our business strategy.
Our ESG strategy has seven dimensions,corresponding to all of the 17 Sustainable
Development Goals (SDGs) issued by the United
Nations and closely tied to China’s modernization
goals.
We have devised our ESG strategy to be pragmatic,
long-term and action-oriented, regimented by atransparent and rigorous indicator system. We focus
our efforts on the seven areas below:
Advancing Towards the Goal of Carbon Neutrality
We target to reach carbon neutrality in our own
operations, including Scope 1 and Scope 2 emissions,by 2030. To further implement green initiatives acrossour value chain (Scope 3 emissions), we are deploying
tools to help our value chain partners reduce theirgreenhouse gas emissions and overall carbon
intensity by at least 50% from the base year of 2020 by2030.
We have made solid progress towards reducing
greenhouse gas emissions. The net emissions of ourown operations (Scope 1 and 2 ) are 4.681 million
MtCO2e in the fiscal year ended March 31, 2023, a
12.9% year-over-year decrease. We have reduced
emissions by 1.419 million MtCO2e in the fiscal year
ended March 31, 2023, compared to 0.620 million
MtCO2e in the prior fiscal year. We have also reduced
our value chain carbon intensity (Scope 3) to 8.7
MtCO2e per million RMB in the fiscal year ended March
31, 2023, from 9.2 MtCO2e per million RMB in thefiscal year ended March 31, 2022, through initiatives
such as promoting digital efficiency and energy
transformation in logistics services, promoting energy
efficiency and transformation in data centers, andencouraging our employees towards low-carbon
business travels.
As for promoting carbon reduction in our platform
ecosystem (Scope 3+), in which we strive towards acumulative ecosystem-wide reduction of greenhousegas emissions by 1.5 billion tons by 2035, we havemade progress in a number of areas. First, together
with authoritative institutions, we have publishedthe framework for Scope 3+ carbon reduction
methodology. Second, we have developed anditerated a number of carbon reduction scenarios
in scientific and diversified measures. In the fiscal
year ended March 31, 2023, we contributed to ameasured reduction of 22.907 million MtCO2e acrossthe ecosystem. Third, we are leveraging Alibaba’s
reach to involve more stakeholders. We launched our“Carbon88 Ledger Platform,” which promotes greener
lifestyles by rewarding consumers for adopting
eco-friendly behaviors, covering some of Alibaba’s
most-used apps, and “Low-carbon Friendly Products
Program,” which focuses on the product lifecycle,
covering key process and measurements in productdecarbonization. These systems have amplified
our decarbonization efforts through 187 million
consumers, 409 brands, and 1.91 million products.
Supporting Our People
It is our employees that make our business and culture
thrive. None of our goals can be accomplished without
our people. It is critical for us to ensure that all of ouremployees can enjoy an equal and inclusive working
environment of dignity and diversity. This also means
supporting our employees to fulfil their potentials
by providing them with on-the-job trainings andopportunities for career advancement.
In addition, we provide abundant channels forour employees at all levels to give feedback to ourmanagement team. We have a holistic personnel
review system in place to help employees identify
where they are today, and a wide array of talentdevelopment programs to help them get to where
they want to be in the future. We have also placed agreat focus on campus design and culture, healthy
lifestyle and employees’ access to healthcare advice.
In fiscal year 2023, Alibaba ranked Top 5 among
Chinese enterprises in “Forbes 2022 Global Best
Employer.”
Enabling a Sustainable Digital Life
Sustainable consumption is crucial to our sustainable
development goals and we run our business toprovide consumers with diverse, inclusive, trustworthy,
and responsible consumption. Highlights of ourprogress during the current fiscal year are as follows.
Inclusive consumption. We pay special attention to
being accessible and senior-friendly. We understandthe difficulties of the disabled community in using
digital technology and help provide them with equal
access to digital technologies. We also provide well-

Fiscal Year 2023 Annual Report55

Business Overview

designed, convenient and efficient digital services tosenior consumers. In the fiscal year ended March 31,
2023, Taobao and Tmall Apps served over 320,000
visually impaired users, while as of March 31, 2023,“Wheelchair Navigation,” developed by Amap, wasavailable in six cities, providing accessible navigation
over 0.9 million times.
Trustworthy consumption. Consumer privacy protection
and data security are the bedrock for consumers. We
have integrated the three principles of “minimizing
data collection”, “ensuring user awareness andchoices,” and “enhancing user data protection” into
our products and services, promoting the use ofprivacy technology and secure computing to protect
consumer privacy and data security.
Fueling Small Businesses
In their digital transformation, micro, small, andmedium-sized enterprises, or MSMEs, are facing
challenges in accessing technology, market
opportunities, and business competitiveness. Asa leading technology platform in China, we strive
to integrate our digital technology into the real
economy to create more jobs, provide more growth
opportunities to MSMEs and achieve sustainable
development. According to the latest estimate by aresearch team from Renmin University of China, ourentire ecosystem facilitated, directly or indirectly, a
total of over 70 million jobs in calendar year 2022.
Propelling Rural Development throughDigitalization
We persistently work to help bridge the urban-ruralgap, facilitate rural revitalization and support rural
economy. In fiscal year 2023, sales of 832 counties
previously categorized as impoverished nationwide
exceeded RMB130 billion on our platforms, andtotal sales of 160 national key counties for rural
revitalization exceeded RMB4.3 billion. Our team ofrural commissioners was awarded as Outstanding
Team of “Sannong” (Sannong in Chinese is anacronym for Agriculture, Rural areas, and Farmers) in
2022 by the General Office of the Ministry of Agriculture
and Rural Affairs and the Policy and Regulations
Department of the National Rural Revitalization
Administration.
Facilitating Participatory Philanthropy
We have connected with a wide range of philanthropic
ecosystem and leveraged the power of technology
to address social challenges. Starting with our
employees, we involved stakeholders across our
56

Alibaba Group Holding Limited

ecosystem to engage in philanthropy via flexible forms
and mechanisms, aiming to promote greater social
involvement. In the fiscal year ended March 31, 2023,
total volunteer service hours of employees reached
250,144 hours.
Building Corporate and Social TrustAs digital technology unprecedentedly transforms
ways of social production and our lifestyles, we areeven more convinced that trust is a prerequisite forour social responsibility and a cornerstone for ourbusiness development. With this conviction, we havebeen focusing on building corporate and social trustin two areas – privacy protection and data security,and science and technology ethics. We believe thesepriorities are in line with our strategic positioning,
corporate governance mechanism and technologicalcapabilities, as we aim to become a pioneer in thetechnology industry to lead the charge of building a
corporate and social place of trust.

ESG Governance Structure
Alibaba’s over 20 years of business success has been
predicated on a thoughtful system of governanceto oversee our wide array of brands, platforms andservices. We recognize that no ESG strategy canreach its full potential without a dedicated structureof governance. Accordingly, we have embedded ESG
oversight into a three-layer structure at the board,
senior management, and group and business unit
levels. Our board has established a sustainability
committee composed of three directors (Jerry Yang,
Joe Tsai, and Maggie Wu) to supervise and lead ESG
efforts across Alibaba. Their responsibilities include
identifying and evaluating ESG opportunities and risks,
ensuring robust oversight and internal managementof ESG strategies and reviewing ESG-related
disclosures. Under the sustainability committee, wehave established a sustainability steering committee,
or the SSC, which is tasked with leading, implementing
and monitoring Alibaba’s ESG goals, strategies andinitiatives, including building a group-wide ESG
management system. Moreover, we have establishedan ESG strategy and operations department thatcoordinates directly with the designated ESG teams ofbusiness units and departments. They are the driving
force to implement the strategies and projects set by
the SSC and to establish and maintain monitoring
systems to measure our progress. Under our neworganizational structure announced in March 2023,
we will keep the three-layer corporate governancestructure. The Reorganization will not change our ESG
strategic positioning or commitments.

Business Overview

Competition
We face competition principally from established
Chinese Internet companies and their respective
affiliates, global and regional e-commerce players,
cloud computing service providers, logistics service
providers and digital media and entertainment
providers. Although foreign e-commerce companies
currently have a limited presence in China, we facesignificant competition from them in the area ofcross-border commerce. These competitors generatesignificant traffic and have established strong brandrecognition, robust technological capabilities andsignificant financial resources. The areas in which wecompete primarily include:

•

•

•

•

Consumers. We compete to attract, engage andretain consumers based on the variety, quality
and value of products and services listed on ourplatforms, the engagement of digital media
and entertainment content available on ourplatforms, the overall user experience of our
products and services, and the effectiveness of
our consumer protection measures.
Merchants, Brands, Retailers and other
Businesses. We compete to attract and retain
merchants, brands and retailers based on thesize and the engagement of consumers on ourplatforms and the effectiveness of our products
and services to help them build brand awarenessand engagement, acquire and retain customers,
complete transactions, expand service
capabilities, protect intellectual property rights
and enhance operating efficiency. In addition,
we compete to attract and retain businesses ofdifferent sizes across various industries based on
the effectiveness of our cloud service offerings
to help them enhance operating efficiency
and realize their digitalization transformation
ambitions.
Marketers. We compete to attract and retain
marketers, publishers and demand-side
platforms operated by agencies based on
the reach and engagement of our properties,
the depth of our consumer insights and theeffectiveness of our branding and marketing
solutions.

As we acquire new businesses and expand into newindustries and sectors, we face competition frommajor players in these industries and sectors. In
addition, as we expand our businesses and operations
into an increasing number of international markets,
such as Southeast Asia and Europe, we increasingly
face competition from domestic and international
players operating in these markets. See “Risk Factors— Risks Related to Our Business and Industry — If
we are unable to compete effectively, our business,financial condition and results of operations would bematerially and adversely affected.”

Seasonality
Our overall operating results fluctuate from quarterto quarter as a result of a variety of factors, including
seasonal factors and economic cycles that influence
consumer spending as well as promotions.
Historically, we have experienced the highest levelsof revenues in the fourth calendar quarter of eachyear due to a number of factors, including merchants
allocating a significant portion of their online
marketing budgets to the fourth calendar quarter,
promotions, and the impact of seasonal buying
patterns in respect of certain merchandise categories
such as apparel. We also have experienced lower
levels of revenues in the first calendar quarter of
each year due to a lower level of operating activities
by merchants early in the calendar year and during
the Chinese New Year holiday, during which time
consumers generally spend less and businesses in
China are generally closed. Moreover, as our fixed
costs and expenses, such as payroll and benefits,
bandwidth and location fees, grow at a relatively
stable rate compared to our revenue growth, we
expect to enjoy increased operating leverage inseasonally strong quarters, but will face significant
margin pressure in seasonally weak quarters. Ourinternational commerce businesses are also subject
to seasonal fluctuations depending on the markets
we operate in. Except for our China and internationalcommerce businesses, operating results of our otherbusinesses have not demonstrated clear seasonalpatterns, which we believe may partially reduce theseasonality impact of our China and internationalcommerce businesses as we continue to grow theseother businesses.

Talent. We compete for motivated and capabletalent, including engineers and productdevelopers to build compelling apps, tools,
and functions and to provide services for allparticipants in our ecosystem.

Fiscal Year 2023 Annual Report57

Business Overview

Permissions and Approvals Required to be
Obtained from PRC Authorities for our Business
Operations
In the opinion of Fangda Partners, our PRC legal
counsel, our consolidated subsidiaries and the VIEs in
China have obtained all major licenses, permissions
and approvals from the competent PRC authorities
that are necessary to the operations of our China
commerce and cloud businesses, which accounted
for a significant majority of our revenue in fiscal year
2023. In addition, we have implemented policies
and control procedures to obtain and maintain thenecessary licenses, permission and approvals to
conduct our businesses. On the basis of the legal
opinion issued by our PRC legal counsel and ourinternal policies and procedures, we believe that
our consolidated subsidiaries and the VIEs in China
have received the requisite licenses, permissions andapprovals from the PRC authorities as are necessary
for our business operations in China. Such licenses,
permits, registrations and filings include, among
others, Value-added Telecommunication License,
License for Online Transmission of Audio-Visual
Programs, Network Cultural Business License, Online
Publishing Service License and License for Surveying
and Mapping.
If we, our consolidated subsidiaries or the VIEs in China(i) do not maintain such permissions or approvals,(ii) inadvertently conclude that such permissions orapprovals are not required, or (iii) applicable laws,
regulations, or interpretations change, and we or
the VIEs are required to obtain such permissions orapprovals in the future, we may be unable to obtainsuch necessary approvals, permits, registrations
or filings in a timely manner, or at all, and suchapprovals, permits, registrations or filings may be
rescinded even if obtained. Any such circumstance
may subject us to fines and other regulatory, civil
or criminal liabilities, and we may be ordered by
the competent PRC authorities to suspend relevant

58

Alibaba Group Holding Limited

operations, which could materially and adversely
affect our business, financial condition, results ofoperations and prospects. Please see “Risk Factors —Risks Related to Our Business and Industry — We aresubject to a broad range of laws and regulations,and future laws and regulations may impose
additional requirements and other obligations that
could materially and adversely affect our business,financial condition and results of operations, as wellas the trading prices of our ADSs, Shares and/or othersecurities.”
Furthermore, if the PRC government determines thatthe contractual arrangements constituting part of
the VIE structure adopted by us do not comply with
PRC regulations, or if these regulations change orare interpreted differently in the future, our securities
may decline in value or become worthless if thedeterminations, changes, or interpretations resultin our inability to assert contractual control over theassets of our consolidated subsidiaries and the VIEs
in China that conduct a significant portion of ourbusiness operations.
In addition, there are substantial uncertainties as
to whether the VIE structure adopted by us may bedeemed as a method of foreign investment in the
future. If the VIE structure adopted by us were to bedeemed as a method of foreign investment under
any future laws, regulations and rules, and if anyof our business operations were to fall under the“Negative List” for foreign investment, we would needto take further actions in order to comply with theselaws, regulations and rules, which may materiallyand adversely affect our current corporate structure,business, financial condition and results of operations.
See “Risk Factors — Risks Related to Our Corporate
Structure — Substantial uncertainties exist with respect
to the interpretation and implementation of the PRC
Foreign Investment Law and its implementing rules
and other regulations and how they may impact theviability of our current corporate structure, business,financial condition and results of operations.”

Business Overview

Given the uncertainties relating to the interpretationand enforcement of PRC laws, rules and regulations,
it is possible that our existing operations may befound not to be in full compliance with relevant laws
and regulations in the future. In addition, the PRC
legal system is based in part on government policies
and internal rules, some of which are not published
on a timely basis or at all, and which may have aretroactive effect. As a result, we may not be awareof our violation of these policies and rules until after
the occurrence of the violation. For more detailed
information, see “Risk Factors — Risks Related to Doing
Business in the People’s Republic of China — There
are uncertainties regarding the interpretation andenforcement of PRC laws, rules and regulations, andchanges in policies, laws, rules and regulations in the
PRC could adversely affect us.”
Permissions and Approvals Required to be
Obtained from PRC Authorities for our Securities
Offerings
The PRC government has enhanced its regulatory
oversight of Chinese companies listing overseas. In
connection with our prior securities offerings andoverseas listings, under PRC laws and regulationsin effect as of the date of this annual report, after
consulting our PRC legal counsel, Fangda Partners, weare not aware of any PRC laws or regulations which
explicitly require us to obtain any permission fromthe CSRC or other Chinese authorities, and we, ourconsolidated subsidiaries and the VIEs in China (i) havenot been required to obtain any permission from orcomplete any filing with any PRC authority, (ii) have notbeen required to go through a cybersecurity review by
the Cyberspace Administration of China, and (iii) have
not received or were denied such requisite permissions
by any PRC authority. There are uncertainties withrespect to how PRC authorities will regulate overseas
securities offerings and overseas listings in general,
as well as the interpretation and implementation of
any related regulations. Although we intend to fullycomply with the then effective relevant laws andregulations applicable to any securities offerings wemay conduct, there are uncertainties with respect
to whether we will be able to fully comply withrequirements to obtain any permissions and approvals
from, or complete any reporting or filing procedures
with, PRC authorities that may be in effect in the future.
If we, our consolidated subsidiaries or the VIEs in China(i) do not maintain such permissions or approvals,(ii) inadvertently conclude that such permissions,approvals or filing or reporting are not required, or(iii) applicable laws, regulations, or interpretations
change, and we or the VIEs are required to obtainsuch permissions, approvals or filing or reportingin the future, we may be unable to obtain suchnecessary approvals, permits, registrations or filings
in a timely manner, or at all, and such approvals,
permits, registrations or filings may be rescinded evenif obtained. Any such circumstance could subject us
to penalties, including fines, suspension of businessand revocation of required licenses, significantly limit
or completely hinder our and our subsidiaries’ ability
to offer securities to investors and cause our securities
to decline in value or become worthless. For moredetailed information, see “Risk Factors — Risks Related
to Doing Business in the People’s Republic of China —There are uncertainties regarding the interpretationand enforcement of PRC laws, rules and regulations,and changes in policies, laws, rules and regulations in
the PRC could adversely affect us” and “Risk Factors —Risks Related to Our Business and Industry — We mayneed additional capital but may not be able to obtainit on favorable terms or at all.”Regulation
We operate in an increasingly complex legal andregulatory environment. We and our key service
provider, Ant Group, are subject to a variety of PRC andforeign laws, rules and regulations across a numberof aspects of our business. As we have expanded
our operations to other countries, we have become
increasingly subject to applicable regulations inthese jurisdictions. This section primarily summarizes
the principal PRC laws, rules and regulations that
we believe have the most significant impact on ourbusiness and operations within the PRC, because
the PRC remains the country where we conduct thesubstantial majority of our business and generate
the substantial majority of our revenues. Other
jurisdictions where we conduct business have theirown laws and regulations that cover many of theareas covered by PRC laws and regulations, but
their focus, specifics and approaches may differ
considerably. Areas in which we are subject to laws,
rules and regulations outside of the PRC mainly
include data protection and privacy, consumer
protection, content regulation, intellectual property,
competition, cross-border trade, taxation, antimoney laundering and anti-corruption. We may also
face protectionist policies and regulatory scrutiny
on national security grounds in foreign countries inwhich we conduct business or investment activities.
See “Risk Factors — Risks Related to Our Business andIndustry — We are subject to a broad range of laws
and regulations, and future laws and regulations may
impose additional requirements and other obligations
that could materially and adversely affect our
Fiscal Year 2023 Annual Report59Business Overview

business, financial condition and results of operations,as well as the trading prices of our ADSs, Shares and/or other securities.”
Our online and mobile commerce businesses areclassified as value-added telecommunication
businesses by the PRC government. Current PRC
laws, rules and regulations generally restrict foreign
ownership in value-added telecommunication
services. As a result, we operate our online and mobilecommerce businesses and other businesses in which
foreign investment is restricted or prohibited throughvariable interest entities, each of which is owned by
PRC citizens or by PRC entities which are ultimately
owned by PRC citizens, and holds all licenses
associated with these businesses.
The applicable PRC laws, rules and regulations
governing value-added telecommunication services
may change in the future. We may be required toobtain additional approvals, licenses and permits
and to comply with any new regulatory requirements
adopted from time to time. Moreover, substantial
uncertainties exist with respect to the interpretationand implementation of these PRC laws, rules andregulations. See “Risk Factors — Risks Related to Doing
Business in the People’s Republic of China — There
are uncertainties regarding the interpretation andenforcement of PRC laws, rules and regulations, andchanges in policies, laws, rules and regulations in the
PRC could adversely affect us.”

Regulation of Telecommunications andInternet Information Services
Regulation of Telecommunications Services
Under the Telecommunications Regulations of the PRC,or the Telecommunications Regulations, promulgatedon September 25, 2000 by the State Council of the
PRC and most recently amended in February 2016,a telecommunications service provider in China
must obtain an operating license from the MIIT, or
its provincial counterparts. The Telecommunications
Regulations categorize all telecommunications
services in China as either basic telecommunications
services or value-added telecommunications services.
Our online and mobile commerce businesses, as well
as Youku’s online video businesses, are classified
as value-added telecommunications services. The
Administrative Measures for Telecommunications
Business Operating License, promulgated by the
MIIT in September 2017, set forth more specificprovisions regarding the types of licenses required to60

Alibaba Group Holding Limited

operate value-added telecommunications services,the qualifications and procedures for obtaining thelicenses and the administration and supervision ofthese licenses.
Foreign investment in telecommunications
businesses is governed by the State Council of the
PRC’s Administrative Rules for Foreign Investment
in Telecommunications Enterprises, or the Foreign
Investment Telecommunications Rules, which wasrecently amended on March 29, 2022 and became
effective on May 1, 2022. According to the amended
Foreign Investment Telecommunications Rules, aforeign investor’s beneficial equity ownership in an
entity providing value-added telecommunications
services in China is generally not permitted to exceed
50% unless otherwise allowed by the competent
PRC governmental authorities. Although the revised
Foreign Investment Telecommunications Rules
no longer require major foreign investors holding
equity in enterprises providing value-added
telecommunications services in China to have a goodtrack record and operational experience in providing
these services, the PRC governmental authorities havenot promulgated the relevant implementation rules.
Accordingly, there are uncertainties as to whether
foreign investors without a good track record andoperational experience in providing these services
may qualify as major foreign investors in value-added
telecommunications enterprises. Based on the Notice
regarding the Strengthening of Ongoing and Post
Supervision of Foreign Invested Telecommunication
Enterprises issued by the MIIT in October 2020, foreign
invested telecommunications enterprises will nolonger be subject to the requirement for prior MIIT
approval. Nonetheless, these enterprises still needto submit the relevant materials to the MIIT to apply
for new telecommunications operating permits oramended permits.
Although the Negative List allows foreign investors tohold more than 50% equity interests in a value-added
telecommunications service provider engaging in
e-commerce, domestic multi-party communications,or storage-and-forward and call center businesses,
other requirements provided by the amended Foreign
Investment Telecommunications Rules shall still apply.
The MIIT’s Notice Regarding Strengthening
Administration of Foreign Investment in Operating
Value-Added Telecommunications Businesses, or the
MIIT Notice, issued on July 13, 2006 prohibits holdersof these service licenses from leasing, transferringBusiness Overview

or selling their licenses in any form, or providing
any resource, site or facility, to any foreign investors
intending to conduct this type of business in China. In
addition to restricting dealings with foreign investors,
the MIIT Notice contains a number of detailed
requirements applicable to holders of value-added
telecommunications service licenses, including thatlicense holders or their shareholders must directly
own the domain names and trademarks used in their
daily operations and each license holder must possess
the necessary facilities for its approved business
operations and maintain its facilities in the regions
covered by its license, including maintaining its
network and providing Internet security in accordancewith the relevant regulatory standards. The MIIT or
its provincial counterparts have the power to require
corrective actions after they discover any noncompliance by license holders, and where license
holders fail to take those steps, the MIIT or its provincial
counterparts have the power to revoke the valueadded telecommunications service licenses.
On December 28, 2016, the MIIT promulgated the
Notice on Regulating Telecommunications Services
Agreement Matters, or the Telecommunications
Services Agreement Notice, which came into
effect on February 1, 2017. According to theTelecommunications Services Agreement Notice,telecommunications service providers must require
their users to present valid identification certificatesand verify the users’ identification information before
provision of services. Telecommunications service
providers are not permitted to provide services tousers with unverifiable identity or users who decline toproceed with identity verification.
Regulation of Internet Information Services
As a subsector of the telecommunications industry,
Internet information services are regulated by the
Administrative Measures on Internet Information
Services, or the ICP Measures. “Internet information
services” are defined as services that provide
information to online users through the Internet.
Internet information service providers that provide
commercial services are required to obtain an
operating license from the MIIT or its provincial
counterpart.
To the extent the Internet information services
provided relate to certain matters, including news,
publication, education or medical and healthcare(including pharmaceutical products and medical
equipment matters), approvals or filings must also
be obtained from the relevant industry regulatorsin accordance with the laws, rules and regulations
governing those industries.

Regulation of Advertising Services
The principal regulations governing advertisingbusinesses in China are:

•
•
•
•

the Advertising Law of the PRC (2021, as
amended);the Advertising Administrative Regulations (1987,
as amended);
the Administrative Regulations on Internet
Information Search Services (2016); andthe Administrative Measures for Internet
Advertising (2023).

These laws, rules and regulations require companies
such as ours that engage in advertising activities
to obtain a business license that explicitly includes
advertising in the business scope from the SAMR,
formerly the SAIC, or its local branches.
The applicable PRC advertising laws, rules andregulations contain certain prohibitions on the content
of advertisements in China (including prohibitions
on misleading content, superlative wording,socially destabilizing content or content involving
obscenities, superstition, violence, discrimination or
infringement of the public interest). Advertisements
for anesthetic, psychotropic, toxic or radioactive
drugs are prohibited, and the dissemination ofadvertisements of certain other products, such as
tobacco, patented products, pharmaceuticals, medical
instruments, agrochemicals, foodstuff, alcohol andcosmetics, are also subject to specific restrictions andrequirements. Advertisers, advertising operators or
advertising distributors may be subject to civil liability
if they infringe the legal rights and interests of third
parties, such as infringement of intellectual property
rights, unauthorized use of a name or portrait anddefamation.
On June 25, 2016, the Cyberspace Administration ofChina promulgated the Administrative Regulations on
Internet Information Search Services, or the Internet
Search Regulations, which came into effect on August
1, 2016. According to the Internet Search Regulations,Internet search service providers must verify paidsearch service customers’ qualifications, limit the ratioof paid-search results on each web page, and clearly
distinguish paid-search results from natural search
results.

Fiscal Year 2023 Annual Report61

Business Overview

On February 25, 2023, the SAMR released theAdministrative Measures for Internet Advertising, whichcame into effect from May 1, 2023 and replaced theInternet Advertising Interim Measures promulgated by
the SAIC on July 4, 2016. The Administrative Measuresfor Internet Advertising set out, among other things,
the following requirements for Internet advertising
activities:

•

•

•

•
•

•

62

are prohibited from engaging in the following
behaviors that affect one-click closure: (i) there
is no “close” sign or the timing is over to close
the advertisements; (ii) the “close” sign is false,
not clearly identifiable or difficult to locate which
set up obstacles to close the advertisements;(iii) closing the advertisements requires morethan two clicks; (iv) during the process ofbrowsing the same page or document, theadvertisements continue to pop up after closing,which affect users normal use of the network.
These requirements also apply to open screen
ads displayed when launching an Internet
application;

online advertisements for tobacco (including
e-cigarettes) are not allowed, and online
advertisements for prescription medicine are notallowed unless otherwise permitted by laws andregulations;
online advertisements for special commodities
and services such as medical treatments,
pharmaceuticals, medical devices,
agrochemicals, veterinary medicine, health foods
and food for special medical purposes must be
reviewed by competent authorities before online
publication, and the advertisements for suchcommodities and services are not allowed tobe published in the form of introducing healthand wellness knowledge. In addition, whenintroducing health and wellness knowledge,
information such as the address or contact
information of commodity operators or service
providers and shopping links related to theseproducts must not appear on the same page orat the same time;advertisements for medical treatments,
pharmaceuticals, health foods, special medical
purpose formula foods, medical devices,
cosmetics, alcohol, beauty advertisements, andonline game advertisements that are detrimental
to the physical and mental health of minors shallnot be published on Internet media targeted tominors;Internet advertisements must be visibly marked
as “advertisement”, while paid-search resultsmust be obviously distinguished from natural
search results;
when promoting commodities or services
through knowledge introduction, experiencesharing or consumer evaluation, and purchasemethods such as shopping links are attached,
the advertisements publishers shall visibly markthem as “advertisements”;“pop-up ads” must be clearly marked with a“close” sign and be closable with one click.
Furthermore, the advertisers and publishers

Alibaba Group Holding Limited•

if the Internet advertisements are published bymeans of algorithmic recommendation or othertechnologies, the rules related to algorithm
recommendation services and advertising
records shall be included in the advertisingarchives.

According to the Administrative Measures for Internet
Advertising, the advertisers are responsible for theauthenticity of the content of Internet advertisements,
while the Internet advertisement publishers andadvertisement agencies are required to establish,
improve, and implement registration, review,
and archive management systems for Internet
advertising businesses, which include verifying
and registering advertiser information, verifying
supporting documents and advertisements content,
and allocating advertising review personnel familiar
with advertising laws and regulations or establish
advertising review bodies.
In addition, the Administrative Measures for Internet
Advertising require Internet platform operators
providing Internet information services to takemeasures to prevent and stop illegal advertisements,
which include recording and storing the real identity
information of users who publish advertisements forat least three years, monitoring and investigating thecontent of advertisements, and employing measures
to stop illegal advertisements. Internet platform
operators are also required to establish effective
complaint and reporting mechanisms, cooperatewith market regulatory departments in investigatingillegal conduct, and use measures such as warnings,
suspending or terminating services for users who
publish illegal advertisements. Furthermore, Internet
platform operators are prohibited from using technicalmeans or other methods to obstruct market regulatory
departments’ advertising monitoring.

Business Overview

Regulation of Online and Mobile Commerce
China’s online and mobile commerce industry as
well as the PRC laws, regulations or rules specificallyregulating this industry are constantly evolving.
The SAIC adopted the Administrative Measures forOnline Trading on January 26, 2014, which became
effective on March 15, 2014. On December 24, 2014,
the MOFCOM promulgated the Provisions on theProcedures for Formulating Transaction Rules of Third
Party Online Retail Platforms (Trial) to regulate theformulation, revision and enforcement of transaction
rules for online retail marketplace platforms. These
measures impose more stringent requirements andobligations on online trading or service operators aswell as marketplace platform providers. For example,
marketplace platform providers are obligated tomake public and file their transaction rules with
MOFCOM or its respective provincial counterparts, toenable examination of the legal status of each thirdparty merchant selling products or services on theirplatforms and display on a prominent location on themerchant’s web page the information stated in themerchant’s business license or a link to its businesslicense, and group buying website operators must
only allow a third-party merchant with a proper
business license to sell products or services on theirplatforms. Where marketplace platform providers also
act as online distributors, these marketplace platform
providers must make a clear distinction between their
online direct sales and sales of third-party merchantproducts on their marketplace platforms.
Since the promulgation of the Administrative Measures
for Online Trading, the SAIC has issued a numberof guidelines and implementing rules providing
greater specificity to these regulations. The relevant
governmental authorities continue to consider andissue guidelines and implementing rules, and we
expect that regulation in this industry will further
develop. For example, three PRC governmental
authorities (the MOF, General Administration ofCustoms and STA) issued a Notice on Tax Policy for
Cross-Border E-commerce Retail Imports on March 24,2016 to regulate cross-border e-commerce trading
which experienced rapid growth in recent years.
According to the notice, which became effective on
April 8, 2016, goods imported through cross-border
e-commerce retail are subject to tariff, import valueadded tax, or VAT, and consumption tax based on
the type of goods. Individuals purchasing any goods
imported through cross-border e-commerce areliable to pay tax, while e-commerce companies,
e-commerce transaction platform operators

or logistics companies shall be responsible forwithholding such tax.
On August 31, 2018, the Standing Committee of
the National People’s Congress promulgated the
E-commerce Law, which came into effect on January
1, 2019. The E-commerce Law imposes a series ofrequirements on e-commerce operators including
e-commerce platform operators, merchants operatingon the platform and the individuals and entities
carrying out business online. According to the
E-commerce Law, e-commerce operators who provide
search results based on consumers’ characteristics
such as hobbies and consumption habits shallalso provide consumers with options that are nottargeted at their personal characteristics at the sametime, and respect and fairly protect the legitimate
interests of consumers. The E-commerce Law requires
e-commerce platform operators to, among otherthings, verify and register the identities, addresses,
contacts and licenses of merchants who apply toprovide goods or services on their platforms, establish
registration archives and update this information ona regular basis; submit the identification informationof the merchants on their platforms to market
regulatory administrative authorities as required andremind the merchants to complete registration withmarket regulatory administrative authorities; submit
identification information and tax-related information
to tax authorities as required in accordance with thelaws and regulations regarding the administration oftax collection and remind the individual merchants
to complete the tax registration; and establish
intellectual property rights protection rules andtake necessary measures against infringement ofintellectual property rights by merchants on theirplatforms.
In addition, e-commerce platform operators are notallowed to impose unreasonable restrictions over or
add unjustified conditions to transactions concluded
on their platforms by merchants, or charge merchants
operating on their platforms any unreasonable fees.
According to the E-commerce Law, e-commerce
platform operators are required to assume joint
liability with the merchants and may be subject towarnings and fines up to RMB2,000,000 where (i)they fail to take necessary actions where they knowor should have known that the products or services
provided by the merchants on the platform do notmeet personal and property security requirements,
or otherwise infringe upon consumers’ legitimate
rights; or (ii) they fail to take necessary actions, suchas deleting and blocking information, disconnecting,
Fiscal Year 2023 Annual Report63

Business Overview

terminating transactions and services, where theyknow or should have known that the merchants on theplatform infringe upon the intellectual property rights
of others. With respect to products or services affecting
consumers’ health and safety, e-commerce platform
operators will be held liable if they fail to review
the qualifications of merchants or fail to safeguard
the interests of consumers, and may be subject towarnings and fines up to RMB2,000,000.
On March 15, 2021, the SAMR promulgated the Online
Trading Measures, which took effect and replaced theAdministrative Measures for Online Trading on May 1,
2021. The Online Trading Measures further strengthen
the administration and supervision of online
trading activities, and impose a series of regulatory
requirements on new forms of online trading, suchas online social networking e-commerce and online
livestreaming e-commerce. The Online Trading
Measures expressly prohibit an online transaction
platform operator from unreasonably restricting or
setting any unreasonable conditions on transactions
on its platform and interfering with merchants’
independent business operations. The Online Trading
Measures specify typical examples of unreasonable
restrictions or conditions imposed by e-commerce
platform operators on transactions concluded on
their platforms, including prohibiting or restricting themerchants to operate on other e-commerce platforms,
by means of unfair practices, such as reducing theirsearch exposure, removing their products or services,
blocking their stores, or prohibiting or restricting themerchants from freely choosing supporting service
providers for transactions, such as logistics services
providers. Furthermore, the Online Trading Measuresrequire e-commerce platform operators to verify andupdate each merchant’s profile on a regular basis andmonitor their market participant registration status.
On April 23, 2021, the Cyberspace Administration ofChina and six other PRC governmental authorities
jointly issued the Administrative Measures on Online
Livestreaming Marketing (Trial), which came into effecton May 25, 2021. According to the Administrative
Measures on Online Livestreaming (Trial), online
livestreaming marketing platforms are required,among other things, to set up a system to internallyrank streamers by metrics such as views andtransaction volumes, and take heightened regulatory
measures in relation to key livestreaming operators.
In addition, online livestreaming marketing platforms
are also required to establish and maintain risk
management systems to guard against high-risk

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Alibaba Group Holding Limited

marketing activities, including taking measures suchas pop-up warnings, limiting traffic, suspending
livestreaming, and prominently alerting users of therisks involved in transactions that are conducted
outside livestreaming platforms.
On March 1, 2022, the Supreme People’s Court of the
PRC issued the Provisions on Issues Concerning theApplication of Law for the Trial of Cases on Online
Consumption Disputes (I), which came into effecton March 15, 2022 and clarified the responsibilities
of online consumption platforms and the scopeof the seven-day unconditional return policy.
According to these judicial interpretations, standard
terms provided by e-commerce operators that are
unfair and unreasonable to consumers may bedeemed invalid, and contracts entered into between
e-commerce operators and any other entity leading
to false publicity by means of fictitious deals, hits oruser comments shall also be null and void. Moreover,
e-commerce platform operators shall be held liable
as the product seller or service provider if the labels
used mislead consumers to believe that the productor service is provided by the e-commerce platform.
Furthermore, operators of livestreaming platforms
are responsible for verifying the qualification andlicense of live-streamers who sell food products. The
operators of e-commerce platforms can be held jointly
liable for damages incurred by consumers resulting
from defects in foods purchased from merchants on
their platforms, if these operators fail to fulfill certain
requirements and obligations.

Regulation of Mobile Apps
On June 28, 2016, the Cyberspace Administrationof China promulgated the Regulations for the
Administration of Mobile Internet Application
Information Services, which came into effect on August
1, 2016, requiring ICPs who provide information
services through mobile Internet apps to, among
other things, verify the real identities of registeredusers through mobile phone numbers or othersimilar channels; establish and improve proceduresfor protection of user information; and establish
and improve procedures for information content
censorship.
If an ICP who provides information services throughapps violates these regulations, mobile app storesthrough which the ICP distributes its apps may
issue warnings, suspend the release of its apps,
or terminate the sale of its apps, and/or report theviolations to governmental authorities.

Business Overview

On June 14, 2022, the Cyberspace Administration ofChina promulgated the revised Regulations for the
Administration of Mobile Application Information
Services, which came into effect on August 1, 2022 andreplaced the then effective Administration of Mobile
Application Information Services. Pursuant to therevised Regulations for the Administration of Mobile
Application Information Services, mobile app providers
shall comply with relevant provisions on the scope ofnecessary personal information when engaging inpersonal information processing activities and shallnot compel users to agree to non-essential personal
information collection or ban users from their basic
functional services due to their refusal of providing
unnecessary personal information. In addition, mobile
app providers shall, among other things, verify the real
identities of registered users; establish and improve
procedures for protection of user information andinformation content censorship, fulfill data security
protection obligations and various obligations ofminors’ protection, and shall not induce users to
download the applications by illegal methods or bad
information. Furthermore, mobile app providers wholaunch new technologies, applications or functions
with the attribute of public opinion or the ability ofsocial mobilization shall conduct security assessmentin accordance with the relevant provisions. If an
application provider violates these regulations,application distribution platforms may issue warnings,
suspend the release of its applications, or terminate
the sale of its applications, and/or report the violations
to governmental authorities, and the application
provider may be imposed administrative penalty by
the Cyberspace Administration of China and relevant
competent authorities in accordance with relevantlaws and regulations.

requirements, these measures specifically prohibit
Internet activities that result in the dissemination of
any content that is found to contain pornography,
promote gambling or violence, instigate crimes,
undermine public morality or the cultural traditionsof the PRC or compromise state security or secrets.
ICPs must monitor and control the information postedon their websites. If any prohibited content is found,they must remove the content immediately, keep arecord of it and report to the relevant authorities. If
an ICP violates these measures, the PRC government
may impose fines and revoke any relevant business
operation licenses.

According to the Provisions on the Scope of Necessary
Personal Information Required for Common Typesof Mobile Internet Applications which became
effective on May 1, 2021, clarifying that necessary
personal information means the personal informationnecessary for ensuring the normal operation of thebasic functional services of the apps, without which
the app cannot perform its basic functional services.

We are also subject to a series of requirements foraudio/video content posted on our platform. The
General Administration of Press and Publication,
Radio, Film and Television, or GAPPRFT (which was split
into the National Radio and Television Administration,
or NRTA, and the State Administration of News andPublication in March 2018) released several notices on
the administration of online audio/video programs,
which stress that entities producing online audio/
video content must obtain a permit for radio andtelevision program production and operation, andthat online audio/video content service providers
should not release any Internet dramas or microfilms that were produced by any entity lacking thepermit. For Internet dramas or micro films produced

Regulation of Internet Content
The PRC government has promulgated measuresrelating to Internet content through various ministries
and agencies, including the MIIT, the News Office of
the State Council of the PRC, the Ministry of Culture andTourism and the General Administration of Press andPublication. In addition to various approval and license

Regulation of Broadcasting Audio/Video
Programs through the Internet
We are subject to various laws and regulations
in connection with providing online audio/video
programs and livestreaming via our platform. For
example, according to the Rules for the Administrationof Internet Audio and Video Program Services,
commonly known as Circular 56, jointly issued by theState Administration of Radio, Film, and Television, or
the SARFT, and the MIIT, all online audio/video service
providers are generally required to be either wholly
state-owned or state-controlled. According to therelevant official answers to press questions publishedon the SARFT’s website dated February 3, 2008, online
audio/video service providers that already had been
operating lawfully prior to the issuance of Circular 56
may re-register and continue to operate without
becoming state-owned or controlled, provided thatthe providers have not engaged in any unlawful
activities. This exemption will not be granted to online
audio/video service providers established after
Circular 56 was issued.

Fiscal Year 2023 Annual Report65Business Overview

and uploaded by individual users, the online audio/
video service providers transmitting this content will
be deemed responsible as the producer. Furthermore,
the online audio/video contents, including Internet
drama and micro films, are required to be filed withthe relevant authorities before release.
According to the Circular on Strengthening theAdministration of the Online Show Livestreaming andE-commerce Livestreaming issued by the NRTA on
November 12, 2020, platforms providing e-commerce
livestreaming services shall register their information
and business operations by November 30, 2020.
The overall ratio of front-line content analysts tolivestreaming rooms shall be 1:50 or higher onsuch platforms. A platform shall report the numberof its livestreaming rooms, streamers and content
analysts to the provincial branch of the NRTA on aquarterly basis. To host any e-commerce promotional
events such as E-commerce festivals, E-commercedays or promotion days using livestreaming, live
performances, live variety shows and other live
programs, the platforms shall register the informationof guests, streamers, content and settings with thelocal branch of NRTA 14 business days in advance.
Online e-commerce livestreaming platforms shallconduct relevant qualification examination and realname authentication on businesses and individuals
providing livestreaming marketing services andkeep complete examination and authentication
records, and shall not enable imposters or businesses
or individuals without qualification or real-nameregistration to conduct livestreaming marketing
services.
On April 12, 2022, the NRTA and the Publicity
Department of the China Communist Party Central
Committee promulgated the Notice on Strengthening
the Administration of Live Games on Online Audio/Video Program Platforms, specifying that online
livestreaming platforms shall discretely select thehosts and guests with political standpoint, moral
character, artistic standard and social evaluation as
the selection criteria, and resolutely refuse hosts andguests who are politically incorrect, or have committed
any violations of laws, regulations, public order orgood morals. The notice further specifies that online
livestreaming platforms shall establish and implementa mechanism for the protection of minors, implement
the real-name registration system, prohibit minors

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from tipping, and establish a special channel for
returning the tips of minors.
Regulation of Internet Publication
The SARFT is responsible for nationwide supervision
and administration of publishing activities in China.
On February 4, 2016, the GAPPRFT, the SARFT’s
predecessor, and the MIIT jointly promulgated theOnline Publication Service Administration Rules, or theOnline Publication Rules, which took effect on March
10, 2016.
Pursuant to the Online Publication Rules, an online
publication service provider must obtain the Online
Publication Service License from the GAPPRFT. The
term “online publication service” is defined as theprovision of online publications to the public throughinformation networks. The term “online publications”
is defined as digital works characteristic of publishingsuch as editing, production or processing provided tothe public through information networks.
The Online Publication Rules expressly prohibit foreign
invested enterprises from providing online publication
services. In addition, if an online publication service
provider intends to cooperate for an online publication
services project with foreign invested enterprises,
overseas organizations or overseas individuals, it
must report to the GAPPRFT and obtain an approval inadvance. Also, an online publication service provider isprohibited from lending, leasing, selling or otherwisetransferring the Online Publication Service License, or
to allow any other online information service provider
to provide online publication services in its name.
Regulation of Internet Drug Information Service
The State Food and Drug Administration, or the SFDA,
the predecessor of the National Medical Products
Administration, promulgated the Administrative
Measures on Internet Drug Information Service in July
2004 and further amended the same in November
2017. Since the promulgation of the Administrative
Measures on Internet Drug Information Service,
the SFDA has issued certain implementing rules
and notices aimed at adding specificity to theseregulations. These measures set out regulations
governing the classification, application, approval,content, qualifications and requirements for Internet
drug information services. An ICP service operator

Business Overview

that provides information regarding drugs or medical
equipment must obtain an Internet Drug Information
Service Qualification Certificate from the applicableprovincial level counterpart of the National Medical
Products Administration.

products (such as audio-video products, gaming
products, performances of plays or programs, works
of art and cartoons) and the production, reproduction,
importation, publication and broadcasting of Internet
cultural products.

On August 3, 2022, the SAMR released theAdministrative Measures for the Supervision of Online
Drug Sales, which came into effect on December 1,
2022, for the regulation of enterprises engaging
in online drug sales and online drug trading thirdparty platforms. According to these measures,
enterprises engaging in online drug sales shall bedrug marketing authorization holders or drug businessenterprises, and shall report relevant information
including names of the websites and application
programs, the IP addresses and domain names,
etc. to the medical products regulators. In addition,
drug trading third-party platforms are also required
to file relevant information including their names,
legal representatives, etc. with the provincial medical
products administration.

On August 12, 2013, the Ministry of Culture
promulgated the Notice on Implementing theAdministrative Measures for the Content Selfexamination of Internet Culture Business Entities.
According to this notice, any cultural product orservice shall be reviewed by the provider before being
released to the public and the review process shallbe done by persons who have obtained the relevant
content review certificate.

Regulation of Internet News Information Services
On May 2, 2017, the Cyberspace Administration ofChina issued the Administrative Provisions on Internet
News Information Services, which came into effect onJune 1, 2017 and define news information as reports
and commentary on political, economic, military,
diplomatic and other social and public affairs, as well
as reports and commentary on emergency social
events. Pursuant to these provisions, the Cyberspace
Administration of China and its local counterparts
replaced the State Council of the PRC Information
Office as the government department in charge ofsupervision and administration of Internet news
information. Furthermore, an ICP operator must obtainapproval from the Cyberspace Administration of China
in order to provide Internet news information services,
including through websites, applications, forums,
blogs, microblogs, public accounts, instant messaging
tools, and webcasts.
Regulation of Internet Culture Activities
On February 17, 2011, the Ministry of Culture, thepredecessor of the Ministry of Culture and Tourism,
promulgated the Internet Culture Administration
Tentative Measures, or the Internet Culture Measures,
which was most recently amended in December 2017.
The Internet Culture Measures require ICP operators
engaging in “Internet culture activities” to obtain apermit from the Ministry of Culture and Tourism. The
term “Internet culture activities” includes, among
other things, online dissemination of Internet cultural

On October 23, 2015, the Ministry of Culture
promulgated the Notice on Further Strengthening
and Improving the Content Review of Online Music,
which took effect on January 1, 2016 and stipulated
that ICPs shall carry out self-examination in respectof the content management of online music, whichshall be regulated by the cultural administration
departments in process or afterwards. According tothis notice, ICP operators are required to submit theircontent administrative system, review procedures, andwork standards to the provincial culture administrative
department where they are located for filing within aprescribed period.
Regulation of Audio/Video Program Production
On July 19, 2004, the SARFT promulgated theAdministrative Measures on the Production andOperation of Radio and Television Programs, whichcame into effect on August 20, 2004 and most recently
amended on December 1, 2020. These measuresprovide that anyone who wishes to produce oroperate radio or television programs must first obtainan operating permit for their business.
On December 25, 2001, the State Council of the PRC
promulgated the Regulations for the Administration ofFilms, or the Film Regulations, which became effective
on February 1, 2002. The Film Regulations set forth
the general regulatory guidelines for China’s film
industry and address practical issues with respect toproduction, censorship, distribution and screening.
They also establish the SARFT as the sector’sregulatory authority, and serve as the foundation for
all other legislation promulgated in this area. The Film
Regulations provide the framework for an industrywide licensing system operated by the SARFT, underwhich separate permits (and permit application
procedures) apply.

Fiscal Year 2023 Annual Report67Business Overview

Regulation of Express Delivery Services
The PRC Postal Law, which took effect in October 2009
and was most recently amended in 2015, sets forth
the fundamental rules on the establishment andoperation of an express delivery company. According
to the Postal Law, an enterprise that operates andprovides express delivery services is required toobtain a Courier Service Operation Permit. Pursuant
to the Postal Law, “delivery” refers to delivery ofcorrespondence, parcels, printed materials and otheritems to specific individuals or entities according to thenames and addresses on the envelopes or packages,
including mail acceptance, sorting, transportation,delivery, and “express delivery” refers to rapid mail“delivery” within a specified time limit.
The PRC Postal Law also requires that a company
operating express delivery services must apply forand obtain the Courier Service Operation Permit prior
to applying for its business license. Pursuant to the
Administrative Measures on Courier Service Operation
Permits, which was promulgated by the Ministry ofTransport in June 2015 and most recently amendedin November 2019, any entity engaging in expressdelivery services is required to obtain a Courier Service
Operation Permit from the State Post Bureau or its
local counterpart and is subject to their supervisionand regulation. The express delivery business must
be operated within the permitted scope and the valid
term of the Courier Service Operation Permit.
On March 2, 2018, the State Council of the PRC
promulgated the Provisional Regulations for Express
Delivery, or the Provisional Regulations, which cameinto effect on May 1, 2018 and was amended on
March 2, 2019. The Provisional Regulations reiteratethat a company operating express delivery services
must obtain the Courier Service Operation Permit andsets forth specific rules and security requirements forexpress delivery operations.

Regulation of Anti-counterfeiting
According to the Trademark Law of the PRC,
counterfeit or unauthorized production of the labelof another person’s registered trademark, or sale ofany label that is counterfeited or produced withoutauthorization will be deemed as an infringement of
the exclusive right to use a registered trademark. The
infringing party will be ordered to cease infringement
immediately, a fine may be imposed and thecounterfeit goods will be confiscated. The infringing
party may also be held liable for damages suffered by
the owner of the intellectual property rights, which will

68

Alibaba Group Holding Limited

be equal to the gains obtained by the infringing partyor the losses suffered by the owner as a result of theinfringement, including reasonable expenses incurredby the owner in connection with enforcing its rights.
Under the Civil Code of the PRC, an Internet service
provider may be subject to joint liability if it is awarethat an Internet user is infringing upon the intellectual
property rights of others through its Internet services,such as selling counterfeit products, and fails totake necessary measures to stop that activity. If an
Internet service provider receives a notice from an
infringed party regarding an infringement, the Internet
service provider is required to take certain measures,
including deleting, blocking and unlinking theinfringing content, in a timely manner.
In addition, under the Online Trading Measures
promulgated by the SAMR on March 15, 2021, as an
operator of an online trading platform, we must adopt
measures to ensure safe online transactions, protect
consumers’ rights and prevent unfair competition.

Regulation of Monopoly and Unfair
Competition
On June 24, 2022, the Standing Committee of the
National People’s Congress promulgated theamended PRC Anti-monopoly Law, which came into
effect on August 1, 2022. The amended PRC Antimonopoly Law requires that where concentration ofundertakings reaches the filing threshold stipulatedby the State Council of the PRC, a filing must be
made with the anti-monopoly authority before theparties implement the concentration. Concentrationrefers to (i) merger of undertakings; (ii) acquisition ofcontrol over other undertakings by acquiring equities
or assets; or (iii) acquisition of control over, or the
possibility of exercising decisive influence on, an
undertaking by contract or by any other means. The
anti-monopoly authority may also require business
operators to file for merger control review whereconcentration of undertakings fails to reach such filingthreshold but there is evidence that the concentration
has or may have the effect of eliminating or restricting
competition. If business operators fail to comply
with the mandatory filing requirement, the PRC State
Administration for Market Regulation, or the SAMR,
is empowered to terminate the transaction, require
the disposal of relevant assets, shares or businesses
within certain period, or take any other necessary
measures to restore the pre-concentration status, andmay also impose fines of up to 50% of the previous
year’s turnover of the filing obligor if the concentration

Business Overview

has or may have the effect of eliminating or restricting
competition, or fines of up to RMB25 million if theconcentration does not have such effect. In addition,
the amended PRC Anti-monopoly Law introduces
a “stop-clock mechanism” which may prolong themerger control review process. The SAMR issued a
new set of guidelines in September 2018 to set forth
the specific procedures and materials for review ofconcentration of undertakings. On August 3, 2008, theState Council of the PRC promulgated the Provisionsof the State Council of the PRC on the Thresholds
for Filing of Concentration of Undertakings, which
was also amended in September 2018, clarifying
the filing thresholds of merger control review. On
June 27, 2022, the SAMR issued the Provisions of theState Council of the PRC on the Thresholds for Filingof Concentration of Undertakings (Revised Draft for
Public Comments), or the Threshold Provisions, which
propose to significantly adjust the revenue thresholdof merger control filing to either one of the following
two conditions:••

the worldwide revenue of all business operators
involved in the concentration exceeds RMB12
billion (increased from the current threshold of
RMB10 billion) collectively in the last fiscal year,
and the revenue in China of at least two business
operators among them each exceeds RMB800
million (increased from the current threshold of
RMB400 million) in the last fiscal year; or
the revenue in China of all the business operators
involved in the concentration exceeds RMB4
billion (increased from the current threshold of
RMB2 billion) collectively in the last fiscal year,
and the revenue in China of at least two business
operators among them each exceeds RMB800
million (increased from the current threshold of
RMB400 million) in the last fiscal year.

Even if the aforementioned revenue threshold is
not met, the transaction must be reported to antimonopoly authority of the State Council of the PRC if (i)the revenue in China of one of the business operators
involved in the concentration exceeds RMB100 billion
in the last fiscal year, (ii) the market value or valuationof the business operators to be merged or controlled
in the concentration exceeds RMB800 million and theirrevenue in China in the last fiscal year accounts formore than one third of their worldwide revenue.
In addition, on March 10, 2023, the SAMR released
the Provisions on the Review of Concentration ofUndertakings, or the Review Provisions, which cameinto effect from April 15, 2023 and replaced theInterim Provisions on the Review of Concentrationof Undertakings issued on October 23, 2020. These
provisions provide detailed rules on how to operate
the “stop-clock mechanism”, allowing the SAMR tosuspend the calculation of time period for merger
review if (i) the notifying parties fail to provide thedocuments or information so that the review cannot
proceed, (ii) new circumstances or new facts appear,
and the review cannot proceed without examining
the new circumstances or facts, or (iii) the proposed
remedies require further assessment, and therelevant parties request for suspension. If the filingthreshold is not met but the proposed concentration
has or may have the effect of eliminating or
restricting competition, the SAMR can request theundertakings to notify. If the concentration has not
yet been implemented, the standstill obligation
automatically kicks in. Even if the concentration has
been implemented, the undertakings need to filea notification within 120 days and take necessary
measures to reduce the negative impact theconcentration has on competition such as temporarily
stopping the implementation of the concentration.
The amended PRC Anti-monopoly Law prohibits abusiness operator with a dominant market position
from abusing such position, such as by sellingcommodities at unfairly high prices or buying
commodities at unfairly low prices, selling products
at prices below cost without any justifiable cause,or refusing to trade with a trading party without
any justifiable cause. Sanctions for violation of
the prohibition on the abuse of dominant market
position include an order to cease the relevant
activity, confiscation of the illegal gains and fines up
to 50% of sales revenue of the preceding year. On
March 10, 2023, the SAMR issued the Provisions on
the Prohibition of Acts of Abuse of Dominant Market
Positions, which came into effect from April 15, 2023
and replaced the Interim Provisions on the Prohibitionof Acts of Abuse of Dominant Market Positions issued
on June 26, 2019 to further prevent and prohibit theabuse of dominant market positions.
The amended PRC Anti-monopoly Law also prohibits
business operators from entering into monopoly
agreements, which refers to agreements thateliminate or restrict competition with competingbusiness operators or transaction counterparties,
such as by boycotting transactions, fixing or changing
the price of commodities, limiting the output ofcommodities or fixing the price of commodities
for resale to third parties, among others, unlessthe business operators can prove the agreements
do not have the effect of eliminating or restricting
Fiscal Year 2023 Annual Report69Business Overview

competition, their market share in relevant market
is below the standard set by the anti-monopoly
authority, or the agreements satisfy certain exemptions
under the amended PRC Anti-monopoly Law, suchas improving technologies, increasing the efficiency
and competitiveness of small and medium-sizedundertakings, or safeguarding legitimate interests incross-border trade and economic cooperation withforeign counterparts. Sanctions for violations include
an order to cease the relevant activity, confiscationof illegal gains, and fines up to 50% of sales revenueof the preceding year, fines up to RMB25 million if
there is no sales revenue of the preceding year, orfines up to RMB15 million if the intended monopoly
agreement has not been performed. In addition,business operators are prohibited from organizing
other business operators to reach any monopoly
agreement or providing substantive assistance forothers to reach such agreements under the amended
PRC Anti-monopoly Law. On March 10, 2023, theSAMR issued the Provisions on the Prohibition of
Monopoly Agreements, which came into effect from
April 15, 2023 and replaced the Interim Provisions on
the Prohibition of Monopoly Agreements to further
enhance the enforcement on the supervision ofmonopoly agreements.
In addition, the amended PRC Anti-monopoly Law
further regulates monopolistic behaviors in theInternet sector. The amended PRC Anti-monopoly Law,among others:••

provides in general provisions that enterprises
must not engage in monopolistic behaviors
through data and algorithms, technology, capital
advantages, or platform rules; andprovides that enterprises with dominant market
position must not abuse their dominant positions
through data and algorithms, technology, capital
advantages, or platform rules.

In February 2021, the SAMR published the Guidelines
on Anti-monopoly Issues in Platform Economy, or
the Platform Economy Anti-monopoly Guidelines.
The Platform Economy Anti-monopoly Guidelines set
out detailed standards and rules in respect to thedefinition of relevant markets, typical types of cartel
activity and abusive behavior by companies withmarket dominance, which provide further guidancefor enforcement of anti-monopoly laws regarding
network platform operators. The Platform Economy
Anti-monopoly Guidelines further detail the types ofhorizontal agreements, vertical agreements, hub-andspoke agreements and collusion which may constitute70

Alibaba Group Holding Limitedmonopoly agreements in the platform economy. The
Platform Economy Anti-monopoly Guidelines also
set out a number of key factors that may be relevant
in identifying a dominant undertaking, including,among others, predatory pricing, unfair pricing,refusal to deal, restraint of trade, tie-in, unreasonabletrading conditions and discrimination. In addition,
concentration of undertakings involving contractual
arrangements is expressly included within the ambitof SAMR’s merger control review if the filing thresholds
are met. Under the Platform Economy Anti-monopoly
Guidelines, the SAMR is empowered to investigate
if the filing threshold is not met but the proposed
concentration may have the effect of eliminating or
restricting competition, and the SAMR will pay close
attention to those cases where one of the following
circumstances exists: (i) a party to the concentration isa start-up or an emerging platform; (ii) the turnover is
low because the business model of the parties to theconcentration involves the provision of free services
or services charged at low prices; (iii) the relevantmarket is highly concentrated; and (iv) the number ofcompetitors is small. These newly enacted measuresand guidelines may require us to make adjustments
to some of our business practices, and our business,financial condition and results of operations may bematerially and adversely affected. In addition, due toour size, these new measures and guidelines, whenenacted and implemented, may affect us more thanour competitors.
According to the Anti-unfair Competition Law
promulgated by the Standing Committee of the
National People’s Congress of China on September
2, 1993 and most recently amended on April 23,
2019, business operators may not engage in anticompetitive activities, such as undue influencetransactions, confusion marketing, commercial
bribery, trade secret infringement and commercial
libel. Failure to comply with the Anti-unfair
Competition Law would subject business operators tovarious administrative penalties, such as impositionof fines, confiscation of illegal gains and an orderto cease business activities, and payment ofcompensatory damages.
In August 2021, the SAMR issued the Provisions
on Preventing Unfair Online Competition (Drafts
for Public Comments), or the Draft Provisions on
Preventing Unfair Online Competition, which detailthe implementation of the Anti-unfair Competition
Law, under which business operators must not
use technical means such as data or algorithms to
implement traffic hijacking or interference, cause

Business Overview

malicious incompatibility or conduct any activity
impeding or disruptive to the normal operation of
network products or services legally provided by otherbusiness operators. Furthermore, business operators
are not allowed to (i) fabricate or spread misleading
information to damage the reputation of competitors,or (ii) employ marketing practices such as fake reviews
or use coupons or “red envelopes” to entice positive
ratings.

Regulation of Internet Security
The Decision in Relation to Protection of Internet
Security enacted by the Standing Committee of the
National People’s Congress of China on December 28,
2000, as amended, provides that the following
activities conducted through the Internet are subject tocriminal punishment:

•
•
•
•
•

gaining improper entry into a computer orsystem of strategic importance;
disseminating politically disruptive information or
obscenities;
leaking state secrets;
spreading false commercial information; orinfringing intellectual property rights.

The Administrative Measures on the Security Protectionof Computer Information Network with International
Connections, issued by the Ministry of Public Security
on December 16, 1997 and amended on January 8,
2011, prohibit the use of the Internet in a mannerthat would result in the leakage of state secrets or
the spread of socially destabilizing content. The
Provisions on Technological Measures for Internet
Security Protection, or the Internet Security Protection
Measures, promulgated on December 13, 2005 by
the Ministry of Public Security require all ICPs tokeep records of certain information about theirusers (including user registration information, log
in and log out time, IP address, content and timeof posts by users) for at least 60 days and submit
the above information as required by laws andregulations. Under these measures, value-added
telecommunications services license holders must
regularly update information security and content
control systems for their websites and must also
report any public dissemination of prohibited content
to local public security authorities. If a value-added
telecommunications services license holder violates
these measures, the Ministry of Public Security and the

local security bureaus may revoke its operating licenseand shut down its websites.
The Communication Network Security Protection
Administrative Measures, which were promulgatedby the MIIT on January 21, 2010, require that allcommunication network operators, including
telecommunications service providers and Internet
domain name service providers, divide theirown communication networks into units. These
communication network units shall be rated inaccordance with degree of damage to national
security, economic operation, social order andpublic interest in the event a unit is damaged.
Communication network operators must filethe division and ratings of their communication
networks with the MIIT or its local counterparts. If
a communication network operator violates thesemeasures, the MIIT or its local counterparts may order
rectification or impose a fine up to RMB30,000 in casea violation is not duly rectified.
Internet security in China is also regulated andrestricted from a national security standpoint. On July
1, 2015, the National People’s Congress Standing
Committee promulgated the PRC National Security
Law, or the National Security Law, which took effecton the same date and replaced the former National
Security Law promulgated in 1993. According to the
National Security Law, the state shall ensure that the
information system and data in important areas are
secure and controllable. In addition, according to
the National Security Law, the state shall establish
national security review and supervision institutions
and mechanisms, and conduct national security
reviews of key technologies and IT products andservices that affect or may affect national security.
There are uncertainties on how the National Security
Law will be implemented in practice.
On November 7, 2016, the National People’s
Congress Standing Committee promulgated the PRC
Cybersecurity Law, or the Cybersecurity Law, whichcame into effect on June 1, 2017, and applies to theconstruction, operation, maintenance and use of
networks as well as the supervision and administrationof cybersecurity in China. The Cybersecurity Law
defines “networks” as systems that are composed ofcomputers or other information terminals and relevant
facilities used for the purpose of collecting, storing,transmitting, exchanging and processing informationin accordance with certain rules and procedures.
“Network operators,” who are broadly defined as

Fiscal Year 2023 Annual Report71Business Overview

owners and administrators of networks and network
service providers, are subject to various security
protection-related obligations including, among
others, security protection, user identity verification,
cybersecurity emergency response planning andtechnical assistance.
According to the Cybersecurity Law, network service
providers must inform users about and report to
the relevant authorities any known security defects
and bugs, and must provide continuous security
maintenance services for their products and services.
Network products and service providers shall notcontain or provide malware. Network service providers
who do not comply with the Cybersecurity Law may
be subject to fines, suspension of their businesses,
shutdown of their websites, and revocation of theirbusiness licenses. In addition, the Cybersecurity Law
provides that personal information and importantdata collected and generated by operators of criticalinformation infrastructure in the course of theiroperations in the PRC should be stored in the PRC, andthe law imposes heightened regulation and additional
security obligations on operators of critical information
infrastructure.
In addition, the PRC Anti-Telecom and Online Fraud
Law was promulgated by the National People’s
Congress Standing Committee on September 2, 2022
and came into effect on December 1, 2022. In orderto prevent and curb the telecom and online fraud, theAnti-Telecom and Online Fraud Law requires, among
others, Internet service providers to obtain real identity
information of users before providing certain services
including information and software distribution
services, etc.
On July 30, 2021, the State Council of the PRC
promulgated the Regulations on Security Protectionof Critical Information Infrastructure, effective on
September 1, 2021, which provide that a “criticalinformation infrastructure” refers to an important
network facility and information system in important
industries such as public communications andinformation services, as well as other important
network facilities and information systems that
may seriously endanger national security, national
economy, people’s livelihood, or public interests inthe event of their damage, loss of function, or dataleakage. The competent governmental authorities
and supervision and management authorities of
the aforementioned important industries will be
responsible for (i) identification of critical information
infrastructures in their respective industries inaccordance with relevant identification rules, and (ii)72

Alibaba Group Holding Limited

promptly notifying the identified operators and the
public security department of the State Council of the
PRC of the identification results. However, the exact
scope of “critical information infrastructure operators”
under the current regulatory regime still remains
unclear, and the PRC government authorities havediscretion in the interpretation and enforcement ofthese laws, rules and regulations.
On April 13, 2020, the Cyberspace Administrationof China, the NDRC, the MIIT, and several othergovernmental authorities jointly issued the Measures
for Cybersecurity Review, or the Cybersecurity Review
Measures, which came into effect on June 1, 2020.
According to the Cybersecurity Review Measures, thepurchase of cyber products and services includingcore network equipment, high-performancecomputers and servers, mass storage devices,large databases and application software, network
security equipment, cloud computing services, andother products and services that have an important
impact on the security of critical information
infrastructure which affects or may affect national
security is subject to cybersecurity review by the
Cybersecurity Review Office. On December 28, 2021,
the Cyberspace Administration of China, together
with certain other PRC governmental authorities,
promulgated the Revised Cybersecurity Review
Measures which replaced the then-effective version
and took effect on February 15, 2022. According
to the Revised Cybersecurity Review Measures,operators of critical information infrastructure whopurchase network products and services and network
platform operators who carry out data processing
activities that affect or may affect national security
shall be subject to cybersecurity review. In addition,
any network platform operator possessing over one
million users’ individual information must apply
for a cybersecurity review before listing abroad.
Relevant competent governmental authorities may
also initiate cybersecurity review if they determine
certain network products, services or data processing
activities affect or may affect national security. Article
10 of the Revised Cybersecurity Review Measures also
sets out certain general factors that are the focus inassessing the national security risk in a cybersecurity
review, including (i) the risks of critical information
infrastructure being illegally controlled by any
individual or organization or subject to interference ordestruction; (ii) the harm caused by the disruption of
the supply of the product or service to the continuityof critical information infrastructure business; (iii)the security, openness, transparency and diversityof sources of the product or service, the reliability ofBusiness Overview

supply channels, and risks of supply disruption due
to political, diplomatic, trade and other factors; (iv)compliance with PRC laws, administrative regulations
and department rules by the provider of the productor service; (v) the risk of core data, important dataor a large amount of personal information being
stolen, leaked, damaged, illegally used, or illegallytransmitted overseas; (vi) the risk that criticalinformation infrastructure, core data, important dataor a large amount of personal information for a listing
being affected, controlled, and maliciously used byforeign governments, as well as network information
security risks; and (vii) other factors that may endanger
the security of critical information infrastructure,cybersecurity and data security. However, there arestill uncertainties as to the exact scope of network
products or services or data processing activities
that will or may affect national security, and the
PRC government authorities have discretion in theinterpretation and enforcement of these measures.
According to the Administrative Provisions on Security
Vulnerability of Network Products jointly promulgatedby the MIIT, the Cyberspace Administration of China
and the Ministry of Public Security, which cameinto effect on September 1, 2021, network productproviders, network operators as well as organizations
or individuals engaging in the network productsecurity vulnerability discovery, collection, releaseand other activities shall establish channels toreceive information of security vulnerability of theirrespective network products and shall examine andfix such security vulnerability in a timely manner.
Network product providers are required to report
relevant security vulnerability of network productswith the MIIT within two days of discovery and provide
technical support to network product users. Network
operators shall take measures to examine and fix
security vulnerability after discovering or becoming
aware that their networks, information systems or
equipment have security loopholes. According to theseprovisions, the network product providers and network
operators who fail to perform the aforementioned
obligations may be subject to administrative penalty inaccordance with the Cybersecurity Law.
The Cyberspace Administration of China is responsible
for organizing and implementing cybersecurity
reviews, while the competent departments in key
industries such as finance, telecommunications,energy and transport shall be responsible fororganizing and implementing security review of cyberproducts and services in their respective industries orfields.

On November 15, 2018, the Cyberspace Administrationof China issued the Provisions on Security Assessmentof the Internet Information Services with Public Opinion
Attributes or Social Mobilization Capacity, which cameinto effect on November 30, 2018. The provisions
require ICPs to conduct security assessments on theirInternet information services if their services include
functions that provide channels for the public toexpress opinions or have the capability of mobilizing
the public to engage in specific activities. ICPs must
conduct self-assessment on, among other things, thelegality of new technology involved in the services
and the effectiveness of security risk prevention
measures, and file the assessment report with thelocal competent cyberspace administration authorityand public security authority.
On September 17, 2021, the Cyberspace
Administration of China and the SAMR, together withseveral other governmental authorities, jointly issued
the Guidelines on Strengthening the Comprehensive
Regulation of Algorithm for Internet Information
Services, which provide that relevant regulators shallcarry out daily monitoring of data use, application
scenarios and effects of algorithms, and conduct
security assessments of algorithm, and that analgorithm filing system shall be established andclassification and hierarchical security managementof algorithms shall be adopted. On December 31,
2021, the Cyberspace Administration of China, theMIIT, the Ministry of Public Security and the SAMR jointly
promulgated the Administrative Provisions on Internet
Information Service Algorithm Recommendation, or
the Algorithm Recommendation Provisions, whichcame into effect on March 1, 2022.
The Algorithm Recommendation Provisions implement
the classification and hierarchical managementof algorithm recommendation service providers
based on various criteria, and stipulate thatalgorithm recommendation service providers shallclearly inform users of their provision of algorithm
recommendation services, and properly publicize
the basic principles, intentions, and main operating
mechanisms of algorithm recommendation services,and that algorithm recommendation service providers
selling goods or providing services to consumers
shall protect consumers’ rights of fair trade, and areprohibited from carrying out illegal conduct such as
unreasonable differentiated treatment on transaction
conditions based on consumers’ preferences,purchasing habits, or such other characteristics.
In October 2021, the SAMR released the draft
Guidelines for Classification and Grading of Internet

Fiscal Year 2023 Annual Report73Business Overview

Platforms, or the Draft Classification Guidelines,
and the draft Guidelines for Implementing Subject
Responsibilities of Internet Platforms, or the
Responsibilities Guidelines, for public comments. The
Classification Guidelines divide Internet platforms
into super platforms, large platforms, and small
and medium platforms, on the basis of the scale ofusers, business types, and restrictive capacities. The
Responsibilities Guidelines further lay down additional
responsibilities for operators of super platforms withrespect to fair competition, equal governance, open
ecosystem, data management, internal governance,risk assessment and prevention, security audit andinnovation. For example, super platforms should
promote interoperability between the services they
provide and those provided by other platforms.
On March 18, 2023, the Cyberspace Administration ofChina released the Provisions on the Administrative
Law Enforcement Procedures for the Cyberspace
Administration Authorities, which came into effect onJune 1, 2023. These provisions clarify the proceduresof cyberspace administrative law enforcement
actions of the cyberspace administration authorities,
as well as the procedures and requirements foradministrative penalty. These provisions state that,prior to the imposition of administrative penalties,
cyberspace administration authorities must notify
parties concerned of their right to request a hearing,and that they must make such request within five daysof receiving a notification, otherwise they shall bedeemed to have waived their right to a hearing.
On July 10, 2023, the Cyberspace Administrationof China, together with other relevant authorities,
released the Interim Measures on Generative AI
Services, which will come into effect on August 15,
2023 and mainly impose compliance requirements
on providers of generative AI services. According
to the Interim Measures on Generative AI Services,
individuals or organizations that provide generative
AI services of text, image, audios, videos and othercontent shall be responsible as the producers of suchnetwork information content and as the personal
information processors to protect any personal
information involved. Providers of generative AI
services shall enter into service agreements with users
registering for their generative AI services and shalladopt effective measures to prevent minor users fromover-relying or addicting to generative AI services. In
the event illegal content or users engaging in illegal
activities using generative AI services are discovered,
the generative AI services providers are required totake appropriate measures, including stopping the74

Alibaba Group Holding Limited

generation of such illegal content and suspendingor terminating the provision of services, undergo
rectifications, keep relevant records and report to thecompetent authority. Any provider of generative AI
services with attribute of public opinions or capable ofsocial mobilization shall conduct security assessment
and complete certain filings in accordance with the
Administrative Provisions on Internet Information
Service Algorithm Recommendation. Providers ofgenerative AI services may be subject to penalties
for non-compliance, including warning, publicdenouncement, rectification orders and suspension of
the provision of relevant services.

Regulation of Data and Privacy Protection
Under the ICP Measures, ICPs are prohibited fromproducing, copying, publishing or distributing
information that is humiliating or defamatory to othersor that infringes upon the lawful rights and interests ofothers. Depending on the nature of the violation, ICPs
may face criminal charges or sanctions by PRC public
security authorities for these acts, and may be ordered
to temporarily suspend their services or have theirlicenses revoked.
Under the rules issued by the MIIT, ICPs are also
prohibited from collecting any personal user
information or providing any information tothird parties without the consent of the user.
The Cybersecurity Law provides an exception to
the consent requirement where the information
is anonymous, not personally identifiable andunrecoverable. ICPs must expressly inform the usersof the method, content and purpose of the collection
and processing of user’s personal information andmay only collect information necessary for its services.
ICPs are also required to properly maintain the user
personal information, and in case of any leak or likely
leak of the user’s personal information, ICPs musttake remedial measures immediately and report any
material leak to the telecommunications regulatory
authority.
The PRC government retains the power and authority
to order ICPs to provide an Internet user’s personal
information if a user posts any prohibited content or
engages in any illegal activities through the Internet.
According to the Cybersecurity Law, individuals may
request that network operators make corrections
to or delete their personal information in case theinformation is wrong or was collected or used beyond
an individual’s agreement with network operators.

Business Overview

On June 10, 2021, the Standing Committee of the
National People’s Congress of China promulgatedthe Data Security Law which took effect in September
2021. The Data Security Law provides for data
security and privacy obligations of entities andindividuals carrying out data activities, prohibits
entities and individuals in China from providing any
foreign judicial or law enforcement authority withany data stored in China without approval from thecompetent PRC authority, and sets forth the legal
liabilities of entities and individuals found to be in
violation of their data protection obligations, including
rectification order, warning, fine, suspension of
relevant business, and revocation of business permits
or licenses. The Data Security Law also introduces adata classification and hierarchical protection system
based on the importance of data in economic andsocial development, as well as the degree of harm
it will cause to national security, public interests,
or legitimate rights and interests of individuals ororganizations when such data is tampered with,destroyed, leaked, or illegally acquired or used,
and an appropriate level of protection measures isrequired to be taken for the respective categories ofdata, for example, the processor of important data
shall designate the personnel and management
institution responsible for the data security, carry out
risk assessment for its data processing activities andfile the risk assessment report with the competentauthorities. In addition, the Data Security Law provides
a national security review procedure for those data
activities which may affect national security andimposes export restrictions on certain data andinformation.
On July 7, 2022, the Cyberspace Administration ofChina promulgated the Measures for the Security
Assessment of Cross-border Data Transmission,
which came into effect on September 1, 2022 andregulate the security assessment on the cross-borderdata transfer by data processor of important dataand personal information collected and generated
during operations within the PRC. According to thesemeasures, personal data processors will be subject
to security assessment conducted by the Cyberspace
Administration of China prior to any cross-bordertransfer of data if the transfer involves (i) important
data; (ii) personal information transferred overseas
by operators of critical information infrastructure
or a data processor that has processed personal
data of more than one million persons; (iii)
personal information transferred overseas by adata processor who has already provided personal
data of 100,000 persons or sensitive personal dataof 10,000 persons overseas since January 1 of lastyear; or (iv) other circumstances as requested by
the Cyberspace Administration of China. According
to the official interpretation by the official of the
Cyberspace Administration of China, cross-borderdata transfer activities subject to these measures
include (1) the transmission and storage overseas bydata processors of the data generated during PRC
domestic operations, and (2) the access to or use of
the data collected and generated by data processors
and stored in the PRC by overseas institutions,organizations or individuals. Furthermore, any crossborder data transfer activities conducted in violationof the Measures for the Security Assessment of Crossborder Data Transmission before the effectiveness ofthese measures are required to be rectified by March
2023.
Furthermore, in November 2021, the Cyberspace
Administration of China promulgated Draft
Regulations on Network Data Security Management,or the Draft Cyber Data Security Regulations, forpublic comments, pursuant to which, data processors
shall apply for cybersecurity review if they engagein (i) merger, reorganization or division of Internet
platform operators with significant data resources
related to national security, economic development
or public interests that affects or may affect national
security; (ii) overseas listing while processing over one
million users’ personal information; (iii) Hong Konglisting that affects or may affect national security;or (iv) other data processing activities that affect or
may affect national security. The Draft Cyber Data
Security Regulations also provide that operators oflarge Internet platforms with headquarters, operation
centers or R&D centers overseas shall report to the
Cyberspace Administration of China and relevant
authorities. The Draft Cyber Data Security Regulations
further require data processors processing importantdata or going public overseas to conduct annual data
security self-assessment, and submit the data security
assessment report to their respective local branchof the Cyberspace Administration of China before
January 31 each year. Internet platform operators
shall also establish and publish data policies
and rules on their websites for user comments. In
addition, data policies and rules and any material
amendments thereof of large Internet platforms withover 100 million daily active users shall be evaluatedby a third-party organization designated by the
Cyberspace Administration of China and approvedby the respective local branches of the Cyberspace
Administration of China and the MIIT. There is no
definite timetable as to when this draft will be
Fiscal Year 2023 Annual Report75Business Overview

enacted. As such, substantial uncertainties exist withrespect to the enactment timetable, final content,interpretation and implementation of such measures.
On August 20, 2021, the Standing Committee of the
National People’s Congress of China promulgatedthe Personal Information Protection Law which tookeffect in November 2021. The Personal Information
Protection Law requires, among others, that (i) theprocessing of personal information should havea clear and reasonable purpose which should bedirectly related to the processing purpose, using amethod that has the least impact on personal rights
and interests, and (ii) the collection of personal
information should be limited to the minimum scopenecessary to achieve the processing purpose to avoid
the excessive collection of personal information.
Different types of personal information and personal
information processing will be subject to various rules
on consent, transfer, and security. Entities handlingpersonal information shall bear responsibility for
their personal information handling activities, andadopt necessary measures to safeguard the securityof the personal information they handle. Otherwise,
information processors could be subject to liability for
their processing activities, including rectification, or
suspension or termination of their provision of theirservices as well as confiscation of illegal income,fines or other penalties. As the Data Security Law, thePersonal Information Protection Law and relevant
rules and regulations were recently promulgated, we
may be required to make further adjustments to ourbusiness practices to comply with these laws, rules
and regulations.

Regulation of Consumer Protection
Our online and mobile commerce business is subject
to a variety of consumer protection laws, including the
PRC Consumer Rights and Interests Protection Law, as
amended and effective on March 15, 2014, and theOnline Trading Measures, both of which have imposed
stringent requirements and obligations on business
operators, including Internet business operatorsand platform service providers like us. For example,
consumers are entitled to return goods purchased
online, subject to certain exceptions, within seven days
upon receipt of goods without any reason. On January
6, 2017, the SAIC issued the Interim Measures for No
Reason Return of Online Purchased Commodities
within Seven Days, which came into effect on March
15, 2017 and was amended on October 23, 2020,
further clarifying the scope of consumers’ rights tomake returns without a reason, including exceptions,
return procedures and online marketplace platform
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Alibaba Group Holding Limited

providers’ responsibility to formulate seven day noreason return rules and related consumer protection
systems, and to supervise merchants for compliancewith these rules. To ensure that merchants and service
providers comply with these laws and regulations,we, as platform operators, are required to implement
rules governing transactions on our platform, monitor
the information posted by merchants and service
providers, and report any violations by merchantsor service providers to the relevant authorities. In
addition, online marketplace platform providers
may, pursuant to PRC consumer protection laws, be
subject to liabilities if the lawful rights and interestsof consumers are infringed in connection with
consumers’ purchase of goods or acceptance ofservices on online marketplace platforms and theplatform service providers fail to provide consumers
with the contact information of the merchant or
manufacturer. In addition, platform service providers
may be jointly and severally liable with merchants
and manufacturers if they are aware or should beaware that the merchant or manufacturer is using
the online platform to infringe upon the lawful rights
and interests of consumers and fail to take measuresnecessary to prevent or stop this activity.
Failure to comply with these consumer protection
laws could subject us to administrative sanctions,such as the issuance of a warning, confiscation ofillegal income, imposition of a fine, an order to ceasebusiness operations, revocation of business licenses,
as well as potential civil or criminal liabilities.

Regulation of Pricing
In China, the prices of a very small number of
products and services are guided or fixed by thegovernment. According to the PRC Pricing Law, or the
Pricing Law, business operators must, as required by
the government departments in charge of pricing,mark the prices explicitly and indicate the name,production origin, specifications, and other relatedparticulars clearly. Business operators may not sell
products at a premium or charge any fees that are
not explicitly indicated. Business operators must notconduct unlawful pricing activities, such as colluding
with others to manipulate the market price, providing
fraudulent discounted price information, using
false or misleading prices to deceive consumers totransact, or conducting price discrimination against
other business operators. In addition, in July 2021,
the SAMR released the revised draft Provisions on the
Administrative Penalties on Price-related Violations for
public comment, which proposed significant penalties,
including fines of up to 10% of revenue during theBusiness Overview

violation period, suspension of business or revocationof business license, for a number of price-related
violations, such as below-cost pricing to squeeze out
competitors, price discrimination, manipulation ofmarket prices and fraudulent pricing. In particular,
improper pricing by e-commerce platform operators,
including the use of big data analysis, algorithms orother technologies to conduct differentiated pricing
and price subsidies, may be subject to significant
penalties, including fines of up to 5% of prior year’s
revenue, suspension of business and revocation ofbusiness license. Failure to comply with the Pricing
Law or other rules or regulations on pricing may
subject business operators to administrative sanctions
such as warnings, orders to cease unlawful activities,
payment of compensation to consumers, confiscationof illegal gains, and/or fines. The business operators
may be ordered to suspend business for rectification,or have their business licenses revoked if thecircumstances are severe. Merchants on Tmall andTaobao undertake the primary obligation under the
Pricing Law. However, in some cases, we have been
and may in the future be held liable and be subject
to fines or other penalties if the authorities determine
that, as platform operator, our guidance for platformwide promotional activities resulted in unlawful pricing
activities by the merchants on our platforms or thepricing information we provided for platform-wide
promotional activities was untrue or misleading.

Labor Laws and Social Insurance
Pursuant to the PRC Labor Law and the PRC Labor
Contract Law, employers must execute written labor
contracts with full-time employees. All employers
must comply with local minimum wage standards.
Violations of the PRC Labor Contract Law and the PRC
Labor Law may result in the imposition of fines andother administrative and criminal liability in the case ofserious violations.
In addition, according to the PRC Social Insurance Law
and the Regulations on the Administration of Housing
Funds, employers in China must provide employeeswith welfare schemes covering pension insurance,
unemployment insurance, maternity insurance,
work-related injury insurance, medical insurance andhousing funds.

Other Regulations
Regulation of Corporate Governance
On December 24, 2021, the Standing Committeeof the National People’s Congress issued the draft
amended PRC Company Law, or the Draft Amended

Company Law, for public comment. The revisions
include (i) optimizing the governance mechanism,
clarifying that the board of directors is the executive
body of the company, allowing the company tochoose to establish a corporate governance structurecomposed of “board of directors with an audit
committee under the board of directors” or “boardof directors and board of supervisors” based on its
actual circumstances, and allowing small companies
limited by shares to be incorporated without a boardof directors; (ii) further improving the company
capital system, introducing the authorized capitalsystem for companies limited by shares, clarifying theclasses of shares that can be issued by companies
limited by shares, strengthening the principle ofcapital maintenance, and allowing the use ofcapital reserves to cover losses; (iii) strengthening
the fiduciary duties of the directors, supervisors andsenior management, including the responsibilities ofthe directors, supervisors and senior management
to maintain adequate company capital and report
related party transactions, their joint and several
liabilities and liquidation obligations; and (iv)
improving the company registration system, clarifyingthat equity interests and creditor rights can becontributed as capital, allowing the establishment ofcompanies limited by shares with one shareholder,
and introducing simplified procedures for capital
reduction and de-registration of company to facilitate
a company’s operation. The Draft Amended Company
Law, if adopted, will have a substantial impact on thecurrent PRC Company Law and corporate governancestructures governed by it, and our PRC corporate
entities and their governance systems may be
adjusted and changed accordingly.
On December 27, 2021, the SAMR issued the Interim
Measures for the Administration of Beneficial
Owner Information of Market Entities (Draft), or the
Draft Measures for the Administration of Beneficial
Owners, for public comment. The Draft Measures
for the Administration of Beneficial Owners specify
the scope of market entities that are subject to filingobligations, the conditions to exemption from filing,
and the definition and identification standards ofbeneficial owners. According to the general standard
for identifying the beneficial owners of companies
and partnerships, natural persons who meet anyof the following conditions are beneficial owners:
ultimately owning 25% or more equity interests,
shares or partnership interests in a company orpartnership directly or indirectly, ultimately being
entitled to 25% or more of its income, or exercisingactual control over the company or partnership
Fiscal Year 2023 Annual Report77Business Overview

individually or jointly. If there is no person who meetsthe aforesaid standards, the person responsible forroutine operation and management shall be deemedas the beneficial owner. The Draft Measures for the
Administration of Beneficial Owners provide that theactual control includes without limitation the control
by agreement, but does not conclusively determine
the beneficial owner under contractual arrangements,
and uncertainties exist with respect to our disclosure ofbeneficial owners pursuant to these draft measures.
Regulation of Foreign Investment
On March 15, 2019, the National People’s Congresspromulgated the 2019 PRC Foreign Investment Law,
which became effective on January 1, 2020 and
replaced the major former laws and regulations
governing foreign investment in the PRC. Pursuant
to the 2019 PRC Foreign Investment Law, “foreign
investments” refer to investment activities conductedby foreign investors directly or indirectly in the PRC,
which include any of the following circumstances: (i)foreign investors setting up foreign-invested enterprisesin the PRC solely or jointly with other investors, (ii)foreign investors obtaining shares, equity interests,
property portions or other similar rights and interestsof enterprises within the PRC, (iii) foreign investors
investing in new projects in the PRC solely or jointly withother investors, and (iv) investment of other methods
as specified in laws, administrative regulations, or as
stipulated by the State Council of the PRC.
According to the 2019 PRC Foreign Investment Law
and its implementing rules, China adopts a system ofpre-entry national treatment plus negative list withrespect to foreign investment administration, andthe negative list will be proposed by the competent
investment department of the State Council of the
PRC in conjunction with the competent commerce
department of the State Council of the PRC andother relevant departments, and be reported to
the State Council of the PRC for promulgation, orbe promulgated by the competent investment
department or competent commerce departmentof the State Council of the PRC after being reported
to the State Council of the PRC for approval. Foreign
investment beyond the negative list will be granted
national treatment. Foreign investors shall not invest
in the prohibited industries as specified in the negative
list, while foreign investment must satisfy certain
conditions stipulated in the negative list for investmentin the restricted industries. The current industry
entry clearance requirements governing investment
activities in the PRC by foreign investors are set out
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Alibaba Group Holding Limited

Encouraged Industry Catalogue for Foreign Investment(2022 version), or the 2022 Encouraged Industry
Catalogue, both of which were promulgated by the
NDRC and the MOFCOM and took effect in January2022 and January 2023 respectively. Industries notlisted in these two categories are generally deemed“permitted” for foreign investment unless otherwise
restricted by other PRC laws. Our major subsidiaries
are registered in China and mainly engage in softwaredevelopment, technical services and consulting, all ofwhich fall into the encouraged or permitted category.
These major subsidiaries have obtained all material
approvals required for their business operations. The
Negative List does not apply to our major subsidiaries
that are registered and domiciled in Hong Kong
S.A.R., the British Virgin Islands or the Cayman Islands,
and operate outside of Chinese mainland. The
businesses of our other PRC subsidiaries — including
PRC subsidiaries of our major subsidiaries — aregenerally software development, technical services
and consulting, which fall into the encouraged or
permitted category. Industries such as value-added
telecommunications services, including Internet
information services, are generally restricted to foreign
investment pursuant to the Negative List. We conductbusiness operations that are restricted or prohibited toforeign investment through variable interest entities.
On December 19, 2020, the NDRC and MOFCOM
promulgated the Foreign Investment Security
Review Measures, which took effect on January 18,
2021. Under the Foreign Investment Security Review
Measures, foreign investments in military, national
defense-related areas or in locations in proximity
to military facilities, or foreign investments thatwould result in acquiring the actual control of assets
in certain key sectors, such as critical agricultural
products, energy and resources, equipment
manufacturing, infrastructure, transport, cultural
products and services, IT, Internet products andservices, financial services and technology sectors,
are required to obtain approval from designatedgovernmental authorities in advance. Although theterm “actual control” is not clearly defined under theForeign Investment Security Review Measures, it ispossible that control through contractual arrangement
may be regarded as a form of actual control andtherefore requires approval from the competent
governmental authority. As the Foreign Investment
Security Review Measures were recently promulgated,
there are significant uncertainties with respect totheir interpretation and implementation. Accordingly,
there are substantial uncertainties as to whether
our contractual arrangements may be deemed as amethod of foreign investment in the future.

Business Overview

Regulation of Foreign Debts
The Administrative Measures for Examination andRegistration of Medium and Long-term Foreign Debts
of Enterprises, or the Foreign Debts Measures, waspromulgated by NDRC on January 5, 2023 and camein effect on February 10, 2023, requiring that the PRC
enterprises and overseas enterprises or branches
controlled by them, including holding companies witha VIE structure, to complete application for registrationof foreign debts with the NDRC prior to the borrowingof foreign debts with a term of over one year.
Tax Regulations
PRC Enterprise Income Tax
The PRC enterprise income tax, or EIT, is calculated
based on the taxable income determined under theapplicable PRC Enterprise Income Tax Law, or EIT Law,
and its implementation rules, both of which became
effective on January 1, 2008 and were most recently
amended on December 29, 2018 and April 23, 2019,respectively. The EIT Law generally imposes a uniform
enterprise income tax rate of 25% on all resident
enterprises in China, including foreign-invested
enterprises.
The EIT Law and its implementation rules permit
certain High and New Technologies Enterprises, or
HNTEs, to enjoy a reduced 15% enterprise income
tax rate if they meet certain criteria and are officiallyacknowledged. In addition, the relevant EIT laws andregulations also provide that entities recognized as
Software Enterprises are able to enjoy a tax holiday
consisting of a two-year-exemption commencing fromtheir first profitable calendar year and a 50% reductionin ordinary tax rate for the following three calendar
years. In 2020, the relevant governmental authorities
further announced that Key Software Enterprises will
be exempted from enterprise income tax for the first
five years, commencing from the first year of profitable
operation after offsetting tax losses generating fromprior years, and be subject to a preferential income tax
rate of 10% after the first five years. The qualification
as a “Key Software Enterprise” is subject to annual
evaluation and approval by the relevant authorities
in China. A number of our PRC subsidiaries andoperating entities enjoy these types of preferential tax
treatment.
PRC VAT
According to the amended Interim Regulation of thePeople’s Republic of China on Value Added Tax issued
by the State Council of the PRC on November 19, 2017,a VAT rate of 6% applies to revenue derived from theprovision of certain services. A taxpayer is allowed
to offset the qualified input VAT paid on taxable
purchases against the output VAT chargeable on therevenue from services provided.
On March 20, 2019, the MOF, the STA and theGeneral Administration of Customs issued theAnnouncement on Policies for Deepening VAT Reform,or Announcement 39, which came into effect on
April 1, 2019, to further slash VAT rates. According toAnnouncement 39, (i) the 16% or 10% VAT previously
imposed on sales and imports by general VAT
taxpayers is reduced to 13% or 9% respectively; (ii) the
10% purchase VAT credit rate allowed for procured
agricultural products is reduced to 9%; (iii) the 13%purchase VAT credit rate allowed for agricultural
products procured for production or commissioned
processing is reduced to 10%; and (iv) the 16% or
10% export VAT refund rate previously granted toexportation of goods or labor services is reduced to
13% or 9%, respectively.
PRC Import Tax
According to the Notice on Tax Policy for Cross-Border
E-commerce Retail Imports, or New Tax Notice on
Cross-Border E-commerce, which became effective
on April 8, 2016, goods imported through crossborder e-commerce platforms have been treated as
normal goods subject to VAT, consumption tax andtariff. In general, a VAT at the rate of 17% (before
May 1, 2018) or 16% (from May 1, 2018 to March 31,2019) or 13% (from April 1, 2019 onwards) is levied onmost goods imported via cross-border e-commerce
platforms and a 15% consumption tax is levied onhigh-end cosmetics and high-end skincare products,
while no consumption tax is levied on regular skincare products, maternity or baby care products. As apreferential tax treatment, the Notice on Improving
the Tax Policies on Cross-Border E-Commerce Retail
Imports, which was issued on November 29, 2018 andtook effect on January 1, 2019, provides that, if thegoods imported through cross-border e-commerce
platforms are within the quota of RMB5,000 per
purchase order and RMB26,000 per year per buyer,
there is a 30% discount off the applicable VAT and theconsumption tax, and the tariff is waived.
PRC Export Tax
According to the Notice on the Taxation Policies
for Cross-border E-Commerce Retail Export, or the
E-Commerce Export Taxation Notice, which was jointly
issued by the MOF and the STA and took effect onJanuary 1, 2014, an e-commerce export enterprise
may be exempt from or refunded with consumption
Fiscal Year 2023 Annual Report79Business Overview

tax and VAT upon satisfaction of certain conditions or
requirements under such notice. However, third-party
e-commerce platforms providing transaction services
for e-commerce export enterprises are not eligible
for a tax refund or exemption under the E-Commerce
Export Taxation Notice.
Regulation of Foreign Exchange and Dividend
Distribution
Foreign Exchange Regulation
The principal regulations governing foreign currency
exchange in China are the Regulations on Foreign
Exchange Administration of the PRC. Under the PRC
foreign exchange regulations, payments of current
account items, such as profit distributions and tradeand service-related foreign exchange transactions,
may be made in foreign currencies without priorapproval from SAFE by complying with certain
procedural requirements. By contrast, approval
from or registration with appropriate government
authorities is required where RMB is to be converted
into foreign currency and remitted out of China to pay
capital expenses, such as the repayment of foreign
currency-denominated loans, or foreign currency is tobe remitted into China under the capital account, suchas capital increases or foreign currency loans to our
PRC subsidiaries.
In June 2016, SAFE issued the Circular on Reforming
and Regulating Policies on the Control over Foreign
Exchange Settlement of Capital Accounts, or Circular
16, which took effect on the same day. Circular
16 provides that discretionary foreign exchange
settlement applies to foreign exchange capital, foreign
debt offering proceeds and remitted foreign listingproceeds, and the corresponding Renminbi obtained
from foreign exchange settlement is not restrictedfrom being used to extend loans to related parties orrepay the inter-company loans (including advances by
third parties).
On January 18, 2017, SAFE promulgated the Circularon Further Improving Reform of Foreign Exchange
Administration and Optimizing Genuineness andCompliance Verification, or Circular 3, which took effecton the same day. Circular 3 sets out various capital
control measures with respect to outbound remittanceof funds from PRC entities to offshore entities. Circular
3 requires banks to verify board resolutions, tax
filing forms, and audited financial statements before
wiring foreign invested enterprises’ foreign exchange
distribution above US$50,000. Moreover, pursuant
to Circular 3, PRC entities must explain in detail the80

Alibaba Group Holding Limited

sources of capital and how the capital will be used,and provide board resolutions, contracts and otherproof as a part of the registration procedure foroutbound investment.
On October 23, 2019, SAFE issued the Notice of Further
Facilitating Cross-border Trade and Investment, orCircular 28, which took effect on the same day. Circular
28 allows non-investment foreign-invested enterprises
to use their capital funds to make equity investments
in China, provided that such investments do not violate
the negative list and the target investment projects are
genuine and in compliance with laws. According to
the Circular on Optimizing Administration of Foreign
Exchange to Support the Development of Foreignrelated Business issued by SAFE on April 10, 2020,
eligible enterprises are allowed to make PRC domestic
payments with their income under capital accounts
such as capital funds, foreign debts and proceedsfrom overseas listing without submitting evidence of
genuineness to the banks in advance, provided theuse of such funds is genuine and in compliance withadministrative regulations on the use of income undercapital accounts.
We typically do not need to use our offshore foreign
currency to fund our PRC operations. In the event weneed to do so, we will apply to obtain the relevant
approvals of SAFE and other PRC government
authorities as necessary. Our PRC subsidiaries’
distributions to their offshore parent companies andour cross-border foreign exchange activities are
required to comply with the various requirements
under the relevant foreign exchange rules.
Regulation of Dividend Distribution
The principal laws, rules and regulations governing
dividend distribution by foreign-invested enterprisesin the PRC are the Company Law of the PRC, asamended, which applies to both PRC domestic
companies and foreign-invested companies,
and the 2019 PRC Foreign Investment Law and its
implementation rules, which apply to foreign-invested
companies. Under these laws, rules and regulations,foreign-invested enterprises may pay dividends onlyout of their accumulated profit, if any, as determinedin accordance with PRC accounting standards andregulations. Both PRC domestic companies andwholly-foreign owned PRC enterprises are required
to set aside as general reserves at least 10% of theirafter-tax profit, until the cumulative amount of theirreserves reaches 50% of their registered capital. A
PRC company is not permitted to distribute any profits
until any losses from prior fiscal years have beenBusiness Overview

offset. Profits retained from prior fiscal years may be
distributed together with distributable profits from thecurrent fiscal year.
Regulation of Overseas Listing
The PRC government has enhanced its regulatory
oversight of Chinese companies listing overseas.
The Opinions on Intensifying Crack Down on Illegal
Securities Activities issued on July 6, 2021 calledfor (i) tightening oversight of data security, crossborder data flow and administration of classified
information, as well as amendments to relevant
regulations to specify responsibilities of overseas
listed Chinese companies with respect to data security
and information security; (ii) enhanced oversight ofoverseas listed companies as well as overseas equity
fundraising and listing by Chinese companies; and (iii)
extraterritorial application of PRC securities laws.
There are substantial uncertainties with respect to theinterpretation and implementation of the Opinions
on Intensifying Crack Down on Illegal Securities
Activities. Furthermore, on February 17, 2023, theCSRC released the Trial Administrative Measures ofOverseas Securities Offering and Listing by Domestic
Companies and five relevant guidelines, or collectively,
the Overseas Listing Trial Measures, which took effectfrom March 31, 2023, requiring Chinese domestic
companies’ overseas offerings and listings of equity
securities be filed with the CSRC. The Overseas Listing
Trial Measures clarify the scope of overseas offerings
and listings by Chinese domestic companies which
are subject to the filing and reporting requirements
thereunder, and provide, among others, that
Chinese domestic companies that have alreadydirectly or indirectly offered and listed securities inoverseas markets prior to the effectiveness of theOverseas Listing Trial Measures shall fulfill their filingobligations and report relevant information to the
CSRC within three working days after conducting afollow-on offering of equity securities on the sameoverseas market, and follow the relevant reporting
requirements within three working days upon theoccurrence of any specified circumstances provided
thereunder. According to the Overseas Listing Trial
Measures, if we fail to complete the filing procedureswith the CSRC for any of our follow-on offerings or fallwithin any of the circumstances where our follow-on
offering is prohibited by the State Council of the PRC,
our offering application may be discontinued andwe may be subject to penalties, sanctions and fines
imposed by the CSRC and relevant departments of theState Council of the PRC.

On February 24, 2023, the CSRC and several othergovernmental authorities jointly issued the revised
Provisions on Strengthening Confidentiality andArchives Administration of Overseas Securities
Offering and Listing by Domestic Companies, or the
Revised Confidentiality Provisions, which came into
effect on March 31, 2023. According to the Revised
Confidentiality Provisions, Chinese companies that
directly or indirectly conduct overseas offerings andlistings, shall strictly abide by the laws and regulations
on confidentiality when providing or publicly
disclosing, either directly or through their overseas
listed entities, materials to securities services providers.
In the event such materials contain state secrets orworking secrets of government agencies, the Chinesecompanies shall first obtain approval from authorities,
and file with the secrecy administrative department
at the same level with the approving authority; in theevent that such materials, if divulged, will jeopardize
national security or public interest, the Chinesecompanies shall comply with procedures stipulated
by national regulations. The Chinese companies
shall also provide a written statement of the specificsensitive information provided when providing
materials to securities service providers, and such
written statements shall be retained for inspection.

Data Protection Regulation in Europe
On May 25, 2018, EU Directive 95/46/EEC was replacedby the GDPR on the protection of natural persons
with regard to the processing and free movementof personal data. The GDPR applies directly in all EU
member states from May 25, 2018 and applies tocompanies with an establishment in the European
Economic Area, or the EEA, and to certain othercompanies not in the EEA that offer or provide
goods or services to individuals located in the EEA
or monitor individuals located in the EEA. The GDPR
implements more stringent operational requirements
for controllers of personal data, including, forexample, expanded disclosures about how personal
information is to be used, limitations on retentionof information and pseudonymized data, increased
cybersecurity requirements, mandatory data breach
notification requirements and higher standards forcontrollers to demonstrate that they have obtained avalid legal basis for certain data processing activities.
The activities of data processors will be regulated forthe first time, and companies undertaking processing
activities are required to offer certain guarantees inrelation to the security of processing and the handlingof personal data. Contracts with data processors will
also need to be updated to include certain terms
Fiscal Year 2023 Annual Report81Business Overview

prescribed by the GDPR, and negotiating these
updates may not be fully successful in all cases.
Failure to comply with EU laws, including failure under
the GDPR and other laws relating to the security of
personal data may result in fines up to €20,000,000
or up to 4% of the total worldwide annual turnoverof the preceding financial year, if greater, and otheradministrative penalties including criminal liability.

Legal and Administrative Proceedings
We are involved from time to time, and may in the
future be involved in, litigation, claims or otherdisputes in the ordinary course of business regarding,among other things, contract disputes with ourcustomers, copyright, trademark and other intellectual
property infringement claims, consumer protection
claims, employment related cases and other matters,
as well as disputes between our merchants andconsumers or pursuant to anti-monopoly or antiunfair competition laws or involving high amountsof alleged damages. We have also been, and may
in the future be, involved in litigation, regulatory
investigations or inquiries and administrative
proceedings that may or may not necessarily arise
from our ordinary course of business, such as
securities class action lawsuits and investigations or
inquiries by securities regulators.
We establish balance sheet provisions relating topotential losses from litigation based on estimatesof the losses. For this purpose, we classify potential
losses as remote, reasonably possible or probable. We
analyze potential outcomes from current and potential
litigation and proceedings as loss contingencies inaccordance with U.S. GAAP.

Pending SEC Inquiry
In early 2016, the SEC informed us that it had initiatedan investigation into whether there have been any
violations of the federal securities laws. The SEC
has requested that we voluntarily provide it with
documents and information relating to, among
other things, our consolidation policies and practices(including our prior practice of accounting for Cainiao
as an equity method investee), our policies andpractices applicable to related party transactions
in general, and our reporting of operating datafrom the 11.11 Global Shopping Festival. We arevoluntarily disclosing this SEC request for informationand cooperating with the SEC and, through our legal

82

Alibaba Group Holding Limited

counsel, have been providing the SEC with requested
documents and information. We believe we have fully
responded to the SEC’s inquiries. The SEC advised usthat the initiation of a request for information should
not be construed as an indication by the SEC or its staff
that any violation of the federal securities laws has
occurred.
Our management believes that the risk of loss inconnection with this proceeding is currently remoteand that this proceeding will not have a material
adverse effect on our financial condition. However, inlight of the inherent uncertainties involved in this andsimilar proceedings, some of which are beyond ourcontrol, the risk of loss may become more likely andan adverse outcome could be material to our resultsof operations or cash flows for any particular reporting
period. See note 2 to our audited consolidated
financial statements included in this annual reportfor more information on our provisioning policy withregard to legal and administrative proceedings.

PRC Anti-monopoly Investigation and
Administrative Penalty Decision
On December 24, 2020, we received a notice ofinvestigation from the SAMR, stating that the SAMR
had commenced an investigation pursuant to the
PRC Anti-monopoly Law. On April 10, 2021, the SAMR
issued an Administrative Penalty Decision, or theDecision, of the anti-monopoly investigation into ourcompany. In the Decision, the SAMR found that we
had violated Article 17(4) of the PRC Anti-monopoly
Law, which states that a business operator thathas a dominant market position is prohibited fromrestricting business counterparties through exclusive
arrangements without justifiable cause. Pursuant
to Articles 47 and 49 of the PRC Anti-monopoly Law,
on April 10, 2021, the SAMR ordered us to ceaseviolating acts and imposed a fine of RMB18.2 billion.
The SAMR also issued an administrative guidance,
instructing us to implement a comprehensive
program of rectification, through strictly fulfilling our
responsibility as a platform operator, strengthening
our internal controls and compliance, upholding faircompetition, and protecting the lawful rights andinterests of our platform’s merchants and consumers.
The administrative guidance requires us to submit aself-assessment and compliance report to the SAMR
for three consecutive years.

Business Overview

Shareholder Class Action Lawsuits

JD.com Lawsuit

In November and December 2020, we and certain of
our officers and directors were named defendants in
two putative securities class action lawsuit filed in the
United States District Court for the Southern District of
New York concerning the suspension of Ant Group’s
planned initial public offering, captioned Laura
Ciccarello v. Alibaba Group et al., No. 1:20-cv-09568(S.D.N.Y.) (the “Ciccarello Action”) and Robert Romnek v.
Alibaba Group et al., No. 1:20-cv-10267 (S.D.N.Y.) (the“Romnek Action”). Both lawsuits assert claims under
Section 10(b) and Section 20(a) of the U.S. ExchangeAct.

In 2017, Beijing Jingdong Shiji Trading Co., Ltd. andBeijing Jingdong 360 E-commerce Co., Ltd. sued
Zhejiang Tmall Technology Co., Ltd., Zhejiang Tmall
Network Co., Ltd. and Alibaba Group Holding Limited
for abuse of dominant market position (Case No.
(2017) Jing Min Chu Zi No.152). The plaintiffs request
the three defendants to cease relevant acts andclaimed a substantial amount of damages in theoriginal complaint. In March 2021, the plaintiffs
amended their claim to seek higher damages. As ofthe date of this annual report, the case is pending in
Beijing High People’s Court and the potential damages
are not reasonably estimable at the current stage.

In January 2021, we and certain of our officers anddirectors were named defendants in a putative
securities class action lawsuit filed in the United States
District Court for the Southern District of New York
concerning certain antitrust developments, captioned
Elissa Hess v. Alibaba Group et al., No. 1:21-cv-00136(S.D.N.Y.) (the “Hess Action”). The complaint in the
Hess Action, which also includes certain allegations
about the suspension of Ant Group’s planned initialpublic offering, asserts claims under Section 10(b) andSection 20(a) of the U.S. Exchange Act.
On January 12, 2021, four plaintiff groups filed Motions
to Consolidate and Motions for Appointment as
Lead Plaintiff under the Private Securities Litigation
Reform Act, or the PSLRA, seeking consolidationof the Ciccarello, Romnek, and Hess Actions andappointment of Lead Plaintiff and Lead Counsel under
the PSLRA. The Court consolidated the three actions
on April 20, 2021, and appointed Lead Plaintiff on
February 10, 2022. On April 22, 2022, Lead Plaintiff
filed an Amended Complaint, naming a founder as anadditional defendant, and asserting new and existingclaims concerning the SAMR’s antitrust investigationand fine and the suspension of Ant Group’s planned
initial public offering.
On July 21, 2022, defendants filed motions to dismiss
the Amended Complaint. On March 22, 2023, the Court
granted in part Defendants’ motions, among otherthings, dismissing the founder and all allegations
relating to the suspension of Ant Group’s planned
initial public offering. The portion of the case related
to the SAMR’s antitrust investigation and fine isproceeding to discovery, which is scheduled toconclude in January 2025.

Fiscal Year 2023 Annual Report83Business Overview

Corporate Structure
Alibaba Group Holding Limited is an exempted
company incorporated with limited liability under thelaws of the Cayman Islands on June 28, 1999, and we
conduct our business through our subsidiaries andvariable interest entities. We are listed on the NYSE
under the symbol “BABA” and on the Hong Kong Stock
Exchange under the stock codes “9988 (HKD Counter)”and “89988 (RMB Counter).”
Our significant subsidiaries, as that term is defined
under Section 1-02 of Regulation S-X under the U.S.
Securities Act, include the following entities:

•

•

•

•

•

84

Taobao Holding Limited, an exempted company
incorporated with limited liability under the lawsof the Cayman Islands, which is our whollyowned subsidiary and a holding company ofcertain major subsidiaries relating to China
commerce and Local consumer services
businesses.
Taobao China Holding Limited 淘寶中國控股有限公司, a limited liability company incorporated
under the laws of Hong Kong, which is the direct
wholly-owned subsidiary of Taobao Holding
Limited and a holding company of certain major
subsidiaries relating to China commerce andLocal consumer services businesses.
Alibaba.com Limited, an exempted company
incorporated with limited liability under the lawsof the Cayman Islands, which is our whollyowned subsidiary and a holding company ofcertain major subsidiaries relating to China
commerce, International commerce and Cloudbusinesses.
Alibaba.com Investment Holding Limited, acompany incorporated with limited liability
under the laws of the British Virgin Islands,
which is the direct wholly-owned subsidiary of
Alibaba.com Limited and a holding company
of certain major subsidiaries relating to China
commerce, International commerce and Cloudbusinesses.
Alibaba.com China Limited 阿里巴巴網絡中國有限公司, a limited liability company incorporated
under the laws of Hong Kong, which is the
direct wholly-owned subsidiary of Alibaba.com
Investment Holding Limited and mainly operates
back office and administrative functions.

Alibaba Group Holding Limited

•

•
•

•

•

•

Alibaba Investment Limited, a company
incorporated with limited liability under the lawsof the British Virgin Islands, which is our whollyowned subsidiary and a holding company forstrategic investments and major subsidiaries
relating to Digital media and entertainment
business.
Alibaba Group Services Limited, a limited liability
company incorporated under the laws of Hong
Kong, which is our wholly-owned subsidiary andoperates as our treasury center in Hong Kong.
Taobao (China) Software Co., Ltd. 淘寶（中國）軟件有限公司, a limited liability company
incorporated under the laws of the PRC, which
is a direct wholly-owned subsidiary of Taobao
China Holding Limited, and provides softwareand technology services for Taobao.
Zhejiang Tmall Technology Co., Ltd. 浙江天貓技術有限公司, a limited liability company
incorporated under the laws of the PRC, which
is a direct wholly-owned subsidiary of Taobao
China Holding Limited, and provides softwareand technology services for Tmall.
Alibaba (China) Technology Co., Ltd. 阿里巴巴（中國）網絡技術有限公司, a limited liability
company incorporated under the laws of the
PRC, which is jointly owned by Taobao (China)
Software Co., Ltd., Zhejiang Tmall Technology
Co., Ltd. and Alibaba.com China Limited, andmainly operates our wholesale marketplaces
and cross-border commerce retail and wholesale
businesses.
Alibaba (China) Co., Ltd. 阿里巴巴（中國）有限公司, a limited liability company incorporated
under the laws of the PRC, which is a direct
wholly-owned subsidiary of Alibaba Group
Services Limited, and is mainly involved in our
strategic cooperation.

Business Overview

The principal executive offices of our main operations
are located at 969 West Wen Yi Road, Yu Hang District,Hangzhou 311121, People’s Republic of China. Our
telephone number at this address is +86-571-85022088. Our registered office in the Cayman Islands
is located at the offices of Trident Trust Company(Cayman) Limited, Fourth Floor, One Capital Place,
P.O. Box 847, George Town, Grand Cayman, Cayman
Islands. Our agent for service of process in the UnitedStates is Corporation Service Company locatedat 1180 Avenue of the Americas, Suite 210, New
York, New York 10036. Our corporate website isw w w.alibabagroup.com.
We have a demonstrated track record of successfulorganic business creation. In addition to organic
growth, we have made, or have entered into
agreements to make strategic investments,
acquisitions and alliances that are intended to further
our strategic objectives. See “Management Discussion
and Analysis — Operating Results — Recent Investment,
Acquisition and Strategic Alliance Activities” for more
information.
We are subject to the periodic reporting and otherdisclosure requirements under the U.S. Exchange Act
that are applicable to foreign private issuers in the
United States. Under the U.S. Exchange Act, we are
required to file periodic reports, financial statements
and other information with the SEC. We are required
to, among other things, file our annual report on Form
20-F within four months after the end of each fiscal
year. However, we are exempt from certain disclosure
requirements under the U.S. Exchange Act that apply
to domestic U.S. companies, and we are not required
to file periodic reports and financial statements with
the SEC as frequently or as promptly as domestic U.S.
companies with securities registered under the U.S.
Exchange Act. See “Risk Factors — Risks Related to Our
ADSs and Shares — As a foreign private issuer in the

United States, we are exempt from certain disclosure
requirements under the U.S. Exchange Act, which may
afford less protection to holders of our ADSs than theywould enjoy if we were a domestic U.S. company.”
Copies of our periodic reports, financial statements
and other information, once filed with the SEC, can beread and copied at the SEC’s Public Reference Roomat 100 F Street, N.E., Washington, D.C. 20549 and at
the SEC’s regional offices in New York, New York andChicago, Illinois. You can also request copies of these
documents, upon payment of a duplicating fee, by
writing information on the operation of the SEC’s
Public Reference Room. The SEC also maintains anInternet website at h t t p://w w w.sec.gov that contains
reports, proxy and information statements, and otherinformation regarding issuers that file electronicallywith the SEC. Our annual report and some of theother information submitted by us to the SEC may
be accessed through this website. Such information
can also be found on our investor relations website
at h t t ps://w w w.alibabagroup.com/en-US/investorrelations .

Share Repurchase Program
In May 2019, our board of directors authorized a share
repurchase program for an amount of up to US$6.0
billion over a period of two years, which has since
been upsized and extended a number of times by ourboard of directors. Most recently, in November 2022,
our board of directors authorized a further upsizeof our share repurchase program to US$40.0 billion
which is effective through March 2025. See “Other
Information for Shareholders — Purchases of Equity
Securities by the Issuer and Affiliated Purchasers” formore details.

Fiscal Year 2023 Annual Report85Business Overview

Organizational Structure

and VIEs that together are representative of the
major businesses operated by our group, including
our significant subsidiaries, as that term is defined
under Section 1‑02 of Regulation S‑X under the U.S.
Securities Act, and other representative subsidiaries,
which we collectively refer to as our major subsidiaries,
as well the corresponding representative VIEs, which
we refer to as the representative VIEs:

Like many large scale, multinational companies withbusinesses around the world and across industries,
we conduct our business through a large number ofChinese and foreign operating entities, including VIEs.
The chart below summarizes our corporate structure
as of March 31, 2023 and identifies the subsidiaries

Alibaba Group Holding Limited (Cayman Islands)
100%
Taobao Holding
Limited(Cayman Islands)

100% (through intermediary holding entities)

100%
Taobao China
Holding Limited(Hong Kong)

Alibaba.com Investment
Holding Limited(British Virgin Islands)

Alibaba.com
China Limited(Hong Kong)

Offshore
PRC
Onshore76%
PRC(through

100%

intermediary
Taobao (China)
holding
Software Co., Ltd.
entities)

Shanghai Rajax
Information
Technology
Co., Ltd.(1)(9)Zhejiang
TaobaoNetworkCo., Ltd.(5)(9)100%

Alibaba Group
AlibabaServices
Investment
LimitedLimited (British
Virgin Islands) (Hong Kong)

100%

100%

Rajax Network
Technology(Shanghai)Co., Ltd.(1)100%

Alibaba.com
Limited(Cayman Islands)

100% (throughintermediaryholding
entities)
Alibaba.com Singapore
E-Commerce Private
Limited (Singapore)67%(throughintermediaryholding
entities)100%(throughintermediaryholding
entities)100%(throughintermediaryholding
entities)

100%

100%
Zhejiang Tmall
Technology
Co., Ltd.

Hangzhou Cainiao
Zhejiang
Beijing Youku
Supply Chain
Alibaba Cloud
Technology(2)Management Co., Ltd.
ComputingCo., Ltd.(4)Ltd.(3)

Zhejiang
Tmall Network
Co., Ltd.(6)(9)

57%

36%

7%

Alibaba(China)Co. Ltd.

AlibabaHangzhou Ali
Alibaba Cloud
CultureVentureComputingEntertainment
CapitalLtd.(3)(9)Co. Ltd.(4)(9)Co., Ltd.(8)(9)

Alibaba (China)
Technology Co., Ltd.

Hangzhou Alibaba
AdvertisingCo., Ltd.(7)(9)Equity interest
Contractual arrangements(1) Primarily involved in the operation of local consumer services businesses.
(2) Primarily involved in the operation of Cainiao business.
(3) Primarily involved in the operation of cloud business.
(4) Primarily involved in the operation of digital media and entertainment business.
(5) Primarily involved in the operation of Taobao.
(6) Primarily involved in the operation of Tmall.
(7) Primarily involved in the operation of our wholesale marketplaces and cross-border commerce retail and wholesale businesses.
(8) Primarily involved in investment projects.
(9) A VIE.

86

Alibaba Group Holding Limited

Business Overview

For information about the major VIEs, which accountfor a significant majority of the total revenue
and assets of the VIEs, please see “Management
Discussion and Analysis — Operating Results — Variable
Interest Entity Financial Information.”Contractual Arrangements among Our
Subsidiaries, Variable Interest Entities
and the Variable Interest Entity Equity
Holders
Due to legal restrictions on foreign ownership andinvestment in, among other areas, value‑added
telecommunications services, which include theoperations of ICPs, we, similar to all other entities withforeign‑incorporated holding company structures
operating in our industry in China, operate ourInternet businesses and other businesses in which
foreign investment is restricted or prohibited in the
PRC through various contractual arrangements with
VIEs that are incorporated and owned by PRC citizens
or by PRC entities owned and/or controlled by PRC
citizens. The relevant VIEs hold the ICP licenses andother regulated licenses and operate our Internet
businesses and other businesses in which foreign
investment is restricted or prohibited. Specifically, forfiscal year 2023, our representative VIEs are Zhejiang
Taobao Network Co., Ltd., Zhejiang Tmall Network
Co., Ltd., Hangzhou Alibaba Advertising Co., Ltd.,
Hangzhou Ali Venture Capital Co., Ltd., Shanghai

Rajax Information Technology Co., Ltd., Alibaba Cloud
Computing Ltd. and Alibaba Culture Entertainment
Co., Ltd. See “— Organizational Structure” above.
While the VIEs hold licenses and approvals andassets for regulated activities that are necessary
for our business operations, as well as certain
equity investments in businesses, to which foreign
investments are typically restricted or prohibited
under applicable PRC law, our subsidiaries hold thesignificant majority of our assets and operations
and capture the significant majority of our revenue.
Therefore, we directly capture the significant
majority of the profits and associated cash flow fromoperations without having to rely on contractual
arrangements to transfer cash flow from the VIEs to
our subsidiaries.
The currently effective contractual arrangements,
as described in more detail below, by and amongus, our relevant subsidiaries, the VIEs, and theirshareholders include loan agreements, exclusive call
option agreements, proxy agreements, equity pledge
agreements and exclusive services agreements. As
a result of the contractual arrangements with the
VIEs and their shareholders, we include the financial
results of each of the VIEs in our consolidated financial
statements in accordance with U.S. GAAP. The VIE
structure involves risks and is subject to uncertainties
under PRC laws and regulations. See “Risk Factors –Risks Related to Our Corporate Structure.”

VIE Structure
Overview
The following diagram is a simplified illustration of the typical ownership structure and contractual arrangements
for VIEs:
Company

Legal ownership
Contractual arrangements

Offshore PRC

100% (through offshore holding companies)

Onshore PRC

•
•
•
•

Loan Agreement
Exclusive Call Option Agreement
Proxy Agreement
Equity Pledge Agreement

Variable Interest
Entity Equity Holders
100%

WFOE

• Exclusive Technical Service Agreement

Variable Interest Entities

Fiscal Year 2023 Annual Report87Business Overview

For most of the VIEs, our group uses a different
structure, or the Enhanced VIE Structure. The Enhanced
VIE Structure maintains the primary legal frameworkthat we and many peer companies in our industry
have adopted to operate businesses in which foreign
investment is restricted or prohibited in the PRC.
Compared with the prior VIE structure adopted bymany peer companies in our industry, which uses
natural persons to serve as direct or indirect equity
holders of the VIE, we have designed the Enhanced VIE
Structure to:

•

•

88

reduce the key man and succession risks
associated with natural person VIE equity
holders, through a new structure that has widelydispersed interests among natural person
interest holders; andcreate a VIE ownership structure that is morestable and self‑sustaining, by distancing thenatural person interest holders with the VIEwith multiple layers of legal entities, including
a partnership structure and multiple layers ofcontractual arrangements.

Alibaba Group Holding Limited

VIE equity holders under the Enhanced VIE
Structure
Under the Enhanced VIE Structure, a VIE is typicallyheld by a PRC limited liability company, insteadof individuals. This PRC limited liability company
is directly or indirectly owned by two PRC limited
partnerships, each of which holds 50% of the equity
interest. Each of these partnerships is comprised of(i) a PRC limited liability company, as general partner(which is formed by a number of selected membersof the Alibaba Partnership and our management who
are PRC citizens), and (ii) the same group of natural
persons, as limited partners. Under the terms of therelevant partnership agreements, the natural person
limited partners must be members of the Alibaba
Partnership or our management who are PRC citizens
and as designated by the general partner of thepartnership. We may also create additional holding
structures in the future. For our representative VIEs,these individuals are Daniel Yong Zhang, Jessie
Junfang Zheng, Xiaofeng Shao, Zeming Wu andFang Jiang (with respect to each of Zhejiang Taobao
Network Co., Ltd., Zhejiang Tmall Network Co., Ltd.,
Hangzhou Alibaba Advertising Co., Ltd., Hangzhou Ali
Venture Capital Co., Ltd., Shanghai Rajax Information
Technology Co., Ltd. and Alibaba Cloud ComputingLtd.), and Jeff Jianfeng Zhang, Winnie Jia Wen, Jie Song,
Yongxin Fang and Li Cheng (with respect to Alibaba
Culture Entertainment Co., Ltd.). Because Li Cheng is
no longer a member of the Alibaba Partnership, weare in the process of replacing him. In addition, we arein the process of restructuring the VIEs and changing
these individuals as part of our Reorganization.

Business Overview

The following diagram is a simplified illustration of the typical ownership structure and contractual arrangementsof the VIEs under the Enhanced VIE Structure.
Legal ownership
Contractual arrangements

Our Company

Offshore PRC

100% (through offshore holding companies)

Onshore PRC
Individual Shareholders of G.P.(1)20%

PRC Limited Liability
Company Serving as
General Partner

20%

PRC Limited
Partnership

PRC Limited
Partnership

50%

Wholly-owned Entities

19.99998%

0.0001%19.99998%

Individual Limited
Partners(1)19.99998%

20%

19.99998%

20%

19.99998%

20%

50%

PRC Investment Holding Company(a PRC Limited Liability Company)
100%

Variable Interest Entities(1) Selected members of the Alibaba Partnership or our management who are PRC citizens.

Fiscal Year 2023 Annual Report89Business Overview

Under the Enhanced VIE Structure, the designatedsubsidiary, on the one hand, and the corresponding
VIE and the multiple layers of legal entities above the
VIE, as well as the natural persons described above, on
the other hand, enter into contractual arrangements,
which are substantially similar to the contractual
arrangements we have historically used for VIEs.
See “— Loan Agreements,” “— Exclusive Call Option
Agreements,” “— Proxy Agreements,” “— Equity Pledge
Agreements” and “— Exclusive Services Agreements”
below.
There are risks associated with the VIE structure in
general and the Enhanced VIE Structure. See “Risk
Factors — Risks Related to Our Corporate Structure.”
The following is a summary of our typical contractual
arrangements.

Loan Agreements
Pursuant to the relevant loan agreement, ourrespective subsidiary has granted a loan to therelevant VIE equity holders, which may only be used
for the purpose of its business operation activities
agreed by our subsidiary or the acquisition of therelevant VIE. Our subsidiary may require accelerationof repayment at its absolute discretion. When the
VIE equity holders make early repayment of theoutstanding amount, our subsidiary or a third‑party
designated by it may purchase the equity interestsin the VIE at a price equal to the outstanding amountof the loan, subject to any applicable PRC laws, rules
and regulations. The VIE equity holders undertake not
to enter into any prohibited transactions in relation
to the VIE, including the transfer of any business,material assets or equity interests in the VIE to any
third‑party. The parties to the loan agreement foreach of the representative VIEs are the relevant VIE
equity holders, on the one hand, and Taobao (China)
Software Co., Ltd., Zhejiang Tmall Technology Co.,
Ltd., Alibaba (China) Technology Co., Ltd., Alibaba(China) Co. Ltd., Rajax Network Technology (Shanghai)Co., Ltd., Zhejiang Alibaba Cloud Computing Ltd. andBeijing Youku Technology Co., Ltd., our corresponding
subsidiaries, on the other hand.

90

Alibaba Group Holding Limited

Exclusive Call Option Agreements
Under the Enhanced VIE Structure, each relevant VIE
and its equity holders have jointly granted our relevant
subsidiary (A) an exclusive call option to request therelevant VIE to decrease its registered capital at an
exercise price equal to the higher of (i) the paid‑inregistered capital in the relevant VIE and (ii) the
minimum price as permitted by applicable PRC law,or the capital decrease price, and (B) an exclusive
call option to subscribe for any increased capital of
relevant VIE at a price equal to the capital decreaseprice, or the sum of the capital decrease price andthe unpaid registered capital, if applicable, as of
the capital decrease. Our subsidiary may nominate
another entity or individual to purchase the equity
interest or assets, or to subscribe for the relevant
increased capital, if applicable, under the call options.
Execution of each call option shall not violate theapplicable PRC laws, rules and regulations. Each VIEequity holders has agreed that the following amounts,
to the extent in excess of the original registered capitalthat they contributed to the VIE (after deduction of
relevant tax expenses), belong to and shall be paid
to our relevant subsidiaries: (i) proceeds from thetransfer of its equity interests in the VIE, (ii) proceeds
received in connection with a capital decrease in the
VIE, and (iii) distributions or liquidation residuals fromthe disposal of its equity interests in the VIE upon
termination or liquidation. Moreover, any profits,
distributions or dividends (after deduction of relevant
tax expenses) received by the VIE equity holder also
belong to and shall be paid to our subsidiary. The
exclusive call option agreements remain in effect until
the equity interest or assets that are the subject ofthese agreements are transferred to our subsidiary.
The parties to the exclusive call option agreement foreach of the representative VIEs are the relevant VIE
equity holder, the relevant VIE and our corresponding
subsidiary.

Business Overview

Proxy Agreements
Pursuant to the relevant proxy agreement, each of
the VIE equity holders irrevocably authorizes any
person designated by our subsidiary to exercise therights of the equity holder of the VIE, including without
limitation the right to vote and appoint directors.
The parties to the proxy agreement for each of therepresentative VIEs are the relevant VIE equity holder,
the relevant VIE and our corresponding subsidiary.

Equity Pledge Agreements
Pursuant to the relevant equity pledge agreement, therelevant VIE equity holders have pledged all of theirinterests in the equity of the VIE as a continuing firstpriority security interest in favor of the corresponding
subsidiary to secure the outstanding amounts
advanced under the relevant loan agreements
described above and to secure the performanceof obligations by the VIE and/or its equity holders
under the other structure contracts. Each subsidiary isentitled to exercise its right to dispose of the VIE equity
holders’ pledged interests in the equity of the VIE andhas priority in receiving payment by the applicationof proceeds from the auction or sale of the pledged
interests, in the event of any breach or default under
the loan agreement or other structure contracts, if
applicable. These equity pledge agreements remain
in force until the later of (i) the full performance ofthe contractual arrangements by the relevant parties,and (ii) the full repayment of the loans made to therelevant VIE equity holders. The parties to the equity
pledge agreement for each of the representative VIEs
are the relevant VIE equity holder, the relevant VIE andour corresponding subsidiary.

Exclusive Services Agreements
Under the Enhanced VIE Structure, each relevant
VIE has entered into an exclusive service agreementwith the respective subsidiary, pursuant to which our
relevant subsidiary provides exclusive services to the
VIE. In exchange, the VIE pays a service fee to our
subsidiary, the amount of which shall be determined,
to the extent permitted by applicable PRC laws as
proposed by our subsidiary, resulting in a transferof substantially all of the profits from the VIE to our
subsidiary.

The exclusive call option agreements described above
also entitle our subsidiary to all profits, distributions ordividends (after deduction of relevant tax expenses) tobe received by the VIE equity holder, and the following
amounts, to the extent in excess of the originalregistered capital that they contributed to the VIE (after
deduction of relevant tax expenses) to be received byeach VIE equity holder: (i) proceeds from the transfer
of its equity interests in the VIE, (ii) proceeds received inconnection with a capital decrease in the VIE, and (iii)
distributions or liquidation residuals from the disposalof its equity interests in the VIE upon termination or
liquidation.
In the opinion of Fangda Partners, our PRC legal
counsel:••the ownership structures of the representative
VIEs in China and our corresponding subsidiaries
do not and will not violate any applicable PRC
law, regulation, or rule currently in effect; andthe contractual arrangements between the
representative VIEs, the VIE holders and ourcorresponding subsidiaries governed by PRC
laws are valid, binding and enforceable inaccordance with their terms and applicable PRC
laws, rules, and regulations currently in effect,
and will not violate any applicable PRC law,regulation, or rule currently in effect.

However, we have been further advised by our
PRC legal counsel, Fangda Partners, that there aresubstantial uncertainties regarding the interpretation
and application of current and future PRC laws, rules
and regulations. Accordingly, the possibility that the
PRC regulatory authorities and PRC courts may in the
future take a view that is contrary to the opinion of our
PRC legal counsel cannot be ruled out. We have beenfurther advised by our PRC legal counsel that if the PRC
government finds that the agreements that establish
the structure for operating our business do notcomply with PRC government restrictions on foreign
investment in the aforesaid business we engage in,we could be subject to severe penalties including
being prohibited from continuing operations. See “Risk
Factors — Risks Related to Our Corporate Structure.”

Fiscal Year 2023 Annual Report91Business Overview

DISCLOSURE REGARDINGFOREIGN JURISDICTIONSTHAT PREVENTINSPECTIONS(ii)

Zhejiang Yitong Digital TV Investment Co.,
Ltd. (“Zhejiang Yitong”), a subsidiary of a PRC
state-owned enterprise, which owns 1% of theregistered capital of Youku Film & Television Co.,
Ltd. (“Youku Film & Television”), a consolidated
entity under our Youku business; andOn December 16, 2021, the PCAOB issued a reportnotifying the SEC of its determination that it is unable
to inspect or investigate completely registered public
accounting firms headquartered in Chinese mainlandor Hong Kong, including our independent registeredpublic accounting firm, PricewaterhouseCoopers.

Wangtou Suicheng (Beijing) Technology Co.,
Ltd., also a subsidiary of a PRC state-owned
enterprise, which owns 1% of the registeredcapital of Guangzhou Lujiao Information
Technology Co., Ltd., a consolidated entity under
our UCWeb business.

On August 22, 2022, the SEC added Alibaba Group
Holding Limited to its conclusive list of issuers
identified under the HFCA Act, following the filing of
our annual report on Form 20-F for the fiscal year
ended March 31, 2022.

In addition, certain consolidated entities in our
sports-related business, which in aggregate
contributed to less than 0.05% of our total
revenue in the fiscal year ended March 31, 2023,
have minority governmental ownership.

On December 15, 2022, the PCAOB announced that
it was able to secure complete access to inspect
and investigate PCAOB-registered public accounting
firms headquartered in Chinese mainland and Hong
Kong in 2022.The PCAOB vacated its previous 2021
determinations that the PCAOB was unable to inspect
or investigate completely registered public accounting
firms headquartered in Chinese mainland andHong Kong. For this reason, we do not expect to be
identified as a Commission-Identified Issuer following
the filing of this annual report.

Our ADSs are listed and traded on the NYSE andour Shares are listed and traded on the Hong
Kong Stock Exchange. PRC governmental entities
or affiliated entities could acquire equity interests
in our company on the open market, but basedon public disclosure, no PRC governmental entity
has any significant shareholding in our company.
Except as disclosed above, no PRC governmental
entities own any shares of Alibaba Group
Holding Limited or any variable-interest entity orsimilarly structured entity that is consolidated in
our financial statements.

As of the date of this annual report and to our best
knowledge:(i)92

No Cayman Islands governmental entities own
any shares of Alibaba Group Holding Limited or
any variable-interest entity or similarly structured
entity that is consolidated in our financial
statements;

Alibaba Group Holding Limited

Certain consolidated entities under our digital
media and entertainment business have stateowned minority strategic investors, namely;(iii)

No Cayman Islands governmental entities or
PRC governmental entities have a controlling
financial interest in Alibaba Group Holding
Limited or any variable-interest entity or similarly
structured entity that is consolidated in our
financial statements; andBusiness Overview(iv)

None of the members of the board of directorsof Alibaba Group Holding Limited, our operating
entities or any variable interest entity or similarly
structured entity that is consolidated in our
financial statements is an official of the Chinese
Communist Party, except for the following:
Yang Yang, an external director of Youku Film &Television, who is also an executive of Zhejiang
Yitong; andBing Wu, an external director of Banma Network
Technology Co., Ltd. (“Banma”), which is amajority-owned consolidated entity engaged
in the development of smart car operating
systems. Mr. Wu is an executive of SAIC Motor andother state-owned enterprises. Banma is a joint
venture between us and SAIC Motor.

The currently effective memorandum and articles ofassociation of Alibaba Group Holding Limited and any
variable interest entity or similarly structured entitythat is consolidated in our financial statements do notcontain any charter of the Chinese Communist Party.

Property, Plant andEquipment
As of March 31, 2023, we occupied facilities aroundthe world with an aggregate gross floor area ofoffice buildings, logistics warehouses, retail space,data centers and other facilities owned by us
totaling approximately 23.7 million square meters,
reflecting the continuous expansion of our business.
We maintain offices in many countries and regions,
including Chinese mainland, Hong Kong S.A.R.,
Singapore and the United States. In addition, we
maintain data centers in a number of countries
including Chinese mainland, Hong Kong S.A.R.,
Indonesia, Malaysia, Thailand, India, Philippines,
Australia, Singapore, UAE, Germany, the UK, Japan,
South Korea and the United States.

Fiscal Year 2023 Annual Report

93

110

101

001

010

101

001

Management
Discussion
and Analysis

1
0
0
1
0
0101

Management Discussion and Analysis
Operating Results
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our audited consolidated financial
statements and the related notes included in thisannual report and in particular, “Business Overview.”
This discussion contains forward-looking statementsthat involve risks and uncertainties. Our actual
results and the timing of selected events could differ
materially from those anticipated in these forwardlooking statements as a result of various factors,
including those set forth under “Risk Factors” andelsewhere in this annual report. We have prepared
our consolidated financial statements in accordancewith U.S. GAAP. Our fiscal year ends on March 31 andreferences to fiscal years 2021, 2022 and 2023 are to
the fiscal years ended March 31, 2021, 2022 and 2023,
respectively.

Overview
Our total revenue increased by 19% from RMB717,289
million in fiscal year 2021 to RMB853,062 million
in fiscal year 2022, and further increased by 2% to
RMB868,687 million (US$126,491 million) in fiscal
year 2023. Our net income decreased by 67% fromRMB143,284 million in fiscal year 2021 to RMB47,079
million in fiscal year 2022, and increased by 39% to
RMB65,573 million (US$9,548 million) in fiscal year2023.
Our non-GAAP net income, which excludes the effectof share-based compensation expense, amortizationand impairment of intangible assets, impairment ofinvestments and goodwill, gain or loss on deemed
disposals/disposals/revaluation of investments
and certain other items, as adjusted for tax effects,
decreased by 21% from RMB171,985 million in fiscal
year 2021 to RMB136,388 million in fiscal year 2022.
Non-GAAP net income increased by 4% to RMB141,379
million (US$20,586 million) in fiscal year 2023. For
further information on non-GAAP financial measures
we use in evaluating our operating results and forfinancial and operational decision-making purposes,
see “— Non-GAAP Measures.”Our Operating Segments
We organize and report our business in seven
operating segments:

•
•
•
•
•
•
•

Alibaba Group Holding Limited

International commerce;
Local consumer services;
Cainiao;
Cloud;
Digital media and entertainment; andInnovation initiatives and others.

This presentation reflects how we manage ourbusiness to maximize efficiency in allocating
resources. This presentation also provides furthertransparency to our various businesses that are
executing different phases of growth and operating
leverage trajectories.
We present segment information after eliminationof inter-company transactions. In general, revenue,
cost of revenue and operating expenses are directly
attributable, or are allocated, to each segment. We
allocate costs and expenses that are not directly
attributable to individual segments, such as thosethat support infrastructure across different operating
segments, to different operating segments mainly on
the basis of usage, revenue or headcount, dependingon the nature of the relevant costs and expenses.
In discussing the operating results of these sevensegments, we present each segment’s revenue,
income from operations and adjusted earnings before
interest, taxes and amortization, or adjusted EBITA.
Our reported segments are described below:

•

•

96

China commerce;

China commerce. China commerce segment
mainly includes our China commerce retailbusinesses such as Taobao, Tmall, Taobao
Deals, Taocaicai, Freshippo, Tmall Supermarket,
Sun Art, Tmall Global and Alibaba Health, as wellas wholesale business including 1688.com.
International commerce. Internationalcommerce segment mainly includes ourinternational commerce retail and wholesale
businesses such as Lazada, AliExpress, Trendyol,
Daraz and Alibaba.com.

Management Discussion and Analysis

•
•
•
•

Local consumer services. Local consumer
services segment mainly includes location-based
businesses, such as Ele.me, Amap, Fliggy andKoubei.
Cainiao. Cainiao segment mainly includes ourdomestic and international one-stop-shop
logistics services and supply chain management
solutions.

Youku, Quark, Alibaba Pictures and other content
and distribution platforms, as well as our online
games business.

•

Innovation initiatives and others. Innovation
initiatives and others segment includes
businesses such as DAMO Academy, Tmall Genieand others. Other revenue also includes annual
fees received from Ant Group or its affiliates
in relation to the SME loans business that wetransferred to Ant Group in February 2015. Thisannual fee is payable for seven years starting in
2015, and has ended in December 2021.

Cloud. Cloud segment is comprised of Alibaba
Cloud and DingTalk.
Digital media and entertainment. Digital media
and entertainment segment is comprised of

We are in the process of implementing a new organizational and governance structure. Under the new structure,
we are the holding company of six major business groups and various other businesses. The six major businessgroups are Cloud Intelligence Group, Taobao and Tmall Group, Local Services Group, Alibaba International
Digital Commerce Group, Cainiao Smart Logistics Network Limited and Digital Media and Entertainment Group.
Accordingly, we expect in the future we will update our segment reporting to reflect the new reporting structurethat will be reviewed by our chief operating decision maker.
The table below sets forth supplemental financial information of our reported segments for fiscal year 2023:
Year ended March 31, 2023
China Internationalcommerce(1) commerce
RMB

RMB

Local
consumer
services(1)Cainiao

RMB

RMB

DigitalInnovation
media and initiatives andCloud entertainment
others Unallocated(2)Consolidated

RMB

RMB

RMB

RMB

RMB

US$

(in millions, except percentages)
Revenue

582,731

69,204

50,112

55,681

77,20331,482

2,274—

868,687

126,491

Income (Loss) from operations

172,191(8,429)(23,302)(3,622)(5,151)(4,638)(9,409)(17,289)

100,351

14,612

Add: Share-based
compensation expense

7,969

2,716

3,672

2,218

6,561

1,756

1,658

4,281

30,831

4,489

Add: Amortization andimpairment ofintangible assets

4,702

93

5,609

1,013

12

1,008

844

223

13,504

1,967

Add: Impairment of goodwill

—

—

—

—

—

—

—

2,714

2,714

395

Add: Equity-settled donation
expense

—

—

—

—

—

—

—

511

511

75

184,862(5,620)(14,021)

(391)

1,422

(1,874)(6,907)(9,560)147,911

21,538

32%

(8)%

(28)%

(1)%

2%

(6)%

(304)%

N/A

17%

Adjusted EBITA
Adjusted EBITA margin(1) Beginning on October 1, 2022, we reclassified the results of our Instant Supermarket Delivery (全能超市) business, which waspreviously reported under China commerce segment, to Local consumer services segment following the strategy refinementof Instant Supermarket Delivery business to focus on building customer mindshare for grocery delivery services through Ele.me
platform. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures werereclassified to conform to this presentation.
(2) Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocated toindividual segments. The goodwill impairment, and the equity-settled donation expense related to the allotment of shares to acharitable trust, are presented as unallocated items in the segment information because our management does not consider theseas part of the segment operating performance measure.

Fiscal Year 2023 Annual Report97Management Discussion and Analysis

Our Monetization Model
Our marketplaces and businesses are highly
synergetic, which create an ecosystem that enables
consumers, merchants, brands, retailers, otherbusinesses, third party service providers and strategic
partners to interconnect and interact with each other.
We leverage our leading technologies to provide
various value propositions to participants in our
ecosystem and realize monetization by offering
different services and creating value under each of ourbusiness segments.
We derive majority of our revenue from our China
commerce segment, which accounted for 70%, 69%
and 67% of our total revenue in fiscal years 2021, 2022
and 2023, respectively, while International commerce
segment, Local consumer services segment, Cainiao
segment, Cloud segment, Digital media andentertainment segment, and Innovation initiatives

and others segment contributed in aggregate 30%,
31% and 33% in fiscal years 2021, 2022 and 2023,
respectively.
Our monetization and profit model primarily consistsof the following elements:

China Commerce
China Commerce RetailWe generate revenue from merchants by leveraging
our consumer insights and data technologies whichenable brands and merchants to attract, engage
and retain consumers, complete transactions,improve their branding, enhance operating efficiency,
and offer various services. On the consumer side,
leveraging these insights and technologies, as wellas our supply chain capabilities, we also generate
revenue from product sales for our direct sales
businesses.

The revenue of our China commerce retail business primarily consists of customer management revenue anddirect sales and other revenue. The following table sets forth the revenue from our China commerce retailbusiness, in absolute amounts and as percentages of our total revenue, for the fiscal years presented:
Year ended March 31,
2021
RMB

2023

2022
% of
revenue

RMB% ofrevenue

RMB

US$

% of
revenue(in millions, except percentages)
China commerce retailCustomer management

304,54343%

315,03837%

290,378

42,28233%

Direct sales and others

182,51425%

259,830

30%

274,954

40,03732%

487,05768%

574,86867%

565,332

82,31965%(1) (2)

Total(1) Beginning on October 1, 2022, we reclassified the revenue of our Instant Supermarket Delivery (全能超市) business, which waspreviously reported under China commerce segment, as revenue from Local consumer services segment following the strategy
refinement of Instant Supermarket Delivery business to focus on building customer mindshare for grocery delivery services throughEle.me platform. This reclassification conforms to the way that we manage and monitor segment performance. Comparative
figures were reclassified to conform to this presentation.
(2) Direct sales and others revenue under China commerce retail businesses primarily represents our direct sales businesses,
comprising mainly Sun Art, Tmall Supermarket, Freshippo, and Alibaba Health’s direct sales businesses where revenue and thecost of inventory are recorded on a gross basis.

98

Alibaba Group Holding Limited

Management Discussion and Analysis

Customer management
We derive a majority of our China commerce retailrevenue from customer management, which primarily
consists of:

•

•

•

•

to offer marketing services to our merchants.
Taobaokes display the marketing informationof our merchants on their media. We generate
revenue from the commissions paid bymerchants based on a percentage of transaction
value generated from users under the Taobaoke
program.

P4P marketing services, where merchants primarily
bid for keywords that match product or service
listings appearing in search results through ouronline auction system on a cost-per-click (CPC)basis. We provide these services directly on ourmarketplaces or through collaboration with thirdparty affiliates.

Direct sales and others

In-feed marketing services, where merchants
primarily bid to market to groups of consumers
with similar profiles that match product or service
listings appearing in browser results throughour online auction system on a CPC or cost-perthousand impression (CPM) basis. We provide
these services directly on our marketplaces or
through collaboration with third-party affiliates.

China Commerce Wholesale

Commissions on transactions, where merchants
pay a commission based on a percentageof transaction value generated on Tmall andcertain other marketplaces. The commission
percentages on Tmall typically range from 0.3%
to 5.0% depending on the product category.
Taobaoke program, where we collaborate withshopping guide platforms, medium- and smallsized websites and mobile apps, individuals
and other third parties, collectively “Taobaokes,”

Direct sales and other revenue from our China
commerce retail businesses is primarily generated byour direct sales businesses, comprising mainly Sun Art,
Tmall Supermarket, Freshippo, and Alibaba Health’s
direct sales businesses and primarily consists ofrevenue from product sales.

We generate revenue from our China commercewholesale business primarily through membershipfees, value-added services and customer
management services. Revenue from membershipfees are primarily fixed annual fees from the sale of
China TrustPass memberships for paying members
to reach customers, provide quotations and transact.
Paying members may also purchase premium
memberships and additional value-added services,such as premium data analytics and upgradedstorefront management tools, the prices of which
are determined based on the types and duration of
the value-added services. Revenue from customer
management services is primarily derived from P4P
marketing services.

Fiscal Year 2023 Annual Report99Management Discussion and Analysis

International Commerce
International Commerce RetailWe generate revenue from our Internationalcommerce retail businesses primarily through logistics
services, direct sales, commissions on transactions
and P4P marketing services. We generate logistics
services and direct sales revenue primarily from
Lazada, Trendyol and AliExpress. Our revenue fromcommission is mainly contributed by transactions on
AliExpress, where merchants typically pay 5% to 8%of the transaction value, and Trendyol. In addition,
we generate revenue from P4P marketing services,primarily from AliExpress and Lazada’s organic traffic
and its collaboration with third-party websites andmobile apps.
International Commerce Wholesale
We generate revenue from our International
wholesale commerce businesses primarily throughmembership fees, value-added services and customer
management services. Revenue from membershipfees are primarily fixed annual fees from the sale ofGold Supplier memberships for paying members toreach customers, provide quotations and transact.
Revenue from value-added services primarily
consists of fees for services such as trade assurance
services, the prices of which are determined basedon the types, usage and duration of the value-added
services. Revenue from customer management
services is primarily derived from P4P marketing
services.

FMCG, flowers and pharmaceutical products, formerchants and customers through Fengniao Logistics,
Ele.me’s on-demand delivery network.
In addition, our “To-destination” businesses mainly
generate revenue from Amap and Fliggy. Amap
primarily charges a software service fee andtechnology service fee to enterprise customers.
Revenue from Fliggy consists of commission fees paidby merchants based on a percentage of transaction
value generated on Fliggy.

Cainiao
We generate revenue from Cainiao business primarily
through supply chain and logistics services. For
International and domestic merchants, Cainiao
provides end-to-end supply chain solution andlogistics services, and charge fees based on thenumber of logistics orders fulfilled. In addition, Cainiao
generates revenue from providing value-added
services to consumers and third-party logistics service
providers, such as technology services, logistics
services and community-based services.

Cloud
Our Cloud businesses primarily generate revenue fromthe provision of public cloud services and hybrid cloudservices to our domestic and international enterprisecustomers:•

Local Consumer Services
We generate revenue from Local consumer services
primarily through platform commissions andon-demand delivery services by our “To-home”
business. Our revenue from platform commissions
is mainly contributed by transactions on Ele.me,
where merchants pay a commission based on apercentage of the transaction value. The commission
percentages vary depending on product category. We
also generate revenue through on-demand delivery
services, including delivery of meals, food, groceries,

100

Alibaba Group Holding Limited•

Public cloud services, where we generate
revenue from a wide range of cloud services,
including, among others, elastic computing,storage, network, database, big data, security
and proprietary servers. Enterprise customers
can pay for these services on a consumption or
subscription basis, such as on-demand deliveryof computing services and storage capacities.
Hybrid cloud services, where we generate
revenue through packaged cloud services,
including hardware, software license, software
installation service, application development andmaintenance service, based on the customized
needs of enterprise customers.

Management Discussion and Analysis

Digital Media and Entertainment
Revenue from Digital media and entertainment
business is primarily comprised of membershipsubscription fees, self-developed online games
revenue and customer management revenue.
Membership subscription fees are mainly generated
from paying subscribers. Revenue from self-developed
online games business is mainly attributable to thesales of in-game virtual items. Customer management
revenue is generally generated from businesses andadvertising agencies and the monetization model issubstantially similar to the customer management
revenue for our China commerce retail business.

our Taobao app and entertainment content on
Youku. Consumers enjoy an engaging social
experience by interacting with each otherand with merchants, brands and KOLs on ourplatforms. We leverage our consumer insights tofurther optimize the relevance of this rich content
we provide to our users. The engagement ofconsumers in our ecosystem is affected by ourability to continue to enhance and expand our
product and service offerings and improve user
experience.

•

Innovation Initiatives and Others
Tmall Genie primarily generates revenue fromproduct sales. Other revenue includes annual fees
received from Ant Group or its affiliates in relation
to the SME loans business that we transferred to Ant
Group in February 2015. This annual fee is payablefor seven years starting in 2015, and has ended in
December 2021. See “Major Shareholders and Related
Party Transactions — Related Party Transactions —Agreements and Transactions Related to Ant Groupand Its Subsidiaries.”

Factors Affecting Our Results ofOperations
Our Ability to Create Value for Our Users andGenerate Revenue. Our ability to create value for ourusers and generate revenue is driven by the factors
described below:•

Number and engagement of consumers.
Consumers are attracted to our platforms by
the breadth of curated products and services,personalized content and the interactive user
experience these platforms offer. Our platforms
include a comprehensive selection of productand service offerings as well as engaging
content, such as recommendation feeds on•

Broader value offered to merchants, brands,
retailers and other businesses. Merchants,
brands, retailers and other businesses use
our products and services to help them reach,acquire and retain customers, build brandawareness and engagement, complete
transactions, and enhance their operating
efficiency. We offer merchants and retailers acomplete suite of services and tools, powered byour consumer insights, to help them effectively
engage consumers, efficiently manage theiroperations and provide a seamless online andoffline consumer experience. With our proprietarydata and technologies, we also facilitate thedigital transformation of traditional merchants
and retailers. In addition, we empowerbusinesses of different sizes across various
industries through our comprehensive enterprisecloud service offerings.
Empowering data and technology. Our ability
to engage consumers and empower merchants,
brands, retailers and other businesses isaffected by the breadth and depth of ourconsumer insights, such as the accuracy of our
shopping recommendations and of our targetedmarketing, and our technology capabilities andinfrastructure, such as cloud computing, and ourcontinued ability to develop scalable products
and services that adapt to the quickly evolving
industry trends and consumer preferences.

Fiscal Year 2023 Annual Report101Management Discussion and Analysis

Operating Leverage of Our Business Model. Our
primary business model has significant operating
leverage and our ecosystem enables us to realize
structural cost savings. For example, Taobao
drives significant traffic to Tmall as Tmall productlistings also appear on Taobao search result pages.
Furthermore, the large number of consumers
on our marketplaces attracts a large number ofmerchants, who become customers for our customer
management and storefront services. In addition, thevast consumer base of our ecosystem presents crossselling opportunities across our various platforms.
For example, we can offer consumer services, suchas Ele.me, and promote our digital media andentertainment services, including Youku, to consumers
on our marketplaces. These network effects allow forlower traffic acquisition costs and provide synergies
across our businesses.
Our Investment in User Base, Technology, People,
Infrastructure, and Innovative Business Model. We
have made, and will continue to make, significant
investments in our platforms and ecosystem toattract consumers and merchants, enhance user
experience and expand the capabilities and scopeof our platforms. We expect our investments will
include expanding our China and international
offerings, implementing our local consumer service
businesses, strengthening our logistics and fulfillment
capabilities, enhancing our Cloud business, investingin content and user acquisition to further develop our
digital media and entertainment business, cultivating
innovation initiatives and new technologies as well as
executing our globalization strategy. Our operating
leverage and profitability enable us to continue toinvest in our people, particularly engineers, scientists
and product management personnel, as well as inour technology capabilities and infrastructure. Ourinvestment in the above-mentioned new and existing
businesses has and will continue to lower our margins
but we believe the investment will deliver overall longterm growth.

102

Alibaba Group Holding Limited

Strategic Investments and Acquisitions. We have
made, and intend to make, strategic investments
and acquisitions. Our investment and acquisition
strategy is focused on strengthening our ecosystem,
creating strategic synergies across our businesses,
and enhancing our overall value. Our strategic
investments and acquisitions may adversely affectour future financial results, including our margins andour net income, at least in the short term. In addition,some of our acquisitions and investments may not
be successful. We have incurred impairment charges
in the past and may incur impairment charges in the
future.

Recent Investment, Acquisition andStrategic Alliance Activities
In addition to organic growth, we have made, or
have entered into agreements to make, strategic
investments, acquisitions and alliances that are
intended to further our strategic objectives. The
financial results for these strategic transactions
that were completed are reflected in our operating
results beginning with the period of their respective
completion. Investments in which we did not obtain
control are generally accounted for under the equity
method if we have significant influence over theinvestee through investment in common stock or
in-substance common stock. Otherwise, investments
are generally carried at fair value with unrealized
gains and losses recorded in the consolidated income
statements or accounted for using the measurement
alternative based on our accounting policies overdifferent categories of investments. For the detailsof our accounting policies for each category of ourinvestments, see notes 2(d), 2(t) and 2(u) to our
audited consolidated financial statements included inthis annual report.

Management Discussion and Analysis

We have developed focused investment strategies,
targeting to invest, acquire or form alliances that will
either complement our existing businesses or drive
innovation initiatives. In some cases, we may take a
staged approach to our investment and acquisition
strategy, by beginning with an initial minority
investment followed by business cooperation. Whenthe business results, cooperation and the overall
relationship established with the management of
the investee company show increasing value toour ongoing business strategy, we may increase
our investment or acquire the investee company
completely.
We have funded our strategic acquisitions andinvestments primarily from cash generated from ouroperations and through debt and equity financing.
Our debt financing primarily consists of unsecured
senior notes and bank borrowings, including an
aggregate of US$8.0 billion unsecured senior notes
issued in November 2014, of which US$5.05 billion
was repaid in 2017, 2019 and 2021, an aggregateof US$7.0 billion unsecured senior notes issued in
December 2017, of which US$0.7 billion was repaid in
June 2023, an aggregate of US$5.0 billion unsecured
senior notes issued in February 2021, a five-year
term loan facility of US$4.0 billion drawn down infiscal year 2017, the maturity of which has been
extended to May 2024 in May 2019 and has beenfurther extended to May 2028 in July 2023, as well
as a US$6.5 billion revolving credit facility which wehave not yet drawn. Going forward, we expect to fundadditional investments through cash generated fromour operations and through debt and equity financing
when opportunities arise in the future. Although
we expect our margins to be negatively affectedby acquisitions of target companies with lower or
negative margins, we do not expect our investment
activities to have any significant negative impact
on our liquidity or operations. We believe acquired
businesses operating at a loss do not detract fromour total value because they bring clear strategic

value to us in the long run. However, there can be noassurance that our future financial results would not
be materially and adversely affected if our strategic
investments and acquisitions are not successful. See“Risk Factors — Risks Related to Our Business andIndustry — Sustained investment in our businesses andour focus on long-term performance and maintaining
the health of our ecosystem may negatively affectour margins and our net income” and “Risk Factors —Risks Related to Our Business and Industry — We facerisks relating to our acquisitions, investments andalliances.”
We did not have significant strategic investment
or acquisition (excluding equity transactions in
subsidiaries) in fiscal year 2023 and the period
through the date of this annual report.

Intangible Assets and Goodwill
When we make an acquisition, consideration thatexceeds the acquisition date amounts of the acquired
assets and liabilities is allocated to intangible assets
and goodwill. We have and will continue to incuramortization expenses as we amortize intangible
assets over their estimated useful life on a straight-line
basis. We do not amortize goodwill. We test intangible
assets and goodwill periodically or whenevernecessary for impairment, and any impairment may
materially and adversely affect our financial condition
and results of operations. Some of our acquisitions
and investments may not be successful, and we may
incur impairment charges in the future. We recognized
an impairment of goodwill of RMB25,141 million and
RMB2,714 million (US$395 million) in fiscal year 2022
and 2023 respectively, in relation to Digital media andentertainment segment. For additional information,
see “— Critical Accounting Policies and Estimates —Impairment Assessment on Goodwill and Intangible
Assets” and “Risk Factors — Risks Related to Our
Business and Industry — We face risks relating to ouracquisitions, investments and alliances.”

Fiscal Year 2023 Annual Report103Management Discussion and Analysis

Components of Results of Operations
Revenue
The following table sets forth the principal components of our revenue for the periods indicated:Year ended March 31,
2021
RMB

2023

2022
% of
revenue

RMB% ofrevenue

RMB

US$

% of
revenue(in millions, except percentages)
China commerce:
China commerce retail(1)487,05768%

574,86867%

565,332

82,31965%

China commerce wholesale

14,322

2%

16,712

2%

17,3992,533

2%501,37970%

591,58069%

582,73184,852

67%

34,455

5%42,6685%49,8737,262

6%International commerce  wholesale

14,3962%

18,4102%

19,331

2,815

2%

Total International commerce

48,851

7%

61,078

7%

69,204

10,077

8%

Local consumer services(1)35,746

5%

44,616

5%

50,112

7,297

6%Cainiao

37,258

5%

46,107

5%

55,681

8,108

6%

Cloud

60,558

8%74,568

9%77,203

11,242

9%

Digital media and entertainment

31,186

4%

32,272

4%

31,4824,584

4%Innovation initiatives and others

2,311

1%

2,841

1%

2,274

331

0%

717,289100%

853,062100%

868,687

126,491

100%

Total China commerce
International commerce:International commerce retail

Total(1) Beginning on October 1, 2022, we reclassified the revenue of our Instant Supermarket Delivery (全能超市) business, which waspreviously reported under China commerce segment, as revenue from Local consumer services segment following the strategy
refinement of Instant Supermarket Delivery business to focus on building customer mindshare for grocery delivery services throughEle.me platform. This reclassification conforms to the way that we manage and monitor segment performance. Comparative
figures were reclassified to conform to this presentation.

We generate most of our revenue from our China
commerce segment. We also earn revenue fromservices associated with our International commerce
segment, Local consumer services segment,
Cainiao segment, Cloud segment, Digital media
and entertainment segment as well as Innovation
initiatives and others segment. A substantial majorityof our revenue is attributable to our businesses in
China. See “— Our Monetization Model” for additional
information regarding our revenue.

Cost of Revenue
The principal components of our cost of revenue
include: cost of inventories; logistics costs; expenses

104

Alibaba Group Holding Limited

associated with the operation of our mobile platforms
and websites, such as depreciation and maintenanceexpenses for our servers and computers, call centersand other equipment, as well as bandwidth and colocation fees; salaries, bonuses, benefits and sharebased compensation expense relating to customer
service, mobile platform and platform operation
personnel as well as payment processing consultants;
traffic acquisition costs paid to third-party marketing
affiliates either at a fixed price or on a revenuesharing basis; content acquisition costs paid to third
parties and production costs of original content forour online media properties; payment processing fees
paid to Alipay or other financial institutions; and othermiscellaneous costs.

Management Discussion and Analysis

Product Development Expenses

Interest Expense

Product development expenses primarily
include salaries, bonuses, benefits and sharebased compensation expense for research anddevelopment personnel and other expenses thatare directly attributable to the development of newtechnologies and products for our businesses, suchas the development of the Internet infrastructure,applications, operating systems, software, databases
and networks.

Our interest expense is comprised of interest payments
and amortization of upfront fees and incidental
charges primarily associated with our US$8.0 billion
unsecured senior notes issued in November 2014, of
which US$5.05 billion was repaid in 2017, 2019 and
2021, the US$4.0 billion five-year term loan facility
drawn down in fiscal year 2017 and extended in 2023,
an aggregate of US$7.0 billion unsecured senior notes
issued in December 2017, of which US$700 million was
repaid in June 2023, as well as an aggregate of US$5.0
billion unsecured senior notes issued in February 2021.
In addition, we have a US$6.5 billion revolving credit
facility, which we have not yet drawn as of the date ofthis annual report.

Sales and Marketing Expenses
Sales and marketing expenses primarily consist of
online and offline advertising expenses, promotion
expenses, salaries, bonuses, benefits and sharebased compensation expense for our employees
engaged in sales and marketing functions, andsales commissions paid for membership and user
acquisition for our marketplaces and platforms.

General and Administrative Expenses
General and administrative expenses mainly consistof salaries, bonuses, benefits and share-based
compensation expense for our management andadministrative employees, office facilities and othersupport overhead costs, professional services fees,
provision for doubtful debts on receivables, charitable
contributions, as well as non-recurring items, such asa fine imposed pursuant to China’s Anti-monopoly
Law (the “Anti-monopoly Fine”) in fiscal year 2021.

Other Income, Net
Other income, net, primarily consists of input VAT
super-credit, exchange gain or loss and government
grants. Exchange gain or loss, arising from ouroperations and treasury management activities,
recognized in our income statement is largely affectedby exchange rate fluctuation among Renminbi, U.S.
dollar and Turkish lira. Government grants primarily
relate to grants by central and local governments
in connection with our contributions to technology
development and investments in local business
districts. These grants may not be recurring in nature,
and we recognize the income when the grants arereceived and no further conditions need to be met.

Interest and Investment Income, Net
Interest and investment income, net mainly consistsof interest income, gain or loss on deemed disposals,disposals and revaluation of our long-term equity
investments and impairment of equity investments.
In fiscal year 2021, we recognized a gain of RMB6.4
billion arising from the revaluation of our previously
held equity interest in Sun Art upon our consolidationin October 2020.

Fiscal Year 2023 Annual Report105Management Discussion and Analysis

Income Tax Expenses
Our income tax expenses are comprised primarily of
current tax expense, mainly attributable to certain
profitable subsidiaries in China, and deferred tax
expense, mainly including deferred tax recognized
for temporary differences in relation to investments,
share-based awards and withholding tax on dividends
to be distributed by our PRC operating subsidiaries.

Taxation
Cayman Islands Tax
Under Cayman Islands law, our company is not subject
to income, corporation or capital gains tax, and nowithholding tax is imposed upon the payment ofdividends.

Hong Kong Profits Tax
Our company’s subsidiaries incorporated in Hong
Kong were subject to Hong Kong profits tax at a rate of
16.5% in fiscal years 2021, 2022 and 2023.

PRC Income Tax
Under the EIT Law, the standard enterprise income tax
rate is 25%.
Entities qualifying as High and New Technology
Enterprises enjoy a preferential tax rate of 15%.
Entities recognized as Software Enterprises are exempt
from the EIT for two years beginning from their firstprofitable calendar year and are entitled to a 50%
reduction in EIT for the following three consecutive
calendar years. Furthermore, entities recognized as
Key Software Enterprises within the PRC national plan
enjoy a preferential EIT rate of 10%.
Certain subsidiaries received the above preferential
tax treatments during calendar years 2020, 2021,
2022 and 2023. Four of our subsidiaries in China,
Alibaba (China) Technology Co., Ltd., Taobao (China)
Software Co., Ltd., Zhejiang Tmall Technology Co., Ltd.,and Alibaba (China) Co., Ltd, which are our whollyowned entities primarily involved in the operationsof wholesale marketplaces, Taobao, Tmall, andtechnology, software research and development

106

Alibaba Group Holding Limited

and relevant services, respectively, were recognizedas Key Software Enterprises in calendar year of 2019
and they were subject to an EIT rate of 10%. Anotherone of our subsidiaries in China, Alibaba (Beijing)
Software Services Co., Ltd., which is our whollyowned entity primarily engaged in the operationsof technology, software research and development
and relevant services, was recognized as a SoftwareEnterprise and was thereby entitled to an income
tax exemption for two years beginning from its firstprofitable calendar year 2017, and a 50% reduction in
the standard statutory rate for the subsequent threeconsecutive years starting from the calendar year
2019. In the calendar year 2019, Alibaba (Beijing)
Software Services Co., Ltd. was recognized as a Key
Software Enterprise and therefore an EIT rate of 10%
was applicable.
Key Software Enterprise (KSE) status is subject toreview by the relevant authorities every year andthe timing of annual review and notification by therelevant authorities may vary from year to year. The
related reduction in tax expense as a result of official
notification confirming KSE status is accounted forupon receipt of such notification. For the calendar
years of 2020, 2021 and 2022, Alibaba (China)
Technology Co., Ltd., Taobao (China) Software Co.,
Ltd., Zhejiang Tmall Technology Co., Ltd., and Alibaba(China) Co., Ltd. did not obtain the KSE status andtherefore applied an EIT rate of 15% as High and New
Technology Enterprises and Alibaba (Beijing) Software
Services Co., Ltd. applied an EIT rate of 12.5% (50%reduction in the standard statutory rate) as a SoftwareEnterprise for the calendar years of 2020 and 2021
and applied an EIT rate of 15% as High and New
Technology Enterprise for the calendar year of 2022.

VAT and Other Levies
Our major PRC subsidiaries are subject to VAT onrevenue earned for our services under a national VAT
reform program. In general, the applicable VAT rate on
the revenue earned for services is 6% with companies
entitled to crediting VAT paid on certain purchases
against VAT on sales. Revenue is recognized net of VAT
in our consolidated income statement.

Management Discussion and Analysis

PRC Withholding Tax

Share-based Compensation

Pursuant to the EIT Law, a 10% withholding tax is
generally levied on dividends declared by companies
in China to their non-resident enterprise investors.
A lower withholding tax rate of 5% is applicable fordirect foreign investors incorporated in Hong Kong
with at least 25% equity interest in the PRC company
and meeting the relevant conditions or requirements
pursuant to the tax arrangement between Chinese
mainland and Hong Kong S.A.R. As the equity holdersof our PRC operating subsidiaries are qualified Hong
Kong incorporated companies, our deferred tax
liabilities for distributable earnings are calculated at
a 5% withholding tax rate. As of March 31, 2023, wehave accrued the withholding tax on substantially allof the earnings distributable by our subsidiaries in
China, except for those being reserved for permanent
reinvestment in China of RMB233.6 billion (US$34.0
billion).

Our equity incentive plans provide the granting ofshare-based awards to eligible grantees. We believe
share-based awards are vital to attract, incentivize
and retain our employees and are the appropriate tool
to align the interests of the grantees with those of ourshareholders. See “Directors, Senior Management and
Employees — Compensation.”
In addition, Junhan and Ant Group have granted
share-based awards to our employees, and theawards will be settled by Junhan or Ant Group
respectively. See “Major Shareholders and Related
Party Transactions — Related Party Transactions —Agreements and Transactions Related to Ant Groupand Its Subsidiaries — Our Commercial Arrangementswith Ant Group and Alipay — Share-based Award
Arrangements.”
We recognized share-based compensation expense of
RMB50,120 million, RMB23,971 million and RMB30,831
million (US$4,489 million) in fiscal years 2021, 2022
and 2023, respectively, representing 7%, 3% and 4% of
our revenue in those respective periods.

The following table sets forth an analysis of share-based compensation expense by function for the periods
indicated:Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions)
Cost of revenue

11,224

5,725

5,710

831

Product development expenses

21,474

11,035

13,514

1,968

Sales and marketing expenses

5,323

3,050

3,710

540

General and administrative expenses

12,099

4,161

7,897

1,150

Total

50,12023,97130,831

4,489

Fiscal Year 2023 Annual Report107Management Discussion and Analysis

The following table sets forth an analysis of share-based compensation expense by type of awards:
Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions)Alibaba Group share-based awards
Ant Group share-based awards
Others

(1)

(2)

(3)

Total

29,31730,576

24,9003,626

17,315(11,585)

668

97

3,488

4,980

5,263

766

50,12023,97130,831

4,489(1) This represents Alibaba Group share-based awards granted to our employees.
(2) This represents Ant Group share-based awards granted to our employees, which is subject to mark-to-market accounting
treatment.
(3) This represents share-based awards of our subsidiaries.

Share-based compensation expense increased infiscal year 2023 as compared to fiscal year 2022,
primarily because the share-based compensation
expense related to Ant Group share-based awards
was a net reversal in fiscal year 2022 as a result of therecognition of a decrease in the value of such awards.
The increase was partially offset by the decreasein the share-based compensation expense related
to Alibaba Group share-based awards due to thegeneral decrease in the average fair market value ofthe awards granted by Alibaba Group.

We expect that our share-based compensation
expense will continue to be affected by changes
in the fair value of the underlying awards and thequantity of awards we grant in the future. See “—Critical Accounting Policies and Estimates — Sharebased Compensation Expense and Valuation of theUnderlying Awards” below for additional information
regarding our share-based compensation expense.

Results of Operations
The following tables set out our consolidated results of operations for the periods indicated:Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions, except per share data)
Revenue
China commerce

501,379

591,580

582,73184,852

International commerce

48,851

61,07869,204

10,077

Local consumer services

35,74644,61650,112

7,297

Cainiao

37,258

46,10755,681

8,108

Cloud

60,55874,56877,203

11,242

Digital media and entertainment

31,18632,272

31,482

4,584

Innovation initiatives and others

2,311

2,841

2,274

331

717,289

853,062

868,687

126,491

Total

108

Alibaba Group Holding Limited

Management Discussion and Analysis

Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions, except per share data)
Cost of revenue(421,205)(539,450)(549,695)(80,042)

Product development expenses(57,236)(55,465)(56,744)(8,263)

Sales and marketing expenses(81,519)(119,799)(103,496)(15,070)

General and administrative expenses(55,224)(31,922)(42,183)(6,142)

Amortization and impairment of intangible assets(12,427)(11,647)(13,504)(1,967)

Impairment of goodwill—(25,141)(2,714)(395)

Income from operations

89,67869,638100,351

14,612

Interest and investment income, net

72,794(15,702)(11,071)(1,612)

Interest expense(4,476)(4,909)(5,918)(862)

Other income, net

7,582

10,523

5,823

848

Income before income tax and share of results ofequity method investees

165,578

59,55089,185

12,986

Income tax expenses(29,278)(26,815)(15,549)(2,264)

6,984

14,344(8,063)(1,174)

143,284

47,07965,573

9,548

7,294

15,170

7,210

1,050

150,578

62,24972,783

10,598

(270)

(290)

(274)

(40)

150,308

61,95972,50910,558

Basic

6.95

2.87

3.46

0.50

Diluted

6.84

2.84

3.43

0.50

Basic

55.63

22.99

27.65

4.03

Diluted

54.70

22.74

27.46

4.00

Share of results of equity method investees
Net income
Net loss attributable to noncontrolling interests
Net income attributable to Alibaba Group
Holding Limited
Accretion of mezzanine equity
Net income attributable to ordinary shareholders
Earnings per share attributable toordinary shareholders: (1)Earnings per ADS attributable to ordinary
shareholders:(1)(1) Each ADS represents eight Shares.

Fiscal Year 2023 Annual Report109Management Discussion and Analysis

Year ended March 31,
2021

2022

2023

%

%

%

(as percentage of revenue)
Revenue
China commerce

70

69

67

International commerce

7

7

8

Local consumer services

5

5

6

Cainiao

5

5

6

Cloud

8

9

9

Digital media and entertainment

4

4

4

Innovation initiatives and others

1

1

—

100

100

100

Cost of revenue

(59)

(63)

(63)

Product development expenses

(8)

(7)

(7)

Sales and marketing expenses

(11)

(14)

(12)

General and administrative expenses

(8)

(4)

(5)

Amortization and impairment of intangible assets

(1)

(1)

(1)

Impairment of goodwill

—

(3)

—

Income from operations

13

8

12

Interest and investment income, net

10

(1)

(1)

Interest expense

(1)

(1)

(1)

Other income, net

1

1

—

Income before income tax and share of results of equity
method investees

23

7

10

Income tax expenses

(4)

(3)

(1)

Share of results of equity method investees

1

2

(1)

Net income

20

6

8

Net loss attributable to noncontrolling interests

1

2

—

Net income attributable to Alibaba Group Holding Limited

21

8

8

Accretion of mezzanine equity

—

—

—

Net income attributable to ordinary shareholders

21

8

8

Total

110

Alibaba Group Holding Limited

Management Discussion and Analysis

Segment Information for Fiscal Years 2021, 2022 and 2023
The tables below set forth certain financial information of our operating segments for the periods indicated:Year ended March 31, 2023
China Internationalcommerce(1) commerce
RMB

RMB

Local
consumer
services(1)Cainiao

RMB

RMB

DigitalInnovation
media and initiatives andCloud entertainment
others Unallocated(2)Consolidated

RMB

RMB

RMB

RMB

RMB

US$

(in millions, except percentages)
Revenue

582,731

69,204

50,112

55,681

77,20331,482

2,274—

868,687

126,491

Income (Loss) from operations

172,191(8,429)(23,302)(3,622)(5,151)(4,638)(9,409)(17,289)

100,351

14,612

Add: Share-based
compensation expense

7,969

2,716

3,672

2,218

6,561

1,756

1,658

4,281

30,831

4,489

Add: Amortization andimpairment of intangible
assets

4,702

93

5,609

1,013

12

1,008

844

223

13,504

1,967

Add: Impairment of goodwill

—

—

—

—

—

—

—

2,714

2,714

395

Add: Equity-settled donation
expense

—

—

—

—

—

—

—

511

511

75

184,862(5,620)(14,021)

(391)

1,422

(1,874)(6,907)(9,560)147,911

21,538

32%

(8)%

(28)%

(1)%

2%

(6)%

(304)%

N/A

17%

Innovation
initiatives andothersUnallocated(2)Consolidated

Adjusted EBITA
Adjusted EBITA margin

Year ended March 31, 2022
China
commerce(1)RMBInternational Local consumer
commerce
services(1)
RMB

RMB

Cainiao

Cloud

Digitalmedia andentertainment

RMB

RMB

RMB

RMB

RMB

RMB

(in millions, except percentages)
Revenue

591,580

61,07844,616

46,10774,56832,2722,841—

853,062

Income (Loss) from operations

172,536(10,655)(30,802)(3,920)(5,167)(7,019)(9,424)(35,911)

69,638Add: Share-based compensation
expense

7,078

1,569

2,556

1,396

6,297

1,520

1,839

1,716

23,971

Add: Amortization of intangible assets

2,817

95

6,154

1,059

16

809

456

241

11,647

—

—

—

—

—

—

—

25,141

25,141

182,431(8,991)(22,092)(1,465)

1,146(4,690)(7,129)(8,813)130,397

31%

(15)%

(50)%

(3)%

2%

(15)%

(251)%

N/A

15%

Add: Impairment of goodwill
Adjusted EBITA
Adjusted EBITA margin

Fiscal Year 2023 Annual Report111Management Discussion and Analysis

Year ended March 31, 2021
China
commerce(1)RMBInternational Local consumer
commerce
services(1)
RMB

RMB

Cainiao

Cloud

Digitalmedia andentertainment

Innovation
initiatives andothersUnallocated(2)Consolidated

RMB

RMB

RMB

RMB

RMB

RMB

(in millions, except percentages)
Revenue

501,379

48,85135,74637,25860,55831,1862,311—

717,289

Income (Loss) from operations

197,232(9,361)(29,197)(3,964)(12,479)(10,321)(7,802)(34,430)

89,678Add: Share-based compensation
expense14,505

4,223

4,972

1,956

10,205

3,281

2,518

8,460

50,120Add: Amortization of intangible assets

1,922

206

7,852

1,195

23

922

83

224

12,427

—

—

—

—

—

—

—

18,22818,228

213,659(4,932)(16,373)(813)(2,251)(6,118)(5,201)(7,518)170,453

43%

(10)%

(46)%

(2)%

(4)%

(20)%

(225)%

N/A

24%

Add: Anti-monopoly Fine(3)Adjusted EBITA
Adjusted EBITA margin(1) Beginning on October 1, 2022, we reclassified the results of our Instant Supermarket Delivery (全能超市) business, which waspreviously reported under China commerce segment, to Local consumer services segment following the strategy refinementof Instant Supermarket Delivery business to focus on building customer mindshare for grocery delivery services through Ele.me
platform. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures werereclassified to conform to this presentation.
(2) Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocated toindividual segments. The goodwill impairment, and the equity-settled donation expense related to the allotment of shares to acharitable trust, are presented as unallocated items in the segment information because our management does not consider theseas part of the segment operating performance measure.
(3) For a description of the relevant PRC Anti-monopoly investigation and administrative penalty decision, see “Business Overview —Legal and Administrative Proceedings — PRC Anti-monopoly Investigation and Administrative Penalty Decision.”

Non-GAAP Measures
We use adjusted EBITDA (including adjusted EBITDA
margin), adjusted EBITA (including adjusted EBITA
margin), non‑GAAP net income, non‑GAAP diluted
earnings per share/ADS and free cash flow, eacha non‑GAAP financial measure, in evaluating ouroperating results and for financial and operational
decision‑making purposes.
We believe that adjusted EBITDA, adjusted EBITA,
non‑GAAP net income and non‑GAAP diluted earnings
per share/ADS help identify underlying trends in ourbusiness that could otherwise be distorted by theeffect of certain income or expenses that we include
in income from operations, net income and diluted
earnings per share/ADS. We believe that these
non‑GAAP measures provide useful information
about our core operating results, enhance the overall
understanding of our past performance and future
prospects and allow for greater visibility with respect
to key metrics used by our management in its financial
and operational decision‑making. We present threedifferent income measures, namely adjusted EBITDA,
adjusted EBITA and non-GAAP net income in order to112

Alibaba Group Holding Limited

provide more information and greater transparency toinvestors about our operating results.
We consider free cash flow to be a liquidity measurethat provides useful information to management
and investors about the amount of cash generated
by our business that can be used for strategic
corporate transactions, including investing in our new
business initiatives, making strategic investments andacquisitions and strengthening our balance sheet.
Adjusted EBITDA, adjusted EBITA, non‑GAAP net
income, non‑GAAP diluted earnings per share/ADS
and free cash flow should not be considered inisolation or construed as an alternative to income
from operations, net income, diluted earnings per
share/ADS, cash flows or any other measure of
performance or as an indicator of our operating
performance. These non‑GAAP financial measurespresented here do not have standardized meanings
prescribed by U.S. GAAP and may not be comparable
to similarly titled measures presented by othercompanies. Other companies may calculate similarly
titled measures differently, limiting their usefulness ascomparative measures to our data.

Management Discussion and Analysis

Adjusted EBITDA represents net income before(i) interest and investment income, net, interest
expense, other income, net, income tax expenses
and share of results of equity method investees, (ii)certain non‑cash expenses, consisting of share‑based
compensation expense, amortization and impairmentof intangible assets, depreciation and impairment ofproperty and equipment, operating lease cost relating
to land use rights, and impairment of goodwill, and(iii) Anti-monopoly Fine, as well as equity-settled
donation expense, which we do not believe arereflective of our core operating performance during
the periods presented.
Adjusted EBITA represents net income before (i)interest and investment income, net, interest expense,
other income, net, income tax expenses and shareof results of equity method investees, (ii) certain
non‑cash expenses, consisting of share‑based
compensation expense, amortization and impairmentof intangible assets and impairment of goodwill,and (iii) Anti-monopoly Fine, as well as equity-settled
donation expense, which we do not believe arereflective of our core operating performance during
the periods presented.
Non‑GAAP net income represents net income before
share‑based compensation expense, amortizationand impairment of intangible assets, impairment of
goodwill and investments, gain or loss on deemed
disposals/disposals/revaluation of investments, Antimonopoly Fine, as well as equity-settled donation
expense and others, as adjusted for the tax effects.

Non‑GAAP diluted earnings per share represents
non‑GAAP net income attributable to ordinary
shareholders divided by the weighted average
number of shares for computing non-GAAP diluted
earnings per share, on a diluted basis. Non-GAAP
diluted earnings per ADS represents non-GAAP diluted
earnings per share after adjusting for the ordinary
share-to-ADS ratio.
Free cash flow represents net cash provided byoperating activities as presented in our consolidated
cash flow statement less purchases of property
and equipment (excluding acquisition of land use
rights and construction in progress relating to officecampuses) and intangible assets (excluding thoseacquired through acquisitions), as well as adjustments
to exclude from net cash provided by operating
activities the buyer protection fund deposits frommerchants on our marketplaces. We deduct certain
items of cash flows from investing activities in order toprovide greater transparency into cash flow from ourrevenue-generating business operations. We exclude“acquisition of land use rights and construction inprogress relating to office campuses” because theoffice campuses are used by us for corporate andadministrative purposes and are not directly related
to our revenue-generating business operations.
We also exclude buyer protection fund deposits
from merchants on our marketplaces because
these deposits are restricted for the purpose ofcompensating buyers for claims against merchants.

Fiscal Year 2023 Annual Report113Management Discussion and Analysis

The following table sets forth a reconciliation of our net income to adjusted EBITA and adjusted EBITDA for theperiods indicated:Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions)
143,284

47,07965,573

9,548(72,794)

15,702

11,071

1,612

Interest expense

4,476

4,909

5,918

862

Other income, net(7,582)(10,523)(5,823)(848)

Income tax expenses

29,27826,815

15,5492,264

Share of results of equity method investees(6,984)(14,344)

8,063

1,174

89,67869,638100,351

14,612

Share‑based compensation expense

50,12023,97130,831

4,489

Amortization and impairment of intangible assets

12,427

11,647

13,504

1,967

Impairment of goodwill—

25,1412,714

395

Equity-settled donation expense

—

—

511

75

18,228———Adjusted EBITA

170,453

130,397

147,911

21,538Depreciation and impairment of property and   equipment, and operating lease cost relating to   land use rights

26,38927,80827,7994,047

Adjusted EBITDA

196,842

158,205

175,710

25,585

Net income
Adjustments to reconcile net income to adjusted
EBITA and adjusted EBITDA:
Interest and investment income, net

Income from operations

Anti-monopoly Fine

(1)(1) For a description of the relevant PRC Anti-monopoly investigation and administrative penalty decision, see “Business Overview —Legal and Administrative Proceedings — PRC Anti-monopoly Investigation and Administrative Penalty Decision.”

114

Alibaba Group Holding Limited

Management Discussion and Analysis

The following table sets forth a reconciliation of our net income to non‑GAAP net income for the periods
indicated:Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions)
143,284

47,07965,573

9,548

Share‑based compensation expense

50,12023,97130,831

4,489

Amortization and impairment of intangible assets

12,427

11,647

13,504

1,967

Impairment of goodwill and investments

14,73740,26424,351

3,546(Gain) Loss on deemed disposals/disposals/   revaluation of investments and others(66,305)

21,671

13,857

2,017

—

—

511

75

18,228

—

—

—

(506)

(8,244)(7,248)(1,056)

171,985

136,388

141,379

20,586

Net income
Adjustments to reconcile net income to non-GAAP
net income:Equity-settled donation expense
Anti-monopoly Fine(1)Tax effects(2)

Non‑GAAP net income(1) For a description of the relevant PRC Anti-monopoly investigation and administrative penalty decision, see “Business Overview —Legal and Administrative Proceedings — PRC Anti-monopoly Investigation and Administrative Penalty Decision.”(2) Tax effects primarily comprises tax effects relating to share-based compensation expense, amortization and impairment ofintangible assets and certain gains and losses from investments, and others.

Fiscal Year 2023 Annual Report115Management Discussion and Analysis

The following table sets forth a reconciliation of our diluted earnings per share/ADS to non‑GAAP diluted earnings
per share/ADS for the periods indicated:Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions, except per share data)
Net income attributable to ordinary shareholders— basic

150,308

61,95972,50910,558

(55)

(37)

(38)

(5)

Net income attributable to ordinary shareholders— diluted

150,253

61,922

72,471

10,553

Non-GAAP adjustments to net income
attributable to ordinary shareholders (1)28,701

81,59371,52010,414

Non-GAAP net income attributable to ordinary
shareholders for computing non-GAAP diluted
earnings per share/ADS

178,954

143,515

143,991

20,967Weighted average number of shares on a diluted
basis for computing non-GAAP diluted earnings
per share/ADS (million shares)(4)21,982

21,787

21,114

Diluted earnings per share(2) (4)

6.84

2.84

3.43

0.50

Non-GAAP diluted earnings per share(3) (4)

8.14

6.59

6.82

0.99

Diluted earnings per ADS(2) (4)

54.70

22.74

27.46

4.00

Non-GAAP diluted earnings per ADS(3) (4)

65.15

52.69

54.56

7.94

Dilution effect on earnings arising from share-based
awards operated by equity method investees andsubsidiaries(1) See the table above regarding the reconciliation of net income to non‑GAAP net income for more information of these non‑GAAP
adjustments.
(2) Diluted earnings per share is derived from dividing net income attributable to ordinary shareholders by the weighted average
number of shares, on a diluted basis. Diluted earnings per ADS is derived from the diluted earnings per share after adjusting forthe ordinary share-to-ADS ratio.
(3) Non-GAAP diluted earnings per share is derived from dividing non-GAAP net income attributable to ordinary shareholders by theweighted average number of outstanding shares for computing non-GAAP diluted earnings per share, on a diluted basis. NonGAAP diluted earnings per ADS is derived from the non-GAAP diluted earnings per share after adjusting for the ordinary share-toADS ratio.
(4) Each ADS represents eight Shares.

116

Alibaba Group Holding Limited

Management Discussion and Analysis

The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow for theperiods indicated:Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions)
231,786

142,759

199,752

29,086

Less: Purchase of property and equipment(excluding land use rights and constructionin progress relating to office campuses)(36,160)(42,028)(30,373)(4,423)

Less: Purchase of intangible assets (excluding
those acquired through acquisitions)(1,735)

(15)

(22)

(3)

Less: C hanges in the buyer protection funddeposits(21,229)(1,842)

2,306

336

172,662

98,874

171,663

24,996US$% Change

Net cash provided by operating activities

Free cash flow

Comparison of Fiscal Years 2022 and 2023
RevenueYear ended March 31,
2022
RMB

2023
RMB

(in millions, except percentages)
591,580

582,73184,852(1)%

61,07869,204

10,077

13%

44,61650,112

7,297

12%

Cainiao

46,10755,681

8,108

21%

Cloud

74,56877,203

11,242

4%

Digital media and entertainment

32,272

31,482

4,584

(2)%

Innovation initiatives and others

2,841

2,274

331

(20)%

853,062

868,687

126,4912%

China commerce(1)

International commerce
Local consumer services

Total revenue(1)(1) Beginning on October 1, 2022, we reclassified the revenue of our Instant Supermarket Delivery (全能超市) business, which waspreviously reported under China commerce segment, as revenue from Local consumer services segment following the strategy
refinement of Instant Supermarket Delivery business to focus on building customer mindshare for grocery delivery services throughEle.me platform. This reclassification conforms to the way that we manage and monitor segment performance. Comparative
figures were reclassified to conform to this presentation.

Fiscal Year 2023 Annual Report117Management Discussion and Analysis

Total revenue increased by 2% from RMB853,062
million in fiscal year 2022 to RMB868,687 million(US$126,491 million) in fiscal year 2023.

significantly narrowed losses year-over-year,
driven by optimized spending in user acquisition.
Freshippo significantly narrowed losses yearover-year, as Freshippo continued to strengthen
its merchandising capabilities and improve
its operating efficiency. Taocaicai significantly
narrowed losses year-over-year, driven by
improving overall operating efficiency.

China Commerce(i)•

Segment revenue
China Commerce Retail Business
Revenue from our China commerce retailbusiness in fiscal year 2023 was RMB565,332
million (US$82,319 million), decreased by
2% compared to RMB574,868 million in fiscal
year 2022. Customer management revenue
decreased by 8% year-over-year, primarily due to
mid-single-digit decline of online physical goods
GMV generated on Taobao and Tmall, excluding
unpaid orders year-over-year, which was mainly
due to soft consumption demand and ongoingcompetition as well as supply chain and logistics
disruptions due to COVID-19.
Direct sales and others revenue under China
commerce retail business in fiscal year 2023
was RMB274,954 million (US$40,037 million),increased by 6% compared to RMB259,830
million in fiscal year 2022, primarily due to therevenue growth contributed by our Freshippo
and Alibaba Health’s direct sales businesses.

•

Segment adjusted EBITA
China commerce adjusted EBITA increased by
1% to RMB184,862 million (US$26,918 million)
in fiscal year 2023, compared to RMB182,431
million in fiscal year 2022. The increase wasprimarily due to reduced losses of Taobao Deals,
Freshippo and Taocaicai, partly offset by adecrease in profit from customer management
services. Adjusted EBITA margin increased from
31% in fiscal year 2022 to 32% in fiscal year
2023. During fiscal year 2023, Taobao Deals

118

(i)

•

Alibaba Group Holding Limited

Segment revenue
International Commerce Retail Business
Revenue from our International commerce retailbusiness in fiscal year 2023 was RMB49,873
million (US$7,262 million), increased by 17%
compared to RMB42,668 million in fiscal year
2022. The increase was mainly attributable to thegrowth in revenue generated by Trendyol and
Lazada. The increase in revenue from Trendyol
resulted from more efficient use of subsidies androbust year-over-year order growth. Increase inrevenue contributed by Lazada was the result ofcontinuous improvement in monetization rate byoffering more value-added services.

•

International Commerce Wholesale Business
Revenue from our International commercewholesale business in fiscal year 2023 was
RMB19,331 million (US$2,815 million), increased
by 5% compared to RMB18,410 million in fiscal
year 2022. The increase was primarily due toincreases in revenue generated by cross-borderrelated value-added services.

China Commerce Wholesale Business
Revenue from our China commerce wholesale
business in fiscal year 2023 was RMB17,399
million (US$2,533 million), increased by 4%compared to RMB16,712 million in fiscal year
2022. The increase was primarily due to theincrease in revenue from value-added services topaying members.

(ii)International Commerce(ii)

Segment adjusted EBITAInternational commerce adjusted EBITA wasa loss of RMB5,620 million (US$818 million) in
fiscal year 2023, compared to a loss of RMB8,991
million in fiscal year 2022. The decrease in loss
year-over-year was primarily due to the reduced
losses from Trendyol and Lazada. The reduced
loss from Trendyol is primarily due to revenue
growth and enhanced operating efficiency.
Narrowing of loss from Lazada was a result ofcontinuous improvement in monetization rate byoffering more value-added services as well as
enhanced operating efficiency.

Management Discussion and Analysis

Local Consumer Services(i)Segment revenue
Revenue from Local consumer services was
RMB50,112 million (US$7,297 million) in fiscal
year 2023, increased by 12% compared to
RMB44,616 million in fiscal year 2022, primarily
driven by higher average order value of Ele.me
and strong order growth of Amap.

(ii)

RMB66,808 million in fiscal year 2022. In fiscal
year 2023, 72% of Cainiao’s total revenue was
generated from external customers.
(ii)

Cainiao adjusted EBITA was a loss of RMB391
million (US$57 million) in fiscal year 2023,
compared to a loss of RMB1,465 million in fiscal
year 2022, mainly due to improved operating
results from International fulfillment solution
service and improved operating efficiency
in consumer logistics services and domestic
fulfillment solution services.

Segment adjusted EBITA
Local consumer services adjusted EBITA wasa loss of RMB14,021 million (US$2,041 million)
in fiscal year 2023, compared to a loss of
RMB22,092 million in fiscal year 2022, primarily
due to the continued narrowing of loss from our“To-Home” business. Narrowing of loss fromour “To-Home” business was driven by Ele.me’s
improved unit economics per order, which
was due to increased average order value andreduced delivery cost per order year-over-year.

Cloud
(i)

Segment revenue
Revenue from Cainiao, which represents revenue
from its domestic and international onestop-shop logistics services and supply chain
management solutions, after inter-segment
elimination, was RMB55,681 million (US$8,108
million) in fiscal year 2023, increased by 21%
compared to RMB46,107 million in fiscal year
2022, primarily contributed by the increase
in revenue from domestic consumer logistics
services as a result of service model upgrade
since late 2021 whereby Cainiao took on more
responsibilities throughout the logistics process
to better serve customers and enhance customer
experience, as well as the increase in revenue
from international fulfillment solution services.
Total revenue generated by Cainiao, before
inter-segment elimination, which includes
revenue from services provided to other Alibaba
businesses, was RMB77,512 million (US$11,287
million), increased by 16% compared to

Segment revenue
Revenue from our Cloud segment, after intersegment elimination, was RMB77,203 million(US$11,242 million) in fiscal year 2023, increased
by 4% year-over-year compared to RMB74,568
million in fiscal year 2022. Year-over-year
revenue growth of our Cloud segment reflected
the revenue growth from non-Internet industries
driven by solid growth of revenue from financial
services, automobile industries and retailindustries, which was partially offset by the
decline in revenue from customers in the Internet
industry mainly driven by declining revenue
from a top customer in the Internet industry
phasing out using our overseas cloud services
for its international business due to non-productrelated reasons.

Cainiao(i)

Segment adjusted EBITA

Total revenue from our Cloud business, before
inter-segment elimination, which includes
revenue from services provided to other
Alibaba businesses, was RMB101,950 million(US$14,845 million), increased by 2% comparedto RMB100,180 million in fiscal year 2022.
(ii)

Segment adjusted EBITA
Cloud adjusted EBITA was RMB1,422 million(US$207 million) in fiscal year 2023, compared to
RMB1,146 million in fiscal year 2022.

Fiscal Year 2023 Annual Report119Management Discussion and Analysis

Digital Media and Entertainment

Innovation Initiatives and Others

(i)

(i)

Segment revenue
Revenue from our Digital media andentertainment segment in fiscal year 2023 was
RMB31,482 million (US$4,584 million), decreased
by 2%, compared to RMB32,272 million in fiscal
year 2022.

(ii)

Segment adjusted EBITA
Digital media and entertainment adjusted EBITA
in fiscal year 2023 was a loss of RMB1,874 million(US$273 million), compared to a loss of RMB4,690
million in fiscal year 2022, primarily due tothe narrowing of loss from Youku driven by
disciplined investment in content and production
capability.

Segment revenue
Revenue from Innovation initiatives and others
was RMB2,274 million (US$331 million) in fiscal
year 2023, decreased by 20% compared to
RMB2,841 million in fiscal year 2022.

(ii)

Segment adjusted EBITA
Innovation initiatives and others adjusted EBITA
in fiscal year 2023 was a loss of RMB6,907
million (US$1,006 million), compared to a loss of
RMB7,129 million in fiscal year 2022.

Cost of Revenue
Year ended March 31,
2022
RMB

2023
RMB

US$

% Change(in millions, except percentages)
539,450549,695

Percentage of revenue

63%

63%

Share-based compensation expense included incost of revenue

5,725

5,710

1%

1%

533,725

543,985

62%

62%

Cost of revenue

Percentage of revenue
Cost of revenue excluding share-based
compensation expense
Percentage of revenue
Our cost of revenue increased by 2% from RMB539,450
million in fiscal year 2022 to RMB549,695 million(US$80,042 million) in fiscal year 2023. Without theeffect of share-based compensation expense, cost

120

Alibaba Group Holding Limited

80,042

2%

831

0%

79,211

2%of revenue as a percentage of revenue would haveremained stable at 62% in fiscal year 2023 comparedto fiscal year 2022.

Management Discussion and Analysis

Product Development Expenses
Year ended March 31,
2022
RMB

2023
RMB

US$

% Change(in millions, except percentages)
Product development expenses
Percentage of revenue
Share-based compensation expense included in
product development expenses
Percentage of revenue
Product development expenses excluding sharebased compensation expense
Percentage of revenue
Our product development expenses increased by
2% from RMB55,465 million in fiscal year 2022 to
RMB56,744 million (US$8,263 million) in fiscal year
2023. Without the effect of share-based compensation

55,46556,7447%

7%

11,035

13,5141%

2%

44,43043,230

6%

5%

8,263

2%

1,968

22%

6,295

(3)%

expense, product development expenses as apercentage of revenue would have decreased from
6% in fiscal year 2022 to 5% in fiscal year 2023.

Sales and Marketing Expenses
Year ended March 31,
2022
RMB

2023
RMB

US$

% Change(in millions, except percentages)
119,799

103,496

Percentage of revenue

14%

12%

Share-based compensation expense included insales and marketing expenses

3,050

3,710

0%

0%

116,749

99,786

14%

12%

Sales and marketing expenses

Percentage of revenue
Sales and marketing expenses excluding sharebased compensation expense
Percentage of revenue
Our sales and marketing expenses decreased by
14% from RMB119,799 million in fiscal year 2022 to
RMB103,496 million (US$15,070 million) in fiscal year
2023. Without the effect of share-based compensation

15,070

(14)%

540

22%

14,530(15)%

expense, sales and marketing expenses as apercentage of revenue would have decreased from
14% in fiscal year 2022 to 12% in fiscal year 2023.

Fiscal Year 2023 Annual Report121Management Discussion and Analysis

General and Administrative Expenses
Year ended March 31,
2022
RMB

2023
RMB

US$

% Change(in millions, except percentages)
General and administrative expenses
Percentage of revenue
Share-based compensation expense included ingeneral and administrative expenses
Percentage of revenue
General and administrative expenses excluding
share-based compensation expense
Percentage of revenue
Our general and administrative expenses increased
by 32% from RMB31,922 million in fiscal year 2022 to
RMB42,183 million (US$6,142 million) in fiscal year
2023. Without the effect of share-based compensation

31,922

42,183

4%

5%

4,161

7,897

1%

1%

27,761

34,286

3%

4%

6,142

32%

1,150

90%

4,992

24%

expense, general and administrative expenses as apercentage of revenue would have increased from 3%
in fiscal year 2022 to 4% in fiscal year 2023.

Amortization and impairment of intangible assets
Year ended March 31,
2022
RMB

2023
RMB

US$

% Change(in millions, except percentages)
Amortization and impairment of intangible assets
Percentage of revenue
Amortization and impairment of intangible assets
increased by 16% from RMB11,647 million in fiscal year
2022 to RMB13,504 million (US$1,967 million) in fiscal
year 2023.

122

Alibaba Group Holding Limited

11,647

13,504

1%

1%

1,967

16%

Impairment of goodwill
Impairment of goodwill in fiscal year 2023 was
RMB2,714 million (US$395 million), decreased by
89% or RMB22,427 million from RMB25,141 million in
fiscal year 2022. Impairment recorded in both years
represents the amount by which the carrying valueof certain reporting units within Digital media andentertainment segment exceeds their fair value, basedon an annual goodwill impairment assessment.

Management Discussion and Analysis

Income from Operations and Operating Margin
Year ended March 31,
2022
RMB

2023
RMB

US$

% Change(in millions, except percentages)
Income from operations

69,638100,351

Percentage of revenue

8%

12%

23,97130,831

3%

4%

93,609131,182

11%

16%

Share-based compensation expense included inincome from operations
Percentage of revenue
Income from operations excluding share-based
compensation expense
Percentage of revenue
Our income from operations increased by 44% from
RMB69,638 million, or 8% of revenue, in fiscal year
2022 to RMB100,351 million (US$14,612 million), or
12% of revenue, in fiscal year 2023. During fiscal year
2023, we recorded a RMB2,714 million (US$395 million)
impairment of goodwill in relation to the Digital media
and entertainment segment, and a RMB2,811 million(US$409 million) impairment of intangible assets.
During fiscal year 2022, we recorded a RMB25,141
million impairment of goodwill in relation to the Digital
media and entertainment segment and a RMB13,046
million reversal of share-based compensation
expense related to the mark-to-market adjustmentof Ant Group share-based awards granted to ouremployees.

14,612

44%

4,489

29%

19,10140%

All of these impacts were excluded from our non-GAAP
measures of profitability. Excluding these impacts,
income from operations would have increased by
RMB24,143 million year-over-year, from RMB81,733
million in fiscal year 2022 to RMB105,876 million(US$15,417 million) in fiscal year 2023, primarily due tothe narrowed adjusted EBITA losses of Local consumer
services, International commerce and Digital media
and entertainment, as well as an increase in China
commerce adjusted EBITA.

Fiscal Year 2023 Annual Report123Management Discussion and Analysis

Interest and Investment Income, Net

Income Tax Expenses

Interest and investment income, net in fiscal year 2023
was a loss of RMB11,071 million (US$1,612 million),compared to a loss of RMB15,702 million in fiscal
year 2022. The year-over-year decrease in loss wasprimarily due to the decrease in net losses arising fromthe changes in fair value of our equity investments.

Income tax expenses in fiscal year 2023 were
RMB15,549 million (US$2,264 million), comparedto RMB26,815 million in fiscal year 2022. Excluding
share-based compensation expense, revaluation anddisposal gains/losses of investments, impairment of
goodwill and investments, as well as the deferred
tax effects on basis differences arising from equity
method investees, our effective tax rate would havebeen 17% in fiscal year 2023.

Other Income, Net
Other income, net in fiscal year 2023 was RMB5,823
million (US$848 million), compared to RMB10,523
million in fiscal year 2022. The year-over-year
decrease was primarily due to the net exchange losses
in fiscal year 2023, compared to net exchange gains infiscal year 2022.

Share of Results of Equity Method Investees
Share of results of equity method investees in fiscal
year 2023 was a loss of RMB8,063 million (US$1,174
million), compared to a profit of RMB14,344 million in
fiscal year 2022.

Share of results of equity method investees in fiscal years 2022 and 2023 consisted of the following:
Year ended March 31,
2022
RMB

2023
RMB

US$

(in millions)Share of profit (loss) of equity method investees:
24,084

10,294

1,499

(89)

(5,481)(798)

Impairment loss

(6,201)(8,310)(1,210)

Others(3,450)(4,566)

(665)

Total

14,344(8,063)(1,174)

Ant Group
Others(1)(1) “Others” mainly include basis differences arising from equity method investees, share-based compensation expense related
to share-based awards granted to employees of our equity method investees, as well as gain or loss arising from the deemed
disposal of the equity method investees.

124

Alibaba Group Holding Limited

Management Discussion and Analysis

We record our share of results of all equity method
investees one quarter in arrears. In connection with
our share of profit of Ant Group, the year-overyear decrease was mainly due to decrease in net
investment gains from the investments held by Ant
Group and decrease in Ant Group’s operating profit.
The decrease in share of results of other equity
method investees was mainly due to the generaldecline in financial performance of our equity method
investees.

Net Income
Our net income in fiscal year 2023 was RMB65,573
million (US$9,548 million), increased by 39% or
RMB18,494 million compared to RMB47,079 million
in fiscal year 2022. The year-over-year increase
was primarily due to the increase in income fromoperations and the decrease in net losses arising fromchanges in the fair values of our equity investments,
partly offset by the decrease in share of profit of equity
method investees and the increase in impairment ofinvestments.

Comparison of Fiscal Years 2021 and 2022
For a discussion of our results of operations for the
fiscal year ended March 31, 2021 compared with thefiscal year ended March 31, 2022, see “— Operating
Results — Comparison of Fiscal Years 2021 and 2022”
of our annual report on Form 20-F for the fiscal year
ended March 31, 2022, filed with the SEC on July 26,
2022.

Variable Interest Entity Financial
Information
The following tables present the condensed
consolidating schedule of operations and cash flows
information for the fiscal years ended March 31,
2021, 2022 and 2023, and condensed consolidatingschedule of balance sheet information as of March
31,2022 and 2023 for:••Alibaba Group Holding Limited (“Parent”);
the variable interest entities, including theirsubsidiaries, that together account for asignificant majority of total revenue and assets ofthe variable interest entities as a group, which wecollectively refer to as the “major variable interest
entities and their subsidiaries”;••

subsidiaries that are, for accounting purposes
only, the primary beneficiaries of the major
variable interest entities; andother subsidiaries and consolidated entities,
which include variable interest entities that are
not major variable interest entities.

We conduct our business through a large numberof subsidiaries and consolidated entities. We arepresenting the condensed consolidating information
for the major variable interest entities only. We believe
this presentation provides a reasonably adequate
basis for investors to evaluate the assets, operations
and overall significance of the variable interest
entities as a group, as well as the nature and amounts
associated with intercompany transactions. The large
number of variable interest entities not included as
major variable interest entities are individually, and in
the aggregate, not material for our company taken asa whole. To include them in the presentation would
require tremendous time and efforts to prepare
condensed consolidating schedules for them,which we do not believe would provide meaningful
additional information to investors.
The amounts shown in the tables do not reconcile
directly to financial information presented for thevariable interest entities in our audited consolidated
financial statements.
Although the variable interest entities hold licenses
and approvals and assets for regulated activities
that are necessary for our business operations, aswell as certain equity investments in businesses, towhich foreign investments are typically restricted or
prohibited under applicable PRC law, we hold thesignificant majority of assets and operations in our
subsidiaries and the significant majority of our revenue
is captured directly by our subsidiaries. Therefore, oursubsidiaries directly capture the significant majority ofthe profits and associated cash flow from operations,
without having to rely on contractual arrangements totransfer cash flow from the variable interest entities toour subsidiaries.

Fiscal Year 2023 Annual Report125Management Discussion and Analysis

For the year ended March 31, 2023
Other
Subsidiaries
and Major VIEs
Consolidated
and their
ParentEntities Subsidiaries
RMB

RMB

Primary
Beneficiaries
of Major
VIEs Eliminations

RMB

RMB

Consolidated
Total

RMB

RMB

US$

(in millions)
Revenue from third parties—

709,42188,121

71,145—

868,687

126,491

Revenue from group companies—

29,1595,671

136,113(170,943)

—

—

(846)

(763,158)(97,402)(1)(168,473)

261,543(768,336)(111,879)

Income from subsidiaries and VIEs

84,000100,379—

3,031(187,410)——

Income (loss) from operations

83,15475,801(3,610)41,816(96,810)

100,351

14,612Other income and expenses(10,645)

11,003

6,557

72,519(90,600)(11,166)(1,626)

Income tax expenses—(6,551)

117(9,115)—(15,549)(2,264)

Share of results of equity method investees—(3,176)(46)(4,841)—(8,063)(1,174)72,50977,077

3,018

100,379(187,410)

65,573

9,548

Net loss attributable to noncontrolling interests

—

7,197

13

—

—

7,210

1,050

Accretion of mezzanine equity

—

(274)

—

—

—

(274)

(40)

72,50984,0003,031

100,379(187,410)

72,50910,558

Total cost and expenses

Net income

Net income attributable to ordinary shareholders

For the year ended March 31, 2022
Other
Subsidiaries
andConsolidated
ParentEntities
RMB

RMB

Major VIEs
and their
Subsidiaries

Primary
Beneficiaries
of Major
VIEs

Eliminations

Consolidated
Total

RMB

RMB

RMB

RMB

73,728—853,062

160,947(245,042)—(in millions)
Revenue from third parties—

691,997

87,337

Revenue from group companies—

75,6108,485

Total cost and expenses(444)(771,883)(96,262)(189,014)

274,179(783,424)

Income from subsidiaries and VIEs

63,74581,515—5,284(150,544)—

Income (loss) from operations

63,301

77,239(440)

50,945(121,407)

69,638Other income and expenses(1,342)(27,923)

5,227

43,087(29,137)(10,088)

Income tax expenses—(15,506)(258)(11,051)—(26,815)

Share of results of equity method investees—

15,055755(1,466)—

14,344

61,95948,865

5,284

81,515(150,544)

47,079Net loss attributable to noncontrolling interests—

15,170———15,170Accretion of mezzanine equity

—

(290)

—

—

—

(290)

61,95963,745

5,284

81,515(150,544)

61,959Net income

Net income attributable to ordinary shareholders

126

Alibaba Group Holding Limited(1)

Management Discussion and Analysis

For the year ended March 31, 2021
Other
Subsidiaries
andMajor VIEs
Consolidated
and their
ParentEntities Subsidiaries
RMB

RMB

Primary
Beneficiaries
of Major
VIEs

Eliminations

Consolidated
Total

RMB

RMB

RMB

RMB
(in millions)

Revenue from third parties—

563,077

71,45582,757—717,289

Revenue from group companies—

85,667

10,854

165,263(261,784)

—

(614)

(658,139)(83,164)(1)(178,855)

293,161(627,611)

Income from subsidiaries and VIEs

150,515

107,740—

3,362(261,617)—

Income (loss) from operations

149,901

98,345(855)

72,527(230,240)

89,678Other income and expenses

407

47,377

5,940

53,553(31,377)

75,900

Income tax expenses—(16,959)(1,249)(11,070)—(29,278)

Share of results of equity method investees—

14,825(571)(7,270)—6,984

150,308

143,5883,265

107,740(261,617)

143,284

Net loss attributable to noncontrolling interests

—

7,197

97

—

—

7,294

Accretion of mezzanine equity

—

(270)

—

—

—

(270)

150,308

150,515

3,362

107,740(261,617)

150,308

Total cost and expenses

Net income

Net income attributable to ordinary shareholders
Note:
(1)

These include technical service fee incurred by major VIEs and their subsidiaries for exclusive technical service provided byprimary beneficiaries of major VIEs to major VIEs and their subsidiaries in the amounts of RMB18,698 million, RMB17,225 million
and RMB15,445 million (US$2,249 million) for the years ended March 31, 2021, 2022 and 2023, respectively.

Fiscal Year 2023 Annual Report127Management Discussion and Analysis

For the year ended March 31, 2023
Other
Subsidiaries
Primaryand Major VIEs Beneficiaries
Consolidated
and theirof Major
ParentEntities Subsidiaries
VIEs Eliminations

Consolidated
Total

RMB

RMB

RMB

US$

RMB

RMB

RMB
(in millions)

Net cash provided by operating activities

71,885(1)154,186

3,622

196,309(226,250)

199,752

29,086

Net cash used in investing activities(12,290)(1)(87,248)(2,003)(2)(100,132)

66,167(135,506)(19,731)

Net cash (used in) provided by financing activities(59,439)(1)(83,590)

1,766(2)(84,439)

160,083(65,619)(9,555)

Effect of exchange rate changes on cash and cash
equivalents, restricted cash and escrow receivables

33

3,495

2

—

—

3,530

514

Increase (Decrease) in cash and cash equivalents,
restricted cash and escrow receivables

189(13,157)

3,387

11,738

—

2,157

314

Cash and cash equivalents, restricted cash and escrowreceivables at the beginning of the year387

175,866

4,537

46,563—

227,353

33,105

Cash and cash equivalents, restricted cash and escrowreceivables at the end of the year

576

162,709

7,924

58,301—

229,51033,419Notes:(1) For the year ended March 31, 2023, the cash transfer from the parent to our subsidiaries amounting to RMB32,025 million(US$4,663 million), of which RMB31,088 million (US$4,527 million) and RMB937 million (US$136 million) were included in theparent’s net cash used in investing activities and financing activities, respectively.
For the year ended March 31, 2023, the cash transfer from our subsidiaries to the parent amounting to RMB112,153 million(US$16,331 million), of which RMB75,355 million (US$10,973 million), RMB20,565 million (US$2,994 million) and RMB16,233 million(US$2,364 million) were included in the parent’s net cash provided by operating activities, net cash used in investing activities andfinancing activities, respectively.
(2) For the year ended March 31, 2023, the cash transfer from our subsidiaries and consolidated entities to the major VIEs and theirsubsidiaries amounting to RMB21,283 million (US$3,099 million), of which RMB11,858 million (US$1,727 million) and RMB9,425
million (US$1,372 million) were included in the major VIEs and their subsidiaries’ net cash used in investing activities and net cash
provided by financing activities, respectively.
For the year ended March 31,2023, the cash transfer from the major VIEs and their subsidiaries to our subsidiaries and consolidated
entities amounting to RMB14,172 million (US$2,064 million), of which RMB6,513 million (US$949 million) and RMB7,659 million(US$1,115 million) were included in the major VIEs and their subsidiaries’ net cash used in investing activities and net cash provided
by financing activities, respectively.
(3) See “— Liquidity and Capital Resources — Holding Company Structure and Cash Flows through Our Company” for nature of cashtransfers mentioned above.

128

Alibaba Group Holding Limited

Management Discussion and Analysis

For the year ended March 31, 2022

ParentOther
Subsidiaries
andConsolidated
Entities

Major VIEs
and their
Subsidiaries

Primary
Beneficiaries
of Major
VIEs

Eliminations

Consolidated
Total

RMB

RMB

RMB

RMB

RMB

RMB

(in millions)
Net cash (used in) provided by operating activities(4,739)219,750

18,811

21,498(112,561)

142,759

Net cash used in investing activities(20,188)(1)(235,528)(15,672)(2)(32,365)

105,161(198,592)

Net cash provided by (used in) financing activities

24,920(1)(51,502)(9,099)(2)(36,168)

7,400(64,449)

Effect of exchange rate changes on cash and cash equivalents,
restricted cash and escrow receivables(36)(8,798)———(8,834)

Decrease in cash and cash equivalents,
restricted cash and escrow receivables(43)(76,078)(5,960)(47,035)—(129,116)

Cash and cash equivalents, restricted cash and escrow receivablesat the beginning of the year430

251,944

10,497

93,598—356,469

Cash and cash equivalents, restricted cash and escrow receivablesat the end of the year387

175,866

4,537

46,563—

227,353

Notes:(1) For the year ended March 31, 2022, the cash transfer from the parent to our subsidiaries amounting to RMB20,188 million was
included in the parent’s net cash used in investing activities.
For the year ended March 31, 2022, the cash transfer from our subsidiaries to the parent amounting to RMB95,621 million was
included in the parent’s net cash provided by financing activities.
(2) For the year ended March 31, 2022, the cash transfer from our subsidiaries and consolidated entities to the major VIEs and theirsubsidiaries amounting to RMB2,539 million, of which RMB35 million and RMB2,504 million were included in the major VIEs andtheir subsidiaries’ net cash used in investing activities and financing activities, respectively.
For the year ended March 31,2022, the cash transfer from the major VIEs and their subsidiaries to our subsidiaries and consolidated
entities amounting to RMB24,404 million, of which RMB11,774 million and RMB12,630 million were included in the major VIEs andtheir subsidiaries’ net cash used in investing activities and financing activities, respectively.

Fiscal Year 2023 Annual Report129Management Discussion and Analysis

For the year ended March 31, 2021

ParentOther
Subsidiaries
andConsolidated
Entities

Major VIEs
and their
Subsidiaries

Primary
Beneficiaries
of Major
VIEs

Eliminations

Consolidated
Total

RMB

RMB

RMB

RMB

RMB

RMB

(in millions)
Net cash provided by operating activities

33,796(1)210,082808

56,727(69,627)

231,786

Net cash used in investing activities(70,623)(1)(147,242)(17,764)(2)(70,138)

61,573(244,194)

Net cash provided by (used in) financing activities

36,570(1)(31,875)

13,726(2)

3,607

8,054

30,082

Effect of exchange rate changes on cash and cash equivalents,
restricted cash and escrow receivables(114)(7,073)———(7,187)(Decrease) Increase in cash and cash equivalents,
restricted cash and escrow receivables(371)

23,892(3,230)(9,804)—

10,487

Cash and cash equivalents, restricted cash and escrowreceivables at the beginning of the year

801

228,052

13,727

103,402—345,982

Cash and cash equivalents, restricted cash and escrowreceivables at the end of the year430

251,944

10,497

93,598—356,469

Notes:(1) For the year ended March 31, 2021, the cash transfer from the parent to our subsidiaries amounting to RMB70,623 million was
included in the parent’s net cash used in investing activities.
For the year ended March 31, 2021, the cash transfer from our subsidiaries to the parent amounting to RMB43,078 million, of which
RMB37,918 million and RMB5,160 million were included in the parent’s net cash provided by operating activities and financing
activities, respectively.
(2) For the year ended March 31, 2021, the cash transfer from our subsidiaries and consolidated entities to the major VIEs and theirsubsidiaries amounting to RMB20,865 million, of which RMB175 million and RMB20,690 million were included in the major VIEs andtheir subsidiaries’ net cash used in investing activities and net cash provided by financing activities, respectively.
For the year ended March 31, 2021, the cash transfer from the major VIEs and their subsidiaries to our subsidiaries andconsolidated entities amounting to RMB5,575 million, of which RMB682 million and RMB4,893 million were included in the major
VIEs and their subsidiaries’ net cash used in investing activities and net cash provided by financing activities, respectively.

130

Alibaba Group Holding Limited

Management Discussion and Analysis

As of March 31, 2023
Other
Subsidiaries
Primaryand Major VIEs Beneficiaries
Consolidated
and theirof Major
ParentEntities Subsidiaries
VIEs Eliminations

Consolidated
Total

RMB

RMB

RMB

US$

RMB

RMB

RMB
(in millions)

Cash and cash equivalents and short-term
investments

576

301,264

22,301

195,437—

519,578

75,656

Investments in equity method investees andequity securities and other investments—

375,195

32,55650,258—458,009

66,691

Accounts receivable, net of allowance—

14,16517,084885—

32,134

4,679

Amounts due from group companies

99,536

319,591

19,812208,070(647,009)——

Prepayments and other assets

868

186,896

15,33449,190—252,288

36,737

Interest in subsidiaries and VIEs

1,123,451

217,954—

5,850(1,347,255)——

Property and equipment and intangible assets—

193,827

8,910

20,207—

222,944

32,463

Goodwill—

266,133

1,958

—

—

268,091

39,037

Total assets

1,224,431

1,875,025

117,955

529,897(1,994,264)

1,753,044

255,263

Amounts due to group companies

103,507

243,398

66,683

233,421(647,009)——

Accrued and other liabilities

131,267

317,945

32,04074,016—555,268

80,853—

57,10013,2494,506—

74,855

10,900234,774

618,443

111,972

311,943(647,009)

630,123

91,753

—

9,858

—

—

—

9,858

1,435

Total shareholders’ equity

989,657

1,123,451

5,850

217,954(1,347,255)

989,657

144,105

Noncontrolling interests—

123,273

133——

123,406

17,9701,224,431

1,875,025

117,955

529,897(1,994,264)

1,753,044

255,263

Deferred revenue and customer advances
Total liabilities
Mezzanine equity

Total liabilities, mezzanine equity and equity

Fiscal Year 2023 Annual Report131Management Discussion and Analysis

As of March 31, 2022
Other
Subsidiaries
andConsolidated
ParentEntities
RMB

RMB

Major VIEs
and their
Subsidiaries

Primary
Beneficiaries
of Major
VIEs

Eliminations

Consolidated
Total

RMB

RMB

RMB

RMB

(in millions)
Cash and cash equivalents and short-term
investments

387

272,254

14,208

159,563—446,412Investments in equity method investees andequity securities and other investments—

397,390

33,98920,547—451,926

Accounts receivable, net of allowance—

11,85320,074886—

32,813

Amounts due from group companies

163,476

282,817

23,556

174,120(643,969)—

Prepayments and other assets

767

198,263

14,22750,527—263,784

Interest in subsidiaries and VIEs

994,066

114,798—(129)(1,108,735)—

Property and equipment and intangible assets—

198,691

6,972

25,374—

231,037

Goodwill—

267,548

2,033

—

—

269,581

1,158,696

1,743,614

115,059

430,888(1,752,704)

1,695,553

Amounts due to group companies

88,887

253,725

71,038230,319(643,969)—

Accrued and other liabilities

121,330

308,763

31,024

81,770—542,887—

53,501

12,971

4,001—

70,473

210,217615,989

115,033

316,090(643,969)

613,360

—

9,655

—

—

—

9,655

Total shareholders’ equity

948,479

994,066(129)

114,798(1,108,735)

948,479

Noncontrolling interests—

123,904

155——

124,059

1,158,696

1,743,614

115,059

430,888(1,752,704)

1,695,553

Total assets

Deferred revenue and customer advances
Total liabilities
Mezzanine equity

Total liabilities, mezzanine equity and equity

132

Alibaba Group Holding Limited

Management Discussion and Analysis

Liquidity and Capital
Resources
We fund our operations and strategic investmentsfrom cash generated from our operations and throughdebt and equity financing. We generated RMB231,786
million, RMB142,759 million and RMB199,752 million(US$29,086 million) of cash from operating activities
for fiscal years 2021, 2022 and 2023, respectively. Asof March 31, 2023, we had cash and cash equivalents,
short-term investments and other treasury
investments of RMB193,086 million (US$28,115
million), RMB326,492 million (US$47,541 million) andRMB40,736 million (US$5,932 million), respectively.
Short-term investments include investments in fixeddeposits with original maturities between threemonths and one year and certain investments in
wealth management products, marketable debt
securities and other investments whereby we have theintention to redeem within one year. Other treasury
investments include investments in fixed deposits andcertificates of deposits with original maturities over
one year for treasury purposes.
In November 2014, we issued unsecured seniornotes, including floating rate and fixed rate notes,
with varying maturities for an aggregate principal
amount of US$8.0 billion. Interest on the unsecured
senior notes is payable in arrears, quarterly for thefloating rate notes and semi-annually for the fixed
rate notes. We used the proceeds from the issuance of
the unsecured senior notes to refinance our previous
syndicated loan arrangements in the same amount.
In November 2017, November 2019 and November
2021, we repaid US$5.05 billion of our US$8.0 billion
unsecured senior notes that became due. We are notsubject to any financial covenant or other significant
operating covenants under the unsecured seniornotes. See note 21 to our audited consolidated
financial statements included in this annual report for
further information on unsecured senior notes.

In March 2016, we signed a five-year US$3.0 billion
syndicated loan agreement with a group of eightlead arrangers, which we subsequently drew downin April 2016. The loan was upsized from US$3.0
billion to US$4.0 billion in May 2016 through a generalsyndication and the upsized portion was subsequently
drawn down in August 2016. The loan had a five-yearbullet maturity and was priced at 110 basis points over
LIBOR. In May 2019, we amended the pricing of theloan to 85 basis points over LIBOR and extended thematurity to May 2024. We further amended the pricingof the loan to 80 basis points over SOFR with a credit
adjustment spread in May 2023 and extended thematurity to May 2028 in July 2023. The use of proceedsof the loan is for general corporate and working
capital purposes (including funding our acquisitions).
In April 2017, we entered into a revolving credit facility
agreement with certain financial institutions for an
amount of US$5.15 billion, which we did not draw
down during the availability period. The interest rate
for this credit facility was calculated based on LIBOR
plus 95 basis points. This loan facility is reserved for
future general corporate and working capital purposes(including funding our acquisitions). In June 2021, theterms of this facility were amended and the amountof the credit facility was increased to US$6.5 billion.
The expiration date of the credit facility was extended
to June 2026. Under the terms of the amended facility,
the interest rate on any outstanding utilized amount
was calculated based on LIBOR plus 80 basis points. In
May 2023, we amended the pricing of the outstanding
utilized amount to SOFR with a credit adjustment
spread plus 80 basis points. We have not yet drawn
down this facility.
In December 2017, we issued an additional aggregateof US$7.0 billion unsecured senior notes. In June
2023, we repaid US$0.7 billion of our US$7.0 billion
unsecured senior notes that became due. We are notsubject to any financial covenant or other significant
operating covenants under the unsecured seniornotes. See note 21 to our audited consolidated
financial statements included in this annual report for
further information on unsecured senior notes.

Fiscal Year 2023 Annual Report133Management Discussion and Analysis

In February 2021, we issued unsecured fixed ratesenior notes with varying maturities for an aggregate
principal amount of US$5.0 billion. Interest on theunsecured senior notes is payable semi-annually.
Except for the sustainability notes we set aside foran aggregate principal amount of US$1.0 billion,
we have used the proceeds from the issuance ofthe remaining unsecured senior notes for general
corporate purposes, including working capital needs,
repayment of offshore debt and potential acquisitionsof or investments in complementary businesses. We
have used the net proceeds from the issuance of thesustainability notes to finance or refinance, in whole
or in part, one or more of our new or existing eligible
projects in accordance with our sustainable financeframework as described in the final prospectus
supplement relating to the offering. Examples of
eligible projects include those in the sectors of green
buildings, energy efficiency, COVID-19 crisis response,
renewable energy and circular economy and design.
See note 21 to our audited consolidated financial
statements included in this annual report for further
information on unsecured senior notes.

As of March 31, 2023, we also had other bankborrowings of RMB32,096 million (US$4,674 million),primarily used for our capital expenditures in relation
to the construction of corporate campuses, officefacilities and infrastructure for logistics business, andfor other working capital purposes. See note 20 to our
audited consolidated financial statements included inthis annual report for further information.
We believe that our current levels of cash and cash
flows from operations will be sufficient to meet
our anticipated cash needs for at least the next
twelve months. However, we may need additional
cash resources in the future if we find and wish to
pursue opportunities for investment, acquisition,
strategic cooperation or other similar actions, which
may include investing in technology, infrastructure,including data management and analytics solutions,or related talent. If we determine that our cash
requirements exceed our amounts of cash on hand or
if we decide to further optimize our capital structure,
we may seek to issue additional debt or equity
securities or obtain credit facilities or other sources offunding.

The following table sets out a summary of our cash flows for the periods indicated:Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$

(in millions)
Net cash provided by operating activities

231,786

142,759

199,752

29,086

Net cash used in investing activities(244,194)(198,592)(135,506)(19,731)

30,082(64,449)(65,619)(9,555)

Net cash provided by (used in) financing activities

Cash Flows from Operating Activities
Net cash provided by operating activities in fiscal year
2023 was RMB199,752 million (US$29,086 million), andprimarily consisted of net income of RMB65,573 million(US$9,548 million), as adjusted for non-cash items andthe effects of changes in working capital and otheractivities. Adjustments for non-cash items primarily
included share-based compensation expense of
RMB30,831 million (US$4,489 million), depreciationand impairment of property and equipment, andoperating lease cost relating to land use rights of134

Alibaba Group Holding Limited

RMB27,799 million (U$4,047 million), amortizationof intangible assets and licensed copyrights of
RMB19,139 million (US$2,787 million) and loss
related to equity securities and other investments of
RMB14,911 million (US$2,171 million). Changes inworking capital and other activities mainly consistedof an increase of RMB11,159 million (US$1,625
million) in accrued expenses, accounts payable andother liabilities and a decrease of RMB8,605 million(US$1,253 million) in prepayments, receivables andother assets, and long-term licensed copyrights.

Management Discussion and Analysis

Net cash provided by operating activities in fiscal year
2022 was RMB142,759 million, and primarily consistedof net income of RMB47,079 million, as adjusted
for non-cash items and the effects of changes inworking capital and other activities. Adjustments for
non-cash items primarily included depreciation andimpairment of property and equipment, and operatinglease cost relating to land use rights of RMB27,808
million, impairment of goodwill, intangible assets andlicensed copyrights of RMB25,886 million, share-based
compensation expense of RMB23,971 million andloss related to equity securities and other investmentsof RMB20,479 million. Changes in working capitaland other activities mainly consisted of an increaseof RMB32,496 million in prepayments, receivables
and other assets, and long-term licensed copyrights,
partially offset by an increase of RMB13,327 million
in accrued expenses, accounts payable and otherliabilities.
Please also see our consolidated statements of cash
flows set forth in our audited consolidated financial
statements included in this annual report.

Cash Flows from Investing Activities
Net cash used in investing activities in fiscal year 2023
was RMB135,506 million (US$19,731 million), andwas primarily attributable to an increase in shortterm investments by RMB61,086 million (US$8,895
million), an increase in other treasury investments
by RMB40,794 million (US$5,940 million), capital
expenditures of RMB34,330 million (US$4,999 million)
primarily in connection with the acquisitions of land
use rights, property and equipment, and cash outflow
of RMB23,574 million (US$3,433 million) for investment
and acquisition activities, partially offset by cash
inflow of RMB22,734 million (US$3,310 million) from
disposal of investments.
Net cash used in investing activities in fiscal year
2022 was RMB198,592 million, and was primarily
attributable to an increase in short-term investments
by RMB106,984 million, capital expenditures of
RMB53,309 million primarily in connection withthe acquisitions of land use rights, property andequipment, and cash outflow of RMB52,848 million forinvestment and acquisition activities, partially offset
by cash inflow of RMB15,468 million from disposal ofinvestments.

Cash Flows from Financing Activities
Net cash used in financing activities in fiscal year
2023 was RMB65,619 million (US$9,555 million) andwas primarily reflected cash used in repurchase ofordinary shares of RMB74,746 million (US$10,884
million), partially offset by the net proceeds frombank borrowings and other borrowings of RMB11,342
million (US$1,652 million).
Net cash used in financing activities in fiscal year
2022 was RMB64,449 million and was primarilyreflected cash used in repurchase of ordinary sharesof RMB61,225 million and repayment of unsecured
senior note of US$1,500 million, partially offset by thenet cash inflow from transactions with noncontrollinginterests of RMB3,953 million.

Capital Expenditures
Our capital expenditures have been incurred primarily
in relation to (i) the acquisition of computer equipment
and construction of data centers relating to our Cloudbusiness and the operation of our mobile platforms
and websites; (ii) the acquisition of infrastructure forlogistics services and direct sales businesses; and (iii)
the acquisition of land use rights and construction of
corporate campuses and office facilities. In fiscal years
2021, 2022 and 2023, our capital expenditures totaled
RMB41,450 million, RMB53,309 million and RMB34,330
million (US$4,999 million), respectively.

Holding Company Structure and Cash
Flows through Our Company
We are a holding company with no operation otherthan ownership of operating subsidiaries in Chinese
mainland, Hong Kong S.A.R., and elsewhere that own
and operate our marketplaces and other businesses
as well as a portfolio of intellectual property rights. As
a result, we rely on dividends and other distributions
paid by our operating subsidiaries for our cash andfinancing requirements, including the funds necessary
to pay dividends and other cash distribution to ourshareholders, fund inter-company loans, service
outstanding debts and pay our expenses. If ouroperating subsidiaries incur additional debt on
their own, the instruments governing the debt may
restrict the ability of our operating subsidiaries to pay
dividends or make other distributions or remittances,including loans, to us.

Fiscal Year 2023 Annual Report135Management Discussion and Analysis

Our holding company structure differs from someof our peers in that, although the variable interest
entities hold licenses and approvals and assets forregulated activities that are necessary for our business
operations, as well as certain equity interests inbusinesses, to which foreign investments are typically
restricted or prohibited under applicable PRC law, wehold the significant majority of assets and operations
in our subsidiaries and the significant majority of
our revenue is captured directly by our subsidiaries.
Therefore, our subsidiaries directly capture thesignificant majority of profits and associated cash flowfrom operations, without having to rely on contractual
arrangements to transfer cash flow from the variableinterest entities to our subsidiaries. In fiscal years 2021,
2022 and 2023, the significant majority of our revenues
were generated by our subsidiaries. See “Business
Overview — Organizational Structure” for a descriptionof these contractual arrangements and the structureof our company. Also see “— Operating Results —Variable Interest Entity Financial Information” forfurther financial information of Alibaba Group Holding
Limited, the major variable interest entities and theirsubsidiaries, our subsidiaries that are, for accounting
purposes only, the primary beneficiaries of the major
variable interest entities, and other subsidiaries andconsolidated entities.
Investors in our securities, including our ADSs, Sharesand notes, should note that, to the extent cash or
assets in our business is in the PRC or a PRC entity,
the funds or assets may not be available to fundoperations or for other use outside of the PRC due tointerventions in or the imposition of restrictions andlimitations on the ability of us or our subsidiaries,or the VIEs by the PRC government to transfer cash
or assets. Under PRC laws and regulations, our PRC
subsidiaries are subject to certain restrictions withrespect to paying dividends or otherwise transferring
any of their net assets to us. Applicable PRC law
permits payment of dividends to us by our operating
subsidiaries in China only out of their retained
earnings, if any, determined in accordance with PRC
accounting standards and regulations. Our operating
subsidiaries in China are also required to set aside a
portion of their net income, if any, each year to fundgeneral reserves for appropriations until this reserve
has reached 50% of the related subsidiary’s registeredcapital. These reserves are not distributable as cash

136

Alibaba Group Holding Limited

dividends. In addition, registered share capital andcapital reserve accounts are also restricted from
distribution. As of March 31, 2023, these restricted
net assets totaled RMB194.6 billion (US$28.3 billion).
See note 23 to our audited consolidated financial
statements included in this annual report. Also see“Risk Factors — Risks Related to Doing Business in the
People’s Republic of China — We rely to a significant
extent on dividends, loans and other distributions onequity paid by our operating subsidiaries in China.”
Remittance of dividends by a wholly foreign-owned
enterprise out of China is also subject to certain
restrictions on currency exchange or outboundcapital flows. See “Risk Factors — Risks Related to
Doing Business in the People’s Republic of China —Restrictions on currency exchange or outbound capital
flows may limit our ability to utilize our PRC revenue
effectively.”
Under the PRC Enterprise Income Tax Law, awithholding tax of 5% to 10% is generally leviedon dividends declared by companies in China totheir non-resident enterprise investors. As of March
31, 2023, we have accrued the withholding tax on
substantially all of the earnings distributable by our
subsidiaries in China, except for those being reservedfor permanent reinvestment in China of RMB233.6
billion (US$34.0 billion). See “— Operating Results —Taxation — PRC Withholding Tax.”
We do not have specific cash management policies inplace that dictate how funds are transferred between
Alibaba Group Holding Limited, our subsidiaries, theVIEs or our investors. However, we have implemented
procedures and control mechanisms to manage thetransfer of funds within our organization to support
our business needs and in compliance with applicablelaws and regulations.
For the years ended March 31, 2021, 2022 and 2023,
Alibaba Group Holding Limited provided capital
contributions and loans, and repaid loans, in theaggregate amounts of RMB70,623 million, RMB20,188
million and RMB32,025 million (US$4,663 million),
respectively, to our subsidiaries, and our subsidiaries
provided dividends and loans, and repaid loans, in theaggregate amounts of RMB43,078 million, RMB95,621
million and RMB112,153 million (US$16,331 million),
respectively, to Alibaba Group Holding Limited.

Management Discussion and Analysis

For the years ended March 31, 2021, 2022 and 2023,
our subsidiaries and consolidated entities providedloans and repaid loans, in the aggregate amounts of
RMB20,865 million, RMB2,539 million and RMB21,283
million (US$3,099 million) to the major VIEs and theirsubsidiaries, and the major VIEs and their subsidiaries
provided loans, repaid loans and paid technicalservice fees to our subsidiaries and consolidated
entities in the aggregate amounts of RMB5,575 million,
RMB24,404 million and RMB14,172 million (US$2,064
million), respectively. See “— Operating Results —Variable Interest Entity Financial Information” forclassification of cashflow detailed in footnotes to thecondensed consolidating schedule. We have settled
and will continue to settle fees under the contractual
arrangements with the variable interest entities. For
a condensed consolidating schedule of financial
information that disaggregates the operations anddepicts the financial position, cash flows, and resultsof operations for the same periods for which audited
consolidated financial statements are required, see“— Operating Results — Variable Interest Entity
Financial Information.” Please also see theconsolidated financial statements included in thisannual report for more financial information.

Critical Accounting Policies and Estimates

We have not declared or paid any dividends on ourordinary shares. We have no present plan to pay any
dividends on our ordinary shares in the foreseeable
future. We intend to retain most, if not all, of ouravailable funds and any future earnings to operate
and expand our business. See “Other Informationfor Shareholders — Dividend Policy.” For PRC andUnited States federal income tax considerations ofan investment in our ADSs, see “Other Information for
Shareholders — Taxation.”

Our significant accounting policies are set forth in note
2 to our audited consolidated financial statements
included in this annual report. The preparation of
our consolidated financial statements requires ourmanagement to make estimates and assumptions
that affect the amounts reported in the consolidated
financial statements. Our management periodically
re-evaluates these estimates and assumptions basedon historical experience and other factors, including
expectations of future events that they believe to bereasonable under the circumstances. We considered
the economic implications of the COVID-19 pandemic
on our significant judgments and estimates. Given
the impact and other unforeseen effects on the
global economy from the COVID-19 pandemic, theseestimates required increased judgment, and actual
results may differ significantly from these estimatesand assumptions. In addition, the recent RussiaUkraine conflict has resulted in significant disruptions
to supply chains, logistics and business activities in theregion that have negatively affected our internationalcommerce business and Cainiao’s logistic businessand may have other unforeseen, unpredictableeffects. The estimates or assumptions related to theimpacts of the conflict on economic conditions also
require our significant judgment. We have identified
the following accounting policies as the most criticalto an understanding of our financial position andresults of operations, because the application ofthese policies requires significant and complex
management estimates, assumptions and judgment,
and the reporting of materially different amounts
could result if different estimates or assumptions wereused or different judgments were made.

Inflation

Principles of Consolidation

Inflation in China has not materially impacted our
results of operations in recent years. According to the
National Bureau of Statistics of China, the year-overyear increase in the consumer price index in calendar
years 2020, 2021 and 2022 was 2.5%, 0.9% and 2.0%,
respectively. Although we have not been materiallyaffected by inflation in the past, we can provide noassurance that we will not be affected in the future byhigher inflation rates in China.

A subsidiary is an entity in which (i) we directly or
indirectly control more than 50% of the voting power;or (ii) we have the power to appoint or remove themajority of the members of the board of directors
or to cast a majority of votes at the meetings ofthe board of directors or to govern the financial
and operating policies of the investee pursuant
to a statute or under an agreement among theshareholders or equity holders. However, there aresituations in which consolidation is required eventhough these usual conditions of consolidation do
not apply. Generally, this occurs when an entity holds

Fiscal Year 2023 Annual Report137Management Discussion and Analysis

an interest in another business enterprise that wasachieved through arrangements that do not involve
voting interests, which results in a disproportionate
relationship between the entity’s voting interests in,and its exposure to the economic risks and potential
rewards of, the other business enterprise. This
disproportionate relationship results in what is known
as a variable interest, and the entity in which wehave the variable interest is referred to as a variableinterest entity. We consolidate a variable interest entity
if we are determined to be the primary beneficiary of
the variable interest entity for accounting purposes
only. The primary beneficiary has both (i) the power
to direct the activities of the variable interest entitythat most significantly impact the entity’s economic
performance, and (ii) the obligation to absorb losses
or the right to receive benefits from the variableinterest entity that could potentially be significant tothe variable interest entity.
For the entities that we invested in or are associatedwith but in which the usual conditions of consolidation
mentioned above do not apply, we continuously
re-assess whether these entities possess any of thecharacteristics of a variable interest entity and whether
we are the primary beneficiary.
We consolidate our subsidiaries and the variableinterest entities of which we are the primary
beneficiary. On a periodic basis, we reconsider the
initial determination of whether a legal entity is a
consolidated entity upon the occurrence of certain
events provided in Accounting Standards Codification(“ASC”) 810 “Consolidation.” We also continuously
reconsider whether we are the primary beneficiaryof our affiliated entities as facts and circumstanceschange.

Recognition of Revenue
Revenue is principally comprised of customer
management services revenue, membership fees,
logistics services revenue, cloud services revenue,
sales of goods and other revenue. Revenue represents
the amount of consideration we are entitled to upon
the transfer of promised goods or services in theordinary course of our activities and is recorded net of
VAT. Consistent with the criteria of ASC 606 “Revenue
from Contracts with Customers,” we recognize
revenue when performance obligations are satisfied
by transferring control of a promised good or service
to a customer. For performance obligations thatare satisfied at a point in time, we also consider
the following indicators to assess whether control
of a promised good or service is transferred to the138

Alibaba Group Holding Limited

customer: (i) right to payment, (ii) legal title, (iii)
physical possession, (iv) significant risks and rewardsof ownership and (v) acceptance of the good orservice. For performance obligations satisfied overtime, we recognize revenue over time by measuring
the progress toward complete satisfaction of aperformance obligation.
The application of various accounting principles
related to the measurement and recognitionof revenue requires us to make judgments andestimates. Specifically, complex arrangements with
non‑standard terms and conditions may require
relevant contract interpretation to determine theappropriate accounting treatment, including whether
the promised goods and services specified in a
multiple element arrangement should be treated as
separate performance obligations. Other significant
judgments include determining whether we are acting
as the principal or the agent from an accounting
perspective in a transaction.
For multiple element arrangements with customers,
which primarily relate to the provision of hybrid
cloud services, which include hardware, software
licenses, software installation services, application
development and maintenance services, significant
judgment is required to determine whether eachgood and service element is a distinct performanceobligation and is separately accounted for. To
determine whether a performance obligation
is distinct, we consider its level of integration,customization, interdependence and interrelation
with other elements within the arrangement. If an
arrangement involves multiple distinct performanceobligations, each distinct performance obligation isseparately accounted for and the total considerationis allocated to each performance obligation basedon the relative standalone selling prices at contract
inception. If directly observable standalone selling
prices are not available, we need to apply significant
judgment and perform assessments on market
conditions and entity-specific factors to estimate thestandalone selling prices for each element. Changes
in the estimated standalone selling price may
cause the amount of revenue to be recognized foreach performance obligation to differ, but the total
amount of revenue to be recognized within a contract
should not be affected. We periodically re-assess thestandalone selling price of the elements as a result ofchanges in market conditions. Revenue recognition
for P4P marketing services, in-feed marketing services
and display marketing services on our marketplaces
does not require us to exercise significant judgment or
estimate.

Management Discussion and Analysis

For certain arrangements, we apply significant
judgment in determining whether we are acting as
the principal or agent in a transaction. We are acting
as the principal if we obtain control over the goods
and services before they are transferred to customers.
Generally, when we are primarily obligated in atransaction and are subject to inventory risk or havelatitude in establishing prices, or have several but not
all of these indicators, we act as the principal andrecord revenue on a gross basis. We act as the agent
and record the net amount as revenue earned if we do
not obtain control over the goods and services before
they are transferred to the customers. We record
P4P marketing services revenue, in-feed marketing
services revenue and display marketing services
revenue generated through third‑party marketing
affiliate programs on a gross basis when we act as
the principal. Commission revenue relating to the
Taobaoke program generated through third‑party
marketing affiliate partners’ websites where we do nothave latitude in establishing prices or we do not takeinventory risks is recorded on a net basis, otherwise
it is recorded on a gross basis. In addition, we
report revenue from the sales of goods and revenue
generated from certain platforms in which we operate
as a principal on a gross basis.

Share‑based Compensation Expense andValuation of the Underlying Awards
Share‑based awards relating to our ordinary
sharesWe account for various types of share-based awards
granted to the employees, consultants and directorsof our company, our affiliates and/or certain othercompanies in accordance with the authoritative
guidance on share-based compensation expense. All
share-based awards granted including RSUs, shareoptions and restricted shares are measured at the
grant date based on the fair value of the awards andwere recognized as an expense over the requisite
service period, which is generally the vesting period of
the respective award, using the accelerated attribution
method. Under the accelerated attribution method,each vesting installment of a graded vesting award
is treated as a separate share-based award, andaccordingly each vesting installment is separately
measured and attributed to expense, resulting inaccelerated recognition of share-based compensation
expense.

Determining the fair value of share‑based awards
requires significant judgment. The fair values of RSUs
and restricted shares are determined based on thefair value of our ordinary shares. The market price ofour publicly traded ADSs is used as an indicator of fairvalue for our ordinary shares.
We generally estimate the fair value of share options
using the Black‑Scholes valuation model, which
requires inputs such as the fair value of our ordinary
shares, risk‑free interest rate, expected dividend yield,
expected life and expected volatility.
If the fair value of the underlying equity and any of
the assumptions used in the Black‑Scholes modelchanges significantly, share‑based compensation
expense for future awards may differ materiallycompared with the awards granted previously.
Share‑based awards relating to Ant Group
Junhan and Ant Group have granted share-based
awards to our employees, and the awards will besettled by Junhan or Ant Group respectively. See“Major Shareholders and Related Party Transactions— Related Party Transactions — Agreements andTransactions Related to Ant Group and Its Subsidiaries— Our Commercial Arrangements with Ant Group andAlipay — Share‑based Award Arrangements.”
These awards meet the definition of a financial
derivative. The cost relating to these awards
is recognized by us and the related expense isrecognized over the requisite service period in the
consolidated income statements with a corresponding
credit to additional paid-in capital. Subsequentchanges in the fair value of these awards are recordedin the consolidated income statements. The expenses
relating to these awards are re-measured at the fairvalue on each reporting date until their settlement
dates. See note 8(b) to our audited consolidated
financial statements included in this annual report.
Share-based compensation expense will be affectedby changes in the fair value of awards granted to ouremployees by Junhan and Ant Group. The fair valueof the underlying equity is primarily determined withreference to the business enterprise value, or BEV, of
Ant Group which is based on the contemporaneous
valuation report, external information and information
obtained from Ant Group. Given that the determinationof the BEV of Ant Group requires judgment and the BEV
is beyond our control, the magnitude of the related
accounting impact is unpredictable and may affectour consolidated income statements significantly.

Fiscal Year 2023 Annual Report139Management Discussion and Analysis

Share-based compensation expense of awards
relating to our ordinary shares and Ant Groupis recorded net of estimated forfeitures in ourconsolidated income statements and accordingly isrecorded only for those share-based awards that are
expected to vest. We estimate the forfeiture rate basedon historical forfeitures of share-based awards andadjust the rate to reflect changes when necessary. We
revise our estimated forfeiture rate if actual forfeitures
significantly differ from the initial estimates.
To the extent the actual forfeiture rate is different fromwhat we have anticipated, share-based compensation
expense related to these awards will be different.
The expenses associated with these awards will berecognized across the functions in which the award
recipients are employed and may continue to besignificant in future periods.

Recognition of Income Taxes and Deferred
Tax Assets/Liabilities
We are mainly subject to income tax in China, but arealso subject to taxation on profit arising in or derived
from the tax jurisdiction where our subsidiaries are
domiciled and operate outside of China. Income taxes
are assessed and determined on an entity basis. There
are transactions (including entitlement to preferential
tax treatment and deductibility of expenses) where theultimate tax determination is uncertain until the final
tax position is confirmed by relevant tax authorities.
In addition, we recognize liabilities for anticipated tax
audit issues based on estimates of whether additional
taxes could be due. Where the final tax outcomeof these matters is different from the amounts thatwere initially recorded, the differences will impact theincome tax and deferred tax provisions in the period inwhich the determination is made.
Deferred income tax is recognized for all temporary
differences, carry forward of unused tax credits andunused tax losses, to the extent that it is probablethat taxable profit will be available in the futureagainst which the temporary differences, the carryforward of unused tax credits and unused tax losses
could be utilized. Deferred income tax is provided
in full, using the liability method. The deferred
tax assets recognized are mainly related to thetemporary differences arising from amortization oflicensed copyrights and accrued expenses, which

140

Alibaba Group Holding Limited

are not deductible until paid under the applicable
PRC tax laws. We have also recognized deferred tax
liabilities on the undistributed earnings generated
by our subsidiaries in China, which are subject towithholding tax when the subsidiaries resolve to
distribute dividends to us. We have also recognizeddeferred tax for temporary differences in relation
to certain investments in equity method investees,
equity securities and other investments and sharebased awards. As of March 31, 2023, we haveaccrued the withholding tax on substantially all of the
distributable earnings of the PRC subsidiaries, except
for those undistributed earnings that we intend toinvest indefinitely in the PRC. If the plan to invest theundistributed earnings indefinitely in the PRC changes
or if these funds are in fact distributed outside of
China, we would be required to accrue or pay thewithholding tax on some or all of these undistributed
earnings and our effective tax rate would be adversely
affected.

Fair Value Determination Related to the
Accounting for Business Combinations
A component of our growth strategy has been toacquire and integrate complementary businesses into
our ecosystem. We complete business combinations
from time to time that require us to perform purchaseprice allocations. In order to recognize the acquisition
date amounts of assets acquired and liabilities
assumed, mainly consisting of intangible assets andgoodwill, as well as the fair value of any contingent
consideration to be recognized, we use valuation
techniques such as discounted cash flow analysis
and ratio analysis with reference to comparable
companies in similar industries under the income
approach, market approach and cost approach. Major
assumptions used in determining the fair value ofthese intangible assets include future growth rates
and weighted average cost of capital. Most of thevaluations of our acquired businesses have been
performed by independent valuation specialists under
our management’s supervision. We believe that theestimated fair value assigned to the assets acquired
and liabilities assumed are based on reasonableassumptions and estimates that market participants
would use. However, these assumptions are inherently
uncertain and actual results could differ from thoseestimates.

Management Discussion and Analysis

Fair Value Determination Related to Financial
Instruments Accounted for at Fair Value
We have a significant amount of financial instrumentsthat are categorized within Level 2 and Level 3
according to ASC 820 “Fair Value Measurement.” Thevaluations for certain financial instruments categorized
within Level 2, such as interest rate swap contracts
and certain option agreements, are performed basedon inputs derived from or corroborated by observable
market data. Convertible and exchangeable bondsthat do not have a quoted price are categorized
within Level 2 or Level 3, of which the valuations are
generally performed using valuation models suchas the binomial model with unobservable inputs
including risk-free interest rate and expected volatility.
The valuation of contingent consideration categorized
within Level 3 is performed using an expected cash
flow method with unobservable inputs including theprobability to achieve the contingencies in connection
with the contingent consideration arrangements.
Significant judgment is required to determine theappropriateness of those unobservable inputs.
Investments in privately held companies for which weelected to record using the measurement alternative
are recorded at cost, less impairment, with subsequentadjustments for observable price changes resulting
from orderly transactions for identical or similar
investments of the same issuer. The valuations ofthese investments are categorized within Level 3, andare estimated based on valuation methods using theobservable transaction price at the transaction dateand considering the rights and obligations of the
securities and other unobservable inputs including
volatility. The determination of whether an observabletransaction is orderly and whether the investment
involved is identical or similar to our investment,
and the amount of fair value adjustment requires
significant judgment.

Impairment Assessment on Goodwill andIntangible Assets
We test annually, or whenever events or circumstancesindicate that the carrying value of assets exceeds
the recoverable amounts, whether goodwill andintangible assets have suffered any impairment inaccordance with the accounting policy stated in note
2 to our audited consolidated financial statements
included in this annual report. For the impairment
assessment on goodwill, we may first perform
a qualitative assessment to determine whether
quantitative impairment testing of goodwill isnecessary. In this assessment, we identify the reporting
units, consider factors such as macroeconomic
conditions, industry and market considerations, overall
financial performance of the reporting units, andother specific information related to the operations,business plans and strategies of the reporting units,
including consideration of the impact of the COVID-19
pandemic. Based on the qualitative assessment, if it ismore likely than not that the fair value of a reporting
unit is less than the carrying amount, the quantitative
impairment test is performed. We may also bypass
the qualitative assessment and proceed directly toperform the quantitative impairment test. For thequantitative assessment of goodwill impairment, we
compare the fair value of each reporting unit to its
carrying amount, including goodwill. If the fair valueof the reporting unit exceeds its carrying amount,goodwill is not considered to be impaired. If thecarrying amount of a reporting unit exceeds its fairvalue, the amount by which the carrying amountexceeds the reporting unit’s fair value is recognized as
impairment.
For intangible assets other than licensed copyrights,
we perform an impairment assessment whenever
events or changes in circumstances indicate thecarrying value of an asset may not be recoverable.
These assessments primarily use cash flow
projections based on financial forecasts prepared bymanagement and an estimated terminal value. The
expected growth in revenues and operating margin,
timing of future capital expenditures, an estimate ofweighted average cost of capital and terminal growthrate are based on actual and prior year performanceand market development expectations. The periods ofthe financial forecasts generally range from three tofive years or a longer period if necessary. Judgment isrequired to determine key assumptions adopted in the
cash flow projections and changes to key assumptions
can significantly affect these cash flow projections andthe results of the impairment tests.

Fiscal Year 2023 Annual Report141Management Discussion and Analysis

Impairment Assessment on Licensed
Copyrights
We evaluate the program usefulness of licensed
copyrights pursuant to the guidance in ASC 920“Entertainment — Broadcasters,” which provides thatthe rights be reported at the lower of unamortizedcost or fair value. When there is a change in the
expected usage of licensed copyrights, we estimate
the fair value of licensed copyrights to determine if any
impairment exists. The fair value of licensed copyrights
is determined by estimating the expected cash flows
from advertising and membership fees, less any costs
and expenses, over the remaining useful lives of thelicensed copyrights at the film-group level. Estimatesthat impact these cash flows include anticipatedlevels of demand for our advertising services and the
expected selling prices of advertisements. Judgment isrequired to determine the key assumptions adopted
in the cash flow projections and changes to key
assumptions can significantly affect these cash flow
projections and the results of the impairment tests.

Impairment Assessment on Investments in
Equity Method Investees
We continually review our investments in equity
method investees to determine whether adecline in fair value below the carrying value is“other‑than‑temporary.” The primary factors that we
consider include:

•
•
•
•

142

the severity and length of time that the fair valueof the investment is below its carrying value;
the stage of development, the business plan, thefinancial condition, the sufficiency of funding, theoperating performance and the prospects of theinvestee companies;
the geographic region, market and industry inwhich the investee companies operate, including
consideration of the impact of the COVID-19
pandemic and Russia-Ukraine conflict; andother entity specific information such as recent
financing rounds completed by the investee
companies and post balance sheet date fairvalue of the investment.

Alibaba Group Holding Limited

Fair value of listed securities is subject to volatility andmay be materially affected by market fluctuations.
Judgment is required to determine the weighting andimpact of the abovementioned factors and changes tothis determination can significantly affect the results of
the impairment tests.

Impairment Assessment on Equity Securities
Equity securities without readily determinable fairvalues that are accounted for using the measurement
alternative are subject to periodic impairment
reviews. Our impairment analysis considers both
qualitative and quantitative factors that may havea significant effect on the fair value of these equity
securities, including consideration of the impact of
the COVID-19 pandemic and Russia-Ukraine conflict.
Qualitative factors considered may include market
environment and conditions, financial performance,business prospects, and other relevant events andfactors. When indicators of impairment exist, we
perform quantitative assessments of the fair value,
which may include the use of market and income
valuation approaches and the use of estimates,
which may include discount rates, investees’ liquidityand financial performance, and market data ofcomparable companies in similar industries. Judgment
is required to determine the appropriateness of thevaluation approaches and the weighting and impactof the abovementioned factors. Changes to thisdetermination can significantly affect the results of thequantitative assessments.

Depreciation and Amortization
The costs of property and equipment and intangible
assets are charged ratably as depreciation andamortization expenses, respectively, over theestimated useful lives of the respective assets using
the straight‑line method. We periodically review
changes in technology and industry conditions, asset
retirement activity and residual values to determine
adjustments to estimated remaining useful lives anddepreciation and amortization rates. Actual economic
lives may differ from estimated useful lives. Periodic
reviews could result in a change in estimated useful
lives and therefore depreciation and amortization
expenses in future periods.

Management Discussion and Analysis

Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04,“Reference Rate Reform (Topic 848): Facilitation of
the Effects of Reference Rate Reform on Financial
Reporting” and issued subsequent amendments
within ASU 2021-01 and ASU 2022-06 (collectively,
including ASU 2020-04, “ASC 848”) in January 2021
and December 2022 respectively. ASC 848 provides
optional expedients and exceptions for applying
U.S. GAAP on contract modifications and hedge
accounting to contracts, hedging relationships, andother transactions that reference LIBOR or anotherreference rate expected to be discontinued becauseof reference rate reform, if certain criteria are met.
These optional expedients and exceptions provided
in ASC 848 are effective for us from January 1, 2020
through December 31, 2024. We have elected theoptional expedients for certain existing interest rate
swaps that are designated as cash flow hedges,
which did not have a material impact on the financial
position, results of operations and cash flows. We are
evaluating the effects, if any, of the potential electionof the other optional expedients and exceptions
provided in this guidance on our financial position,
results of operations and cash flows.
In October 2021, the FASB issued ASU 2021-08,“Business Combinations (Topic 805): Accounting
for Contract Assets and Contract Liabilities fromContracts with Customers”, which provides guidanceon the acquirer’s accounting for acquired revenue
contracts with customers in a business combination.
The amendments require an acquirer recognizes
and measures contract assets and contract liabilities
acquired in a business combination at the acquisition
date in accordance with ASC 606 as if it had originatedthe contracts. This guidance also provides certain
practical expedients for acquirers when recognizing
and measuring acquired contract assets and contract
liabilities from revenue contracts in a businesscombination. The new guidance is required to be
applied prospectively to business combinations
occurring on or after the date of adoption. This
guidance is effective for us for the year ending March
31, 2024 and interim reporting periods during the year
ending March 31, 2024. Early adoption is permitted.
We do not expect that the adoption of this guidance
will have a material impact on the financial position,
results of operations and cash flows.

In June 2022, the FASB issued ASU 2022-03, “Fair Value
Measurement (Topic 820): Fair Value Measurementof Equity Securities Subject to Contractual Sale
Restrictions”, which clarifies that a contractual
restriction on the sale of an equity security is notconsidered part of the unit of account of the equity
security and, therefore, is not considered in measuring
fair value. The amendments also clarify that an entity
cannot, as a separate unit of account, recognize andmeasure a contractual sale restriction. This guidance
also requires certain disclosures for equity securities
subject to contractual sale restrictions. The new
guidance is required to be applied prospectively
with any adjustments from the adoption of theamendments recognized in earnings and disclosed
on the date of adoption. This guidance is effective
for us for the year ending March 31, 2025 and interim
reporting periods during the year ending March 31,
2025. Early adoption is permitted. We do not expectthat the adoption of this guidance will have a material
impact on the financial position, results of operations
and cash flows.
In September 2022, the FASB issued ASU 2022-04,“Liabilities — Supplier Finance Programs (Subtopic
405-50): Disclosure of Supplier Finance Program
Obligations”, which require a buyer in a supplierfinance program disclose qualitative and quantitative
information about the supplier finance program.
The amendments do not affect the recognition,measurement, or financial statement presentation of
obligations covered by supplier finance programs. The
new guidance is required to be applied retrospectively
to each period in which a balance sheet is presented,
except for the amendment on rollforward information,
which should be applied prospectively. This guidanceis effective for us for the year ending March 31, 2024
and interim reporting periods during the year ending
March 31, 2024. Early adoption is permitted. We do
not expect that the adoption of this guidance will havea material impact on the financial position, results ofoperations and cash flows.

Fiscal Year 2023 Annual Report143Management Discussion and Analysis

Research andDevelopment, Patents andLicenses, etc.
Research and Development
We have built our core technologies for our online andmobile commerce and cloud businesses in-house.
We employ research and development personnel tobuild our technology platform and develop new online
and mobile products. We recruit top and experienced
talent locally and overseas, and we have advanced
training programs designed specifically for new
campus hires.

Intellectual Property
We believe the protection of our trademarks,
copyrights, domain names, trade names, trade
secrets, patents and other proprietary rights is
critical to our business. We rely on a combination of
trademark, fair trade practice, copyright and trade
secret protection laws and patent protection in China
and other jurisdictions, as well as confidentiality
procedures and contractual provisions to protect our
intellectual property and our trademarks. We also
enter into confidentiality and invention assignment
agreements with all of our employees, and werigorously control access to our proprietary technology
and information. As of March 31, 2023, we had
11,483 issued patents and 12,818 publicly filed patentapplications in China and 5,338 issued patents and
3,370 publicly filed patent applications in various
other countries and jurisdictions globally. We do notknow whether any of our pending patent applications
will result in the issuance of patents or whether theexamination process will require us to narrow ourclaims.

Trend Information
Other than as disclosed in this annual report, we are
not aware of any trends, uncertainties, demands,
commitments or events for the current fiscal yearthat are reasonably likely to have a material effecton our net revenues, income, profitability, liquidity orcapital reserves, or that caused the disclosed financial
information to be not necessarily indicative of future
operating results or financial conditions.

144

Alibaba Group Holding Limited

QUANTITATIVEAND QUALITATIVEDISCLOSURES ABOUT
MARKET RISK
Market Risks
Interest Rate Risk
Our main interest rate exposure relates to ourindebtedness. We also have interest-bearing assets,
including cash and cash equivalents, short-term
investments and restricted cash. We manage ourinterest rate exposure with a focus on reducing ouroverall cost of debt and exposure to changes ininterest rates. When considered appropriate, we use
derivatives, such as interest rate swaps, to manage
our interest rate exposure.
As of March 31, 2023, approximately 33% of our total
debt (including bank borrowings and unsecured
senior notes) carries floating interest rates and theremaining 67% carries fixed interest rates. We haveentered into various agreements with various financial
institutions as counterparties to swap a certain portionof our floating interest rate debt to effectively become
fixed interest rate debt. After taking these interest
rate swaps into consideration, approximately 32%
of our total debt carries floating interest rates andthe remaining 68% carries fixed interest rates as ofMarch 31, 2023. All of the abovementioned interest
rate derivatives are designated as cash flow hedges
and we expect these hedges to be highly effective.
Certain of our indebtedness carries floating interest
rates based on SOFR. As a result, the interest expenses
associated with these indebtedness will be subject
to the potential impact of any fluctuation in SOFR.
An increase in SOFR could raise our financing costs,
which could adversely affect our operating results andfinancial condition, as well as our cash flows. See “Risk
Factors — Risks Related to Our Business and Industry —We are subject to interest rate risk in connection with
our indebtedness.”
As of March 31, 2022 and 2023, if interest rates
increased/decreased by 1%, with all other variables
having remained constant, and assuming the amountof interest-bearing assets and debts that bear floating

Management Discussion and Analysis

interest were outstanding for the entire respective
years, our profit attributable to equity owners would
have been RMB4,457 million and RMB5,473 million(US$797 million) higher/lower, respectively, mainly asa result of higher/lower interest income from our cash
and cash equivalents and short-term investments. The
analysis does not include floating interest rate debts
whose interests are hedged by interest rate swaps.

Foreign Exchange Risk
Foreign currency risk arises from future commercial
transactions, recognized assets and liabilities andnet investments in foreign operations. Although we
operate businesses in different countries, most of ourrevenue-generating transactions, and a majority of
our expense-related transactions, are denominatedin Renminbi, which is the functional currency of
our major operating subsidiaries and the reporting
currency of our financial statements. When consideredappropriate, we enter into hedging activities withregard to exchange rate risk.
The value of the Renminbi against the U.S. dollar
and other currencies may fluctuate and is affectedby, among other things, changes in political andeconomic conditions and the foreign exchange policy
adopted by the PRC government. It is difficult topredict how market forces or PRC or U.S. government
policy may impact the exchange rate between theRenminbi and the U.S. dollar in the future. Thereremains significant international pressure on the
PRC government to adopt a more flexible currency
policy, which could result in greater fluctuations of theRenminbi against the U.S. dollar.
To the extent that we need to convert U.S. dollars
into Renminbi for our operations, appreciation of theRenminbi against the U.S. dollar would reduce theRenminbi amount we receive from the conversion.
Conversely, if we decide to convert Renminbi into
U.S. dollars for the purpose of making payments for
dividends on our ordinary shares or ADSs, servicing
our outstanding debts, or for other business purposes,
appreciation of the U.S. dollar against the Renminbi
would reduce the U.S. dollar amounts available to us.

As of March 31, 2022, we had Renminbi denominatedcash and cash equivalents and short-term investmentsof RMB269,892 million and U.S. dollar-denominatedcash and cash equivalents and short-term investmentsof US$26,269 million. Assuming we had converted
RMB269,892 million into U.S. dollars at the exchange
rate of RMB6.3393 for US$1.00 as of March 31, 2022,
our total U.S. dollar cash balance would have been
US$68,843 million. If the Renminbi had depreciatedby 10% against the U.S. dollar, our U.S. dollar cash
balance would have been US$64,973 million.
As of March 31, 2023, we had Renminbi denominatedcash and cash equivalents, short-term investments
and other treasury investments of RMB351,195
million and U.S. dollar-denominated cash andcash equivalents, short-term investments and othertreasury investments of US$29,171 million. Assuming
we had converted RMB351,195 million into U.S. dollars
at the exchange rate of RMB6.8676 for US$1.00 asof March 31, 2023, our total U.S. dollar cash balance
would have been US$80,309 million. If the Renminbi
had depreciated by 10% against the U.S. dollar, our
U.S. dollar cash balance would have been US$75,660
million.

Market Price Risk
We are exposed to market price risk primarily withrespect to equity securities carried at fair value thatare publicly traded. A substantial portion of ourinvestments in equity method investees are held forlong-term appreciation or for strategic purposes,
which are accounted for under equity method and are
not subject to market price risk. We are not exposed
to commodity price risk. The sensitivity analysis isdetermined based on the exposure of equity securities
and certain other financial instruments that are carriedat fair value on a recurring basis to market price risk at
the end of each reporting period.
In fiscal year 2022 and 2023, if the market price ofthe respective financial instruments held by us had
been 1% higher/lower as of March 31, 2022 and 2023,
these instruments would have been approximately
RMB1,224 million and RMB1,233 million (US$180
million) higher/lower, respectively, all of which would
be recognized as income or loss during the respective
period.

Fiscal Year 2023 Annual Report145Management Discussion and Analysis

CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls andProcedures
We maintain disclosure controls and procedures
designed to provide reasonable assurance that
information required to be disclosed in reports filed
under the U.S. Exchange Act is recorded, processed,
summarized and reported within the specified time
periods and accumulated and communicated to ourmanagement, including our chief executive officer andchief financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
Our management, under the supervision and with theparticipation of our principal executive officer and ourprincipal financial officer, evaluated the effectivenessof our disclosure controls and procedures, as definedin Rules 13a-15(e) or 15d-15(e) promulgated under
the U.S. Exchange Act, at March 31, 2023. Based onthat evaluation, our principal executive officer andprincipal financial officer have concluded that ourdisclosure controls and procedures are effective inensuring that information required to be disclosed
in the reports that we file or submit under the U.S.
Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
SEC’s rules and forms, and that information required
to be disclosed in the reports that we file or submit
under the U.S. Exchange Act is accumulated andcommunicated to our management, including ourchief executive officer and chief financial officer, toallow timely decisions regarding required disclosure.

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Alibaba Group Holding Limited

Management’s Annual Report on Internal
Control over Financial Reporting
Our management is responsible for establishingand maintaining adequate internal control overfinancial reporting as defined in Rules 13a-15(f)and 15d-15(f) under the U.S. Exchange Act. As
required by Rule 13a-15(c) of the U.S. Exchange Act,
our management conducted an evaluation of ourcompany’s internal control over financial reporting asof March 31, 2023 based on the framework in Internal
Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of theTreadway Commission. Based on this evaluation, ourmanagement concluded that our internal control overfinancial reporting was effective as of March 31, 2023.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluationof effectiveness of our internal control over financial
reporting to future periods are subject to the risks that
controls may become inadequate because of changes
in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.
Our independent registered public accounting
firm, PricewaterhouseCoopers, has audited theeffectiveness of our internal control over financial
reporting as of March 31, 2023, as stated in its report,
which appears on page F-2 of this annual report.

Changes in Internal Control overFinancial Reporting
There were no changes in our internal control overfinancial reporting that occurred during the period
covered by this annual report that have materiallyaffected, or are reasonably likely to materially affect,
our internal control over financial reporting.

Management Discussion and Analysis

PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain
professional services rendered by PricewaterhouseCoopers, our principal external auditors, for the periods
indicated. We did not pay any other fees to our auditors during the periods indicated below.
Year ended March 31,
2022

2023

(in thousands of RMB)
125,332

109,122

Audit-related Fees

8,560

3,800

Tax Fees

2,754

7,078

All Other Fees

15,466

10,511

Total

152,112130,511

Audit Fees

(1)
(2)

(3)
(4)

(1) “Audit Fees” represents the aggregate fees billed or to be billed for each of the fiscal years listed for professional services renderedby our principal auditors for the audit of our annual financial statements, as well as assistance with and review of documents filedwith the SEC and other statutory and regulatory filings.
(2) “Audit-related Fees” represents the aggregate fees billed in each of the fiscal years listed for the assurance and related services
rendered by our principal auditors that are reasonably related to the performance of the audit or review of our financial statements
and not reported under “Audit Fees.”(3) “Tax Fees” represents the aggregate fees billed in each of the fiscal years listed for the professional tax services rendered by our
principal auditors.
(4) “All Other Fees” represents the aggregate fees billed in each of the fiscal years listed for services rendered by our principal auditors
other than services reported under “Audit Fees,” “Audit-related Fees” and “Tax Fees.”

The policy of our audit committee is to pre-approve all audit and non-audit services provided byPricewaterhouseCoopers, including audit services, audit-related services, tax services and other services as
described above, other than those for de minimis services that are approved by the audit committee prior to thecompletion of the audit.

Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements
included in this annual report.

Fiscal Year 2023 Annual Report

147

110

101

001

Directors,
Senior Management010
1 0 1 and Employees
00
1

1
0
0
1
0
0101

Directors, Senior Management and Employees
Directors and Senior Management
The following table sets forth certain information relating to our directors and executive officers.
Name

Age
51

Chairman and Chief Executive Officer
Chairman and Chief Executive Officer, Cloud Intelligence
Group

Joseph C. TSAI†(2)(a)(d)59

Executive Vice Chairman
Chairman, Cainiao Smart Logistics Network Limited

J. Michael EVANS†(2)(a)65

Director and President
Chairman, Alibaba International Digital CommerceGroup

Maggie Wei WU†(2)(c)55

Director

54

Independent director

Wan Ling MARTELLO

65

Independent director

Weijian SHAN

69

Independent director

69

Independent director

Albert Kong Ping NG

65

Independent director

Kabir MISRA

54

Independent director

50

Chief Financial Officer

Jane Fang JIANG

49

Chief People Officer

Zeming WU

Jerry YANG(2)(b)(2)(b)(2)(a)

Irene Yun-Lien LEE(2)(a)(2)(b)(2)(c)

Toby Hong XU

(1)
(1)

43

Chief Technology Officer

(1)

48

General Counsel

Trudy Shan DAI

47

Chief Executive Officer, Taobao and Tmall Group(1)

Yongfu YU

46

Chief Executive Officer, Local Services Group(1)

Fan JIANG

37

Chief Executive Officer, Alibaba International Digital
Commerce GroupLin WAN(1)48

Chief Executive Officer, Cainiao Smart Logistics Network
LimitedLuyuan FAN(1)50

Chief Executive Officer, Digital Media and Entertainment
Group

(1)

Sara Siying YU(1)†

Position/Title

Daniel Yong ZHANG†(1)(b)(d)Director nominated by the Alibaba Partnership.

(a) Group I directors. Current term of office will expire at our 2024 annual general meeting.
(b) Group II directors. Current term of office will expire at our 2025 annual general meeting.
(c) Group III directors. Current term of office will expire at our 2023 annual general meeting.
(d) Effective on September 10, 2023, Joe Tsai will succeed Daniel Zhang as Chairman of the Company and Eddie Yongming Wu,
Chairman of Taobao and Tmall Group, will succeed Daniel Zhang as Director and Chief Executive Officer.
(1) 969 West Wen Yi Road, Yu Hang District, Hangzhou 311121, the People’s Republic of China.
(2) 26/F Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong S.A.R., the People’s Republic of China.

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Alibaba Group Holding Limited

Directors, Senior Management and Employees

Biographical Information
Daniel Yong ZHANG (張勇) has served as ourchairman since September 2019, has been our chief
executive officer since May 2015 and our director since
September 2014. He is a founding member of the
Alibaba Partnership. He became the chief executive
officer of Cloud Intelligence Group in December 2022
and was appointed chairman of Cloud Intelligence
Group in May 2023, in addition to his existing roles
as chairman and chief executive officer of Alibaba
Group. Previously, he served as our chief operating
officer from September 2013 to May 2015. He joined
our company in August 2007 as chief financial officer
of Taobao Marketplace and served in this position
until June 2011. He took on the additional role ofgeneral manager for Tmall.com in August 2008, which
he performed concurrently until his appointment aspresident of Tmall.com in June 2011 when Tmall.com
became an independent platform. Prior to joining
Alibaba Group, Daniel served as chief financial
officer of Shanda Interactive Entertainment Limited,an online game developer and operator then listedon Nasdaq, from September 2005 to August 2007.
From 2002 to 2005, he was a senior manager ofPricewaterhouseCoopers’ Audit and Business Advisory
Division in Shanghai. Daniel is a member of the WEF
International Business Council. He served as the cochair of the board of Consumer Goods Forum from
June 2021 to June 2023. Daniel received a bachelor’s
degree in finance from Shanghai University of Financeand Economics.
Joseph C. TSAI (蔡崇信) joined our company in1999 as a member of the Alibaba founding teamand has served on our board of directors since our
inception. He was chief financial officer until 2013
and is currently our executive vice chairman. Joe is afounding member of the Alibaba Partnership. He ischairman of Cainiao Smart Logistics Network Limited,a board member of Taobao and Tmall Group, and aboard member of our affiliate Ant Group. From 1995 to1999, Joe was a private equity investor based in Hong
Kong with Investor AB, the main investment vehicleof Sweden’s Wallenberg family. Prior to that, he was
general counsel of Rosecliff, Inc., a managementbuyout firm based in New York. From 1990 to 1993, Joe
was an associate attorney in the tax group of Sullivan& Cromwell LLP, a New York-based international law
firm. Joe is qualified to practice law in the State of New
York. Joe received his bachelor’s degree in Economics
and East Asian Studies from Yale College and a juris
doctor degree from Yale Law School.

J. Michael EVANS has been our president sinceAugust 2015 and our director since September 2014. In
May 2023 he was appointed Chairman of the Alibaba
International Digital Commerce business. Prior tojoining Alibaba Group, Mike spent 30 years in global
finance. Mike served as Vice Chairman of The Goldman
Sachs Group, Inc. from February 2008 until his
retirement in December 2013. Mike served as chairmanof Asia operations at Goldman Sachs from 2004 to
2013. Mike joined Goldman Sachs in 1993, became apartner of the firm in 1994 and held various leadership
positions within the firm’s securities business whilebased in New York and London, including global headof equity capital markets and global co-head of theequities division, and global co-head of the securities
business. Mike is a board member of City Harvest. He
is also a trustee of the Asia Society and a memberof the Advisory Council for the Bendheim Center for
Finance at Princeton University. In August 2014, Mike
joined the board of Barrick Gold Corporation, andin December 2020, he joined the board of Farfetch
Limited as a non-executive director, both companies
listed on the NYSE. Mike received his bachelor’s degree
in politics from Princeton University in 1981, and won
an Olympic gold medal for his home country Canada
as a member of the men’s eights rowing team in theLos Angeles 1984 Summer Olympics.
Maggie Wei WU (武衛) has been our director since
September 2020 and is a founding member of the
Alibaba Partnership. Maggie joined our company in
July 2007 as chief financial officer of Alibaba.com. She
served as our chief financial officer from May 2013
to March 2022 and our head of strategic investmentsfrom June 2019 to March 2022. She was voted thebest CFO in FinanceAsia’s annual poll for Asia’s BestManaged Companies in 2010. In 2018, she was named
as one of the world’s 100 most powerful women by
Forbes. Before joining Alibaba, Maggie was an audit
partner at KPMG in Beijing. Maggie is a member of the
Association of Chartered Certified Accountants (ACCA).
She received a bachelor’s degree in accounting from
Capital University of Economics and Business.
Jerry YANG (楊致遠) has been our director since
September 2014. Jerry previously served as our
director from October 2005 to January 2012. Since
March 2012, Jerry has served as the founding partnerof AME Cloud Ventures, a venture capital firm. Jerry
is a co-founder of Yahoo! Inc., and served as Chief
Yahoo! and as a member of its board of directors fromMarch 1995 to January 2012. In addition, he served
as Yahoo!’s Chief Executive Officer from June 2007
to January 2009. From January 1996 to January 2012,
Jerry served as a director of Yahoo! Japan. Jerry also
Fiscal Year 2023 Annual Report151Directors, Senior Management and Employees

served as an independent director of Cisco Systems,
Inc. from July 2000 to November 2012. He is currently
an independent director of Workday Inc., a company
listed on the NYSE, and Lenovo Group Ltd., a company
listed on the Hong Kong Stock Exchange. He also
serves as a director of various private companies
and foundations. Jerry received a bachelor’s degree
and a master’s degree in electrical engineering from
Stanford University, where he is currently serving on
the university’s Board of Trustees since October 2017.
Jerry was appointed Chair of Stanford’s Board ofTrustees in July 2021. He was previously on Stanford’s
Board of Trustees from 2005 to 2015, including beinga vice chair.
Wan Ling MARTELLO has been our director since
September 2015. She is a founding partner of BayPine,a private equity firm based in Boston, U.S.A., a role she
has held since February 2020. She is also on the boardof portfolio companies of BayPine. She served as theexecutive vice president and chief executive officerof the Asia, Oceania, and sub-Saharan Africa region
for Nestlé SA from May 2015 to December 2018. She
was Nestlé’s global chief financial officer from April
2012 to May 2015, and executive vice president from
November 2011 to March 2012. Prior to Nestlé, Wan
Ling was a senior executive at Walmart Stores Inc., aglobal retailer, from 2005 to 2011. Her roles included
executive vice president and chief operating officer
for Global eCommerce, and senior vice president,
chief financial officer and strategy for Walmart
International. Before Walmart, she was president,
U.S.A. at NCH Marketing Services Inc. She was with thefirm from 1998 to 2005. She also worked at Borden
Foods Corporation and Kraft Inc. where she held
various senior management positions. She is currently
a director of Uber Technologies, Inc., a company listedon the NYSE and Stellantis N.V., a company listed on
the NYSE, the Italian Stock Exchange and Euronext,
Paris. Wan Ling received a master’s degree in businessadministration (management information systems)
from the University of Minnesota and a bachelor’s
degree in business administration and accountancy
from the University of the Philippines.
Weijian SHAN (單偉建) has been our director since
March 2022. He is the executive chairman and afounder of PAG, a leading private equity firm in Asia.
He has been with PAG since 2010. Between 1998 and2010, he was a partner of the private equity firm TPG
and co-managing partner of TPG Asia (formerly known
as Newbridge Capital). Previously, he was a managing
director of JP Morgan, where he was concurrently thechief representative for China between 1993 and 1998.

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He was an assistant professor at the Wharton Schoolof the University of Pennsylvania between 1987 and1993. Shan is a Trustee of the British Museum. He is
also a member of the International Advisory Councilof Hong Kong Exchanges and Clearing Limited. He
served as an independent director of Singaporelisted Wilmar International Limited between 2018and 2021. He holds an M.A. and a Ph.D. from the
University of California, Berkeley, and an M.B.A. fromthe University of San Francisco. He graduated with amajor in English from the Beijing Institute of Foreign
Trade (currently the Beijing University of International
Business and Economics). Shan is the author of Money
Machine: A Trailblazing American Venture in China(Wiley, 2023), Money Games: The Inside Story of How
American Dealmakers Saved Korea’s Most Iconic Bank
(Wiley, 2020) and Out of the Gobi: My Story of China
and America (Wiley, 2019). He has published articles
and commentaries in the Financial Times, The New
York Times, The Wall Street Journal, Foreign Affairs, The
Economist and other leading publications.
Irene Yun-Lien LEE (利蘊蓮) has been our director
since August 2022. Irene is the executive chairman of
Hysan Development Limited and is the independent
non-executive chairman of Hang Seng Bank Limited,
both companies listed on the Hong Kong Stock
Exchange. She is an independent non-executive
director of Hong Kong and Shanghai Banking
Corporation Limited. She is also a member of the
Exchange Fund Advisory Committee of the Hong
Kong Monetary Authority. Irene was on the board ofmany listed and unlisted companies in Hong Kong,
Singapore, UK and Australia, including CLP Holdings
Limited, Cathay Pacific Airways Limited, QBE InsuranceGroup Limited, ING Bank (Australia) Limited, Noble
Group Limited, amongst others. She was a member ofthe Australian Takeovers Panel as well as a member ofthe Advisory Council of JP Morgan Australia. Until April
2022, she was an independent non-executive directorof HSBC Holdings plc. Irene had a long career infinancial services and held senior positions at Citibank
in New York, London and Sydney. She was the global
head of corporate finance at the CommonwealthBank of Australia and she held other senior positionsin investment banking and funds management
in a number of international financial institutions.
Irene received a Bachelor of Arts degree from Smith
College, United States of America, and is a Barristerat-Law in England and Wales and a member of the
Honourable Society of Gray’s Inn, United Kingdom. She
was awarded the degree of Doctor of Social Science,honoris causa from the Chinese University of Hong
Kong in November 2022.

Directors, Senior Management and Employees

Albert Kong Ping NG (吳港平) has been our
director since August 2022 and chairman of our audit
committee since December 2022. Albert currently
serves as an independent non-executive director
and chairman of the audit committee of a numberof public companies, including Ping An Insurance(Group) Company of China, Ltd., a company listed on
the Shanghai Stock Exchange and the Hong Kong
Stock Exchange, Beijing Airdoc Technology Co., Ltd.,a company listed on the Hong Kong Stock Exchange,
and China International Capital Corporation Limited,
a company listed on the Shanghai Stock Exchange
and the Hong Kong Stock Exchange. Albert is also an
independent non-executive director and member of
the audit and risk committee of Shui On Land Limited,
a company listed on the Hong Kong Stock Exchange.
Albert worked at Ernst & Young China from April 2007
to June 2020, where he was the chairman of Ernst& Young China and a member of Ernst & Young’s
Global Executive Board. Prior to joining Ernst & Young,he was Greater China Managing Partner of Arthur
Andersen, Managing Partner — China Operation ofPricewaterhouseCoopers and Managing Directorof Citigroup — China Investment Banking. Albert is amember of the Hong Kong Institute of Certified Public
Accountants (HKICPA), Chartered Accountants ofAustralia and New Zealand (CAANZ), CPA Australia(CPAA) and Association of Chartered Certified
Accountants (ACCA). He received a bachelor’s degree
in business administration and a master’s degree inbusiness administration from the Chinese University ofHong Kong.
Kabir MISRA has been our director since September
2020, redesignated as our independent director since
February 2023, and is currently managing partner at
RPS Ventures, a venture capital firm in Palo Alto, CA.
Prior to October 2018, Kabir was a managing partner
at SoftBank Investment Advisors (which manages
the SoftBank Vision Fund) and SoftBank Capital. He
worked with SoftBank from 2006 to 2022 (as advisor
from 2018-2022) and has assisted Mr. Masayoshi
Son with our company, and his duties as one ofour directors, since before our IPO. Kabir has also
represented SoftBank at various points on the boardsof its investee companies, including other e-commerceand payments companies Flipkart, Paytm, Tokopedia,
Coupang and BigCommerce. Prior to joining SoftBank,
Kabir worked as an investment banker in the U.S. andHong Kong. Kabir is currently a director of Stratim
Cloud Acquisition Corp., a special purpose acquisition
company listed on Nasdaq, and an independent
director of PayActiv. He received a Bachelor of Arts
degree in Economics from Harvard University and amaster’s degree in business administration from the
Stanford Graduate School of Business.

Toby Hong XU (徐宏) has been our chief financial
officer since April 2022. He joined Alibaba Group in July
2018 and was our deputy chief financial officer from
July 2019 to March 2022. Before joining Alibaba Group,
Toby was a partner at PricewaterhouseCoopers for 11
years, where he joined in 1996. Toby graduated from
Fudan University in Shanghai, China, with a bachelor’s
degree in Physics in 1996. He is a member of theChinese Institute of Certified Public Accountants.
Jane Jiang FANG (蔣芳) has served as our chief
people officer since April 2023 and is a founding
member of the Alibaba Partnership. Prior to hercurrent position, she served as deputy chief people
officer since 2017. Jane joined our company in 1999
as a member of our founding team. Over the years,
Jane has held a number of senior management
roles in different departments within the company,at different times leading China TrustPass productplanning, business analysis, global operations,
website operations and marketing for Alibaba.com,
as well as credit system development. Jane received abachelor’s degree in industry and foreign trade fromthe Hangzhou Institute of Electrical Engineering.
Zeming WU (吳澤明) has been our chief technology
officer since December 2022. Zeming joined Taobao in
2004 and has been the main driver of the technology
structure of Alibaba Group’s e-commerce system. He
has served as the technology leader of several years of
Alibaba 11.11 Global Shopping Festival. As a memberof the Alibaba Partnership who has been trusted
in several of Alibaba’s frontline technical positions,Zeming has been president of Alibaba’s New RetailTechnology business group since November 2018and head of Alibaba’s Local Consumer Services
Technology Center since December 2020. Since July
2021, Zeming has served as chief technology officer
of Alibaba’s Local Consumer Services and head of
the company’s Business Productivity Product Center.
He was appointed our chief technology officer, vicepresident of DAMO Academy in December 2022,
and served as the chief executive officer of Ai Cheng
Technology, a wholly-owned subsidiary of Alibaba,
and the chief technology officer of Taobao and Tmall
Group since April 2023. Zeming holds a bachelor’s
degree in computer science and technology from
Hangzhou Dianzi University.
Sara Siying YU (俞思瑛) has been our general
counsel since April 2020. Sara joined our company
in April 2005 and became one of the first partners of
the Alibaba Partnership. Prior to her current role, she
served as deputy general counsel, responsible fordomestic legal affairs. Before joining Alibaba Group,
she worked in various law firms and government
departments. Sara received a bachelor’s degree in law
from East China University of Political Science and Law.

Fiscal Year 2023 Annual Report153Directors, Senior Management and Employees

Trudy Shan DAI (戴珊) joined our company in 1999
as one of the members of the Alibaba founding team,is a member of the Alibaba Partnership. She has been
serving as the chief executive officer of Taobao andTmall Group since March 2023. Taobao and Tmall
Group, a business group of Alibaba Group, is a globallyleading company driven by technology, which currently
comprises Taobao, Tmall, Tmall Global, Taobao Live,
Tmall Supermarket, Taocaicai, Taobao Deals, Xianyu,
Alimama and 1688.com, providing services such as
online retail, online wholesale, resale, and digitalmarketing. Prior to her current role, Trudy served as
President of Alibaba’s Core Domestic e-Commercefrom January 2022 to February 2023. From January 2017
to December 2021, she was president of Alibaba’s
Industrial E-commerce (formerly “B2B business”),
which at the time comprised Alibaba.com, 1688.com,
AliExpress, Taobao Deals as well as digital agriculture.
She concurrently served as president of Alibaba’s
Community E-commerce from March to December
2021. Trudy was chief customer officer of Alibaba
Group from June 2014 to January 2017. She also served
as senior vice president of human resources andadministration of Taobao and Alibaba.com, as well as
deputy chief people officer and chief people officer of
Alibaba Group from 2009 to 2014. From 2007 to 2008,
she served as general manager of Alibaba.com. Prior
to that, she was vice president of human resources ofYahoo China and the first general manager of Alibaba.
com’s Guangzhou branch, in charge of field andtelephone sales, marketing and human resources in
Guangdong Province. From 2002 to 2005, she served
as senior sales director of TrustPass. Trudy received
a bachelor’s degree in engineering from Hangzhou
Institute of Electrical Engineering.
Yongfu YU (俞永福), a member of the Alibaba
Partnership, currently serves as chairman and chief
executive officer of Local Services Group, where heoversees and manages location-based services
including Amap and Ele.me. Prior to this, Yongfu
served as chairman and chief executive officer of
our Digital Media and Entertainment Group from2016 to 2017 where he streamlined and oversaw
the strategic development of a diverse lineup ofbusinesses and services including online video, news
feed, online gaming, online literature, film, music,
and digital entertainment. Yongfu also previously
served as president of Alimama from 2015 to 2016,
the digital marketing arm of Alibaba Group. Under
his leadership, Alimama successfully restructured
its businesses and achieved rapid growth. Before
joining Alibaba Group, Yongfu was the co-founder,
chairman and chief executive officer of UCWeb Incfrom 2006 to 2014 and was in charge of the overall
154

Alibaba Group Holding Limited

development and operations of the company. He
had spearheaded the company to fast paced growththrough development and reform in business models,
efficient management, product development, teambuilding and capital operations of the company.
Yongfu received his bachelor’s degree in businessadministration from Nankai University in 1999.
Fan JIANG (蔣凡) currently serves as chief executive
officer of Alibaba International Digital CommerceGroup and is a member of the Alibaba Partnership.
He has served as president of Alibaba International
Digital Commerce since January 2022. He has served
as president of Taobao since December 2017,
president of Tmall since March 2019 and presidentof Alimama since December 2019. Prior to his current
position, he had been responsible for the Taobao app
since joining our company in August 2013. Previously,
he founded and served as the chief executive officer ofUmeng, a provider of mobile app analytics solutions
for developers which we acquired. Before founding
Umeng in 2010, he worked in product development at
Google China. Jiang Fan received a bachelor’s degree
in computer science from Fudan University.
Lin WAN (萬霖) currently serves as the director andthe chief executive officer of Cainiao Smart Logistics
Network Limited, a global smart logistics company
and the logistics arm of Alibaba Group, overseeing thecompany’s strategic planning and business operations.
He is also a member of the Alibaba Partnership. Sincejoining the company in 2014, he has spearheaded
the creation of the industrial Internet structure forlogistics, and Cainiao’s core capability building throughglobalization, operation and digitalization. Under his
leadership, Cainiao has advanced in global logistics,
smart supply chain and express, community delivery,
logistics parks and technologies, leading the digitaltransformation of the entire logistics industry throughcooperation. Prior to joining Cainiao, he was a senior
executive at Amazon’s global logistics division. Lin
holds a Ph.D. degree in operational research from The
University of Texas in Austin.
Luyuan FAN (樊路遠) currently serves as chairman
and chief executive officer of Digital Media andEntertainment Group and is a member of the Alibaba
Partnership. He has served as president of DigitalMedia and Entertainment Group since November
2018. He has been an executive director of Alibaba
Pictures since January 2016, and currently serves as
the chairman and chief executive officer of Alibaba
Pictures. He joined Alipay in 2007 where he served ina number of senior management positions, including
the president of Alipay and the president of Ant

Directors, Senior Management and Employees

Group’s wealth management business. Fan holds an
executive master’s degree in business administrationfrom Cheung Kong Graduate School of Business.

Alibaba Partnership
Since our founders first gathered in Jack Ma’sapartment in 1999, they and our management haveacted in the spirit of partnership. We view our culture
as fundamental to our success and our ability to serve
our customers, develop our employees and deliver
long‑term value to our shareholders. In July 2010,
in order to preserve this spirit of partnership and toensure the sustainability of our mission, vision andvalues, we decided to formalize our partnership as
Lakeside Partners, named after the Lakeside Gardens
residential community where Jack Ma and our otherfounders started our company. We refer to thepartnership as the Alibaba Partnership.
We believe that our partnership approach has helped
us to better manage our business, with the peer
nature of the partnership enabling senior managers tocollaborate and override bureaucracy and hierarchy.
As of the date of this annual report, the Alibaba
Partnership has a total of 28 members. The number ofpartners in the Alibaba Partnership may change fromtime to time due to the election of new partners, theretirement of partners and the departure of partners
for other reasons.
Our partnership is a dynamic body that rejuvenates
itself through admission of new partners each year,
which we believe enhances our excellence, innovationand sustainability. Unlike dual‑class ownership
structures that employ a high‑vote class of shares toconcentrate control in a few founders, our approachis designed to embody the vision of a large group of
management partners. This structure is our solution
for preserving the culture shaped by our founders
while at the same time accounting for the fact thatfounders will inevitably retire from the company.
Consistent with our partnership approach,all partnership votes are made on a
one‑partner‑one‑vote basis.
The partnership is governed by a partnershipagreement and operates under principles, policies
and procedures that have evolved with our businessand are further described below.

Nomination and Election of Partners
The Alibaba Partnership elects new partners annually
after a nomination process whereby existing partners
propose candidates to the partnership committee
as described below. The partnership committee

reviews the nominations and determines whether
the nomination of a candidate will be proposed tothe entire partnership for election. Election of newpartners requires the approval of at least 75% of all of
the partners. Partners should be employees of Alibaba
Group.
To be eligible for election, a partner candidate musthave demonstrated the following attributes:

•
•
•
•

a high standard of personal character andintegrity;
continued service with Alibaba Group for not lessthan five years;
a track record of contribution to the business of
Alibaba Group; andbeing a “culture carrier” who shows a consistentcommitment to, and traits and actions consonant
with, our mission, vision and values.

We believe the criteria and process of the Alibaba
Partnership applicable to the election promoteaccountability among the partners as well as to ourcustomers, employees and shareholders. In order
to align the interests of partners with the interestsof our shareholders, we require that each partner
maintain a meaningful level of equity interests in ourcompany during his or her tenure as a partner. Sincea partner nominee must have been our employee forat least five years, as of the time he or she becomesa partner, he or she will typically already own or havebeen awarded a personally meaningful level of equity
interest in our company through our equity incentive
and share purchase or investment plans.

Duties of Partners
The main duty of partners in their capacity as partners
is to embody and promote our mission, vision andvalues. We expect partners to be evangelists forour mission, vision and values, both within ourorganization and externally to customers, business
partners and other participants in our ecosystem.

Partnership Committee
The partnership committee must consist of at least
five but no more than seven partners, including
partnership committee continuity members, andis currently comprised of Jack Ma, Joe Tsai, DanielZhang, Lucy Peng, Xiaofeng Shao and Eddie Wu. The
partnership committee is responsible for administering
partner elections and managing the relevant portionof the deferred cash bonus pool, with any amounts
payable to partners who are our executive officers ordirectors or members of the partnership committee
Fiscal Year 2023 Annual Report155Directors, Senior Management and Employees

subject to approval of the compensation committeeof our board of directors. Either one or two partners
may be designated as partnership committee
continuity partners, and currently the partnershipcommittee continuity members consist of Jack Ma and
Joe Tsai. Other than partnership committee continuity
members, the partnership committee members serve
for a term of five years and may serve multiple terms.
Elections of partnership committee members areheld once every five years. Partnership committee
continuity members are not subject to election, andmay serve until they cease to be partners, retire fromthe partnership committee or are unable to discharge
duties as partnership committee members as a resultof illness or permanent incapacity. A replacement
partnership committee continuity partner is either
designated by a retiring or, as the case may be, theremaining, partnership committee continuity member.
Prior to each election, the partnership committee
will nominate a number of partners equal to thenumber of partnership committee members that willserve in the next partnership committee term plus
three additional nominees less the number of theserving partnership committee continuity members.
Each partner votes for a number of nominees equal
to the number of partnership committee membersthat will serve in the next partnership committee
term less the number of the serving partnershipcommittee continuity members, and all except thethree nominees who receive the least votes from thepartners are elected to the partnership committee.

Director Nomination and Appointment Rights
Pursuant to our Articles of Association, the Alibaba
Partnership has the exclusive right to nominate or, in
limited situations, appoint up to a simple majority ofthe members of our board of directors.
The election of each director nominee of the Alibaba
Partnership will be subject to the director nominee
receiving a majority vote from our shareholders voting
at an annual general meeting of shareholders. If an
Alibaba Partnership director nominee is not elected byour shareholders or after election departs our board of
directors for any reason, the Alibaba Partnership has
the right to appoint a different person to serve as aninterim director of the class in which the vacancy exists
until our next scheduled annual general meeting ofshareholders. At the next scheduled annual general
meeting of shareholders, the appointed interim
director or a replacement Alibaba Partnership director
nominee (other than the original nominee) will standfor election for the remainder of the term of the classof directors to which the original nominee would havebelonged.
156

Alibaba Group Holding Limited

If at any time our board of directors consists of lessthan a simple majority of directors nominated or
appointed by the Alibaba Partnership for any reason,
including because a director previously nominated by
the Alibaba Partnership ceases to be a member of ourboard of directors or because the Alibaba Partnership
had previously not exercised its right to nominate or
appoint a simple majority of our board of directors,
the Alibaba Partnership will be entitled (in its sole
discretion and without the need for any additional
shareholder action) to appoint such number of
additional directors to the board as necessary toensure that the directors nominated or appointed by
the Alibaba Partnership comprise a simple majority ofour board of directors.
In determining the Alibaba Partnership director
nominees who will stand for election to our board, thepartnership committee will propose director nominees
who will be voted on by all of the partners, and thosenominees who receive a simple majority of the votesof the partners will be selected for these purposes. The
director nominees of the Alibaba Partnership may bepartners of the Alibaba Partnership or other qualified
individuals who are not affiliated with the Alibaba
Partnership.
The Alibaba Partnership’s right to nominate or appoint
up to a simple majority of our directors is conditionedon the Alibaba Partnership being governed by thepartnership agreement in effect as of the completionof our initial public offering in September 2014, or as
may be amended in accordance with its terms fromtime to time. Any amendment to the provisions of
the partnership agreement relating to the purposeof the partnership, or to the manner in which the
Alibaba Partnership exercises its right to nominate a
simple majority of our directors, will be subject to theapproval of the majority of our directors who are notnominees or appointees of the Alibaba Partnershipand are “independent directors” within the meaningof Section 303A of the NYSE Listed Company Manual.
The provisions relating to nomination rights andprocedures described above are incorporated in
our Articles. Pursuant to our Articles, the Alibaba
Partnership’s nomination rights and related provisionsof our Articles may only be changed upon the voteof shareholders representing 95% of the votes
present in person or by proxy at a general meeting ofshareholders.
Alibaba Partnership has not fully exercised its director
nomination right. Our board of directors currently
consists of ten members, six are independent
directors nominated by our nominating and corporate
governance committee, four are Alibaba Partnership
nominees.

Directors, Senior Management and Employees

Current Partners
The following table sets forth the names, in alphabetical order by surname, and other information regarding thecurrent partners of the Alibaba Partnership as of the date of this annual report.

Name

Year
JoinedAlibaba
Age Gender Group Current position with Alibaba Group

Lijuan CHEN (陳麗娟)

42

F

2003

Vice President

Trudy Shan DAI (戴珊)

47

F

1999

Director and Chief Executive Officer, Taobao andTmall Group
Director, Alibaba International Digital Commerce Group
Director, Cainiao Smart Logistics Network Limited

Luyuan FAN (樊路遠)

50

M

2007

Chairman and Chief Executive Officer, Digital Media andEntertainment Group

Yongxin FANG (方永新)

49

M

2000

President, Ele.me, Local Services GroupFan JIANG (蔣凡)

37

M

2013

Director and Chief Executive Officer, Alibaba
International Digital Commerce Group
Director, Taobao and Tmall Group
Director, Cainiao Smart Logistics Network Limited

Jane Fang JIANG (蔣芳)

49

F

1999

Group Chief People Officer
Director, Cloud Intelligence Group
Director, Cainiao Smart Logistics Network Limited

Jiangwei JIANG (蔣江偉)

41

M

2008

Vice President, Cloud Intelligence Group

Zhenfei LIU (劉振飛)

51

M

2006

President, Amap

Jack Yun MA (馬雲)†

58

M

1999

Partner, Alibaba Partnership

Lucy Lei PENG (彭蕾)†

49

F

1999

Partner, Alibaba Partnership
Director, Local Services Group
Director, Alibaba International Digital Commerce Group

Xiaofeng SHAO (邵曉鋒)†

57

M

2005

Senior Vice President

Jie SONG (宋潔)

44

F

2000

Vice President, Alibaba International Digital CommerceGroup

Lijun SUN (孫利軍)

46

M

2002

Director-General, Alibaba Foundation

Judy Wenhong TONG (童文紅)

52

F

2000

Partner, Alibaba Partnership
Director, Digital Media and Entertainment Group

Joseph C. TSAI (蔡崇信)†*

59

M

1999

Executive Vice Chairman
Chairman, Cainiao Smart Logistics Network Limited
Director, Taobao and Tmall Group

Fiscal Year 2023 Annual Report157

Directors, Senior Management and Employees

Name

Year
JoinedAlibaba
Age Gender Group Current position with Alibaba GroupLin WAN (萬霖)

48

M

2014

Director and Chief Executive Officer, Cainiao Smart
Logistics Network Limited

Hai WANG (汪海)

43

M

2003

Vice President, Taobao and Tmall GroupLei WANG (王磊)

43

M

2003

Senior Vice President, Cloud Intelligence Group

Winnie Jia WEN (聞佳)

46

F

2007

President, Public Affairs
Director, Digital Media and Entertainment Group

Maggie Wei WU (武衛)

55

F

2007

Director
Director, Digital Media and Entertainment Group

Eddie Yongming WU (吳泳銘)†*

48

M

1999

Senior Vice President
Chairman, Taobao and Tmall Group
Director, Local Services Group
Director, Alibaba International Digital Commerce Group

Zeming WU (吳澤明)

43

M

2004

Group Chief Technology Officer
Deputy Head of Alibaba DAMO Academy
Chief Technology Officer, Local Services Group
Director, Cloud Intelligence Group
Director, Taobao and Tmall Group
Director, Local Services GroupSara Siying YU (俞思瑛)

48

F

2005

Group General Counsel
Director, Digital Media and Entertainment Group

Yongfu YU (俞永福)

46

M

2007

Chairman and Chief Executive Officer, Local Services
Group

Jeff Jianfeng ZHANG (張建鋒)

50

M

2004

Head of Alibaba DAMO Academy

Daniel Yong ZHANG (張勇)

51

M

2007

Group Chairman and Chief Executive Officer
Chairman and Chief Executive Officer, CloudIntelligence Group

Jessie Junfang ZHENG (鄭俊芳) 49

F

2010

Director and Chief Risk Officer, Cloud Intelligence Group

52

M

2014

Chairman and Chief Executive Officer, Alibaba HealthDirector, Local Services Group†*Shunyan ZHU (朱順炎)

158†

Member of the partnership committee.

*

Effective September 10, 2023, Joe Tsai will succeed Daniel Zhang as Group Chairman and Eddie Wu will succeed Daniel Zhang asGroup Chief Executive Officer.

Alibaba Group Holding Limited

Directors, Senior Management and Employees

Retirement and Removal
Partners may elect to retire from the partnership at
any time. All partners except continuity partners are
required to retire upon reaching the age of sixty or
upon termination of their qualifying employment. JackMa and Joe Tsai are designated as continuity partners,
who may remain partners until they reach the ageof seventy (and this age limit may be extended by amajority votes of all partners), elect to retire from thepartnership, die or are incapacitated or are removed
as partners. Any partner, including continuity partners,
may be removed upon the vote of a simple majorityof all partners present at a duly‑called meeting ofpartners for violations of certain standards set forthin the partnership agreement, including failure toactively promote our mission, vision and values,
fraud, gross misconduct or gross negligence. As withother partners, continuity partners must maintainthe shareholding levels required by us of all partners
as described below. Partners who retire from thepartnership upon meeting certain age and service
requirements may be designated as honorably retired
partners by the partnership committee. Honorably
retired partners may not act as partners, but may beentitled to allocations from the deferred portion of theannual cash bonus pool described below as postretirement payments. Continuity partners will not be
eligible to receive allocations from the annual cash
bonus pool if they cease to be our employees even if
they remain partners, but may be entitled to receive
allocations from the deferred bonus pool if they arehonorably retired partners.

Restrictive Provisions
Under our Articles of Association, in connection withany change of control, merger or sale of our company,
the partners and other holders of our ordinary sharesshall receive the same consideration with respect totheir ordinary shares in connection with any of thesetypes of transactions. In addition, our Articles providethat the Alibaba Partnership may not transfer orotherwise delegate or give a proxy to any third‑party
with respect to its right to nominate directors, although
it may elect not to exercise its rights in full. In addition,
as noted above, our Articles also provide that theamendment of certain provisions of the Alibaba
Partnership agreement relating to the purpose of thepartnership or the manner in which the partnershipexercises its rights to nominate or appoint a majorityof our board of directors will require the approval ofa majority of directors who are not appointees of the
Alibaba Partnership and are “independent directors”
within the meaning of Section 303A of the NYSE Listed
Company Manual.

Amendment of Alibaba Partnership
Agreement
Pursuant to the partnership agreement, amendmentof the partnership agreement requires the approval of
75% of the partners in attendance at a meeting of thepartners at which not less than 75% of all the partners
are in attendance, except that the general partner
may effect certain administrative amendments. In
addition, certain amendments relating to the purposesof the Alibaba Partnership or the manner in which
it exercises its nomination rights with respect to ourdirectors require the approval of a majority of our
independent directors not nominated or appointed by
the Alibaba Partnership.

Alibaba Group Equity Interest Holding
Requirements for Partners
Each of the partners holds his or her equity interests in
our company directly as an individual or through hisor her affiliates. Each partner is required to enter intoshare retention agreement with us. These agreements
provide that a period of three years from the date on
which a person becomes a partner, which ranges fromJanuary 2014 to June 2023 for our existing partners,
we require that each partner retain at least 60% of
the equity interests (including shares underlying
vested and unvested awards) that he or she held on
the starting date of the three‑year period. Following
the initial three‑year holding period and for so longas he or she remains a partner, we require that thepartner retain at least 40% of the equity interests(including shares underlying vested and unvested
awards) that he or she held on the starting date of
the initial three‑year holding period. Exceptions to theholding period rules described in the share retention
agreements must be approved by a majority of the
independent directors.

Weighted Voting Rights (WVR) Structure
We have one class of Shares, and each holder of our
Shares is entitled to one vote per Share. Pursuant to
our Articles of Association, the Alibaba Partnership has
the exclusive right to nominate or, in limited situations,
appoint, up to a simple majority of the members ofour board of directors. These rights are categorized asa weighted voting rights structure, or WVR structure,under the Hong Kong Listing Rules. As a result, weare deemed as a company with a WVR structure. For
further information about the risks associated with our
WVR structure, see “Risk Factors — Risks Related to Our
Corporate Structure.”

Fiscal Year 2023 Annual Report159Directors, Senior Management and Employees

Compensation
Compensation of Directors and Executive
Officers
For fiscal year 2023, we paid and accrued aggregate
fees, salaries and benefits (excluding share‑based
awards) of approximately RMB267 million (US$39
million) and granted share-based awards to acquire
an aggregate of 13,087,200 ordinary shares of ourcompany (equivalent to 1,635,900 ADSs) as well asshare-based awards of our subsidiaries with anaggregate value of approximately RMB53 million(US$8 million) to our directors and executive officers. In
addition, Junhan and Ant Group also granted sharebased awards to our directors and executive officers
with an aggregate value of approximately RMB78
million (US$11 million), the costs of which we agreed
to settle with Junhan and Ant Group upon vesting ofthese awards. See “Major Shareholders and Related
Party Transactions — Related Party Transactions —Agreements and Transactions Related to Ant Groupand Its Subsidiaries — Our Commercial Arrangementswith Ant Group and Alipay — Share-based Award
Arrangements.”
Our board of directors, acting on the recommendationof our compensation committee, approves an annual
cash bonus pool for our management, calculated
based on a percentage of our adjusted pretax
operating profits. Once the annual cash bonus
pool is calculated, our compensation committee
determines the proportion allocated and payable
to our management for the year, and approves theamount of individual cash bonus payable to our
executive officers and directors and members of thepartnership committee. The remaining portion of theannual cash bonus pool is available for the partners
and may, upon the approval of our compensationcommittee, be deferred, and used as determined by
the partnership committee, with any amounts payable
to our executive officers or directors or members of thepartnership committee individually be also subject toapproval of the compensation committee of our boardof directors.
The board, acting on the recommendation of ourcompensation committee, may determine theremuneration to be paid to non‑employee directors.
We do not provide employee directors with any
additional remuneration for serving as directors otherthan their remuneration as our employees. Pursuant to160

Alibaba Group Holding Limited

our service agreements with our directors, neither we
nor our subsidiaries provide benefits to directors upon
termination of employment. We do not separately set
aside any amounts for pensions, retirement or otherbenefits for our executive officers, other than pursuant
to relevant statutory requirements. Management
members who are partners of the Alibaba Partnershipmay receive retirement payments from the deferred
portion of the annual cash bonus pool available to the
Alibaba Partnership.
For information regarding share‑based awards
granted to our directors and executive officers, see“— Equity Incentive Plan” below.

Employment Agreements
We have entered into employment agreements witheach of our executive officers. We may terminate
their employment at any time, with cause, and weare not required to provide any prior notice of thetermination. We may also terminate their employment
in circumstances prescribed under and in accordancewith the requirements of applicable labor law,
including but not limited to notice and payment
in lieu of notice. Executive officers may terminate
their employment with us at any time upon written
notice. Although our employment agreements with
our executive officers do not provide for severance
pay, where severance pay is mandated by law, ourexecutive officers will be entitled to severance pay inthe amount mandated by law or in accordance with
our policy when his or her employment is terminated.
We have been advised by our PRC counsel, Fangda
Partners, that we may be required to make severance
payments upon termination without cause to comply
with the PRC Labor Law, the PRC Labor Contract Law
and other relevant PRC regulations, which entitle
employees to severance payments in case of earlytermination of “de facto employment relationships”
by PRC entities without statutory cause regardless ofwhether there exists a written employment agreementwith these entities.
Our award agreements under our equity incentive
plan also contain, among other rights, restrictive
covenants that enable us to terminate grants, forfeit
and cancel shares or, if applicable, repurchase sharesat the original purchase price or the exercise price paid
for the shares in the event of a grantee’s termination
for cause or for breaching of these covenants. See“— Equity Incentive Plan” below.

Directors, Senior Management and Employees

Equity Incentive Plan
Our 2014 Post-IPO Equity Incentive Plan, or the2014 Plan (which we adopted in September 2014,
amended and restated in February 2020 to reflect
the Share Split and other administrative changes,
and further amended and restated in May 2022
to reflect administrative changes) provides for the
granting of share-based awards to eligible grantees.
Share-based awards granted are generally subject
to a four‑year vesting schedule as determined by
the plan administrator. Depending on the natureand the purpose of the grant, share-based awards
in general vest 25% or 50% upon the first or second
anniversary of the vesting commencement date,respectively, as provided in the award agreements,
and 25% every year thereafter. Share-based awards
granted to certain management members are subject
to a vesting period of up to ten years. We believe
share‑based awards are vital to attract, motivate andretain the grantees, and are the appropriate tool toalign their interests with our shareholders. Accordingly,
we will continue to grant share‑based awards to theemployees, consultants and directors of our company,
our affiliates and/or certain other companies as animportant part of their compensation packages.
In addition, our award agreements generally
provide that, in the event of a grantee’s termination
for cause (including any commission of an act offraud, dishonesty or ethical breach) or violation ofa non‑competition undertaking, we will have theright to terminate or cancel grants, forfeit the sharesacquired by the grantee or, if applicable, repurchasethe shares acquired by the grantee, generally at theoriginal purchase price or the exercise price paid forthe shares.
As of March 31, 2023, under the 2014 Plan, there were:•••490,305,632 ordinary shares (equivalent to61,288,204 ADSs) issuable upon vesting ofoutstanding RSUs;
57,034,672 ordinary shares (equivalent to7,129,334 ADSs) issuable upon exercise ofoutstanding options; andIn addition, during the term of the 2014 Plan, startingfrom April 1, 2015 and on each anniversary thereof, anadditional amount equal to the lesser of 200,000,000
ordinary shares (equivalent to 25,000,000 ADSs)
and such lesser number of ordinary shares as isdetermined by our board of directors will be includedin the shares available for issuance under the 2014
Plan.
The following paragraphs summarize other key termsof the 2014 Plan:

Plan Administration
Subject to certain limitations, the 2014 Plan is generally
administered by the compensation committee ofthe board (or a subcommittee thereof), or anothercommittee of the board to which the board hasdelegated power to act; provided that, in the absenceof any committee, the 2014 Plan will be administeredby the board. Grants to any executive directors of theboard must be approved by the disinterested directorsof our board.

Types of Awards
RSUs, incentive and non‑statutory stock options,
restricted shares, dividend equivalents, shareappreciation rights, share payments and other rights
or interests may be granted under the 2014 Plan.

Award Agreements
Generally, awards granted under the 2014 Plans areevidenced by an award agreement providing for thenumber of ordinary shares subject to the award, andthe terms and conditions of the award, which must be
consistent with the plan.

Eligibility
Any employee, consultant or director of our company,
our affiliates or certain other companies, is eligible
to receive awards under the 2014 Plan, but only
employees of our company, our affiliates and/or certain other companies, are eligible to receive
incentive stock options.

305,164,328 ordinary shares (equivalent to38,145,541 ADSs) authorized for issuance but
unissued.

Fiscal Year 2023 Annual Report161Directors, Senior Management and Employees

Term of Awards

Amendment and Termination

The term of awards granted under the 2014 Plan are
generally not to exceed ten years from the date of
grant.

Unless earlier terminated, the 2014 Plan continues in
effect for a term of ten years. The board may at any
time terminate or amend the 2014 Plan in any respect,
including amendment of any form of any award
agreement or instrument to be executed, provided,
however, that to the extent necessary and desirable
to comply with applicable laws or stock exchange
rules, shareholder approval of any amendment to the2014 Plan shall be obtained in the manner and to thedegree required.

Acceleration, Waiver and Restrictions
The plan administrator has sole discretion in
determining the terms and conditions of any award,
any vesting acceleration or waiver of forfeiture
restrictions, and any restrictions regarding any award
or the ordinary shares relating thereto.

Change in Control
If a change in control of our company occurs, the plan
administrator may, in its sole discretion:

•
•

•

162

accelerate the vesting, in whole or in part, of any
award;
purchase any award for an amount of cash or
ordinary shares of our company equal to thevalue that could have been attained upon theexercise of the award or the realization of theplan participant’s rights had the award been
currently exercisable or payable or fully vested;orprovide for the assumption, conversion or
replacement of any award by the successor
corporation, or a parent or subsidiary of thesuccessor corporation, with other rights orproperty selected by the plan administrator
in its sole discretion, or the assumption or
substitution of the award by the successor or
surviving corporation, or a parent or subsidiaryof the surviving or successor corporation, withappropriate adjustments as to the number
and kind of shares and prices as the plan
administrator deems, in its sole discretion,
reasonable, equitable and appropriate.

Alibaba Group Holding Limited

Directors, Senior Management and Employees

Share‑based Awards Held by Our Directors and Officers
The following table summarizes the outstanding RSUs and options held as of March 31, 2023 by our directors andexecutive officers, as well as by their affiliates, under our equity incentive plan.

Name

Number ofoutstanding
RSUs/options
grantedExercise
price(US$ per
RSU/option
granted)Sharesunderlying
outstanding
RSUs/options
grantedDate of grant

Date of expiration

*

87.06

*

(2)

May 10, 2015

May 10, 2027

(1)

*

—

*

(1)

May 17, 2017

May 17, 2025

(1)

*

—

*

(1)

July 24, 2018

July 24, 2026

*

—

*

(1)

August 16, 2019

August 16, 2027*

182.48*(2)

November 14, 2019

November 14, 2027

(1)

*

—

*

(1)

November 14, 2019

November 14, 2029

(1)

*

—

*

(1)

June 15, 2020

June 15, 2028

*(1)

—

*(1)

May 24, 2021

May 24, 2029

3,334(1)—26,672(1)May 17, 2017

May 17, 2025

4,000(1)—32,000(1)July 24, 2018

July 24, 2026

4,000(1)—32,000(1)August 16, 2019

August 16, 2027

*(2)

79.96

*(2)

July 31, 2015

July 31, 2027

(1)

*

—

*

(1)

August 16, 2019

August 16, 2025

(1)

*

—

*

(1)

June 15, 2020

June 15, 2026

(1)

*

—

*

(1)

May 24, 2021

May 24, 2027

(1)

*

—

*

(1)

June 8, 2022

June 8, 2028

*

(1)

—

*

(1)

May 17, 2017

May 17, 2025

(1)

*

—

*

(1)

July 24, 2018

July 24, 2026

(1)

*

—

*

(1)

August 16, 2019

August 16, 2027

(1)

*

—

*

(1)

May 27, 2020

May 27, 2028

(1)

*

—

*

(1)

June 15, 2020

June 15, 2028

(1)

*

—

*

(1)

May 24, 2021

May 24, 2029

Jerry YANG

*

(1)

—

*

(1)

October 30, 2022

October 30, 2028

Wan Ling MARTELLO

*

(1)

—

*

(1)

October 30, 2022

October 30, 2028

Irene Yun-Lien LEE

*

(1)

—

*

(1)

August 3, 2022

August 3, 2028

Albert Kong Ping NG

*(1)

—

*(1)

August 3, 2022

August 3, 2028

Kabir Misra

*(1)

—

*(1)

July 14, 2022

July 14, 2028

Toby Hong XU

*(1)

—

*(1)

May 15, 2019

May 15, 2025

*(1)

—

*(1)

May 27, 2020

May 27, 2026

(1)

*

—

*

(1)

May 24, 2021

May 24, 2027

*

—

*

(1)

June 8, 2022

June 8, 2028

Daniel Yong ZHANG

(2)

(1)
(2)

Joseph C. TSAI

J. Michael EVANS

Maggie Wei WU(1)Fiscal Year 2023 Annual Report163Directors, Senior Management and Employees

Number ofoutstanding
RSUs/options
grantedExercise
price(US$ per
RSU/option
granted)Sharesunderlying
outstanding
RSUs/options
grantedDate of grant

Date of expiration

*

(1)

—

*

(1)

July 30, 2018

July 30, 2026

(1)

*

—

*

(1)

September 1, 2019

September 1, 2027

(1)

*

—

*

(1)

June 15, 2020

June 15, 2028

(1)

*

—

*

(1)

May 24, 2021

May 24, 2029

*(1)

—

*(1)

June 8, 2022

June 8, 2030

*

(1)

—

*

(1)

July 3, 2017

July 3, 2025

(1)

*

—

*

(1)

October 1, 2017

October 1, 2025

(1)

*

—

*

(1)

July 30, 2018

July 30, 2026

*(1)

—

*(1)

September 1, 2019

September 1, 2027

(1)

*

—

*

(1)

June 15, 2020

June 15, 2028

(1)

*

—

*

(1)

May 24, 2021

May 24, 2029

*

(1)

—

*

(1)

July 3, 2017

July 3, 2025

*(1)

—

*(1)

July 30, 2018

July 30, 2026

(1)

*

—

*

(1)

September 1, 2019

September 1, 2027

(1)

*

—

*

(1)

March 2, 2020

March 2, 2028

(1)

*

—

*

(1)

June 15, 2020

June 15, 2028

(1)

*

—

*

(1)

May 24, 2021

May 24, 2029

*(1)

—

*(1)

May 17, 2017

May 17, 2025

(1)

*

—

*

(1)

July 24, 2018

July 24, 2026

(1)

*

—

*

(1)

August 16, 2019

August 16, 2027

(1)

*

—

*

(1)

May 27, 2020

May 27, 2028

*(1)

—

*(1)

June 15, 2020

June 15, 2028

(1)

*

—

*

(1)

May 24, 2021

May 24, 2029

Yongfu YU

*

(2)

23.00

*

(2)

March 12, 2022

May 23, 2027

Fan JIANG

*

(1)

—

*

(1)

August 16, 2019

August 16, 2027

(1)

*

—

*

(1)

May 24, 2021

May 24, 2027

*(1)

—

*(1)

September 5, 2021

September 5, 2027

(1)

*

—

*

(1)

June 8, 2022

June 8, 2028

*

(1)

—

*

(1)

June 1, 2019

June 1, 2025

(1)

*

—

*

(1)

May 27, 2020

May 27, 2026

*(1)

—

*(1)

May 24, 2021

May 24, 2027

(1)

*

—

*

(1)

June 8, 2022

June 8, 2028

*

(1)

—

*

(1)

July 30, 2018

July 30, 2026

(1)

*

—

*

(1)

August 16, 2019

August 16, 2027

(1)

*

—

*

(1)

June 15, 2020

June 15, 2028

*(1)

—

*(1)

May 24, 2021

May 24, 2029

*

—

*

June 8, 2022

June 8, 2030

Name
Jane Fang JIANG

Zeming WU

Sara Siying YU

Trudy Shan DAI

Lin WAN

Luyuan FAN(1)*

The shares underlying the outstanding RSUs and options held by each of these directors and executive officers and their affiliates
represent less than 1% of our total outstanding shares.

(1) Represents RSUs.
(2) Represents options.

164

(1)

Alibaba Group Holding Limited

Directors, Senior Management and Employees

Board Practices
Nomination and Terms of Directors
Pursuant to our Articles of Association, our board of
directors is classified into three classes of directors
designated as Group I, Group II and Group III, eachgenerally serving a three‑year term unless earlier
removed. The Group I directors currently consist of Joe
Tsai, J. Michael Evans, Weijian Shan and Irene Yun-Lien
Lee; the Group II directors currently consist of DanielZhang, Jerry Yang, Wan Ling Martello and Albert Kong
Ping Ng; and the Group III directors currently consistof Maggie Wu and Kabir Misra. The terms of office ofthe current Group I, Group II and Group III directors
will expire, respectively, at our 2024 annual general
meeting, 2025 annual general meeting and 2023
annual general meeting. Unless otherwise determinedby the shareholders in a general meeting, our board
will consist of not less than nine directors. The Alibaba
Partnership has the exclusive right to nominate up toa simple majority of our board of directors. If at any
time our board of directors consists of less than asimple majority of directors nominated or appointed
by the Alibaba Partnership for any reason, including
because a director previously nominated by the
Alibaba Partnership ceases to be a member of ourboard of directors or because the Alibaba Partnership
had previously not exercised its right to nominate or
appoint a simple majority of our board of directors,
the Alibaba Partnership shall be entitled (in its sole
discretion) to appoint such number of additional
directors to the board as necessary to ensure thatthe directors nominated or appointed by the Alibaba
Partnership comprise a simple majority of our boardof directors. The remaining members of the boardof directors will be nominated by the nominating
and corporate governance committee of the board.
Director nominees will be elected by the simple
majority vote of shareholders at our annual general
meeting.

If a director nominee is not elected by our shareholders
or departs our board of directors for any reason, theparty or group entitled to nominate that director has
the right to appoint a different person to serve as aninterim director of the class in which the vacancy exists
until our next scheduled annual general meeting ofshareholders. At the next scheduled annual general
meeting of shareholders, the appointed interim
director or a replacement director nominee (who, inthe case of Alibaba Partnership nominees, cannot be
the original nominee) will stand for election for theremainder of the term of the class of directors to which
the original nominee would have belonged.
For additional information, see “— Directors and Senior
Management — Alibaba Partnership.”

Code of Ethics and Corporate Governance
Guidelines
We have adopted a code of ethics, which is applicable
to all of our directors, executive officers andemployees. Our code of ethics is publicly available on
our website.
In addition, our board of directors has adopted a
set of corporate governance guidelines coveringa variety of matters, including approval of related
party transactions. Our corporate governanceguidelines also provide that any adoption of a newequity incentive plan and any material amendments
to those plans will be subject to the approval of
our non‑executive directors. The guidelines reflect
certain guiding principles with respect to our board’s
structure, procedures and committees. The guidelines
are not intended to change or interpret any applicablelaw, rule or regulation or our Articles of Association.

Fiscal Year 2023 Annual Report165Directors, Senior Management and Employees

Duties of Directors

Audit Committee

Under Cayman Islands law, all of our directors owe
us fiduciary duties, including a duty of loyalty, a duty
to act honestly and a duty to act in good faith andin a manner they believe to be in our best interests.
Our directors also have a duty to exercise the skill
they actually possess and the care and diligencethat a reasonably prudent person would exercise incomparable circumstances. In fulfilling their duty ofcare to us, our directors must ensure compliance with
our Articles of Association, as amended and restatedfrom time to time. We have the right to seek damages
if a duty owed by any of our directors is breached.

Our audit committee currently consists of Albert Ng,
Wan Ling Martello and Weijian Shan. Mr. Ng is thechairman of our audit committee. Mr. Ng satisfies thecriteria of an audit committee financial expert as set
forth under the applicable rules of the SEC. Mr. Ng, Ms.
Martello and Mr. Shan satisfy the requirements for an“independent director” within the meaning of Section
303A of the NYSE Listed Company Manual and meetthe criteria for independence set forth in Rule 10A‑3 ofthe U.S. Exchange Act.

Board Committees
Our board of directors has established an audit
committee, a compensation committee, a nominating
and corporate governance committee, a sustainability
committee, a compliance and risk committee anda capital management committee. A majority ofthe members of our compensation committee,
nominating and corporate governance committee andcompliance and risk committee shall be independent
directors within the meaning of Section 303A of the
NYSE Listed Company Manual. At least one member ofour sustainability committee shall be an independent
director within the meaning of Section 303A of the
NYSE Listed Company Manual. All members of ouraudit committee are independent within the meaningof Section 303A of the NYSE Listed Company Manualand meet the criteria for independence set forth inRule 10A‑3 of the U.S. Exchange Act.

166

Alibaba Group Holding Limited

The audit committee oversees our accounting andfinancial reporting processes and the audits ofour financial statements. Our audit committee is
responsible for, among other things:

•
•
•
•
•

selecting, and evaluating the qualifications,performance and independence of, theindependent auditor;
pre‑approving or, as permitted, approving
auditing and non‑auditing services permitted tobe performed by the independent auditor;
considering the adequacy of our internal
accounting controls and audit procedures;
reviewing with the independent auditor any
audit problems or difficulties and management’s
response;
reviewing and approving related party
transactions between us and our directors, senior
management and other persons specified in Item
6B of Form 20‑F as required by the U.S. ExchangeAct;Directors, Senior Management and Employees

•
•

•
•

reviewing and discussing the quarterly
financial statements and annual audited
financial statements with management and the
independent auditor;
establishing procedures for the receipt, retention
and treatment of complaints received fromour employees regarding accounting, internal
accounting controls or auditing matters andthe confidential, anonymous submission by our
employees of concerns regarding questionableaccounting or auditing matters;
meeting separately, periodically, withmanagement, internal auditors and the
independent auditor; andreporting regularly to the full board of directors.

Compensation Committee
Our compensation committee currently consists ofJerry Yang, Albert Ng and Kabir Misra. Mr. Yang is thechairman of our compensation committee. Mr. Yang,
Mr. Ng and Mr. Misra satisfy the requirements for an“independent director” within the meaning of Section
303A of the NYSE Listed Company Manual.
Our compensation committee is responsible for,among other things:•••

determining the proportion of annual cash bonus
pool allocated and payable to our management
for the year and determining the amount ofcash bonus payable to our executive officers
and directors and members of the partnershipcommittee;
reviewing, evaluating and, if necessary, revising
our overall compensation policies;
reviewing and evaluating the performance of ourdirectors and executive officers and determining
the compensation of our directors and executive
officers;••••

reviewing and approving our executive officers’
employment agreements with us;
determining performance targets for our
executive officers with respect to our incentive
compensation plan and share‑based
compensation plans;
administering our share‑based compensationplans in accordance with the terms thereof; andcarrying out other matters that are specificallydelegated to the compensation committee by
our board of directors from time to time.

Nominating and Corporate GovernanceCommittee
Our nominating and corporate governance committee
currently consists of Irene Lee, Joe Tsai and Jerry Yang.
Ms. Lee is the chairwoman of our nominating andcorporate governance committee. Ms. Lee and Mr.
Yang satisfy the “independence” requirements ofSection 303A of the NYSE Listed Company Manual.
Our nominating and corporate governance committee
is responsible for, among other things:

•
•
•
•

selecting the board nominees (other thanthe director nominees to be nominated by
the Alibaba Partnership) for election by theshareholders or appointment by the board;
periodically reviewing with the board thecurrent composition of the board with regards
to characteristics such as independence,
knowledge, skills, experience and diversity;
making recommendations on the frequency andstructure of board meetings and monitoring thefunctioning of the committees of the board; andadvising the board periodically with regards
to significant developments in corporate
governance law and practices as well as
our compliance with applicable laws andregulations, and making recommendations tothe board on corporate governance matters.

Fiscal Year 2023 Annual Report167Directors, Senior Management and Employees

Sustainability Committee

Capital Management Committee

Our sustainability committee currently consists ofJerry Yang, Joe Tsai and Maggie Wu. Mr. Yang is thechairman of our sustainability committee. Mr. Yangsatisfies the “independence” requirements of Section
303A of the NYSE Listed Company Manual.

Our capital management committee currently consistsof Daniel Zhang, Joe Tsai, J. Michael Evans andMaggie Wu. Mr. Zhang is the chairman of our capitalmanagement committee.

Our sustainability committee is responsible for, among
other things:•••

assisting the board in identifying and evaluating
the company’s ESG opportunities and risks;
overseeing an evaluating the implementationand performance of ESG initiatives and projects;
andadvising the board on ESG-related legal,
regulatory and compliance developments andpublic policy trends.

Compliance and Risk Committee
Our compliance and risk committee currently consistsof Irene Lee, Albert Ng, Kabir Misra, Daniel Zhang and
J. Michael Evans. Ms. Lee is the chairwoman of ourcompliance and risk committee. Ms. Lee, Mr. Ng and
Mr. Misra satisfy the “independence” requirements ofSection 303A of the NYSE Listed Company Manual.
Our compliance and risk committee is responsible for,among other things:

•
•
•

168

overseeing our overall compliance and risk
management requirements and issuing overall
compliance and risk management framework;
evaluating key risk exposures and vulnerabilities
and oversee the implementation of complianceand risk policies and procedures; andassessing the performance of members ofmanagement responsible for compliance andrisk, and advise our compensation committee
to align the compensation of the chief executive
officers of our subsidiary businesses withperformance on compliance and risk.

Alibaba Group Holding Limited

Our capital management committee is responsible for,among other things:••

establishing and overseeing the implementationof our overall capital management andallocation plan; andreviewing and advising our board, or approving
based on authorization by our board, significant
capital-related transactions and undertakings by
us and our subsidiary businesses.

Employees
As of March 31, 2021, 2022 and 2023, we had a totalof 251,462, 254,941 and 235,216 full‑time employees,
respectively. A substantial majority of our employees
are based in China.
We believe that we have a good working relationshipwith our employees and we have not experienced any
significant labor disputes.

Share Ownership
For information regarding the share ownership of ourdirectors and officers, see “Major Shareholders andRelated Party Transactions — Major Shareholders.”
For information as to stock options granted to ourdirectors, executive officers and other employees, see“— Compensation — Equity Incentive Plan.”Major Shareholders and Related Party Transactions
Major Shareholders
The following table sets forth information with respect
to beneficial ownership of our ordinary shares as ofJuly 12, 2023, except otherwise noted, by:•••each of our directors and executive officers;
our directors and executive officers as a group;
andeach person known to us to beneficially own 5%or more of our ordinary shares.

Beneficial ownership is determined in accordancewith the rules and regulations of the SEC and includes
the power to direct the voting or the disposition of
the securities or to receive the economic benefit of
the ownership of the securities. In computing thenumber of shares beneficially owned by a person andthe percentage ownership of that person, we haveincluded Shares underlying the ADSs and Shares in
CCASS held by the person. We have also included
Shares that the person has the right to acquire within
60 days of this annual report, including through thevesting of RSUs and options. These Shares, however,are not included in the computation of the percentage
ownership of any other person. The calculations ofpercentage ownership in the table below are basedon 20,374,238,040 ordinary shares (equivalent to2,546,779,755 ADSs) outstanding as of July 12, 2023.

Beneficial
ownership(Ordinary shares)

Beneficial
ownership(ADSs)(3)

Percent***

Joseph C. TSAI(1)281,675,752

35,209,469

1.4%

J. Michael EVANS

*

*

*

Maggie Wei WU

*

*

*

Jerry YANG

*

*

*

Wan Ling MARTELLO

*

*

*

Weijian SHAN

*

*

*

Irene Yun-Lien LEE

*

*

*

Albert Kong Ping NG

*

*

*

Kabir MISRA

*

*

*

Toby Hong XU

*

*

*

Jane Fang JIANG

*

*

*

Zeming WU***

Sara Siying YU

*

*

*

Trudy Shan DAI

*

*

*

Yongfu YU***

Fan JIANG***

Lin WAN***

Luyuan FAN

*

*

*

447,894,628

55,986,829

2.2%

2,839,209,112

354,901,139

13.9%

Name
Directors and Executive Officers:
Daniel Yong ZHANG

All directors and executive officers as a group
Greater than 5% Beneficial Owners:
SoftBank(2)Fiscal Year 2023 Annual Report169

Major Shareholders and Related Party Transactions

Notes:*

This person beneficially owns less than 1% of ouroutstanding ordinary shares.

(1) Represents (i) 443,736 ordinary shares held directly by Joe
Tsai, (ii) 20,307,176 ordinary shares held by Joe and Clara
Tsai Foundation Limited, a company incorporated under thelaw of the Island of Guernsey with its registered address at
PO Box 186, Royal Chambers, St Julian’s Avenue, St Peter Port,
Guernsey GY1 4HP, that has granted Joe Tsai a revocableproxy over these shares and which is wholly-owned by Joe
and Clara Tsai Foundation, (iii) 147,385,672 ordinary shares
held by Parufam Limited, a Bahamas corporation with its
registered address at 303 Shirley Street, P.O. Box N-492,
Nassau, The Bahamas, and over which, Joe Tsai, as a directorof Parufam Limited, has been delegated sole voting anddisposition power and (iv) 113,539,168 ordinary shares heldby PMH Holding Limited, a British Virgin Islands corporation
with its registered address at Kingston Chambers, PO Box173, Road Town, Tortola, British Virgin Islands, and overwhich, Joe Tsai, as sole director of PMH Holding Limited, hasvoting and dispositive power. Joe Tsai does not have any
pecuniary interests in the 20,307,176 ordinary shares held
by Joe and Clara Tsai Foundation Limited. Joe Tsai’s businessaddress is 26/F Tower One, Times Square, 1 Matheson Street,
Causeway Bay, Hong Kong S.A.R., the People’s Republic ofChina.
(2) Represents ordinary shares owned indirectly by SoftBank
Group Corp., with its registered office at 1-7-1, Kaigan,
Minato-Ku, Tokyo, 105-7537, Japan. These ordinary sharesare beneficially owned via direct or indirect subsidiaries
of SoftBank Group Corp. As of July 12, 2023, none of thesubsidiaries of SoftBank Group Corp. holding our ordinary
shares beneficially owned more than 5% of our outstanding
ordinary shares. According to public disclosure by SoftBank,SoftBank has entered into forward contracts using ourshares.
(3) Each ADS represents eight Shares.

We have one class of ordinary shares, and each holderof our ordinary shares is entitled to one vote per share.
As of July 12, 2023, 20,374,238,040 of our ordinary
shares (equivalent to 2,546,779,755 ADSs) were
outstanding. To our knowledge, 6,571,492,864
ordinary shares (equivalent to 821,436,608 ADSs),
representing approximately 32.3% of our total
outstanding shares, were held by 184 record
shareholders with registered addresses in the
United States, including brokers and banks that holdsecurities in street name on behalf of their customers.
We are not aware of any arrangement that may at a
subsequent date, result in a change of control of ourcompany.

170

Alibaba Group Holding Limited

Related Party Transactions
Our Related Party Transaction Policy
In order to prevent risks of conflicts of interest or theappearance of conflicts of interest, all of our directors
and employees are subject to our code of businessconduct and other policies which require, among
other things, that any potential transaction between us
and an employee or director, their relatives and closely
connected persons and certain entities in which they,
their relatives or closely connected persons have aninterest be approved in writing by an appropriate
supervisor or compliance officer.
We have also adopted a related party transaction
policy to which all of our directors, senior
management and other key management personnel,
all close family members (as defined in the policy)of the foregoing individuals, Ant Group and its
subsidiaries as well as the Alibaba Partnership andcertain other related entities are subject. Related party
transactions defined under this policy, as requiredby Form 20-F, include transactions with our directors,
senior management and major shareholders andtheir affiliates, as well as transactions with parties
that do not pose risks of conflicts of interest, such astransactions with our investee companies that are
not otherwise affiliated with any of the foregoing
individuals. This policy is intended to supplement theprocedures set forth in our code of business conductand our other corporate governance policies anddoes not exempt any person from more restrictive
provisions that may exist in our existing proceduresand policies.
This related party transaction policy provides, among
other things, that, unless otherwise pre-approved byour board of directors:•

each related party transaction, and any material
amendment or modification to a related party
transaction, shall be adequately disclosed to,
and reviewed and approved or ratified by, ouraudit committee or any committee composed
solely of disinterested independent directors orby the disinterested members of such committee;andMajor Shareholders and Related Party Transactions•

any employment relationship or similartransaction involving our directors or senior
management and any related compensation
shall be approved by the disinterested
members of our compensation committee orrecommended by the disinterested members of
the compensation committee to our board for its
approval.

Our related party transaction policy, code of businessconduct and our other corporate governance policies
are subject to periodic review and revision by ourboard.

Summary of Major Related Party Transactions
We have entered into various commercial arrangements with certain of our investees, Ant Group and its affiliates,
pursuant to which we receive and provide certain services to these parties. See “— Commercial Arrangements with
Investees and Ant Group and Its Affiliates.” In addition, as disclosed in greater detail in the following paragraphs,
we have entered into or continued certain major related party transactions in fiscal years 2021, 2022 and 2023,
which are summarized in the table below.
Related Party

Transaction Description

SoftBank•

Amended voting agreement among us, Joe Tsai and SoftBank, and, solely
for limited purposes, Jack Ma, which, among others, provides that SoftBank
has the right to nominate a director, and that Softbank and Joe Tsai will
vote their shares in favor of Alibaba Partnership director nominees and theSoftbank director nominee, respectively. Softbank’s director nominationright and the voting arrangement have effectively terminated.

•

Various investments involving SoftBank.

•The SAPA, which was amended in 2018, 2019, 2020 and 2022, pursuant
to which we received a 33% equity interest (on a fully diluted basis) in Ant
Group, and which sets forth, among other things, our rights in Ant Group.

•

The Alipay commercial agreement, pursuant to which Alipay provides
payment and escrow services to us.

•

The 2014 IPLA, an amendment to which was subsequently entered into in
2019 upon our receipt of the 33% equity interest (on a fully diluted basis)in Ant Group, or the Amended IPLA, provides that we and our subsidiaries
license to Ant Group and/or its subsidiaries certain intellectual property
rights and provide various software technology services, and, prior to ourreceipt of the 33% equity interest (on a fully diluted basis) in Ant Group, Ant
Group paid us profit share payments; pursuant to the SAPA, a cross-license
agreement was entered into in September 2019 upon our receipt of the 33%
equity interest (on a fully diluted basis) in Ant Group.

•

We and Ant Group cooperate with each other with respect to the enforcementof each other’s rights and the provision of certain financial services to ourcustomers and merchants in connection with the SME loan business.

•

We granted Ant Group a license for it to continue to use certain trademarks
and domain names.

•

Various investments involving Ant Group.

Ant Group and its affiliates

Fiscal Year 2023 Annual Report171

Major Shareholders and Related Party Transactions

Related Party

Transaction Description•

We have granted share-based awards to employees of Ant Group; Junhan,a major equity holder of Ant Group, and Ant Group have granted sharebased awards to our employees. We, Junhan and Ant Group agreed tosettle with each other the cost associated with certain share-based awards
granted to each other’s employees upon vesting.

Our executive vice chairman•

We agreed to assume the cost of maintenance, crew and operation of
personal aircraft of our executive vice chairman where the cost is allocatedfor business purposes.

Investment funds affiliatedwith Jack Ma•

Various investments involving the Yunfeng Funds, investment funds
affiliated with Jack Ma.

Jack Ma•

Jack Ma, formerly one of our directors made certain commitments to us
relating to his interest in Ant Group, the Yunfeng Funds and other entities.

Investees•

We extended loans to and provided a guarantee for certain of our investees.

•

We have made co-investments with certain of our investees.

Variable interest entities andvariable interest entity
equity holders•

We operate certain of our businesses in China through contractual
arrangements between our relevant subsidiaries, the variable interest
entities and variable interest entity equity holders.

Directors and executive
officers•

We entered into indemnification agreements with our directors andexecutive officers.

•

We entered into employment agreements with our directors and executive
officers.

•

We grant equity incentive awards to our directors and executive officers.

Commercial Arrangements with Investees and Ant Group and Its Affiliates
The following table summarizes the services fees paid to Ant Group and its affiliates in fiscal years 2021, 2022 and2023.
Year ended March 31,
Related Party

Transaction

2021

2022

RMB

RMB

2023
RMB

US$

(in millions)
Ant Group andits affiliates

Payment processing and escrowservices fee
Administrative and support
services
Marketplace software technology
services fee and others(1)10,598

11,824

12,484

1,818

218

161

230

33

4,291

3,381

2,041

297

Note:
(1) Marketplace software technology services fee and others primarily relates to marketing support services in connection with our
retail marketplaces.

172

Alibaba Group Holding Limited

Major Shareholders and Related Party Transactions

Certain of our investees have entered into commercial
arrangements with us in connection with certain
logistics services they provide to us. In fiscal years
2021, 2022 and 2023, we incurred costs and expensesof RMB11,068 million, RMB13,120 million and
RMB14,750 million (US$2,148 million), respectively, forthese logistics services. In fiscal year 2023, these costs
and expenses accounted for 1.9% of our costs andexpenses.
Certain of our investees have also entered into
commercial arrangements with us in connection

with certain marketing services they provide to ourbusiness. In fiscal years 2021, 2022 and 2023, we
incurred costs and expenses of RMB1,394 million,
RMB976 million and RMB382 million (US$56 million),
respectively, for these marketing services. In fiscal year
2023, these costs and expenses accounted for 0.1% of
our costs and expenses.
Other than the foregoing, the aggregate service fees
we paid to other related parties accounted for lessthan 1% of total costs and expenses in each of fiscal
years 2021, 2022 and 2023.

The following table summarizes the services fees received from Ant Group and its affiliates in fiscal years 2021,
2022 and 2023.
Year ended March 31,
Related Party

Transaction

2021

2022

RMB

RMB

2023
RMB

US$

(in millions)
Ant Group andits affiliates

Annual fee for SME loanbusiness(1)

954

708

—

—

Administrative and support
services

1,208

1,165

565

82

Cloud services fee

3,916

5,536

8,409

1,224

Marketplace software technology
services fee and others

2,427

2,358

2,831

412

Note:
(1) Pursuant to our agreement with Ant Group, we received these annual fees for a term of seven years, commencing in 2015 andending in 2021.

We have entered into commercial arrangements withcertain of our investees related to logistics services.
In fiscal years 2021, 2022 and 2023, we recognizedrevenue of RMB1,732 million, RMB1,728 million and
RMB1,140 million (US$166 million), respectively, inconnection with these logistics services. In fiscal year
2023, this revenue accounted for 0.1% of our revenue.

Other than the related party transactions summarized
above, the aggregate payments we received fromother related parties accounted for less than 1% of
total revenue in each of the fiscal years 2021, 2022
and 2023.

We have also entered into commercial arrangementswith certain of our investees related to cloud services.
In fiscal years 2021, 2022 and 2023, we recognizedrevenue of RMB2,411 million, RMB1,826 million and
RMB1,462 million (US$213 million), respectively, forthese cloud services. In fiscal year 2023, this revenue
accounted for 0.2% of our revenue.

Fiscal Year 2023 Annual Report173

Major Shareholders and Related Party Transactions

Transactions and Agreements with
SoftBank
Based on our understanding of SoftBank’s forward
contracts using our Shares, SoftBank controls less than
10% of the voting interest in our company. In addition,
SoftBank no longer nominates a director to our boardof directors, as further discussed below. Accordingly,
we no longer consider SoftBank as a related party.

Amended Voting Agreement
We entered into a voting agreement, which wasamended and restated in December 2021, or
the amended voting agreement. The terms of
the amended voting agreement, by and amongus, Joe Tsai and SoftBank, and, solely for limited
purposes, Jack Ma, provides, amongst other things,
that for so long as SoftBank owns 15% or more of
our outstanding shares, SoftBank has the right tonominate one director to our board of directors,
Softbank will vote their shares in favor of Alibaba
Partnership director nominees and Joe Tsai will votehis shares in favor of the SoftBank director nominee.
As of December 31, 2022, as reported in their
Schedule 13G/A, filed on February 14, 2023, SoftBank
beneficially owned 13.7% of our outstanding shares,
and accordingly, their director nomination right andthe voting arrangements have effectively terminated.

Investments Involving SoftBank
We have invested in businesses in which SoftBank or
one or more of its affiliates is a shareholder or coinvested with SoftBank or one or more of its affiliates
in other businesses. SoftBank has also invested
in businesses in which we are shareholders. We
may continue to co-invest with SoftBank, invest in
businesses in which SoftBank is already an existing
investor, and may also bring SoftBank as an investor
into new businesses or businesses in which we are an
existing investor.

Agreements and Transactions Related to
Ant Group and Its Subsidiaries
Ownership of Ant Group and Alipay
We originally established Alipay in December 2004
to operate our payment services business. In June
2010, the PBOC issued new regulations that required
non-bank payment companies to obtain a license inorder to operate in China. These regulations provided
specific guidelines for license applications only fordomestic PRC-owned entities. These regulations

174

Alibaba Group Holding Limited

stipulated that, in order for any foreign-invested
payment company to obtain a license, the scope ofbusiness, the qualifications of any foreign investor
and any level of foreign ownership would be subject
to future regulations to be issued, which in addition
would require approval by the State Council of the
PRC. Furthermore, these regulations required that any
payment company that failed to obtain a license mustcease operations by September 1, 2011. Although
Alipay was prepared to submit its license applicationin early 2011, at that time the PBOC had not issued
any guidelines applicable to license applications forforeign-invested payment companies. In light of theuncertainties relating to the license qualification andapplication process for a foreign-invested payment
company, our management determined that itwas necessary to restructure Alipay as a company
wholly-owned by PRC citizens in order to avail Alipayof the specific licensing guidelines applicable only
to domestic PRC-owned entities. Accordingly, wedivested all of our interest in and control over Alipay in2011, which resulted in deconsolidation of Alipay fromour financial statements. This action enabled Alipay
to obtain a payment business license in May 2011
without delay and without any detrimental impact to
our China retail marketplaces or to Alipay.
Following the divestment of our interest in and control
over Alipay, effective in the first calendar quarterof 2011, the ownership structure of Alipay’s parent
entity, Ant Group, was changed so that Jack Ma
held a substantial majority of the equity ownershipinterest in Ant Group. The ownership structure of
Ant Group subsequently was further restructured.
Ant Group also completed several rounds of equity
financing. In September 2019, we received a newly
issued 33% equity interest (on a fully diluted basis)in Ant Group following the satisfaction of the closing
conditions set forth in the SAPA, as amended in 2018and 2019. As of March 31, 2023, Junhan and Junao
held approximately 31% and 22% of Ant Group’s
equity interest, respectively, we held 33% and othershareholders held the remaining equity interest. The
general partner of Junhan and Junao is an entity thatwas previously wholly-owned by Jack Ma. In August
2020, Jack Ma transferred 66% of the equity interest insuch general partner entity but retained control overthe equity interests in Ant Group held by Junhan and
Junao. Through an agreement with the transferees
as well as the articles of association of the generalpartner entity, Jack Ma has control over resolutions
passed at general meetings of the general partner
entity that relate to the exercise of rights by Junhan
and Junao as shareholders of Ant Group. On January

Major Shareholders and Related Party Transactions

7, 2023, Ant Group announced that Junhan and Junao
will undergo certain changes in their voting structures,
pursuant to which this agreement among Jack Ma andthe other shareholders of the general partner entityof Junhan and Junao will be terminated. In addition,
Junhan will change its general partner to a newly
established entity while Junao will keep the existing
general partner entity. The changes are subject toregulatory approval. As a result of the changes, (i) Jack
Ma will no longer control the majority voting interests
in Ant Group held by Junhan and Junao, (ii) each of
Junhan and Junao will be controlled by a separate
general partner entity that is not controlled by any
single person, (iii) our equity interest in Ant Groupremains unchanged, and (iv) neither we nor any othershareholder will have control over Ant Group.
Economic interests of Ant Group through Junhan are
owned by Jack Ma, Simon Xie and other employees
and former employees of us and Ant Group and its
affiliates and investee companies. These economic
interests are in the form of limited partnership interestsand interests similar to share appreciation rights tied
to potential appreciation in the value of Ant Group.
The economic interests in Junao are held in the form oflimited partnership interests by certain members of the
Alibaba Partnership and Ant Group’s management.
We understand that it is the intention of theshareholders of Ant Group that:••

Jack Ma’s direct and indirect economic interest
in Ant Group (for the avoidance of doubt, otherthan the equity stake in Ant Group held byour company) will be reduced over time to apercentage that does not exceed his and his
affiliates’ interest in our company as of the time
immediately prior to the completion of our initialpublic offering (the percentage of our ordinary
shares Jack Ma and his affiliates beneficiallyowned immediately prior to the completion of
our initial public offering was 8.8%) and that
this reduction will be caused in a manner bywhich neither Jack Ma nor any of his affiliates
would receive any economic benefit thereby. See“— Commitments of Jack Ma to Alibaba Group”
below. We have been informed by Ant Group thatthe proposed reduction of Jack Ma’s economic
interest is expected to be accomplished througha combination of future share-based awards toemployees and dilutive issuances of equity in Ant
Group, among others;
from time to time, additional economic interests
in Ant Group in the form of interests similar toshare appreciation rights issued by Junhan willbe transferred to employees of Ant Group andour employees; and•Ant Group may raise equity capital from investors
in the future in order to finance its businessexpansion, with the effect that the shareholdingof Junao and Junhan in Ant Group will be reduced
through dilution (the amount of dilution would
depend on future valuations and the amount ofequity capital to be raised).

In July 2023, we received notice from Ant Group ofa shareholder meeting to approve, among otherthings, a proposal by Ant Group to repurchase fromall of its shareholders up to 7.6% of its equity interest.
We understand that any repurchased shares will betransferred into Ant Group’s equity incentive pool.
As of the filing of this annual report, Ant Group’s
proposed share repurchase is still pending approvalby its shareholders.

Our Commercial Arrangements with Ant
Group and Alipay
After the divestment of our interest in and control
over Alipay, we entered into a framework agreementin July 2011, or the 2011 framework agreement, with
SoftBank, Altaba, Alipay, Ant Group, Jack Ma and Joe
Tsai and certain of their affiliates. At the same time, we
also entered into various implementation agreementsthat included a commercial agreement, or the Alipay
commercial agreement, an intellectual property licenseand software technology service agreement, or the2011 IPLA, and a shared services agreement, which
together governed our financial and commercial
relationships with Ant Group and Alipay.
Restructuring of Our Relationship with Ant Groupand Alipay, 2019 Equity Issuance, and Related
Amendments
On August 12, 2014, we entered into a share andasset purchase agreement, which we refer to as
the SAPA, and entered into or amended certain
ancillary agreements including an amendment
and restatement of the 2011 IPLA, or the 2014 IPLA.
Pursuant to these agreements, we restructured
our relationships with Ant Group and Alipay andterminated the 2011 framework agreement. On
February 1, 2018, we amended both the SAPA and the
Alipay commercial agreement, and agreed with Ant
Group and certain other parties on forms of certain
ancillary agreements. On September 23, 2019, we
further amended the SAPA. The relevant amendments

Fiscal Year 2023 Annual Report175

Major Shareholders and Related Party Transactions

were entered into or agreed to facilitate ouracquisition of a 33% equity interest (on a fully diluted
basis) in Ant Group. On August 24, 2020, we further
amended the SAPA, the Alipay commercial agreement
and certain other agreements, referred to as the 2020
Amendments. The 2020 Amendments were madeprimarily to facilitate Ant Group’s planned IPO on
the Science and Technology Innovation Board of the
Shanghai Stock Exchange and on the Main Board of
the Hong Kong Stock Exchange.

amounted to RMB954 million, RMB708 million and nil,respectively.

On July 25, 2022, we and Ant Group further amended
the SAPA and the Alipay commercial agreement (suchfurther amendments, the “2022 Amendments”), withcertain amendments that took effect on August 13,
2022. The 2022 Amendments were made primarily
to improve our ability to maximize our competitive
advantage, enhance the economic benefit from ourequity interest in Ant Group and help us better manage
related party and other risks arising from changes in theregulatory and operational environment.

In September 2019, following the satisfaction of theclosing conditions, we received through an onshore PRC
subsidiary the issuance of a 33% equity interest (on afully diluted basis) in Ant Group pursuant to the SAPA,
as amended in 2018 and 2019, or the Issuance. We
believe that the acquisition of the 33% equity interest(on a fully diluted basis) in Ant Group has strengthened
our strategic relationship pursuant to the series ofagreements initially reached with Ant Group in 2014.

Apart from the 2018, 2019, 2020 and 2022
amendments to our agreements with Ant Groupdescribed below, the key terms of our agreementswith Ant Group and Alipay from the 2014 restructuring
remain substantially unchanged.
Sale of SME Loan Business and Certain Other Assets
Pursuant to the SAPA, we sold certain securities andassets primarily relating to our SME loan businessand other related services to Ant Group in February
2015. In addition, pursuant to software system use
and service agreements relating to the know-how
and related intellectual property that we agreed tosell together with the SME loan business and related
services, we received annual fees for a term of sevenyears, commencing in 2015 and ending in 2021. These
fees, which were recognized as other revenue, were
determined as follows: for calendar years 2015 to2017, the entities operating the SME loan businesspaid an annual fee equal to 2.5% of the average dailybalance of the SME loans provided by these entities,
and in calendar years 2018 to 2021, these entities paid
an annual fee equal to the amount of the fees paidin calendar year 2017. In fiscal years 2021, 2022 and2023, the annual fees we received from Ant Group andits affiliates in connection with the SME loan business

176

Alibaba Group Holding Limited

For regulatory reasons, we retained approximately
RMB1,225 million of the existing SME loan portfolio
upon the completion of the transfer of the SME loanbusiness. These loans have been repaid. We do notintend to conduct any new SME loan business going
forward.
Issuance of Equity Interest

Pursuant to the SAPA, as amended in 2018 and 2019,the consideration we paid to receive the newly issued
33% equity interest (on a fully diluted basis) in Ant
Group was fully funded by payments from Ant Groupand its subsidiaries to us in consideration for certain
intellectual property and assets that we transferredunder the SAPA, as amended in 2018 and 2019.
In connection with the receipt of the Issuance, we
entered into a cross license agreement with Ant Group
providing for a license by each of Ant Group and us toeach other of certain patents, trademarks, softwareand other technologies (including but not limited
to patents and software transferred at the Issuanceclosing). The cross license agreement also contains
provisions relating to cooperation and coordination
between Ant Group and us on various intellectual
property matters, including prosecution, enforcement,
acquisition, and joint defense arrangements, among
other matters.
Upon closing of the Issuance, we entered into
the previously agreed form of amendment andrestatement of the 2014 IPLA, or the Amended IPLA,and the profit share payment arrangement underthe 2014 IPLA automatically terminated. For more
information, see “— Alipay Intellectual Property License
and Software Technology Services Agreement” below.

Major Shareholders and Related Party Transactions

Financial and Accounting Treatment upon Issuance of
Equity Interest in Ant Group
There was no material operational and economic
impact on us as a result of our receipt of the 33%
equity interest (on a fully diluted basis) in Ant Group
in 2019, but we changed our accounting for our
relationship with Ant Group as a result of the Issuance.
Upon the Issuance, and our transfer of certain
intellectual property to Ant Group and its subsidiaries,
the profit share arrangement under the 2014 IPLA
was terminated, and we no longer received any
profit share payments from Ant Group. Following
the Issuance, we accounted for our equity interest
in Ant Group under the equity method and recorded
it in “Investments in equity method investees” onour consolidated balance sheet. Subsequent to theIssuance, we record our proportionate share of resultsof Ant Group in “Share of results of equity method
investees” in our consolidated income statements on a
one quarter in-arrears basis.
Regulatory Unwind
Prior to the 2020 Amendments, the SAPA as amended
in 2018 and 2019, provided that, if a relevant
governmental authority prohibits us from owning all ora portion of our equity interest in Ant Group after theequity issuance has occurred through enactment of alaw, rule or regulation, or explicitly requires Ant Groupto redeem this equity interest, and the prohibition
or request is not subject to appeal and cannot
otherwise be resolved, then to the extent necessary,
Ant Group will redeem the equity interest; the related
intellectual property and asset transfers, and ancillarytransactions under the SAPA will be unwound; and theterms of the SAPA, the 2014 IPLA, and other relatedagreements will be restored, including the prior profit
share payments and liquidity event payment (which
would be payable to us in the event of a qualified IPOof Ant Group or Alipay, in an amount equal to 37.5% of
the equity value of Ant Group as a whole, immediately
prior to the qualified IPO). If there is a partial unwind
where we retain a portion of our equity interest in
Ant Group, but less than the full 33%, then pursuant
to the terms of the SAPA and the 2014 IPLA, the priorprofit share payment arrangement and liquidity event
payment amount will be proportionately reduced
based on the amount of equity interest retained by us.
Pursuant to the 2020 Amendments, these provisions
would terminate upon the completion of a qualified
IPO of Ant Group. However, pursuant to the 2020

Amendments and the 2022 Amendments, if a qualified
IPO of Ant Group has not been completed within theprescribed period of time, the foregoing rights will nolonger be subject to termination upon the completionof a qualified IPO of Ant Group.
In 2011, Jack Ma and Joe Tsai contributed 280,000,000
and 120,000,000 of our Shares, respectively, after
having accounted for the Share Split, held by themto APN Ltd. (“APN”), a vehicle they established tohold these shares. Prior to June 2, 2022, the shares of
APN, as well as the 400,000,000 Shares, after having
accounted for the Share Split, held by APN, were
pledged to us to secure certain obligations of Ant
Group under the SAPA and the Alipay commercial
agreement, as well as the direct liability of APN for up
to US$500 million of the liquidity event payment if any
liquidity event payment becomes due. On June 2, 2022,
we agreed with Jack Ma, Joe Tsai and APN to terminate
the pledges in relation to the shares of APN and the400,000,000 Shares, in consideration of personal
guarantees provided to us by Jack Ma and Joe Tsai inconnection with Ant Group’s remaining contingent
payment obligations to us. We believe this transaction
reasonably reflects the reduction in Ant Group’s
contingent payment obligations to us since 2011
when the pledges were first created, the valuation ofwhich was conducted with help from an independent
financial advisor, and the increased financial strengthand creditworthiness of Ant Group.
Pre-emptive Rights
Following our receipt of equity interest in Ant Group,
we have pre-emptive rights to participate in otherissuances of equity securities by Ant Group and certainof its affiliates prior to a qualified IPO of Ant Group.
These pre-emptive rights entitle us to maintain theequity ownership percentage we hold in Ant Group
immediately prior to any such issuances. In connection
with our exercise of our pre-emptive rights we arealso entitled to receive certain payments from Ant
Group, effectively funding our subscription for these
additional equity interests, up to a value of US$1.5
billion, subject to certain adjustments, or the preemptive rights funded payments. In addition to thesepre-emptive rights and the pre-emptive rights funded
payments, under the SAPA, in certain circumstances
we are permitted to exercise pre-emptive rights
through an alternative arrangement that will further
protect us from dilution.

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Major Shareholders and Related Party Transactions

Certain Restrictions on the Transfer of Ant Group Equity
Interests
Under the SAPA, certain parties thereto, including us insome cases, are subject to restrictions on the transfer
of equity interests in Ant Group, including:••following our receipt of the Issuance and until
the earlier of the completion of a qualified IPO of
Ant Group or the termination of the independent
director rights provided in the SAPA, without theprior written consent of our company, none ofJack Ma, Joe Tsai (if he holds any equity interestat that time), Junao, Junhan or Ant Group may
knowingly transfer any equity in Ant Group toa third-party who would thereby acquire morethan 50% of the voting or economic rights in, or
assets of, Ant Group; andfollowing our receipt of the Issuance and until thecompletion of a qualified IPO of Ant Group, anytransfer of equity interests in Ant Group by Junao
or Junhan, on the one hand, or our company, on
the other hand, will be subject to a right of firstrefusal by the other party.

Non-competition Undertakings
Under the SAPA, subject to certain limitations andunless both parties agree, Ant Group may not engage
in any business conducted by us from time to timeor logical extensions thereof, and we are restrictedfrom engaging in specified business activities within
the scope of business of Ant Group, including theprovision and distribution of credit and insurance, theprovision of investment management and banking
services, payment transaction processing andpayment clearing services for third parties, leasing,lease financing and related services, trading, dealing
and brokerage with respect to foreign exchange
and financial instruments, distribution of securities,
commodities, funds, derivatives and other financial
products and the provision of credit ratings, credit
profiles and credit reports. Each party may, however,make passive investments in competing businesses
below specified thresholds, in some cases after
offering the investment opportunity to the other party.
The 2020 Amendments allow Ant Group to engage inthe sale and placement of advertisements by financial
institutions solely in connection with financial services
on publicly available mobile applications and end-

178

Alibaba Group Holding Limiteduser interfaces majority-owned and operated by Ant
Group, an activity that falls within the scope of ourbusiness but which Ant Group is permitted to engage
in as an exception to the non-compete provisions,subject to certain qualifications. Pursuant to the2022 Amendments, we have agreed to expand Ant
Group’s ability to engage in such sale and placementof advertisements on publicly available mobile
applications and end-user interfaces majority-owned
and operated by Ant Group. We have also agreed
to permit Ant Group to provide technology services
in facilitation of the operations of any payment or
financial services business to financial institutions andmerchants using Ant Group’s payment services, exceptthat Ant Group may not provide any IaaS-related cloudservices, and we are allowed to provide services andproducts relating to payment accounts outside ofChinese mainland that Ant Group is unable to provide
to us or our customers and to provide and distributecredit and insurance in cooperation with financial
services business operators to facilitate businesses on
our platforms, among other things.
Corporate Governance Provisions
The SAPA provides that we and Ant Group will
recommend one independent nominee who, subject
to the vetting by the nomination and remunerationcommittee of the board of Ant Group, to the extent
required by such committee’s charter (subject toany amendments required by any applicable law orrequested by any applicable governmental authority),and subject further to the vetting by applicablegovernmental authorities, as required by applicablelaw, will be nominated as a member of its board andserve on the board’s audit committee, and Jack Ma,
Joe Tsai (in case he holds any equity interest in Ant
Group), Junhan and Junao will agree to vote the equity
interests in Ant Group controlled by them in favor of
the nomination. If this independent director resigns
or the director’s seat otherwise becomes vacant, solong as SoftBank owns at least 20% of our outstanding
ordinary shares, and certain other conditions are
satisfied, SoftBank and Jack Ma, acting jointly, will
select on our behalf the individual to be designatedas a replacement director, subject to the approval of
the Independent Committee. We are not permitted toapprove certain actions to be taken under the SAPA
and related agreements before we obtain the consent
from the Independent Committee.

Major Shareholders and Related Party Transactions

Upon the Issuance in September 2019, we nominated
two of our officers who have been elected to theboard of Ant Group pursuant to our rights under theSAPA.
In each case, these director nomination rights willcontinue unless we cease to own a certain amountof our post-issuance equity interests in Ant Group, or
upon the completion of a qualified IPO of Ant Group,
whichever is earlier.
Additional Alibaba Rights
In addition to the rights discussed above, the SAPA, as
amended in 2018 and 2019, provides us with certain
other rights with respect to Ant Group. These include,
among others:

•
•
•
•

•

customary information rights;

of our rights to the extent necessary or advisable toachieve an efficient and successful IPO. Certain of ourrights that would be incremental to the rights of othershareholders of Ant Group as of the consummationof the IPO (excluding, among other things, ourinformation rights) will terminate if required by arelevant stock exchange or governmental authority,
or if necessary to obtain a legal opinion in connection
with the IPO application. If the IPO application iswithdrawn or rejected by the relevant authorities, orif the IPO is not consummated within a certain periodof time, then any of our rights that were terminated oramended in anticipation of the IPO will be restored.
Pursuant to the 2020 Amendments, the following
rights under the SAPA, as amended in 2018 and 2019,will terminate upon the completion of a qualified IPOof Ant Group:

approval rights over certain Ant Group or Alipay
actions;•rights to ensure our ability to participate in any
qualified IPO of Ant Group;•

our rights to participate in any qualified IPO of
Ant Group or Alipay;
the Independent Committee’s approval rights
over:approval rights (with the consent of the
Independent Committee) over increases to thesize of Ant Group board resulting in the numberof board seats exceeding a certain specificnumber; and•approval rights (with the consent of the
Independent Committee) over any Alipay IPO.

•

Pursuant to the 2020 Amendments, the foregoingrights requiring the Independent Committee’s consent
will terminate upon the completion of a qualified
IPO of Ant Group. However, pursuant to the 2020
Amendments and the 2022 Amendments, if a qualified
IPO of Ant Group has not been completed within theprescribed period of time, these rights will no longer
be subject to termination upon the completion of aqualified IPO of Ant Group. For more information, see“— Termination of Alibaba Rights” below.
Termination of Alibaba Rights
Under the SAPA, as amended in 2018 and 2019,certain of our rights with respect to Ant Group were
terminated upon our receipt of the Issuance.
In addition, the SAPA, as amended in 2018 and 2019,provides that, in connection with Ant Group or Alipay
commencing an IPO process, we and Ant Group will
discuss in good faith the amendment or termination•

voluntary transfers of any equity securities
of Alipay;
increases to the size of Ant Group board
resulting in the number of board seats
exceeding a certain number; andany Alipay IPO.

If the IPO of Ant Group has not been completed within
the prescribed period of time, it is expected that theforegoing Independent Committee’s approval rights
will, pursuant to the 2020 Amendments and the 2022
Amendments, no longer be subject to termination
upon the completion of a qualified IPO of Ant Group.
Alipay Commercial Agreement
Under the Alipay commercial agreement among us,
Alipay and Ant Group, which agreement still remains
in place following the 2014 restructuring and the2018, 2019, 2020 and 2022 amendments to ouragreements with Ant Group, each as described above,
Alipay provides payment processing and escrowservices to us. These services enable settlement oftransactions on our marketplaces through a secure
payment platform and escrow process. Given thesignificant transaction volume on our platforms,
we pay Alipay a fee for these services on terms
that are preferential to us. These preferential terms

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Major Shareholders and Related Party Transactions

enable us, with certain exceptions, to make available
basic payment processing and escrow services to
consumers and merchants on our marketplaces freeof charge. We believe that these services provide us
with a competitive advantage that otherwise would bediminished without the preferential terms of the Alipay
commercial agreement.
The fees that we pay Alipay are based on fee rates
and actual payment volumes processed on ourmarketplaces. The fee rates reflect, among otherthings, Alipay’s bank-processing costs and operating
costs allocable to the services provided to us, andaccordingly are subject to adjustment on an annual
basis to the extent these costs increase or decline.
In connection with the 2014 restructuring, the Alipay
commercial agreement was amended to providethat a special independent committee formed by our
independent directors and the director designatedby SoftBank, or the Independent Committee, must
approve the fee rates in advance on an annual basis.
The fee rates for the immediately preceding year
remain in effect until such time as the annual approvalby the Independent Committee has been obtained.
In fiscal years 2021, 2022 and 2023, service fees inconnection with the payment services provided by
Alipay under this agreement amounted to RMB10,598
million, RMB11,824 million and RMB12,484 million(US$1,818 million), respectively. The Alipay commercial
agreement has an initial term of 50 years, and is
automatically renewable for further periods of 50
years, subject to our right to terminate at any timeupon one year’s prior written notice. Prior to the 2020
Amendments, if the Alipay commercial agreement
was required by applicable regulatory authorities,
including under stock exchange listing rules, tobe modified in certain circumstances, a one-time
payment may have been payable to us by Ant Groupto compensate us for the impact of the adjustment.
Certain conforming amendments were made to the
Alipay commercial agreement as part of the relevant
amendments to our agreements with Ant Groupand Alipay described above. Pursuant to the 2020
Amendments, we no longer have the right to receive
such one-time payment. This change was made tofacilitate the IPO of Ant Group. If the IPO of Ant Groupis withdrawn or rejected by governmental authority or
is not completed within a certain period of time, thechange will be unwound and our right will be restored.
Pursuant to the 2022 Amendments, our right to such
one-time payment will no longer be restored. We haveconsidered the probability of such one-time payment
becoming payable, the changes in the regulatory
and operational environment of our and Ant Group’s
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Alibaba Group Holding Limited

businesses and the resultant uncertainty to the twobusinesses if Ant Group were to remain subject tothe obligation to make such one-time payment. We
believe that an amendment to the Alipay commercial
agreement to remove Ant Group’s obligation to pay
such one-time payment will ultimately enhance theeconomic benefit that we may receive from Ant Group
as a result of our equity interest in Ant Group and help
us better manage related party and other risks arisingfrom changes in the regulatory and operational
environment.
Pursuant to the 2022 Amendments, from August
13, 2023, with respect to any payment processing
and escrow services to be provided by Ant Group to
us outside of Chinese mainland, the fee rates andpayment-related terms for such services will no longer
be governed by the Alipay commercial agreement andwill instead be agreed upon between Ant Group andus separately.
Ancillary Agreements
In connection with our entry into the original SAPA in
2014, we also entered into the 2014 IPLA, an amended
and restated shared services agreement, a SME loan
cooperation framework agreement and a trademark
agreement, each of which is described below. We
also entered into a data sharing agreement, which
was subsequently terminated on July 25, 2022. It is
intended that we and Ant Group will, to the extent
necessary for each party to provide services to ourrespective customers, instead negotiate the terms ofdata sharing arrangements on a case-by-case basis
and as permitted by applicable laws and regulations.
Pursuant to the SAPA, as amended in 2018 and2019, upon the Issuance we also entered into theAmended IPLA, a cross license agreement andvarious intellectual property transfer agreements inconnection with, and to implement, the contemplated
intellectual property and asset transfers described in“— Issuance of Equity Interest” above.
Alipay Intellectual Property License and Software
Technology Services Agreement
2014 IPLA
Pursuant to the original 2011 framework agreement,
we entered into the 2011 IPLA, pursuant to which
we and our subsidiaries licensed to Alipay certain
intellectual property rights and provided various
software technology services to Alipay and its
subsidiaries. In August 2014, we entered into the 2014
IPLA.

Major Shareholders and Related Party Transactions

Under the 2011 IPLA, Alipay paid us a royalty andsoftware technology services fee equal to thesum of an expense reimbursement plus 49.9% of
the consolidated pre-tax income of Alipay and its
subsidiaries until a liquidity event of Alipay or Ant
Group. The calculation of the profit share percentage
was subject to downward adjustments upon certain
dilutive equity issuances by Alipay or Ant Group. Underthe 2014 IPLA, we received, in addition to a software
technology service fee, royalty streams related to
Alipay and other current and future businesses of
Ant Group, which we refer to collectively as the profit
share payments. The profit share payments were paid
at least annually and equal the sum of an expense
reimbursement plus 37.5% of the consolidated pre-tax
income of Ant Group (subject to certain adjustments),
including not only Alipay but all of Ant Group’s
subsidiaries.
Upon our receipt of the Issuance in September 2019,
we entered into the Amended IPLA and terminated the2014 IPLA, and accordingly, the profit share payment
arrangement under the 2014 IPLA automaticallyterminated.
Amended IPLA
Pursuant to the SAPA, as amended in 2018 and 2019,
we, Ant Group and Alipay entered into the Amended
IPLA upon our receipt of the Issuance, at which time
we also transferred certain intellectual property andassets to Ant Group and its subsidiaries and the profit
share payment arrangement was terminated, as
described in “— Issuance of Equity Interest” above.
While the profit share payments have terminatedunder the Amended IPLA, Ant Group may in certain
circumstances continue to make certain royalty
payments to us (as agreed to by Ant Group and theIndependent Committee), which may be used as preemptive rights funded payments under the SAPA, as
described in “— Pre-emptive Rights” above.
Additionally, pursuant to the Amended IPLA, Ant Groupand its subsidiaries will receive expanded rights toapply for, register and manage certain intellectual
property related to their businesses, subject to certain
continuing restrictions and our rights, and we willcease to provide certain software technology services
to Ant Group and its subsidiaries.
The Amended IPLA will terminate upon the earliest of:•

the full payment of all pre-emptive rights funded
payments under the SAPA;••

the closing of a qualified IPO of Ant Group or
Alipay; andour transfer to Ant Group of any remaining
intellectual property we own that is exclusively
related to the business of Ant Group.

SME Loan Cooperation Framework Agreement
We and Ant Group entered into a SME loan
cooperation framework agreement in August 2014,
pursuant to which each party agreed to cooperate
with, and provide certain services with respect to,
the other party’s enforcement of certain rights of
the other party against users of its platforms andservices and with respect to the provision of certain
financial services to our customers and merchants.
In particular, we agreed, upon Ant Group’s request,
to close down or suspend online storefronts andrestrict marketing activities on our platforms of
persons defaulting on loans made by Ant Group andpersons in violation of Alipay rules and regulations,and to publish notices on our platforms and provide
information regarding these persons, in each casein a manner to be further agreed upon from time totime. Ant Group agreed, upon our request, to makeloans and/or extensions of credit and related financial
services available to our users, freeze and pay over to
us funds in accounts of users violating our rules andregulations or agreements with us, accelerate loans
and terminate credit facilities of these users, restrict
marketing activities on its platforms by these users,
and provide information regarding these users, ineach case in a manner to be further agreed upon fromtime to time. Neither party is required to pay any feesin consideration for the services provided by the otherparty, and apart from the provision of these services,
there will be no other exchange of value in connection
with this agreement. The cooperation agreement has
an initial term of five years, with automatic renewals
upon expiry for additional five-year periods.
From time to time, we expect to enter into similarcommercial arrangements with respect to cooperation
matters and the provision of services between us and
Ant Group and to our respective customers.
Trademark Agreement
We and Ant Group entered into a trademark
agreement in August 2014, pursuant to which
we granted Ant Group a non-transferable, nonassignable and non-sublicensable (except toits subsidiaries) license for it and its sublicensed
subsidiaries to continue to use certain trademarks andFiscal Year 2023 Annual Report181

Major Shareholders and Related Party Transactions

domain names based on trademarks owned by us,
in connection with their payment services businessand the SME loan business transferred by us to them,and in the same manner of use as in August 2014,
and a non-transferable, non-assignable and nonsublicensable (except to its subsidiaries) license touse other trademarks and domain names basedon trademarks owned by us, and in that manner,
as we may agree to allow in the future. Pursuant
to the trademark agreement, each of the parties
further agreed to the rights and limitations that eachwould have to use the “Ali” name or prefix and the“e-commerce” (and its Chinese equivalent) name,prefix or logo as part of a trademark or domainname in each party’s and its subsidiaries’ respective
businesses. Neither party is required to pay any fees
under this agreement, and, apart from the licenses
and rights set forth in the agreement, there will be
no other exchange of value in connection with thisagreement. Pursuant to the SAPA, following our receiptof the Issuance, we transferred and are in the processof transferring to Ant Group ownership of several of
the trademarks and domain names licensed by us to
Ant Group. However, the trademark agreement willremain in effect in accordance with its terms following
the transaction to provide for a continued license ofother trademarks that we will continue to own.

Documents to Implement Transfers of IP Contemplated
by SAPA

Shared Services Agreement and Other
Commercial Arrangements with Ant Group

Certain of our employees hold share-based awards
granted by Junhan and Ant Group, and certain
employees of Ant Group hold share-based awards
granted by us. These awards will be settled byrespective grantors upon disposal of these awards
by the holders, vesting or exercise of these awards,
depending on the forms of these awards. In addition,
Junhan and Ant Group have the right to repurchasethe vested awards (or any underlying equity for thesettlement of the vested awards) granted by them,as applicable, from the holders upon an initial public
offering of Ant Group or the termination of the holders’employment with us at a price to be determined basedon the then fair market value of Ant Group.

We and Ant Group entered into a shared services
agreement, which was amended and restated inAugust 2020 in connection with the 2020 Amendments
to the SAPA. Pursuant to the shared services
agreement, we and Ant Group provide certain
administrative and support services to each otherand our respective affiliates. We also provide Ant
Group and its affiliates with cloud computing services,marketplace software technology services and otherservices. See “— Commercial Arrangements with
Investees and Ant Group and Its Affiliates.”
Agreements Entered into in 2020
Arrangements to Acquire Further Shares in an IPO of
Ant Group
In 2020, we entered into certain agreements with
Ant Group, pursuant to which we may subscribe for
additional shares in Ant Group as part of an IPO of Ant
Group, such that we may continue to hold an equity
interest not exceeding 33% in Ant Group upon thecompletion of such IPO of Ant Group.

182

Alibaba Group Holding Limited

In connection with the 2020 Amendments, we enteredinto a number of agreements pursuant to which wetransferred to Ant Group certain intellectual property
exclusively relating to the business of Ant Group inconnection with the IPO of Ant Group, which transfers
were contemplated by the SAPA, as amended in 2018and 2019. Ant Group would be required to transfer
such intellectual property back to us if the IPO of Ant
Group is not completed within a certain period of time.
Pursuant to the 2022 Amendments, having considered
the relevant insignificance of such intellectual property
to us and the uncertainties associated with any suchrequirements to transfer such intellectual property
back to us in light of the regulatory and operationalchanges, we agreed that Ant Group would no longer
be required to transfer such intellectual property
to us regardless of whether the IPO of Ant Group iscompleted.
Investments Involving Ant GroupWe have invested in businesses in which Ant Group isa shareholder or co-invested with Ant Group in otherbusinesses.
Share-based Award Arrangements

Starting from April 2020, the parties agreed to settlewith each other the cost associated with certain sharebased awards granted to each other’s employees
upon vesting. The settlement amounts under thisarrangement will depend on the values of Ant Group
share-based awards granted to our employees andour share-based awards granted to employees of Ant
Group. It is expected that the net settlement amountwould be insignificant to us.

Major Shareholders and Related Party Transactions

Transactions with Entities Affiliated with
Our Directors and Officers
Joe Tsai, our executive vice chairman, has purchased
his own aircraft for both business and personal use.
He has waived any leasing fees for the use of suchaircraft in connection with the performance of his
duties, and we have agreed to assume the cost of
maintenance, crew and operation of the aircraft where
the cost is allocated for business purposes.

Relationship with Investment Funds
Affiliated with Jack Ma
Jack Ma currently holds minority interests in thegeneral partners of a number of Yunfeng investment
funds, in which he is entitled to receive a portion ofcarried interest proceeds. We refer to these funds
collectively as the Yunfeng Funds. He also holds
minority interests in certain investment advisor entities
of certain Yunfeng Funds. In addition, Jack Ma, his wife,
certain trusts established for the benefit of his family
and certain entities controlled by Jack Ma and his wife
have committed, or are expected to commit, funds to
the general partners or as limited partners of certain
Yunfeng Funds.
Jack Ma has either non-voting interests or has waived
the exercise of his voting power with respect to hisinterests in each of the investment advisor entities andthe managing entities of certain Yunfeng Funds. Jack
Ma has also agreed to donate all distributions of (x)carried interest proceeds he may receive in respectof the Yunfeng Funds and (y) dividends he may
receive with respect to his holdings of shares in any
investment advisor entity of the Yunfeng Funds, which
we collectively refer to as the Yunfeng GP Distributions,to, or for the benefit of, the Alibaba Group Charitable
Fund or other entities identified by Jack Ma that serve
charitable purposes. In addition, Jack Ma has agreed
that, other than his income tax obligations arising fromrecognition of income from Yunfeng GP Distributions,

he will not claim any charitable deductions withrespect to donations of his Yunfeng GP Distributions
against his other income tax obligations. See “—Commitments of Jack Ma to Alibaba Group” below. We
believe that, through its expertise, knowledge baseand extensive network of contacts in private equity in
China, Yunfeng will assist us in developing a range of
relevant strategic investment opportunities.
The Yunfeng Funds have historically entered into coinvestment transactions with us and third parties. We
have also invested in other businesses in which the
Yunfeng Funds are shareholders.

Commitments of Jack Ma to Alibaba
Group
Jack Ma, formerly one of our directors, has confirmed
the following commitments to our board of directors:•••

He intends to reduce and thereafter limit his
direct and indirect economic interest in Ant Groupover time (for the avoidance of doubt, otherthan the equity stake in Ant Group held by ourcompany), to a percentage that does not exceed
his and his affiliates’ interest in our company
immediately prior to our initial public offeringand that the reduction will occur in a mannerby which neither Jack Ma nor any of his affiliates
would receive any economic benefit;
He will donate all of his Yunfeng GP Distributions
to, or for the benefit of, the Alibaba Group
Charitable Fund or other entities identified by him
that serve charitable purposes;
Other than his income tax obligations arisingfrom recognition of income from Yunfeng GP
Distributions, he will not claim any charitabledeductions with respect to donations of his
Yunfeng GP Distributions against his otherincome tax obligations; andFiscal Year 2023 Annual Report183

Major Shareholders and Related Party Transactions•

If required by us, while he remains an Alibaba
executive, he will assume for our benefit legal
ownership of investment vehicles, holding
companies and variable interest entities thatfurther our business interests in Internet, media
and telecom related businesses and, in this case,he will disclaim all economic benefits from his
ownership and enter into agreements to transfer
any benefits to us (or as we may direct) whenpermitted by applicable law.

Transactions with Other Investees
We have extended loans to certain of our investees
for working capital and other uses in conjunction with
our investments. As of March 31, 2023, the aggregate
outstanding balance of these loans was RMB2,345
million (US$341 million), with remaining terms of up to
four years and interest rates of up to 10% per annum.
We have agreed to provide a guarantee for a termloan facility of HK$7.7 billion (US$1.0 billion) in favor of
Cingleot, a company that is partially owned by us, inconnection with a logistic center development projectat the Hong Kong International Airport. As of thedate of this annual report, HK$5,233 million (US$669
million) was drawn down by that entity under thisfacility.
We have also co-invested with certain of our investees
in other businesses. For example, we have madeco-investments with Hangzhou Hanyun Xinling Equity
Investment Fund Partnership and New Retail Strategic
Opportunities Fund, L.P. (both of which are ourinvestees that focus on retail-related businesses) in a
number of companies, including Sun Art.

Other Commercial Transactions with
Investees
Other than the transactions disclosed above, we also
have commercial arrangements with certain of ourinvestees and other related parties in which:

•
•

184

we recorded cost and expenses paid to investees
for cloud computing services, content acquisition,purchase of inventory and various other services;
and
we recorded income generated from investees
for providing marketing, commission and otherservices.

Alibaba Group Holding Limited

The amounts relating to these services provided andreceived represent less than 1% of our revenue andtotal costs and expenses, respectively, for the years
ended March 31, 2021, 2022 and 2023.

Contractual Arrangements among Our
Subsidiaries, Variable Interest Entities
and the Variable Interest Entity Equity
Holders
Chinese law restricts foreign ownership in enterprisesthat provide value-added telecommunications
services, which includes the ICPs. As a result, we
operate our Internet businesses and other businesses
in which foreign investment is restricted or prohibitedin China through contractual arrangements between
our relevant subsidiaries, the variable interest entities,
which, where applicable, hold the ICP licenses andother regulated licenses and generally operate ourInternet businesses and other businesses in which
foreign investment is restricted or prohibited, and thevariable interest entity equity holders. For a descriptionof these contractual arrangements, see “Business
Overview — Organizational Structure — Contractual
Arrangements among Our Subsidiaries, Variable
Interest Entities and the Variable Interest Entity Equity
Holders.”

Indemnification Agreements
We have entered into indemnification agreementswith our directors and executive officers. These
agreements require us to indemnify these individuals,
to the fullest extent permitted by law, for certain
liabilities to which they may become subject as a resultof their affiliation with us.

Employment Agreements
See “Directors, Senior Management and Employees —Compensation — Employment Agreements.”

Share Options
See “Directors, Senior Management and Employees —Compensation — Equity Incentive Plan.”Other Information for Shareholders
Description Of Securities Other Than Equity Securities
American Depositary Shares
Fees Paid by Our ADS Holders
As an ADS holder, you will be required to pay the following service fees to the depositary, Citibank, N.A.:
Persons depositing or withdrawing
shares or ADS holders must pay:
Up to US$5.00 per 100 ADSs (or fraction thereof)

Up to US$5.00 per 100 ADS (or fraction thereof) per
calendar year
As an ADS holder you will also be responsible to pay
certain fees and expenses incurred by the depositaryand certain taxes and governmental charges such as:

•
•
•
•
•
•
•

taxes (including applicable interest andpenalties) and other governmental charges;
fees for the transfer and registration of Sharescharged by the registrar and transfer agent for
the Shares in the Cayman Islands (i.e., upon
deposit and withdrawal of Shares);expenses incurred for converting foreign currency
into U.S. dollars;
expenses for cable, telex and fax transmissions
and for delivery of securities;
fees and expenses as are incurred by thedepositary in connection with compliance withapplicable exchange control regulations;cable, telex and facsimile transmission anddelivery expenses as expressly provided in the
Deposit Agreement; andfees and expenses incurred in connection withthe delivery or servicing of Shares on deposit.

For:•

Issuance of ADSs upon deposit of Shares(excluding issuances as a result of distributionsof ADSs pursuant to (i) stock dividends or otherfree stock distributions, or (ii) exercise of rights topurchase additional ADSs).

•

Delivery of Shares against surrender of ADSs.

•

Distribution of cash dividends or other cash
distributions.

•

Distribution of ADSs pursuant to (i) stock dividends
or other free stock distributions, or (ii) exercise ofrights to purchase additional ADSs.

•

Distribution of securities other than ADSs or rights
to purchase additional ADSs.

•

ADS services

Depositary fees payable upon the issuance andcancellation of ADSs are typically paid to thedepositary bank by the brokers (on behalf of theirclients) receiving the newly issued ADSs from thedepositary bank and by the brokers (on behalf of theirclients) delivering the ADSs to the depositary bank forcancellation. The brokers in turn charge these fees totheir clients. Depositary fees payable in connection
with distributions of cash or securities to ADS holders
and the depositary services fee are charged by thedepositary bank to the holders of record of ADSs as of
the applicable ADS record date.
The Depositary fees payable for cash distributions are
generally deducted from the cash being distributed.
In the case of distributions other than cash (e.g.,stock dividend, rights), the depositary bank charges
the applicable fee to the ADS record date holders
concurrent with the distribution. In the case of ADSs
registered in the name of the investor (whether
certificated or uncertificated in direct registration),
the depositary bank sends invoices to the applicable
record date ADS holders. In the case of ADSs heldin brokerage and custodian accounts (via DTC), thedepositary bank generally collects its fees throughthe systems provided by DTC (whose nominee is the
Fiscal Year 2023 Annual Report185

Other Information for Shareholders

registered holder of the ADSs held in DTC) from thebrokers and custodians holding ADSs in their DTC
accounts. The brokers and custodians who hold theirclients’ ADSs in DTC accounts in turn charge theirclients’ accounts the amount of the fees paid to thedepositary banks.
In the event of refusal to pay the depositary fees, thedepositary bank may, under the terms of the Deposit
Agreement, refuse the requested service until payment
is received or may set off the amount of the depositary
fees from any distribution to be made to the ADS
holder.

•••

Note that the fees and charges you may be required
to pay may vary over time and may be changed by us
and by the depositary. You will receive prior notice of
these changes.

•

Fees and Payments from the Depositary
to Us

•

Our depositary has agreed to share with us certain
fees payable to the depositary by holders of ADSs. For
fiscal year 2023, the depositary shared with us US$39
million, after deduction of applicable U.S. taxes.

Conversion between ADSs and Shares
Dealings and Settlement of Shares in Hong
Kong
Our Shares trade on the Hong Kong Stock Exchange
in board lots of 100 Shares. Dealings in our Shares on
the Hong Kong Stock Exchange are conducted in Hong
Kong dollars. Following the launch of Hong Kong
Dollar – Renminbi Dual Counter Model by the Hong
Kong Stock Exchange, our shares are also traded inRenminbi (RMB) with stock code “89988” under the
RMB counter since June 19, 2023.
The transaction costs of dealings in our Shares on the
Hong Kong Stock Exchange include:

•

186

•

Hong Kong Stock Exchange trading fee of
0.00565% of the consideration of the transaction,
charged to each of the buyer and seller;

Alibaba Group Holding Limited•

SFC transaction levy of 0.0027% of theconsideration of the transaction, charged to eachof the buyer and seller;
Financial Reporting Council transaction levy of
0.00015% of the consideration of the transaction,
charged to each of the buyer and seller;transfer deed stamp duty of HK$5.00 per transfer
deed (if applicable), payable by the seller;
ad valorem stamp duty at a total rate of 0.26%
of the consideration for, or (if greater) the valueof, the Shares transferred, with 0.13% payable byeach of the buyer and seller;
stock settlement fee, which is currently 0.002%
of the gross transaction value, subject to aminimum fee of HK$2.00 and a maximum fee of
HK$100.00 per side per trade;brokerage commission, which is freely
negotiable with the broker; andthe Hong Kong Share Registrar will charge
between HK$2.50 to HK$20.00, depending on
the speed of service (or such higher fee as mayfrom time to time be permitted under the Hong
Kong Listing Rules), for each transfer of Sharesfrom one registered owner to another, eachshare certificate canceled or issued by it and any
applicable fee as stated in the share transfer
forms used in Hong Kong.

Investors must settle their trades executed on the
Hong Kong Stock Exchange through their brokers
directly or through custodians. For an investor who
has deposited his or her Shares in his or her stock
account or in his or her designated Central Clearing
and Settlement System participant’s stock accountmaintained with the Central Clearing and Settlement
System, or CCASS, settlement will be effected in
CCASS in accordance with the General Rules of CCASS
and CCASS Operational Procedures in effect fromtime to time. For an investor who holds the physicalcertificates, settlement certificates and the duly
executed transfer forms must be delivered to his
broker or custodian before the settlement date.

Other Information for Shareholders

Conversion between Shares Trading in Hong
Kong and ADSs

Converting Shares Trading in Hong Kong into
ADSs

In connection with the listing of our Shares on the
Hong Kong Stock Exchange, we have establisheda branch register of members in Hong Kong, or the
Hong Kong share register, which is maintained by
our Hong Kong Share Registrar, Computershare
Hong Kong Investor Services Limited. Our principal
register of members, or the Cayman share register, ismaintained by our Principal Share Registrar.

An investor who holds Shares registered in Hong Kongand who intends to convert them to ADSs to tradeon the NYSE must deposit or have his or her broker
deposit the Shares with the depositary’s Hong Kong
custodian, Citibank, N.A. – Hong Kong branch, or thecustodian, in exchange for ADSs.

All Shares offered in our Hong Kong public offering
are registered on the Hong Kong share register inorder to be listed and traded on the Hong Kong
Stock Exchange. As described in further detail below,
holders of Shares registered on the Hong Kong shareregister are able to convert these Shares into ADSs,
and vice versa.

•

In connection with the Hong Kong public offering, andto facilitate fungibility and conversion between ADSs
and Shares and trading between the NYSE and theHong Kong Stock Exchange, we moved a portion of
our issued Shares that are represented by ADSs from
our Cayman share register to our Hong Kong shareregister.

•

Our ADSs
Our ADSs are traded on the NYSE. Dealings in our ADSs
on the NYSE are conducted in U.S. Dollars.

A deposit of Shares trading in Hong Kong in exchange
for ADSs involves the following procedures:•

ADSs may be held either:••

directly, by having a certificated ADS, or an
American Depositary Receipt, or ADR, registeredin the holder’s name, or by holding in the
direct registration system, pursuant to which
the depositary may register the ownership ofuncertificated ADSs, which ownership shall beevidenced by periodic statements issued by thedepositary to the ADS holders entitled thereto; orindirectly, through the holder’s broker or otherfinancial institution.

The depositary for our ADSs is Citibank, N.A., whose
office is located at 388 Greenwich Street, New York,New York 10013, United States. The depositary’s
custodian in Hong Kong is Citibank, N.A. – Hong Kongbranch, whose office is located at 9/F Citi Tower, One
Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon,
Hong Kong.

•

If Shares have been deposited with CCASS, theinvestor must transfer Shares to the depositary’s
account with the custodian within CCASS byfollowing the CCASS procedures for transfer
and submit and deliver a duly completed
and signed conversion form to the depositary(localcustody @ citi.com) via his or her broker.
If Shares are held outside CCASS, the investor
must arrange to deposit his or her Shares into
CCASS for delivery to the depositary’s accountwith the custodian within CCASS, submit anddeliver a request for conversion form to thecustodian and after duly completing and signing
such conversion form, deliver such conversion
form to the custodian.
Upon payment of its fees and expenses and of
any taxes or charges, such as stamp taxes orstock transfer taxes or fees, if applicable, thedepositary will issue the corresponding numberof ADSs in the name(s) requested by an investor
and will deliver the ADSs to the designated
DTC account of the person(s) designated by aninvestor or his or her broker.
The investor (or one of its agents) mustdeliver a certification to the depositary that(i) the shareholder is not the company or anaffiliate of the company, or acting on behalfof the company or one of its affiliates, (ii) the
deposited shares are not “restricted securities”(as defined in the Deposit Agreement), and (iii)the deposited shares were acquired in either(a) an open market transaction executed on,
or in a “direct business” transaction between abroker and its client reported to, the Hong Kong
Stock Exchange, (b) a transaction registeredwith the SEC under the U.S. Securities Act, or(c) a transaction exempt from registration with
the SEC (and the applicable restricted period or
distribution compliance period has elapsed).

Fiscal Year 2023 Annual Report187

Other Information for Shareholders

For Shares deposited in CCASS, under normal
circumstances, the above steps generally require
two business days. For Shares held outside CCASS in
physical form, the above steps may take 14 businessdays, or more, to complete. Temporary delays
may arise. For example, the transfer books of thedepositary may from time to time be closed to ADS
issuances. The investor will be unable to trade the
ADSs until the procedures are completed.
Converting ADSs to Shares Trading in Hong Kong
An investor who holds ADSs and who intends toconvert his/her ADSs into Shares to trade on the
Hong Kong Stock Exchange must cancel the ADSs theinvestor holds and withdraw Shares from our ADS
program and cause his or her broker or other financial
institution to trade such Shares on the Hong Kong
Stock Exchange.
An investor that holds ADSs indirectly through a
broker should follow the broker’s procedure andinstruct the broker to arrange for cancelation of
the ADSs, and transfer of the underlying Sharesfrom Citibank’s account on the CCASS system to theinvestor’s Hong Kong stock account. The broker,
upon receiving instructions from its client, should
surrender the ADSs to Citibank and said instructions
to Citibank (drcerts @ citi.com/citiadr @ citi.com/
drbrokerservices @ citi.com) to cancel the ADSs withshare delivery instructions in CCASS.
For investors holding ADSs directly, the following steps
must be taken:

•

•

•

188

To withdraw Shares from our ADS program, aninvestor who holds ADSs may turn in such ADSs
at the office of the depositary (and the applicable
ADR(s) if the ADSs are held in certificated form),and send an instruction to cancel such ADSs to
the depositary.
Upon payment or net of its fees and expenses
and of any taxes or charges, such as stamp taxes
or stock transfer taxes or fees, if applicable, thedepositary will instruct the custodian to deliver
Shares underlying the canceled ADSs to the
CCASS account designated by an investor.
If an investor prefers to receive Shares outside
CCASS, he or she must receive Shares in CCASS
first and then arrange for withdrawal fromCCASS. Investors can then obtain a transfer
form signed by HKSCC Nominees Limited (asthe transferor) and register Shares in their own
names with the Hong Kong Share Registrar.

Alibaba Group Holding Limited

For Shares to be received in CCASS, under normal
circumstances, the above steps generally require
two business days. For Shares to be received outside
CCASS in physical form, the above steps may take 14
business days, or more, to complete. The investor will
be unable to trade the Shares on the Hong Kong Stock
Exchange until the procedures are completed.
Temporary delays may arise. For example, the transfer
books of the depositary may from time to time beclosed to ADS cancellations. In addition, completionof the above steps and procedures is subject to there
being a sufficient number of Shares on the Hong
Kong share register to facilitate a withdrawal from the
ADS program directly into the CCASS system. We are
not under any obligation to maintain or increase thenumber of Shares on the Hong Kong share register tofacilitate such withdrawals.
Depositary Requirements
Before the depositary issues ADSs or permits
withdrawal of Shares, the depositary may require:••production of satisfactory proof of the identityand genuineness of any signature or otherinformation it deems necessary; andcompliance with procedures it may establish,
from time to time, consistent with the Deposit
Agreement, including presentation of transfer
documents.

The depositary may refuse to deliver, transfer, or
register issuances, transfers and cancelations of ADSs
generally when the transfer books of the depositaryor our Hong Kong Share Registrar are closed or at any
time if the depositary or we determine it advisable
to do so or it would violate any applicable law or thedepositary’s policies or procedures.
All costs attributable to the transfer of Shares to effecta withdrawal from or deposit of Shares into our ADS
program will be borne by the investor requesting thetransfer. In particular, holders of Shares and ADSs
should note that the Hong Kong Share Registrar will
charge between HK$2.50 to HK$20.00, depending on
the speed of service (or such higher fee as may fromtime to time be permitted under the Hong Kong Listing
Rules), for each transfer of Shares from one registeredowner to another, each share certificate canceled or
issued by it and any applicable fee as stated in theshare transfer forms used in Hong Kong. In addition,holders of Shares and ADSs must pay US$5.00 (or less)per 100 ADSs for each issuance of ADSs and for eachcancelation of ADSs, as the case may be, in connection
with the deposit of Shares into, or withdrawal of
Shares from, our ADS program.

Other Information for Shareholders

Purchases of Equity
Securities by the Issuer
and Affiliated Purchasers

billion to US$40.0 billion, which is effective through theend of March 2025.
During the year ended March 31, 2023, werepurchased approximately 130 million of our ADSs (or1,039 million of our ordinary shares) for approximately
US$10.9 billion under the share repurchase program.
As of March 31, 2023, we had 20.5 billion ordinary
shares (equivalent to 2.6 billion ADSs) issued andoutstanding.

In May 2019, our board of directors authorized a share
repurchase program for an amount of up to US$6.0
billion over a period of two years. In December 2020,
our board of directors authorized an upsize of ourshare repurchase program from US$6.0 billion to
US$10.0 billion, for a two-year period through theend of 2022. In August 2021, our board of directors
authorized an upsize of our share repurchase programfrom US$10.0 billion to US$15.0 billion, for a 16-month
period through the end of 2022. In March 2022, ourboard of directors authorized an upsize of our share
repurchase program from US$15.0 billion to US$25.0
billion, through the end of March 2024. In November
2022, our board of directors authorized a further
upsize of our share repurchase program from US$25.0

In addition, our equity incentive award agreements
generally provide that, in the event of a grantee’s
termination for cause (including any commission of anact of fraud, dishonesty or ethical breach) or violationof a non-competition undertaking, we will have theright to terminate grants, forfeit and cancel shares or,if applicable, repurchase the shares acquired by the
grantee, generally at the original purchase price or
the exercise price paid for these shares. See “Directors,
Senior Management and Employees — Compensation— Equity Incentive Plan.”

The table below summarizes the repurchases we made in the periods indicated.

Month

Total Numberof Ordinary
SharesPurchased as
Part of ShareTotal Price
Repurchase
Paid
Program (US$, in millions)

Approximate
Dollar Value of
Ordinary Sharesthat May Yet
Average Price
Be Purchased
Paid Per
Under Share
Ordinary
Repurchase
Share(1)Program(2)(US$) (US$, in millions)

April 2022

138,152,200

1,633

11.82

13,622

May 2022

166,412,296

1,842

11.07

11,780June 2022

4,181,344

50

12.05

11,729July 2022

2,495,952

30

12.03

11,699August 2022

55,085,648

642

11.66

11,057

September 2022

137,158,224

1,462

10.66

9,595

October 2022

190,949,144

1,725

9.03

7,871

November 2022

138,049,152

1,215

8.80

21,656

December 2022

34,301,056

377

10.98

21,280January 2023

—

—

—

21,280February 2023

20,196,800

225

11.14

21,055

March 2023

152,183,488

1,655

10.88

19,399(1) Each ADS represents eight Shares.
(2) In November 2022, our board of directors authorized a further upsize of our share repurchase program from US$25.0 billion to
US$40.0 billion.

Fiscal Year 2023 Annual Report

189

Other Information for Shareholders

Taxation
The following is a general summary of certain Cayman
Islands, Chinese mainland, Hong Kong S.A.R. andUnited States federal income tax consequences
relevant to an investment in our ADSs and ordinary
shares. The discussion is not intended to be, norshould it be construed as, legal or tax advice to any
particular prospective purchaser. The discussion isbased on laws and relevant interpretations thereof in
effect as of the date of this annual report, all of which
are subject to change or different interpretations,
possibly with retroactive effect. The discussion does
not address U.S. state or local tax laws, or tax laws ofjurisdictions other than the Cayman Islands, Chinese
mainland, Hong Kong S.A.R. and the United States.
You should consult your own tax advisors with respect
to the consequences of acquisition, ownership anddisposition of our ADSs and ordinary shares. To
the extent that this discussion relates to matters of
Cayman Islands tax law, it is the opinion of Maples
and Calder (Hong Kong) LLP, our Cayman Islands
legal counsel. To the extent that the discussion states
definitive legal conclusions under PRC tax laws andregulations, it is the opinion of Fangda Partners, our
special PRC counsel.

Cayman Islands Taxation
The Cayman Islands currently levies no taxes on
individuals or corporations based upon profits,
income, gains or appreciation and there is no taxationin the nature of inheritance tax or estate duty orwithholding tax applicable to us or to any holder of
our ADSs or ordinary shares. There are no other taxes
likely to be material to us levied by the Government of
the Cayman Islands except for stamp duties that may
be applicable on instruments executed in, or after
execution brought into, the jurisdiction of the Cayman
Islands. No stamp duty is payable in the Cayman
Islands on the issue of shares by, or any transfer ofshares of, Cayman Islands companies (except thosewhich hold interests in land in the Cayman Islands).
The Cayman Islands is not party to any double tax
treaties that are applicable to any payments madeto or by our company. There are no exchange control
regulations or currency restrictions in the Cayman
Islands.

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Payments of dividends and capital in respect of
our ADSs and ordinary shares will not be subject totaxation in the Cayman Islands and no withholding will
be required on the payment of a dividend or capital toany holder of our ADSs or ordinary shares, as the casemay be, nor will gains derived from the disposal of our
ADSs or ordinary shares be subject to Cayman Islands
income or corporation tax.

People’s Republic of China Taxation
We are a holding company incorporated in the
Cayman Islands and we gain substantial income
by way of dividends from our PRC subsidiaries. The
EIT Law and its implementation rules, both of whichbecame effective on January 1, 2008 and were mostrecently amended on December 29, 2018 and April
23, 2019, respectively, provide that China-sourced
income of foreign enterprises, such as dividends
paid by a PRC subsidiary to its equity holders that are
non-resident enterprises, will normally be subject
to PRC withholding tax at a rate of 10%, unless any
non-resident enterprise’s jurisdiction of incorporation
has a tax treaty with China that provides for a lower
withholding tax rate for which the foreign investor iseligible.
Under the EIT Law, an enterprise established outsideof China with a “de facto management body”
within China is considered a “resident enterprise,”which means that it is treated in the same manneras a Chinese enterprise for enterprise income tax
purposes. Although the implementation rules of the
EIT Law define “de facto management body” as amanaging body that exercises substantive and overallmanagement and control over the production andbusiness, personnel, accounting books and assetsof an enterprise, the only official guidance for thisdefinition currently available is set forth in Circular
82 issued by the STA, which provides guidance on
the determination of the tax residence status of a
Chinese-controlled offshore incorporated enterprise,defined as an enterprise that is incorporated under
the laws of a foreign country or territory and that has
a PRC enterprise or enterprise group as its primarycontrolling shareholder. Although Alibaba Group
Holding Limited does not have a PRC enterpriseor enterprise group as our primary controllingshareholder and is therefore not a Chinese-controlled
offshore incorporated enterprise within the meaningof Circular 82, in the absence of guidance specificallyapplicable to us, we have applied the guidance set
forth in Circular 82 to evaluate the tax residence status
of Alibaba Group Holding Limited and its subsidiaries
outside the PRC.

Other Information for Shareholders

According to Circular 82, a Chinese-controlled offshore
incorporated enterprise will be regarded as a PRC tax
resident by virtue of having a “de facto managementbody” in China and will be subject to PRC enterpriseincome tax on its worldwide income only if all of thefollowing criteria are met:

•
•
•
•

the primary location of the day-to-day
operational management is in the PRC;
decisions relating to the enterprise’s financial
and human resource matters are made orare subject to approval by organizations or
personnel in the PRC;
the enterprise’s primary assets, accounting books
and records, company seals, and board andshareholders meeting minutes are located or
maintained in the PRC; and50% or more of voting board members or senior
executives habitually reside in the PRC.

We do not believe that we meet any of the conditions
outlined in the immediately preceding paragraph.
Alibaba Group Holding Limited and its offshore
subsidiaries are incorporated outside the PRC. As
a holding company, our key assets and records,
including the resolutions and meeting minutesof our board of directors and the resolutions andmeeting minutes of our shareholders, are locatedand maintained outside the PRC. In addition, we are
not aware of any offshore holding companies witha corporate structure similar to ours that has been
deemed a PRC “resident enterprise” by the PRC tax
authorities. Accordingly, we believe that Alibaba Group
Holding Limited and our offshore subsidiaries should
not be treated as a “resident enterprise” for PRC tax
purposes if the criteria for “de facto managementbody” as set forth in Circular 82 were deemed
applicable to us. However, as the tax residency statusof an enterprise is subject to determination by the
PRC tax authorities and uncertainties remain withrespect to the interpretation of the term “de facto
management body” as applicable to our offshore
entities, we will continue to monitor our tax status.

The implementation rules of the EIT Law provide
that, (i) if the enterprise that distributes dividends
is domiciled in the PRC or (ii) if gains are realized
from transferring equity interests of enterprises
domiciled in the PRC, then the dividends or capitalgains are treated as China-sourced income. It is notclear how “domicile” may be interpreted under the
EIT Law, and it may be interpreted as the jurisdiction
where the enterprise is a tax resident. Therefore,
if we are considered a PRC tax resident enterprisefor PRC tax purposes, any dividends we pay to ouroverseas shareholders or ADS holders that are nonresident enterprises as well as gains realized bythose shareholders or ADS holders from the transferof our shares or ADSs may be regarded as Chinasourced income and as a result become subject to
PRC withholding tax at a rate of 10%, unless any of the
non-resident enterprises’ jurisdictions has a tax treaty
with China that provides for a preferential treatment.
Furthermore, if we are considered a PRC resident
enterprise and the competent PRC tax authorities
consider dividends we pay with respect to our sharesor ADSs and the gains realized from the transfer ofour shares or ADSs to be income derived from sources
within the PRC, the dividends we pay to our overseas
shareholders or ADS holders who are non-resident
individuals, and gains realized by those shareholders
or ADS holders from the transfer of our shares or ADSs,
may be subject to PRC individual income tax at a rateof 20%, unless any of the non-resident individuals’
jurisdictions has a tax treaty with China that provides
for a preferential tax rate or a tax exemption. It is also
unclear whether, if we are considered a PRC resident
enterprise, holders of our shares or ADSs would be
able to claim the benefit of income tax treaties oragreements entered into between China and othercountries or areas.
See “Risk Factors — Risks Related to Doing Business in
the People’s Republic of China — We may be treated asa resident enterprise for PRC tax purposes under the
PRC Enterprise Income Tax Law, and we may therefore
be subject to PRC income tax on our global income”
and “Risk Factors — Risks Related to Doing Business in
the People’s Republic of China — Dividends payable
to foreign investors and gains on the sale of our ADSs
and/or ordinary shares by our foreign investors may
become subject to PRC taxation.”

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Other Information for Shareholders

Hong Kong Taxation
Our subsidiaries incorporated in Hong Kong were
subject to Hong Kong profits tax at a rate of 16.5% in
the fiscal years ended March 31, 2021, 2022 and 2023.
Our principal register of members is maintained by our
Principal Share Registrar in the Cayman Islands, andour Hong Kong register of members is maintained by
the Hong Kong Share Registrar in Hong Kong.
Dealings in our Shares registered on our Hong Kongshare register are subject to Hong Kong stamp duty.
The stamp duty is charged to each of the seller andpurchaser at the rate of 0.13% of the consideration for,or (if greater) the value of, our Shares transferred. In
other words, a total of 0.26% is currently payable on a
typical sale and purchase transaction of our Shares. In
addition, a fixed duty of HK$5.00 is charged on each
instrument of transfer (if required).
To facilitate ADS-ordinary share conversion andtrading between the NYSE and the Hong Kong Stock
Exchange, we have moved a portion of our issued
ordinary shares from our Cayman share register to ourHong Kong share register. It is unclear whether, as amatter of Hong Kong law, the trading or conversion of
ADSs constitutes a sale or purchase of the underlying
Hong Kong-registered ordinary shares that is subject
to Hong Kong stamp duty. We advise investors to
consult their own tax advisors on this matter. See “Risk
Factors — Risks Related to Our ADSs and Shares —There is uncertainty as to whether Hong Kong stamp
duty will apply to the trading or conversion of our
ADSs.”

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Material United States Federal Income
Tax Considerations
The following summary describes the material UnitedStates federal income tax consequences of theownership and disposition of our ordinary shares and
ADSs. The discussion set forth below is applicable only
to United States Holders that hold ordinary sharesor ADSs as capital assets. As used herein, the term
“United States Holder” means a beneficial owner of an
ordinary share or ADS that is for United States federal
income tax purposes:

•
•

•
•

an individual who is a citizen or resident of theUnited States;
a corporation (or other entity treated as acorporation for United States federal income tax
purposes) created or organized in or under thelaws of the United States, any state thereof or theDistrict of Columbia;
an estate the income of which is subject to UnitedStates federal income taxation regardless of its
source; ora trust if it is subject to the primary supervision ofa court within the United States and one or more
United States persons has or have the authority
to control all substantial decisions of the trust, or
if it has a valid election in effect under applicable
United States Treasury regulations to be treatedas a United States person.

Other Information for Shareholders

This summary does not represent a detailed
description of the United States federal income tax
consequences applicable to you if you are subject
to special treatment under the United States federal
income tax laws, including if you are:

•
•
•
•
•
•
•
•
•
•
•

•
•

a dealer in securities or currencies;
a financial institution;a regulated investment company;a real estate investment trust;an insurance company;a tax-exempt organization;a person holding our ordinary shares or ADSs
as part of a hedging, integrated or conversion
transaction, a constructive sale or a straddle;a trader in securities that has elected the markto-market method of accounting for yoursecurities;

If a partnership (or other entity or arrangement treatedas a partnership for United States federal income
tax purposes) holds our ordinary shares or ADSs,
the tax treatment of a partner will generally depend
upon the status of the partner and the activities ofthe partnership. If you are a partner of a partnership
holding our ordinary shares or ADSs, you should
consult your tax advisors.
This summary does not contain a detailed
description of all the United States federal income
tax consequences to you in light of your particular
circumstances and does not address the Medicare
tax on net investment income, United States federal
estate and gift taxes or the effects of any state, local
or non-United States tax laws. If you are considering
the purchase of our ordinary shares or ADSs, you
should consult your own tax advisors concerning
the United States federal income tax consequences
to you in light of your particular situation as well as
any consequences arising under other United Statesfederal tax laws and the laws of any other taxing
jurisdiction.

a person liable for alternative minimum tax;

ADSs

a person who owns or is deemed to own 10% ormore of our stock (by vote or value);If you hold ADSs, for United States federal income tax
purposes, you generally will be treated as the ownerof the underlying ordinary shares that are represented
by the ADSs. Accordingly, deposits or withdrawals of
ordinary shares for ADSs will not be subject to UnitedStates federal income tax.

a person required to accelerate the recognitionof any item of gross income with respect toour ordinary shares or ADSs as a result of suchincome being recognized on an applicablefinancial statement;a partnership or other pass-through entity for
United States federal income tax purposes; ora person whose “functional currency” is not the
U.S. dollar.

The discussion below is based upon the provisionsof the Internal Revenue Code of 1986, as amended,or the Code, and regulations, rulings and judicial
decisions thereunder as of the date of this annual
report, as well as the current income tax treaty
between the United States and the PRC, which ishereinafter referred to as the Treaty. Those authorities
may be replaced, revoked or modified, perhaps
retroactively, so as to result in United States federal
income tax consequences different from those
discussed below. In addition, this summary assumes
that the Deposit Agreement, and all other relatedagreements, will be performed in accordance with
their terms.

Taxation of Dividends
Subject to the discussion under “— Passive Foreign
Investment Company” below, the gross amountof distributions on the ADSs or ordinary shares(including any amounts withheld to reflect PRC
withholding taxes) will be taxable as dividends, tothe extent paid out of our current or accumulated
earnings and profits, as determined under UnitedStates federal income tax principles. The dividends(including withheld taxes) will be includable in yourgross income as ordinary income on the day actuallyor constructively received by you, in the case of theordinary shares, or by the depositary, in the caseof ADSs. Such dividends will not be eligible for thedividends received deduction allowed to corporations
under the Code. The following discussion assumes
that all dividends will be paid in U.S. dollars.

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Other Information for Shareholders

Subject to applicable limitations (including a minimum
holding period requirement), certain dividends
received by non-corporate United States investors
from a qualified foreign corporation may be treated as“qualified dividend income” that is subject to reduced
rates of taxation. A foreign corporation is treated as aqualified foreign corporation with respect to dividends
paid by that corporation on ordinary shares (or ADSs
backed by such shares) that are readily tradable onan established securities market in the United States.
United States Treasury Department guidance indicatesthat our ADSs (which are listed on the NYSE) arereadily tradable on an established securities market in
the United States. Thus, subject to the discussion under“— Passive Foreign Investment Company” below, we
believe that any dividends we pay on our ordinary
shares that are represented by ADSs will be eligible forthese reduced tax rates. Since we do not expect that
our ordinary shares will be listed on an establishedsecurities market in the United States, we do notbelieve that any dividends that we pay on our ordinary
shares that are not represented by ADSs currently
meet the conditions required for these reduced tax
rates. There also can be no assurance that our ADSs
will continue to be readily tradable on an establishedsecurities market in the United States in subsequent
years. A qualified foreign corporation also includes aforeign corporation that is eligible for the benefits ofcertain income tax treaties with the United States. In
the event that we were deemed to be a PRC resident
enterprise under the EIT Law, although no assurance
can be given, we might be eligible for the benefits of
the Treaty, and if we were eligible for such benefits,dividends we pay on our ordinary shares, regardlessof whether the shares are represented by ADSs,
would be eligible for the reduced rates of taxation.
See “— People’s Republic of China Taxation” above.
You should consult your own tax advisors regarding
the application of these rules given your particular
circumstances.
Non-corporate United States Holders will not be
eligible for reduced rates of taxation on any dividends
received from us if we are a PFIC in the taxable year
in which the dividends are paid or in the preceding
taxable year. See “— Passive Foreign Investment
Company” below.

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In the event that we were deemed to be a PRC resident
enterprise under the EIT Law, you might be subject
to PRC withholding taxes on dividends paid to you
with respect to the ADSs or ordinary shares. See “—People’s Republic of China Taxation” above. In thatcase, subject to certain conditions and limitations(including a minimum holding period requirement)
and the Foreign Tax Credit Regulations (as defined
below), PRC withholding taxes on dividends may betreated as foreign taxes eligible for credit against yourUnited States federal income tax liability. For purposesof calculating the foreign tax credit, dividends paidon the ADSs or ordinary shares will be treated as
foreign source income and will generally constitutepassive category income. However, recently issued
United States Treasury regulations addressing foreign
tax credits, or the Foreign Tax Credit Regulations,
impose additional requirements for foreign taxes tobe eligible for a foreign tax credit, and there can be noassurance that those requirements will be satisfied. In
addition, if you are eligible for Treaty benefits, any PRC
taxes on dividends will not be creditable against yourUnited States federal income tax liability to the extent
withheld at a rate exceeding the applicable Treaty
rate. Alternatively, instead of claiming a foreign tax
credit, you may be able to deduct any PRC withholding
taxes on dividends in computing your taxable income,subject to generally applicable limitations under
United States law (including that a United States
Holder is not eligible for a deduction for otherwise
creditable foreign income taxes paid or accrued ina taxable year if such United States Holder claims aforeign tax credit for any foreign income taxes paid or
accrued in the same taxable year). The rules governing
the foreign tax credit and deductions for foreigntaxes are complex. You are urged to consult your tax
advisors regarding the Foreign Tax Credit Regulations
and the availability of the foreign tax credit or adeduction under your particular circumstances.

Other Information for Shareholders

To the extent that the amount of any distribution
exceeds our current and accumulated earnings andprofits for a taxable year, as determined under UnitedStates federal income tax principles, the distribution
will first be treated as a tax free return of capital,causing a reduction in the adjusted basis of the ADSs
or ordinary shares (thereby increasing the amountof gain, or decreasing the amount of loss, to berecognized by you on a subsequent disposition of the
ADSs or ordinary shares), and the balance in excess ofadjusted basis will be taxed as capital gain recognizedon a sale or exchange, as described under “—Taxation of Capital Gains” below. Consequently, any
distributions in excess of our current and accumulated
earnings and profits will generally not give rise toforeign source income and you will generally not be
eligible for a foreign tax credit for any PRC withholding
tax imposed on those distributions unless the credit
can be applied (subject to applicable limitations)against United States federal income tax due on otherforeign source income in the appropriate category
for foreign tax credit purposes. However, we do not
expect to keep earnings and profits in accordance with
United States federal income tax principles. Therefore,
you should expect that a distribution will generally bereported as a dividend (as discussed above).
Distributions of ADSs, ordinary shares or rights
to subscribe for ADSs or ordinary shares that arereceived as part of a pro rata distribution to all of
our shareholders generally will not be subject toUnited States federal income tax. Consequently, these
distributions will generally not give rise to foreignsource income and you will generally not be eligible
for a foreign tax credit for any PRC withholding tax
imposed on these distributions unless the credit canbe applied (subject to applicable limitations) against
United States federal income tax due on other foreignsource income in the appropriate category for foreign
tax credit purposes.

Passive Foreign Investment Company
Based on the composition of our income and assets,
and the valuation of our assets, including goodwill,
we do not believe we were a PFIC for our most recent
taxable year, although there can be no assurance inthis regard.

In general, we will be a PFIC for any taxable year inwhich:••

at least 75% of our gross income is passive
income; orat least 50% of the value (generally determinedon a quarterly basis) of our assets for thattaxable year is attributable to assets that produce
or are held for the production of passive income.

For this purpose, passive income generally includes
dividends, interest, royalties and rents (other thanroyalties and rents derived in the active conduct ofa trade or business and not derived from a related
person). In addition, cash and other assets readily
convertible into cash are generally considered passive
assets. If we own at least 25% (by value) of the stock ofanother corporation, we will be treated, for purposesof the PFIC tests, as owning our proportionate shareof the other corporation’s assets and receiving our
proportionate share of the other corporation’s income.
However, it is not entirely clear how the contractual
arrangements between us and the variable interest
entities will be treated for purposes of the PFIC rules.
If it were determined that we do not own the stockof the variable interest entities for United Statesfederal income tax purposes (for instance, because
the relevant PRC authorities do not respect thesearrangements), we may be treated as a PFIC.
The determination of whether we are a PFIC is madeannually. Accordingly, it is possible that we may
become a PFIC in the current or any future taxable year
due to changes in our asset or income composition orin the value of our assets. The calculation of the valueof our assets will be based, in part, on the quarterlymarket value of our ADSs. The market value of our
ADSs has been volatile and has declined significantly
over the past few years. Any further decline in the priceof our ADSs may result in our becoming a PFIC. If weare a PFIC for any taxable year during which you hold
our ADSs or ordinary shares, you will be subject tospecial tax rules discussed below.

Fiscal Year 2023 Annual Report

195

Other Information for Shareholders

If we are a PFIC for any taxable year during which you
hold our ADSs or ordinary shares and you do not makea timely mark-to-market election (as discussed below),
you will be subject to special tax rules with respect
to any “excess distribution” received and any gain
realized from a sale or other disposition, including
a pledge, of ADSs or ordinary shares. Distributions
received in a taxable year that are greater than 125%of the average annual distributions received during
the shorter of the three preceding taxable years or
your holding period for the ADSs or ordinary shares
will be treated as excess distributions. Under these
special tax rules:•••

the excess distribution or gain will be allocatedratably over your holding period for the ADSs or
ordinary shares;
the amount allocated to the current taxable year,
and any taxable year prior to the first taxable
year in which we were a PFIC, will be treated asordinary income; andthe amount allocated to each other year will
be subject to tax at the highest tax rate in effectfor that year for individuals or corporations, asapplicable, and the interest charge generally
applicable to underpayments of tax will be
imposed on the resulting tax attributable to eachrelevant year.

Although the determination of whether we are a PFIC
is made annually, if we are a PFIC for any taxable year
in which you hold our ADSs or ordinary shares, you will
generally be subject to the special tax rules describedabove for that year and for each subsequent year inwhich you hold the ADSs or ordinary shares (even if
we do not qualify as a PFIC in such subsequent years).
However, if we cease to be a PFIC, you can avoid
the continuing impact of the PFIC rules by making a
special election to recognize gain as if your ADSs or
ordinary shares had been sold on the last day of thelast taxable year during which we were a PFIC. You
are urged to consult your own tax advisors about thiselection.

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In certain circumstances, in lieu of being subject
to the special tax rules discussed above, you may
make a mark-to-market election with respect toyour ADSs or ordinary shares, provided such ADSs or
ordinary shares are treated as “marketable stock.”
The ADSs or ordinary shares generally will be treatedas marketable stock if the ADSs or ordinary shares,
as applicable, are regularly traded on a “qualified
exchange or other market” (within the meaning of theapplicable United States Treasury regulations). Under
current law, the mark-to-market election may beavailable to holders of ADSs since the ADSs are listedon the NYSE, which constitutes a qualified exchange,
although there can be no assurance that the ADSs
will be “regularly traded” for purposes of the markto-market election. Our ordinary shares are listed on
the Hong Kong Stock Exchange, which must meetcertain trading, listing, financial disclosure and otherrequirements to be treated as a qualified exchange
for these purposes, and no assurance can be giventhat our ordinary shares will be “regularly traded” forpurposes of the mark-to-market election.
If you make an effective mark-to-market election, foreach taxable year that we are a PFIC you will include
as ordinary income the excess of the fair market valueof your ADSs or ordinary shares at the end of the year
over your adjusted tax basis in the ADSs or ordinary
shares. You will be entitled to deduct as an ordinary
loss in each such year the excess of your adjusted
tax basis in the ADSs or ordinary shares over their fairmarket value at the end of the year, but only to theextent of the net amount previously included in income
as a result of the mark-to-market election. If you makean effective mark-to-market election, in each year that
we are a PFIC: (i) any gain you recognize upon the saleor other disposition of your ADSs or ordinary shares
will be treated as ordinary income and (ii) any loss
will be treated as ordinary loss, but only to the extent
of the net amount previously included in income as aresult of the mark-to-market election.

Other Information for Shareholders

Your adjusted tax basis in the ADSs or ordinary shares
will be increased by the amount of any income
inclusion and decreased by the amount of any
deductions under the mark-to-market rules. If you
make a mark-to-market election, it will be effective forthe taxable year for which the election is made and all
subsequent taxable years unless the ADSs or ordinary
shares are no longer regularly traded on a qualified
exchange or other market or the Internal Revenue
Service, or the IRS, consents to the revocation of theelection. However, because a mark-to-market election
cannot be made for any lower-tier PFICs that we mayown (as discussed below), you will generally continue
to be subject to the special tax rules discussed above
with respect your indirect interest in any such lowertier PFIC. You are urged to consult your tax advisors
about the availability of the mark-to-market election,
and whether making the election would be advisable
in your particular circumstances.
Alternatively, you can sometimes avoid the rules
described above by electing to treat a PFIC as a“qualified electing fund” under Section 1295 of
the Code. However, this option is not available toyou because we do not intend to comply with therequirements necessary to permit you to make thiselection.
In addition, non-corporate United States Holders will
not be eligible for reduced rates of taxation on any
dividends received from us if we are a PFIC in the
taxable year in which the dividends are paid or in thepreceding taxable year. You will generally be required
to file IRS Form 8621 if you hold our ADSs or ordinary
shares in any year in which we are classified as a PFIC.
If we are a PFIC for any taxable year during which you
hold our ADSs or ordinary shares and any of our nonUnited States subsidiaries is also a PFIC, you will betreated as owning a proportionate amount (by value)of the shares of the lower-tier PFIC for purposes of theapplication of these rules. You are urged to consult
your tax advisors about the application of the PFIC
rules to any of our subsidiaries.
You are urged to consult your tax advisors concerning
the United States federal income tax consequences ofholding ADSs or ordinary shares if we are considered a
PFIC in any taxable year.

Taxation of Capital Gains
For United States federal income tax purposes, you willrecognize taxable gain or loss on any sale, exchange
or other taxable disposition of our ADSs or ordinary
shares in an amount equal to the difference between
the amount realized for the ADSs or ordinary shares(net of any Hong Kong stamp duty imposed on suchproceeds) and your tax basis in the ADSs or ordinary
shares (which should similarly take into account any
Hong Kong stamp duty paid in connection with theacquisition of the ADSs or ordinary shares), both
determined in U.S. dollars. Subject to the discussion
under “— Passive Foreign Investment Company”
above, such gain or loss will generally be capital gainor loss and will generally be long-term capital gainor loss if you have held the ADSs or ordinary sharesfor more than one year. Long-term capital gains
of non-corporate United States Holders (including
individuals) are eligible for reduced rates of taxation.
The deductibility of capital losses is subject tolimitations. Any gain or loss recognized by you will
generally be treated as United States source gain or
loss. However, if we were treated as a PRC resident
enterprise for EIT Law purposes and PRC tax were
imposed on any gain, and if you are eligible for the
benefits of the Treaty, you may elect to treat suchgain as PRC source gain under the Treaty. If you are
not eligible for the benefits of the Treaty or you failto make the election to treat any gain as PRC source,then you generally would not be able to use a foreign
tax credit for any PRC tax imposed on the dispositionof our ADSs or ordinary shares unless the credit canbe applied (subject to applicable limitations) against
United States federal income tax due on other foreignsource income in the appropriate category for foreign
tax credit purposes. However, pursuant to the Foreign
Tax Credit Regulations, if you do not elect to treat any
gain as PRC source gain under the Treaty, any PRC
tax imposed on such gain would generally not be
a foreign income tax eligible for a foreign tax credit(regardless of any other income that you may havethat is derived from foreign sources). In such case,however, the non-creditable PRC tax may reduce theamount realized on the disposition of our ADSs or
ordinary shares. You will be eligible for the benefitsof the Treaty if, for purposes of the Treaty, you area resident of the United States, and you meet otherrequirements specified in the Treaty. Because thedetermination of whether you qualify for the benefitsof the Treaty is fact intensive and depends upon
your particular circumstances, you are specificallyurged to consult your tax advisors regarding youreligibility for the benefits of the Treaty. You are also
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Other Information for Shareholders

urged to consult your tax advisors regarding the tax
consequences in case any PRC tax is imposed ongain on a disposition of our ADSs or ordinary shares,
including the availability of the foreign tax credit andthe election to treat any gain as PRC source, under
your particular circumstances.

Information Reporting and Backup
Withholding
In general, information reporting will apply to
dividends in respect of our ADSs or ordinary sharesand the proceeds from the sale, exchange or otherdisposition of our ADSs or ordinary shares thatare paid to you within the United States (and incertain cases, outside the United States), unless you
establish that you are an exempt recipient. A backup
withholding tax may apply to these payments if you
fail to provide a taxpayer identification number or,in the case of dividend payments, if you fail to makecertain certifications or to report in full dividend andinterest income.
Backup withholding is not an additional tax and any
amounts withheld under the backup withholding rules
will be allowed as a refund or a credit against yourUnited States federal income tax liability provided therequired information is furnished to the IRS in a timely
manner.
Certain United States Holders are required to report
information relating to ADSs or ordinary shares,
subject to certain exceptions (including an exception
for ADSs or ordinary shares held in accounts
maintained by certain financial institutions), by
attaching a complete IRS Form 8938, Statement ofSpecified Foreign Financial Assets, with their tax returnfor each year in which they hold the ADSs or ordinary
shares. You are urged to consult your own tax advisors
regarding information reporting requirements relating
to your ownership of the ADSs or ordinary shares.

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Dividend Policy
Since our inception, we have not declared or paid any
dividends on our ordinary shares. We have no present
plan to pay any dividends on our ordinary shares in
the foreseeable future. We intend to retain most, if notall, of our available funds and any future earnings tooperate and expand our business.
Any future determination to pay dividends will bemade at the discretion of our board of directors andmay be based on a number of factors, including our
future operations and earnings, capital requirements
and surplus, general financial condition, contractual
restrictions and other factors that the board of
directors may deem relevant. If we pay any dividends,
the depositary will pay our ADS holders to the same
extent as holders of our ordinary shares, subject to theterms of the Deposit Agreement, including the feesand expenses payable thereunder.
We are a holding company incorporated in the
Cayman Islands. In order for us to distribute any
dividends to our shareholders and ADS holders, werely on dividends, loans, and other distributions onequity paid by our operating subsidiaries in China
and on remittances, including loans, from variableinterest entities in China. Dividend distributions fromour PRC subsidiaries to us are subject to PRC taxes,
such as withholding tax. In addition, regulations in
the PRC currently permit payment of dividends of a
PRC company only out of accumulated distributable
after-tax profits as determined in accordance with its
articles of association and the accounting standards
and regulations in China. See “Risk Factors — Risks
Related to Doing Business in the People’s Republic ofChina — We rely to a significant extent on dividends,
loans and other distributions on equity paid by ouroperating subsidiaries in China.”

Exemptions and Waivers
New York Stock Exchange
Listed Compliance Manual
We are a “foreign private issuer” (as such term isdefined in Rule 3b-4 under the U.S. Exchange Act), and
our ADSs, each representing eight ordinary shares,
are listed on the NYSE. Under Section 303A of the
NYSE Listed Company Manual, NYSE listed companies
that are foreign private issuers are permitted tofollow home country practice in lieu of the corporate
governance provisions specified by the NYSE withlimited exceptions. The following summarizes somesignificant ways in which our corporate governancepractices differ from those followed by domestic
companies under the listing standards of the NYSE.
Under the NYSE Listed Company Manual, U.S.
domestic listed companies are required to have amajority independent board, which is not required
under the Companies Act (As Revised) of the Cayman
Islands (the “Companies Act”), our home country.
Currently, our board of directors is composed of ten
members, six of whom are independent directors.
All of our independent directors are independent
within the meaning of Section 303A of the NYSE
Listed Company Manual. We have also received
from each independent director a confirmation of
his or her independence and we consider them to
be independent pursuant to the Hong Kong Listing
Rules. In addition, the NYSE Listed Company Manual
requires U.S. domestic listed companies to havea compensation committee and a nominating/corporate governance committee, each composed
entirely of independent directors, which are notrequired under the Companies Act. Currently, ourcompensation committee is composed of threemembers, all of whom are independent directors. Our
nominating and corporate governance committee iscomposed of three members, only two of whom are
independent directors. In addition, the NYSE Listed
Company Manual requires shareholder approval for
certain matters, such as requiring that shareholders
must be given the opportunity to vote on all equity
compensation plans and material revisions to thoseplans, which is not required under the Cayman Islands
law. We intend to comply with the requirements of
Cayman Islands law only in determining whether
shareholder approval is required.

Hong Kong Listing Rules
Under Rule 19C.11 of the Hong Kong Listing Rules,
we are exempt from certain corporate governancerequirements of the Hong Kong Stock Exchange,

including Appendix 14 of the Hong Kong Listing Rules(Corporate Governance Code) and Appendix 16 of
the Hong Kong Listing Rules (Disclosure of Financial
Information).
In connection with our listing on the Hong Kong Stock
Exchange, the Hong Kong Stock Exchange and the SFC
granted certain waivers and exemptions from strict
compliance with the relevant provisions of the Hong
Kong Listing Rules and the SFO, respectively, and the
SFC also granted a ruling under the Takeovers Codes.

Not a Public Company in Hong Kong
Section 4.1 of the Takeovers Codes provides that the
Takeovers Codes applies to takeovers, mergers andshare repurchases affecting public companies inHong Kong and companies with a primary listing in
Hong Kong. According to the Note to Section 4.2 of theIntroduction to the Takeovers Codes, a Grandfathered
Greater China Issuer within the meaning of Rule 19C.01
of the Hong Kong Listing Rules with a secondary listingon the Hong Kong Stock Exchange will not normallybe regarded as a public company in Hong Kong under
Section 4.2 of the Introduction to the Takeovers Codes.
The SFC granted a ruling that we are not a “publiccompany in Hong Kong” for the purposes of Section
4.2. Therefore, the Takeovers Codes does not apply tous. This ruling may be reconsidered by the SFC in theevent that the bulk of trading in our Shares migrates toHong Kong such that we would be treated as having
a dual-primary listing pursuant to Rule 19C.13 of theHong Kong Listing Rules or in the event of a materialchange in information provided to the SFC.

Disclosure of Interests under Part XV of
SFOPart XV of the SFO imposes duties of disclosure ofinterests in Shares. Under the U.S. Exchange Act, which
we are subject to, any person (including directors andofficers of the company concerned) who acquires
beneficial ownership, as determined in accordancewith the rules and regulations of the SEC andwhich includes the power to direct the voting or the
disposition of the securities, of more than 5% of a classof equity securities registered under Section 12 of the
U.S. Exchange Act must file beneficial owner reports
with the SEC, and such person must promptly report
any material change in the information provided(including any acquisition or disposition of 1% or moreof the class of equity securities concerned), unlessexceptions apply. Therefore, compliance with Part
XV of the SFO would subject our corporate insiders to
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Exemptions and Waivers

a second level of reporting, which would be unduly
burdensome to them, would result in additional costs
and would not be meaningful, since the statutory
disclosure of interest obligations under the U.S.
Exchange Act that apply to us and our corporate
insiders would provide our investors with sufficient
information relating to the shareholding interests ofour significant shareholders.

securities an express, positive confirmation in writingor the shareholders of the listed issuer have resolvedin a general meeting that the listed issuer may sendor supply corporate communications to shareholders
by making them available on the listed issuer’s own
website or the listed issuer’s constitutional documents
contain provision to that effect, and certain conditions
are satisfied.

The SFC granted a partial exemption under section
309(2) of the SFO from the provisions of Part XV of theSFO (other than Divisions 5, 11 and 12 of Part XV ofthe SFO), on the conditions that (i) the bulk of tradingin the Shares is not considered to have migrated to
Hong Kong on a permanent basis in accordancewith Rule 19C.13 of the Hong Kong Listing Rules; (ii)the disclosures of interest filed in the SEC are also
filed with the Hong Kong Stock Exchange as soon aspracticable, which will then publish such disclosurein the same manner as disclosures made under Part
XV of the SFO; and (iii) we will advise the SFC if there
is any material change to any of the information
which has been provided to the SFC, including any
significant changes to the disclosure requirements in
the U.S. and any significant changes in the volume of
our worldwide share turnover that takes place on the
Hong Kong Stock Exchange. This exemption may bereconsidered by the SFC in the event there is a materialchange in information provided to the SFC.

Since our listing on the Hong Kong Stock Exchange, we
made the following arrangements:

The U.S. Exchange Act and the rules and regulations
promulgated thereunder require disclosure of interests
by shareholders that are broadly equivalent to Part
XV of the SFO. For relevant disclosure in respect of
the substantial shareholder’s interests, see “Major
Shareholders and Related Party Transactions — Major
Shareholders.”
We undertook to file with the Hong Kong Stock
Exchange, as soon as practicable, any declaration ofshareholding and securities transactions filed with theSEC. We further undertook to disclose in future listing
documents any shareholding interests as disclosed
in an SEC filing and the relationship between our
directors, officers, members of committees and theirrelationship to any controlling shareholder.

Corporate Communication
Rule 2.07A of the Hong Kong Listing Rules provides
that a listed issuer may send or otherwise makeavailable to the relevant holders of its securities
any corporate communication by electronic means,provided that either the listed issuer has previously
received from each of the relevant holders of its
200

Alibaba Group Holding Limited•••

We issue all corporate communications as
required by the Hong Kong Listing Rules on ourown website in English and Chinese, and on the
Hong Kong Stock Exchange’s website in English
and Chinese.
We continue to provide printed copies of noticeincluding the proxy materials to our shareholders
at no costs.
We have added to the “Investor Relations” pageof our website which directs investors to all of ourfilings with the Hong Kong Stock Exchange.

The Hong Kong Stock Exchange granted us a waiverfrom strict compliance with the requirements under
Rule 2.07A of the Hong Kong Listing Rules.

Monthly Return
Rule 13.25B of the Hong Kong Listing Rules requires
a listed issuer to publish a monthly return in relation
to movements in its equity securities, debt securities
and any other securitized instruments, as applicable,
during the period to which the monthly return relates.
Pursuant to the Joint Policy Statement Regarding
the Listing of Overseas Companies, or Joint Policy
Statement, we sought a waiver from Rule 13.25B
subject to satisfying the waiver condition that the
SFC has granted a partial exemption from strict
compliance with Part XV of the SFO (other thanDivisions 5, 11 and 12 of Part XV of the SFO) in respectof disclosure of shareholders’ interests. As we haveobtained a partial exemption from the SFC, theHong Kong Stock Exchange granted a waiver fromstrict compliance with Rule 13.25B of the Hong Kong
Listing Rules. We disclose information about share
repurchases, if any, in our quarterly earnings releases
and annual reports on Form 20-F which are furnishedor filed with the SEC in accordance with applicable U.S.
rules and regulations.

Risk Factors
Summary of Risk Factors
Investing in our company may involve significant
risks. Alibaba Group Holding Limited is a Cayman
Islands holding company. It does not directly engage
in business operations itself. Due to PRC legal
restrictions on foreign ownership and investment incertain industries, we, similar to all other entities withforeign-incorporated holding company structures
operating in our industry in China, operate throughVIEs our Internet businesses and other businesses inwhich foreign investment is restricted or prohibited in
the PRC. The VIEs are incorporated and owned by PRC
citizens or by PRC entities owned and/or controlledby PRC citizens, and not by our company. We haveentered into certain contractual arrangements whichcollectively enable us to exercise effective control overthe VIEs and realize substantially all of the economic
risks and benefits arising from the VIEs. As a result,
we include the financial results of each of the VIEs in
our consolidated financial statements in accordancewith U.S. GAAP. Investors in our ADSs and Shares arepurchasing equity securities of a Cayman Islands
holding company rather than equity securities issued
by our consolidated subsidiaries and the VIEs. See“Business Overview — Organizational Structure” formore details. See “— Risks Related to Our Corporate
Structure” for risks involving the VIE structure.
In addition, we face various legal and operationalrisks and uncertainties as a company based in andprimarily operating in China. The PRC government
has significant authority to oversee and regulate
the business operations of a China-based company
like us, including overseas listing and overseas
fundraisings. See “— Risks Related to Doing Business in
the People’s Republic of China.”
A summary of the risk factors is set forth below, you
should read this summary together with the detail risk
factors set forth in this annual report.

Risks and uncertainties related to our business andindustry include risks and uncertainties associatedwith the following:

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our ability to achieve the intended benefits of ourreorganization into a holding company structure;
our ability to maintain the trusted status of ourecosystem, and to maintain and improve the
network effects of our ecosystems;
our ability to maintain or grow our revenue or
our business, as well as the impact of sustained
investment in our business on our margins andnet income;our ability to compete effectively and continue toinnovate and adapt to changes in our industry;
our ability to manage the significant
management, operational and financial
challenges in growing our business andoperations, and our ability to maintain our
culture;economic slowdowns, geopolitical tensions andthe impact of widespread health epidemics or
natural disasters;international trade or investment policies,
barriers to trade or investment and geopoliticalconflicts, as well as export control, economic ortrade sanctions and the trend towards trade andtechnology “de-coupling”;
reputational and other risks due to businessdealings by, or connections of, merchants or
consumers on our marketplaces with sanctioned
countries or persons;risks relating to our acquisitions, investments andalliances, as well as regulatory approval andreview requirements for acquisitions;challenges in expanding our international andcross-border businesses and operations;
epidemic or natural disasters;risks arising from the broad range of evolving
laws and regulations that affect our business,
including but not limited to, regulations of digitalplatforms and regulations regarding privacy
and data protection, competition laws, content
regulations, consumer protection laws;

Fiscal Year 2023 Annual Report

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Risk Factors

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alleged pirated, counterfeit or illegal items
or content, allegations of infringements ofintellectual property rights, and our ability toprotect our intellectual property rights;

Risks and uncertainties related to our corporate
structure that may arise from the following:

security breaches and cyberattacks;•material litigation and regulatory proceedings;
our ability to maintain or improve ourtechnology infrastructure, risks relating to theperformance, reliability and security of theInternet infrastructure and the effect of network
interruptions;risks relating to Ant Group and Alipay, including
our reliance on Alipay to conduct substantially allof the payment processing and all of the escrowservices on our marketplaces and our potential
conflicts of interests with them;

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risks relating to third-party service providers
and ecosystem participants, and the quality oflogistics services provided by logistics service
providers and Cainiao;
our ability to attract, motivate and retain our
staff, including key management and experienceand capable personnel; fraudulent or illegal
activities by our employees, business partners
and service providers, and the effect of any
fraud perpetuated and fictitious transactions
conducted in our ecosystem;
tax compliance efforts that may affect ourmerchants;••

our ability to comply with the terms of ourindebtedness and to raise additional capital, as
well as interest rate risks; andthe potential insufficiency of insurance coverage.

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202

Alibaba Group Holding Limited

differences between the interests of the Alibaba
Partnership and our shareholders;anti-takeover provisions in our Articles of
Association;
our shareholders do not hold equity securitiesof our subsidiaries and the VIEs that havesubstantive business operations in China; andrisks and uncertainties relating to the VIE
structure, including regulatory risks anduncertainties; limitations of contractual
arrangements in providing control over the VIEs;
potential failure by the VIEs or their equity holders
to perform their obligations; potential loss of
the ability to use, or otherwise benefit from,the licenses, approvals and assets held by the
VIEs; potential conflicts of interests between us
and the equity holders, directors and executive
officers of the VIEs; as well as potential scrutinyof the contractual arrangements with the VIEs by
the PRC tax authority.

Risks and uncertainties related to doing business in
the PRC include risks and uncertainties associated withthe following:

effects of public scrutiny, or aggressive
marketing and communication strategies of ourcompetitors;
quarter-to-quarter fluctuations of our results ofoperations;

our shareholders’ limited ability to nominate andelect directors;

changes and developments in the politicaland economic policies of the PRC government,
including but not limited to that the PRC
government may intervene in or influence ouroperations through adopting and enforcing rules
and regulatory requirements, which may evolve
quickly with little advance notice;uncertainties regarding the interpretation andenforcement of PRC laws, rules and regulations,
including but not limited to actions the PRC
government may take to exert more oversightand control over offerings that are conducted
overseas and/or foreign investment in Chinabased issuers, which could significantly limit
or completely hinder our and our subsidiaries’
ability to offer securities to investors and cause
our securities to decline in value or become
worthless;
PRC regulations relating to investments inoffshore companies and employee equity
incentive plans;

Risk Factors

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our reliance on dividends, loans and other
distributions on equity paid by our operating
subsidiaries in China, the risk that interventions
in or the imposition of restrictions and limitations
on the ability of us or our subsidiaries, or the VIEs
by the PRC government to transfer cash or assetsthat are in a business in the PRC or in a PRC entity
may limit our ability to fund operations or forother use outside of the PRC and fluctuations in
exchange rates;

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potential limitations on the ability of ADS holders
to vote, transfer ADSs and receive distributions
on our ordinary shares, and our discretionary
proxy from the depositary of our ADSs;
the exchange between our Shares and our ADSs
that may affect liquidity and/or trading prices ofour securities and cause delays;
the possibility that we may be or may become apassive foreign investment company; andthe potential impact of PRC laws and regulations
related to Internet advertisement;•

the possibility that we may be subject to PRC
income tax on our global income, and potential
discontinuation of preferential tax treatments wecurrently enjoy;

We discuss the various risks and uncertainties we aresubject to in detail below.

the possibility that dividends payable to foreign
investors and gains on the sale of our securities
by our foreign investors may become subject
to PRC taxation, and uncertainties with respect
to indirect transfers of equity interests in PRC
resident enterprises or other assets attributed toa PRC establishment of a non-PRC company; andrisks relating to the approval, filing or otherrequirements of PRC regulatory authorities inconnection with future issuance of securities
overseas.

Risks related to our ADSs and Shares include risks anduncertainties associated with the following:••volatilities in the trading prices of our securities,
the substantial future sales or perceived potential
sales of our securities, and the sustainability ofactive trading markets for our securities;
different characteristics of the capital markets inHong Kong and the U.S., and the possibility of apublic offering and listing of our equity securities
in Shanghai or Shenzhen;
the limited ability of our shareholders and U.S.
authorities to bring actions against us;
our exemptions from certain NYSE corporate
governance standards and certain disclosure
requirements, as well as our different practices
as to certain matters compared with many othercompanies listed in Hong Kong;

uncertainty as to whether Hong Kong stamp duty
will apply to the trading or conversion of our
ADSs.

Risks Related to Our Business andIndustry
We may not achieve the intended benefits of ourreorganization into a holding company structure.
We are in the process of implementing a neworganizational and governance structure, underwhich we are the holding company of six major
business groups and various other businesses,with each business operating with a high degreeof independence, or the Reorganization. As partof our Reorganization, we are conducting a full
spin-off of our cloud business and certain of our
subsidiaries are pursuing IPOs or otherwise raisingexternal capital. We believe our new organizationaland governance structure will unlock the value of ourvarious businesses by empowering them to become
more agile, enhance decision making, enable faster
responses to market changes and promote innovation
to capture opportunities. However, the timing andimplementation details of our new organizationaland governance structure, the proposed spin-off ofour cloud business, the proposed fundraisings or IPOs
by our subsidiaries and whether the new structure
will in fact yield the expected strategic benefits are
subject to uncertainties and various factors, many ofwhich may be out of our control, including without
limitations, successful restructuring of assets, liabilities
and contracts, implementation of equity incentive
plans, market conditions and regulatory reviews andapprovals. We cannot assure you that the expected
benefits of our Reorganization will be reflected in theprice of our securities. Moreover, our Reorganization

Fiscal Year 2023 Annual Report203

Risk Factors

could have a material adverse effect on our business,financial condition, results of operations andprospects. The proposed fundraisings and IPOs by our
subsidiaries may result in deconsolidation of thesebusinesses and impact our financial condition andresults of operations in the period in which such action
is taken. We are dedicating significant time, resourcesand efforts into establishing the new organizationaland governance structure and may incur substantial
costs as a result. These efforts may divert ourmanagement’s attention away from our day-to-day
operations and may be disruptive to our business.
As our businesses operate more independently, thenetwork effect, synergies and economic of scale
among our businesses may also be negatively
affected.
Maintaining the trusted status of our ecosystem iscritical to our success and growth, and any failure
to do so could severely damage our reputation
and brand, which would have a material adverse
effect on our business, financial condition, results ofoperations and prospects.
We have established a strong brand name andreputation for our ecosystem. Any loss of trust in our
ecosystem or platforms could harm our reputation andthe value of our brand, and could result in consumers,
merchants, brands, retailers and other participants
reducing their levels of activity in our ecosystem, which
could materially reduce our revenue and profitability.
Our ability to maintain trust in our ecosystem andplatforms is based in large part upon:

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204

the quality, value and functionality of products
and services as well as the quality and appeal ofcontent available through our ecosystem;
the reliability and integrity of our company andour platforms, as well as of the merchants,
software developers, logistics providers,service providers and other participants in our
ecosystem;
our commitment to high levels of service;
the safety, security and integrity of the data on
our systems, and those of other participants in
our ecosystem;

Alibaba Group Holding Limited

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the manner in which we and other participantsin our ecosystem collect, store and use consumer
data, and changes in the related regulations andconsumer expectations;the effectiveness and fairness of rules governing
our marketplaces, various platforms and overall
ecosystem;
the strength of our measures to protect
consumers and intellectual property rights
owners; andour ability to provide reliable and trusted
payment and escrow services through ourarrangements with Alipay.

As our businesses operate more independently
following the Reorganization, failure by any of ourbusinesses to establish and maintain its own trusted
brand could also harm the value of our brand nameand reputation of our ecosystem.
We may not be able to maintain or grow our revenue
or our business.
The ability of our businesses to grow their revenue
depends on a number of factors, including thenumber and engagement of consumers on theirplatforms, the value that they are able to offer to theircustomers, including merchants, brands, retailers
and other businesses, and their consumer insightand technology capabilities and infrastructure. See“Management Discussion and Analysis — Operating
Results — Factors Affecting Our Results of Operations— Our Ability to Create Value for Our Users andGenerate Revenue.” Revenue growth is also affectedby competition and other factors that may not bewithin our control, including the macroeconomic
environment, inflation, disruptions to the economy
and business operations from pandemics, natural
disasters, armed conflicts or other events, as well as
the geopolitical landscape and government policies.
Furthermore, due to the size and scale we haveachieved, our user base and our businesses may notcontinue to grow as quickly or at all.

Risk Factors

We are exploring and will continue to explore in
the future new business initiatives, including inindustries and markets in which we have limited
or no experience, as well as new business models,that may be untested. Developing new businesses,
initiatives and models requires significant investmentsof time and resources, and may increase our costs
and present new and difficult technological andoperational challenges. We may encounter difficulties
or setbacks in the execution of various growthstrategies and our growth strategies may not generate
the returns we expect within the timeframe weanticipate, or at all.
Growing our existing and new businesses also involves
risks and challenges. For example, as we continue
to grow our direct sales and local consumer services
businesses, we face new and increased risks. Theserisks include those relating to inventory procurement
and management, such as failure to stock sufficientinventory to meet demands or additional costs orwrite-offs resulting from overstocking, supply chain
management, relationships with suppliers, accounts
receivable and related potential impairment charges,
potential labor disputes, worker safety, minimum
wage and social insurance requirements, including
offering minimum wage and providing social
insurance for delivery workers. Our cloud business also
faces technology challenges and challenges related
to data center capacity, data and systems security,
service disruptions, delays, failures or other service
quality issues. Growing our business also subjects
us to new and heightened regulatory requirements
and increased liabilities. For example, as operators of
direct sales businesses, we are subject to additional
regulatory requirements, including those relating
to consumer protection, customs and permits andlicenses, and allegations of unfair business practices,such as alleged favorable treatment of our own
services and products, including those offered byour direct sales business and cloud business, overthird-party services and products on our platforms.
Failure to adequately address these and other risks
and challenges relating to our direct sales business
may harm our relationship with suppliers, consumers,
merchants and other service providers on ourplatforms, adversely affect our business and resultsof operations and subject us to regulatory scrutiny or
liabilities. In addition, many of our businesses, suchas livestreaming and marketing services provided by
Alimama, may face quickly evolving regulations andincreasing compliance risks in a wide range of areas,
including platform liability, content, data security,
consumer protection and taxation, which may leadto regulatory investigations, penalties and liabilities
that may materially and adversely affect our business
operations and share price. These additional costs andrisks may materially and adversely affect our businessand financial condition, subject us to regulatory
scrutiny and liabilities, damage our reputation, andnegatively affect the price of our ADSs, Shares and/or
other securities.
If we are unable to compete effectively, our business,financial condition and results of operations would
be materially and adversely affected.
Our businesses face increasingly intense competitionin different industries, principally from established
Chinese Internet companies and their respective
affiliates, global and regional e-commerce players,
cloud computing service providers, logistics service
providers and digital media and entertainment
providers. These areas of our business are subject torapid market change, the introduction of new businessmodels, and the entry of new and well-funded
competitors. Increased investments made and lower
prices offered by our competitors may require us todivert significant managerial, financial and humanresources in order to remain competitive or to give up
business opportunities to maintain our profitability,
and ultimately may reduce our market share andnegatively impact the revenue and profitability of ourbusiness. See also “Business Overview — Competition.”
Our ability to compete depends on a number ofother factors as well, some of which may be beyond
our control, including alliances, acquisitions or
consolidations within our industries that may result instronger competitors, technological advances, shifts incustomer preferences and changes in the regulatoryenvironment in the markets we operate. Existingand new competitors may leverage their experience,client relationships or resources in ways that could
affect our competitive position, including by making
acquisitions, continuing to invest heavily in researchand development and in talent, introducing innovative
business models or technologies, and launching
highly engaging content, products or services toattract a large user base and achieve rapid growth,which may make it more challenging for us to acquire
new customers and materially and adversely affectour business expansion and results of operations.

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Risk Factors

In addition, if international players gain greater
access to the China market, certain of our businesses,
such as our cloud business and digital media andentertainment business, could be subject to greater
competition and pricing pressure, which could reduce
our margins or otherwise negatively affect our resultsof operations. As we acquire new businesses andexpand into new industries and sectors, we facecompetition from major players in these industries
and sectors. Moreover, as we continue to expand
into markets outside of China, we increasingly facecompetition from domestic and international players
operating in these markets, as well as potential
geopolitical tensions, regulatory challenges andprotectionist policies that may support domestic
players in those markets.
If we are not able to compete effectively, the levelof economic activity and user engagement in our
ecosystem may decrease and our market share andprofitability may be negatively affected, which could
materially and adversely affect our business, financial
condition and results of operations, as well as our
reputation and brand.
Sustained investment in our businesses and our focus
on long-term performance and maintaining thehealth of our ecosystem may negatively affect our
margins and our net income.
We focus on the long-term interests of the participantsin our ecosystem. Our businesses may continue
to increase spending and investments, including
investing in organic development and incubating new
businesses, enhancing consumer experience and user
engagement, supporting merchants and acquiring
users, as well as enhancing our technology, logistics,
supply chain and other long term capabilities.
Although we believe these investments are crucial
to our success and future growth, they will havethe effect of increasing our costs and lowering our
margins and profit, and this effect may be significant
in the short term and potentially over longer periods.
Certain of our businesses may have negative margins
or margins that are lower than what our China
commerce retail business has enjoyed in the past.
For example, certain of our businesses, including
direct sales, Taobao Deals, Taocaicai, internationalcommerce, local consumer services, Cainiao anddigital media and entertainment, have incurred,and may continue to incur, losses. There can be noassurance that these investments will be able to206

Alibaba Group Holding Limited

generate the growth or profitability that we expect.
Many of our businesses that are currently loss making
may not turn profitable at our expected timing or at
our expected scale, or at all. In addition, we expectthat our margin will continue to be affected by thecontinuing shift in our revenue mix to our direct sales
businesses.
We may not be able to maintain and improve the
network effects of our ecosystem, which could
negatively affect our business and prospects.
Our ability to maintain a healthy and vibrantecosystem that creates strong network effects among
consumers, merchants, brands, retailers and otherparticipants is critical to our success. The extent towhich we are able to maintain and strengthen these
network effects depends on our ability to:

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offer secure and open platforms for allparticipants and balance the interests of theseparticipants;
provide a wide range of high-quality product,
service and content offerings to consumers;
attract and retain a wide range of consumers,
merchants, brands and retailers;
provide effective technologies, infrastructureand services that meet the evolving needs ofconsumers, merchants, brands, retailers andother ecosystem participants;
arrange secure and trusted payment settlement
and escrow services;comply with legal requirements and addressuser concerns with respect to data security andprivacy;
improve our logistics data platform andcoordinate fulfillment and delivery services withlogistics service providers;
attract and retain third-party service providers
that are able to provide quality services
on commercially reasonable terms to ourmerchants, brands, retailers and other ecosystem
participants;
maintain the quality of our customer service; andcontinue adapting to the changing demands ofthe market.

Risk Factors

In addition, changes we make to our current
operations to enhance and improve our ecosystemor to comply with regulatory requirements may
be viewed positively from one participant group’s
perspective, such as consumers, but may havenegative effects from another group’s perspective,
such as merchants. If we fail to balance the interestsof all participants in our ecosystem, consumers,
merchants, brands, retailers and other participants
may spend less time, mind share and resources on ourplatforms and may conduct fewer transactions or use
alternative platforms, any of which could result in amaterial decrease in our revenue and net income. As
our businesses operate more independently following
the Reorganization, including making independent
business decisions regarding customers and service
providers, the network effect of our ecosystem may be
adversely affected.
If we are not able to continue to innovate or if wefail to adapt to changes in our industry, our business,financial condition and results of operations would
be materially and adversely affected.
Our industries are characterized by rapidly changing
technology, evolving industry standards, new mobile
apps and protocols, new products and services, newmedia and entertainment content, including usergenerated content, and changing user demands andtrends. Furthermore, our domestic and international
competitors are continuously developing innovations
in personalized search and recommendation,
online shopping and marketing, communications,social networking, entertainment, logistics andother services, to enhance user experience. As aresult, we continue to invest significant resourcesin our infrastructure, research and development
and other areas in order to enhance our businesses
and operations, as well as to explore new growthstrategies and introduce new high-quality products
and services.
Our investments in innovations and new technologies,
which may be significant, may not increase ourcompetitiveness or generate financial returns in the
short term, or at all, and we may not be successful
in adopting and implementing new technologies,
such as generative AI which has recently attracted
prominent attention. The changes and developments
taking place in our industry may also require us tore-evaluate our business model and adopt significant
changes to our long-term strategies and businessplans. Our failure to innovate and adapt to thesechanges and developments in a timely manner could

have a material adverse effect on our business,financial condition and results of operations. Even
if we timely innovate and adopt changes in our
strategies and plans, we may nevertheless fail torealize the anticipated benefits of these changes oreven generate lower levels of revenue as a result.
Our failure to manage the significant management,
operational and financial challenges involved in
growing our business and operations could harm us.
Our businesses have become increasingly complex
as the scale, diversity and geographic coverage ofour businesses and our workforce continue to expand
through both organic growth and acquisitions. The
complexity and scale of our operations places asignificant strain on our management, operationaland financial resources. Our Reorganization may
pose additional challenges, requiring us to effectively
allocate resources among our various businesses
and oversee their operations, including in theareas of capital management, compliance and risk
management. Moreover, the current and planned
staffing, systems, policies, procedures and controls ofour businesses may not be adequate to support their
future operations. To effectively manage continuing
expansion and growth of their operations andworkforce, our businesses will need to continue toimprove their personnel management, transaction
processing, operational and financial systems,
policies, procedures and controls, particularly after
the Reorganization our businesses operate more
independently. These efforts will require significant
managerial, financial and human resources. If we are
not able to effectively oversee our businesses or if anyof our businesses fails to manage its expansion andgrowth effectively, our business, financial condition,
results of operations and prospects may be materiallyand adversely affected.
We may not be able to maintain our culture, which
has been a key to our success.
Since our founding, our culture has been defined byour mission, vision and values, and we believe that ourculture has been critical to our success. In particular,
our culture has helped us serve the long-term
interests of our customers, attract, retain and motivate
employees and create value for our shareholders. We
face a number of challenges that may affect our ability
to sustain our corporate culture, including:•failure to identify, attract, promote and retain
people who share our culture, mission, visionand values in leadership positions;Fiscal Year 2023 Annual Report

207

Risk Factors

•
•

•
•

•
•
•

retirements and departures of founders,
executives and members of the Alibaba
Partnership, and failure to execute an effective
management succession plan;challenges of effectively incentivizing andmotivating employees, including members ofsenior management, and in particular those whohave gained a substantial amount of personal
wealth related to share-based awards;
the increasing size, complexity, geographic
coverage and cultural diversity of our businesses
and workforce;challenges in managing an expansive, diverseand changing workforce, in providing effective
training to this workforce, and in promoting aculture of compliance with laws and regulations
and preventing misconduct among our
employees and participants in our ecosystem;competitive pressures to move in directions
that may divert us from our mission, vision andvalues;the pressure from the public markets to focus
on short-term results instead of long-term value
creation; andthe increasing need to develop expertise in new
areas of business, such as direct sales business,consumer services and expansion of our logistics
network services.

If we are not able to maintain our culture or if ourculture fails to deliver the long-term results we
expect to achieve, our reputation, business, financial
condition, results of operations and prospects
could be materially and adversely affected. Our
Reorganization may negatively affect our ability
to sustain our corporate culture. In addition, if ourbusinesses are not able to develop and sustain their
independent and cohesive culture following the
Reorganization, their ability to recruit talents, theirbusiness operations and financial performance could
be negatively affected.
Our business operations and financial position
may be materially and adversely affected by any
economic slowdown in China as well as globally.
Our revenue and net income are impacted to asignificant extent by economic conditions in China
and globally, as well as economic conditions specific208

Alibaba Group Holding Limited

to our business. The global economy, markets andlevels of spending by businesses and consumers
are influenced by many factors beyond our control,
including geopolitical tension and conflicts,
pandemics and other natural disasters, energy crisis,
inflation risk and instability in the financial system.
The growth of China’s economy has slowed inrecent years compared to prior years. There havealso been concerns about the relationships among
China and other Asian countries, the relationshipbetween China and the United States, as well as therelationship between the United States and certain
other Asian countries such as North Korea, which
may result in or intensify potential conflicts in relation
to territorial, regional security and trade disputes.
See “— Changes in international trade or investment
policies and barriers to trade or investment, and any
ongoing geopolitical conflict, may have an adverse
effect on our business and expansion plans, andcould lead to the delisting of our securities from U.S.
exchanges and/or other restrictions or prohibitions on
investing in our securities.” The COVID-19 pandemic
has severely disrupted business operations, supply
chain and workforce availability across the world,
leading to substantial declines in business activities
that have negatively impacted and may continue tonegatively impact our business, financial condition
and results of operations. See “— An occurrence of awidespread health epidemic or other outbreaks or
natural disasters could have a material adverse effecton our business, financial condition and results ofoperations.” The Russia-Ukraine conflict has resulted
in significant disruptions to supply chains, logistics andbusiness activities in the region that have negatively
affected our international commerce business andCainiao’s international logistics business, negatively
impacting the number of orders and revenue of
AliExpress and Cainiao and increasing the operating
costs of Cainiao. The conflict has also caused,and continues to intensify, significant geopoliticaltensions in Europe and across the globe. The resulting
sanctions imposed are expected to have significant
impacts on the economic conditions of the countries
and markets targeted by such sanctions, and may
have unforeseen, unpredictable secondary effects on
global energy prices, supply chains and other aspectsof the global economy, which increases logistics
costs and negatively affects our business operations,such as Cainiao. Any disruptions or continuing or
worsening slowdown, whether as a result of trade
conflicts, the COVID-19 pandemic, the Russia-Ukraine

Risk Factors

conflict or other reasons, could significantly reduce
commerce activities in China and globally, which could
lead to significant reduction in merchants’ demand
for and spending on the various services we offer,such as our marketing services, logistics services andcloud computing services. Moreover, rising inflation
could result in higher costs of services and supplies
and a decrease in consumer spending, which could
negatively affect our business operations and financial
results. An economic downturn, whether actual or
perceived, a further decrease in economic growth
rates or an otherwise uncertain economic outlook in
any market in which we operate could have a material
adverse effect on business and consumer spending
and, as a result, adversely affect our business,financial condition and results of operations.
In addition, because we hold a significant amount ofcash and cash equivalents, short-term investments
and other treasury investments, if financial institutions
and issuers of financial instruments that we holdbecome insolvent or if the market for these financial
instruments become illiquid as a result of a severe
economic downturn, our business and financial
condition could be materially and adversely affected.
For example, in March 2023, Silicon Valley Bank wasclosed by the California Department of Financial
Protection and Innovation, and in the same month,each of Signature Bank and Silvergate Capital Corp.
were swept into receivership, followed by the Federal
Deposit Insurance Corporation’s announcement of theclosing of First Republic Bank in May 2023. The failureof these banks resulted in an insignificant amount ofasset impairment on our balance sheet for fiscal year
2023.
Changes in international trade or investment policies
and barriers to trade or investment, and any ongoinggeopolitical conflict, may have an adverse effect on
our business and expansion plans, and could lead tothe delisting of our securities from U.S. exchanges
and/or other restrictions or prohibitions on investingin our securities.
In recent years, international market conditions
and the international regulatory environment havebeen increasingly affected by competition among
countries and geopolitical frictions. In particular, theU.S. government has advocated for and taken steps
towards restricting trade in certain goods, particularly
from China. The progress of trade talks between China
and the United States is subject to uncertainties, andthere can be no assurance as to whether the UnitedStates will maintain or reduce tariffs, or impose
additional tariffs on Chinese products in the near
future. The United States may take further actions toeliminate perceived unfair competitive advantages
created by alleged manipulating actions. Changes
to national trade or investment policies, treaties
and tariffs, fluctuations in exchange rates or theperception that these changes could occur, and could
adversely affect the financial and economic conditionsin the jurisdictions in which we operate, as well as
our international and cross-border operations, ourfinancial condition and results of operations.
In addition, the United States has been considering
ways to limit U.S. investment portfolio flows into China.
For example, in May 2020, under pressure from U.S.
administration officials, the independent Federal
Retirement Thrift Investment Board suspended its
implementation of plans to change the benchmark of
one of its retirement asset funds to an international
index that includes companies in emerging markets,
including China. China-based companies, including
us and our related entities, may become subject
to executive orders or other regulatory actions that
may, among other things, prohibit U.S. investors frominvesting in these companies or delist the securitiesof these companies from U.S. exchanges. As a result,
U.S. and certain other persons may be prohibitedfrom investing in the securities of our company or our
related entities, whether or not they are listed on U.S.
exchanges. For example, in November 2020, the U.S.
administration issued U.S. Executive Order 13959,
prohibiting investments by any U.S. persons in publicly
traded securities of certain Chinese companies thatare deemed owned or controlled by the Chinese
military. In May 2021, the American depositary sharesof China Telecom Corporation Limited, China Mobile
Limited and China Unicom (Hong Kong) Limited weredelisted from the NYSE to comply with this executive
order. In June 2021, the U.S. administration expanded
the scope of the executive order to Chinese defense
and surveillance technology companies. Furthermore,
the U.S. government is also considering, by new
legislation or further executive action, measures thatmay place outbound investment restrictions on U.S.
persons investing in certain technology sectors incertain international markets that would be deemed
critical to U.S. national security. Geopolitical tensions
between China and the United States may intensify
and the United States may adopt even more drastic
measures in the future.

Fiscal Year 2023 Annual Report

209

Risk Factors

China and other countries have retaliated and may
further retaliate in response to new trade policies,
treaties and tariffs implemented by the United States.
For instance, in response to the tariffs announced by
the United States, in 2018 and 2019, China announced
it would stop buying U.S. agricultural products andimposed tariffs on over US$185 billion worth of U.S.
goods. Although China subsequently granted tariff
exemptions for certain U.S. products as a result oftrade talks and the phase one trade deal agreed with
the United States, it is uncertain whether there will be
any further material changes to China’s tariff policies.
Any further actions to increase existing tariffs or
impose additional tariffs could result in an escalationof the trade conflict, which would have an adverse
effect on manufacturing, trade and a wide range ofindustries that rely on trade, including logistics, retailsales and other businesses and services, which could
adversely affect our business operations and financial
results.
Additionally, China has issued regulations to giveitself the ability to unilaterally nullify the effects ofcertain foreign restrictions that are deemed to beunjustified to Chinese individuals and entities. The
Rules on Counteracting Unjustified Extra-territorial
Application of Foreign Legislation and Other Measures
promulgated by the MOFCOM on January 9, 2021,
provide that, among other things, Chinese individuals
or entities are required to report to the MOFCOM
within 30 days if they are prohibited or restricted fromengaging in normal business activities with thirdparty countries or their nationals or entities due tonon-Chinese laws or measures; and the MOFCOM,
following the decision of the relevant Chinese
authorities, may issue prohibition orders contravening
such non-Chinese laws or measures. Furthermore,on June 10, 2021, the Standing Committee of the
National People’s Congress of China promulgatedthe Anti-foreign Sanctions Law. The Anti-foreign
Sanctions Law prohibits any organization or individualfrom implementing or providing assistance in
implementation of discriminatory restrictive measurestaken by any foreign state against the citizens ororganizations of China. In addition, all organizations
and individuals in China are required to implement theretaliatory measures taken by relevant departmentsof the State Council of the PRC. Since the aforesaid
laws and rules are relatively new, there exist highuncertainties as to how such regulations will beinterpreted and implemented and how they would
affect our business, results of operations or the trading
prices of our ADSs, Shares and/or other securities.

210

Alibaba Group Holding Limited

Changes in laws and policy could negatively affect,
for example, both export-focused businesses on
AliExpress and Alibaba.com, as well as import-focusedbusinesses on Tmall and Tmall Global. Conflicting
regulatory requirements could also increase ourcompliance costs and subject us to regulatory scrutiny.
Any further escalation in geopolitical tensions or a
trade war, or news and rumors of any escalation,
could affect activity levels within our ecosystem andhave a material and adverse effect on our business,
results of operations, and/or the trading prices of our
ADSs, Shares and/or other securities. Any restrictions
imposed by the United States or other countries oncapital flows into China or China-based companies
may prevent potential investors from investing in
us, and the trading prices and liquidity of our ADSs,
Shares and/or other securities may suffer as a result.
Geopolitical tensions and policy changes have also
led to measures that could have adverse effects
on China-based issuers, including the U.S. Holding
Foreign Companies Accountable Act, which requires
companies listed in the United States whose audit
reports and/or auditors are not subject to review
by the PCAOB to be subject to enhanced disclosure
obligations and be subject to delisting if they do notcomply with the requirements. See “— Risks Related
to Doing Business in the People’s Republic of China— Our ADSs will be delisted and our ADSs and sharesprohibited from trading in the United States underthe Holding Foreign Companies Accountable Act,as amended, if the PCAOB is unable to inspect orinvestigate completely auditors located in China.”
Export control, economic or trade sanctions anda heightened trend towards trade and technology“de-coupling” could negatively affect ourbusiness operations and subject us to regulatory
investigations, fines, penalties or other actions andreputational harm, which could materially andadversely affect our competitiveness and business
operations, as well as the trading prices of our ADSs,
Shares and/or other securities.
The United Nations and a number of countries andjurisdictions, including China, the United States andthe EU, have adopted various export control andeconomic or trade sanction regimes. In particular,
the U.S. government and other governments havethreatened and/or imposed export control, as wellas economic and trade sanctions on a numberof China-based companies. It is possible that theUnited States or other jurisdictions may impose
further export control, sanctions, trade embargoes,Risk Factors

and other heightened regulatory requirements on
China and China-based companies in a wide rangeof areas such as sale or transfer of technologies,
data security, emerging technologies, “dual-use”
commercial technologies that could be deployed
for surveillance or military purposes, import/exportof technology, purchase and sale by Americans of
securities of Chinese firms, or other restrictions or
prohibitions on business activities. These regulatory
requirements could (1) prohibit or restrict firms fromselling, exporting, re-exporting or transferring certain
technology, components, software and other items
to China-based companies, (2) prohibit or restrict
persons from entering into transactions with Chinabased companies, (3) prohibit or restrict China-based
companies from accessing data, providing services
in or operating in the sanctioning jurisdiction, or (4)prohibit purchases and sale of securities of Chinese
firms, among other prohibitions or restrictions. For
example, in October 2022, the U.S. Departmentof Commerce’s Bureau of Industry and Security
released broad changes in export control regulations,
including new regulations restricting the export toChina of advanced semiconductors, supercomputer
technology, equipment for the manufacturingof advanced semiconductors, and components
and technology for the manufacturing in China of
certain semiconductor manufacturing equipment.
Subsequently, Japan and the Netherlands issued
similar regulations restricting export of advanced chipmanufacturing equipment, which may further curb
China’s access to chip technologies. The United Statesand other countries may impose other and more
expansive restrictions on the sales of chips to China
in future. In May 2023, the Cyberspace Administrationof China stated that certain U.S. memory chip
manufacturer posed national security risks andbanned the use of its products from key infrastructure
projects in China. In addition, Chinese companies, if
targeted under U.S. economic sanctions, may lose
access to the U.S. markets and the U.S. financial
system, including the ability to use U.S. dollars to
conduct transactions, settle payments or to maintaincorrespondent accounts with U.S. financial institutions.
U.S. entities and individuals may not be permitted to
do business with sanctioned companies and persons,and international banks and other companies may as
a matter of law and/or policy decide not to engage intransactions with such companies. Moreover, certain
reports have suggested that the U.S. government may
use its influence to block Chinese financial institutions
from using the SWIFT network that enables financial
institutions to send and receive information about
financial transactions, which may in turn adversely
affect the ability of Chinese companies to accessinternational payment, clearance and settlement
networks.

These restrictions or sanctions, and similar or more
expansive restrictions or sanctions that may be
imposed by the United States or other jurisdictions in
the future, whether directed against us, our affiliates,
including Ant Group, or our business partners,
may materially and adversely affect our and ourtechnology partners’ abilities to acquire technologies,
systems, devices or components that may be criticalto our technology infrastructure, service offeringsand business operations, and thereby negatively
affecting our ability to offer products and services(including those based on AI technologies) as well as
our ability to continue to enhance our technologicalcapabilities. As a result of heightened restrictions, weand our technology partners may be forced to develop
equivalent technologies or components, or obtainequivalent technologies or components from sources
outside the United States. We and they may not beable to do so in a timely manner and on commerciallyfavorable or acceptable terms, or at all. These
restrictions, sanctions, or other prohibitions could
negatively affect our and our technology partners’abilities to recruit research and development talentor conduct technological collaboration with scientists
and research institutes in the United States, Europe
or other countries, which could significantly harm ourcompetitiveness, as well as increase our compliancecosts and risks. These restrictions, sanctions, orother prohibitions could also restrict our ability tooperate in the United States or other jurisdictions.
For example, U.S. entities and individuals with whom
we have existing contractual or other relationships
may be prohibited from continuing to do businesswith us, including performing their obligations underagreements involving our supply chain, logistics,
software development, cloud services and otherproducts and services. In addition, holders of our debt
and equity securities may be required or forced todivest, which could result in significant loss to them.
In August 2020, MOFCOM and the Ministry of Scienceand Technology of the PRC issued a notice which
stipulates that certain technologies, including
technologies related to personalized information
push services based on data analysis, are restrictedfrom export outside the PRC without approval. Someof our technologies could fall within the scope oftechnologies subject to such export restriction. In
addition, according to the PRC Export Control Law
which came into effect in December 2020, we, ouraffiliates and business partners may also be required
to obtain licenses, permits and governmental
approvals to export certain goods, technologies andservices. These and additional regulatory restrictions
and requirements that may become effective fromtime to time may increase our compliance burden
and affect our ability and efficiency in expanding tointernational markets.
Fiscal Year 2023 Annual Report

211

Risk Factors

Our business and results of operations, as well as
the trading prices of our ADSs, Shares and/or othersecurities may be materially and negatively affectedby current or future export control or economic andtrade sanctions or developments. Export control
and economic sanctions laws and regulations arecomplex and likely subject to frequent changes, andthe interpretation and enforcement of the relevant
regulations involve substantial uncertainties, which
may be driven by political and/or other factors that areout of our control or heightened by national security
concerns. The high level of uncertainty relating topotential actions and their timing and scope, as wellas market rumors or speculation on potential actions,
could also negatively and materially affect the trading
prices of our ADSs, Shares and/or other securities.
Furthermore, if any of our expanding network ofinvestee companies, global business partners,
joint venture partners or other parties that havecollaborative relationships with us or our affiliates,
including Ant Group, were to become subject tosanctions or export control restrictions, this might
result in significant negative publicity, governmental
investigations and reputational harm, as well as
losses from impairments or write-offs. Some of suchcompanies, partners and other parties, including someof our investee companies, have become subject tosanctions or export control restrictions. For example,
in connection with the Russia-Ukraine conflict, certain
Russian shareholders of our AliExpress Russia joint
venture have become subject to varying degrees ofsanctions. There is no assurance that the scope ofsanctions will not expand to include AliExpress Russia
or us.
Media reports on alleged violation of export control
or economic and trade sanctions laws, or on usesof the technologies, systems or innovations that wedevelop, such as biometrics data analysis and artificial
intelligence, for purposes which could be perceived
as inappropriate or controversial, by us, our clients,
business partners, investees or other parties notaffiliated with or controlled by us, even on matters not
involving us, could damage our reputation and lead toregulatory investigations, fines and penalties against
us. Such fines and penalties may be significant,and if we were publicly named or investigated byany regulator on the basis of suspected or alleged
violations of export control or economic and trade
sanctions laws and rules, even in situations where thepotential amount or fine involved may be relatively
small, and even in these instances where we would becleared of any wrongdoing, our reputation could be

212

Alibaba Group Holding Limited

significantly harmed. Any of these circumstances may
cause the trading prices of our ADSs, Shares and/or
other securities to decline significantly, and materiallyreduce the value of your investment in our ADSs,
Shares and/or other securities.
We may suffer reputational harm and the trading
prices of our ADSs, Shares and/or other securities
may decrease significantly due to business dealings
by, or connections of, merchants or consumers
on our marketplaces with sanctioned countries or
persons.
The U.S. government imposes broad economic andtrade restrictions on dealings with certain countries
and regions, including the Crimea, certain regions
affected by the Russia-Ukraine conflict, Cuba, Iran,North Korea and Syria, or the Sanctioned Countries,
and numerous individuals and entities, including
those designated as having engaged in activities
relating to terrorism, drug trafficking, cybercrime,
the rough diamond trade, proliferation of weaponsof mass destruction or human rights violations,or the Sanctioned Persons. The U.S. government’s
economic sanctions programs evolve or threaten
to change frequently, including with respect to theSanctioned Countries and other countries, such as
Russia and Venezuela, and there are risks of further
enhanced economic sanctions concerning thesecountries, among others. It is not, however, possible
to predict with a reasonable degree of certainty how
the regulatory environment concerning U.S. economic
sanctions may develop. The United Nations, the EU,
the UK, and other countries also impose economic
and trade restrictions, including on certain Sanctioned
Countries and Sanctioned Persons. The Russia-Ukraine
conflict has resulted in additional sanctions imposedon Russia by the U.S., the EU, the UK, and othercountries.
As a Cayman Islands company with the substantial
majority of our subsidiaries and operations outsideof the U.S., UK and EU, we are generally not required
to comply with U.S., UK, and EU sanctions to thesame extent as U.S., UK or EU entities. However, forcompanies like us, our U.S., UK, and EU subsidiaries,
employees who are U.S. persons or UK or EU nationals,
activities in the U.S., UK, or EU, activities involving
U.S.-origin goods, technology or services, and certain
conduct or dealings, among other activities, aresubject to applicable sanctions requirements. We
do not have employees or operations in any of theSanctioned Countries, and, although our websites
are open and available worldwide, we do not actively
solicit business from the Sanctioned Countries

Risk Factors

or Sanctioned Persons. For instance, in the caseof AliExpress, Taobao and Tmall, an insignificant
percentage of orders have been placed by consumers
from the Sanctioned Countries, with a negligible
amount of aggregate GMV in the fiscal year ended
March 31, 2023 through transactions conductedvoluntarily among merchants and consumers onthese marketplaces. As all transaction fees on
AliExpress, Taobao and Tmall are paid by merchants,
primarily based in China, we do not earn any fees orcommission from consumers in Sanctioned Countries
in respect of transactions conducted on theseplatforms.
We have established a compliance program thataims to ensure our compliance with these economic
and trade restrictions, as well as export control
regimes. However, these laws and regulations arecomplex and subject to frequent change, including
with respect to jurisdictional reach and the lists ofcountries, entities, individuals and technologies
subject to sanctions and other regulatory controls. For
example, the Uyghur Forced Labor Disclosure Act was
passed by the U.S. House of Representatives in June
2021. If enacted, this bill would require publicly-listedcompanies in the United States including us to disclose
information about their supply chain links to China’s
Xinjiang Autonomous Uyghur Region, or Xinjiang.
In December 2021, the U.S. Senate and the Houseof Representatives passed the Uyghur Forced Labor
Prevention Act, or the UFLP Act, which was signed into
law on December 23, 2021. The UFLP Act prohibits
from importation into the United States any goods,
wares, articles, and merchandise mined, produced,
or manufactured wholly or in part in Xinjiang, orby certain entities within Xinjiang. We may incur
significant costs related to current, new or changing
sanctions, embargoes, export controls programs orother restrictions and disclosure requirements, as well
as negative publicity, investigations, fines, fees orsettlements, which may be difficult to predict. We also
could face increased compliance costs and risks as we
expand globally and into additional businesses, suchas cloud business.
Certain institutional investors, including state andmunicipal governments in the United States anduniversities, as well as financial institutions, haveproposed or adopted divestment or similar initiatives
regarding investments in companies that do businesswith Sanctioned Countries. Accordingly, as a result ofactivities on our marketplaces or in connection withother business we operate that may involve users
based in the Sanctioned Countries or Sanctioned
Persons, certain investors may not wish to invest or
may divest their investment in us, certain financial
institutions may not wish to lend, extend credit oroffer ordinary banking services to us, or seek early
repayment of loans made to us, and certain financial
institutions and other businesses with which wepartner or may partner may seek to avoid business
relationships with us. These divestment initiatives
and terminations of business services may negatively
impact our reputation, business and results ofoperations, and may materially and adversely affectthe trading prices of our ADSs, Shares and/or othersecurities.
We face risks relating to our acquisitions, investments
and alliances.
We have acquired and invested in a large number
and a diverse range of businesses, including thosein different countries and regions, technologies,
services and products in recent years. We have also
made investments of varying sizes in joint ventures.
From time to time, we may have a number of pending
investments and acquisitions that are subject toclosing conditions and risks of failure to close. See“Management Discussion and Analysis — Operating
Results — Recent Investment, Acquisition and Strategic
Alliance Activities.” As we continue to invest in
our ecosystem, we expect to continue to evaluate
and consider a wide array of potential strategictransactions as part of our overall business strategy,
including business combinations, acquisitions anddispositions of businesses, technologies, services,
products and other assets, as well as strategic
investments, joint ventures and alliances. At any given
time we may be engaged in discussing or negotiatinga range of these types of transactions. Thesetransactions involve significant challenges and risks,
including:••difficulties in, and significant and unanticipatedadditional costs and expenses resulting from,
integrating into our business the large numberof personnel, operations, products, services,
technology, internal controls and financial
reporting of the businesses we acquire;disruption of our ongoing business, distraction ofand significant time and attention required fromour management and employees and increases
in our expenses;

Fiscal Year 2023 Annual Report

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Risk Factors

•
•

•

•

•

•

•
•
•

214

departure of skilled professionals and provenmanagement teams of acquired businesses, aswell as the loss of established client relationshipsof those businesses we invest in or acquire;for investments over which we may not obtain
management and operational control, we maylack influence over the controlling partners or
shareholders, or may not have aligned interests
with those of our partners or other shareholders;
additional or conflicting regulatory requirements,
heightened restrictions on and scrutiny ofinvestments, acquisitions and foreign ownershipin other jurisdictions, on national security
grounds or for other reasons, regulatory
requirements (such as filings and approvals
under the anti-monopoly and competition laws,
rules and regulations, and review of investments
and acquisitions of large Internet platforms
under certain policies), the risk that acquisitions
or investments may fail to close, due to politicaland regulatory challenges, as well as related
compliance and publicity risks;
actual or alleged misconduct, unscrupulous
business practices or non-compliance by us
or any company we acquire or invest in or by
its affiliates or current or former employees,
whether before, during or after our acquisition or
investments;
difficulties in identifying and selecting
appropriate targets and strategic partners,
including potential loss of opportunities forstrategic transactions with competitors of ourinvestee companies and strategic partners;difficulties in conducting sufficient andeffective due diligence on potential targets andunforeseen or hidden liabilities or additional
incidences of non-compliance, operating losses,
costs and expenses that may adversely affect us
following our acquisitions or investments or otherstrategic transactions;
negative impact on our cash and credit profile
from loans to or guarantees for the benefit ofequity method investees;
losses arising from disposal of investments orde-consolidation of businesses; andactual or potential impairment charges or writeoffs of investments in equity method investees
or intangible assets (including intellectual
property we acquire), and goodwill recorded in

Alibaba Group Holding Limited

connection with invested businesses, particularly
investments in publicly traded companies, inthe event that a decline in fair value below thecarrying value of our equity method investments
is other-than-temporary, or the carrying amountof a reporting unit to which goodwill is allocatedexceeds its fair value. See “Management
Discussion and Analysis — Liquidity and Capital
Resources — Critical Accounting Policies andEstimates — Impairment Assessment on
Investments in Equity Method Investees” and“—Impairment Assessment on Goodwill andIntangible Assets.”
These and other risks could lead to negative publicity,
increased regulatory scrutiny, litigation, government
inquiries, investigations, actions or penalties against
us and the companies we invest in or acquire on
the ground of non-compliance with policy andregulatory requirements, or even against our otherbusinesses, and may force us to incur significant
additional expenses and allocate significant
management and human resources to rectify or
improve these companies’ corporate governancestandards, disclosure controls and procedures orinternal controls and systems. Due to business or
financial underperformance, regulatory scrutiny orcompliance reasons, we may need to divest interestsin, or terminate business cooperation with, businesses
and entities in which we have invested capital andother resources. See also “— PRC regulations regarding
acquisitions impose significant regulatory approval
and review requirements, which could make it moredifficult for us to pursue growth through acquisitions
and subject us to fines or other administrative
penalties.” As a result, we may experience significant
difficulties and uncertainties carrying out investments
and acquisitions, and our growth strategy, reputation
and/or the trading prices of our ADSs, Shares and/or other securities may be materially and adversely
affected.
In addition, our strategic investments and acquisitions
may adversely affect our financial results, at leastin the short term. For example, acquisitions of, andcontinued investments in lower margin or loss-making
businesses and the integration of our local consumer
services business, have negatively affected our
margins and net income. Acquired businesses thatare loss-making may continue to sustain losses andmay not become profitable in the near future or atall. The performance of our current and future equity
method investees may also adversely affect our net
income. There can be no assurance that we will beable to grow our acquired or invested businesses,

Risk Factors

or realize returns, benefits of synergies and growth
opportunities we expect in connection with theseinvestments and acquisitions.
We face challenges in expanding our internationaland cross-border businesses and operations.
In addition to risks that generally apply to ouracquisitions and investments, we face risks associatedwith expanding into an increasing number of markets
where we have limited or no experience, we may
be less well-known or have fewer local resources
and we may need to localize our business practices,
culture and operations. We also face protectionist
or national security policies that could, among otherthings, hinder our ability to execute our businessstrategies and put us at a competitive disadvantage
relative to domestic companies in other jurisdictions.
The expansion of our international and cross-borderbusinesses will also expose us to risks and challenges
inherent in operating businesses globally, including:

•
•

•
•
•
•
•
•
•

•
•
•

•

challenges in replicating or adapting ourcompany policies and procedures to operating
environments different from that of China,
including technology and logistics infrastructure;
challenges of maintaining efficient andconsolidated internal systems, including IT
infrastructure, and of achieving customizationand integration of these systems with the otherparts of our ecosystem;••lack of acceptance of our product and service
offerings, and challenges of localizing ourofferings to appeal to local tastes;
failure to understand cultural differences, local
consumer behaviors and preferences and local
business practices;protectionist or national security policies that
restrict our ability to:invest in or acquire companies;
develop, import or export certain technologies,
such as the national AI initiative proposed by the
U.S. government;utilize technologies that are deemed by local
governmental regulators to pose a threat to theirnational security; or
obtain or maintain the necessary licenses andauthorizations to operate our businesses;•••

the need for increased resources to manage
regulatory compliance across our international
businesses;
failure to attract and retain capable talent withinternational perspectives who can effectively
manage and operate local businesses;
compliance with local laws and regulations,
including those relating to e-commercemarketplaces and platforms, digital services,privacy and data security, such as the DigitalMarkets Act, the Digital Services Act and theGeneral Data Protection Regulation of theEU, consumer and labor protection, andenvironmental regulations, and increased
compliance costs across different legal systems;changes in applicable cross-border e-commerce
tax laws, such as the EU’s removal of valueadded tax exemption for cross-border parcels
valued below €22, which could negatively affecttransactions conducted through our internationaland cross-border platforms, increase ourcompliance costs and subject us to additionalrisks;
heightened restrictions and barriers on thetransfer of data between different jurisdictions;differing, complex and potentially adverse
customs, import/export laws, tax rules
and regulations or other trade barriers or
restrictions, including significant delays in oreven suspensions of customs clearance, which
may be applicable to transactions conducted
through our international and cross-border
platforms, related compliance obligations andconsequences of non-compliance, and any new
developments in these areas;
availability, reliability and security of internationaland cross-border payment systems and logistics
infrastructure;exchange rate fluctuations, which may havea material adverse effect on cross-bordercommerce businesses and businesses in theaffected countries or regions; andpolitical instability and general economic or
political conditions in particular countries orregions, including territorial or trade disputes,
war and terrorism, such as the Russia-Ukraine
conflict.

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215

Risk Factors

Failure to manage these risks and challenges
could negatively affect our ability to expand ourinternational and cross-border businesses andoperations as well as materially and adversely affectour business, financial condition and results ofoperations.
An occurrence of a widespread health epidemic orother outbreaks or natural disasters could have amaterial adverse effect on our business, financial
condition and results of operations.
Our business could be materially and adversely
affected by the outbreak of a widespread healthepidemic, such as COVID-19, swine flu, avian
influenza, severe acute respiratory syndrome, Ebola
and Zika; natural disasters, such as earthquakes,
snowstorms, storm surges, floods, fires, drought andother extreme weather events and other effects ofclimate change; or other events, such as wars, acts ofterrorism, environmental accidents, power shortages
or communication interruptions. The occurrence ofa disaster or a prolonged outbreak of an epidemic
illness or other adverse public health developments
in China or elsewhere in the world could materiallydisrupt our industry and our business and operations,and have a material adverse effect on our business,financial condition and results of operations. For
example, these events could cause a temporary
closure of the facilities we use for our operations,significantly disrupt supply chains and logistics
services or severely impact consumer behaviors andthe operations of merchants, business partners andother participants in our ecosystem. Our operations
could also be disrupted if any of our employees or
employees of our business partners are suspectedof contracting an epidemic disease, since this could
require us or our business partners to quarantine
some or all of these employees or disinfect thefacilities used for our operations. In addition, ourrevenue and profitability could be materially reduced
to the extent that a natural disaster, health epidemicor other outbreak or any change in policy in response
to such event harms the global or PRC economy ingeneral.
In particular, the global outbreak of the COVID-19
pandemic continued to have a significant negative
impact on the global economy in fiscal year 2023,
which has adversely affected our business andfinancial results. From early 2020 to early 2023, the
COVID-19 pandemic triggered a series of lock-downs,
social distancing requirements and travel restrictions
that significantly and negatively affected our various
businesses in China, particularly our China commerce
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Alibaba Group Holding Limited

and local consumer services businesses. Our key
international commerce businesses also experienced
a negative impact. The COVID-19 pandemic alsopresented challenges to our business operations aswell as the business operations of our merchants,business partners and other participants in our
ecosystem, such as closure of offices and facilities,
disruptions to or even suspensions of normal businessand logistics operations, as well as restrictions on
travel. Starting in December 2022, China has liftedmost of the COVID-19-induced travel restrictions andquarantine requirements. From late December 2022
to early 2023, certain parts of China experienced
COVID-19 resurgence, which caused significant
disruption to our business operations in these regions.
It is not possible to determine the impact of the
COVID-19 pandemic on our business operations
and financial results going forward, which is highly
dependent on numerous factors, including thefrequency, duration and spread of the outbreaks of
the COVID-19 pandemic (including any new variant
with different characteristics) in China or elsewhere,
actions taken by governments, the response ofbusinesses and individuals to the pandemic, theimpact of the pandemic on business and economic
conditions in China and globally, consumer demand,
our ability and the ability of merchants, retailers,
logistics service providers and other participants in our
ecosystem to continue operations in areas affectedby the pandemic and our efforts and expenditures
to support merchants and partners and ensure thesafety of our employees. The COVID-19 pandemic may
continue to adversely affect our business and resultsof operations.
We are subject to a broad range of laws andregulations, and future laws and regulations
may impose additional requirements and otherobligations that could materially and adversely
affect our business, financial condition and results ofoperations, as well as the trading prices of our ADSs,
Shares and/or other securities.
The industries in which we operate, including online
and mobile commerce, local consumer services,logistics, cloud computing, digital media andentertainment and other online content offerings,
as well as certain of our important businessprocesses, including those that may be deemed as
relating to payment and settlement of funds, aresubject to government regulations in the PRC andother countries. These requirements may include
requirements or restrictions relating to, among otherthings, the provision of certain regulated products
or services through platforms, new and additional

Risk Factors

licenses, permits and approvals, renewals andamendments of licenses, or governance or ownership
structures. Failure to obtain and maintain suchrequired licenses or approvals may require us to adjust
our business practices, increase our costs or subject
us to fines, which materially and adversely affect ourbusiness and the trading prices of our ADSs, Shares
and/or other securities.
We are subject to regulations in a wide range ofareas, including, among others, anti-monopoly andanti-unfair competition, privacy and data protection
and content. See “— Claims or regulatory actions
under competition laws against us may result in ourbeing subject to fines, constraints on our businessand damage to our reputation.”; “— Our businessis subject to complex and evolving domestic andinternational laws and regulations regarding privacy
and data protection, which are subject to change anduncertain interpretation. Complying with these laws
and regulations increases our cost of operations andmay require changes to our data and other businesspractices or negatively affect our user growth andengagement. Failure to comply with these laws
and regulations could result in claims, regulatory
investigations, litigation or penalties, or otherwise
negatively affect our business.”; and “— We may
be subject to liability for content available in our
ecosystem that is alleged to be obscene, defamatory,
libelous, fraudulent, socially destabilizing or otherwise
unlawful.”
In particular, regulators in the PRC and other countries
are increasingly focused on regulating digitalplatforms. For example, the PRC E-commerce Law,or the E-commerce Law, and the Measures for theSupervision and Administration of Online Trading,or the Online Trading Measures, impose a series ofrequirements on e-commerce platform operators,
including requiring e-commerce platform operators
to verify and update each merchant’s profile on aregular basis and monitor their market participant
registration status. Other laws also impose obligations
and limitations on network platform operators,
including, among others, taking measures to preventand stop false and illegal advertisements andmarketing information, improving technical measuresfor discovering and dealing with illegal or criminal
activities on the platforms, and limiting and regulating
an e-commerce platform operator’s personalized
shopping recommendations service to consumers.
Large-scale Internet platforms, including us, aresubject to more responsibilities and obligations thansmaller platforms. For example, the draft Guidelines

for Implementing Subject Responsibilities of Internet
Platforms, or the Responsibilities Guidelines, set forth
additional responsibilities for operators of super
platforms, as defined in the draft Guidelines forClassification and Grading of Internet Platforms, orthe Draft Classification Guidelines. These additional
responsibilities include promoting interoperability
between the services they provide and those provided
by other platforms. The above guidelines have notbeen formally adopted, and substantial uncertainties
still exist with respect to the enactment timetable,
final content, interpretation and implementation ofthese guidelines and how they will affect our business
operation. If adopted, certain of our platforms may bedeemed as an operator of super platforms under theClassification Guidelines and will need to comply withadditional requirements under the Responsibilities
Guidelines. These requirements could result insignificant additional compliance costs, subject us tohigher liabilities or require us to change our businesspractices. Failure to comply with these requirements
may subject us to suspension of business, rectification
orders and fines. Due to our size, these guidelines
may affect us more than our competitors. For
example, certain third-party platforms, althoughoffering products and services competing with ourmarketplaces, may not be deemed as operatorsof super platforms or even e-commerce operatorsand may be subject to less stringent requirementswith respect to merchant regulation and consumer
protection. Our strict platform governance measuresin response to these requirements may lead to lossof merchants to those platforms, or to complaints
or claims made against us by merchants on ourplatforms.
We face scrutiny and have from time to time been
subject, and are likely again in the future to be subject,
to inquiries and investigations from both PRC andforeign governments. We may face inquiries andinvestigations in a wide range of areas, including
online content, alleged third-party intellectual
property infringement, cybersecurity and privacy laws,
competition laws and regulations, securities laws
and regulations, cross-border trade, tax, investment
activities, human rights, and allegedly fraudulent orother criminal transactions. As we further expand
into international markets, we will also increasingly
become subject to additional legal and regulatorycompliance requirements as well as political andregulatory challenges, including scrutiny on data
privacy and security and anti-money laundering
compliance, on national security grounds or for otherreasons, in foreign countries in which we conduct
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Risk Factors

business or investment activities. Government
authorities in the PRC and other countries or regions
are likely to continue to issue new laws, rules andregulations and enhance enforcement of existinglaws, rules and regulations in these industries, andthe perception that new laws and regulations will
be implemented or that more stringent enforcement
may be put in place may further negatively impact
the trading prices of our ADSs, Shares and/or othersecurities. Any failure, or perceived failure, by us
to comply with such local laws and regulations
could result in reputational damages, regulatory
investigations, sanctions or court proceedings andsubject us to legal liabilities, including criminal
liabilities. As we continue to grow in scale andsignificance, we expect to face increased scrutiny,
which will, at a minimum, result in our having tocontinue to increase our investment in complianceand related capabilities and systems, which could
adversely affect our business, financial condition andresults of operations.
Our business and technologies generate and processa large amount of data, including personal data,
and the improper use or disclosure of data could
result in regulatory investigations and penalties, andharm our reputation and have a material adverse
effect on the trading prices of our ADSs, Shares and/or other securities, our business and our prospects.
Our business and technologies generate and processa large quantity of personal data. Our privacy policies
concerning the collection, use and disclosure of
personal data are posted on our platforms. We
face risks inherent in handling and protecting large
volumes of data, especially consumer data. In
particular, we face a number of challenges relating
to data from transactions and other activities on ourplatforms, including:

•
•

218

protecting the data in and hosted on our system,
including against attacks on our system orunauthorized use by outside parties or fraudulent
behavior or improper use by our employees;
addressing concerns, challenges, negative
publicity and litigation related to data privacy,
collection, use and actual or perceived sharing
for promotional and other purposes (including
cooperation and sharing among our own
businesses, cooperation with business partners
or mandatory disclosure to regulators), andconcerns among the public about the alleged
discriminatory treatment adopted by Internet
platforms based on user profile, safety, security

Alibaba Group Holding Limited

and other factors that may arise from our existing
businesses or new businesses and technologies,
such as new forms of data (for example,
biometric data, location information and otherdemographic information); and•complying with applicable laws, rules andregulations relating to the collection (fromusers and other third-party systems or sources),use, storage, transfer, disclosure and securityof personal data, including requests fromdata subjects and regulatory and government
authorities.

These challenges are heightened as we expand ourbusiness into jurisdictions with different legal andregulatory regimes, such as the GDPR. There havebeen a number of reports on and litigation relating toincidents relating to data security and unauthorized
use of user data by high-profile Internet andtechnology companies and their business partners.
If our user data is improperly used or disclosed byany party, or if we were to be found in violation ofany data-related laws, rules or regulations, including
those relating to collection and use of user data, it
could result in a loss of users, businesses and otherparticipants from our ecosystem, suspension ofservice or blockage of access to mobile app services,loss of confidence or trust in our platforms, litigation,
regulatory investigations, significant amounts ofpenalties or actions against us, significant damage
to our reputation or even criminal liabilities, and havea material adverse effect on the trading prices of our
ADSs, Shares and/or other securities, our business andprospects.
As permitted by our privacy policies and user
agreements, we grant expressly limited accessto specified data on our data platform to certain
participants in our ecosystem that provide services
to consumers, merchants, brands, retailers andother ecosystem participants. In addition, following
the termination of the data sharing agreement with
Ant Group in July 2022, we and Ant Group will, to theextent necessary for each party to provide services
to our respective customers, negotiate the terms ofdata sharing arrangements on a case-by-case basis
and as permitted by applicable laws and regulations.
Participants in our ecosystem, including Ant Group,
face the same challenges inherent in handling andprotecting large volumes of data. Any actual or
perceived improper use of data by us or them, andany systems failure or security breach or lapse on
our or their part that results in the release of user
data could harm our reputation and brand and,

Risk Factors

consequently, our business, in addition to exposing
us to potential legal liability or regulatory actions.
This could also attract negative publicity from media
outlets, privacy advocates, our competitors or others
and could adversely affect the trading prices of our
ADSs, Shares and/or other securities.
Our business is subject to complex and evolving
domestic and international laws and regulations
regarding privacy and data protection, which are
subject to change and uncertain interpretation.
Complying with these laws and regulations increases
our cost of operations and may require changes toour data and other business practices or negatively
affect our user growth and engagement. Failure
to comply with these laws and regulations could
result in claims, regulatory investigations, litigationor penalties, or otherwise negatively affect ourbusiness.
Regulatory authorities in China and around theworld have recently implemented, and may in the
future continue to implement, further legislative andregulatory proposals concerning privacy and dataprotection, particularly relating to the protection of
personal information, cybersecurity and cross-borderdata transmission. These laws and regulations canbe complex and the interpretation and application ofthese laws and regulations are often uncertain, in fluxand complicated.
PRC regulatory authorities have increasingly focusedon personal data and privacy protection, andpromulgated a number of laws and regulations,
including the Personal Information Protection Law and
the Provisions on the Scope of Necessary Personal
Information Required for Common Types of Mobile
Internet Applications, that stipulate requirements andlimitations on the collection, processing and handlingof personal information. See “Business Overview— Regulation — Regulation of Data and Privacy
Protection” and “Business Overview — Regulation— Regulation of Mobile Apps.” In the course of ourbusiness operations, we collect information of ourcustomers and users, including personal information.
Therefore, we are required to comply with applicablelaws and regulations relating to personal data andprivacy protection. To ensure our compliance withthese laws and regulations, we have establishedrelevant protocols and mechanisms. For example,
to get consent from users before collecting theirpersonal information, we clearly notify them theinformation collected and the purpose of collecting
the information, explain to them what, how and why
the information may be shared with third parties andalso provide the privacy policy of the third parties
with whom we share the information. These personal
data privacy protection procedures have increased
our compliance and operating costs. The data privacy
laws and regulations also impose penalties andliability on information processors for non-compliant
information collection and processing activities,
including correction, suspension or termination of
their services, confiscation of illegal income, as wellas significant fines of up to 5% of revenue and otherpenalties. PRC regulatory authorities have also put
forward regular inspections and reporting on thecompliance of mobile apps, mini-programs, softwaredevelopment kits and other applications. We believethat our business operations are compliant withthe currently effective PRC laws relating to personal
data and privacy protection in all material respects.
Nevertheless, the interpretation and implementationof these laws and regulations are evolving, and we
may be required to continuously adjust and upgrade
our applications. The Cyberspace Administration ofChina has previously named certain of our mobile
apps for failure to comply with privacy and data
security regulations. We have rectified these mobile
apps’ data collection and use practices to bring theminto compliance.
PRC regulatory authorities have also enhanced theirregulation on algorithm recommendation services.
According to the Administrative Provisions on Internet
Information Service Algorithm Recommendation,or the Algorithm Recommendation Provisions,which came into effect on March 1, 2022, algorithm
recommendation service providers shall clearly inform
users of their provision of algorithm recommendation
services, and make public the basic principles,
intentions and main operating mechanisms of thealgorithm recommendation services, and shall also
ensure that users may conveniently terminate thealgorithm recommendation services. Moreover,algorithm recommendation service providers selling
goods or providing services to consumers shallprotect consumers’ rights of fair trade, and areprohibited from carrying out illegal conduct suchas unreasonable differentiated treatment based on
consumers’ preferences, purchase behavior, or suchother characteristics. In addition, the Administrative
Provisions on Deep Synthesis of Internet Information
Services, which took effect in January 2023, impose
obligations on providers, technology supporters
and users of deep synthesis technology, including
verification of user identity, implementing measures
to protect data security and personal information,
content moderation, labelling content generated
Fiscal Year 2023 Annual Report219

Risk Factors

using deep synthesis technology, and conducting
security assessment and completing filings forprovision of certain services. We use algorithmic
recommendation and deep synthesis technology
in a wide range of our businesses. Accordingly, weneed to comply with the Algorithm Recommendation
Provisions, the Administrative Provisions on Deep
Synthesis of Internet Information Services and otherapplicable laws and regulations governing algorithm
recommendation services, and we may be subject topenalties and liability for non-compliance, which may
include administrative liabilities, including warnings,
public denouncement, fines, enforcement orders
requiring us to correct, or suspending us from posting
new information, suspension of business or evencriminal liabilities. Complying with PRC regulation on
algorithm recommendation services has increased ourcompliance costs, changed our data use and businesspractices, and could negatively affect user activities on
our platforms. We believe that our business operations
are compliant with currently effective PRC laws relating
to algorithm recommendation services in all material
respects. Moreover, on July 10, 2023, the Cyberspace
Administration of China, together with other relevant
authorities, released the Interim Measures on
Generative AI Services, which will come into effect on
August 15, 2023 and impose compliance requirements
on providers of generative AI services. According to theInterim Measures on Generative AI Services, individuals
or organizations that provide generative AI servicesof text, image, audios, videos and other content shallbe responsible as the producers of such network
information content and as the personal information
processors to protect any personal information
involved. Certain providers of generative AI services
shall also conduct security assessment and complete
certain filings in accordance with the Administrative
Provisions on Internet Information Service Algorithm
Recommendation. Non-compliance with the Interim
Measures on Generative AI services may subject
generative AI services providers to penalties, including
warning, public denouncement, rectification orders
and suspension of the provision of relevant services.
See “Business Overview — Regulation — Regulation ofInternet Security.” As of the date of this annual report,
uncertainties exist with respect to the interpretationand implementation of the Interim Measures on
Generative AI Services, as well as how they will affectour business operations.
PRC regulatory authorities have also stepped up
efforts in safeguarding cybersecurity. The PRC
Cybersecurity Law, which generally governs theconstruction, operation, maintenance and use of
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Alibaba Group Holding Limited

networks in China, subjects network operators,
including us, to various security protection-related
obligations. In addition, the PRC Cybersecurity Law
provides that personal information and importantdata collected and generated by operators of criticalinformation infrastructure in the course of theiroperations in the PRC should be stored in the PRC,
and imposes heightened regulation and additional
security obligations on operators of critical information
infrastructure. See “Business Overview — Regulation— Regulation of Internet Security.” We believe that weare compliant with PRC Cybersecurity Law, including
requirements relating to security protection, user
identity verification, cybersecurity emergency response
planning and technical assistance, in all material
respects. Failure to comply could subject us to fines,
suspension of businesses, shutdown of websites andrevocation of business licenses.
PRC regulatory authorities have recently promulgatedlaws and regulations relating to cybersecurity review,
including requirements that affect overseas listingsby Chinese companies. According to the Revised
Cybersecurity Review Measures, which became
effective in February 2022, operators of criticalinformation infrastructure who purchase network
products and services and network platform operators
who carry out data processing activities that affector may affect national security shall be subject tocybersecurity review. In addition, any network platform
operator possessing over one million users’ individual
information must apply for cybersecurity review
before listing abroad. Relevant PRC governmental
authorities may also initiate cybersecurity review ifthey determine certain network products, services,or data processing activities affect or may affectnational security. See “Business Overview — Regulation— Regulation of Internet Security.” Moreover, inNovember 2021, the Cyberspace Administration ofChina promulgated the Draft Regulations on Network
Data Security Management, or the Draft Cyber Data
Security Regulations, for public comments, which set
forth different scenarios where data processors are
required to apply for cybersecurity review, including,among others, overseas listing while processing overone million users’ personal information, Hong Konglisting that affects or may affect national security, andother data processing activities that affect or may
affect national security. The Draft Cyber Data Security
Regulations also require data policies and rules andany material amendments thereof of large Internet
platforms with over 100 million daily active users be
evaluated by a third-party organization designated by
the Cyberspace Administration of China and approved

Risk Factors

by the respective local branch of the Cyberspace
Administration of China. There is no definite timetable
as to when the Draft Cyber Data Security Regulations
will be enacted. See “Business Overview — Regulation— Regulation of Data and Privacy Protection.”
PRC laws and regulations relating to cybersecurity
review are relatively new, and the applicable scopeof these laws and regulations remain subject touncertainties and further clarifications from PRC
regulators. As of the date of this annual report, wehave not received any notice from the Cyberspace
Administration of China of a cybersecurity review on
us under the Revised Cybersecurity Review Measures.
Based on advice from Fangda Partners, our PRC
counsel, we do not believe that we are required toundergo cybersecurity review by the Cyberspace
Administration of China for our previous securities
offerings. However, given the scale of our businessand the number of users on our platforms, we believethat we may be subject to a cybersecurity review in the
future. If we are subject to a cybersecurity review, we
may incur significant costs and face challenges, bothin the review process and in making enhancements
to our cybersecurity measures that may be required.
If we are unable to manage these risks, we may besubject to penalties, including fines, suspension ofbusiness, prohibition against new user registration(even for a short period of time) and revocation ofrequired licenses, and our reputation and results ofoperations could be materially and adversely affected.
In 2021, the PRC government launched cybersecurity
reviews on a number of mobile apps operated byseveral U.S.-listed Chinese companies and prohibited
relevant apps from registering new users during thereview period. Moreover, if we are required to undergocybersecurity review in connection with any future
securities offerings, our ability to obtain additional
capital may be negatively affected. See also “— We
may need additional capital but may not be able toobtain it on favorable terms or at all.”
PRC regulatory authorities have also enhanced thesupervision and regulation of cross-border datatransmission. The Data Security Law which took effectin September 2021 prohibits entities and individuals
in China from providing any foreign judicial or law
enforcement authority with any data stored in China
without approval from a competent PRC authority,and sets forth the legal liabilities of entities andindividuals found to be in violation of their dataprotection obligations, including rectification order,
warning, fines, suspension of relevant business,and revocation of business permits or licenses.

Moreover, the Measures for the Security Assessmentof Cross-border Data Transmission promulgated by
the Cyberspace Administration of China came into
effect on September 1, 2022. According to thesemeasures, personal data processors are subject tosecurity assessment conducted by the Cyberspace
Administration of China prior to any cross-bordertransfer of important data and personal information.
See “Business Overview — Regulation — Regulationof Data and Privacy Protection.” Any cross-borderdata transfer activities conducted in violation of the
Measures for the Security Assessment of Cross-border
Data Transmission before the effectiveness of thesemeasures are required to be rectified by March 2023.
We have implemented control procedures to comply
with the new requirements. Complying with PRC
laws and regulations relating to cross-border datatransmission increases our compliance costs andcould affect our ability to transfer data across borders.
We believe that our business operations are compliant
with PRC laws and regulations relating to cross-borderdata transmission in all material respects.
In addition, regulators in China and other jurisdictions
in which we operate may implement measures toensure that encryption of user data does not hinder
law enforcement agencies’ access to that data. For
example, according to the PRC Cybersecurity Law andrelevant regulations, network operators, including
us, are obligated to provide assistance and support
in accordance with the law for public security andnational security authorities to protect national security
or assist with criminal investigations. Non-complianceor compliance with these laws and requirements inmanners that are perceived as harming privacy could
lead to significant damages to our reputation andproceedings and actions against us by regulators andprivate parties.
As we further expand our operations into international
markets, we will be subject to additional laws inother jurisdictions where we operate and where
our consumers, users, merchants, customers andother participants are located. Such laws, rules
and regulations of other jurisdictions may be morecomprehensive, detailed and nuanced in their scope,and may impose requirements and penalties thatconflict with, or are more stringent than, those in
China. For example, the European Union has adopted
the Digital Markets Act and the Digital Services Act
and proposed the European Data Act since 2020,
which impose various requirements on data use, data
sharing and data protection, among other matters.
Moreover, AliExpress has been designated as a “veryFiscal Year 2023 Annual Report

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Risk Factors

large online platform” under the Digital Services
Act, and thus is required to fulfil more stringent
obligations, including algorithm transparency,
content moderation, mandatory reporting of incidents
and measures to tackle illegal content, regular risk
assessment, annual independent audit, data sharing
with relevant regulators and annual supervisory fee.
These requirements will create additional operationalburdens and compliance costs for us, and we may besubject to significant regulatory penalties for failure
to comply with these requirements. In addition, theselaws, rules and regulations in other jurisdictions
where we operate may restrict the transfer of data
across jurisdictions, which could impose additionaland substantial operational, administrative andcompliance burdens on us, and may also restrict
our business activities and expansion plans, as wellas impede our data-driven business strategies.
Complying with laws and regulations for an increasing
number of jurisdictions could require significant
resources and costs. Our continued expansion into
cloud business, both in China and elsewhere, will
also increase the amount of data hosted on oursystem, as well as increase the number of jurisdictions
in which we have IT systems. This, as well as theincreasing number of new legal requirements invarious jurisdictions, such as the GDPR, present
increased challenges and risks in relation to policies
and procedures relating to data collection, storage,transfer, disclosure, protection and privacy, and will
impose significant penalties for non-compliance. For
example, penalties calculated as a percentage ofglobal revenue may be imposed under the GDPR. The
compliance requirements of the GDPR affect a numberof our businesses, such as AliExpress, Alibaba.com
and Alibaba Cloud. Any failure, or perceived failure,by us to comply with the above and other applicableregulatory requirements or privacy protection-relatedlaws, rules and regulations could result in reputational
damages or proceedings or actions against us bygovernmental entities, consumers or others. These
proceedings or actions could subject us to significant
penalties and negative publicity, require us to change
our data and other business practices, increase ourcosts and severely disrupt our business, hinder our
global expansion or negatively affect the trading
prices of our ADSs, Shares and/or other securities.
While we believe we are compliant with such laws
and regulations in all material respects, there areuncertainties with respect to how these laws andregulations will be interpreted, implemented andenforced in practice, especially since many of theselaws and regulations only came into effect recently
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Alibaba Group Holding Limitedor have not come into effect yet, and we may still be
subject to regulatory investigations, fines, suspensionof businesses and revocation of licenses. In addition,
future interpretation and implementation of theselaws and regulations, or additional laws andregulations that may come into effect, may result insignificant increase in our compliance costs, force us
to change our business practices, adversely affectour business performance as well as subject us tonegative publicity, which could harm our reputation
among users and negatively affect the trading pricesof our ADSs, Shares and/or other securities.
Security breaches and attacks against our systems
and network, and any potentially resulting breachor failure to otherwise protect personal, confidential
and proprietary information, could damage our
reputation and negatively impact our business, aswell as materially and adversely affect our financial
condition and results of operations.
Our cybersecurity measures may not detect, prevent orcontrol all attempts to compromise our systems or risks
to our systems, including distributed denial-of-service
attacks, viruses, Trojan horses, malicious software,
break-ins, phishing attacks, third-party manipulation,
security breaches, employee misconduct ornegligence or other attacks, risks, data leakage andsimilar disruptions that may jeopardize the securityof data stored in and transmitted by our systems orthat we otherwise maintain. Moreover, if we fail to
implement adequate encryption of data transmitted
through the networks of the telecommunications
and Internet operators we rely upon, there is a riskthat telecommunications and Internet operators or
their business partners may misappropriate our data.
Breaches or failures of our cybersecurity measures
could result in unauthorized access to our systems,
misappropriation of information or data, deletion or
modification of user information, or denial-of-service
or other interruptions to our business operations. If
the security of domain names is compromised, we will
be unable to use the domain names in our business
operations.
We may not have the resources or technicalsophistication to anticipate or prevent rapidly
evolving cyber-attacks. As techniques used to obtain
unauthorized access to or sabotage systems change
frequently and may not be known until launchedagainst us, there can be no assurance that we will beable to anticipate, or implement adequate measures
to protect against, these attacks. We could also be
subject to an attack, breach or leakage, which we
do not discover at the time or the consequences ofRisk Factors

which are not apparent until a later point in time.
We only carry limited cybersecurity insurance, andactual or anticipated attacks and risks may cause us
to incur significantly higher costs, including costs to
deploy additional personnel and network protection
technologies, train employees, and engage third-party
experts and consultants.
Cyber-attacks may target us, our merchants,
consumers, users, customers, key service providers
or other participants in our ecosystem, or thecommunication infrastructure on which we depend.
In particular, breaches or failures of our third-party
service providers’ systems and cybersecurity measures
could also result in unauthorized access to our data
and user information. In addition, we develop systems
for customers through our cloud or other services.
If these systems suffer attacks, breaches and dataleakage, whether or not we are involved in managing
or operating such systems, we could be subject tonegative publicity, potential liabilities and regulatory
investigations, including extensive cybersecurity
review, which could result in significant losses to us,
and materially and adversely affect our reputation,business growth and prospects. We, our third-party
service providers and customers that use systems
we have developed have been in the past and arelikely again in the future to be subject to these types
of attacks, breaches and data leakage. For example,
in October 2020, Lazada reported a data breach ofa legacy RedMart database hosted by a third-party
service provider, which resulted in the leakage of
certain personal information of 1.1 million RedMartuser accounts. Further, in May 2021, a court in China
ruled in a criminal case that a software developer
illegally collected approximately 1.2 billion pieces
of user log-in IDs, alias and phone numbers fromthe Taobao website using a web crawler, which we
discovered and reported to law enforcement in August
2020.
Cyber-attacks and security breaches, whether or
not related to our systems or attributable to us,
could subject us to negative publicity, regulatory
investigations and significant legal and financial
liability, harm our reputation and result in substantial
revenue loss from lost sales and customer
dissatisfaction, materially decrease our revenue andnet income, and negatively affect the trading prices of
our ADSs and Shares.

Claims or regulatory actions under competition
laws against us may result in our being subject tofines, constraints on our business and damage to our
reputation.
In recent years, the PRC government has stepped up
enforcement against concentration of undertakings,
cartel activities, monopoly agreements, unfair
pricing, abusive behaviors by companies with market
dominance and other anti-competitive activities.
In December 2020, the PRC central government
announced that strengthening anti-monopoly
measures and preventing the disorderly expansionof capital has become one of its focuses in 2021, andthe government targets to improve digital regulations
and legal standards for the identification of platform
enterprise monopolies, for the gathering, usage
and management of data, and for the protection of
consumer rights.
The PRC government is enhancing its anti-monopoly
and anti-unfair competition laws and regulations andguidance. The Online Trading Measures which tookeffect on May 1, 2021, the amended Anti-monopoly
Law which came into effect on August 1, 2022, as
well as the Provisions on the Prohibition of Monopoly
Agreements, the Provisions on the Prohibitions ofActs of Abuse of Dominant Market Positions andthe Provisions on the Review of Concentration ofUndertakings, all of which came into effect on April
15, 2023, among others, impose liabilities on cartel
facilitators who aid others in the summation of anticompetitive agreements, clarify that data, algorithms,
technologies, platform rules and other measures
may not be used for consummation of monopoly
agreements, and prohibit platform operators fromabuse of dominant market positions. On November
22, 2022, the SAMR published the Draft Amendment
to the PRC Anti-unfair Competition Law for publiccomments, which introduced prohibition against themisuse of a relatively dominant market position andset significant administrative penalties specifically for
unfair competitive practices in digital economy. Suchlaws and regulations:•provide guidelines for the implementation ofanti-monopoly and anti-unfair competition
laws and regulations, including prohibition
against the abuse of dominant market positions,Fiscal Year 2023 Annual Report

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Risk Factors

especially in terms of unreasonable restrictions
on transactions, price manipulation, interferencewith merchants’ independent business
operations, false or misleading marketing andthe use of technical means to disrupt the normal
operations of network products or services legallyprovided by other business operators and detailsof the review of concentration of undertakings;••

strengthen enforcement of anti-monopoly andanti-unfair competition laws and regulations,
including the regulation of monopolistic
behaviors and monopoly agreements andprice-related violations as well as assistance inthe consummation of monopoly agreements,
such as below-cost pricing, price discrimination,
manipulation of market prices, fraudulent
pricing, entering into monopoly agreements andabuse of dominant market positions throughdata, algorithms, technology or platform rules,
as well as supervision of concentration ofundertakings; andincrease legal liabilities, including greater
penalties and criminal liabilities, for violations ofanti-monopoly and anti-unfair competition laws
and regulations.

See “Business Overview — Regulation — Regulationof Monopoly and Unfair Competition,” “Business
Overview — Regulation — Regulation of Online
and Mobile Commerce” and “Business Overview —Regulation — Regulation of Pricing.”
The SAMR, together with certain other PRC government
authorities have been active in their oversight andthe establishment of long-term mechanisms forfair market competition in the sharing consumption
industry. While we have conducted self-inspections
and undergone self-rectifications, we may still makefurther changes to our business practices, which may
increase our compliance costs and adversely affectour business performance.

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To comply with existing laws and regulations andnew laws and regulations that may be enacted
in the future, as well as administrative guidance
and requirements by regulators from time to time,
we may need to devote significant resources andefforts, including changing our business andpricing practices, restructuring our businesses andadjusting our investment activities, which may
materially and adversely affect our business, growthprospects, reputation and the trading prices of
our ADSs, Shares and/or other securities. We may
also be subject to regulatory investigations, finesand other penalties, which could materially andadversely affect our business and reputation. The
consequences of violating anti-monopoly and antiunfair competition laws and regulations could besignificant, including, for example, fines of up to 50%
of revenue, suspension of business and revocationof business licenses. Due to the expansive scope ofbusiness activities the anti-monopoly and anti-unfair
competition laws and regulations target to regulate,many of our businesses and practices, including
our business models, pricing practices, promotional
activities and cooperation with business partners,
may be subject to regulatory scrutiny and significant
penalties. Certain long-standing practices, such as
upstream and downstream investments and mergers
as well as horizontal investments and mergers, ourcross-platform user ID system, data and algorithm
applications, our traffic allocation approach andthe manners in which we offer payment, logistics
and other services to consumers may be subject tochallenges by regulators, consumers, merchantsand other parties. On December 24, 2020, the SAMR
commenced an investigation on us pursuant to the
PRC Anti-monopoly Law. Following the investigation,
on April 10, 2021, the SAMR issued an administrative
penalty decision finding that we violated provisionsof the PRC Anti-monopoly Law prohibiting a business
operator with a dominant market position fromrestricting business counterparties through exclusive
arrangements without justifiable cause, and imposeda fine of RMB18.2 billion. The SAMR also issued anadministrative guidance, instructing us to implement
a comprehensive rectification program, and to file aself-assessment and compliance report to the SAMR
for three consecutive years. In addition, the SAMR
has imposed and in the future may further impose
administrative penalties on various companies
including us for failing to duly make filings as to theirtransactions subject to merger control review by the
SAMR. See “— PRC regulations regarding acquisitions

Risk Factors

impose significant regulatory approval and review
requirements, which could make it more difficult for us
to pursue growth through acquisitions and subject us
to fines or other administrative penalties.”
The PRC Anti-monopoly Law and Anti-unfair
Competition Law also provide a private right of action
for competitors, business partners or customers tobring anti-monopoly and anti-unfair competition
claims against companies. In recent years, anincreased number of companies have been exercising
their right to seek relief under the PRC Anti-monopoly
Law, Anti-unfair Competition Law and related judicial
interpretations. Some of these companies, including
our competitors, business partners and customers,
have resorted to and may continue making public
allegations or launching media campaigns against
us, submitting complaints to regulators or initiating
private litigation that targets our and our business
partners’ prior and current business practices, such as
our market approach with traffic resource allocationon our e-commerce platforms, which we base on
multiple factors, and our alleged prior narrowlydeployed exclusive partnerships. For example, anothere-commerce player in China has brought suit against
us under the PRC Anti-monopoly Law in connection
with such alleged exclusive partnership arrangements
and is claiming a substantial amount of damages,
and there may be other similar litigation in the future.
See “Business Overview — Legal and Administrative
Proceedings — JD.com Lawsuit.” In the wake of theApril 2021 SAMR administrative penalty decision, there
may be other similar litigation in the future, and we
may face increased challenges in defending ourselves
in existing and future lawsuits brought against us
pursuant to the PRC Anti-monopoly Law. If we fail tosuccessfully defend ourselves against these claims,
we may be required to pay damages, which may
be significant and could materially and adversely
affect our business operations, financial results andreputation.
Allegations, claims, investigations, regulatoryinterviews, unannounced inspections, or other actions
or proceedings under the anti-monopoly and antiunfair competition laws and regulations, regardless of
their merits, have caused, and may continue to cause,
us to be subject to regulatory actions, such as profit
disgorgement and heavy fines, significant amounts ofdamage payments or settlements, and constraints on
our investments and acquisitions. We may be required
to make further changes to some of our businesspractices and divest certain businesses, which could

decrease the popularity of our businesses, products
and services and cause our revenue and net income todecrease materially. Any of the above circumstances
could materially and adversely affect our business,
operations, reputation, brand, the trading prices of our
ADSs, Shares and/or other securities.
PRC regulations regarding acquisitions impose
significant regulatory approval and review
requirements, which could make it more difficult for
us to pursue growth through acquisitions and subject
us to fines or other administrative penalties.
Under the PRC Anti-monopoly Law, companies
undertaking certain investments and acquisitions
relating to businesses in China must notify andobtain approval from the SAMR, before completing
any transaction where the parties’ revenues in China
exceed certain thresholds and the buyer would
obtain control of, or decisive influence over, the otherparty or any transaction that would otherwise trigger
merger control filing obligations. In addition, we
need to notify other PRC regulatory authorities if theinvestment or acquisition is in certain industries. The
SAMR, the Cyberspace Administration of China andother regulatory agencies in China are enhancing
merger control review in key areas, including national
interest and people’s livelihood, finance, technology
and media. On August 8, 2006, six PRC regulatory
agencies, including the MOFCOM, the State-owned
Assets Supervision and Administration Commission of
the State Council of the PRC, or the SASAC, the STA, theSAIC, the CSRC, and the SAFE, jointly adopted the M&A
Rules, which came into effect on September 8, 2006
and were amended on June 22, 2009. Under the M&A
Rules, the approval of MOFCOM must be obtained incircumstances where overseas companies establishedor controlled by PRC enterprises or residents acquiredomestic companies affiliated with PRC enterprises orresidents. Applicable PRC laws, rules and regulations
also require certain merger and acquisitiontransactions to be subject to security review.
Under the currently effective PRC Anti-monopoly
Law, due to the level of our revenues, our proposed
acquisition of control of, or decisive influence over,any company with revenues within China of morethan RMB400 million in the year prior to any proposed
acquisition, would be subject to SAMR merger control
review. In addition, a proposed transaction would
be subject to SAMR merger control review if we havejoint control of or joint decisive influence over any
company with another party and where such otherparty has revenues within China of more than RMB400

Fiscal Year 2023 Annual Report

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Risk Factors

million in the year prior to such transaction. Many of
the transactions we undertook and may undertake
could be subject to SAMR merger review. We havebeen fined, and expect to be subject to additionalfines, which may be significant, for failing to obtainmerger control approval for past acquisitions. Under
the PRC Anti-monopoly Law, we may also be required
to make divestitures or be subject to limitations on ourbusiness practices and other administrative penalties
if regulators determine that we have failed to obtain
the required approvals in relation to investments andacquisitions, which could materially and adversely
affect our business operations and financial results aswell as the trading prices of our ADSs, Shares and/or
other securities.
The Provisions of the State Council of the PRC on theThresholds for Filing of Concentration of Undertakings(Revised Draft for Public Comments) issued by the
SAMR on June 27, 2022 propose to significantly raise
the filing thresholds with respect to revenue, but
at the same time subjecting certain transactions
that do not meet the revenue threshold to filingobligations. See “Business Overview — Regulation— Regulation of Monopoly and Unfair Competition.”If adopted in current form, these provisions may
subject transactions involving significant undertaking
and between one party with large revenue, likeus, and start-up enterprises, to filing obligations.
Substantial uncertainties exist with respect to theenactment timetable, final content, interpretationand implementation of such draft provisions. The
amended PRC Anti-monopoly Law, which became
effective on August 1, 2022, significantly raises the
maximum fines for failure to file for merger control
review, and introduces a “stop-clock mechanism”
which may prolong the merger control review
process. Furthermore, the Provisions on the Review ofConcentration of Undertakings, which came into effecton April 15, 2023, provide detailed rules on how to
implement the “stop-clock mechanism,” which allow
the SAMR to suspend the calculation of time period formerger control review under various circumstances.
See “Business Overview — Regulation — Regulationof Monopoly and Unfair Competition.” Complying
with the requirements of the relevant regulations
to complete these transactions could be timeconsuming, and any required approval processes,
including approval from SAMR, may be uncertain andcould delay or inhibit our ability to complete thesetransactions, which could affect our ability to expand
our business, maintain our market share or otherwiseachieve the goals of our acquisition strategy.

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According to the Regulations on Enterprise OutboundInvestment issued by the NDRC in December 2017,
which came into effect on March 1, 2018, we may
also need to report to the NDRC relevant information
on overseas investments with an amount of US$300
million or more in non-sensitive areas, and obtainthe NDRC’s approval for our overseas investments
in sensitive areas, if any, before the closing of theinvestments. According to the Overseas Listing Trial
Measures, if a Chinese overseas listed company issues
overseas listed securities to acquire assets, such
issuance shall be subject to filing requirements. See“— Risks Related to Doing Business in the People’s
Republic of China — The approval, filing or otherrequirements of the CSRC or other PRC regulatory
authorities may be required under PRC law inconnection with any future issuance of securities
overseas, and, if required, we cannot predict whether
or for how long we or our subsidiaries will be able
to obtain such approval or complete such filing.”
Accordingly, these regulations may restrict our ability
to make investments in some regions and industries
overseas, and may subject any proposed investments
to additional delays and increased uncertainty, as wellas heightened scrutiny, including after the investments
have been made.
Our ability to carry out our investment and acquisition
strategy may be materially and adversely affected
due to significant regulatory uncertainty as to thetiming of receipt of relevant approvals or completionof relevant filings and whether transactions that we
may undertake would subject us to fines or otheradministrative penalties and negative publicity andwhether we will be able to complete investments andacquisitions in the future in a timely manner or at all.
We may be subject to liability for content available
in our ecosystem that is alleged to be obscene,defamatory, libelous, fraudulent, sociallydestabilizing or otherwise unlawful.
Under PRC law and the laws of certain otherjurisdictions in which we operate, we are required
to monitor our websites and the websites hosted on
our servers, cloud computing services and mobile
apps or interfaces, as well as our services and devices
that generate or host content, for items or content
deemed to be obscene, superstitious, defamatory,
libelous, fraudulent or socially destabilizing, as well
as for items, content or services that are illegal tosell online or otherwise in jurisdictions in which we
operate our marketplaces and other businesses,

Risk Factors

and to promptly take appropriate action with respect
to the relevant items, content or services. We may
also be subject to potential liability in China or otherjurisdictions for any unlawful actions of our merchants,
marketing customers or users of our websites, cloudcomputing services or mobile apps or interfaces, orfor content we distribute or that is linked from ourplatforms that is deemed inappropriate. It may bedifficult for us to determine the type of content that
may result in liability to us. The nature and scale of
our websites, mobile apps and platforms, such as
our cloud computing services, which allow users to
upload and save massive data on our cloud data
centers, social communities on our marketplaces and
DingTalk, such as livestreams and other interactive
media content on Taobao and Tmall, and Youku,
which allow users to upload videos and other content
to our websites, mobile apps and platforms, generally
referred to as user-generated content, may make thiseven more difficult. Due to the significant amount ofcontent uploaded by our users, we may not be able toidentify all the videos or other content that may violate
relevant laws and regulations. If any of the information
disseminated through our marketplaces, websites,
mobile apps or other businesses we operate, including
videos and other content (including user-generated
content), or any content that we have produced or
acquired, are deemed by the PRC government toviolate any content restrictions, we would not be able
to continue to display or distribute this content andcould suffer losses or become subject to penalties,
including confiscation of income, fines, suspension ofbusiness and revocation of required licenses, which
could materially and adversely affect our business,financial condition and results of operations. Our
livestreaming, short-form videos and interactive
content businesses are subject to heightened risks andchallenges associated with content liability. Moreover,
PRC regulators have enhanced enforcement against
illegal content and information on Internet platforms
and have imposed more stringent obligations on
Internet platforms, such as us. For example, theCyberspace Administration of China has launched aseries of “Cleaning Up the Internet” campaigns withspecial focus on livestreaming, short-form videos,content for minors, fandom culture, Internet rumors
and Internet account operations. As a result, ourcompliance costs may increase and we may be subject
to regulatory actions and penalties. If we are unable
to manage these risks, we could become subject topenalties, including regulatory actions, significant
fines, suspension of business, revocation of required

licenses and prohibition against new user registration,and our reputation, results of operations and financial
condition could be materially and adversely affected.
Furthermore, compliance requirements arecomplicated and evolving, and may require us to
implement different protections based on the typeof content and intended audience. For example, theRegulations on the Administration of Minors Program,or the Minors Program Regulation, promulgated by
the National Radio and Television Administration ofChina, or the NRTA, which came into effect on April
30, 2019 and amended on October 8, 2021, provides
that radio and television broadcasters and online
audiovisual program service providers shall establish
relevant protocols and review content of minororiented programs to ensure that they do not containviolence, obscenity, superstition, social disruption,
drug abuse or other prohibited elements. Furthermore,
the Opinions on Standardizing the Virtual Gifting ofLivestreaming and Strengthening the Protection of
Minors issued by the Cyberspace Administration ofChina and several other PRC governmental authorities
require platforms not to provide livestreaming hosting
services to minors under the age of 16 and adopt“teenager modes” to prevent minors from obsession,
block unsuitable content to minors and refrain fromproviding virtual gift purchase services to minors.
We may incur significant compliance costs and be
subject to significant regulatory penalty for failure tocomply with these requirements. If we are found tobe liable for content displayed or hosted on or evenhyperlinked to our services and platforms, we may besubject to negative publicity, fines, have our relevantbusiness operation licenses revoked, or be prevented
temporarily or for an extended period of time fromoperating our websites, mobile apps, interfaces orbusinesses in China or other jurisdictions, which could
materially and adversely affect our business andresults of operations.
Certain consolidated entities of our digital media
and entertainment business brought in state-owned
minority strategic investors. Such shareholder
has the right to appoint a director of the relevant
consolidated entity and other rights including certain
veto rights over the content review processes. Market
perception of this and other similar arrangements
may affect the trading prices of our ADSs, Shares
and/or other securities. In the future, our businesses
that generate or distribute content may be subject togreater governmental oversight or comply with otherregulatory requirements.

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Risk Factors

In addition, claims may be brought against us fordefamation, libel, negligence, copyright, patentor trademark infringement, tort (including deathand personal injury), other unlawful activity orother theories and claims based on the nature andcontent of information posted on our platforms,
including user-generated content, product reviews
and message boards, by our consumers, merchantsand other participants. Regardless of the outcome ofany dispute or lawsuit, we may suffer from negative
publicity and reputational damage as a result of theseactions.
We may be subject to claims under consumer
protection laws, including health and safety claims
and product liability claims, if property or people areharmed by the products and services sold throughour platforms.
Government authorities in the PRC and other countries
where we operate, media outlets and public advocacy
groups are increasingly focused on consumer
protection. Operators of e-commerce platforms are
subject to certain provisions of consumer protection
laws even where the operator is not the merchant of
the product or service purchased by the consumer.
For example, under the E-commerce Law, we may
be held jointly liable with the merchants if we failto take necessary actions when we know or shouldhave known that the products or services provided
by the merchants on our platforms do not meet
personal and property security requirements, orotherwise infringe upon consumers’ legitimate rights.
Applicable consumer protection laws in China also
hold that trading platforms will be held liable for
failing to meet any undertaking that the platforms
make to consumers with regard to products listedon their websites. Furthermore, we are required toreport to the SAMR or its local branches any violationof applicable laws, regulations or SAMR rules bymerchants or service providers, such as sales of goods
without proper license or authorization, and we are
required to take appropriate remedial measures,
including ceasing to provide services to the relevantmerchants or service providers. According to theOnline Trading Measures, we are also required toverify and update each merchant’s profile on a regularbasis and monitor their market participant registration
status. Therefore, we may be held liable if we fail toverify the licenses or qualifications of merchants, orfail to safeguard consumers with respect to products
or services affecting consumers’ health or safety.
Furthermore, under the PRC Minors’ Protection Law,
network product and service providers shall not

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provide products or services that induce minors to
obsession, or otherwise may be subject to rectification,
warning or penalties including confiscation of income,fines, suspension of business, shutdown of websites
and revocation of relevant licenses. On March 14,2022, the Cyberspace Administration of China released
the draft Regulations on the Protection of Minors on
the Network for public comments, which stipulate thatimportant Internet platforms with large number ofminor users and significant influence among minors
must fulfill their obligations, including but not limited
to establishing a protocol to oversee the protectionof minors online and carrying out periodic impact
assessment, adopting “teenager modes” for minors,
and suspending services to providers of products orservices on the platform who seriously violate laws
and regulations and harm minors’ rights and interests.
On September 2, 2022, the Standing Committee of
the National People’s Congress promulgated theAnti-Telecom and Online Fraud Law of PRC, effective
on December 1, 2022, which stipulates that Internet
service providers may not provide assistance totelecom and online fraud and must strengtheninternal control mechanisms to prevent and curb
telecom and online fraud, including verifying user
identities, timely and proper handling of abnormal
accounts, enhancing protection of key information
vulnerable to fraud and enhancing risk and security
assessment for new businesses. Failure to comply
with these requirements may subject us to warnings,
public denouncement, fines, suspension of business,rectification orders, shutdown of websites andapplications and revocation of relevant licenses, which
could materially and adversely affect our business,financial condition and results of operations.
Moreover, our businesses provide food, food delivery,
food supplements and beverages, mother care,cosmetics, baby care, pharmaceutical and healthcare
products and services, as well as electronics products,
both as a platform operator and as part of ourdirectly operated business. We have also invested incompanies involved in these sectors. These activities
pose increasing challenges to our internal control andcompliance systems and procedures, including ourcontrol over and management of third-party service
personnel, and expose us to substantial increasing
liability, negative publicity and reputational damage
arising from consumer complaints, harm to personal
health or safety or accidents involving products orservices offered through our platforms or provided
by us. For example, China’s Supreme People’s Court
issued its interpretation of certain laws, including
food safety laws and consumer protection laws,

Risk Factors

on December 8, 2020, and issued the Provisions on
Issues Concerning the Application of Law for the
Trial of Cases on Online Consumption Disputes (I)on March 1, 2022, which took effect on March 15,2022. According to these judicial interpretations,
livestreaming platform operators and online catering
service platform operators are responsible for verifying
the qualifications and licenses of livestreamers selling
food product and online food operators, respectively,
and they may be held jointly liable with the merchantson their respective platforms for damages incurredby consumers caused by defects in foods purchasedon their platforms, if these operators fail to fulfill
certain requirements and obligations. In addition,
e-commerce platform operators shall be held liable
as the product seller or service provider if the labels
used mislead consumers to believe that the product orservice is provided by the e-commerce platform, evenif such product or service is in fact provided by third
parties. See also “Business Overview — Regulation —Regulation of Online and Mobile Commerce.”
New laws and regulations on consumer protection
may be introduced in China and other jurisdictions
where we operate and impose more requirements
on operators of e-commerce and livestreaming
platforms. For example, PRC regulatory authorities
promulgated several regulations on livestreaming
activities, including the Administrative Measureson Online Livestreaming Marketing (Trial), whichcame into effect on May 25, 2021, which require
livestreaming platforms to take actions such as
limiting traffic and suspending livestreaming involving
illegal high-risk marketing activities, and prominently
alert users of the risks involved in transactions thatare conducted outside livestreaming platforms. See
also “Business Overview — Regulation — Regulationof Online and Mobile Commerce.” These regulations
on e-commerce and livestreaming activities may
impose additional operational burdens on us, resultin increased compliance costs and liability to us andsubject us to negative publicity.
In addition, we are facing increasing levels of activist
litigation in China by plaintiffs claiming damages
based on consumer protection laws. This type ofactivist litigation could increase in the future, and if it
does, we could face increased costs defending thesesuits and damages should we not prevail, which could
materially and adversely affect our reputation andbrand and our results of operations.

We may also face increasing scrutiny from consumer
protection regulators and activists, as well as
increasingly become a target for litigation, in the
United States, Europe and other jurisdictions. For
example, our AliExpress platform faces claims
related to consumer protection in the United States,
and member groups of the European Consumer
Organization’s BEUC network have expressed
concerns about certain consumer rights related to
product returns and dispute resolution with respect
to transactions conducted on our AliExpress platform
and requested a review of these consumer rights
by their national consumer protection agencies. We
only maintain product liability insurance for certain
businesses we operate, and do not maintain productliability insurance for products and services transacted
on our marketplaces, and our rights of indemnity fromthe merchants in our ecosystem may not adequately
cover us for any liability we may incur. Consumer
complaints and associated negative publicity could
materially and adversely harm our reputation andaffect our business expansion. Claims brought
against us under consumer protection laws, even if
unsuccessful, could result in significant expenditureof funds and diversion of management time andresources, which could materially and adversely affectour business operations, net income and profitability.
We have been and expect to continue to be subject
to allegations, investigations, lawsuits, liabilities
and negative publicity claiming that items listed
and content available in our ecosystem infringe
intellectual property rights of third parties or are
illegal.
We have been and expect to continue to be the subjectof allegations that products or services offered, soldor made available through our online marketplacesby third parties or that content made available on
our platforms, including content available throughour digital media and entertainment business,search business, online reading platform, online
music platform, news feed features and IoT devices
or our technology, infringe third-party copyrights,
trademarks and patents or other intellectual property
rights or are provided beyond the authorized scope.
Moreover, the United States is increasingly focusing
on investigating, preventing and taking action
against alleged misappropriation of intellectual
property, which has resulted in increased scrutiny,
investigations, enforcement actions and litigation
relating to intellectual property infringement.
Although we have adopted and continue to optimize
measures to proactively verify the products sold on

Fiscal Year 2023 Annual Report229

Risk Factors

our marketplaces for infringement and to minimize
potential infringement of third-party intellectual
property rights through our intellectual property
infringement complaint and take-down procedures,
these measures may not always be successful.
In the event that alleged counterfeit or infringing
products are listed or sold on our marketplaces or
allegedly infringing content are made available
through our other services, we could face claims
and negative publicity relating to these activities orfor our alleged failure to act in a timely or effective
manner in response to infringement or to otherwise
restrict or limit these activities. We may also choose
to compensate consumers for any losses, although
we are currently not legally obligated to do so. If, asa result of regulatory developments, we are required
to compensate consumers, we would incur additional
expenses.
We have also acquired businesses, such as Youku,
that have been, and may continue to be, subject toliabilities for infringement of third-party intellectual
property rights or other allegations based on thecontent available on their websites and mobile appsor the services they provide. In addition, we expect our
ecosystem to involve more and more user-generated
content, including the entertainment content on Youku
and our smart speakers, the interactive media content
displayed on Taobao and Tmall, including livestreams
and short-form videos, as well as the data generated,uploaded and saved by users of our cloud services,
over which we have limited control. Such content may
subject us to claims for infringement of third-party
intellectual property rights, or subject us to additional
scrutiny by the relevant government authorities. These
claims or scrutiny, whether or not having merit, may
result in our expenditure of significant financial andmanagement resources, injunctions against us or
payment of damages. We may need to obtain licenses
from third parties who allege that we have infringed
their rights, but these licenses may not be available
on terms acceptable to us or at all. These risks havebeen amplified by the increase in the number of third
parties whose sole or primary business is to assert
these claims.
Measures we take to protect against these potential
liabilities could require us to spend substantial
additional resources and/or result in reduced
revenues. In addition, these measures may reduce
the attractiveness of our ecosystem to consumers,
merchants, brands, retailers and other participants.
A merchant, brand, retailer, online marketer,
livestreamer, music or video service provider or

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other content provider whose content is removed orwhose services are suspended or terminated by us,
regardless of our compliance with the applicable laws,
rules and regulations, may dispute our actions andcommence action against us for damages based on
breach of contract or other causes of action, makepublic complaints or allegations or organize groupprotests and publicity campaigns against us or seek
compensation. Any costs incurred as a result of liability
or asserted liability relating to the sale of unlawful
goods or other infringement could harm our business.
Regulators in China and other jurisdictions, including
the United States, are increasingly seeking tohold Internet platforms liable for product liability,
illegal listings and inappropriate content. We
have been and may continue to be subject tosignificant negative publicity, regulatory scrutiny,
investigations and allegations of civil or criminal
penalties based on allegedly unlawful activities orunauthorized distribution of products or content,such as pharmaceuticals, carried out by third parties
through our online marketplaces. Due to our roleas an operator of online marketplaces, we will also
become subject to criminal liabilities or civil liabilities if
we are found to have knowingly provided assistanceor support, such as Internet access, server escrowor online storage services, commerce facilitation
services, payment services or logistics services, orwere negligent in not preventing, a third party fromusing our marketplaces and services to commit
certain illegal activities, such as unauthorized saleof pharmaceuticals. The outcome of any claims,
investigations and proceedings is inherently uncertain,
and in any event defending against these claims
could be both costly and time-consuming, andcould significantly divert the efforts and resources ofour management and other personnel. An adverse
determination in any of these proceedings could
cause us to pay penalties or damages, incur legal andother costs, limit our ability to conduct business, or
subject us to supervision by a third-party government
appointed monitor or require us to change themanner in which we operate and harm our reputation.
We have also acquired certain companies, such as
Youku, Lazada and Ele.me, that from time to time aresubject to allegations and lawsuits regarding alleged
infringement of third-party intellectual property orother rights, and we may continue to acquire othercompanies that are subject to similar disputes.
In addition, we have been and may continue to be
subject to significant negative publicity in China, theUnited States and other countries based on similar

Risk Factors

claims and allegations. For example, in past years andagain in January 2023, the USTR identified Taobao andAliExpress each as a “notorious market.” The USTR
may continue to identify Taobao and AliExpress as
notorious markets, and there can be no assurance that
the USTR or other relevant authorities in the UnitedStates or other countries will not identify Taobao,
AliExpress or any of our other businesses as notorious
markets in the future. In addition, government
authorities have and we expect them to continue toaccuse us of perceived problems and failures of ourplatforms, including alleged failures to crack downon the sale of counterfeit goods and other alleged
illegal activities on our marketplaces. As a result of
any claims or accusations by government authorities,
by industry watchdog organizations, including the
U.S. Commission on the Theft of American Intellectual
Property, by brand and intellectual property rights
holders or by enterprises, there may be a public
perception that counterfeit or pirated items arecommonplace on our marketplaces or that we delay
the process of removing these items. This perception,even if factually incorrect, and existing or new
litigation as well as regulatory pressure or actions
related to intellectual property rights protection, could
damage our reputation, harm our business, diminish
the value of our brand name and negatively affectthe trading prices of our ADSs, Shares and/or othersecurities.
We may be subject to material litigation andregulatory proceedings.
We have been involved in a high volume of litigationin China and a small volume of potentially highvalue litigation outside of China relating principally tosecurities law class actions, third-party and principal
intellectual property infringement claims, contract
disputes involving merchants and consumers on ourplatforms, consumer protection claims, claims relating
to data and privacy protection, employment relatedcases and other matters in the ordinary course of
our business. As our ecosystem expands, including
across jurisdictions and through the addition of new
businesses, we have encountered and may facean increasing number and a wider variety of theseclaims, including those brought against us pursuant
to anti-monopoly or anti-unfair competition laws
or involving high amounts of alleged damages.
Laws, rules and regulations may vary in their scopeand overseas laws and regulations may impose
requirements that are more stringent than, or whichconflict with, those in China. We have acquired andmay acquire companies that have been subject to or
may become subject to litigation, as well as regulatory
proceedings. In addition, in connection with litigation
or regulatory proceedings we may be subject toin various jurisdictions, we may be prohibited bylaws, regulations or government authorities in one
jurisdiction from complying with subpoenas, orders
or other requests from courts or regulators of otherjurisdictions, including those relating to data held inor with respect to persons in these jurisdictions. Ourfailure or inability to comply with the subpoenas,
orders or requests could subject us to fines, penalties
or other legal liability, which could have a material
adverse effect on our reputation, business, resultsof operations, the trading prices of our ADSs, Shares
and/or other securities.
As publicly listed companies, we and certain of our
subsidiaries face additional exposure to claims andlawsuits, as well as threatened claims and lawsuits,
inside and outside of China. In particular, since Ant
Group’s announcement of the suspension of its
IPO in early November 2020, we and certain of ourcurrent and former officers and directors were named
as defendants in certain shareholder class action
lawsuits in the United States. Certain of these suits also
assert claims related to our alleged failure to disclose
non-compliance with certain Chinese antitrust laws
and regulations. See “Business Overview — Legal and
Administrative Proceedings — Shareholder Class Action
Lawsuits” for more details about the shareholder classaction lawsuits. Although the court has dismissed
the claim alleging misstatements about Ant Group’s
IPO, the litigation process of defending against
such lawsuits, including any appeals, may utilize amaterial portion of our cash resources and divert
management’s attention away from our day-to-day
operations, all of which could harm our business.
There can be no assurance that we will prevail in anyof these cases, and any adverse outcome of thesecases could have a material adverse effect on our
reputation, business and results of operations. In
addition, although we have obtained directors’ andofficers’ liability insurance, the insurance coverage
may not be adequate to cover our obligations toindemnify our directors and officers, fund a settlementof litigation in excess of insurance coverage or pay anadverse judgment in litigation.
In early 2016, the SEC informed us that it had initiatedan investigation into whether there have been any
violations of the federal securities laws. The SEC
has requested that we voluntarily provide it with
documents and information relating to, among

Fiscal Year 2023 Annual Report231

Risk Factors

other things, our consolidation policies and practices(including our prior practice of accounting for Cainiao
Network as an equity method investee), our policies
and practices applicable to related party transactions
in general, and our reporting of operating datafrom the 11.11 Global Shopping Festival. We arecooperating with the SEC and, through our legal
counsel, have been providing the SEC with requested
documents and information. The SEC advised us thatthe initiation of a request for information should not
be construed as an indication by the SEC or its staff
that any violation of the federal securities laws has
occurred. This matter is ongoing, and, as with any
regulatory proceeding, we cannot predict when it will
be concluded.
The existence of litigation, claims, investigations
and proceedings may harm our reputation, limit ourability to conduct our business in the affected areas
and adversely affect the trading prices of our ADSs,
Shares and/or other securities. The outcome of any
claims, investigations and proceedings is inherently
uncertain, and in any event defending against theseclaims could be both costly and time-consuming, andcould significantly divert the efforts and resources ofour management and other personnel. An adverse
determination in any litigation, investigation orproceeding could cause us to pay damages, incurlegal and other costs, limit our ability to conductbusiness or require us to change the manner in which
we operate.
Failure to maintain or improve our technology
infrastructure could harm our business andprospects.
We are continuously upgrading our platforms toprovide increased scale, improved performance,
additional capacity and additional built-infunctionality, including functionality related tosecurity. Adopting new products and maintaining
and upgrading our technology infrastructure requiresignificant investments of time and resources. Any
failure to maintain and improve our technology
infrastructure could result in unanticipated system
disruptions, slower response times, impaired
user experience and delays in reporting accurate
operating and financial information. The risks ofthese events occurring are even higher during certain
periods of peak usage and activity, such as on oraround the 11.11 Global Shopping Festival or otherpromotional events, when user activity and thenumber of transactions are significantly higher on ourmarketplaces compared to other days of the year. In
addition, much of the software and interfaces we use
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are internally developed and proprietary technology.
If we experience problems with the functionality andeffectiveness of our software, interfaces or platforms,
or are unable to maintain and continuously improve
our technology infrastructure to handle our businessneeds, our business, financial condition, results ofoperations and prospects, as well as our reputation
and brand, could be materially and adversely
affected.
In addition, our technology infrastructure and services,
including our cloud product and service offerings,
incorporate third-party-developed software, systems
and technologies, as well as hardware purchasedor commissioned from third-party and overseas
suppliers. As our technology infrastructure andservices expand and become increasingly complex,
we face increasingly serious risks to the performanceand security of our technology infrastructure andservices that may be caused by these third-partydeveloped components, including risks relating toincompatibilities with these components, service
failures or delays or difficulties in integrating backend procedures on hardware and software. We alsoneed to continuously enhance our existing technology.
Otherwise, we face the risk of our technology
infrastructure becoming unstable and susceptible tosecurity breaches. This instability or susceptibility could
create serious challenges to the security and operationof our platforms and services, which would materiallyand adversely affect our business and reputation.
The successful operation of our business depends
upon the performance, reliability and security of theInternet infrastructure in China and other countries inwhich we operate.
Our business depends on the performance, reliability
and security of the telecommunications and Internet
infrastructure in China and other countries in which we
operate. Substantially all of our computer hardware
and a majority of our cloud computing services
are currently located in China. Almost all access to
the Internet in China is maintained through stateowned telecommunication operators under theadministrative control and regulatory supervision of
the MIIT. In addition, the national networks in China
are connected to the Internet through state-owned
international gateways, which are the only channels
through which a domestic user can connect to theInternet outside of China. We may face similar or otherlimitations in other countries in which we operate. We
may not have access to alternative networks in theevent of disruptions, failures or other problems with
the Internet infrastructure in China or elsewhere. In

Risk Factors

addition, the Internet infrastructure in the countries
in which we operate may not support the demands
associated with continued growth in Internet usage.
The failure of telecommunications network operators
to provide us with the requisite bandwidth could
also interfere with the speed and availability of
our websites and mobile apps. We have no control
over the costs of the services provided by thetelecommunications operators. If the prices that wepay for telecommunications and Internet services risesignificantly, our margins could be adversely affected
and the development and growth of our businesscould also be materially and adversely affected. In
addition, if Internet access fees or other charges toInternet users increase, our user base may decrease,which in turn may significantly decrease our revenues.
Our ecosystem could be disrupted by network
interruptions.
Our ecosystem depends on the efficient anduninterrupted operation of our computer andcommunications systems. System interruptions anddelays may prevent us from efficiently processing thelarge volume of transactions on our marketplaces
and other businesses we operate. In addition, alarge number of merchants and customers maintaintheir important systems, such as enterprise resource
planning and customer relationship management
systems, on our cloud computing platform, whichcontains substantial quantities of data that enable
them to operate and manage their businesses.
Increasing media and entertainment content on ourplatforms also requires additional network capacity
and infrastructure to process. Consumers expect
our media and entertainment content to be readily
available online, and any disruptions or delay to thedelivery of content could affect the attractiveness andreputation of our media and entertainment platforms.
We and other participants in our ecosystem, including
Ant Group, have experienced, and may experiencein the future, system interruptions and delays that
render websites, mobile apps and services (such as
cloud services and payment services) temporarily
unavailable or slow to respond. Although we have
prepared for contingencies through redundancy
measures and disaster recovery plans and also carrybusiness interruption insurance, these preparations
and insurance coverage may not be sufficient. Despite
any precautions we may take, the occurrence ofa natural disaster, including the effects of climatechange (such as drought, floods and increased
storm severity), or other unanticipated problems at

our facilities or the facilities of Ant Group and otherparticipants in our ecosystem, including power
outages, system failures, telecommunications delays
or failures, construction accidents, break-ins to IT
systems, computer viruses or human errors, could
result in delays in or temporary outages of ourplatforms or services, loss of our, consumers’ andcustomers’ data and business interruption for us andour customers. Any of these events could damage our
reputation, significantly disrupt our operations and theoperations of the participants in our ecosystem andsubject us to liability, heightened regulatory scrutiny
and increased costs, which could materially andadversely affect our business, financial condition andresults of operations.
We rely on Alipay to conduct substantially all of thepayment processing and all of the escrow services
on our marketplaces. If services and products
provided by Alipay or Ant Group’s other businesses
are limited, restricted, curtailed or degraded in any
way, or become unavailable to us or our users forany reason, our business may be materially andadversely affected.
Ant Group offers a variety of services and productsthat have become essential parts of the services andexperience we offer to consumers and merchantson our platforms. These services and products are
critical to our marketplaces and the developmentof our ecosystem. In particular, given the significant
transaction volume on our platforms, Alipay provides
convenient payment processing and escrow services
to us on preferential terms. We also leverage theconvenience, availability and ease of use of Alipay
and Ant Group’s other products and services, such as
consumer loans and insurance, to provide high quality
experience and services to users, merchants andother participants in our ecosystem. If the availability,
quality, utility, convenience or attractiveness of
Alipay’s and Ant Group’s other services and products
declines or changes for commercial, regulatory,compliance or any other reason, the attractivenessof our marketplaces and the level of activities on
our marketplaces could be materially and adversely
affected.
Particularly, Alipay’s business is subject to a numberof risks that could materially and adversely affect its
ability to provide payment processing and escrowservices to us, including:•dissatisfaction with Alipay’s services or lower useof Alipay by consumers, merchants, brands andretailers;
Fiscal Year 2023 Annual Report233

Risk Factors

•
•
•
•
•
•
•

increasing competition, including from otherestablished Chinese Internet companies,
payment service providers and companies
engaged in other financial technology services;changes to rules or practices applicable topayment systems that link to Alipay;
breach of users’ privacy and concerns over theuse and security of information collected from
customers and any related negative publicity
relating thereto;
service outages, system failures or failure toeffectively scale the system to handle large andgrowing transaction volumes;
increasing costs to Alipay, including fees charged
by banks to process transactions through Alipay,
which would also increase our cost of revenues;
negative news about and social media coverageon Alipay, its business, its product and service
offerings or matters relating to Alipay’s data
security and privacy; andfailure to manage user funds accurately or lossof user funds, whether due to employee fraud,
security breaches, technical errors or otherwise.

In addition, certain commercial banks in China impose
limits on the amounts that may be transferred byautomated payment from users’ bank accounts
to their linked accounts with third-party payment
services. Although we believe the impact of theserestrictions has not been and will not be significant interms of the overall volume of payments processed for
Taobao and Tmall, and automated payment services
linked to bank accounts represent only one of many
payment mechanisms that consumers may use tosettle transactions, we cannot predict whether theseand any additional restrictions that could be put inplace would have a material adverse effect on ourmarketplaces.
Alipay’s and Ant Group’s other businesses are highly
regulated and are required to comply with numerous
complex and evolving laws, rules and regulations,
including in the areas of online and mobile payment
services, wealth management, financing, crossborder money transmission, anti-money laundering,consumer protection and insurance. As Alipay and
Ant Group’s other businesses expand their businesses
and operations into more international markets,
they will become subject to additional legal andregulatory risks and scrutiny. For example, Alipay or
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Alibaba Group Holding Limited

Ant Group’s other affiliates are required to maintainpayment business licenses in the PRC and are also
required to obtain and maintain other applicablepayment, money transmitter or other related licenses
and approvals in other countries or regions where
they operate. In certain jurisdictions where Ant Groupcurrently does not have the required licenses, Ant
Group provides payment processing and escrowservices through third-party service providers. If
Ant Group or any of its partners fails to obtain andmaintain all required licenses and approvals orotherwise fails to manage the risks relating to theirbusinesses, if new laws, rules or regulations comeinto effect that impact Ant Group or its partners’
businesses, or if any of Ant Group’s partners ceases
to provide services to Ant Group, its services could
be suspended or severely disrupted, and its ability
to continue to deliver payment services to us on
preferential terms and other services and products
to our consumers, merchants and other ecosystem
participants may be undermined. Furthermore, ourcommercial arrangements with Alipay and Ant Groupmay be subject to anti-competition challenges. If
we need to migrate to another third-party payment
service or significantly expand our relationship withother third-party payment services, the transition
would require significant time and management
resources, and the third-party payment service may
not be as effective, efficient or well-received byconsumers, merchants, brands and retailers on ourmarketplaces. These third-party payment services also
may not provide escrow services, and we may not beable to receive commissions based on GMV settled
through these systems. We would also receive less, orlose entirely, the benefit of the commercial agreementwith Ant Group and Alipay and may be required to
pay more for payment processing and escrow services
than we currently pay. There can be no assurance
that we would be able to reach an agreement with analternative payment service provider on acceptableterms or at all, and our business, financial condition
and results of operations may be materially andadversely affected.
Because of our equity interest in Ant Group, Ant
Group’s financial results and valuation may materiallyaffect our financial results and the trading prices of
our ADSs, Shares and/or other securities. Moreover,because of our close association with Ant Group andoverlapping user bases, regulatory developments,
litigation or proceedings, media and other reports,
whether or not true, and other events that affect
Ant Group could also negatively affect customers’,regulators’, investors’ and other third parties’Risk Factors

perception of us. For example, shortly after Ant Group’s
announcement of the suspension of its proposeddual-listing and IPO in November 2020, the trading
prices of our ADSs and Shares declined significantly. In
addition, Ant Group has been in discussions with PRC
regulators about its business rectification plan, andon April 12, 2021, Ant Group announced that it would
apply to set up a financial holding company to ensure
its financial-related businesses are fully regulated.
To implement the rectification plan and comply withapplicable new measures and rules, Ant Group may
be required to spend significant time and resources
and make changes to its businesses, which could
materially and adversely affect its business operations
and growth prospects. On July 7, 2023, PRC regulators
announced a RMB7.07 billion fine for Ant Group and
Ant Group has completed the related work on therectification. Changes in Ant Group’s business andfuture prospects, or speculation of such changes, aswell as additional regulatory requirements placed on
Ant Group, could in turn have a material adverse effecton us and the trading prices of our ADSs, Shares and/or other securities.
We do not control Alipay or its parent entity, Ant
Group, over which Jack Ma effectively controls morethan 50% of the voting interests. If conflicts that
could arise between us and Alipay or Ant Group are
not resolved in our favor, our ecosystem, business,financial condition, results of operations andprospects may be materially and adversely affected.
We rely on Alipay to conduct substantially all of thepayment processing and all of the escrow services
on our marketplaces. Ant Group also facilitates otherfinancial services to participants in our ecosystem,
including wealth management, financing (including
consumer financing) and insurance, and may offer
additional services in the future. Starting from
September 2019, we hold a 33% equity interest in
Alipay’s parent, Ant Group, and also have the rightto nominate two directors for election to the boardof Ant Group. However, we do not hold a majority
interest in or control Ant Group or Alipay. Following
the 2011 divestment and subsequent equity holding
restructuring related to Ant Group, an entity whollyowned by Jack Ma, our former executive chairman,
became the general partner of Junhan and Junao,
each a PRC limited partnership, which are two major
equity holders of Ant Group. In August 2020, Jack Ma
transferred 66% of the equity interest in such generalpartner entity but retained control over the equity
interests in Ant Group held by Junhan and Junao.
Through an agreement with the transferees as wellas the articles of association of the general partner

entity, Jack Ma has control over resolutions passed at
general meetings of the general partner entity that
relate to the exercise of rights by Junhan and Junao
as shareholders of Ant Group. We understand thatthrough the exercise of his voting power over Junhan
and Junao, Jack Ma continues to control more than
50% of the voting interests in Ant Group. On January
7, 2023, Ant Group announced that Junhan and
Junao would undergo certain changes in their voting
structures, which are subject to regulatory approval.
Upon completion of such changes, Jack Ma will nolonger control the majority voting interests in Ant
Group held by Junhan and Junao and no shareholder
will have control over Ant Group. If for any reason,
Alipay sought to amend the terms of its agreements
and arrangements with us, there can be no assurance
that we will be able to negotiate terms that are noless favorable than those we currently enjoy, and as
a result, our ecosystem could be negatively affected,
and our business, financial condition, results ofoperations and prospects could be materially andadversely affected.
Other conflicts of interest between us, on the one
hand, and Alipay and Ant Group, on the other
hand, may arise relating to commercial or strategic
opportunities or initiatives. Although we and Ant
Group have each agreed to certain non-competition
undertakings, Ant Group may from time to time
provide services to our competitors or engage incertain businesses that fall within our scope, andthere can be no assurance that Ant Group would not
pursue other opportunities that would conflict with
our interests. See “Major Shareholders and Related
Party Transactions — Related Party Transactions —Agreements and Transactions Related to Ant Groupand Its Subsidiaries — Our Commercial Arrangementswith Ant Group and Alipay — Restructuring of Our
Relationship with Ant Group and Alipay, 2019
Equity Issuance, and Related Amendments — Noncompetition Undertakings.” Jack Ma may not resolvethese conflicts in a manner that is in our interests.
Furthermore, our ability to explore alternative payment
services other than Alipay for our marketplaces may
be constrained due to Jack Ma’s relationship with Ant
Group.
In addition, certain of our employees hold sharebased awards granted by Junhan, a major equity
holder of Ant Group, and Ant Group, and certain
employees of Ant Group hold share-based awards
granted by us. The share-based awards granted by
Junhan and Ant Group to our employees result in
expenses that are recognized by us, and because of
mark-to-market accounting treatment, changes in
Fiscal Year 2023 Annual Report

235

Risk Factors

the fair value of these awards will affect the amountof share-based compensation expense that we
recognize. See “Major Shareholders and Related
Party Transactions — Related Party Transactions —Agreements and Transactions Related to Ant Groupand Its Subsidiaries — Our Commercial Arrangementswith Ant Group and Alipay — Share-based Award
Arrangements.” Subject to the approval of our audit
committee, Junhan and Ant Group could propose
and promote other cross-grant arrangements that
could result in additional share-based grants, andadditional, potentially significant, expenses to us.
Conflicts of interest may arise from our management
team members’ and other employees’ ownershipof interests in Ant Group, which could represent
a substantial portion of their personal wealth.
Accordingly, these and other potential conflicts ofinterest between us and Ant Group or Alipay, andbetween us and Jack Ma or Junhan or Junao, may not
be resolved in our favor, which could have a material
adverse effect on our business, financial condition,
results of operations and prospects.
In addition, any actual or perceived conflict of interest
between us and Ant Group, or any other company
integral to the functioning of our ecosystem, could
also materially harm our reputation as well as ourbusiness and prospects.
If third-party service providers and other participantsin our ecosystem fail to provide reliable orsatisfactory services or comply with applicablelaws or regulations, our reputation, business,financial condition and results of operations may bematerially and adversely affected.
Ant Group and a number of other third-party
participants, including retail operating partners,
logistics service providers, mobile app developers,
independent software vendors, or ISVs, cloud-based
developers, marketing affiliates, livestreaming
hosts and key opinion leaders, or KOLs, and various
professional service providers, provide services
to users on our platforms, including consumers,
merchants, brands, retailers and users of our cloudcomputing services. To the extent these ecosystem
participants and service providers are unable
to provide satisfactory services to our users oncommercially acceptable terms, or at all, or if we fail toretain existing or attract new quality service providers
to our platforms, our ability to retain, attract or engage
our users may be severely limited, which may have amaterial and adverse effect on our business, financial
condition and results of operations. In addition, we
share our user data with certain of these third-party
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Alibaba Group Holding Limited

service providers in our ecosystem in accordance with
our privacy policies, agreements and applicable laws.
These third-party service providers and ecosystem
participants may engage in a broad range of otherbusiness activities on and outside of our platforms,
and may have broad user bases and social influencethat create substantial business opportunities andeconomic returns to themselves and our business. Ifthey engage in activities that are negligent, fraudulent,
illegal or otherwise harm the trustworthiness andsecurity of our ecosystem, including, for example,
the leakage or negligent use of data, the handling,transport and delivery of prohibited or restricted
content or items, or if these participants cease theirbusiness relationship with us or fail to perform theircontractual obligations, fail to comply with any laws,
regulations or government requirements, cause any
property damage or personal injuries, or users areotherwise dissatisfied with their service quality on or
off our platforms, we could suffer loss of businessand revenue, reputational harm or regulatory
investigations or liabilities, even if these activities
are not related to, attributable to or caused by us, orwithin our control.
If logistics service providers used by our merchants
fail to provide reliable logistics services, or thelogistics data platform operated by Cainiao wereto malfunction, suffer an outage or otherwise
fail, our business and prospects, as well as ourfinancial condition and results of operations, may bematerially and adversely affected.
Our merchants use third-party logistics service
providers as well as Cainiao to fulfill and deliver theirorders. Cainiao cooperates with a number of thirdparty logistics service providers and leverages its
proprietary logistics services to help merchants on
our platforms fulfill orders and deliver their products
to consumers. We operate Cainiao’s logistics data
platform that links our information system andthose of logistics service providers. Because of ourplatform model, interruptions to or failures in logistics
services, or in Cainiao’s logistics data platform, could
prevent the timely or proper delivery of products
to consumers, which would negatively impact ourcompetitive position as well as harm the reputationof our ecosystem and the businesses we operate.
In addition, certain of our businesses, including
Lazada, operate and provide logistics services tomerchants within our ecosystem and may experienceinterruptions or failures to timely and properly
deliver products to consumers. These interruptions
or failures may be due to events that are beyond thecontrol of any of our companies, Cainiao or theseRisk Factors

logistics service providers, such as inclement weather,natural disasters including the effects of climatechange (such as drought, floods and increased storm
severity), the COVID-19 pandemic, other pandemics or
epidemics, armed conflicts, accidents, transportation
disruptions, including special or temporary restrictions
or closings of facilities or transportation networks
due to regulatory or political reasons, or labor unrestor shortages. These logistics services could also beaffected or interrupted by business disputes, industry
consolidation, insolvency or government shut-downs.
The merchants in our ecosystem may not be able tofind alternative logistics service providers to provide
logistics services in a timely and reliable manner, orat all. We do not have agreements with third-party
logistics service providers that require them to offer
services to our merchants. If the logistics data platform
operated by Cainiao were to fail for any reason, thelogistics service providers would be severely hinderedfrom connecting or unable to connect with ourmerchants, and their services and the functionalityof our ecosystem could be severely affected. If the
products sold by merchants in our ecosystem are notdelivered in proper condition, on a timely basis or atshipping rates that are commercially acceptable tomarketplace participants, our business and prospects,
as well as our financial condition and results ofoperations could be materially and adversely affected.
We depend on key management as well as
experienced and capable personnel generally, andany failure to attract, motivate and retain our staff
could severely hinder our ability to maintain andgrow our business.
Our future success is significantly dependent upon
the continued service of our key executives and otherkey employees, particularly in new business areas
we are expanding into, such as direct sales, local
consumer services and international commerce. If
we lose the services of any member of management
or key personnel, we may not be able to locate
suitable or qualified replacements, and may incur
additional expenses to recruit and train new staff.
For example, Jack Ma, our lead founder, who has
been crucial to the development of our vision, culture
and strategic direction, completed his term as adirector of our company in September 2020, and is
no longer a member of our board or management
team, although he continues to be a partner of the
Alibaba Partnership. This and similar retirements andsuccessions could result in disruptions, or perceived
disruptions, in our operations and the execution of ourstrategy.

As our business develops and evolves, it may become
difficult for us to continue to retain our employees. In
particular, our Reorganization may negatively affectour ability to retain key talents and result in reductionin our workforce. A number of our employees,
including many members of management, maychoose to pursue other opportunities outside of us. If
we are unable to motivate or retain these employees,
our business may be severely disrupted and ourprospects could suffer.
The size and scope of our ecosystem also require
us to hire and retain a wide range of capableand experienced personnel who can adapt to a
dynamic, competitive and challenging businessenvironment. We will need to continue to attract andretain experienced and capable personnel at alllevels, including members of management, as we
expand our business and operations. Our various
incentive initiatives may not be sufficient to retain
our management and employees. Competition for
talent in our industry is intense, and the availabilityof suitable and qualified candidates in China andelsewhere is limited. Competition for these individuals
could cause us to offer higher compensation andother benefits to attract and retain them. Even if wewere to offer higher compensation and other benefits,
there can be no assurance that these individuals will
choose to join or continue to work for us. Any failure to
attract or retain key management and personnel could
severely disrupt our business and growth.
Failure to deal effectively with fraudulent or illegal
activities by our employees, business partners orservice providers would harm our business.
Illegal, fraudulent, corrupt or collusive activities or
misconduct, whether actual or perceived, by our
employees, representatives, agents, business partners
or service providers could subject us to liability or
negative publicity, which could severely damage
our brand and reputation. We have a zero-tolerance
policy towards fraudulent and illegal conduct, andhave dismissed and assisted in the investigations,arrests and prosecutions of employees who engaged
such conduct. We have implemented and continue
to improve internal controls and policies with regard
to the review and approval of merchant accounts,
interactions with business partners and government
officials, account management, sales activities,
data security and other relevant matters. However,there can be no assurance that our controls andpolicies will prevent fraud, corrupt or illegal activity

Fiscal Year 2023 Annual Report237

Risk Factors

or misconduct by our employees, representatives,
agents, business partners or service providers orthat similar incidents will not occur in the future.
As we expand our operations in China and otherjurisdictions, in particular our businesses that provide
services to governments and public institutions, we aresubject to additional internal control and compliancerequirements relating to corrupt and other illegal
practices by our employees, representatives or agents,
and we may also be held liable for such misconduct
or other misconduct by our business partners andservice providers. Alleged or actual failure to comply
or ensure our employees, representatives, agents,
business partners and service providers to comply
with these requirements could subject us to regulatory
investigations and liabilities, which would materiallyand adversely affect our business operations,customer relationships, reputation and the trading
prices of our ADSs and/or Shares.
Failure to deal effectively with any fraud
perpetrated and fictitious transactions conductedin our ecosystem, and other sources of customer
dissatisfaction, could harm our business.
We face risks with respect to fraudulent activities
on our marketplaces and in connection withother businesses we operate, and we periodicallyreceive complaints from consumers who may nothave received the goods that they had purchased,complaints from merchants who have not received
payment for the goods that a consumer had
contracted to purchase, as well as other types ofactual and alleged fraudulent activities. See “Business
Overview — Customer Services and Protection” formore details about the measures we have adopted
against fraudulent activities. Although we have
implemented various measures to detect andreduce the occurrence of fraudulent activities on ourmarketplaces and in connection with other businesses
we operate, there can be no assurance that thesemeasures will be effective in combating fraudulent
transactions or improving overall satisfaction among
our consumers, merchants and other participants.
Additional measures that we take to address fraud
could also negatively affect the attractivenessof our marketplaces and other businesses we
operate to consumers or merchants. In addition,
merchants on our marketplaces contribute to a fundto provide consumer protection guarantees. If ourmerchants do not perform their obligations underthese programs, we may use funds that have been
deposited by merchants in a buyer protection fund tocompensate consumers. If the amounts in the fund238

Alibaba Group Holding Limited

are not sufficient, we may choose to compensate
consumers for losses, although currently we are notlegally obligated to do so. If, as a result of regulatory
developments, we are required to compensate
consumers, we would incur additional expenses.
Although we have recourse against our merchants forany amounts we incur, there can be no assurance that
we would be able to collect these amounts from ourmerchants.
In addition to fraudulent transactions with legitimate
consumers, merchants may also engage in fictitious
or “phantom” transactions with themselves orcollaborators in order to artificially inflate their own
ratings on our marketplaces, reputation and search
results rankings, an activity sometimes referred to as“brushing.” This activity may harm other merchants byenabling the perpetrating merchant to be favored overlegitimate merchants, and may harm consumers bydeceiving them into believing that a merchant is morereliable or trusted than the merchant actually is.
Government authorities, industry watchdog
organizations or other third parties may issue reports
or engage in other forms of public communications
concerning alleged fraudulent or deceptive conduct
on our platforms. Negative publicity and user
sentiment generated as a result of these reports
or allegations could severely diminish consumer
confidence in and use of our services, reduce ourability to attract new or retain current merchants,
consumers and other participants, damage our
reputation, result in shareholder or other litigation,
diminish the value of our brand, and materially andadversely affect our business, financial condition andresults of operations.
We may not be able to protect our intellectual
property rights.
We rely on a combination of trademark, patent,
copyright, trade secret protection and fair tradepractice laws in China and other jurisdictions, aswell as confidentiality procedures and contractual
provisions, to protect our intellectual property rights.
We also enter into confidentiality agreements with
our employees and any third parties who may accessour proprietary information, and we rigorously control
access to our proprietary technology and information.
In addition, as our business expands and we increase
our acquisition of and management of content, we
expect to incur greater costs to acquire, license andenforce our rights to content.

Risk Factors

Intellectual property protection may not be sufficientin the jurisdictions in which we operate. Confidentiality
agreements may be breached by counterparties,
and there may not be adequate remedies available
to us for these breaches. Accordingly, we may not beable to effectively protect our intellectual property
rights or to enforce our contractual rights in China or
elsewhere. In addition, policing any unauthorized useof our intellectual property is difficult, time-consuming
and costly and the steps we have taken may beinadequate to prevent the misappropriation of ourintellectual property. In the event that we resort tolitigation to enforce our intellectual property rights,
this litigation could result in substantial costs and adiversion of our managerial and financial resources.
There can be no assurance that we will prevail in any
litigation. In addition, our trade secrets may be leakedor otherwise become available to, or be independently
discovered by, our competitors. Any failure inprotecting or enforcing our intellectual property rights
could have a material adverse effect on our business,financial condition and results of operations.
Tightening of tax compliance efforts that affect ourmerchants could materially and adversely affectour business, financial condition and results ofoperations.
Tax legislation relating to the ecosystem is stilldeveloping. Governments, both in China and inother jurisdictions, may promulgate or strengthen
the implementation of tax regulations that impose
obligations on e-commerce companies, which could
increase the costs to consumers and merchants
and make our platforms less competitive in thesejurisdictions. Governments may require operators ofmarketplaces, such as us, to assist in the enforcementof tax registration requirements and the collection oftaxes with respect to the revenue or profit generated
by merchants from transactions conducted on
their platforms. We may also be requested by tax
authorities to supply information about our merchants,
such as transaction records and bank accountinformation, and assist in the enforcement of othertax regulations, including payment and withholding
obligations against our merchants. As a result of more
stringent tax compliance requirements and liabilities,
we may lose existing merchants and potential
merchants might not be willing to open storefronts on
our marketplaces, which could in turn negatively affectus. Stricter tax enforcement by tax authorities may also
reduce the activities by merchants on our platforms
and increase our liabilities and obligations.

Any heightened tax law enforcement against
participants in our ecosystem (including imposition ofreporting or withholding obligations on operators ofmarketplaces with respect to VAT of merchants andstricter tax enforcement against merchants generally)
could have a material adverse effect on our business,financial condition and results of operations.
We may increasingly become a target for public
scrutiny, including complaints to regulatory
agencies, negative media coverage, including
social media and malicious reports, and aggressive
marketing and communications strategies of ourcompetitors, all of which could severely damage our
reputation and brand and materially and adversely
affect our business and prospects.
We process an extremely large number of transactions
on a daily basis on our marketplaces and otherbusinesses we operate, and the high volume oftransactions taking place in our ecosystem andpublicity about our business creates the possibility ofheightened attention from the public, regulators, themedia and participants in our ecosystem. Changes inour services or policies have resulted and could resultin objections by members of the public, the media,
including social media, participants in our ecosystemor others. We may also become subject to public
scrutiny relating to our workplace environment, work
culture and other practices. From time to time, theseobjections, complaints and negative media coverage,
regardless of their veracity, may result in public
protests or negative publicity, which could result ingovernment inquiry or harm our reputation and brand,
and adversely affect the price of our ADSs, Shares
and/or other securities.
Corporate transactions we or our related parties
undertake, such as our Reorganization, ourtransactions with Ant Group, initiatives to grow ourdirect sales business and consumer services businessand expand into international markets, as well as
our various business practices may also subject us toincreased media exposure and public scrutiny. Therecan be no assurance that we would not become atarget for regulatory or public scrutiny in the future orthat scrutiny and public exposure would not severely
damage our reputation and brand as well as ourbusiness and prospects.
In addition, our directors, management andemployees have been, and continue to be, subject toscrutiny by the media and the public regarding theiractivities in and outside Alibaba Group, which may
result in negative, unverified, inaccurate or misleading
Fiscal Year 2023 Annual Report239

Risk Factors

information about them being reported by the press.
Negative publicity about our founders, directors,
management or employees, even if unrelated to the
products or services we offer, or even if untrue or
inaccurate, may harm our reputation and brand, andadversely affect the price of our ADSs, Shares and/or
other securities.
Furthermore, due to intense competition in our
industry, we have been and may be the target ofincomplete, inaccurate and false statements andcomplaints about us and our products and services
that could damage our reputation and brand andmaterially deter consumers and customers fromspending in our ecosystem. Competitors have used,
and may continue to use, methods such as lodging
complaints with regulators, initiating intellectual
property and competition claims (whether or not
meritorious) or frivolous and nuisance lawsuits, andother forms of attack litigation and “lawfare” that
attempt to harm our reputation and brand, hinder
our operations, force us to expend resources on
responding to and defending against these claims,
and otherwise gain a competitive advantage over us
by means of litigious and accusatory behavior. Ourability to respond on share price-sensitive information
to our competitors’ misleading marketing efforts,
including lawfare, may be limited during our selfimposed quiet periods around quarter ends consistent
with our internal policies or due to legal prohibitions
on permissible public communications by us duringcertain other periods.
Our results of operations fluctuate significantly fromquarter to quarter which may make it difficult topredict our future performance.
Our results of operations generally are characterized
by seasonal fluctuations due to various reasons,
including seasonal buying patterns and economic
cyclical changes, as well as promotions on ourmarketplaces. Historically, the fourth quarter of
each calendar year generally contributes the largest
portion of our annual revenues due to a number offactors, such as merchants allocating a significant
portion of their online marketing budgets to the fourthcalendar quarter, promotions, such as the 11.11
Global Shopping Festival, and the impact of seasonal
buying patterns in respect of certain categories suchas apparel. The first quarter of each calendar year
generally contributes the smallest portion of ourannual revenues, primarily due to a lower level ofallocation of marketing budgets by merchants at the
beginning of the calendar year and the Chinese New
Year holiday, during which time consumers generally
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Alibaba Group Holding Limited

spend less and businesses in China are generally
closed. We may also introduce new promotions orchange the timing of our promotions in ways thatfurther cause our quarterly results to fluctuate anddiffer from historical patterns. In addition, seasonal
weather patterns may affect the timing of buying
decisions. The performance of our equity method
investees, including Ant Group, may also result influctuations in our results of operations. Fluctuations
in our results of operations related to our investments
may also be because of accounting implicationof re-measurement of fair values of certain equity
investments and financial instruments, particularly
those that are publicly traded, share-based awards
and previously held equity interests upon step
acquisitions, as well as accounting implication arisingfrom loss of control of subsidiaries. Fluctuations in fairvalue and the magnitude of the related accounting
impact are unpredictable, and may significantly affectour results of operations.
Our results of operations will likely fluctuate due tothese and other factors, some of which are beyond
our control. In addition, our growth in the past may
have masked the seasonality that might otherwise beapparent in our results of operations. As the rate of
growth of our business declines in comparison to priorperiods, we expect that the seasonality in our businessmay become more pronounced. Moreover, as ourbusiness grows, our fixed costs and expenses may
continue to increase, which will result in operating
leverage in seasonally strong quarters but cansignificantly pressure operating margins in seasonally
weak quarters.
To the extent our results of operations do not meet the
expectations of public market analysts and investors in
the future, or if there are significant fluctuations in our
financial results, the market price of our ADSs, Shares
and/or other securities could fluctuate significantly.
Failure to comply with the terms of our indebtedness
or enforcement of our obligations as a guarantor ofother parties’ indebtedness could have an adverse
effect on our cash flow and liquidity.
As of March 31, 2023, we had US$14.95 billion inaggregate principal amount of unsecured senior notes
and a US$4.0 billion term loan outstanding. As of thedate of this annual report, we also have a US$6.5
billion revolving credit facility that we have not yet
drawn down. Under the terms of our indebtedness
and under any debt financing arrangement that we
may enter into in the future, we are, and may be in
the future, subject to covenants that could, among

Risk Factors

other things, restrict our business and operations. If
we breach any of these covenants, our lenders under
our credit facilities and holders of our unsecured
senior notes will be entitled to accelerate our debt
obligations. Any default under our credit facilities or
unsecured senior notes could require that we repay
these debts prior to maturity as well as limit our ability
to obtain additional financing, which in turn may
have a material adverse effect on our cash flow andliquidity. We also provide a guarantee for a term loan
facility of HK$7.7 billion (US$1.0 billion) in favor ofHong Kong Cingleot Investment Management Limited,
a company that is partially owned by us, in connection
with a logistics center development project at theHong Kong International Airport. As of the date ofthis annual report, this entity has drawn down HK$5.2
billion (US$0.7 billion) under this facility. In the eventof default by this entity under the loan facility, we may
be required to repay the full amount or a portion of
the outstanding loan and interests and undertake theborrower’s other obligations under the loan facility.
Enforcement against us under this guarantee andother similar arrangements we may enter into in the
future could materially and adversely affect our cash
flow and liquidity.
We may need additional capital but may not be able
to obtain it on favorable terms or at all.
We may require additional cash resources due tofuture growth and development of our business,
including any investments or acquisitions we may
decide to pursue, and for other general corporate
purposes. If our cash resources are insufficient
to satisfy our cash requirements, we may seek toissue additional equity or debt securities or obtainnew or expand credit facilities. Our ability to obtain
external financing in the future is subject to avariety of uncertainties. On January 5, 2023, the
NDRC promulgated the Administrative Measures for
Examination and Registration of Medium and Longterm Foreign Debts of Enterprises, or the Foreign Debts
Measures, which became effective on February 10,2023. According to the Foreign Debts Measures, PRC
enterprises and overseas enterprises or branches
controlled by them, including holding companies
with a VIE structure like us, are required to complete
application for registration of foreign debts with the
NDRC prior to the borrowing of foreign debts witha term of over one year. See “Business Overview— Regulation — Other Regulations — Regulation of
Foreign Investment.” If we fail to complete such
filing on a timely manner or at all, we may miss thebest market windows for debt issuances or loan
applications. In addition, according to the Overseas

Listing Trial Measures, we have to complete filingprocedures with the CSRC for any follow-on equity
offerings within three working days after conducting
such offerings, and comply with relevant reporting
requirements within three business days upon theoccurrence of any specified circumstances provided
under these measures. If we fail to complete such
filing and reporting on a timely manner or at all,
we may be subject to penalties, sanctions and fines
imposed by the CSRC and relevant departments of
the State Council of the PRC. See also “— Risks Related
to Doing Business in the People’s Republic of China —The approval, filing or other requirements of the CSRC
or other PRC regulatory authorities may be required
under PRC law in connection with any future issuanceof securities overseas, and, if required, we cannot
predict whether or for how long we or our subsidiaries
will be able to obtain such approval or complete such
filing.” In addition, incurring indebtedness would
subject us to increased debt service obligations andcould result in operating and financial covenants thatwould restrict our operations. Our ability to accessinternational capital and lending markets may be
restricted at a time when we would like, or need, todo so, especially during times of increased volatility
and reduced liquidity in global financial markets andstock markets, including due to policy changes andregulatory restrictions, which could limit our ability toraise funds. See “— Risks Related to Doing Businessin the People’s Republic of China — Our ADSs will bedelisted and our ADSs and shares prohibited fromtrading in the United States under the Holding Foreign
Companies Accountable Act, as amended, if the
PCAOB is unable to inspect or investigate completely
auditors located in China.” In addition, in response
to increasing inflation, the United States Federal
Reserve, along with central banks around the world,
has adopted tightened monetary policies throughraising interest rates or signaling expected interest
hikes, which could significantly increase borrowing
costs for companies. While we have been able tosecure financing at similar cost range, there can be
no assurance that financing will be available in atimely manner or in amounts or on terms acceptable
to us, or at all in the future. Any failure to raise needed
funds on terms favorable to us, or at all, could
severely restrict our liquidity as well as have a material
adverse effect on our business, financial condition
and results of operations. Moreover, any issuance ofequity or equity-linked securities, including issuanceof share-based awards under our equity incentive
plans, could result in significant dilution to our existing
shareholders.

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241

Risk Factors

We are subject to interest rate risk in connection with
our indebtedness.
We are exposed to interest rate risk related to ourindebtedness. The interest rates under certain of ouroffshore credit facilities are based on forward-looking
Secured Overnight Financing Rate, or SOFR. As a result,the interest expenses under our bank borrowings will
be subject to the potential impact of any fluctuation in
SOFR. Any increase in SOFR could raise our financing
costs, which could adversely affect our operating
results and financial condition, as well as our cash
flows. Our Renminbi-denominated bank borrowings
are also subject to interest rate risk. Although fromtime to time, we use hedging transactions in an effort
to reduce our exposure to interest rate risk, thesehedges may not be effective.
We may not have sufficient insurance coverage tocover our business risks.
We have obtained insurance to cover certain potential
risks and liabilities, such as property damage, businessinterruptions, public liabilities and product liability
insurance for certain businesses we operate. However,insurance companies in China and other jurisdictions
in which we operate may offer limited businessinsurance products or we may not be able to obtainsuch insurance on favorable terms. As a result, we donot maintain insurance for all types of risks we facein our operations in China and elsewhere, and ourcoverage may not be adequate to compensate for all
losses that may occur, particularly with respect to lossof business or operations. We do not maintain productliability insurance for products and services transacted
on our marketplaces or other businesses we operate,
and our rights of indemnity from the merchants in
our ecosystem may not adequately cover us for any
liability we may incur.
We also do not maintain key-man life insurance. Thispotentially insufficient coverage could expose us topotential claims and losses. Any business disruption,
litigation, regulatory action, outbreak of epidemic
disease or natural disaster could also expose us to
substantial costs and diversion of resources. Therecan be no assurance that our insurance coverage issufficient to prevent us from any loss or that we will beable to successfully claim our losses under our current
insurance policy on a timely basis, or at all. If we incur
any loss that is not covered by our insurance policies,or the compensated amount is significantly less than
our actual loss, our business, financial condition andresults of operations could be materially and adversely
affected.
242

Alibaba Group Holding Limited

Risks Related to Our Corporate Structure
The Alibaba Partnership limits the ability of ourshareholders to nominate and elect directors.
Our Articles of Association allow the Alibaba
Partnership to nominate or, in limited situations,
appoint a simple majority of our board of directors.
If at any time our board of directors consists of lessthan a simple majority of directors nominated or
appointed by the Alibaba Partnership for any reason,
including because a director previously nominatedby the Alibaba Partnership ceases to be a memberof our board of directors or because the Alibaba
Partnership had previously not exercised its right tonominate or appoint a simple majority of our board of
directors, the Alibaba Partnership will be entitled (in its
sole discretion) to nominate or appoint such numberof additional directors to the board as necessary toensure that the directors nominated or appointed by
the Alibaba Partnership comprise a simple majority ofour board of directors.
This governance structure limits the ability of ourshareholders to influence corporate matters,
including any matters determined at the board
level. In addition, the nomination right granted to
the Alibaba Partnership will remain in place for thelife of the Alibaba Partnership unless our Articles
are amended to provide otherwise by a vote ofshareholders representing at least 95% of sharesthat vote at a shareholders meeting. The nominationrights of the Alibaba Partnership will remain in placenotwithstanding a change of control or merger of ourcompany. These provisions could have the effect ofdelaying, preventing or deterring a change in control
and could limit the opportunity of our shareholders toreceive a premium for the ADSs and/or Shares theyhold, and could also materially decrease the price thatsome investors are willing to pay for our ADSs and/or
Shares.
The interests of the Alibaba Partnership may conflictwith the interests of our shareholders.
The nomination and appointment rights of the Alibaba
Partnership limit the ability of our shareholders to
influence corporate matters, including any mattersto be determined by our board of directors. Theinterests of the Alibaba Partnership may not coincidewith the interests of our shareholders, and the
Alibaba Partnership or its director nominees may
make decisions with which they disagree, including
decisions on important topics such as compensation,
management succession, acquisition strategy

Risk Factors

and our business and financial strategy. Since the
Alibaba Partnership will continue to be largely
comprised of members of our management team,
the Alibaba Partnership and its director nominees,consistent with our operating philosophy, may focus
on the long-term interests of participants in our
ecosystem at the expense of our short-term financial
results, which may differ from the expectations
and desires of shareholders unaffiliated with the
Alibaba Partnership. To the extent that the interestsof the Alibaba Partnership differ from the interestsof any of our shareholders, our shareholders may
be disadvantaged by any action that the Alibaba
Partnership may seek to pursue.
Our Articles of Association contain anti-takeoverprovisions that could adversely affect the rights ofholders of our ordinary shares and ADSs.
Our Articles of Association contain certain provisions
that could limit the ability of third parties to acquire
control of our company, including:

•

•

•

a provision that grants authority to our board of
directors to establish from time to time one ormore series of preferred shares without action by
our shareholders and to determine, with respect
to any series of preferred shares, the terms andrights of that series;
a provision that a business combination, if it
may adversely affect the right of the Alibaba
Partnership to nominate or appoint a simple
majority of our board of directors, including
the protective provisions for this right under
our Articles, shall be approved upon vote ofshareholders representing at least 95% of
the votes in person or by proxy present at ashareholders meeting; anda classified board with staggered terms thatwill prevent the replacement of a majority of
directors at one time.

These provisions could have the effect of delaying,
preventing or deterring a change in control and could
limit the opportunity for our shareholders to receive apremium for their ADSs and/or Shares, and could alsomaterially decrease the price that some investors arewilling to pay for our ADSs and/or Shares.

Our ADSs and ordinary shares are equity securities
of a Cayman Islands holding company rather thanequity securities of our subsidiaries and the VIEs thathave substantive business operations in China.
We are incorporated in the Cayman Islands with nobusiness operations. We conduct substantially all of
our operations in China through our subsidiaries andthe VIEs. We do not and are not, and holders of our
ADSs and ordinary shares do not and are not, legallypermitted to have any, or more than the permitted
percentage of, equity interest in the VIEs due tocurrent PRC laws and regulations restricting foreign
ownership and investment. As a result, we provide
services that may be subject to such restrictionsin the PRC through the VIEs, and we operate ourbusinesses in the PRC through certain contractual
arrangements with the VIEs. For a summary of suchcontractual arrangements, see “Business Overview —Organizational Structure — Contractual Arrangements
among Our Subsidiaries, Variable Interest Entities andthe Variable Interest Entity Equity Holders.” Our ADSs
and ordinary shares are equity securities of a Cayman
Islands holding company rather than equity securitiesof our subsidiaries and the VIEs.
If the PRC government deems that the contractual
arrangements in relation to the VIEs do not comply
with PRC regulations on foreign investment, or if
these regulations or the interpretation of existing
regulations change in the future, we could be subject
to penalties, or be forced to relinquish our interests inthe operations of the VIEs, which would materiallyand adversely affect our business, financial results,
trading prices of our ADSs, Shares and/or othersecurities.
Due to legal restrictions on foreign ownership andinvestment in, among other areas, value-added
telecommunication services, which include theoperations of ICPs, we, similar to all other entities withforeign-incorporated holding company structures
operating in our industry in China, operate our Internet
businesses and other business in China, includingInternet information services, which are critical to ourbusiness, through a number of PRC incorporated VIEs.
See “Business Overview — Regulation — Regulation of
Telecommunications and Internet Information Services— Regulation of Telecommunications Services” andFiscal Year 2023 Annual Report

243

Risk Factors“Business Overview — Regulation — Other Regulations— Regulation of Foreign Investment.”
We and, through us, our shareholders do not own
any equity interests in these VIEs. The equity interestsof the VIEs are generally held by PRC limited liability
companies, which in turn are indirectly held (through alayer of PRC limited partnerships) by selected membersof the Alibaba Partnership or our management who
are PRC citizens. Please also see “Business Overview —Organizational Structure.” Contractual arrangements
between us and the VIEs and their equity holders giveus effective control over each of the VIEs and enable
us to obtain substantially all of the economic benefits
arising from the VIEs as well as to consolidate thefinancial results of the VIEs in our results of operations.
Although we believe the structure we have adopted isconsistent with longstanding industry practice, the PRC
government may not agree that these arrangementscomply with PRC licensing, registration or otherregulatory requirements, with existing policies or withrequirements or policies that may be adopted in the
future.
In the opinion of Fangda Partners, our PRC counsel,
the ownership structures of our representative VIEs
and the corresponding subsidiaries in China do not
and will not violate any applicable PRC law, regulation
or rule currently in effect; and the contractual
arrangements between the representative VIEs,the corresponding subsidiaries and the respective
equity holders of the representative VIEs governedby PRC law are valid, binding and enforceable inaccordance with their terms and applicable PRC laws
and regulations currently in effect and will not violate
any applicable PRC law, rule or regulation currently
in effect. However, Fangda Partners has also advised
us that there are substantial uncertainties regarding
the interpretation and application of current PRC laws,
rules and regulations. Accordingly, the possibility that
the PRC regulatory authorities and PRC courts may inthe future take a view that is contrary to the opinion of
our PRC legal counsel cannot be ruled out. In addition,such laws, rules and regulations could change or beinterpreted differently in the future.
Contractual arrangements in relation to VIEs havenot been tested in a court of law, and it is uncertain
whether any new PRC laws, rules or regulations
relating to VIE structures will be adopted or if
adopted, what they would provide. Please also see“— Substantial uncertainties exist with respect to theinterpretation and implementation of the PRC Foreign
Investment Law and its implementing rules and other244

Alibaba Group Holding Limited

regulations and how they may impact the viability of
our current corporate structure, business, financial
condition and results of operations.”
If we or any of the VIEs are found to be in violation ofany existing or future PRC laws, rules or regulations, orfail to obtain or maintain any of the required permits
or approvals, we could be subject to severe penalties.
The relevant PRC regulatory authorities would havebroad discretion to take action in dealing with these
violations or failures, including revoking the businessand operating licenses of our PRC subsidiaries orthe VIEs, requiring us to discontinue or restrict ouroperations, restricting our right to collect revenue,
blocking one or more of our websites, requiring us torestructure our operations or taking other regulatory or
enforcement actions against us. The imposition of anyof these measures could result in a material adverse
effect on our ability to conduct all or any portion of
our business operations. In addition, it is unclear
what impact the PRC government actions would haveon us and on our ability to consolidate the financial
results of any of the VIEs in our consolidated financial
statements, if the PRC government authorities were tofind our legal structure and contractual arrangements
to be in violation of PRC laws, rules and regulations.
If the imposition of any of these government actions
causes us to lose our right to direct the activities ofany of the VIEs or otherwise separate from any ofthese entities and if we are not able to restructure ourownership structure and operations in a satisfactorymanner, we would no longer be able to consolidate
the financial results of the VIEs in our consolidated
financial statements. Any of these events would havea material adverse effect on our business, financial
condition and results of operations, as well as
cause the trading prices of our ADSs and Shares tosignificantly decline or become worthless.
Substantial uncertainties exist with respect to theinterpretation and implementation of the PRC
Foreign Investment Law and its implementing rules
and other regulations and how they may impact theviability of our current corporate structure, business,financial condition and results of operations.
The VIE structure has been adopted by many Chinabased companies, including us and certain of ourequity method investees, to obtain licenses andpermits necessary to operate in industries thatcurrently are subject to restrictions on or prohibitions
for foreign investment in China. The MOFCOM
published a discussion draft of the proposed Foreign
Investment Law in January 2015, or the 2015 Draft PRC
Foreign Investment Law, according to which, VIEs that

Risk Factors

are controlled via contractual arrangements would be
deemed as foreign-invested enterprises, if they are
ultimately “controlled” by foreign investors. In March
2019, the National People’s Congress promulgatedthe 2019 PRC Foreign Investment Law. In December
2019, the State Council of the PRC promulgated the
Implementing Rules of the Foreign Investment Law of
the People’s Republic of China, or the Implementing
Rules, to further clarify and elaborate upon relevant
provisions of the 2019 PRC Foreign Investment
Law. The 2019 PRC Foreign Investment Law andthe Implementing Rules both became effective on
January 1, 2020 and replaced major former laws
and regulations governing foreign investment in the
PRC. See “Business Overview — Regulation — Other
Regulations — Regulation of Foreign Investment.” As
the 2019 PRC Foreign Investment Law has a catch-all
provision that broadly defines “foreign investments”
as those made by foreign investors in China throughmethods as specified in laws, administrative
regulations, or as stipulated by the State Councilof the PRC, relevant government authorities may
promulgate additional rules and regulations as to theinterpretation and implementation of the 2019 PRC
Foreign Investment Law. In particular, there can be noassurance that the concept of “control” as reflected in
the 2015 Draft PRC Foreign Investment Law, will not be
reintroduced, or that the VIE structure adopted by us
will not be deemed as a method of foreign investment
by other laws, regulations and rules.
Furthermore, on December 19, 2020, the NDRC and
MOFCOM promulgated the Foreign Investment Security
Review Measures, which took effect on January 18,
2021. Under the Foreign Investment Security Review
Measures, investments in military, national defenserelated areas or in locations in proximity to militaryfacilities, or investments that would result in acquiring
the actual control of assets in certain key sectors, suchas critical agricultural products, energy and resources,
equipment manufacturing, infrastructure, transport,
cultural products and services, IT, Internet products
and services, financial services and technology
sectors, are required to be approved by designatedgovernmental authorities in advance. Although theterm “investment through other means” is not clearly
defined under the Foreign Investment Security Review
Measures, we cannot rule out the possibility that
control through contractual arrangement may be
regarded as a form of actual control and therefore
require approval from the competent governmental
authority. There are great uncertainties with respect tothe interpretation and implementation of the Foreign
Investment Security Review Measures. Accordingly,

there are substantial uncertainties as to whether
the VIE structure adopted by us may be deemed asa method of foreign investment in the future. If the
VIE structure adopted by us were to be deemed as amethod of foreign investment under any future laws,
regulations and rules, and if any of our business
operations were to fall under the “Negative List” forforeign investment, we would need to take further
actions in order to comply with these laws, regulations
and rules, which may materially and adversely affectour current corporate structure, business, financial
condition and results of operations.
Our contractual arrangements may not be aseffective in providing control over the VIEs as directownership.
We rely on contractual arrangements with the
VIEs to operate part of our Internet businesses
in China and other businesses in which foreign
investment is restricted or prohibited. We and,through us, our shareholders do not own any equity
interests in these VIEs. For a description of thesecontractual arrangements, see “Business Overview —Organizational Structure — Contractual Arrangements
among Our Subsidiaries, Variable Interest Entities
and the Variable Interest Entity Equity Holders.” These
contractual arrangements may not be as effective as
direct ownership in providing us with control over the
VIEs.
If we had direct ownership of the VIEs, we would
be able to exercise our rights as an equity holder
directly to effect changes in the boards of directorsof those entities, which could effect changes at
the management and operational level. Under ourcontractual arrangements, we may not be able todirectly change the members of the boards of directorsof these entities and would have to rely on the VIEs
and the VIE equity holders to perform their obligations
in order to exercise our control over the VIEs. The VIE
equity holders may have conflicts of interest with us
or our shareholders, and they may not act in our bestinterests or may not perform their obligations underthese contracts. Pursuant to the call options, we may
replace the equity holders of the VIEs at any time
pursuant to the contractual arrangements. However, if
any equity holder is uncooperative in the replacementof the equity holders or there is any dispute relating
to these contracts that remains unresolved, we will
have to enforce our rights under the contractual
arrangements through the operations of PRC law andarbitral or judicial agencies, which may be costly andtime-consuming and will be subject to uncertainties in
the PRC legal system. See “— Any failure by the VIEs or
Fiscal Year 2023 Annual Report245

Risk Factors

their equity holders to perform their obligations under
the contractual arrangements would have a material
adverse effect on our business, financial condition andresults of operations.” Consequently, the contractual
arrangements may not be as effective in ensuring
our control over the relevant portion of our business
operations as direct ownership.
Any failure by the VIEs or their equity holders to
perform their obligations under the contractual
arrangements would have a material adverse effecton our business, financial condition and results ofoperations.
If the VIEs or their equity holders fail to performtheir respective obligations under the contractual
arrangements, we may have to incur substantial
costs and expend additional resources to enforce
the arrangements. Although we have entered into
call option agreements in relation to each VIE, which
provide that we may exercise an option to acquire,or nominate a person to acquire, ownership of theequity in that entity or, in some cases, its assets, tothe extent permitted by applicable PRC laws, rules
and regulations, the exercise of these call options issubject to the review and approval of the relevant PRC
governmental authorities. We have also entered into
equity pledge agreements with the equity holders withrespect to each VIE, including the general partners
and limited partners of the PRC limited partnershipsthat indirectly hold the VIEs under the Enhanced
VIE Structure, to secure certain obligations of the
VIE or its equity holders to us under the contractual
arrangements. In addition, the enforcement of these
agreements through arbitral or judicial agencies,
if any, may be costly and time-consuming and will
be subject to uncertainties in the PRC legal system.
Moreover, our remedies under the equity pledge
agreements are primarily intended to help us collectdebts owed to us by the VIEs or the VIE equity holders
under the contractual arrangements and may not help
us in acquiring the assets or equity of the VIEs.
In addition, with respect to the VIEs that are directly
owned by individuals, although the terms of thecontractual arrangements provide that they will bebinding on the successors of the VIE equity holders, as
those successors are not a party to the agreements,
it is uncertain whether the successors in case of thedeath, bankruptcy or divorce of a VIE equity holder will
be subject to or will be willing to honor the obligationsof the VIE equity holder under the contractual
arrangements. If the relevant VIE or its equity holder(or its successor), as applicable, fails to transfer theshares of the VIE according to the respective call
246

Alibaba Group Holding Limited

option agreement or equity pledge agreement,
we would need to enforce our rights under the call
option agreement or equity pledge agreement, which
may be costly and time-consuming and may not be
successful.
The contractual arrangements are governed by PRC
law and provide for the resolution of disputes througharbitration or court proceedings in China. Accordingly,
these contracts would be interpreted in accordancewith PRC law and any disputes would be resolved inaccordance with PRC legal procedures. Uncertainties
regarding the interpretation and enforcement of
the relevant PRC laws and regulations could limit
our ability to enforce the contractual arrangements.
Under PRC law, if the losing parties fail to carry out
the arbitration awards or court judgments within aprescribed time limit, the prevailing parties may only
enforce the arbitration awards or court judgments in
PRC courts, which would require additional expenseand delay. In the event we are unable to enforce thecontractual arrangements, we may not be able toexert effective control over the VIEs, and our ability
to conduct our business, as well as our financial
condition and results of operations, may be materiallyand adversely affected.
We may lose the ability to use, or otherwise benefit
from, the licenses, approvals and assets held by
the VIEs, which could severely disrupt our business,
render us unable to conduct some or all of ourbusiness operations and constrain our growth.
Although the significant majority of our revenues
are captured through, and the significant majority of
our operational assets are held, by our subsidiaries,
the VIEs hold licenses and approvals and assets forregulated activities that are necessary for our business
operations, as well as equity interests in a series ofour portfolio companies, to which foreign investments
are typically restricted or prohibited under applicable
PRC law. The contractual arrangements contain terms
that specifically obligate VIE equity holders to ensure
the valid existence of the VIEs and restrict the disposalof material assets of the VIEs. However, in the event
the VIE equity holders breach the terms of thesecontractual arrangements and voluntarily liquidate
the VIEs, or any of the VIEs declares bankruptcy
and all or part of its assets become subject to liens
or rights of third-party creditors, or are otherwise
disposed of without our consent, we may be unable
to conduct some or all of our business operations orotherwise benefit from the assets held by the VIEs,
which could have a material adverse effect on ourbusiness, financial condition and results of operations.

Risk Factors

Furthermore, if any of the VIEs undergoes a voluntary
or involuntary liquidation proceeding, its equity holder
or unrelated third-party creditors may claim rights tosome or all of the assets of the VIE, thereby hindering
our ability to operate our business as well as constrain
our growth.
The equity holders, directors and executive officers of
the VIEs may have potential conflicts of interest withus.
PRC laws provide that a director and an executive
officer owes a fiduciary duty to the company he or
she directs or manages. On one hand, the directors
and executive officers of the VIEs, including therelevant members of the Alibaba Partnership or ourmanagement, must act in good faith and in the bestinterests of the VIEs and must not use their respective
positions for personal gain. On the other hand, as adirector or management of our company, the relevant
individuals have a duty of care and loyalty to us
and to our shareholders as a whole under Cayman
Islands law. We control the VIEs through contractual
arrangements and the business and operations of
the VIEs are closely integrated with the business andoperations of our subsidiaries. Nonetheless, conflictsof interests for these individuals may arise due to dual
roles both as equity holders, directors and executive
officers of the VIEs and as our directors or employees.
There can be no assurance that these individual
shareholders of the VIEs will always act in our bestinterests should any conflicts of interest arise, or thatany conflicts of interest will always be resolved in
our favor. There also can be no assurance that these
individuals will ensure that the VIEs will not breachthe existing contractual arrangements. If we cannot
resolve any of these conflicts of interest or any related
disputes, we would have to rely on legal proceedings
to resolve these disputes and/or take enforcement
action under the contractual arrangements. There issubstantial uncertainty as to the outcome of any ofthese legal proceedings. See “— Any failure by the VIEs
or their equity holders to perform their obligations
under the contractual arrangements would have amaterial adverse effect on our business, financial
condition and results of operations.”
The contractual arrangements with the VIEs may besubject to scrutiny by the PRC tax authorities. Any
pricing adjustment of a related party transaction
could lead to additional taxes, and therefore
substantially reduce our consolidated net income
and the value of your investment.

The tax regime and practices in China are evolving
and PRC tax laws may be interpreted in significantly
different ways. The PRC tax authorities may assertthat we or our subsidiaries or the VIEs or their equity
holders are required to pay additional taxes onprevious or future revenue or income. In particular,
under applicable PRC laws, rules and regulations,arrangements and transactions among relatedparties, such as the contractual arrangements with
the VIEs, may be subject to audit or challenge by the
PRC tax authorities. If the PRC tax authorities determinethat any contractual arrangements were not enteredinto on an arm’s length basis and therefore constitutefavorable transfer pricing, the PRC tax liabilities of therelevant subsidiaries and/or VIEs and/or VIE equity
holders could be increased, which could increase
our overall tax liabilities. In addition, the PRC tax
authorities may impose late payment interest. Our net
income may be materially reduced if our tax liabilities
increase.

Risks Related to Doing Business in the
People’s Republic of China
Changes and developments in the political andeconomic policies of the PRC government may
materially and adversely affect our business,financial condition and results of operations andmay result in our inability to sustain our growth andexpansion strategies.
Although we have operating subsidiaries locatedin various countries and regions, our operations in
China currently contribute the large majority of ourrevenue. The PRC government has significant oversightand discretion over the conduct of our business,and may intervene in or influence our operations
through adopting and enforcing rules and regulatory
requirements. Accordingly, our financial condition
and results of operations are affected to a significant
extent by economic, political and legal developmentsin the PRC.
The PRC economy differs from the economies of mostdeveloped countries in many respects, including
the level of development, growth rate, extent ofgovernment involvement, control of foreign exchange
and allocation of resources. A substantial portionof productive assets in China is still managed by
the government. In addition, the PRC government
regulates industry development by imposing industrial
policies. The PRC government also plays a significant
role in China’s economic growth by allocating
resources, controlling payment of foreign currency-

Fiscal Year 2023 Annual Report247

Risk Factors

denominated obligations, setting monetary policy andregulating financial services and institutions.
While the PRC economy has experienced significant
growth in the past four decades, growth has been
uneven, both geographically and among various
sectors of the economy. The PRC government has
implemented various measures to encourage
economic growth and guide the allocation of
resources. Some of these measures may benefit theoverall PRC economy, but may also have a negative
effect on us. Our financial condition and results ofoperations could be materially and adversely affectedby government control over capital investments orchanges in tax regulations that are applicable to us.
In addition, the PRC government has implemented
in the past certain measures, including interest rateincreases, to manage the pace of economic growthand prevent the economy from overheating. Any
prolonged slowdown in the Chinese economy could
lead to a reduction in demand for our services andconsequently have a material adverse effect on
our businesses, financial condition and results ofoperations.
There are uncertainties regarding the interpretationand enforcement of PRC laws, rules and regulations,and changes in policies, laws, rules and regulationsin the PRC could adversely affect us.
Most of our operations are conducted in the PRC, andare governed by PRC laws, rules and regulations.
Our PRC subsidiaries are subject to laws, rules andregulations applicable to foreign investment in China.
The PRC legal system is a civil law system based on
written statutes. Unlike the common law system, priorcourt decisions may be cited for reference but have
limited precedential value.
China has not developed a fully integrated legal
system, and enacted laws, rules and regulations
may not sufficiently cover all aspects of economic
activities in China or may be subject to a significant
degree of interpretation by PRC regulatory agencies
and courts. In particular, because these laws, rules
and regulations are relatively new and quickly
evolving, and because of the limited number ofpublished decisions and the non-precedential natureof these decisions, and because the laws, rules andregulations often give the relevant regulator certain
discretion in how to enforce them, the interpretationand enforcement of these laws, rules and regulations
involve uncertainties and can be inconsistent andunpredictable. Therefore, it is possible that our existing
operations may be found not to be in full compliance
248

Alibaba Group Holding Limitedwith relevant laws and regulations in the future. In
addition, the PRC legal system is based in part on
government policies and internal rules, some of which
are not published on a timely basis or at all, and which
may have a retroactive effect. As a result, we may not
be aware of our violation of these policies and rules
until after the occurrence of the violation.
Any administrative and court proceedings in China
may be protracted, resulting in substantial costs anddiversion of resources and management attention.
Since PRC administrative and court authorities havecertain discretion in interpreting and implementing
statutory and contractual terms, it may be moredifficult to predict the outcome of administrative andcourt proceedings and the level of legal protection
than in more developed legal systems. These
uncertainties may impede our ability to enforce thecontracts we have entered into and could materiallyand adversely affect our business, financial condition
and results of operations.
In addition, the PRC government has significant
influence over business activities and, to further
regulatory and societal goals, has become more
involved in regulating China-based companies,
including us. For example, in recent years the PRC
government, has enhanced regulation in areas
such as anti-monopoly, anti-unfair competition,
cybersecurity and data privacy. In addition, the PRC
government recently published new policies thatsignificantly affected the Internet industries andcertain other industries, including industries that we
operate in, and in the future it may implement otherpolicies or regulations that may have a significant
adverse impact on us or industries that we operatein. Moreover, the PRC government has recently
strengthened the administration over illegal securities
activities and the supervision on overseas listingsby China-based companies and issued new filingobligations and approval requirements in connection
with offshore offerings, which will increase ourregulatory compliance costs and may limit or hinder
our ability and the ability of our subsidiaries to offer
or continue to offer securities to investors and cause
the value of our securities, including our ADSs, tosignificantly decline or become worthless. See “— Risks
Related to Doing Business in the People’s Republic ofChina — The approval, filing or other requirements of
the CSRC or other PRC regulatory authorities may berequired under PRC law in connection with any futureissuance of securities overseas, and, if required, wecannot predict whether or for how long we or our
subsidiaries will be able to obtain such approval

Risk Factors

or complete such filing.” The Chinese government
may further promulgate relevant laws, rules andregulations that may impose additional and significant
obligations and liabilities on Chinese companies.
These laws and regulations can be complex andstringent, and many are subject to change anduncertain interpretation, which could result in claims,
change to our data and other business practices,
regulatory investigations, penalties, increased cost ofoperations, or declines in user growth or engagement,or otherwise affect our business. It is uncertain
whether or how these new laws, rules and regulations
and the interpretation and implementation thereof
may affect us, but among other things, our ability
and the ability of our subsidiaries to obtain externalfinancing through the issuance of equity securities
overseas could be negatively affected and as a result,
the trading prices of our ADSs and Shares to could
significantly decline or become worthless.
The PCAOB had historically been unable to inspect
our auditor in relation to their audit work performed
for our financial statements, and the inability of the
PCAOB to conduct inspections over our auditor in the
future may deprive our investors of the benefits ofsuch inspections.
PricewaterhouseCoopers, our auditor, is required
under U.S. law to undergo regular inspections by
the PCAOB. Prior to 2022, the PCAOB was unable toconduct inspections of the audit work and practices of
PCAOB-registered audit firms within the PRC on a basis
comparable to other non-U.S. jurisdictions without
approval from the Chinese government authorities,
and as we have substantial operations in the PRC, the
PCAOB was unable to fully inspect our auditor and its
audit work. As a result, investors of our ADSs, Shares
and/or other securities did not have the benefit ofsuch inspections. Inspections of auditors conductedby the PCAOB outside of China have at times identified
deficiencies in those auditors’ audit procedures andquality control procedures, which may be addressedas part of the inspection process to improve future
audit quality. The inability of the PCAOB to conduct
full inspections of auditors in China in the past madeit more difficult for it to evaluate the effectivenessof our auditor’s audit procedures or quality control
procedures as compared to auditors outside of Chinathat are subject to PCAOB inspections, which could
cause investors of our ADSs, Shares and/or othersecurities to lose confidence in the audit proceduresof our auditor and our reported financial informationand the quality of our financial statements. On
December 15, 2022, the PCAOB announced that it
was able to secure complete access to inspect andinvestigate PCAOB-registered public accounting firms
headquartered in Chinese mainland and Hong Kongin 2022. However, it is uncertain whether the PCAOB
will continue to be able to satisfactorily conduct
inspections of PCAOB-registered public accounting
firms headquartered in Chinese mainland and Hong
Kong in 2023 and beyond, which ability depends ona number of factors beyond our, and our auditor’s,control, including the uncertainties surrounding therelationship between China and the United States.
Our ADSs will be delisted and our ADSs and sharesprohibited from trading in the United States underthe Holding Foreign Companies Accountable Act,as amended, if the PCAOB is unable to inspect orinvestigate completely auditors located in China.
In recent years, U.S. regulators have continued toexpress concerns about challenges in their oversightof financial statement audits of U.S.-listed companies
with significant operations in China. More recently, as
part of increased regulatory focus in the United Stateson access to audit information, the United Statesoriginally enacted the HFCA Act in December 2020. The
HFCA Act includes requirements for the SEC to identify
issuers whose audit reports are prepared by auditorsthat the PCAOB is unable to inspect or investigate
completely because of a restriction imposed by anon-U.S. authority in the auditor’s local jurisdiction.
The HFCA Act also requires public companies on
this SEC list to certify that they are not owned orcontrolled by a foreign government and make certain
additional disclosures in their SEC filings. In addition,
if the auditor of a U.S. listed company is not subject
to PCAOB inspections for three consecutive “noninspection” years after the law becomes effective,
the SEC is required to prohibit the securities of such
issuer from being traded on a U.S. national securities
exchange, such as the NYSE, or in U.S. over-thecounter markets. On December 29, 2022, the UnitedStates enacted the Consolidated Appropriations Act,
2023, which amended the HFCA Act to require the
SEC to prohibit an issuer’s securities from trading in
the United States if its auditor is not subject to PCAOB
inspections for two consecutive “non-inspection” years
instead of three. On December 16, 2021, the PCAOB
issued its report notifying the SEC of its determinationthat it was unable to inspect or investigate completely
accounting firms headquartered in Chinese mainlandor Hong Kong. Subsequently on August 22, 2022, theSEC added us to its conclusive list of issuers identified
under the HFCA Act, or Commission-Identified Issuers,
following the filing of our annual report on Form
20-F with the SEC on July 26, 2022, indicating that it
has determined that Alibaba Group filed an annual
Fiscal Year 2023 Annual Report249

Risk Factors

report with an audit report by a registered public
accounting firm, whose audit work papers cannot
be fully inspected or investigated by the PCAOB for
the fiscal year ended March 31, 2022. With the above
identification, 2022 became our first “non-inspection”
year. As such, in this annual report, we are required
to satisfy additional disclosure requirements forCommission-Identified Issuers that are also foreignissuers. See “Business Overview — Organizational
Structure — Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections.”
On August 26, 2022, the PCAOB signed a Statementof Protocol with the CSRC and the MOF, taking thefirst step towards opening access for the PCAOB to
inspect and investigate registered public accounting
firms headquartered in Chinese mainland and HongKong. Following that, on December 15, 2022, the
PCAOB announced that it was able to secure complete
access to inspect and investigate PCAOB-registeredpublic accounting firms headquartered in Chinese
mainland and Hong Kong in 2022. The PCAOB vacatedits previous 2021 determinations that the PCAOB
was unable to inspect or investigate completely
registered public accounting firms headquartered in
Chinese mainland and Hong Kong. For this reason,
we do not expect to be identified as a CommissionIdentified Issuer following the filing of this annual
report. However, it is uncertain whether the PCAOB
will continue to be able to satisfactorily conduct
inspections of PCAOB-registered public accounting
firms headquartered in Chinese mainland andHong Kong in the future, which ability depends ona number of factors beyond our, and our auditor’s,control, including the uncertainties surrounding therelationship between China and the United States.
If in the future the PCAOB finds that it is unable tocompletely inspect and investigate registered public
accounting firms headquartered in Chinese mainlandor Hong Kong, the PCAOB may act immediately
to consider the need to issue new determinations
consistent with the HFCA Act, and we may be
identified as a Commission-Identified Issuer again.
In accordance with the HFCA Act as amended by theConsolidated Appropriations Act, 2023, if the PCAOB is
unable to continue to inspect or investigate completely
registered public accounting firms headquarteredin Chinese mainland or Hong Kong, including our
independent registered public accounting firm, for
two consecutive years, our securities (including our
ADSs and Shares) would be delisted from the NYSE
and will be prohibited from trading on other U.S. stock
exchanges and “over-the-counter” in the U.S. Delistingof our ADSs would force our U.S.-based shareholders
to sell their ADSs or convert them into Shares listed
250

Alibaba Group Holding Limitedin Hong Kong. Although we are listed in Hong Kong,
investors may face difficulties in migrating theirunderlying ordinary shares to Hong Kong, or may haveto incur increased costs or suffer losses in order to doso. The risk and uncertainty associated with delistingof our securities or other anticipated negative impactsof the HFCA Act upon and investor sentiment towards
China-based companies listed in the United States
would have a negative impact on the price of our ADSs
and Shares, and may significantly affect our ability toraise capital in the future, which would have a material
adverse impact on our business, financial condition,and prospects.
PRC regulations relating to investments in offshore
companies by PRC residents may subject our PRCresident beneficial owners or our PRC subsidiaries
to liability or penalties, limit our ability to inject
capital into our PRC subsidiaries or limit our PRC
subsidiaries’ ability to increase their registeredcapital or distribute profits.
SAFE promulgated the SAFE Circular 37 on July 4, 2014,
which replaced the former circular commonly known
as “SAFE Circular 75” promulgated by SAFE on October
21, 2005. SAFE Circular 37 and its implementing
rules require PRC residents to register with banks
designated by local branches of SAFE in connection
with their direct establishment or indirect control of an
offshore entity, for the purpose of overseas investment
and financing, with the PRC residents’ legally owned
assets or equity interests in domestic enterprises oroffshore assets or interests, referred to in SAFE Circular
37 as a “special purpose vehicle.”
We notified substantial beneficial owners of ordinary
shares who we know are PRC residents of theirfiling obligation, and pursuant to the former SAFE
Circular 75, we filed the above-mentioned foreignexchange registration on behalf of certain employee
shareholders who we know are PRC residents.
However, we may not be aware of the identities ofall of our beneficial owners who are PRC residents.
We do not have control over our beneficial owners,
and there can be no assurance that all of our PRCresident beneficial owners will comply with relevant
SAFE regulations. The failure of our beneficial owners
who are PRC residents to register or amend their
SAFE registrations in a timely manner or the failure of
future beneficial owners of our company who are PRC
residents to comply with the registration procedures
set forth in SAFE Circular 37 and subsequent
implementation rules, may subject the beneficial
owners or our PRC subsidiaries to fines and legal
sanctions.

Risk Factors

Furthermore, since it is unclear how those SAFE
regulations, and any future regulation concerning
offshore or cross-border transactions, will be further
interpreted, amended and implemented by therelevant PRC government authorities, we cannot
predict how these regulations will affect our business
operations or future strategy. Failure to register orcomply with relevant requirements may also limit
our ability to contribute additional capital to our PRC
subsidiaries and limit our PRC subsidiaries’ ability
to distribute dividends to our company. These risks
may have a material adverse effect on our business,financial condition and results of operations.
Any failure to comply with PRC regulations
regarding our employee equity incentive plans may
subject the PRC participants in the plans, us or ouroverseas and PRC subsidiaries to fines and otherlegal or administrative sanctions.
Pursuant to SAFE Circular 37, PRC residents who
participate in share incentive plans in overseas nonpublicly-listed companies may, prior to the exercise
of an option, submit applications to SAFE or its local
branches for the foreign exchange registration withrespect to offshore special purpose companies. In themeantime, our directors, executive officers and other
employees who are PRC citizens or who are non-PRC
citizens residing in the PRC for a continuous period of
not less than one year, subject to limited exceptions,and whom we or our overseas listed subsidiaries
have granted RSUs, options or restricted shares, mayfollow the Notice on Issues Concerning the Foreign
Exchange Administration for Domestic Individuals
Participating in Stock Incentive Plan of Overseas
Publicly Listed Company, issued by SAFE in February
2012, to apply for the foreign exchange registration.
According to those regulations, employees, directors
and other management members participating inany stock incentive plan of an overseas publicly listedcompany who are PRC citizens or who are non-PRC
citizens residing in China for a continuous period of
not less than one year, subject to limited exceptions,are required to register with SAFE through a domestic
qualified agent, which may be a PRC subsidiary of theoverseas listed company, and complete certain otherprocedures. Failure to complete the SAFE registrations
may subject them to fines and legal sanctions andmay also limit their ability to make payment under the
relevant equity incentive plans or receive dividends orsales proceeds related thereto in foreign currencies,
or may limit our ability to contribute additional capital
into our domestic subsidiaries in China and limit ourdomestic subsidiaries’ ability to distribute dividends

to us. We also face regulatory uncertainties under PRC
law that could restrict our ability or the ability of ouroverseas listed subsidiaries to adopt additional equity
incentive plans for our directors and employees who
are PRC citizens or who are non-PRC citizens residingin the PRC for a continuous period of not less than one
year, subject to limited exceptions.
In addition, the STA has issued circulars concerning
employee RSUs, share options or restricted shares.
Under these circulars, employees working in the PRC
whose RSUs or restricted shares vest, or who exercise
share options, will be subject to PRC individual
income tax. The PRC subsidiaries of an overseas listedcompany have obligations to file documents related
to employee RSUs, share options or restricted shareswith relevant tax authorities and to withhold individual
income taxes of those employees related to their RSUs,
share options or restricted shares. Although we andour overseas listed subsidiaries currently withholdindividual income tax from our PRC employees inconnection with the vesting of their RSUs and restricted
shares and their exercise of options, if the employees
fail to pay, or the PRC subsidiaries fail to withhold, theirindividual income taxes according to relevant laws,
rules and regulations, the PRC subsidiaries may facesanctions imposed by the tax authorities.
We rely to a significant extent on dividends, loans
and other distributions on equity paid by ouroperating subsidiaries in China.
We are a holding company and rely to a significant
extent on dividends, loans and other distributions
on equity paid by our operating subsidiaries forour cash and financing requirements, including thefunds necessary to pay dividends and other cash
distributions to our shareholders, fund inter-company
loans, service outstanding debt and pay our expenses.
If our operating subsidiaries incur additional debt
on their own, the instruments governing the debt
may restrict their ability to pay dividends or makeother distributions or remittances, including loans,to us. Furthermore, the laws, rules and regulations
applicable to our PRC subsidiaries and certain othersubsidiaries permit payments of dividends only outof their retained earnings, if any, determined inaccordance with applicable accounting standards andregulations.
Under PRC laws, rules and regulations, each of our
subsidiaries incorporated in China is required to set
aside a portion of its net income each year to fundcertain statutory reserves. These reserves, together
with the registered equity, are not distributable as
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Risk Factors

cash dividends. As a result of these laws, rules andregulations, our subsidiaries incorporated in China
are restricted in their ability to transfer a portion of
their respective net assets to their shareholders as
dividends. In addition, registered share capital andcapital reserve accounts are also restricted fromwithdrawal in the PRC, up to the amount of net assets
held in each operating subsidiary. As of March 31,
2023, these restricted net assets totaled RMB194.6
billion (US$28.3 billion).
P4P services are considered, in part, to involve
Internet advertisement, which subjects us to otherlaws, rules and regulations as well as additional
obligations.
The Administrative Measures for Internet Advertisingpromulgated by the SAMR apply to any commercial
advertising that directly or indirectly promotes goods
or services through Internet media in any form
including paid-for search results. See “Business
Overview — Regulation — Regulation of AdvertisingServices.”
There exist substantial uncertainties with respect tothe interpretation and implementation in practice of
the Administrative Measures for Internet Advertisingby various government authorities. We derive asignificant amount of our revenue from P4P services
and other related services. Our P4P services and otherrelated services may be considered to, in part, involve
Internet advertisement. We may incur additional
taxes in connection with our P4P and other related
services. Moreover, PRC advertising laws, rules andregulations require advertisers, advertising operators
and advertising distributors to ensure that the content
of the advertisements they prepare or distribute is fair
and accurate and is in full compliance with applicablelaw. Violation of these laws, rules or regulations may
result in penalties, including fines, confiscation ofadvertising fees and orders to cease dissemination of
the advertisements. In circumstances involving serious
violations, the PRC government may suspend or revoke
a violator’s business license or license for operating anadvertising business. In addition, the Administrative
Measures for Internet Advertising require paidfor search results to be clearly distinguished fromorganic search results so that consumers will not
misunderstand the nature of these search results.
Therefore, we are obligated to distinguish from others
the merchants who purchase the above-mentioned
P4P and related services or the relevant listings bythese merchants. Complying with these requirements,
including any penalties or fines for any failure tocomply, may significantly reduce the attractiveness of
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Alibaba Group Holding Limited

our platforms and increase our costs, and could havea material adverse effect on our business, financial
condition and results of operations.
In addition, for advertising content related to specifictypes of products and services, advertisers, advertising
operators and advertising distributors must confirm
that the advertisers have obtained requisite
government approvals, including the advertiser’s
operating qualifications, proof of quality inspection of
the advertised products, and, with respect to certain
industries, government approval of the content of theadvertisement and filing with the local authorities.
Pursuant to the Administrative Measures for Internet
Advertising, we are required to take steps to monitor
the content of advertisements displayed on ourplatforms. This requires considerable resources andtime, and could significantly affect the operation of
our business, while also subjecting us to increased
liability under the relevant laws, rules and regulations.
The costs associated with complying with these laws,
rules and regulations, including fines or any otherpenalties for our failure to so comply if required,
could have a material adverse effect on our business,financial condition and results of operations. Any
further change in the classification of our P4P andother related services by the PRC government may alsosignificantly disrupt our operations and materially andadversely affect our business and prospects.
We may be treated as a resident enterprise for PRC
tax purposes under the PRC Enterprise Income Tax
Law, and we may therefore be subject to PRC income
tax on our global income.
Under the PRC Enterprise Income Tax Law, as
amended, enterprises established under the lawsof jurisdictions outside of China with “de facto
management bodies” located in China may beconsidered PRC tax resident enterprises for tax
purposes and may be subject to the PRC enterpriseincome tax at the rate of 25% on their global income.
The STA issued Circular 82 on April 22, 2009, which
was further amended on December 29, 2017. Circular
82 specifies certain criteria for determining whether
the “de facto management body” of a Chinesecontrolled, offshore-incorporated enterprise is locatedin China. Although Circular 82 applies only to offshore
enterprises controlled by PRC enterprises, and does
not apply to offshore enterprises controlled by foreign
enterprises or individuals, the determining criteria set
forth in Circular 82 may reflect the PRC tax authorities’
general position on how the “de facto managementbody” test should be applied in determining the tax
resident status of offshore enterprises, regardlessRisk Factorsof whether they are controlled by PRC enterprises. If
we were to be considered a PRC resident enterprise,
we would be subject to PRC enterprise income tax at
the rate of 25% on our global income. In this case,our profitability and cash flow may be materiallyreduced as a result of our global income being taxed
under the PRC Enterprise Income Tax Law. We believethat none of our entities outside of China is a PRC
resident enterprise for PRC tax purposes. However,
the tax resident status of an enterprise is subject
to determination by the PRC tax authorities anduncertainties remain with respect to the interpretationof the term “de facto management body.”
Dividends payable to foreign investors and gains
on the sale of our ADSs and/or ordinary shares by
our foreign investors may become subject to PRC
taxation.
Under the PRC Enterprise Income Tax Law and its
implementation regulations, a 10% PRC withholding
tax is applicable to dividends payable by a resident
enterprise to investors that are non-resident
enterprises, which do not have an establishment
or place of business in the PRC or which have an
establishment or place of business but the dividends
are not effectively connected with the establishment
or place of business, to the extent these dividends
are derived from sources within the PRC, subject toany reduction set forth in applicable tax treaties.
Similarly, any gain realized on the transfer of sharesof a PRC resident enterprise by these investors is also
subject to PRC tax at a current rate of 10%, subject
to any exemption set forth in relevant tax treaties. If
we are deemed a PRC resident enterprise, dividends
paid on our ordinary shares or ADSs, and any gain
realized by the non-resident enterprise investors fromthe transfer of our ordinary shares or ADSs, may betreated as income derived from sources within the
PRC and as a result be subject to PRC taxation. See“Business Overview — Regulation — Other Regulations— Tax Regulations — PRC Enterprise Income Tax.”
Furthermore, if we are deemed a PRC resident
enterprise, dividends payable to individual investors
who are non-PRC residents and any gain realized on
the transfer of our ADSs and/or ordinary shares bythese investors may be subject to PRC tax at a current
rate of 20%, subject to any reduction or exemption set
forth in applicable tax treaties. It is unclear if we or anyof our subsidiaries established outside of China areconsidered a PRC resident enterprise, whether holdersof our ADSs and/or ordinary shares would be able toclaim the benefit of income tax treaties or agreements
entered into between China and other countries orareas and claim foreign tax credit if applicable. If
dividends payable to our non-PRC investors, or gains
from the transfer of our ADSs and/or ordinary sharesby these investors are subject to PRC tax, the value of
your investment in our ADSs and/or ordinary shares
may decline significantly.
Discontinuation of preferential tax treatments wecurrently enjoy or other unfavorable changes in tax
law could result in additional compliance obligations
and costs.
Chinese companies operating in the high-technology
and software industry that meet relevant requirements
may qualify for three main types of preferential
treatment, which are high and new technology
enterprises, software enterprises and key software
enterprises within the scope of the PRC national plan.
For a qualified high and new technology enterprise,
the applicable enterprise income tax rate is 15%. The
high and new technology enterprise qualification is reassessed by the relevant authorities every three years.
Moreover, a qualified software enterprise is entitled toa tax holiday consisting of a two-year tax exemption
beginning from the first profit-making calendar year
and a 50% tax reduction for the subsequent threeconsecutive calendar years. The software enterprisequalification is subject to an annual assessment.
A qualified encouraged key software enterprise isentitled to a five-year enterprise income tax exemption
beginning from the first profit-making calendar year
and its applicable enterprise income tax rate for thefollowing calendar year is 10%. The key software
enterprise qualification is subject to an annual
assessment.
A number of our China operating entities enjoy
these preferential tax treatments. There is no
guarantee that these entities will be able to renew
or maintain the above-mentioned qualifications
when such qualifications expire or be able to meet
new requirements under continuously evolving rules
concerning preferential tax treatments, and if anyof our China operating entities fails to do so, it will
not be able to continue to enjoy the preferential tax
treatments. For example, certain of our subsidiaries
did not obtain the key software enterprise status forcalendar years 2020 and 2021. The discontinuation of
any of the various types of preferential tax treatment
we enjoy could materially and adversely affect our
results of operations. See “Management Discussion
and Analysis — Operating Results — Taxation — PRC
Income Tax.”

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Risk Factors

We and our shareholders face uncertainties withrespect to indirect transfers of equity interests in PRC
resident enterprises or other assets attributed to a
PRC establishment of a non-PRC company.
On February 3, 2015, the STA issued Bulletin 7, which
has been further amended by Bulletin 37, issued by
the STA on October 17, 2017 and amended on June 15,
2018. Pursuant to these bulletins, an “indirect transfer”
of assets, including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises may be recharacterized and treated as a direct transfer of PRC
taxable assets, if the arrangement does not have areasonable commercial purpose and was established
for the purpose of avoiding payment of PRC enterpriseincome tax. As a result, gains derived from this indirecttransfer may be subject to PRC enterprise income tax.
There are uncertainties as to the application of Bulletin
7 and Bulletin 37. Bulletin 7 may be determined by
the tax authorities to be applicable to some of ouroffshore restructuring transactions or sale of theshares of our offshore subsidiaries or investments
where PRC taxable assets are involved. The transferors
and transferees may be subject to the tax filing andthe transferees may be subject to withholding or tax
payment obligation, while our PRC subsidiaries may
be requested to assist in the filing. Furthermore, we,
our non-resident enterprises and PRC subsidiaries may
be required to spend valuable resources to comply
with Bulletin 7 or to establish that we and our nonresident enterprises should not be taxed under Bulletin
7, for our previous and future restructuring or disposalof shares of our offshore subsidiaries, which may havea material adverse effect on our financial condition
and results of operations.
The PRC tax authorities have the discretion under
Bulletin 7 to make adjustments to the taxable
capital gains based on the difference between thefair value of the taxable assets transferred and thecost of investment. If the PRC tax authorities makeadjustments to the taxable capital gains of thetransactions under Bulletin 7, our income tax costs
associated with potential acquisitions or disposals will
increase, which may have an adverse effect on our
financial condition and results of operations.

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Alibaba Group Holding Limited

Restrictions on currency exchange or outboundcapital flows may limit our ability to utilize our PRC
revenue effectively.
Substantially all of our revenue is denominated inRenminbi. The Renminbi is currently convertible underthe “current account,” which includes dividends, tradeand service-related foreign exchange transactions,but requires approval from or registration withappropriate government authorities or designatedbanks under the “capital account,” which includes
foreign direct investment and loans, including loans
we may secure from our onshore subsidiaries or
VIEs. Currently, our PRC subsidiaries, that are foreign
invested enterprises, may purchase foreign currency
for settlement of “current account transactions,”
including payment of dividends to us, without
the approval of SAFE by complying with certain
procedural requirements. However, the relevant PRC
governmental authorities may limit or eliminate ourability to purchase foreign currencies in the future forcurrent account transactions.
Since 2016, PRC governmental authorities have
imposed more stringent restrictions on outboundcapital flows, including heightened scrutiny over“irrational” overseas investments for certain industries,
as well as over four kinds of “abnormal” offshore
investments, which are:

•
•
•
•

investments through enterprises established
for only a few months without substantive
operations;investments with amounts far exceeding theregistered capital of onshore parent and notsupported by its business performance shown on
financial statements;
investments in targets that are unrelated to theonshore parent’s main business; andinvestments with abnormal sources of Renminbi
funding suspected to involve illegal transfer
of assets or illegal operation of undergroundbanking.

Risk Factors

On January 18, 2017, SAFE promulgated the Circularon Further Improving Reform of Foreign Exchange
Administration and Optimizing Genuineness andCompliance Verification, or Circular 3, which, among
other things, requires stricter authenticity andcompliance verification of outbound investment
transactions. In addition, the Outbound Investment
Sensitive Industry Catalog (2018) lists certain sensitive
industries that are subject to NDRC pre-approvalrequirements prior to remitting investment funds
offshore, which subjects us to increased approvalrequirements and restrictions with respect to ouroverseas investment activity. Since a significant
amount of our PRC revenue is denominated inRenminbi, any existing and future restrictions on
currency exchange or outbound capital flows may limit
our ability to utilize revenue generated in Renminbi tofund our business activities outside of the PRC, makeinvestments, service any debt we have incurred or
may incur outside of China, including our outstanding
senior notes and other debt securities we may offer inthe future or pay dividends in foreign currencies to ourshareholders, including holders of our ADSs.
Fluctuations in exchange rates could result in foreign
currency exchange losses to us.
The value of the Renminbi against the U.S. dollar
and other currencies may fluctuate and is affectedby, among other things, changes in political andeconomic conditions and the foreign exchange policy
adopted by the PRC government. It is difficult to predict
how market forces or PRC or U.S. government policy,
including any interest rate increases by the Federal
Reserve, may impact the exchange rate between
the Renminbi and the U.S. dollar in the future. Thereremains significant international pressure on the
PRC government to adopt a more flexible currency
policy, including from the U.S. government. In August
2019, the U.S. Treasury Department announced thatit labelled China a “currency manipulator,” whichlabel was officially dropped by the U.S. Treasury
Department in January 2020. However, it is uncertain
whether the U.S. government may issue any similar
announcement in the future. As a result of suchannouncement, the United States may take further
actions to eliminate perceived unfair competitive
advantages created by alleged manipulating actions.
Any actions taken by the U.S. Treasury Department inthis regard as well as China’s possible responses could
result in greater fluctuation of the Renminbi against
the U.S. dollar.

A substantial percentage of our revenues and costs
are denominated in Renminbi, and a significant
portion of our financial assets are also denominatedin Renminbi while the majority of our debt isdenominated in U.S. dollars. We are a holding
company and we rely on dividends, loans andother distributions on equity paid by our operating
subsidiaries in China. Any significant fluctuationsin the value of the Renminbi may materially andadversely affect our liquidity and cash flows. If we
decide to convert our Renminbi into U.S. dollars forthe purpose of repaying principal or interest expenseon our outstanding U.S. dollar-denominated debt,
making payments for dividends on our ordinary sharesor ADSs or other business purposes, appreciation of
the U.S. dollar against the Renminbi would have anegative effect on the U.S. dollar amount we would
receive. Conversely, to the extent that we need toconvert U.S. dollars into Renminbi for our operations,appreciation of the Renminbi against the U.S. dollar
would have an adverse effect on the Renminbi
amount we would receive. In addition, the revenues
and costs of certain of our international businesses
are denominated in local currencies. Fluctuations
in exchange rates of these currencies against ourreporting currency Renminbi will have a material
adverse effect on our financial condition and results ofoperations. From time to time we enter into hedging
activities with regard to exchange rate risk. Therecan be no assurance that our hedging activities will
successfully mitigate these risks adequately or at allor that our counterparties will be able to perform their
obligations, and in addition hedging activities may
result in greater volatility in our financial results.
The approval, filing or other requirements of the
CSRC or other PRC regulatory authorities may
be required under PRC law in connection withany future issuance of securities overseas, and, if
required, we cannot predict whether or for how long
we or our subsidiaries will be able to obtain suchapproval or complete such filing.
PRC laws and regulations in relation to the shareissuance and listing of Chinese companies overseas
have been evolving. On July 6, 2021, the relevant PRC
authorities issued the Opinions on Intensifying Crack
Down on Illegal Securities Activities, which called
for strengthening the administration over illegal
securities activities and enhancing the supervision on
overseas listings by Chinese companies. As a followup, on February 17, 2023, the CSRC promulgated the

Fiscal Year 2023 Annual Report

255

Risk Factors

Trial Administrative Measures of Overseas Securities
Offering and Listing by Domestic Companies and five
supporting relevant guidelines, or collectively, theOverseas Listing Trial Measures, which took effect on
March 31, 2023. The Overseas Listing Trial Measuresclarify the scope of overseas offerings and listingsby Chinese domestic companies which are subject
to the filing and reporting requirements thereunder.
Pursuant to the Overseas Listing Trial Measures, anoverseas offering and listing by a Chinese company,
including any follow-on offering, secondary listingsor other equivalent offering activities, whether directly
or indirectly, shall be filed with the CSRC. Specifically,a Chinese company whose securities had alreadybeen listed overseas prior to the effectiveness of
the Overseas Listing Trial Measures is required tofile with the CSRC with respect to any follow-on
offering in the same overseas market where its
securities are listed within three business days after
completion of such follow-on offering. The Overseas
Listing Trial Measures have also imposed additional
reporting obligations on listed companies upon theoccurrence of certain circumstances, including but
not limited to change of controlling interest anddelisting. See “Business Overview — Regulation — Other
Regulations — Regulation of Overseas Listing.” As
the Overseas Listing Trial Measures have just beenpromulgated, there are substantial uncertainties as
to the interpretation and implementation thereof. If
we fail to properly or timely complete the reporting
procedures with the CSRC upon the occurrence of thecircumstances stipulated in the Overseas Listing Trial
Measures, or the filing procedures with the CSRC for
our future securities offerings and listings outside ofChinese mainland, we may be subject to penalties,
sanctions and fines imposed by the CSRC and relevant
departments of the State Council. In addition, as
certain of our subsidiaries are pursuing IPOs outsideof Chinese mainland, they may be required to filewith the CSRC with respect to their IPOs and listings
as well as subsequent securities offerings in an
overseas market different from the market where theirsecurities are listed within three business days after
their submission of listing application documents to
the relevant regulator of the intended listing venue.
They may be subject to penalties, sanctions and fines
imposed by the CSRC and relevant departments of
the State Council if they fail to complete the filingor reporting procedures with the CSRC as required,and we as their controlling shareholder, mayalso be subject to penalties, sanctions and fines
if we organized or aided and abetted such noncompliance.

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Alibaba Group Holding Limited

PRC regulatory authorities have also promulgatedlaws and regulations relating to cybersecurity review
of Chinese companies listing overseas. According
to the Revised Cybersecurity Review Measures, any
network platform operator possessing over one
million users’ individual information must apply
for cybersecurity review before listing abroad, andthe Draft Cyber Data Security Regulations, also set
forth different scenarios where data processors are
required to apply for cybersecurity review, including,among others, overseas listing while processing overone million users’ personal information, Hong Konglisting that affects or may affect national security,and other data processing activities that affect or
may affect national security. See “— Risks Related to
Our Business and Industry — Our business is subject
to complex and evolving domestic and internationallaws and regulations regarding privacy and dataprotection, which are subject to change and uncertain
interpretation. Complying with these laws andregulations increases our cost of operations andmay require changes to our data and other businesspractices or negatively affect our user growth andengagement. Failure to comply with these laws
and regulations could result in claims, regulatory
investigations, litigation or penalties, or otherwise
negatively affect our business.” As we may conduct
follow-on offerings and our subsidiaries may seek
listing overseas in the future, we and our subsidiaries
may be required to apply for cybersecurity review inaccordance with the Revised Cybersecurity Review
Measures or the Draft Cyber Data Security Regulations,if adopted, before offerings and listings, as applicable.
Failure to comply with these laws and regulations may
subject us or our subsidiaries to penalties including
fines, suspension of business, prohibition against newuser registration and revocation of required licenses.
These new and evolving regulatory requirements
could significantly increase our regulatory compliancecosts, and it is uncertain whether we can, or how
long it will take us to, obtain the relevant approvalor complete the relevant reviews and filings for any
offshore offerings, which would limit or hinder ourability to continue to offer securities to investors andthe ability of our subsidiaries to seek IPOs or continue
to offer securities to investors. Any uncertainties ornegative publicity regarding such approval, reviews
and filings could materially and adversely affect ourbusiness, prospects, reputation, and the trading pricesof our ADSs and/or Shares.
In addition, on February 24, 2023, the CSRC and other
PRC governmental authorities jointly issued the revised
Provisions on Strengthening Confidentiality andRisk Factors

Archives Administration of Overseas Securities Offeringand Listing by Domestic Companies, or the Revised
Confidentiality Provisions, which took effect on March
31, 2023. According to the Revised Confidentiality
Provisions, Chinese companies that directly or
indirectly conduct overseas offerings and listings,
shall strictly abide by the laws and regulations on
confidentiality when providing or publicly disclosing,either directly or through their overseas listed entities,
materials to securities service providers. In the eventthat such materials contain state secrets or working
secrets of government agencies, companies shall firstobtain approval from and file with relevant authorities.
See “Business Overview — Regulation — Other
Regulations — Regulation of Overseas Listing.”

•
•
•
•

Risks Related to Our ADSs and Shares
The trading prices of our ADSs and Shares have been
and are likely to continue to be volatile, which could
result in substantial losses to holders of our ADSs
and/or Shares.
The trading prices of our ADSs and Shares havebeen and is likely to continue to be volatile andcould fluctuate widely in response to a variety offactors, many of which are beyond our control. For
example, the high and low closing prices of our ADSs
on the NYSE in fiscal year 2023 were US$122.39 andUS$63.15, respectively. Likewise, the high and low
closing prices of our Shares on the Hong Kong Stock
Exchange during fiscal year 2023 were HK$121.00 and
HK$61.45, respectively. In addition, the performanceand fluctuation of the market prices of othercompanies with business operations located mainly
in China that have listed their securities in Hong Kong
S.A.R. and/or the United States may affect the volatility
in the prices of and trading volumes for our ADSs and/or Shares. Some of these companies have experienced
significant volatility. The trading performances ofthese companies’ securities may affect the overall
investor sentiment towards other companies withbusiness operations located mainly in China and listedin Hong Kong S.A.R. and/or the United States andconsequently may impact the trading performanceof our ADSs and/or Shares. In addition to market andindustry factors, the prices and trading volumes for our
ADSs and/or Shares may be highly volatile for specificreasons, including:•variations in our results of operations or earnings
that are not in line with market or securities
research analyst expectations or changes
in financial estimates by securities researchanalysts;

•
•
•
•
•
•

•
•

regulatory developments, including new laws
and regulations issued and the overall trend ofgovernment enforcement actions;publication of operating or industry metrics bythird parties, including government statisticalagencies, that differ from expectations ofindustry or securities research analysts;
announcements made by us or our competitorsof new product and service offerings,
acquisitions, strategic relationships, joint
ventures or capital commitments;
media and other reports, whether or notcomprehensive or true, about our business,
our lead founder Jack Ma or other directors
and management, Ant Group or our ecosystem
participants, our Reorganization and proposed
fundraisings or IPOs by subsidiaries, planned
conversion to primary listing in Hong Kong,
including negative reports published by shortsellers, regardless of their veracity or materiality
to us;
timing of the proposed spin-off of our cloudbusiness, the proposed fundraisings or IPOs by
our subsidiaries or our planned conversion toprimary listing in Hong Kong;
litigation and regulatory allegations orproceedings that involve us or our ecosystem
participants;changes in pricing we or our competitors adopt;
additions to or departures of our management orother key personnel;
actual or perceived general industry, regulatory,
economic and business conditions and trends
in China and globally, due to various reasons,
including changes in geopolitical landscape;some investors or analysts may invest in orvalue our ADSs and/or Shares based on theeconomic performance of the Chinese economy,
which may not be correlated to our financial
performance;
the inclusion, exclusion, or removal of our ADSs
and/or Shares from market indices;
political or market instability or disruptions,pandemics or epidemics and other disruptions
to China’s economy or the global economy, andactual or perceived social unrest in the UnitedStates, Hong Kong S.A.R. or other jurisdictions;Fiscal Year 2023 Annual Report257

Risk Factors••

fluctuations of exchange rates among theRenminbi, the Hong Kong dollar and the U.S.
dollar; andsales or perceived potential sales or otherdispositions of existing or additional ADSs and/or
Shares or other equity or equity-linked securities.

Any of these factors may result in large and suddenchanges in the volume and trading prices of our ADSs
and/or Shares. In addition, the stock market has fromtime to time experienced significant price and volume
fluctuations that are unrelated to the operating
performance of particular companies and industries.
These fluctuations may include a so-called “bubble
market” in which investors temporarily raise the priceof the stocks of companies in certain industries, suchas the technology industry, to unsustainable levels.
These market fluctuations may significantly affectthe trading prices of our ADSs and/or Shares. In thepast, following periods of volatility in the market priceof a company’s securities, shareholders have often
instituted securities class action litigation against thatcompany. We were named as a defendant in certain
purported shareholder class action lawsuits describedin “Business Overview — Legal and Administrative
Proceedings — Shareholder Class Action Lawsuits.” Thelitigation process may utilize a material portion of our
cash resources and divert management’s attention
from our day-to-day operations, all of which could
harm our business. If adversely determined, the classaction suits may have a material adverse effect on our
financial condition and results of operations.
Substantial future sales or perceived potential salesof our ADSs, Shares, or other equity or equity-linked
securities in the public market could cause the priceof our ADSs and/or Shares to decline significantly.
Sales of our ADSs, Shares, or other equity or equitylinked securities in the public market, or the perceptionthat these sales could occur, could cause themarket price of our ADSs and/or Shares to decline
significantly. All of our Shares trading on the Hong
Kong Stock Exchange and Shares represented by
ADSs are freely transferable by persons other than ouraffiliates without restriction or additional registration
under the U.S. Securities Act. The Shares held by ouraffiliates and other shareholders are also available
for sale, subject to volume and other restrictions asapplicable under Rules 144 and 701 under the U.S.
Securities Act, under sales plans adopted pursuant toRule 10b5-1 or otherwise.

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Alibaba Group Holding Limited

According to public disclosure by SoftBank, SoftBank
has monetized a significant amount of the Shares it
owns in us through forward contracts. The amountof our shares that SoftBank owns could decrease
upon settlement of forward contracts. SoftBank could
continue to pledge, monetize or sell more of our ADSs
or Shares in the future. If SoftBank divests significant
amounts of our ADSs, or further engages in derivativeor other financing arrangements with respect to asignificant amount of our ADSs or Shares, the price of
our ADSs and/or Shares could decline significantly.
News, market rumors or speculations about any
SoftBank’s plans to divest our shares could also
negatively affect the price of our ADS and/or Shares.
Additional divestitures in the future of our ADSs and/or
Shares by shareholders, announcements of any plan
to divest our ADSs and/or Shares, or hedging activities
by third-party financial institutions in connection withsimilar derivative or other financing arrangements
entered into by shareholders, could also cause theprice of our ADSs and/or Shares to decline.
An active trading market for our ordinary shareson the Hong Kong Stock Exchange, our ADSs on
the NYSE and/or our other securities might not besustained and trading prices of our ordinary shares,
ADSs and/or our other securities might fluctuatesignificantly.
Since our listing in Hong Kong in 2019, we haveconsistently been one of the most actively-traded
companies on the Hong Kong Stock Exchange.
However, we cannot assure you that an active trading
market for our ordinary shares on the Hong Kong
Stock Exchange will be sustained. In addition, we
cannot assure you that an active trading market for
our ADSs on the NYSE or for our other securities will
be sustained. For example, since our listing in Hong
Kong in 2019, investors have been converting our
ADSs into Shares listed in Hong Kong. If our investors
convert a significant portion of our ADSs into Shares
listed in Hong Kong or if such conversions happen
suddenly or at a rapid pace, the price and liquidityof our ADSs could be severely impacted. The trading
price or liquidity for our ADSs on the NYSE and the
trading price or liquidity for our ordinary shares on the
Hong Kong Stock Exchange in the past might not be
indicative of those of our ADSs on the NYSE and ourordinary shares on the Hong Kong Stock Exchange inthe future. In addition, legislation, executive orders
and other regulatory actions, such as the HFCA Act
and U.S. Executive Order 13959, may cause our ADSs
to be delisted from the NYSE. See “— Risks Related toRisk Factors

Doing Business in the People’s Republic of China —Our ADSs will be delisted and our ADSs and sharesprohibited from trading in the United States underthe Holding Foreign Companies Accountable Act,as amended, if the PCAOB is unable to inspect orinvestigate completely auditors located in China.” Seealso “— Risks Related to Our Business and Industry —Changes in international trade or investment policies
and barriers to trade or investment, and any ongoinggeopolitical conflict, may have an adverse effect on
our business and expansion plans, and could leadto the delisting of our securities from U.S. exchanges
and/or other restrictions or prohibitions on investingin our securities.” If an active trading market of ourordinary shares on the Hong Kong Stock Exchange,
our ADSs on the NYSE or our other securities is notsustained, the market price and liquidity of ourordinary shares, our ADSs or our other securities, could
be materially and adversely affected, and there may
be difficulties in enforcing obligations with respect toour other securities.
In 2014, the Hong Kong, Shanghai and Shenzhen
Stock Exchanges collaborated to create an interexchange trading mechanism called Stock Connectthat allows international and mainland Chinese
investors to trade eligible equity securities listed ineach other’s markets through the trading and clearing
facilities of their home exchange. Stock Connect allows
certain mainland Chinese investors to trade directlyin eligible equity securities listed on the Hong Kong
Stock Exchange, known as Southbound Trading.
If a company’s shares are not considered eligible,
they cannot be traded through Stock Connect. It is
unclear whether and when the ordinary shares ofour company will be eligible to be traded throughStock Connect, if at all. The ineligibility of our ordinary
shares for trading through Stock Connect will affectcertain mainland Chinese investors’ ability to trade ourordinary shares.
The different characteristics of the capital markets
in Hong Kong S.A.R. and the U.S. may negatively
affect the trading prices of our ADSs and Shares.
As a dual-listed company, we are subject to Hong
Kong and NYSE listing and regulatory requirements
concurrently. The Hong Kong Stock Exchange andthe NYSE have different trading hours, trading
characteristics (including trading volume and liquidity),
trading and listing rules, and investor bases (including
different levels of retail and institutional participation).
As a result of these differences, the trading prices of
our ADSs and our Shares may not be the same, evenallowing for currency differences. Fluctuations in theprice of our ADSs due to circumstances peculiar to the
U.S. capital markets could materially and adversely
affect the price of the Shares, or vice versa. Certain
events having significant negative impact specificallyon the U.S. capital markets may result in a decline in
the trading price of our Shares notwithstanding thatsuch event may not impact the trading prices of othersecurities listed in Hong Kong generally or to the same
extent, or vice versa.
We may in the future conduct a public offeringand listing of our equity securities in Shanghai or
Shenzhen, which may result in increased regulatory
scrutiny and compliance costs as well as increased
fluctuations in the prices of our ADSs and Shares.
We may conduct a public offering and/or listing of
our equity securities on a stock exchange in Shanghaior Shenzhen in the future. We have not set a specifictimetable or decided on any specific form for anoffering in Shanghai or Shenzhen and may not
ultimately conduct an offering and listing. The precise
timing of the offering and/or listing of our equity
securities in Shanghai or Shenzhen would depend
on a number of factors, including relevant regulatory
developments and market conditions. If we completea public offering or listing in Shanghai or Shenzhen,
we would become subject to the applicable laws,
rules and regulations governing public companies
listed in Shanghai or Shenzhen, in addition to thevarious laws, rules and regulations that we are subject
to in the United States and Hong Kong S.A.R. as adual-listed company. The listing and trading of ourequity securities in multiple jurisdictions and multiple
markets may lead to increased compliance costs forus, and we may face the risk of significant intervention
by regulatory authorities in these jurisdictions andmarkets.
In addition, under current PRC laws, rules andregulations, the ADSs and Shares, will not beinterchangeable or fungible with any equity securities
we may decide to list on a stock exchange in Shanghaior Shenzhen, and there is no trading or settlement
between either the NYSE or the Hong Kong Stock
Exchange and stock exchanges in Shanghai or
Shenzhen. Furthermore, the NYSE, the Hong Kong
Stock Exchange and stock exchanges in Shanghaior Shenzhen have different trading characteristics
and investor bases, including different levels of
retail and institutional participation. As a result of
these differences, the trading prices of our ADSs andShares, accounting for the ADS ratio, may not be thesame as the trading prices of any equity securities
we may decide to offer and/or list in Shanghai or
Fiscal Year 2023 Annual Report259

Risk Factors

Shenzhen. The issuance of a separate class of sharesand fluctuations in its trading price may also lead toincreased volatility in, and may otherwise materiallydecrease, the prices of our ADSs and Shares.
Our shareholders may face difficulties in protecting
their interests, and the ability of our shareholders,the SEC, the U.S. Department of Justice, and other
U.S. authorities to bring actions against us may belimited in the foreign jurisdictions where we operate.
We are incorporated in the Cayman Islands andconduct a substantial portion of our operations in
China through our subsidiaries and the VIEs. Most of
our directors and substantially all of our executive
officers reside outside the United States and Hong
Kong S.A.R. and a substantial portion of theirassets are located outside of the United States andHong Kong S.A.R. As a result, it may be difficult or
impossible for our shareholders (including holdersof our ADSs and Shares) to bring an action against
us or against these individuals in the Cayman Islands
or in China in the event that they believe that theirrights have been infringed under the securities lawsof the United States, Hong Kong S.A.R. or otherwise.
Even if shareholders are successful in bringing anaction of this kind, the laws of the Cayman Islands
and China may render them unable to enforce a
judgment against our assets or the assets of ourdirectors and officers. There is no statutory recognitionin the Cayman Islands of judgments obtained in
the United States, Hong Kong S.A.R. or Chinese
mainland, although the courts of the Cayman Islands
will generally recognize and enforce a non-penal
judgment of a foreign court of competent jurisdiction
without retrial on the merits.
Our corporate affairs are governed by ourMemorandum and Articles of Association, and by theCompanies Act as well as common law of the Cayman
Islands. The rights of shareholders to take legal action
against us and our directors, actions by minority
shareholders and the fiduciary duties of our directors
are to a large extent governed by the common law of
the Cayman Islands. The common law of the Cayman
Islands is derived in part from comparatively limited
judicial precedent in the Cayman Islands as well asfrom English common law, which provides persuasive,
but not binding, authority in a court in the Cayman
Islands. The rights of our shareholders and thefiduciary duties of our directors under Cayman Islands
law are not as clearly established as they would beunder statutes or judicial precedents in the UnitedStates and Hong Kong S.A.R. In particular, the Cayman
Islands has a less-developed body of securities laws
260

Alibaba Group Holding Limited

than the United States and Hong Kong S.A.R. andprovides significantly less protection to investors. In
addition, shareholders in Cayman Islands companies
may not have standing to initiate a shareholder
derivative action in U.S. federal courts or Hong Kong
courts.
Our Articles provide that in the event that any
shareholder initiates or asserts any claim orcounterclaim against us, or joins, offers substantial
assistance to or has a direct financial interest in any
claim or counterclaim against us, and does not obtaina judgment on the merits in which the initiating or
asserting party prevails, then the shareholder will
be obligated to reimburse us for all fees, costs andexpenses (including, but not limited to, all reasonable
attorneys’ fees and other litigation expenses) that
we may incur in connection with such claim orcounterclaim. These fees, costs and expenses that may
be shifted to a shareholder under this provision arepotentially significant and this fee-shifting provision
is not limited to specific types of actions, but is rather
potentially applicable to the fullest extent permitted bylaw.
Our fee-shifting provision may dissuade or discourage
our shareholders (and their attorneys) from initiating
lawsuits or claims against us or may impact the fees,
contingency or otherwise, required by attorneys torepresent our shareholders. Fee-shifting provisions
such as ours are relatively new and untested. Therecan be no assurance that we will or will not invoke our
fee-shifting provision in any particular dispute, or that
we will be successful in obtaining fees if we choose to
invoke the provision.
In addition, our Articles are specific to us and include
certain provisions that may be different from common
practices in Hong Kong, such as the absence of
requirements that the appointment, removal andremuneration of auditors must be approved by amajority of our shareholders, and the minimum
shareholding required to requisition an extraordinary
general meeting is one-third of the voting rights of
our issued shares which are entitled to vote at general
meetings, as opposed to the threshold of 10% voting
rights in Hong Kong.
Furthermore, due to jurisdictional limitations, mattersof comity and various other factors, the abilityof U.S. authorities, such as the SEC and the U.S.
Department of Justice, or the DOJ, to investigate andbring enforcement actions against companies may
be limited in foreign jurisdictions, including China.
Local laws may constrain our and our directors’ andRisk Factors

officers’ ability to cooperate with such an investigationor action. For example, according to Article 177 of
the PRC Securities Law, which became effectivein March 2020, no overseas securities regulator isallowed to directly conduct investigations or evidencecollection activities within the territory of the PRC.
Accordingly, without the consent of the competent
PRC securities regulators and relevant authorities, noorganization or individual may provide documents
or materials relating to securities business activities
to overseas parties. As a result of the foregoing,
our public shareholders may have more difficulty inprotecting their interests through actions against us,
our management, our directors, our officers or our
major shareholders, than they otherwise would withrespect to a corporation incorporated in a jurisdictionin the United States or Hong Kong S.A.R. Shareholder
protection through actions by the SEC, DOJ and other
U.S. authorities also may be limited.
As a foreign private issuer in the United States, weare permitted to and we will, rely on exemptions
from certain NYSE corporate governance standards
applicable to domestic U.S. issuers. This may afford
less protection to holders of our ADSs.
We are exempted from certain corporate governancerequirements of the NYSE by virtue of being a foreign
private issuer in the United States. We are required
to provide a brief description of the significant
differences between our corporate governancepractices and the corporate governance practices
required to be followed by domestic U.S. companies
listed on the NYSE. The standards applicable to us
are considerably different than the standards applied
to domestic U.S. issuers. For instance, we are notrequired to:

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•

have a majority of the board be independent(although all of the members of the audit
committee must be independent under the U.S.
Exchange Act);
have a compensation committee or anominating or corporate governance committee
consisting entirely of independent directors;
have regularly scheduled executive sessions fornon-management directors; orhave executive sessions of solely independent
directors each year.

We have relied on and intend to continue to rely onsome of these exemptions. As a result, holders of our
ADSs may not be provided with the benefits of certain
corporate governance requirements of the NYSE.
As a foreign private issuer in the United States, weare exempt from certain disclosure requirements
under the U.S. Exchange Act, which may afford lessprotection to holders of our ADSs than they would
enjoy if we were a domestic U.S. company.
As a foreign private issuer in the United States, weare exempt from, among other things, the rules
prescribing the furnishing and content of proxystatements under the U.S. Exchange Act and therules relating to selective disclosure of material
non-public information under Regulation FD under
the U.S. Exchange Act. In addition, our executive
officers, directors and principal shareholders are
exempt from the reporting and short-swing profit andrecovery provisions contained in Section 16 of the U.S.
Exchange Act. We are also not required under the U.S.
Exchange Act to file periodic reports and financial
statements with the SEC as frequently or as promptly
as domestic U.S. companies with securities registeredunder the U.S. Exchange Act. For example, in addition
to annual reports with audited financial statements,
domestic U.S. companies are required to file with the
SEC quarterly reports that include interim financial
statements reviewed by an independent registeredpublic accounting firm and certified by the companies’
principal executive and financial officers. By contrast,
as a foreign private issuer, we are not required tofile such quarterly reports with the SEC or to provide
quarterly certifications by our principal executive andfinancial officers. As a result, holders of our ADSs may
be afforded less protection than they would under the
U.S. Exchange Act rules applicable to domestic U.S.
companies.
We adopt different practices as to certain matters ascompared with many other companies listed on the
Hong Kong Stock Exchange.
We completed our public offering in Hong Kong inNovember 2019 and the trading of our Shares on the
Hong Kong Stock Exchange commenced on November
26, 2019 under the stock code “9988.” As a company
listed on the Hong Kong Stock Exchange pursuant toChapter 19C of the Hong Kong Listing Rules, we are
not subject to certain provisions of the Hong Kong
Listing Rules pursuant to Rule 19C.11, including,Fiscal Year 2023 Annual Report261

Risk Factors

among others, rules on notifiable transactions,connected transactions, share schemes, content
of financial statements as well as certain othercontinuing obligations. In addition, in connection
with the listing of our Shares on the Hong Kong
Stock Exchange, we have been granted a number ofwaivers and/or exemptions from strict compliancewith the Hong Kong Listing Rules, the Companies(WUMP) Ordinance, the Takeovers Codes and the
SFO. As a result, we adopt different practices as tothose matters, including with respect to the content
and presentation of our annual reports and interim
reports, as compared with other companies listed on
the Hong Kong Stock Exchange that do not enjoy thoseexemptions or waivers.
Furthermore, if 55% or more of the total worldwide
trading volume, by dollar value, of our Shares and
ADSs over our most recent fiscal year takes placeon the Hong Kong Stock Exchange, the Hong Kong
Stock Exchange will regard us as having a dual
primary listing in Hong Kong. In addition, we haveannounced our plan to voluntarily change oursecondary listing status on the Hong Kong Stock
Exchange to a primary listing, although the timetableof our primary conversion remains uncertain. Once
we become dual primary listed in Hong Kong, we
will no longer enjoy certain exemptions or waivers
from strict compliance with the requirements underthe Hong Kong Listing Rules, the Companies (WUMP)
Ordinance, the Takeovers Codes and the SFO, which
could result in our needing to undertake additional
compliance activities, to devote additional resources
to comply with new requirements, and our incurring ofincremental compliance costs.
The voting rights of holders of our ADSs are limitedby the terms of the Deposit Agreement.
Holders of our ADSs may exercise their voting rights
with respect to the ordinary shares underlying
their ADSs only in accordance with the provisionsof the Deposit Agreement. Upon receipt of voting
instructions from them in the manner set forth in the
Deposit Agreement, the depositary for our ADSs will
endeavor to vote their underlying ordinary shares inaccordance with these instructions. Under our Articles
of Association, the minimum notice period requiredfor convening a general meeting is ten days. Whena general meeting is convened, holders of our ADSs
may not receive sufficient notice of a shareholders’meeting to permit them to withdraw their ordinary
shares to allow them to cast their votes with respect
to any specific matter at the meeting. In addition, thedepositary and its agents may not be able to send
262

Alibaba Group Holding Limited

voting instructions to holders of our ADSs or carry out
their voting instructions in a timely manner. We will
make all reasonable efforts to cause the depositary
to extend voting rights to holders of our ADSs in atimely manner, but they may not receive the voting
materials in time to ensure that they can instruct thedepositary to vote the ordinary shares underlying
their ADSs. Furthermore, the depositary and its agentswill not be responsible for any failure to carry out any
instructions to vote, for the manner in which any voteis cast or for the effect of any vote. As a result, holdersof our ADSs may not be able to exercise their rights tovote and they may lack recourse if the ordinary shares
underlying their ADSs are not voted as they requested.
The depositary for our ADSs will give us adiscretionary proxy to vote our ordinary shares
underlying the ADSs if holders of these ADSs do notgive voting instructions to the depositary, except inlimited circumstances, which could adversely affectthe interests of holders of our ordinary shares and
ADSs.
Under the Deposit Agreement for our ADSs, thedepositary will give us a discretionary proxy to vote theordinary shares underlying the ADSs at shareholders’meetings if holders of these ADSs do not give voting
instructions to the depositary, unless:

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we have failed to timely provide the depositary
with our notice of meeting and related voting
materials;
we have instructed the depositary that we do notwish a discretionary proxy to be given;
we have informed the depositary that there issubstantial opposition as to a matter to be voted
on at the meeting;a matter to be voted on at the meeting would
have a material adverse impact on shareholders;orvoting at the meeting is made on a show ofhands.

The effect of this discretionary proxy is that, if holdersof our ADSs fail to give voting instructions to thedepositary, they cannot prevent our ordinary shares
underlying their ADSs from being voted, absent
the situations described above, and it may makeit more difficult for shareholders to influence ourmanagement. Holders of our ordinary shares are notsubject to this discretionary proxy.

Risk Factors

Holders of our ADSs may be subject to limitations ontransfer of their ADSs.
ADSs are transferable on the books of the depositary.
However, the depositary may close its transfer books
at any time or from time to time when it deems
expedient in connection with the performance ofits duties. In addition, the depositary may refuse todeliver, transfer or register transfers of ADSs generally
when our books or the books of the depositary areclosed, or at any time if we or the depositary deems it
advisable to do so because of any requirement of law
or of any government or governmental body, or under
any provision of the Deposit Agreement, or for any
other reason.
Holders of our ADSs may not receive distributions
on our ordinary shares or any value for them if it
is illegal or impractical to make them available tothem.
The depositary of our ADSs has agreed to pay holdersof our ADSs the cash dividends or other distributions it
or the custodian for our ADSs receives on our ordinary
shares or other deposited securities after deducting
its fees and expenses. Holders of our ADSs will receive
these distributions in proportion to the number of ourordinary shares that their ADSs represent. However,the depositary is not responsible for making thesepayments or distributions if it is unlawful or impracticalto make a distribution available to any holders of
ADSs. For example, it would be unlawful to makea distribution to a holder of ADSs if the distribution
consists of securities that require registration under the
U.S. Securities Act but that are not properly registeredor distributed pursuant to an applicable exemption
from registration. The depositary is not responsible formaking a distribution available to any holders of ADSs
if any government approval or registration required forthe distribution cannot be obtained after reasonable
efforts made by the depositary. We have no obligation
to take any other action to permit the distribution of
our ADSs, ordinary shares, rights or anything else toholders of our ADSs. This means that holders of our
ADSs may not receive the distributions we make on
our ordinary shares or any value for them if it is illegal
or impractical for us to make them available. These
restrictions may materially reduce the value of the
ADSs.

Exchange between our Shares and our ADSs may
adversely affect the liquidity and/or trading price ofeach other.
Our ADSs are currently traded on the NYSE. Subject
to compliance with U.S. securities law and the termsof the Deposit Agreement, holders of our Shares may
deposit Shares with the depositary in exchange forthe issuance of our ADSs. Any holder of ADSs may also
withdraw the Shares underlying the ADSs pursuant
to the terms of the Deposit Agreement for trading on
the Hong Kong Stock Exchange. In the event that asubstantial number of Shares are deposited with thedepositary in exchange for ADSs or vice versa, theliquidity and trading price of our Shares on the Hong
Kong Stock Exchange and our ADSs on the NYSE may
be adversely affected.
The time required for the exchange between ADSs
and Shares might be longer than expected andinvestors might not be able to settle or effect any
sale of their securities during this period, and theexchange of Shares into ADSs involves costs.
There is no direct trading or settlement between the
NYSE and the Hong Kong Stock Exchange on which
our ADSs and the Shares are respectively traded.
In addition, the time differences between Hong
Kong S.A.R. and New York and unforeseen market
circumstances or other factors may delay the depositof Shares in exchange of ADSs or the withdrawalof Shares underlying the ADSs. Investors will be
prevented from settling or effecting the sale of theirsecurities during such periods of delay. In addition,
there is no assurance that any exchange of Shares into
ADSs (and vice versa) will be completed in accordancewith the timelines investors may anticipate.
Furthermore, the depositary for the ADSs is entitled
to charge holders fees for various services including
for the issuance of ADSs upon deposit of Shares,
cancelation of ADSs, distributions of cash dividends orother cash distributions, distributions of ADSs pursuant
to share dividends or other free share distributions,distributions of securities other than ADSs and annual
service fees. As a result, shareholders who exchange
Shares into ADSs, and vice versa, may not achieve
the level of economic return the shareholders may
anticipate.

Fiscal Year 2023 Annual Report263

Risk Factors

We may be or may become a passive foreign
investment company, which could result in adverse
United States federal income tax consequences toUnited States investors.
Based on the composition of our income and assets,
and the valuation of our assets, including goodwill, we
do not believe we were a passive foreign investmentcompany, or PFIC, for our most recent taxable year,
although there can be no assurance in this regard.
The determination of whether or not we are a PFIC
is made on an annual basis and will depend on
the composition of our income and assets and thevaluation of our assets from time to time. Specifically,
we will be classified as a PFIC for United States federal
income tax purposes for any taxable year if either:(i) 75% or more of our gross income for that taxable
year is passive income, or (ii) at least 50% of the value(generally determined on a quarterly basis) of ourassets for that taxable year is attributable to assetsthat produce or are held for the production of passive
income. The calculation of the value of our assets will
be based, in part, on the quarterly market value of our
ADSs. The market value of our ADSs has been volatileand has declined significantly over the past few years.
Any further decline in the price of our ADSs may resultin our becoming a PFIC. See “Other Information for
Shareholders — Taxation — Material United States
Federal Income Tax Considerations — Passive Foreign
Investment Company.”
In addition, it is not entirely clear how the contractual
arrangements between us and the VIEs will betreated for purposes of the PFIC rules. If it were
determined that we do not own the stock of the VIEs
for United States federal income tax purposes (forexample, because the relevant PRC authorities do
not respect these arrangements), we may be treatedas a PFIC. See “Other Information for Shareholders— Taxation — Material United States Federal Income
Tax Considerations — Passive Foreign Investment
Company.”
If we are or were to become a PFIC, there may
be adverse United States federal income tax
consequences to our shareholders and holders of our
ADSs that are United States investors. For example,
if we are a PFIC for any taxable year during which
any such United States investor holds our ADSs or
ordinary shares, such United States investor may
become subject to increased tax liabilities under
United States federal income tax laws and regulations,and will become subject to burdensome reporting
requirements. There can be no assurance that
we will not be a PFIC for the current or any future264

Alibaba Group Holding Limited

taxable year. You are urged to consult your own
tax advisors concerning the United States federal
income tax consequences of the application of the
PFIC rules. See “Other Information for Shareholders— Taxation — Material United States Federal Income
Tax Considerations — Passive Foreign Investment
Company.”
There is uncertainty as to whether Hong Kong stamp
duty will apply to the trading or conversion of our
ADSs.
In connection with the public offering of our ordinary
shares in Hong Kong in November 2019, or the
Hong Kong IPO, we established a branch registerof members in Hong Kong, or the Hong Kong shareregister. Our ordinary shares that are traded on the
Hong Kong Stock Exchange, including those issued in
the Hong Kong IPO and those that may be converted
from ADSs, are registered on the Hong Kong shareregister, and the trading of these ordinary shares on
the Hong Kong Stock Exchange are subject to theHong Kong stamp duty. To facilitate ADS-ordinary
share conversion and trading between the NYSE andthe Hong Kong Stock Exchange, we have moved a
portion of our issued ordinary shares from our Cayman
share register to our Hong Kong share register.
Under the Hong Kong Stamp Duty Ordinance, any
person who effects any sale or purchase of Hong Kongstock, defined as stock the transfer of which is required
to be registered in Hong Kong, is required to pay Hong
Kong stamp duty. The stamp duty is currently set at a
total rate of 0.26% of the greater of the consideration
for, or the value of, shares transferred, with 0.13%
payable by each of the buyer and the seller.
To the best of our knowledge, Hong Kong stamp
duty has not been levied in practice on the tradingor conversion of ADSs of companies that are listed
in both the United States and Hong Kong S.A.R. andthat have maintained all or a portion of their ordinary
shares, including ordinary shares underlying ADSs, intheir Hong Kong share registers. However, it is unclear
whether, as a matter of Hong Kong law, the tradingor conversion of ADSs of these dual-listed companies
constitutes a sale or purchase of the underlying Hong
Kong-registered ordinary shares that is subject toHong Kong stamp duty. We advise investors to consult
their own tax advisors on this matter. If Hong Kong
stamp duty is determined by the competent authority
to apply to the trading or conversion of our ADSs, thetrading price and the value of your investment in our
ADSs or ordinary shares may be affected.

Definitions
CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT
Unless the context otherwise requires, references in this annual report to:

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“2019 PRC Foreign Investment Law” are to the PRC Foreign Investment Law, promulgated by the National
People’s Congress on March 15, 2019, which became effective on January 1, 2020;“ADSs” are to the American depositary shares, each of which represents eight Shares;“AI” are to artificial intelligence;“Alibaba,” “Alibaba Group,” “company,” “our company,” “we,” “our” or “us” are to Alibaba Group
Holding Limited, a company incorporated in the Cayman Islands with limited liability on June 28, 1999 and,
where the context requires, its consolidated subsidiaries and its affiliated consolidated entities, including its
variable interest entities and their subsidiaries, from time to time;“Alibaba Health” are to Alibaba Health Information Technology Limited, a company incorporated
in Bermuda on March 11, 1998, the shares of which are listed on the Main Board of the Hong Kong
Stock Exchange (Stock Code: 0241), and, except where the context otherwise requires, its consolidated
subsidiaries;“Alibaba Pictures” are to Alibaba Pictures Group Limited, a company incorporated in Bermuda withlimited liability on January 6, 1994, the shares of which are listed on the Main Board of the Hong Kong
Stock Exchange (Stock Code: 1060) and, except where the context otherwise requires, its consolidated
subsidiaries;“Alipay” are to Alipay.com Co., Ltd., a company incorporated under the laws of the PRC on December 8,
2004, with which we have a long-term contractual relationship and which is a wholly-owned subsidiary of
Ant Group or, where the context requires, its predecessor entities;“Altaba” are to Altaba Inc. (formerly known as Yahoo! Inc.) and where the context requires, its consolidated
subsidiaries; Altaba filed a certificate of dissolution with the Secretary of State of the State of Delaware,
which became effective on October 4, 2019;“Analysys” are to Analysys, a research institution;“annual active consumers” are to user accounts that placed one or more confirmed orders through therelevant platform during the previous twelve months, regardless of whether or not the buyer and seller
settle the transaction;“Ant Group” are to Ant Group Co., Ltd. (formerly known as Ant Small and Micro Financial Services Group
Co., Ltd.), a company organized under the laws of the PRC on October 19, 2000 and, as context requires, itsconsolidated subsidiaries;“Articles” or “Articles of Association” are to our Articles of Association (as amended and restated fromtime to time), adopted on September 2, 2014;“board” or “board of directors” are to our board of directors, unless otherwise stated;“business day” are to any day (other than a Saturday, Sunday or public holiday) on which banks in relevant
jurisdictions are generally open for business;“Cainiao Network” are to Cainiao Smart Logistics Network Limited, a company incorporated on May 20,
2015 under the laws of the Cayman Islands and our consolidated subsidiary, together with its subsidiaries;

Fiscal Year 2023 Annual Report265Definitions

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“CCASS” are to the Central Clearing and Settlement System established and operated by Hong Kong
Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchange and Clearing
Limited;“China” and the “PRC” are to the People’s Republic of China;“Companies (WUMP) Ordinance” are to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong), as amended or supplemented from time to time;“CSRC” are to the China Securities Regulatory Commission of the PRC;
“Deposit Agreement” are to the deposit agreement, dated as of September 24, 2014, as amended, amongus, Citibank, N.A. and our ADS holders and beneficial owners from time to time;“director(s)” are to member(s) of our board, unless otherwise stated;“DTC” are to The Depository Trust Company, the central book-entry clearing and settlement system forequity securities in the United States and the clearance system for our ADSs;“Ele.me” are to Rajax Holding, a company incorporated under the laws of the Cayman Islands on June 8,
2011 and our consolidated subsidiary, and, except where the context otherwise requires, its consolidated
subsidiaries and its affiliated consolidated entities, including its variable interest entities and theirsubsidiaries; where the context requires, also refers to our on-demand delivery and local services platform
under the Ele.me brand;“Enhanced VIE Structure” are to our enhanced structure for variable interest entities as described in“Business Overview — Organizational Structure”;“EU” are to the European Union;“FMCG” are to fast-moving consumer goods;“foreign private issuer” are to such term as defined in Rule 3b-4 under the U.S. Exchange Act;
“Gartner” are to Gartner, Inc.; the Gartner content described herein (the “Gartner Content”) represent(s)research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc.
(“Gartner”), and are not representations of fact; Gartner Content speaks as of its original publication date(and not as of the date of this annual report), and the opinions expressed in the Gartner Content are subject
to change without notice. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its
affiliates in the U.S. and internationally and is used herein with permission. All rights reserved. Gartner
does not endorse any vendor, product or service depicted in its research publications, and does not advise
technology users to select only those vendors with the highest ratings or other designation. Gartner research
publications consist of the opinions of Gartner’s research organization and should not be construed asstatements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research,
including any warranties of merchantability or fitness for a particular purpose;“GDP” are to gross domestic product;“GDPR” are to the EU General Data Protection Regulation;

Alibaba Group Holding Limited

Definitions

•

•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

“GMV” are to the value of confirmed orders of products and services on our marketplaces, regardlessof how, or whether, the buyer and seller settle the transaction; our calculation of GMV includes shipping
charges paid by buyers to sellers; as a prudential matter aimed at eliminating any influence on our GMV of
potentially fraudulent transactions, we exclude from our calculation of GMV transactions in certain productcategories over certain amounts and transactions by buyers in certain product categories over a certain
amount per day;
“HK$” or “Hong Kong dollars” or “HKD” are to Hong Kong dollars, the lawful currency of Hong Kong;“Hong Kong” or “Hong Kong S.A.R.” are to the Hong Kong Special Administrative Region of the PRC;
“Hong Kong Listing Rules” are to the Rules Governing the Listing of Securities on The Stock Exchange ofHong Kong Limited, as amended or supplemented from time to time;“Hong Kong Share Registrar” are to Computershare Hong Kong Investor Services Limited;“Hong Kong Stock Exchange” are to The Stock Exchange of Hong Kong Limited;“IaaS” are to infrastructure-as-a-service;“ICP(s)” are to Internet content provider(s);“IDC” are to International Data Corporation, a research institution;“IoT” are to Internet of things;“IPO” are to initial public offering;“IT” are to information technology;“Junao” are to Hangzhou Junao Equity Investment Partnership (Limited Partnership) (杭州君澳股權投資合夥
企業（有限合夥）), a limited liability partnership incorporated under the laws of the PRC;
“Junhan” are to Hangzhou Junhan Equity Investment Partnership (Limited Partnership) (杭州君瀚股權投資合夥企業（有限合夥）), a limited liability partnership incorporated under the laws of the PRC;
“Lazada” are to Lazada South East Asia Pte. Ltd., a company incorporated under the laws of the Republicof Singapore on January 19, 2012 and our consolidated subsidiary, and, except where the context otherwise
requires, its consolidated subsidiaries and affiliated consolidated entities;“major subsidiaries” are to the subsidiaries identified in our corporate structure chart in “Business
Overview — Organizational Structure”;“major variable interest entities” or “major VIEs” are to the variable interest entities that account for asignificant majority of total revenue and assets of the variable interest entities as a group as described in“Management Discussion and Analysis — Operating Results — Variable Interest Entity Financial Information”;

Fiscal Year 2023 Annual Report267

Definitions

•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

268

“Memorandum” are to our memorandum of association (as amended from time to time);“MIIT” are to the Ministry of Industry and Information Technology of the PRC;
“MOF” are to the Ministry of Finance of the PRC;
“MOFCOM” are to the Ministry of Commerce of the PRC;
“MtCO2e” are to metric tons of carbon dioxide equivalent;“NDRC” are to the National Development and Reform Commission of the PRC;“NYSE” are to the New York Stock Exchange;“orders” unless the context otherwise requires, are to each confirmed order from a transaction between
a buyer and a seller for products and services on the relevant platform, even if the order includes multiple
items, during the specified period, whether or not the transaction is settled;
our “wholesale marketplaces” are to 1688.com and Alibaba.com, collectively;“P4P” are to pay-for-performance;“PaaS” are to platform-as-a-service;“PBOC” are to the People’s Bank of China;“PCAOB” are to the Public Company Accounting Oversight Board;“PRC government” or “State” are to the central government of the PRC, including all political subdivisions(including provincial, municipal and other regional or local government entities) and its organs or, as thecontext requires, any of them;“Principal Share Registrar” are to Maples Fund Services (Cayman) Limited;“QuestMobile” are to QuestMobile, a research institution;“representative variable interest entities” or “representative VIEs” are to the variable interest entities
identified in our corporate structure chart in “Business Overview — Organizational Structure”;“RMB” or “Renminbi” are to Renminbi, the lawful currency of the PRC;
“RSU(s)” are to restricted share unit(s);“SaaS” are to software-as-a-service;“SAFE” are to the State Administration of Foreign Exchange of the PRC, the PRC governmental agency
responsible for matters relating to foreign exchange administration, including local branches, whenapplicable;“SAIC” are to State Administration for Industry and Commerce of the PRC, which has been merged into
SAMR;
“SAMR” are to the State Administration for Market Regulation of the PRC;“SAPA” are to a share and asset purchase agreement by and among us, Ant Group, Altaba, SoftBank andthe other parties named therein, dated August 12, 2014, together with any subsequent amendments as thecontext requires;

Alibaba Group Holding Limited

Definitions

•
•
•
•

•
•
•
•
•
•
•
•
•
•
•
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•
•

“SEC” are to the United States Securities and Exchange Commission;“SFC” are to the Securities and Futures Commission of Hong Kong;“SFO” are to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or
supplemented from time to time;“Share Split” are to the subdivision of each ordinary share into eight Shares, pursuant to which the parvalue of our Shares was correspondingly changed from US$0.000025 per Share to US$0.000003125 per
Share, with effect from July 30, 2019; immediately after the Share Split became effective, our authorizedshare capital became US$100,000 divided into 32,000,000,000 Shares of par value US$0.000003125 per
Share;“shareholder(s)” are to holder(s) of Shares and, where the context requires, ADSs;“Share(s)” or “ordinary share(s)” are to ordinary share(s) in our capital with par value of US$0.000003125
each;“SMEs” are to small and medium-sized enterprises;“SoftBank” are to SoftBank Group Corp. (formerly known as SoftBank Corp.), and, except where the context
otherwise requires, its consolidated subsidiaries;“STA” are to the State Taxation Administration of the PRC;
“Sun Art” are to Sun Art Retail Group Limited, a company incorporated under the laws of Hong Kong on
December 13, 2000 with limited liability, the shares of which are listed on the Main Board of the Hong Kong
Stock Exchange (Stock Code: 6808), and except where the context requires, its consolidated subsidiaries;“Takeovers Codes” are to Hong Kong’s Codes on Takeovers and Mergers and Share Buy-backs issued by
the SFC;“UK” are to the United Kingdom of Great Britain and Northern Ireland;“U.S.” or “United States” are to the United States of America, its territories, its possessions and all areas
subject to its jurisdiction;“US$” or “U.S. dollars” are to the lawful currency of the United States;“U.S. Exchange Act” are to the United States Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder;“U.S. GAAP” are to accounting principles generally accepted in the United States;“U.S. Securities Act” are to the United States Securities Act of 1933, as amended, and the rules andregulations promulgated thereunder;“USTR” are to the Office of the U.S. Trade Representative;“variable interest entities” or “VIE(s)” are to the variable interest entities that are incorporated and ownedby PRC citizens or by PRC entities owned and/or controlled by PRC citizens, where applicable, that hold the
ICP licenses, or other business operation licenses or approvals, and generally operate the various websites
and/or mobile apps for our Internet businesses or other businesses in which foreign investment is restrictedor prohibited, and are consolidated into our consolidated financial statements in accordance with U.S.
GAAP;

Fiscal Year 2023 Annual Report269

Definitions

•
•
•

•

“VAT” are to value-added tax; all amounts are exclusive of VAT in this annual report except where indicatedotherwise;“VIE structure” or “Contractual Arrangements” are to the variable interest entity structure;“Youku” are to Youku Tudou Inc., a company incorporated under the laws of the Cayman Islands on
September 20, 2005 and our indirect wholly-owned subsidiary, and, except where the context otherwise
requires, its consolidated subsidiaries and its affiliated consolidated entities, including its variable interest
entities and their subsidiaries; where the context requires, Youku also refers to our online video platform
under the Youku brand; and“Yunfeng Fund(s)” are to one or more Yunfeng investment funds established by Yunfeng Capital Limited or
its affiliates, in which Jack Ma currently holds minority interest in the general partners.

Exchange Rate Information
Our reporting currency is the Renminbi. This annual report contains translations of Renminbi and Hong Kong
dollar amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise
stated, all translations of Renminbi and Hong Kong dollars into U.S. dollars and from U.S. dollars into Renminbi
in this annual report were made at a rate of RMB6.8676 to US$1.00 and HK$7.8499 to US$1.00, the respective
exchange rates on March 31, 2023 set forth in the H.10 statistical release of the Federal Reserve Board. We makeno representation that any Renminbi, Hong Kong dollar or U.S. dollar amounts referred to in this annual report
could have been, or could be, converted into U.S. dollars, Renminbi or Hong Kong dollars, as the case may be,at any particular rate or at all. On July 12, 2023, the noon buying rate for Renminbi and Hong Kong dollars was
RMB7.1656 to US$1.00 and HK$7.8268 to US$1.00, respectively.

Language
The English version of this annual report prevail over the Chinese version.
The English names of the PRC entities, PRC laws or regulations, and the PRC governmental authorities referred toin this annual report are translations from their Chinese names and are for identification purposes. If there is any
inconsistency, the Chinese names shall prevail.

270

Alibaba Group Holding Limited

Definitions

FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements are made under the “safe harbor”
provision under Section 21E of the U.S. Exchange Act, and as defined in the Private Securities Litigation ReformAct of 1995. Forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,”“anticipate,” “future,” “aim,” “estimate,” “intend,” “seek,” “plan,” “believe,” “potential,” “continue,”“ongoing,” “target,” “guidance,” “is/are likely to” or other similar expressions. The forward-looking statements
included in this annual report relate to, among others:

•
•
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•
•
•
•
•
•

our new organizational and governance structure, strategic benefits of this new structure and future spin-off
or capital raising plans;
our growth strategies and business plans;
our future business development, results of operations and financial condition;
trends and competition in commerce, cloud computing and digital media and entertainment industries andthe other industries in which we operate, both in China and globally, as well as trends in overall technology;
our continuing investments in our businesses;
expected changes in our revenues and certain cost and expense items and our margins;fluctuations in general economic and business conditions in China and globally;
international trade policies, protectionist policies and other policies (including those relating to export
control and economic or trade sanctions) that could place restrictions on economic and commercial activity;
the regulatory environment in which we and companies integral to our ecosystem operate in China andglobally;
expected results of regulatory investigations, litigations and other proceedings;
impacts of the COVID-19 pandemic;
our sustainability goals; andassumptions underlying or related to any of the foregoing.

Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual
results to differ materially from those contained in any forward-looking statement. These factors include but
are not limited to the following: our corporate structure, including the VIE structure we use to operate certain
businesses in the PRC; the implementation of our new organizational and governance structure and theexecution of spin-off or capital raising plans of our subsidiaries; our ability to maintain the trusted status of ourecosystem; our ability to compete, innovate and maintain or grow our revenue or business, including expanding
our international and cross-border businesses and operations and managing a large and complex organization;risks associated with sustained investments in our businesses; fluctuations in general economic and businessconditions in China and globally; uncertainties arising from competition among countries and geopoliticaltensions, including protectionist or national security policies and export control, economic or trade sanctions;risks associated with our acquisitions, investments and alliances; uncertainties and risks associated with abroad range of complex laws and regulations (including in the areas of data security and privacy protection,
anti-monopoly and anti-unfair competition, content regulation, consumer protection and regulation of Internet
platforms) in the PRC and globally; cybersecurity risks; impacts of the COVID-19 pandemic and assumptions
underlying or related to any of the foregoing. Please also see “Risk Factors.”
The forward-looking statements made in this annual report relate only to events or information as of the dateon which the statements are made in this annual report and are based on current expectations, assumptions,estimates and projections. We undertake no obligation to update any forward-looking statements to reflect
events or circumstances after the date on which the statements are made or to reflect the occurrence of
unanticipated events. You should read this annual report and the documents that we have referred to in thisannual report completely and with the understanding that our actual future results may be materially different
from what we expect.

Fiscal Year 2023 Annual Report

271

110

101

001

010

101

001

1
0
0
1
0
0101

Financial
Statements

Independent Auditor’s Report

To the Shareholders of Alibaba Group Holding Limited(incorporated in the Cayman Islands with limited liability)

OpinionWhat we have audited
The consolidated financial statements of Alibaba Group Holding Limited (the “Company”) and its subsidiaries(the “Group”), which are set out on pages 279 to 363, comprise:•the consolidated balance sheet as of March 31, 2023;•

the consolidated income statement for the year then ended;•

the consolidated statement of comprehensive income for the year then ended;•

the consolidated statement of changes in shareholders’ equity for the year then ended;•

the consolidated statement of cash flows for the year then ended; and•the notes to the consolidated financial statements, which include significant accounting policies and otherexplanatory information.

Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as of March 31, 2023, and of its consolidated financial performance and its consolidated
cash flows for the year then ended in accordance with accounting principles generally accepted in the UnitedStates of America (“U.S. GAAP”).

Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Independence
We are independent of the Group in accordance with the International Code of Ethics for Professional
Accountants (including International Independence Standards) issued by the International Ethics Standards
Board for Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with
the IESBA Code.

274

Alibaba Group Holding Limited

Independent Auditor’s Report

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of ouraudit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters.
Key audit matters identified in our audit are summarized as follows:•

Impairment assessment on goodwill relating to a reporting unit under the Digital media and entertainment
segment•

Fair value determination related to investments in privately held companies accounted for using themeasurement alternative
Key Audit Matter

How our audit addressed the Key Audit Matter

Impairment assessment on goodwill relating
to a reporting unit under the Digital media andentertainment segment
Refer to Note 2(y) and Note 17 to the consolidated
financial statements.
The Group’s balance of goodwill allocated toreporting units under the Digital media andentertainment segment as of March 31, 2023 was
RMB30,825 million, primarily relating to one unlisted
reporting unit.
Goodwill is tested for impairment on an annual
basis, or more frequently if events or changes incircumstances indicate that it might be impaired.
During the year ended March 31, 2023, management
has performed a quantitative impairment test on
the goodwill relating to the unlisted reporting unit
under the Digital media and entertainment segment.
No impairment charge was recognized on the
goodwill relating to the reporting unit as a result of
the impairment test. The fair value of the reporting
unit was determined based on the discounted cash
flow analysis using the assumptions including thefuture growth rates and the weighted average cost ofcapital.
We focus on this area because the impairment
assessment on goodwill relating to a reporting unit
under the Digital media and entertainment segment
is subject to a high degree of estimation uncertainty.
The inherent risk in relation to the impairment
assessment on goodwill relating to the reporting unit
is considered significant due to significant judgement
involved.

We obtained an understanding of management’s
internal control and assessment process for the
impairment assessment on goodwill relating
to a reporting unit under the Digital media andentertainment segment and assessed the inherent
risk of material misstatements by considering thedegree of estimation uncertainty and level of otherinherent risk factors such as subjectivity.
We tested the effectiveness of controls relating tomanagement’s impairment assessment on goodwill
relating to a reporting unit under the Digital media
and entertainment segment, including controls
relating to fair value determination of the reportingunit.
We evaluated the appropriateness of the valuation
method.
We tested the completeness, mathematical accuracy
and relevance of the key underlying data adopted in
the valuation.
We evaluated the reasonableness of the significant
assumptions related to the future growth rates andthe weighted average cost of capital used in thevaluation by considering (i) the past performanceof the reporting unit, and economic and industry
forecasts; (ii) the weighted average cost of capital ofcomparable businesses; and (iii) the consistency withexternal market and industry data.

Fiscal Year 2023 Annual Report275Independent Auditor’s Report

Key Audit Matter

How our audit addressed the Key Audit Matter
Professionals with specialized skill and knowledge
were used to assist in evaluating the appropriatenessof the valuation method, and the reasonablenessof the future growth rate for terminal value andthe weighted average cost of capital used in thevaluation.
We found that the assumptions adopted andestimations made by management were supportedby the evidence we gathered and were consistent
with our understanding.

Fair value determination related to investments inprivately held companies accounted for using themeasurement alternative
Refer to Note 2(t) and Note 11 to the consolidated
financial statements.
The Group’s investments in privately held companies
accounted for using the measurement alternative
were RMB79,545 million as of March 31, 2023.
Management recorded these investments at cost,less impairment, with subsequent adjustments forobservable price changes resulting from orderlytransactions for identical or similar investments ofthe same issuer. Management recorded fair value
adjustments to a portion of these investments withobservable price changes during the year ended
March 31, 2023. The fair value of these investments
was determined based on valuation methods using
the observable transaction price at the transaction
date and considering the rights and obligationsof the securities and other unobservable inputs
including volatility.
We focus on this area because the fair value
determination related to investments in privately heldcompanies accounted for using the measurement
alternative is subject to a high degree of estimation
uncertainty. The inherent risk in relation to the fairvalue determination related to these investments is
considered significant due to significant judgement
involved.

276

Alibaba Group Holding Limited

We obtained an understanding of management’s
internal control and assessment process for thefair value determination related to investments inprivately held companies accounted for using themeasurement alternative and assessed the inherent
risk of material misstatements by considering thedegree of estimation uncertainty and level of otherinherent risk factors such as subjectivity.
We tested the effectiveness of controls relating to fairvalue determination of these investments, including
controls over management’s assessment of whether
the observable transaction is orderly and whether
the investment involved is identical or similar to theGroup’s investment of the same issuer and controls
over the determination of the fair value adjustments.
We evaluated whether the observable transaction
is orderly and whether the investment involved is
identical or similar to the Group’s investment of thesame issuer.
We tested the completeness, mathematical accuracy
and relevance of key underlying data used in thevaluation.
We evaluated the rights and obligations of the
securities and other unobservable inputs including
volatility used in the valuation. The rights andobligations of the securities were evaluated byreading the investment agreements. The volatility
was evaluated by considering the external market
and industry data of comparable businesses.

Independent Auditor’s Report

Key Audit Matter

How our audit addressed the Key Audit Matter
Professionals with specialized skill and knowledge
were used to assist in evaluating the rights andobligations of the securities, and the reasonablenessof the volatility used in the valuation.
We found that the assumptions adopted andestimations made by management were supportedby the evidence we gathered and were consistent
with our understanding.

Other Information
The directors of the Company are responsible for the other information. The other information comprises all of
the information included in the annual report other than the consolidated financial statements and our auditor’sreport thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with theconsolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Directors and the Audit Committee for the Consolidated Financial
Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements thatgive a true and fair view in accordance with U.S. GAAP, and for such internal control as the directors determine
is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do notassume responsibility towards or accept liability to any other person for the contents of this report. Reasonableassurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these consolidated financial statements.
Fiscal Year 2023 Annual Report277Independent Auditor’s Report

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the Group’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made by the directors.

•

Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threatsor safeguards applied.
From the matters communicated with the Audit Committee, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Shin Wai Kit Ricky.

PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, July 21, 2023
278

Alibaba Group Holding Limited

Consolidated Income Statements
Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$
(Note 2(a))(in millions, except per share data)
Notes
Revenue

5, 22

717,289

853,062

868,687

126,491

Cost of revenue

22(421,205)(539,450)(549,695)(80,042)

Product development expenses

22(57,236)(55,465)(56,744)(8,263)

Sales and marketing expenses

22(81,519)(119,799)(103,496)(15,070)

General and administrative expenses

22(55,224)(31,922)(42,183)(6,142)(12,427)(11,647)(13,504)(1,967)—(25,141)(2,714)(395)

Amortization and impairment ofintangible assets
Impairment of goodwill

17

Income from operations

89,67869,638100,351

14,612

Interest and investment income, net

72,794(15,702)(11,071)(1,612)(4,476)(4,909)(5,918)

(862)

7,582

10,523

5,823

848

Interest expense
Other income, net

22Income before income tax and share of
results of equity method investees
Income tax expenses

7

Share of results of equity method
investees
Net income

165,578

59,55089,185

12,986(29,278)(26,815)(15,549)(2,264)

6,984

14,344(8,063)(1,174)

143,284

47,07965,573

9,548

Net loss attributable to noncontrollinginterests

7,294

15,170

7,210

1,050

Net income attributable to Alibaba
Group Holding Limited

150,578

62,24972,783

10,598

(270)

(290)

(274)

(40)

150,308

61,95972,50910,558  Basic

6.95

2.87

3.46

0.50

  Diluted

6.84

2.84

3.43

0.50

  Basic

55.63

22.99

27.65

4.03

  Diluted

54.70

22.74

27.46

4.00

  Basic

21,61921,55820,980  Diluted

21,982

21,787

21,114

Accretion of mezzanine equity
Net income attributable to ordinary
shareholders
Earnings per share attributable toordinary shareholders

Earnings per ADS attributable toordinary shareholders (one ADS
equals eight ordinary shares)

Weighted average number of sharesused in computing earnings per share(million shares)

9

9

9

The accompanying notes form an integral part of these consolidated financial statements.
Fiscal Year 2023 Annual Report279

Consolidated Statements of Comprehensive Income
Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$
(Note 2(a))(in millions)
Net income

143,284

47,07965,573

9,548(18,646)(15,470)

22,332

3,252(1,449)

(784)

1,493

217

104

157

10

2

Other comprehensive (loss) income(19,991)(16,097)

23,835

3,471

Total comprehensive income

123,293

30,982

89,40813,0199,005

17,361

6,480

944

132,298

48,343

95,888

13,963

Other comprehensive (loss) income:— Foreign currency translation:    Change in unrealized (losses) gains— Share of other comprehensive income of   equity method investees:    Change in unrealized (losses) gains— Interest rate swaps under hedge accounting   and others:    Change in unrealized gains

Total comprehensive loss attributable tononcontrolling interests
Total comprehensive income attributable toordinary shareholders

The accompanying notes form an integral part of these consolidated financial statements.
280

Alibaba Group Holding Limited

Consolidated Balance Sheets
As of March 31,
2023

2022

RMB

RMB

US$
(Note 2(a))(in millions)
Notes
AssetsCurrent assets:
Cash and cash equivalents2(p)189,898

193,086

28,115

Short-term investments2(q)256,514

326,492

47,541

Restricted cash and escrow receivables

10

37,45536,4245,304

Equity securities and other investments

11

8,673

4,892

712

Prepayments, receivables and other assets

13

145,995

137,072

19,960638,535

697,966

101,632

Total current assets
Equity securities and other investments

11

223,611245,737

35,782

Prepayments, receivables and other assets

13

113,147

110,926

16,152

Investments in equity method investees

14219,642

207,380

30,197

Property and equipment, net

15

171,806

176,031

25,632Intangible assets, net

1659,231

46,913

6,831

Goodwill

17

269,581

268,091

39,037

1,695,553

1,753,044

255,263

Total assets
Liabilities, mezzanine equity and shareholders’ equity
Current liabilities:
Current bank borrowings

20

8,841

7,466

1,087

Current unsecured senior notes

21

—

4,800

699

21,753

12,543

1,826

19271,460

275,950

40,182Merchant deposits2(ac)14,747

13,297

1,936

Deferred revenue and customer advances

18

66,98371,295

10,381

383,784

385,351

56,111

Income tax payable
Accrued expenses, accounts payable and  other liabilities

Total current liabilities
Deferred revenue

18

3,490

3,560

518

Deferred tax liabilities

7

61,706

61,745

8,991

Non-current bank borrowings

20

38,24452,023

7,575

Non-current unsecured senior notes

21

94,25997,065

14,134

Other liabilities

19

31,87730,3794,424

613,360

630,123

91,753

Total liabilities

The accompanying notes form an integral part of these consolidated financial statements.
Fiscal Year 2023 Annual Report281

Consolidated Balance Sheets

As of March 31,
2023

2022

RMB

RMB

US$
(Note 2(a))(in millions)
Notes
Commitments and contingencies

24, 25
9,655

9,858

1,435

1

1

—

410,506

416,880

60,702(2,221)(28,763)(4,188)

(46)

(49)

(7)

9,839

12,9771,890(33,184)(10,476)(1,525)2759

8563,557

599,028

87,225

Total shareholders’ equity

948,479

989,657

144,105

Noncontrolling interests

124,059

123,406

17,970Total equity

1,072,538

1,113,063

162,075

Total liabilities, mezzanine equity and equity

1,695,553

1,753,044

255,263

Mezzanine equity
Shareholders’ equity:
Ordinary shares, US$0.000003125 par value;   32,000,000,000 shares authorized as of   March 31, 2022 and 2023; 21,357,323,112 and   20,526,017,712 shares issued and outstanding as   of March 31, 2022 and 2023 respectively
Additional paid-in capital
Treasury shares, at cost2(af)Subscription receivables
Statutory reserves2(ag)Accumulated other comprehensive (loss) income   Cumulative translation adjustments   Unrealized gains on interest rate swaps   and others
Retained earnings

The accompanying notes form an integral part of these consolidated financial statements.
282

Alibaba Group Holding Limited

Fiscal Year 2023 Annual Report283—

Acquisition of subsidiaries——

Appropriation to statutory reserves

Others
1

—

—

—

—

—

—

—

—

—

—

—

394,308(270)—

47,006

1,201

(79)

205

1,836

—

—

702

—

343,707

RMB
1

RMB

Amount

—

—

—

—

—

—

—

—

—

—

—

—

—

RMB

—

—

—

—

—

—

—

—

—

—

—

—

—

RMB

(47)

—

—

—

—

—

—

—

—

—

—

4

(51)

RMB

Treasury Restructuring Subscription
sharesreserve receivables

The accompanying notes form an integral part of these consolidated financial statements.

21,699,031,448—

Amortization of compensation cost

Balance as of March 31, 2021—

Transactions with noncontrolling interests(4,526,416)—

Net income for the year

Repurchase and retirement of ordinary shares—

Change in fair value of interest rate swaps under hedge
accounting and others

211,562,920—

Share of additional paid-in capital and othercomprehensive income of equity method investees

Issuance of shares, including vesting of RSUs and early
exercised options and exercise of share options—

21,491,994,944

Foreign currency translation adjustment

Balance as of April 1, 2020

ShareAdditional
paid-in
capitalOrdinary shares

RMB

7,347

—

1,247

—

—

—

—

—

—

—

—

—

6,100

(18,930)

—

—

—

—

—

—

—

—

—

(1,451)(17,092)(387)(in millions, except per share data)

RMB

(133)

—

—

—

—

—

—

—

—

104

2

17

(256)

RMB

Unrealized
gains (losses)
on interest
Cumulative
rate swaps
Statutory translationand others
reserves adjustments

Accumulated othercomprehensive income (loss)

554,924—(1,247)

—

—

(694)

—

—

150,578———406,287

RMB

937,470(270)—

47,006

1,201

(773)

205

1,836

150,578

104

(747)

(17,071)755,401

RMB

137,491

(517)

—

3,983

(507)

—

—

28,389(7,434)—

1(1,571)

115,147

RMB

Total
Retained shareholders’ Noncontrolling
equityinterests
earnings

Consolidated Statements of Changes in Shareholders’ Equity

1,074,961

(787)

—

50,989

694

(773)

205

30,225

143,144

104

(746)

(18,642)

870,548

RMB

Total
equity284

Alibaba Group Holding Limited—

Acquisition of subsidiaries——

Appropriation to statutory reserves

Others
1

—

—

—

—

—

—

—

—

—

—

—

410,506(290)—

19,334

6,057(8,567)

109

—

—

—

(445)

—

394,308

RMB
1

RMB

Amount(2,221)

—

—

—

—

(2,221)

—

—

—

—

—

—

—

RMB

—

—

—

—

—

—

—

—

—

—

—

—

—

RMB

(46)

—

—

—

—

—

—

—

—

—

—

1

(47)

RMB

Treasury Restructuring Subscription
sharesreserve receivables

The accompanying notes form an integral part of these consolidated financial statements.

21,357,323,112—

Amortization of compensation cost

Balance as of March 31, 2022—

Transactions with noncontrolling interests(518,805,304)—

Net income for the year

Repurchase and retirement of ordinary shares—

Change in fair value of interest rate swaps under hedge
accounting and others

177,096,968—

Share of additional paid-in capital and othercomprehensive income of equity method investees

Issuance of shares, including vesting of RSUs and early
exercised options and exercise of share options—

21,699,031,448

Foreign currency translation adjustment

Balance as of April 1, 2021

Share

Additional
paid-in
capitalOrdinary shares

Accumulated othercomprehensive income (loss)

RMB

9,839

—

2,492

—

—

—

—

—

—

—

—

—

7,347

(33,184)

—

—

—

—

—

—

—

—

—

(784)

(13,470)(18,930)(in millions, except per share data)

RMB

27

—

—

—

—

—

—

—

—

157

—

3

(133)

RMB

Unrealized
gains (losses)
on interest
Cumulative
rate swaps
Statutory translationand others
reserves adjustments

Consolidated Statements of Changes in Shareholders’ Equity

563,557—(2,492)——(51,124)——

62,249———554,924

RMB

948,479(290)—

19,334

6,057(61,912)

109—

62,249157(1,229)(13,466)

937,470

RMB

124,059

(764)

—

4,670

(38)

—

—

59

(15,358)—2(2,003)

137,491

RMB

Total
Retained shareholders’ Noncontrolling
equityinterests
earnings

1,072,538(1,054)—24,004

6,019(61,912)109

59

46,891157(1,227)(15,469)

1,074,961

RMB

Total
equityFiscal Year 2023 Annual Report

285

(274)

—
1

—

20,526,017,712

416,880—511

25,134(3,987)(13,990)

11

—

—

—

(1,031)

—

—

—

—

—

—

—

—

—

—

—

—

—

410,506

RMB
1

RMB

Amount(28,763)

—

—

—

—

—

(26,542)

—

—

—

—

—

—

(2,221)

RMB

—

—

—

—

—

—

—

—

—

—

—

—

—

—

RMB

(49)

—

—

—

—

—

—

—

—

—

—

—

(3)

(46)

RMB

Treasury Restructuring Subscription
sharesreserve receivables

The accompanying notes form an integral part of these consolidated financial statements.

Balance as of March 31, 2023

OthersAppropriation to statutory reserves

6,400,000—

Amortization of compensation cost

Equity-settled donation expense—(1,039,252,920)

Transactions with noncontrolling interests

Repurchase and retirement of ordinary shares

201,547,520—

Acquisition of subsidiaries

Issuance of shares, including vesting of RSUs and early
exercised options and exercise of share options—

under hedge accounting and others

Net income for the year——

Share of additional paid-in capital and othercomprehensive income of equity method investees

Change in fair value of interest rate swaps—

21,357,323,112

Foreign currency translation adjustment

Balance as of April 1, 2022

Share

Additional
paid-in
capitalOrdinary shares

Accumulated othercomprehensive income (loss)

RMB

12,977

—

3,138

—

—

—

—

—

—

—

—

—

—

9,839

(10,476)

—

—

—

—

—

—

—

—

—

—

1,472

21,236(33,184)(in millions, except per share data)

RMB

59

—

—

—

—

—

—

—

—

—

10

21

1

27

RMB

Unrealized
gains (losses)
on interest
Cumulative
rate swaps
Statutory translationand others
reserves adjustments

Consolidated Statements of Changes in Shareholders’ Equity

599,028—(3,138)———(34,174)——

72,783———

563,557

RMB

989,657

(274)

—

511

25,134(3,987)(74,706)

11—

72,78310462

21,234

948,479

RMB

123,406(1,342)

—

—

5,462

1,673

—

—

38

(7,575)

—

(4)

1,095

124,059

RMB

Total
Retained shareholders’ Noncontrolling
equityinterests
earnings

1,113,063(1,616)—511

30,596(2,314)(74,706)11

38

65,20810458

22,329

1,072,538

RMB

Total
equityConsolidated Statements of Cash Flows
Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$
(Note 2(a))(in millions)
Cash flows from operating activities:
143,284

47,07965,573

9,548 Revaluation (gain) loss on previously held
equity interest(8,759)2—— (Gain) Loss on disposals of equity method
investees

(644)

32

72

11

 (Gain) Loss related to equity securities andother investments(57,930)

20,47914,911

2,171

Change in fair value of other assets and liabilities

250

1,478

(1,522)(222)

Gain on disposals of subsidiaries(383)(1,163)(14)(2) Depreciation and impairment of property and equipment, and operating lease cost relating toland use rights

26,38927,80827,7994,047 Amortization of intangible assets and licensed
copyrights

21,52020,257

19,1392,787

50,12023,97130,831

4,489

—

—

511

75

 Impairment of equity securities and otherinvestments

7,481

8,922

13,327

1,941 Impairment of goodwill, intangible assets andlicensed copyrights

1,688

25,886

6,658

970

75

132

(163)

(24)

Share of results of equity method investees(6,984)(14,344)

8,063

1,174

Deferred income taxes

3,236(1,369)(1,717)(250)

Allowance for doubtful accounts

1,935

1,739

2,802

408

(43,611)(32,496)

8,605

1,253

4,026

(3,526)(9,214)(1,342)74,554

13,327

11,1591,625

Merchant deposits

1,377

(270)

(1,450)(211)

Deferred revenue and customer advances

14,162

4,815

4,382

638

231,786

142,759

199,752

29,086

Net income
Adjustments to reconcile net income to net cash
provided by operating activities:

Share-based compensation expense
Equity-settled donation expense Loss (Gain) on disposals of property and equipment

Changes in assets and liabilities, net of effects ofacquisitions and disposals: Prepayments, receivables and other assets, andlong-term licensed copyrights
Income tax payable Accrued expenses, accounts payable andother liabilities

Net cash provided by operating activities

The accompanying notes form an integral part of these consolidated financial statements.
286

Alibaba Group Holding Limited

Consolidated Statements of Cash Flows

Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$
(Note 2(a))(in millions)
Cash flows from investing activities:(114,826)(106,984)(61,086)(8,895)——(40,794)(5,940)

(803)

(448)

1,282

187

Acquisitions of equity securities and otherinvestments, and other assets(57,514)(39,378)(17,818)(2,595)

Disposals of equity securities and otherinvestments, and other assets

7,280

14,543

21,7383,165

Acquisitions of equity method investees(18,661)(9,383)(4,552)

(663)

2,538

936

1,001

146

369

—

—

—

Land use rights, property and equipment(41,450)(53,309)(34,330)(4,999)Intangible assets(1,735)

(15)

(22)

(3)

—

—

644

94

(19,137)(4,087)(1,204)(175)

Deconsolidation and disposal of subsidiaries, netof cash proceeds

(126)

(11)

(5)

(1)

Loans to employees, net of repayments

(129)

(456)

(360)

(52)

(244,194)(198,592)(135,506)(19,731)

Increase in short-term investments, net
Increase in other treasury investments, net
Settlement of forward exchange contracts, net

Disposals and distributions of equity method
investees
Disposals of intellectual property rights and assets
Acquisitions of:

Disposals of property and equipment
Cash paid for business combinations, net ofcash acquired

Net cash used in investing activities

The accompanying notes form an integral part of these consolidated financial statements.
Fiscal Year 2023 Annual Report287

Consolidated Statements of Cash Flows

Year ended March 31,
2021

2022

RMB

RMB

2023
RMB

US$
(Note 2(a))(in millions)
Cash flows from financing activities:
Issuance of ordinary shares

175

109

11

2

Repurchase of ordinary shares(773)(61,225)(74,746)(10,884)(11,218)(7,406)(2,511)(366)

Dividends paid by non-wholly owned subsidiaries
to noncontrolling interests

(471)

(881)

(489)

(71)

Contingent consideration payments made after
a business combination

—

—

(144)

(21)

Capital injection from noncontrolling interests

11,02012,240918

133Proceeds from bank borrowings and otherborrowings, net of upfront fee payment fora syndicated loan

6,402

9,427

22,790

3,319

Repayment of bank borrowings(7,061)(7,128)(11,448)(1,667)

Proceeds from unsecured senior notes, net ofdebt issuance cost

32,008————(9,585)——

Net cash provided by (used in) financing activities

30,082(64,449)(65,619)(9,555)

Effect of exchange rate changes on cash andcash equivalents, restricted cash andescrow receivables(7,187)(8,834)

3,530

514

Increase (Decrease) in cash and cash equivalents,
restricted cash and escrow receivables

10,487(129,116)

2,157

314

Cash and cash equivalents, restricted cash andescrow receivables at beginning of year

345,982

356,469

227,353

33,105

Cash and cash equivalents, restricted cash andescrow receivables at end of year

356,469

227,353

229,51033,419Acquisition of additional equity interests in
non-wholly owned subsidiaries

Repayment of unsecured senior notes

The accompanying notes form an integral part of these consolidated financial statements.
288

Alibaba Group Holding Limited

Consolidated Statements of Cash Flows

Supplemental disclosures of cash flow information:
Payment of income tax
Income tax paid was RMB20,898 million, RMB31,733 million and RMB26,476 million for the years ended March
31, 2021, 2022 and 2023, respectively.

Payment of interest
Interest paid was RMB4,101 million, RMB4,886 million and RMB5,637 million for the years ended March 31, 2021,
2022 and 2023, respectively.

Business combinations
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
Cash paid for business combinations
Cash acquired in business combinations(27,014)(5,282)(1,254)

7,877

1,195

50

(19,137)(4,087)(1,204)

The accompanying notes form an integral part of these consolidated financial statements.
Fiscal Year 2023 Annual Report289

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

1.

Organization and principal activities
Alibaba Group Holding Limited (the “Company”) is a limited liability company, which was incorporated
in the Cayman Islands on June 28, 1999. The Company is a holding company and conducts its businesses
primarily through its subsidiaries. In these consolidated financial statements, where appropriate, the term“Company” also refers to its subsidiaries as a whole. The Company provides the technology infrastructure
and marketing reach to help merchants, brands, retailers and other businesses to leverage the power of
new technology to engage with their users and customers and operate in a more efficient way.
The Company has seven operating and reportable segments, namely China commerce, Internationalcommerce, Local consumer services, Cainiao, Cloud, Digital media and entertainment, and Innovation
initiatives and others segments. An ecosystem has developed around the Company’s platforms andbusinesses that consists of consumers, merchants, brands, retailers, third-party service providers,strategic alliance partners and other businesses. As of March 31, 2023, the Company was in the process of
implementing a new organizational and governance structure.
The Company’s China commerce segment is comprised of (i) China commerce retail businesses and (ii)
China commerce wholesale businesses. China commerce retail businesses consist of Taobao, the digitalretail platform and Tmall, the third-party online and mobile commerce platform, Taobao Deals, which
offers consumers value-for-money products, Taocaicai, which provides next-day pick-up services forgroceries and fresh goods at neighborhood pick-up points, as well as direct sales businesses, including
Sun Art, Tmall Supermarket and Freshippo, which the Company has developed a digital commerce
infrastructure that offers an upgraded consumer experience by integrating online and offline capabilities
for the Company’s marketplaces and direct sales businesses. China commerce wholesale businesses
include 1688.com, the integrated domestic wholesale marketplace.
The Company’s International commerce segment is comprised of (i) International commerce retailbusinesses and (ii) International commerce wholesale businesses. International commerce retailbusinesses include Lazada, the e-commerce platform in Southeast Asia, AliExpress, the international retailmarketplace, Trendyol, the e-commerce platform in Türkiye, and Daraz, the e-commerce platform acrossSouth Asia with key markets in Pakistan and Bangladesh. International commerce wholesale businesses
include Alibaba.com, the integrated international online wholesale marketplace.
The Company’s Local consumer services segment is comprised of (i) “To-Home” businesses which include
Ele.me, the local services and on-demand delivery platform and (ii) “To-Destination” businesses which
include Amap, the provider of mobile digital map, navigation and real-time traffic information in China,
Fliggy, the online travel platform, and Koubei, the restaurant and local services guide platform for in-store
consumption.
The Company’s Cainiao segment is comprised of Cainiao Network, which leverages the Company’s selfdeveloped and the Company’s logistics partners’ capacity and capabilities, and offers domestic andinternational one-stop-shop logistics services and supply chain management solutions, fulfilling various
logistics needs of merchants and consumers at scale.
The Company’s Cloud segment is comprised of Alibaba Cloud, a cloud business that offers a complete
suite of cloud services, including proprietary servers, computing, storage, network, security, database, bigdata, container, machine learning, and model training and inference, as well as DingTalk, the intelligent
collaboration workplace and application development platform that offers new ways of working, sharing
and collaboration for modern enterprises and organizations.

290

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

1.

Organization and principal activities (Continued)
The Company’s Digital media and entertainment segment leverages the Company’s deep consumer
insights to serve the broader interests of consumers through the Company’s key distribution platforms,
including Youku, and the Company’s other diverse content platforms, including Alibaba Pictures, thatprovide online videos, films, live events, news feeds and literature, among others. In addition, the Digital
media and entertainment segment also includes Lingxi Games, a China’s digital interactive entertainment
service provider, specializing in the development, operation and licensed publishing of mobile games andproviding a professional distribution and service platform for both players and developers.
The Company’s Innovation initiatives and others segment includes businesses such as DAMO Academy,
the global research program in cutting-edge technologies that aim to integrate and speed up knowledge
exchange between science and industry, Tmall Genie, which provides a selection of IoT-enabled smart
home appliances, and others.
The Company’s American depositary shares (“ADSs”) have been listed on the New York Stock Exchange(“NYSE”) under the symbol of “BABA” and the Company’s ordinary shares have been listed on the Hong
Kong Stock Exchange (“HKSE”) under the codes “9988 (HKD Counter)” and “89988 (RMB Counter).”2.

Summary of significant accounting policies(a) Basis of presentation
The accompanying consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”).
Translations of balances in the consolidated balance sheet, consolidated income statement,
consolidated statement of comprehensive income and consolidated statement of cash flows from
RMB into the US$ as of and for the year ended March 31, 2023 are solely for the convenience of thereaders and are calculated at the rate of US$1.00 = RMB6.8676, representing the exchange rate set
forth in the H.10 statistical release of the Federal Reserve Board on March 31, 2023. No representation
is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at
this rate, or at any other rate.

(b) Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires
the Company to make estimates and assumptions that affect the reported amounts of assets andliabilities, disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. The
Company bases its estimates on historical experience and on various other assumptions that are
believed to be reasonable, the results of which form the basis for making judgments about thecarrying values of assets and liabilities. The Company considered the economic implications of
the COVID-19 pandemic on its significant judgments and estimates. Given the impact and other
unforeseen effects on the global economy from the COVID-19 pandemic, these estimates required
increased judgment, and actual results could differ from these estimates.

Fiscal Year 2023 Annual Report291

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(c) Consolidation
The consolidated financial statements include the financial statements of the Company and its
subsidiaries, which include the PRC-registered entities directly or indirectly owned by the Company(“WFOEs”) and variable interest entities (“VIEs”) over which the Company is the primary beneficiaryfor accounting purposes only. All transactions and balances among the Company, its subsidiaries andthe VIEs have been eliminated upon consolidation. The results of subsidiaries acquired or disposed ofare recorded in the consolidated income statements from the effective date of acquisition or up to theeffective date of disposal, as appropriate.
A subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of thevoting power; or (ii) the Company has the power to appoint or remove the majority of the membersof the board of directors or to cast a majority of votes at the meetings of the board of directors or
to govern the financial and operating policies of the investee pursuant to a statute or under anagreement among the shareholders or equity holders. A VIE is required to be consolidated by the
primary beneficiary of the entity if the equity holders in the entity do not have the characteristics
of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
Due to legal restrictions on foreign ownership and investment in, among other areas, valueadded telecommunications services, which include the operations of Internet content providers,the Company operates its Internet businesses and other businesses in which foreign investment
is restricted or prohibited in the PRC through various contractual arrangements with VIEs that areincorporated and owned by PRC citizens or by PRC entities owned and/or controlled by PRC citizens.
Specifically, these representative PRC domestic companies are Zhejiang Taobao Network Co., Ltd.,
Zhejiang Tmall Network Co., Ltd., Hangzhou Alibaba Advertising Co., Ltd., Hangzhou Ali Venture
Capital Co., Ltd., Shanghai Rajax Information Technology Co., Ltd., Alibaba Cloud Computing Ltd.
and Alibaba Culture Entertainment Co., Ltd. The registered capital of these PRC domestic companies
was funded by the Company through loans extended to the equity holders of these PRC domestic
companies.
The Company has entered into certain exclusive services agreements with these PRC domestic
companies, which entitle it to receive substantially all of the profits of the VIEs. In addition, theCompany has entered into certain agreements with the equity holders of these PRC domestic
companies, including loan agreements that require them to contribute registered capital to those
PRC domestic companies, exclusive call option agreements to acquire the equity interests in thesecompanies when permitted by the PRC laws, rules and regulations, equity pledge agreements ofthe equity interests held by those equity holders, and proxy agreements that irrevocably authorize
individuals designated by the Company to exercise the equity owner’s rights over these PRC domestic
companies.

292

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(c) Consolidation (Continued)
Details of the typical structure of the Company’s representative VIEs are set forth below:

Loan agreements
Pursuant to the relevant loan agreements, the respective WFOEs have granted loans to the equity
holders of the VIEs, which may only be used for the purpose of its business operation activities
agreed by the WFOEs or the acquisition of the relevant VIEs. The WFOEs may require acceleration of
repayment at their absolute discretion. When the equity holders of the VIEs make early repaymentof the outstanding amount, the WFOEs or a third-party designated by the WFOEs may purchase theequity interests in the VIEs at a price equal to the outstanding amount of the loan, subject to any
applicable PRC laws, rules and regulations. The equity holders of the VIEs undertake not to enter into
any prohibited transactions in relation to the VIEs, including the transfer of any business, material
assets or equity interests in the VIEs to any third party.

Exclusive call option agreements
The equity holders of the VIEs have granted the WFOEs exclusive call options to purchase their equity
interest in the VIEs at an exercise price equal to the higher of (i) the paid-in registered capital in the
VIEs; and (ii) the minimum price as permitted by applicable PRC laws. Each relevant VIE has further
granted the relevant WFOE an exclusive call option to purchase its assets at an exercise price equal
to the book value of the assets or the minimum price as permitted by applicable PRC laws, whicheveris higher. Certain VIEs and their equity holders will also jointly grant the WFOEs (A) exclusive call
options to request the VIEs to decrease their registered capital at an exercise price equal to the higherof (i) the paid-in registered capital in the VIEs and (ii) the minimum price as permitted by applicable
PRC laws (the “Capital Decrease Price”), and (B) exclusive call options to subscribe for any increased
capital of the VIEs at a price equal to the Capital Decrease Price, or the sum of the Capital Decrease
Price and the unpaid registered capital, if applicable, as of the capital decrease. The WFOEs may
nominate another entity or individual to purchase the equity interest or assets, or to subscribe forthe increased capital, if applicable, under the call options. Execution of each call option shall not
violate the applicable PRC laws, rules and regulations. Each equity holder of the VIE has agreed thatthe following amounts, to the extent in excess of the original registered capital that they contributed
to the VIE (after deduction of relevant tax expenses), belong to and shall be paid to the WFOEs: (i)proceeds from the transfer of its equity interests in the VIE, (ii) proceeds received in connection with acapital decrease in the VIE, and (iii) distributions or liquidation residuals from the disposal of its equity
interests in the VIE upon termination or liquidation. Moreover, any profits, distributions or dividends(after deduction of relevant tax expenses) received by the VIEs also belong to and shall be paid to the
WFOEs. The exclusive call option agreements remain in effect until the equity interest or assets thatare the subject of these agreements are transferred to the WFOEs.

Proxy agreements
Pursuant to the relevant proxy agreements, the equity holders of the VIEs irrevocably authorize any
person designated by the WFOEs to exercise their rights of the equity holders of the VIEs, including
without limitation the right to vote and appoint directors.

Fiscal Year 2023 Annual Report293Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(c) Consolidation (Continued)
Equity pledge agreements
Pursuant to the relevant equity pledge agreements, the equity holders of the VIEs have pledged
all of their interests in the equity of the VIEs as a continuing first priority security interest in favor of
the corresponding WFOEs to secure the outstanding amounts advanced under the relevant loan
agreements described above and to secure the performance of obligations by the VIEs and/or theequity holders under the other structure contracts. Each WFOE is entitled to exercise its right todispose of the pledged interests in the equity of the VIE held by the equity holders and has priority inreceiving payment by the application of proceeds from the auction or sale of the pledged interests,
in the event of any breach or default under the loan agreement or other structure contracts, if
applicable. These equity pledge agreements remain in force until the later of (i) the full performanceof the contractual arrangements by the relevant parties, and (ii) the full repayment of the loans madeto the equity holders of the VIEs.

Exclusive services agreements
Each relevant VIE has entered into an exclusive services agreement with the respective WFOE,
pursuant to which the relevant WFOE provides exclusive services to the VIE. In exchange, the VIEpays a service fee to the WFOE, the amount of which shall be determined, to the extent permitted byapplicable PRC laws as proposed by the WFOE, resulting in a transfer of substantially all of the profits
from the VIE to the WFOE.

Other arrangements
The exclusive call option agreements described above also entitle the WFOEs to all profits,
distributions or dividends (after deduction of relevant tax expenses) to be received by the equity
holder of the VIEs, and the following amounts, to the extent in excess of the original registered capitalthat they contributed to the VIEs (after deduction of relevant tax expenses) to be received by each
equity holder of the VIEs: (i) proceeds from the transfer of its equity interests in the VIEs, (ii) proceeds
received in connection with a capital decrease in the VIEs, and (iii) distributions or liquidation
residuals from the disposal of its equity interests in the VIEs upon termination or liquidation.
Based on these contractual agreements, the Company believes that the PRC domestic companies as
described above should be considered as VIEs because the equity holders do not have significant
equity at risk nor do they have the characteristics of a controlling financial interest. Given that theCompany is the primary beneficiary of these PRC domestic companies, the Company believes thatthese VIEs should be consolidated based on the structure as described above.

294

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(c) Consolidation (Continued)
The following financial information of the consolidated VIEs and their subsidiaries was recorded in
the accompanying consolidated financial statements:
As of March 31,
2022

2023

RMB

RMB

(in millions)
Cash and cash equivalents and short-term investments

15,94324,057

Investments in equity method investees andequity securities and other investments

37,64740,597

Accounts receivable, net of allowance

22,00319,023

Amounts due from non-VIE subsidiaries of the Company

28,377

26,863

Property and equipment, net and intangible assets, net

8,608

9,779

Others25,92725,207

Total assets

138,505

145,526

Amounts due to non-VIE subsidiaries of the Company

89,27190,314

Accrued expenses, accounts payable and other liabilities

38,826

39,612

Deferred revenue and customer advances

13,57014,051

Total liabilities

141,667

143,977

Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
Revenue (i)93,029111,498

112,270

Net income

2,557

5,944

2,442

329

19,932

4,378

Net cash used in investing activities(18,445)(16,710)(2,044)

Net cash provided by (used in) financing activities

14,463(9,904)

1,386

Net cash provided by operating activities(i) Revenue generated by the VIEs are primarily from cloud services, digital media and entertainment services and others.

Fiscal Year 2023 Annual Report295Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(c) Consolidation (Continued)
The VIEs did not have any material related party transactions except for the related party transactions
which are disclosed in Note 22 or elsewhere in these consolidated financial statements, and thosetransactions with other subsidiaries that are not VIEs, which were eliminated upon consolidation.
Under the contractual arrangements with the VIEs, the Company has the power to direct activities of
the VIEs and can have assets transferred out of the VIEs under its control. Therefore, the Company
considers that there is no asset in any of the VIEs that can be used only to settle obligations of the
VIEs, except for registered capital and PRC statutory reserves. As all VIEs are incorporated as limited
liability companies under the Company Law of the corresponding jurisdictions, creditors of the VIEs do
not have recourse to the general credit of the Company for any of the liabilities of the VIEs.
Currently, there is no contractual arrangement which requires the Company to provide additional
financial support to the VIEs. However, as the Company conducts its businesses primarily basedon the licenses and approvals held by its VIEs, the Company has provided and will continue toprovide financial support to the VIEs considering the business requirements of the VIEs as well as theCompany’s own business objectives in the future.
Unrecognized revenue-producing assets held by the VIEs include certain Internet content provisionand other licenses, domain names and trademarks. The Internet content provision and other licenses
are required under relevant PRC laws, rules and regulations for the operation of Internet businesses
in the PRC, and therefore are integral to the Company’s operations. The Internet content provision
licenses require that core PRC trademark registrations and domain names are held by the VIEs thatprovide the relevant services.

(d) Business combinations and noncontrolling interests
The Company accounts for its business combinations using the acquisition method of accounting
in accordance with ASC 805 “Business Combinations.” The cost of an acquisition is measured as
the aggregate of the acquisition date fair value of the assets transferred to the sellers, liabilities
incurred by the Company and equity instruments issued by the Company. Transaction costs directly
attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities
assumed are measured separately at their fair values as of the acquisition date, irrespective of theextent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value ofthe noncontrolling interests and acquisition date fair value of any previously held equity interest in
the acquiree over (ii) the acquisition date amounts of the identifiable net assets of the acquiree isrecorded as goodwill. If the cost of acquisition is less than the acquisition date amounts of the net
assets of the subsidiary acquired, the difference is recognized directly in the consolidated income
statements. During the measurement period, which can be up to one year from the acquisitiondate, the Company may record adjustments to the assets acquired and liabilities assumed with thecorresponding offset to goodwill. Subsequent to the conclusion of the measurement period or final
determination of the values of assets acquired or liabilities assumed, whichever comes first, any
further adjustments are recorded in the consolidated income statements.

296

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(d) Business combinations and noncontrolling interests (Continued)
In a business combination achieved in stages, the Company re-measures the previously held equity
interest in the acquiree immediately before obtaining control at its acquisition date fair value and there-measurement gain or loss, if any, is recognized in the consolidated income statements.
When there is a change in ownership interests or a change in contractual arrangements that results ina loss of control of a subsidiary, the Company deconsolidates the subsidiary from the date control islost. Any retained noncontrolling investment in the former subsidiary is measured at fair value and isincluded in the calculation of the gain or loss upon deconsolidation of the subsidiary.
For the Company’s non-wholly owned subsidiaries, a noncontrolling interest is recognized toreflect the portion of equity that is not attributable, directly or indirectly, to the Company. When thenoncontrolling interest is contingently redeemable upon the occurrence of a conditional event, which
is not solely within the control of the Company, the noncontrolling interest is classified as mezzanine
equity. The Company accretes changes in the redemption value over the period from the date thatit becomes probable that the mezzanine equity will become redeemable to the earliest redemption
date using the effective interest method. Consolidated net income in the consolidated income
statements includes net income or loss attributable to noncontrolling interests and mezzanine equity
holders when applicable.
Net income attributable to mezzanine equity holders is included in net loss attributable tononcontrolling interests in the consolidated income statements, while it is excluded from theconsolidated statements of changes in shareholders’ equity. During the years ended March 31, 2021,
2022 and 2023, net income attributable to mezzanine equity holders amounted to RMB140 million,
RMB188 million and RMB365 million, respectively. The cumulative results of operations attributable tononcontrolling interests, along with adjustments for share-based compensation expense arising fromoutstanding share-based awards relating to subsidiaries’ shares, are also recorded as noncontrollinginterests on the Company’s consolidated balance sheets. Cash flows related to transactions with
noncontrolling interests are presented under financing activities in the consolidated statements ofcash flows.

(e) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided tothe chief operating decision maker (the “CODM”), which is comprised of certain members of theCompany’s management team. Prior to the quarter ended December 31, 2021, the Company had
four operating and reportable segments, namely Core commerce, Cloud computing, Digital media
and entertainment, and Innovation initiatives and others segments. Starting from the quarter
ended December 31, 2021, the CODM started to review information under a new reporting structure,and segment reporting has been updated to conform to this change, which also provides greatertransparency in the Company’s business progress and financial performance. Consequently,
the Company presents seven operating and reportable segments as set out in Notes 1 and 26 toreflect the change. As of March 31, 2023, the Company was in the process of implementing a neworganizational and governance structure. Following the implementation of the new organizational
structure, the segment reporting will be updated to reflect the new reporting structure that will be
reviewed by the CODM.

Fiscal Year 2023 Annual Report297Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(f)Foreign currency translation
The functional currency of the Company is US$. The Company’s subsidiaries with operations in
Chinese mainland, the Hong Kong Special Administrative Region of the PRC (“Hong Kong” or “HongKong S.A.R.”), the United States and other jurisdictions generally use their respective local currencies
as their functional currencies. When the Company determines that a subsidiary is operating in a highly
inflationary economy, the financial statements of this subsidiary shall be remeasured prospectively
as if the functional currency were the functional currency of its immediate parent company. The
reporting currency of the Company is RMB as the major operations of the Company are within the
PRC. The financial statements of the Company’s subsidiaries, other than the subsidiaries with thefunctional currency of RMB, are translated into RMB using the exchange rate as of the balance sheet
date for assets and liabilities and the average daily exchange rate for each month for income andexpense items. Translation gains and losses are recorded in accumulated other comprehensive
income or loss as a component of shareholders’ equity.
In the financial statements of the Company’s subsidiaries, transactions in currencies other than thefunctional currency are measured and recorded in the functional currency using the exchange ratein effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities thatare denominated in currencies other than the functional currency are translated into the functional
currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign
currency transactions are recorded in the consolidated income statements during the year in which
they occur.

(g) Revenue recognition
Revenue is principally comprised of customer management services revenue, membership fees,
logistics services revenue, cloud services revenue, sales of goods and other revenue. Revenue
represents the amount of consideration the Company is entitled to upon the transfer of promised
goods or services in the ordinary course of the Company’s activities and is recorded net of valueadded tax (“VAT”). Consistent with the criteria of ASC 606 “Revenue from Contracts with Customers”,
the Company recognizes revenue when performance obligations are satisfied by transferring control
of a promised good or service to a customer. For performance obligations that are satisfied at a point
in time, the Company also considers the following indicators to assess whether control of a promised
good or service is transferred to the customer: (i) right to payment, (ii) legal title, (iii) physicalpossession, (iv) significant risks and rewards of ownership and (v) acceptance of the good or service.
For performance obligations satisfied over time, the Company recognizes revenue over time bymeasuring the progress toward complete satisfaction of a performance obligation.
For revenue arrangements with multiple distinct performance obligations, each distinct performanceobligation is separately accounted for and the total consideration is allocated to each performanceobligation based on the relative standalone selling price at contract inception.

298

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(g) Revenue recognition (Continued)
The Company evaluates if it is a principal or an agent in a transaction to determine whether revenue
should be recorded on a gross or net basis. The Company is acting as the principal if it obtains control
over the goods and services before they are transferred to customers. Generally, when the Company
is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices,or has several but not all of these indicators, the Company acts as the principal and revenue isrecorded on a gross basis. Generally, when the Company is not primarily obligated in a transaction,
does not bear the inventory risk and does not have the ability to establish the price, the Company acts
as the agent and revenue is recorded on a net basis.
When services are exchanged or swapped for other services, revenue is recognized based on theestimated standalone selling price of services promised to customer if the fair value of the services
received cannot be reasonably estimated. The amount of revenue recognized for barter transactions
was not material for each of the periods presented.

Practical expedients and exemptions
The Company applies the practical expedient to not disclose the value of unsatisfied performanceobligations for contracts with an original expected duration of one year or less and contracts forwhich revenue is recognized at the amount to which the Company has the right to invoice for services
performed.
The Company applies the practical expedient to not adjust any of the transaction price for the timevalue of money for contracts where the period between the transfer of the promised goods or services
to the customer and payment by the customer is within one year.
Revenue recognition policies by type are as follows:(i)

Customer management services revenue
Within the Company’s China commerce and International commerce segments, the Company
provides the following customer management services to merchants on the Company’s retail
and wholesale marketplaces and certain third-party marketing affiliates’ websites:

Pay-for-performance (“P4P”) marketing services
P4P marketing services allow merchants to bid for keywords that match product or service
listings appearing in search results on the Company’s marketplaces. Merchants bid for
keywords through an online auction system. The positioning of the listings and the price for the
positioning are determined through an online auction system, which facilitates price discovery
through a market-based mechanism. In general, merchants prepay for P4P marketing services
and the related revenue is recognized when a user clicks their product or service listings as thisis the point of time when the merchants benefit from the marketing services rendered.

Fiscal Year 2023 Annual Report299Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(g) Revenue recognition (Continued)(i)

Customer management services revenue (Continued)

In-feed marketing services
In-feed marketing services allow merchants to bid to market to groups of consumers with similar
profiles that match product or service listings appearing in browser results on the Company’smarketplaces. Merchants bid for groups of consumers with similar profiles through an online
auction system. The positioning of the listings and the price for the positioning are determinedthrough an online auction system, which facilitates price discovery through a market-based
mechanism. In general, merchants prepay for in-feed marketing services and the related
revenue is recognized when a user clicks their product or service listings as this is the point oftime when the merchants benefit from the marketing services rendered.

Display marketing services
Display marketing services allow merchants to place advertisements on the Company’smarketplaces, at fixed prices or prices established by a market-based bidding system andin particular formats. In general, merchants need to prepay for display marketing which isaccounted for as customer advances and revenue is recognized either ratably over the period inwhich the advertisement is displayed as the merchants simultaneously consume the benefits as
the advertisement is displayed or when an advertisement is viewed by users, depending on thetype of marketing services selected by the merchants.
The Company also places P4P marketing services content and display marketing services
content through the third-party marketing affiliate program. A substantial portion of customer
management services revenue generated through the third-party marketing affiliate program
represented P4P marketing services revenue. In delivery of these customer management
services, the Company, through the third-party marketing affiliate program, places the P4P
marketing services content of the participating merchants on third-party online resources in
the forms of picture or text links through contextual relevance technology to match merchants’marketing content to the textual content of the third-party online resources and the users’
attributes based on the Company’s systems and algorithms. When the links on third-party online
resources are clicked, users are diverted to a landing page of the Company’s marketplaces
where listings of the participating merchant as well as similar products or services of othermerchants are presented. In limited cases, the Company may embed a search box for one ofits marketplaces on the third-party online resources, and when a keyword is input into thesearch box, the user will be diverted to the Company’s marketplaces where search results arepresented. Revenue is recognized when the users further click on the P4P marketing content
on the landing pages. The Company places display marketing content on third-party online
resources in a similar manner. In general, merchants need to prepay for display marketing
which is accounted for as customer advances and revenue is recognized ratably over the period
in which the advertisement is displayed as merchants simultaneously consume the benefits as
the advertisement is displayed.

300

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(g) Revenue recognition (Continued)(i)

Customer management services revenue (Continued)

Display marketing services (Continued)
P4P marketing services revenue, in-feed marketing services revenue, as well as display
marketing services revenue generated on the Company’s marketplaces or through the thirdparty marketing affiliate program are recorded on a gross basis when the Company is theprincipal to the merchants in the arrangements. For third-party marketing affiliates withwhom the Company has an arrangement to share the revenue, traffic acquisition cost is also
recognized at the same time if the P4P marketing content on the landing page clicked by theusers is from merchants participating in the third-party marketing affiliate program.

Commissions on transactions
The Company earns commissions from merchants when transactions are completed on
Tmall and certain other retail marketplaces of the Company. The commissions are generally
determined as a percentage based on the value of merchandise being sold by the merchants.
The commission revenue includes merchant deposits that are expected to be non-refundable
and is accounted for as variable consideration (Note 2(ac)), which is estimated at contract
inception and updated at the end of each reporting period if additional information becomes
available. Revenue related to commissions is recognized in the consolidated income statements
based on the expected value when the performance obligation is satisfied. Adjustments to theestimated variable consideration related to prior reporting periods were not material for each of
the periods presented.

Taobaoke services
In addition, the Company offers the Taobaoke program which generates commissions frommerchants for transactions completed by consumers sourced from certain third-party marketing
affiliates’ websites and mobile apps. The commission rates on Taobaoke are set by themerchants. The Company’s commission revenue is recognized at the time when the underlying
transaction is completed. The Company evaluates if it is a principal or an agent in a transaction
to determine whether the commission revenue is recognized on a gross or net basis. When
the Company is the agent of the arrangement (such as arrangements where the Company
does not have latitude in establishing prices or does not have inventory risk), the commission
revenue is recorded on a net basis. When the Company is the principal of the arrangement(such as arrangements where the Company is obligated to pay for website inventory costs in
fixed amounts to third-party marketing affiliates regardless of whether commission revenue
is generated from these marketing affiliates), the commission revenue is recorded on a grossbasis.

Fiscal Year 2023 Annual Report301Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(g) Revenue recognition (Continued)(ii)

Membership fees
The Company earns membership fees revenue from wholesale sellers in respect of the sale ofmembership packages and subscriptions that allow them to host premium storefronts on the
Company’s wholesale marketplaces, as well as the provision of other value-added services,and from customers in respect of the sale of membership packages which allow them to accesspremium content on Youku’s paid content platforms. These service fees are paid in advancefor a specific contracted service period. All these fees are initially deferred as deferred revenue
and customer advances when received and revenue is recognized ratably over the term of therespective service contracts as the services are provided.

(iii) Logistics services revenue
The Company earns logistics services revenue from domestic and international one-stop-shop
logistics services and the supply chain management solutions provided by Cainiao Network and
Lazada as well as on-demand delivery services provided by Ele.me. Revenue is recognized at
the time when the logistics services are provided.

(iv) Cloud services revenue
The Company earns cloud services revenue from the provision of cloud services such as
proprietary servers, computing, storage, network, security, database, big data, container,machine learning, and model training and inference. Certain cloud services allow customers touse hosted software over the contract period without taking possession of the software. These
cloud services are mainly charged on either a subscription or consumption basis. Revenue
related to cloud services charged on a subscription basis is recognized ratably over the contract
period. Revenue related to cloud services charged on a consumption basis, such as the quantityof storage or elastic computing services used in a period, is recognized based on the customer
utilization of the resources.
For the provision of hybrid cloud services, which include hardware, software licenses, software
installation services, application development and maintenance services, each distinct
performance obligation identified is separately accounted for and the total consideration isallocated to each performance obligation based on the relative standalone selling prices atcontract inception. Revenue for each performance obligation is recognized when the control ofthe promised goods or services is transferred to the customer.

302

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(g) Revenue recognition (Continued)(v)

Sales of goods
Revenue from the sales of goods is mainly generated from Sun Art, Tmall Supermarket andFreshippo. Revenue from the sales of goods is recognized when the control over the promised
goods is transferred to customers. Receipts of fees in respect of all other incidental goods orservices provided by the Company that are distinct performance obligations are recognizedwhen the control of the underlying goods or services is transferred to the customers. The
amounts relating to these incidental services are not material to the Company’s total revenue foreach of the periods presented.

(h) Cost of revenue
Cost of revenue consists primarily of cost of inventories, logistics costs, expenses associated with theoperation of the Company’s mobile platforms and websites (such as depreciation and maintenanceexpenses for servers and computers, call centers and other equipment, and bandwidth and colocation fees), staff costs and share-based compensation expense, traffic acquisition costs, content
costs, payment processing fees and other related incidental expenses that are directly attributable to
the Company’s principal operations.

(i)

Product development expenses
Product development expenses consist primarily of staff costs and share-based compensation
expense for research and development personnel and other expenses that are directly attributable tothe development of new technologies and products for the businesses of the Company, such as thedevelopment of the Internet infrastructure, applications, operating systems, software, databases andnetworks.
The Company expenses all costs that are incurred in connection with the planning andimplementation phases of development and costs that are associated with repair or maintenanceof the existing websites or the development of software and website content. Costs incurred in thedevelopment phase are capitalized and amortized over the estimated product life. However, as
the amount of costs qualified for capitalization has been insignificant, all website and softwaredevelopment costs have been expensed as incurred.

Fiscal Year 2023 Annual Report303

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(j)Sales and marketing expenses
Sales and marketing expenses consist primarily of online and offline advertising expenses, promotion
expenses, staff costs and share-based compensation expense, sales commissions and other related
incidental expenses that are incurred directly to attract or retain consumers and merchants.
The Company expenses the costs of producing advertisements at the time production occurs, andexpenses the costs of delivering advertisements in the period in which the advertising space or
airtime is used. Advertising and promotional expenses totaled RMB57,073 million, RMB91,103 million
and RMB76,818 million during the years ended March 31, 2021, 2022 and 2023, respectively.

(k) Share-based compensation
Share-based awards granted are measured at fair value on grant date and the value is recognized
as share-based compensation expense (i) immediately at the grant date if no vesting conditions
are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over therequisite service period. The fair values of restricted share units (“RSUs”) and restricted shares are
determined with reference to the fair value of the underlying shares and the fair value of shareoptions is generally determined using the Black-Scholes valuation model. Share-based compensation
expense, when recognized, is charged to the consolidated income statements with the corresponding
entry to additional paid-in capital, liability or noncontrolling interests as disclosed in Note 2(d).
On each measurement date, the Company reviews internal and external sources of information toassist in the estimation of various attributes to determine the fair value of the share-based awards,
including the fair value of the underlying shares, expected life and expected volatility. The Company
recognizes the impact of any revisions to the original forfeiture rate assumptions in the consolidated
income statements, with a corresponding adjustment to equity or liability.

(l)Other employee benefits
The Company’s subsidiaries in the PRC participate in a government-mandated multi-employer
defined contribution plan pursuant to which certain retirement, medical and other welfare benefits
are provided to employees. The relevant labor regulations require the Company’s subsidiaries in
the PRC to pay the local labor and social welfare authorities monthly contributions based on theapplicable benchmarks and rates stipulated by the local government. The relevant local labor andsocial welfare authorities are responsible for meeting all retirement benefits obligations and theCompany’s subsidiaries in the PRC have no further commitments beyond their monthly contributions.
The contributions to the plan are expensed as incurred. The Company also makes payments to otherdefined contribution plans and defined benefit plans for the benefit of employees employed bysubsidiaries outside of the PRC.
During the years ended March 31, 2021, 2022 and 2023, contributions to the plans amounting to
RMB8,223 million, RMB13,086 million and RMB13,953 million, respectively, were charged to theconsolidated income statements. Amounts contributed to defined benefit plans during the years
ended March 31, 2021, 2022 and 2023 were insignificant.

304

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(m) Income taxes
The Company accounts for income taxes using the liability method, under which deferred income tax
is recognized for future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax of a change in tax rates is recognized as income or expense in the period that includes theenactment date. Valuation allowance is provided on deferred tax assets to the extent that it is more
likely than not that the asset will not be realizable in the foreseeable future.
Deferred tax is recognized on the undistributed earnings of subsidiaries, which are presumed tobe distributed to parent companies, unless there is sufficient evidence that the subsidiaries haveinvested or will invest the undistributed earnings permanently in the domestic jurisdictions or theearnings will not be subject to tax upon the subsidiaries’ liquidation. Deferred tax is recognized for
temporary differences in relation to certain investments in equity method investees, equity securities
and other investments.
The Company adopts ASC 740 “Income Taxes” which prescribes a more likely than not thresholdfor financial statement recognition and measurement of a tax position taken or expected to betaken in a tax return. It also provides guidance on derecognition of income tax assets and liabilities,classification of current and deferred income tax assets and liabilities, accounting for interest andpenalties associated with tax positions, accounting for income taxes in interim periods and income
tax disclosures. The Company did not have significant unrecognized uncertain tax positions or any
unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of and forthe years ended March 31, 2021, 2022 and 2023.
In April 2021, the Company adopted ASU 2019-12, “Income Taxes (Topic 740): Simplifying the
Accounting for Income Taxes”. ASU 2019-12 simplifies various aspects related to accounting forincome taxes, removing certain exceptions to the general principles in ASC 740 and also clarifies andamends existing guidance to improve consistent application. The adoption of ASU 2019-12 did nothave a material impact on the Company’s financial position, results of operations and cash flows.

Fiscal Year 2023 Annual Report305Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(n) Government grants
Government grants, which mainly represent amounts received from central and local governments inconnection with the Company’s investments in local business districts and contributions to technology
development, are recognized as income in other income, net or as a reduction of specific costs
and expenses for which the grants are intended to compensate. Such amounts are recognized in
the consolidated income statements upon receipt and when all conditions attached to the grants
are fulfilled. For the years ended March 31, 2021, 2022 and 2023, government grants recorded asa reduction of specific costs and expenses were RMB4,532 million, RMB6,028 million and RMB5,889
million, respectively. For the years ended March 31, 2021, 2022 and 2023, government grants
recorded as other income, net were RMB1,589 million, RMB1,661 million and RMB1,857 million,
respectively. As of March 31, 2022 and 2023, government grants recorded as other liabilities were
RMB1,071 million and RMB1,687 million, respectively.
Government grants related to assets are recognized as a reduction of the carrying amount of therelated asset when all conditions attached to the grants are fulfilled and are recognized in the
consolidated income statements as a reduction of related depreciation or amortization expense overthe estimated useful live of the related asset on a straight-line method.
In April 2022, the Company adopted ASU 2021-10, “Government Assistance (Topic 832): Disclosures
by Business Entities about Government Assistance”, which provides guidance on the disclosure oftransactions with a government that are accounted for by applying a grant or contribution accounting
model by analogy. The adoption of this guidance did not have a material impact on the financial
position, results of operations and cash flows.

(o) Leases
The Company determines if an arrangement is a lease at inception. Leases that transfer substantiallyall of the benefits and risks incidental to the ownership of assets are accounted for as finance leases
as if there was an acquisition of an asset and incurrence of an obligation at the inception of thelease. All other leases are accounted for as operating leases. The Company has no significant financeleases.
The Company recognizes lease liabilities and corresponding right-of-use assets on the balance
sheet for leases. Operating lease right-of-use assets are included in non-current prepayments,
receivables and other assets (Note 13), and operating lease liabilities are included in current accrued
expenses, accounts payable and other liabilities and other non-current liabilities (Note 19) on the
consolidated balance sheets. Operating lease right-of-use assets and operating lease liabilities are
initially recognized based on the present value of future lease payments at lease commencement.
The operating lease right-of-use asset also includes any lease payments made prior to leasecommencement and the initial direct costs incurred by the lessee and is recorded net of any lease
incentives received. As the interest rates implicit in most of the leases are not readily determinable,
the Company uses the incremental borrowing rates based on the information available at leasecommencement to determine the present value of the future lease payments. Operating lease
expenses are recognized on a straight-line basis over the term of the lease.
The Company elected to combine the lease and non-lease components for leases of certain asset
classes such as shops and malls and equipment leases. Lease and non-lease components for leasesof other asset classes are accounted for separately. The Company also elected not to recognize shortterm leases with an initial lease term of twelve months or less.

306

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(p) Cash and cash equivalents
The Company considers all short-term, highly liquid investments with an original maturity of threemonths or less, when purchased, to be cash equivalents. Cash and cash equivalents primarily
represent bank deposits and fixed deposits with original maturities of less than three months.

(q) Short-term investments
Short-term investments consist primarily of investments in fixed deposits with original maturities
between three months and one year and certain investments in wealth management products,
certificates of deposits, marketable debt securities and other investments that the Company has theintention to redeem within one year.

(r) Accounts receivable
Accounts receivable represent the amounts that the Company has an unconditional right toconsideration. The Company maintains an allowance for doubtful accounts to reserve for potentially
uncollectible receivable amounts which is estimated using the approach based on expected losses.
The allowance for doubtful accounts were RMB4,912 million and RMB6,174 million as of March
31, 2022 and 2023, respectively. The Company’s estimation of allowance for doubtful accounts
considers factors such as historical credit loss experience, age of receivable balances, current market
conditions, reasonable and supportable forecasts of future economic conditions, as well as an
assessment of receivables due from specific identifiable counterparties to determine whether thesereceivables are considered at risk or uncollectible. The Company assesses collectibility by poolingreceivables that have similar risk characteristics and evaluates receivables individually when specificreceivables no longer share those risk characteristics. For receivables evaluated individually, when
it is determined that foreclosure is probable or when the debtor is experiencing financial difficulty at
the reporting date and repayment is expected to be provided substantially through the operation orsale of collateral, expected credit losses are based on the fair value of the collateral at the reporting
date, adjusted for selling costs as appropriate.

(s) Inventories
Inventories mainly consist of merchandise available for sale. They are accounted for using theweighted average cost method and stated at the lower of cost and net realizable value. Net realizablevalue is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion and the estimated costs necessary to make the sale.

Fiscal Year 2023 Annual Report307Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(t)Equity securities and other investments
Equity securities and other investments represent the Company’s investments in equity securities thatare not accounted for under the equity method, as well as other investments which primarily consistof debt investments.

(i)

Equity securities
Equity securities not accounted for using the equity method are carried at fair value withunrealized gains and losses recorded in the consolidated income statements, according to ASC
321 “Investments — Equity Securities”.
The Company elected to record a majority of equity investments in privately held companies
using the measurement alternative at cost, less impairment, with subsequent adjustments forobservable price changes resulting from orderly transactions for identical or similar investmentsof the same issuer.
Equity investments in privately held companies accounted for using the measurement
alternative are subject to periodic impairment reviews. The Company’s impairment analysis
considers both qualitative and quantitative factors that may have a significant effect on the fairvalue of these equity securities, including consideration of the impact of the COVID-19 pandemic
and Russia-Ukraine conflict.
In computing realized gains and losses on equity securities, the Company determines cost basedon amounts paid using the average cost method. Dividend income is recognized when the rightto receive the payment is established.

(ii)

Debt investments
Debt investments consist of investments in debt securities and loan investments which areaccounted for at amortized cost or under the fair value option, which the Company has elected
for certain investments including convertible and exchangeable bonds subscribed. The fairvalue option permits the irrevocable election on an instrument-by-instrument basis at initialrecognition or upon an event that gives rise to a new basis of accounting for that instrument. The
investments accounted for under the fair value option are carried at fair value with unrealized
gains and losses recorded in the consolidated income statements. Interest income from debt
investments is recognized using the effective interest method which is reviewed and adjusted
periodically based on changes in estimated cash flows. Debt investments also include othertreasury investments which consist of investments in fixed deposits and certificates of deposits
with original maturities over one year for treasury purposes. The remaining maturities of thesetreasury investments held by the Company generally range from one to three years.

308

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(u) Investments in equity method investees
The Company applies the equity method to account for equity investments in common stock or insubstance common stock, according to ASC 323 “Investments — Equity Method and Joint Ventures”,
over which it has significant influence but does not own a controlling financial interest, unless the fairvalue option is elected for an investment.
An investment in in-substance common stock is an investment in an entity that has risk and reward
characteristics that are substantially similar to that entity’s common stock. The Company considers
subordination, risks and rewards of ownership and obligation to transfer value when determining
whether an investment in an entity is substantially similar to an investment in that entity’s common
stock.
Under the equity method, the Company’s share of the post-acquisition profits or losses of theequity method investee is recognized in the consolidated income statements and its share of
post-acquisition movements in accumulated other comprehensive income is recognized in othercomprehensive income. The Company records its share of the results of the equity method investees
on a one quarter in arrears basis. The excess of the carrying amount of the investment over theunderlying equity in net assets of the equity method investee generally represents goodwill andintangible assets acquired. When the Company’s share of losses of the equity method investee equals
or exceeds its interest in the equity method investee, the Company does not recognize further losses,
unless the Company has incurred obligations or made payments or guarantees on behalf of theequity method investee.
The Company continually reviews its investments in equity method investees to determine whether
a decline in fair value below the carrying value is other-than-temporary. The primary factors theCompany considers in its determination include the severity and the length of time that the fair valueof the investment is below its carrying value; the financial condition, the operating performance andthe prospects of the equity method investee; the geographic region, market and industry in which theequity method investee operates, including consideration of the impact of the COVID-19 pandemic
and Russia-Ukraine conflict; and other company specific information such as recent financing rounds
completed by the equity method investee. If the decline in fair value is deemed to be other-thantemporary, the carrying value of the investment in the equity method investee is written down to its
fair value.

(v) Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and any impairment
loss. Depreciation is computed using the straight-line method with no residual value based on theestimated useful lives of the various classes of assets, which range as follows:
Computer equipment and software

3–5 years

Furniture, office and transportationequipment and others

3–10 years

Buildings and other property

10–50 years

Property improvements

shorter of remaining lease period or estimated useful life

Fiscal Year 2023 Annual Report309

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(v) Property and equipment, net (Continued)
Construction in progress represents buildings and related premises under construction, which isstated at actual construction cost less any impairment loss. Construction in progress is transferred to
the respective category of property and equipment when completed and ready for its intended use.
Costs of repairs and maintenance are expensed as incurred and asset improvements are capitalized.
The cost and related accumulated depreciation of assets disposed of or retired are removed from theaccounts, and any resulting gain or loss is reflected in the consolidated income statements.

(w) Intangible assets other than licensed copyrights
Intangible assets mainly include those acquired through business combinations and purchased
intangible assets. Intangible assets acquired through business combinations are recognized asassets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion.
Intangible assets arising from business combinations are measured at fair value upon acquisition
using valuation techniques such as discounted cash flow analysis and ratio analysis with reference tocomparable companies in similar industries under the income approach, market approach and cost
approach. Major assumptions used in determining the fair value of these intangible assets include
future growth rates and weighted average cost of capital. Purchased intangible assets are initiallyrecognized and measured at cost upon acquisition. Separately identifiable intangible assets thathave determinable lives continue to be amortized over their estimated useful lives using the straightline method as follows:
User base and customer relationships

3–16 years

Trade names, trademarks and domain names

5–20 years

Developed technology and patents

2–7 years

Non-compete agreements

over the contracted term of up to 10 years(x) Licensed copyrights
Licensed copyrights related to titles to movies, television series, variety shows, animations and othervideo content acquired from external parties are carried at the lower of unamortized cost or fairvalue. The amortization period for the licensed content vary depending on the type of content, which
typically ranges from six months to ten years. Licensed copyrights are presented on the consolidatedbalance sheets as current assets under prepayments, receivables and other assets, or non-current
assets under intangible assets, net, based on estimated time of usage. Licensed copyrights are
generally amortized using an accelerated method based on historical viewership consumption
patterns. Estimates of the consumption patterns for licensed copyrights are reviewed periodically andrevised if necessary. For the years ended March 31, 2021, 2022 and 2023, amortization expenses inconnection with the licensed copyrights of RMB9,093 million, RMB8,610 million and RMB8,446 million
were recorded in cost of revenue within the Company’s Digital media and entertainment segment.

310

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(x) Licensed copyrights (Continued)
On a periodic basis, the Company evaluates the program usefulness of licensed copyrights pursuant
to the guidance in ASC 920 “Entertainment — Broadcasters”, which provides that the rights bereported at the lower of unamortized cost or fair value. When there is a change in the expected usageof licensed copyrights, the Company estimates the fair value of licensed copyrights to determine if
any impairment exists. The fair value of licensed copyrights is determined by estimating the expectedcash flows from advertising and membership fees, less any costs and expenses, over the remaining
useful lives of the licensed copyrights at the film-group level. Estimates that impact these cash flows
include anticipated levels of demand for the Company’s advertising services and the expected selling
prices of advertisements. For the years ended March 31, 2021, 2022 and 2023, impairment charges inconnection with the licensed copyrights of RMB1,688 million, RMB745 million and RMB1,133 million
were recorded in cost of revenue within the Company’s Digital media and entertainment segment.

(y) Goodwill
Goodwill represents the excess of the purchase consideration over the acquisition date amounts of
the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired
entity as a result of the Company’s acquisitions of interests in its subsidiaries. Goodwill is notamortized but is tested for impairment on an annual basis, or more frequently if events or changes
in circumstances indicate that it might be impaired. In accordance with ASC 350, the Company
may first assess qualitative factors to determine whether it is necessary to perform the quantitative
goodwill impairment test. In the qualitative assessment, the Company considers factors such as
macroeconomic conditions, industry and market considerations, overall financial performance of thereporting unit, and other specific information related to the operations, business plans and strategiesof the reporting unit, including consideration of the impact of the COVID-19 pandemic. Based on thequalitative assessment, if it is more likely than not that the fair value of a reporting unit is less thanthe carrying amount, the quantitative impairment test is performed. The Company may also bypass
the qualitative assessment and proceed directly to perform the quantitative impairment test.
The Company performs the quantitative impairment test by comparing the fair value of eachreporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds
its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting
unit exceeds its fair value, the amount by which the carrying amount exceeds the reporting unit’s fairvalue is recognized as impairment. Application of a goodwill impairment test requires significant
management judgment, including the identification of reporting units, allocation of assets, liabilities
and goodwill to reporting units, and determination of the fair value of each reporting unit.

(z) Impairment of long-lived assets other than goodwill and licensed copyrights
The Company reviews long-lived assets for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. Recoverability of assets tobe held and used is measured by a comparison of the carrying amount of an asset to the future
undiscounted net cash flows expected to be generated by the asset. If the assets are considered to be
impaired, the impairment recognized is measured by the amount by which the carrying amount of theassets exceeds the fair value of the assets. Impairment of long-lived assets other than goodwill andlicensed copyrights recognized for the years ended March 31, 2021, 2022 and 2023 was nil, RMB973
million and RMB1,922 million, respectively.

Fiscal Year 2023 Annual Report311

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(aa) Derivatives and hedging
All contracts that meet the definition of a derivative are recognized on the consolidated balance
sheets as either assets or liabilities and recorded at fair value. Changes in the fair value of derivatives
are either recognized periodically in the consolidated income statements or in other comprehensive
income depending on the use of the derivatives and whether they qualify for hedge accounting andare so designated as cash flow hedges, fair value hedges or net investment hedges.
To qualify for hedge accounting, the hedge relationship is designated and formally documented
at inception, detailing the particular risk management objective and strategy for the hedge (which
includes the item and risk that is being hedged), the derivative that is being used and how hedge
effectiveness is being assessed. A derivative has to be effective in accomplishing the objective ofoffsetting either changes in fair value or cash flows for the risk being hedged. The effectiveness ofthe hedging relationship is evaluated on a prospective and retrospective basis using qualitative andquantitative measures of correlation. Qualitative methods may include comparison of critical termsof the derivative to those of the hedged item. Quantitative methods include a comparison of thechanges in the fair value or discounted cash flow of the hedging instrument to that of the hedged
item. A hedging relationship is considered initially effective if the results of the hedging instrument
are within a ratio of 80% to 125% of the results of the hedged item.

Interest rate swaps
Interest rate swaps designated as hedging instruments to hedge against the cash flows attributableto recognized assets or liabilities or forecasted payments may qualify as cash flow hedges. The
Company entered into interest rate swap contracts to swap floating interest payments related tocertain borrowings for fixed interest payments to hedge the interest rate risk associated with certain
forecasted payments and obligations. All changes in the fair value of interest rate swaps that aredesignated and qualify as cash flow hedges are recognized in accumulated other comprehensive
income. Amounts in accumulated other comprehensive income are reclassified into earnings in thesame period during which the hedged forecasted transaction affects earnings.
The Company has elected the optional expedients under ASC 848 “Reference Rate Reform” for certain
existing interest rate swaps that are designated as cash flow hedges in the hedging relationshipdesignation and the assessment of probability of forecasted transaction and hedge effectiveness.

(ab) Bank borrowings and unsecured senior notes
Bank borrowings and unsecured senior notes are recognized initially at fair value, net of upfront
fees, debt discounts or premiums, debt issuance costs and other incidental fees. Upfront fees, debt
discounts or premiums, debt issuance costs and other incidental fees are recorded as a reduction of
the proceeds received and the related accretion is recorded as interest expense in the consolidated
income statements over the estimated term of the facilities using the effective interest method.

312

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(ac) Merchant deposits
The Company collects deposits representing an annual upfront service fee from merchants on Tmall
and AliExpress before the beginning of each calendar year. These deposits are initially recorded as
a liability by the Company. The deposits are refundable to a merchant if the level of sales volume
that is generated by that merchant on Tmall or AliExpress meets the target during the period. If thetransaction volume target is not met at the end of each calendar year, the relevant deposits will
become non-refundable. These merchant deposits are accounted for as variable consideration at an
amount that is estimated at contract inception. The estimate is updated at the end of each reporting
period and when there are changes in circumstances during the reporting period. Merchant deposits
are recognized as revenue in the consolidated income statements when the likelihood of refund tothe merchant is considered remote based on the patterns of sales volume generated by the merchantduring the reporting period.

(ad) Deferred revenue and customer advances
Deferred revenue and customer advances generally represent cash received from customers
that relate to goods or services to be provided in the future. Deferred revenue, mainly relating tomembership fees and cloud services revenue, is stated at the amount of service fees received less theamount previously recognized as revenue upon the provision of the respective services to customers.

(ae) Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, such as legal proceedings
and claims arising out of its business, that cover a wide range of matters. Liabilities for thecontingencies are recorded when it is probable that a liability has been incurred and the amount of
the liability can be reasonably estimated.
Certain conditions may exist as of the date the consolidated financial statements are issued, which
may result in a loss to the Company, but which will only be resolved when one or more future eventsoccur or fail to occur. The Company assesses these contingent liabilities, which inherently involves
judgment. In assessing loss contingencies related to legal proceedings that are pending against theCompany or unasserted claims that may result in legal proceedings, the Company, in consultation
with its legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims
as well as the perceived merits of the amount of relief sought or expected to be sought therein. If
the assessment of a contingency indicates that it is probable that a material loss has been incurred
and the amount of the liability can be estimated, the estimated liability would be accrued in the
consolidated financial statements. If the assessment indicates that a potentially material loss
contingency is not probable, or is probable but cannot be estimated, the nature of the contingent
liability, together with an estimate of the range of the reasonably possible loss, if determinable andmaterial, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, inwhich case the nature of the guarantee would be disclosed.

Fiscal Year 2023 Annual Report313

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

2.

Summary of significant accounting policies (Continued)(af) Treasury shares
The Company accounts for treasury shares using the cost method. Under this method, the cost
incurred to purchase the shares is recorded in the treasury shares account on the consolidatedbalance sheets. At retirement of the treasury shares, the ordinary shares account is charged only forthe aggregate par value of the shares. The excess of the acquisition cost of treasury shares over theaggregate par value is allocated between additional paid-in capital and retained earnings.

(ag) Statutory reserves
In accordance with the relevant regulations and their articles of association, subsidiaries of theCompany incorporated in the PRC are required to allocate at least 10% of their after-tax profit
determined based on the PRC accounting standards and regulations to the general reserve until
the reserve has reached 50% of the relevant subsidiary’s registered capital. Appropriations to theenterprise expansion fund and staff welfare and bonus fund are at the discretion of the respective
board of directors of the subsidiaries. These reserves can only be used for specific purposes and are
not transferable to the Company in the form of loans, advances or cash dividends. During the years
ended March 31, 2021, 2022 and 2023, appropriations to the general reserve amounted to RMB1,247
million, RMB2,492 million and RMB3,138 million, respectively. No appropriations to the enterprise
expansion fund and staff welfare and bonus fund have been made by the Company.

(ah) Newly adopted accounting standard updates
In April 2021, the Company adopted ASU 2020-01, “Investments — Equity Securities (Topic 321),
Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic
815) — Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the
FASB Emerging Issues Task Force)”, which clarifies the interactions of the accounting for certain equity
securities under ASC 321, investments accounted for under the equity method of accounting in ASC
323, and the accounting for certain forward contracts and purchased options accounted for under
ASC 815. The Company adopted this guidance prospectively and the adoption of this guidance did nothave a material impact on the financial position, results of operations and cash flows.
In April 2022, the Company adopted ASU 2020-06, “Debt — Debt with Conversion and Other Options(Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies
an issuer’s accounting for certain convertible instruments and the application of derivatives scope
exception for contracts in an entity’s own equity. This guidance also addresses how convertible
instruments are accounted for in the diluted earnings per share calculation and required enhanced
disclosures about the terms of convertible instruments and contracts in an entity’s own equity.
The adoption of this guidance did not have a material impact on the financial position, results ofoperations and cash flows.

314

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

3.

Recent accounting pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effectsof Reference Rate Reform on Financial Reporting” and issued subsequent amendments within ASU 202101 and ASU 2022-06 (collectively, including ASU 2020-04, “ASC 848”) in January 2021 and December 2022
respectively. ASC 848 provides optional expedients and exceptions for applying U.S. GAAP on contract
modifications and hedge accounting to contracts, hedging relationships, and other transactions thatreference LIBOR or another reference rate expected to be discontinued because of reference rate reform,
if certain criteria are met. These optional expedients and exceptions provided in ASC 848 are effective for
the Company from January 1, 2020 through December 31, 2024. The Company has elected the optional
expedients for certain existing interest rate swaps that are designated as cash flow hedges, which did
not have a material impact on the financial position, results of operations and cash flows. The Company
is evaluating the effects, if any, of the potential election of the other optional expedients and exceptions
provided in this guidance on the financial position, results of operations and cash flows.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting forContract Assets and Contract Liabilities from Contracts with Customers”, which provides guidance on
the acquirer’s accounting for acquired revenue contracts with customers in a business combination. The
amendments require an acquirer recognizes and measures contract assets and contract liabilities acquired
in a business combination at the acquisition date in accordance with ASC 606 as if it had originatedthe contracts. This guidance also provides certain practical expedients for acquirers when recognizing
and measuring acquired contract assets and contract liabilities from revenue contracts in a businesscombination. The new guidance is required to be applied prospectively to business combinations occurringon or after the date of adoption. This guidance is effective for the Company for the year ending March 31,
2024 and interim reporting periods during the year ending March 31, 2024. Early adoption is permitted. The
Company does not expect that the adoption of this guidance will have a material impact on the financial
position, results of operations and cash flows.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurementof Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction
on the sale of an equity security is not considered part of the unit of account of the equity security and,
therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot,
as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also
requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidanceis required to be applied prospectively with any adjustments from the adoption of the amendments
recognized in earnings and disclosed on the date of adoption. This guidance is effective for the Company
for the year ending March 31, 2025 and interim reporting periods during the year ending March 31, 2025.
Early adoption is permitted. The Company does not expect that the adoption of this guidance will have amaterial impact on the financial position, results of operations and cash flows.
In September 2022, the FASB issued ASU 2022-04, “Liabilities — Supplier Finance Programs (Subtopic
405-50): Disclosure of Supplier Finance Program Obligations”, which require a buyer in a supplierfinance program disclose qualitative and quantitative information about the supplier finance program.
The amendments do not affect the recognition, measurement, or financial statement presentationof obligations covered by supplier finance programs. The new guidance is required to be applied
retrospectively to each period in which a balance sheet is presented, except for the amendment on
rollforward information, which should be applied prospectively. This guidance is effective for the Company
for the year ending March 31, 2024 and interim reporting periods during the year ending March 31, 2024.
Early adoption is permitted. The Company does not expect that the adoption of this guidance will have amaterial impact on the financial position, results of operations and cash flows.

Fiscal Year 2023 Annual Report315Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

4.

Significant mergers and acquisitions and investments
Mergers and acquisitions(a) Acquisition of Sun Art Retail Group Limited (“Sun Art”)
Sun Art, a company that is listed on the HKSE, is a leading hypermarket operator in the PRC.
The Company previously held an approximately 31% effective equity interest in Sun Art and theinvestment in Sun Art was previously accounted for under the equity method. New Retail Strategic
Opportunities Fund, L.P. (the “Offshore Retail Fund”), an investment fund for which the Company isable to exercise significant influence over its investment decisions, is also an existing shareholder in
Sun Art.
In October 2020, the Company acquired additional effective equity interest in Sun Art for a cash
consideration of US$3.6 billion (RMB24.1 billion). Upon the completion of the transaction, theCompany’s effective equity interest in Sun Art increased to approximately 67% and Sun Art became aconsolidated subsidiary of the Company.
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Amounts
RMB(in millions)
Net assets acquired (i)49,672

Amortizable intangible assets (ii)Trade names, trademarks and domain names

11,500Non-compete agreements

4,700

Developed technology and patents

615

User base and customer relationships

47

Goodwill

13,474

Deferred tax liabilities(9,629)Noncontrolling interests (iii)(23,684)
46,695
Amounts
RMB(in millions)

Total purchase price is comprised of:- cash consideration

24,136- fair value of previously held equity interests

22,55946,695(i) Net assets acquired primarily included property and equipment of RMB27,333 million, operating lease right-of-use
assets relating to land use rights of RMB22,997 million, payables and accruals for cost of revenue of RMB14,681
million, short-term investments of RMB14,387 million, customer advances of RMB11,082 million and inventories of
RMB9,341 million as of the date of acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding 13 years and a weightedaverage amortization period of 11.8 years.
(iii) Fair value of the noncontrolling interests was estimated with reference to the market price per share as of theacquisition date.

316

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

4.

Significant mergers and acquisitions and investments (Continued)
Mergers and acquisitions (Continued)(a) Acquisition of Sun Art Retail Group Limited (“Sun Art”) (Continued)
A gain of RMB6,381 million in relation to the revaluation of the previously held equity interests wasrecorded in interest and investment income, net in the consolidated income statement for the year
ended March 31, 2021. The fair value of the previously held equity interests was estimated withreference to the market price per share as of the acquisition date.
As reported in Sun Art’s 2020/2021 annual report, revenue and net income for the 15 months ended
March 31, 2021 were RMB124.3 billion and RMB3.8 billion, respectively. Revenue and net income forthe year ended December 2019 were RMB95.4 billion and RMB3.0 billion, respectively.
The acquisition of Sun Art demonstrates the Company’s continued commitment to Sun Art as wellas to further update its digital commerce infrastructure by further integrating online and offline
resources in the PRC’s retail sector. Goodwill arising from this acquisition was attributable to thesynergies expected from the combined operations of Sun Art and the Company, the assembled
workforce and their knowledge and experience in the retail sector in the PRC. The Company did not
expect the goodwill recognized to be deductible for income tax purposes.
In December 2020, the Company acquired additional ordinary shares of Sun Art from public
shareholders for a cash consideration of HK$4.9 billion (RMB4.1 billion) through a mandatory generaloffer as required under the Hong Kong Code on Takeovers and Mergers, which resulted in a reduction
in noncontrolling interests amounting to RMB4,592 million. Upon the completion of the mandatory
general offer, the Company’s effective equity interest in Sun Art further increased to approximately
74%.

Fiscal Year 2023 Annual Report317

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

4.

Significant mergers and acquisitions and investments (Continued)
Mergers and acquisitions (Continued)(b) Other acquisitions
Other acquisitions that constitute business combinations are summarized in the following table:
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
Net (liabilities) assets

(106)

852

1

Identifiable intangible assets

3,888

1,000

285

Deferred tax liabilities

(195)

(170)

(68)

3,587

1,682

218

(3,310)(1,884)

(38)

277

(202)

180

Goodwill

4,105

3,283

583

Total purchase consideration

4,382

3,081

763

Fair value of previously held equity interests(2,434)(31)—

Purchase consideration settled(1,794)(2,671)

(481)

154

379

282

875

3,050

763

- non-cash consideration

1,073

—

—

- fair value of previously held equity interests

2,434

31

—

4,382

3,081

763

Noncontrolling interests and mezzanine equity
Net identifiable assets (liabilities)

Deferred consideration as of year end
Total purchase consideration is comprised of:- cash consideration

In relation to the revaluation of previously held equity interests, the Company recognized a gain of
RMB2,378 million, a loss of RMB2 million and nil in the consolidated income statements for the years
ended March 31, 2021, 2022 and 2023, respectively, for the other acquisitions that constitute businesscombinations.
Pro forma results of operations for these acquisitions have not been presented because the effectsof these acquisitions, except for Sun Art (Note 4(a)), are not material to the consolidated income
statements for the year ended March 31, 2021, 2022 and 2023, either individually or in aggregate.

Equity investments and others(c)Investment in Bilibili, Inc. (“Bilibili”)
Bilibili, a company that is listed on both the Nasdaq Global Select Market and the HKSE, is a PRCbased video streaming platform. The Company previously held approximately 8% equity interest in
Bilibili. In March 2021, the Company acquired newly issued shares of Bilibili for a cash considerationof HK$5,818 million (RMB4,885 million). Upon the completion of the transaction, the Company’s
equity interest in Bilibili remained at approximately 8%. The investment is carried at fair value withunrealized gains and losses recorded in the consolidated income statements both before and after
the additional investment in March 2021.

318

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

4.

Significant mergers and acquisitions and investments (Continued)
Equity investments and others (Continued)(d) Investment in STO Express Co., Ltd. (“STO Express”)
STO Express, a company that is listed on the Shenzhen Stock Exchange, is one of the leading
express delivery services companies in the PRC. The Company previously held an approximately
14.7% effective equity interest in STO Express through an investment vehicle and the investment
was accounted for under the fair value option and recorded under equity securities and otherinvestments. In addition, under a call option agreement the Company entered into with the major
shareholder of STO Express, the Company may elect to acquire an additional effective equity interestof approximately 31.3% in STO Express for a total consideration of RMB10.0 billion. The call option
agreement is measured at fair value with unrealized gains and losses recorded in the consolidated
income statements. A loss of RMB1,413 million, a loss of RMB36 million and a gain of RMB557 million
was recorded in interest and investment income, net relating to this call option agreement for theyears ended March 31, 2021, 2022 and 2023, respectively.
In February 2021, the Company acquired additional effective equity interest in STO Express for acash consideration of RMB3.3 billion by effectively exercising a portion of the above call options.
Upon the completion of the transaction, the Company’s effective equity interest in STO Express
increased to 25% and the investment in STO Express is accounted for under the equity method (Note14). Out of the total consideration, which primarily included the cash consideration and the carrying
amount of the effective equity interest in STO Express previously held by the Company, RMB1,731
million was allocated to amortizable intangible assets, RMB2,433 million was allocated to goodwill,
RMB477 million was allocated to deferred tax liabilities and RMB2,002 million was allocated to net
assets acquired. Subsequent to this transaction, the Company may elect to exercise the remaining
call options to acquire an additional effective equity interest of 21% in STO Express for a total
consideration of RMB6.7 billion at any time on or before December 27, 2022.
In December 2022, the expiry date of the remaining call options was extended to December 27, 2025
and the total consideration was adjusted to RMB5.3 billion.

(e)

Investment in Mango Excellent Media Co., Ltd. (“Mango Excellent Media”)
Mango Excellent Media, a company that is listed on the Shenzhen Stock Exchange, is an audiovisualinteraction-focused new media service platform in the PRC. In December 2020, the Company acquired
an approximately 5% equity interest in Mango Excellent Media for a cash consideration of RMB6.2
billion. The investment was carried at fair value with unrealized gains and losses recorded in the
consolidated income statements. The investment was fully disposed in October 2021.

(f)

Investment in China Broadcasting Network Joint Stock Corporation Limited (“China
Broadcasting Network”)
China Broadcasting Network is a telecommunications company in the PRC. In October and December
2020, the Company invested a total of RMB10.0 billion for an approximately 7% equity interest in
China Broadcasting Network. The investment is accounted for using the measurement alternative.

Fiscal Year 2023 Annual Report319

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

4.

Significant mergers and acquisitions and investments (Continued)
Equity investments and others (Continued)(g) Investment in YTO Express Group Co., Ltd. (“YTO Express”)
YTO Express, a company that is listed on the Shanghai Stock Exchange, is one of the leading expressdelivery services companies in the PRC. The Company previously held an approximately 11% equity
interest in YTO Express and carried the investment at fair value with unrealized gains and losses
recorded in the consolidated income statements. Yunfeng, which is comprised of certain investment
funds the general partner of which Jack Ma has equity interests in, is also an existing shareholder of
YTO Express.
In September 2020, the Company acquired additional equity interest in YTO Express for a cash
consideration of RMB6.6 billion. Upon the completion of the transaction, the Company’s equity
interest in YTO Express increased to approximately 23% and the investment in YTO Express isaccounted for under the equity method (Note 14). Out of the total consideration, which included the
cash consideration and the carrying amount of the previously held equity interest in YTO Express,
RMB4,442 million was allocated to amortizable intangible assets, RMB4,270 million was allocatedto goodwill, RMB1,171 million was allocated to deferred tax liabilities and RMB3,891 million was
allocated to net assets acquired.

320

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

4.

Significant mergers and acquisitions and investments (Continued)
Equity investments and others (Continued)(h) Investment in Ant Group Co., Ltd. (“Ant Group”)
Ant Group provides comprehensive digital payment services and facilitates digital financial andvalue-added services for consumers and merchants, in China and across the world. In September
2019, following the satisfaction of the closing conditions, the Company received the 33% equity
interest in Ant Group pursuant to the share and asset purchase agreement as amended from time totime (the “SAPA”).
The Company accounts for its equity interest in Ant Group under the equity method. Upon thecompletion, the Company recorded the 33% equity interest in Ant Group with a carrying value
amounting to RMB90.7 billion in investments in equity method investees. The difference between
the carrying value of the 33% equity interest in Ant Group and the Company’s share of the carrying
value of Ant Group’s net assets upon completion is a basis difference, which mainly represents thefair value adjustments of amortizable intangible assets and equity investments. These adjustments
amounted to RMB24.5 billion and RMB5.3 billion, respectively, both of which were net of theircorresponding tax effects.
Subsequent to the receipt of the equity interest in Ant Group, the proportionate share of results of
Ant Group, adjusted for the effects of the basis difference as described above, is recorded in shareof results of equity method investees in the consolidated income statements on a one quarter inarrears basis. Following the receipt of equity interest in Ant Group, the Company has pre-emptive
rights to participate in other issuances of equity securities by Ant Group and certain of its affiliates
prior to the time of Ant Group meeting certain minimum criteria for a qualified IPO set forth in the
SAPA. These pre-emptive rights entitle the Company to maintain the equity ownership percentage theCompany holds in Ant Group immediately prior to any such issuances. In connection with the exerciseof the pre-emptive rights, the Company is also entitled to receive certain payments from Ant Group,
effectively funding the subscription for these additional equity interest, up to a value of US$1.5 billion,
subject to certain adjustments. In addition, under the SAPA, in certain circumstances the Company
is permitted to exercise pre-emptive rights through an alternative arrangement which will further
protect the Company from dilution.
In July 2023, the Company received notice from Ant Group of a shareholder meeting to approve,
among other things, a proposal to repurchase from all of its shareholders up to 7.6% of its equity
interest. The shares repurchased would be transferred to employee incentive plans of Ant Group.
These transactions were not completed as of the date of this annual report.

Fiscal Year 2023 Annual Report321Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

5.

Revenue
Revenue by segment is as follows:Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
China commerce:
China commerce retail (i)- Customer management

304,543

315,038

290,378- Direct sales and others (ii)(xi)

182,514259,830

274,954

487,057

574,868

565,332

14,322

16,712

17,399501,379

591,580

582,731

International commerce retail (iv)

34,45542,66849,873

International commerce wholesale (v)14,396

18,41019,331

Total International commerce

48,851

61,07869,204

Local consumer services (vi)(xi)

35,74644,61650,112Cainiao (vii)

37,258

46,10755,681Cloud (viii)

60,55874,56877,203

Digital media and entertainment (ix)31,18632,272

31,482Innovation initiatives and others (x)

2,311

2,841

2,274

717,289

853,062

868,687

China commerce wholesale (iii)
Total China commerce
International commerce:322

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

5.

Revenue (Continued)(i) Revenue from China commerce retail is primarily generated from the Company’s China commerce retail businesses andincludes revenue from customer management services and sales of goods.
(ii) Revenue from direct sales and others under China commerce retail is primarily generated from the Company’s direct sales
businesses, comprising mainly Sun Art, Tmall Supermarket, Freshippo and Alibaba Health’s direct sales businesses. Revenueof Sun Art included in the consolidated income statement of the Company since the date of acquisition was RMB42.9 billion
for the year ended March 31, 2021.
(iii) Revenue from China commerce wholesale is primarily generated from 1688.com and includes revenue from membershipfees and related value-added services and customer management services.
(iv) Revenue from International commerce retail is primarily generated from Lazada, Trendyol and AliExpress and includes
revenue from logistics services, customer management services and sales of goods.
(v) Revenue from International commerce wholesale is primarily generated from Alibaba.com and includes revenue frommembership fees and related value-added services and customer management services.
(vi) Revenue from Local consumer services primarily represents platform commissions, logistics services revenue from theprovision of on-demand delivery services and revenue from other services provided by Ele.me.
(vii) Revenue from Cainiao represents logistics services revenue from the domestic and international one-stop-shop logistics
services and supply chain management solutions provided by Cainiao Network.
(viii) Revenue from Cloud is primarily generated from the provision of cloud services, which include public cloud services andhybrid cloud services.
(ix) Revenue from Digital media and entertainment is primarily generated from Youku and other content platforms, as wellas the online games business, and includes revenue from membership fees, self-developed online games and customer
management services.
(x) Revenue from Innovation initiatives and others primarily represented other revenue from businesses such as Tmall Genieand other innovation initiatives. Other revenue also includes the annual fee for the SME loan business received from Ant
Group and its affiliates and such arrangement was terminated in December 2021 (Note 22).
(xi) For the year ended March 31, 2023, the Company reclassified the revenue of Instant Supermarket Delivery business, which
was previously reported under the China commerce segment, as revenue from Local consumer services segment in order
to conform to the way that we manage and monitor segment performance. Figures for the years ended March 31, 2021 and2022 were reclassified to conform to this presentation.

Revenue by type is as follows:Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)Customer management services (i)363,381379,999355,144

Membership fees

29,45035,73940,078Logistics services

55,653

71,27989,214Cloud services

60,12074,12376,648

Sales of goods

180,634

255,171

271,016

Other revenue (ii)28,05136,751

36,587717,289

853,062

868,687(i) Customer management services mainly include P4P marketing, in-feed marketing, display marketing and commission.
(ii) Other revenue includes revenue from self-developed online games, other value-added services provided through various
platforms and businesses and the annual fee for the SME loan business received from Ant Group and its affiliates (Note 22).

The amount of revenue recognized for performance obligations satisfied (or partially satisfied) in priorperiods for contracts with expected duration of more than one year during the years ended March 31, 2021,
2022 and 2023 were not material.

Fiscal Year 2023 Annual Report323

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

6.

LeasesThe Company entered into operating lease agreements primarily for shops and malls, offices, warehouses
and land. Certain lease agreements contain an option for the Company to renew a lease for a term of up to
five years or an option to terminate a lease early. The Company considers these options in determining theclassification and measurement of the leases.
The leases may include variable payments based on measures such as the level of sales at a physical store,
which are expensed as incurred.
Components of operating lease cost are as follows:Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)Operating lease cost
Variable lease cost
Total operating lease cost

6,812

10,982

10,802

47

837

672

6,859

11,81911,474

For the years ended March 31, 2021, 2022 and 2023, cash payments for operating leases amounted to
RMB4,408 million, RMB6,556 million and RMB8,050 million, respectively. For the years ended March 31,
2022 and 2023, the operating lease assets obtained in exchange for operating lease liabilities amounted to
RMB7,375 million and RMB5,030 million, respectively.
As of March 31, 2022 and 2023, the Company’s operating leases had a weighted average remaining leaseterm of 9.9 years and 9.3 years, respectively. As of the same dates, the Company’s operating leases had
a weighted average discount rate of 5.1% and 4.8%, respectively. Future lease payments under operatingleases as of March 31, 2023 are as follows:
Amounts
RMB(in millions)
For the year ending March 31,
2024

6,931

2025

5,707

2026

4,736

2027

4,110

2028

3,524

Thereafter

17,71742,725324

Less: imputed interest(8,510)Total operating lease liabilities (Note 19)

34,215

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

7.

Income tax expenses
Composition of income tax expenses
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
Current income tax expense

26,042

28,184

17,266

Deferred taxation

3,236(1,369)(1,717)29,27826,815

15,549Under the current laws of the Cayman Islands, the Company is not subject to tax on its income or capitalgains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands
withholding tax is imposed. The Company’s subsidiaries incorporated in Hong Kong were subject to theHong Kong profits tax rate at 16.5% for the years ended March 31, 2021, 2022 and 2023. The Company’s
subsidiaries incorporated in other jurisdictions were subject to income tax charges calculated according to
the tax laws enacted or substantially enacted in the countries where they operate and generate income.
Current income tax expense primarily includes the provision for PRC Enterprise Income Tax (“EIT”) for
subsidiaries operating in the PRC and withholding tax on earnings that have been declared for distribution
by PRC subsidiaries to offshore holding companies. Substantially all of the Company’s income before
income tax and share of results of equity method investees are generated by these PRC subsidiaries. Thesesubsidiaries are subject to EIT on their taxable income as reported in their respective statutory financial
statements adjusted in accordance with the relevant tax laws, rules and regulations in the PRC.
Under the PRC Enterprise Income Tax Law (the “EIT Law”), the standard enterprise income tax rate fordomestic enterprises and foreign invested enterprises is 25%. In addition, the EIT Law provides for,among others, a preferential tax rate of 15% for enterprises qualified as High and New Technology
Enterprises. Further, certain subsidiaries were recognized as Software Enterprises and thereby entitled
to full exemption from EIT for two years beginning from their first profitable calendar year and a 50%
reduction for the subsequent three calendar years. In addition, a duly recognized Key Software Enterprise(“KSE”) within China’s national plan can enjoy a preferential EIT rate of 10%. The KSE status is subject toreview by the relevant authorities every year and the timing of the annual review and notification by therelevant authorities may vary from year to year. The related reduction in tax expense as a result of official
notification confirming the KSE status is accounted for upon the receipt of such notification.
The tax status of the subsidiaries of the Company with major taxable profits is described below:•

Alibaba (China) Technology Co., Ltd. (“Alibaba China”), Taobao (China) Software Co., Ltd. (“Taobao
China”), Zhejiang Tmall Technology Co., Ltd. (“Tmall China”) and Alibaba (China) Co., Ltd (“ChinaCo.”), entities primarily engaged in the operations of the Company’s wholesale marketplaces,
Taobao, Tmall, and technology, software research and development and relevant services,
respectively, were qualified as High and New Technology Enterprises. Alibaba China, Taobao China
and Tmall China also obtained the annual review and notification relating to the renewal of the KSE
status for the taxation year of 2019 in the quarter ended September 30, 2020. Accordingly, Alibaba
China, Taobao China and Tmall China, which had applied an EIT rate of 15% for the taxation yearof 2019, reflected the reduction in tax rate to 10% for the taxation year of 2019 in the consolidated
income statements for the year ended March 31, 2021.

Fiscal Year 2023 Annual Report325Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

7.

Income tax expenses (Continued)
Composition of income tax expenses (Continued)•

Alibaba (Beijing) Software Services Co., Ltd (“Alibaba Beijing”), an entity primarily engaged in theoperations of technology, software research and development and relevant services, was recognized
as a High and New Technology Enterprise. Alibaba Beijing was also granted the Software Enterprisestatus and was thereby entitled to an income tax exemption for two years beginning from its firstprofitable taxation year of 2017, and a 50% reduction for the subsequent three consecutive years
starting from the taxation year of 2019. Accordingly, Alibaba Beijing was entitled to an EIT rate of
12.5% (50% reduction in the standard statutory rate) during the taxation years of 2019, 2020 and
2021. Alibaba Beijing also obtained notification of recognition as a KSE for the taxation year of 2019
in the quarter ended September 30, 2020. Accordingly, Alibaba Beijing, which had applied an EIT rateof 12.5% for the taxation year of 2019, reflected the reduction in tax rate to 10% for the taxation yearof 2019 in the consolidated income statement for the year ended March 31, 2021.

The total tax adjustments for the recognition of KSE status for Alibaba China, Taobao China, Tmall China,
Alibaba Beijing and certain other PRC subsidiaries of the Company, amounting to RMB6,085 million, nil andnil, were recorded in the consolidated income statements for the years ended March 31, 2021, 2022 and2023, respectively.
For the taxation years of 2020, 2021 and 2022, Alibaba China, Taobao China, Tmall China, China Co. andAlibaba Beijing did not obtain the KSE status, and accordingly, Alibaba China, Taobao China, Tmall China
and China Co. continued to apply an EIT rate of 15% as High and New Technology Enterprises. Alibaba
Beijing applied an EIT rate of 12.5% (50% reduction in the standard statutory rate) as a Software Enterprisefor the taxation years of 2020 and 2021 and applied an EIT rate of 15% as High and New Technology
Enterprise for the taxation year of 2022.
Most of the remaining PRC entities of the Company are subject to EIT at 25% for the years ended March 31,
2021, 2022 and 2023.
Pursuant to the EIT Law, a 10% withholding tax is levied on dividends declared by PRC companies totheir foreign investors. A lower withholding tax rate of 5% is applicable if direct foreign investors withat least 25% equity interest in the PRC company are incorporated in Hong Kong and meet the relevant
requirements pursuant to the tax arrangement between Chinese mainland and Hong Kong S.A.R. Since
the equity holders of the major PRC subsidiaries of the Company are Hong Kong incorporated companies
and meet the relevant requirements pursuant to the tax arrangement between Chinese mainland andHong Kong S.A.R., the Company has used 5% to provide for deferred tax liabilities on retained earnings
which are anticipated to be distributed. As of March 31, 2023, the Company has accrued the withholding
tax on substantially all of the distributable earnings of the PRC subsidiaries, except for those undistributed
earnings that the Company intends to invest indefinitely in the PRC which amounted to RMB233.6 billion.

326

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

7.

Income tax expenses (Continued)
Composition of deferred tax assets and liabilities
As of March 31,
2022

2023

RMB

RMB

(in millions)Deferred tax assets
Licensed copyrights

3,893

4,438

Tax losses carried forward and others (i)46,94547,58650,83852,024

Valuation allowance(36,363)(36,530)

Total deferred tax assets

14,475

15,494

Identifiable intangible assets(20,773)(18,751)

Withholding tax on undistributed earnings (ii)

(8,106)(8,170)Equity method investees and others (iii)(32,827)(34,824)

Total deferred tax liabilities(61,706)(61,745)

Net deferred tax liabilities(47,231)(46,251)

Deferred tax liabilities(i) Others primarily represents deferred tax assets for share-based awards, investments in equity method investees, equity
securities and other investments, as well as accrued expenses which are not deductible until paid under PRC tax laws.
(ii) The related deferred tax liabilities as of March 31, 2022 and 2023 were provided on the assumption that substantially allof the distributable earnings of PRC subsidiaries will be distributed as dividends, except for those undistributed earnings
that the Company intends to invest indefinitely in the PRC which amounted to RMB176.4 billion and RMB233.6 billion,
respectively.
(iii) Deferred tax liabilities for investments in equity method investees mainly includes the deferred tax effect on the gain in
relation to the receipt of the 33% equity interest in Ant Group of RMB19.7 billion. Others primarily represents deferred tax
liabilities for investments in equity securities and other investments.

Valuation allowances provided on the deferred tax assets mainly related to the tax losses carried forward
due to the uncertainty surrounding their realization. If events occur in the future that improve the certainty
of realization, an adjustment to the valuation allowances will be made and consequently income tax
expenses will be reduced.
As of March 31, 2023, the accumulated tax losses of subsidiaries incorporated in Singapore, Hong Kong
S.A.R. and Indonesia. subject to the agreement of the relevant tax authorities, of RMB32,033 million,
RMB4,918 million and RMB2,458 million, respectively, are allowed to be carried forward to offset against
future taxable profits. The carry forward of tax losses in Singapore and Hong Kong S.A.R. generally
has no time limit, while the tax losses in Indonesia will expire, if unused, in the years ending March 31,
2024 through 2028. The accumulated tax losses of subsidiaries incorporated in the PRC, subject to theagreement of the PRC tax authorities, of RMB136,741 million as of March 31, 2023 will expire, if unused, inthe years ending March 31, 2024 through 2033.

Fiscal Year 2023 Annual Report327

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

7.

Income tax expenses (Continued)
Composition of deferred tax assets and liabilities (Continued)
Reconciliation of the differences between the statutory EIT rate applicable to profits of the consolidated
entities and the income tax expenses of the Company:
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions, except per share data)
Income before income tax and share of result of
equity method investees

165,578

59,55089,185

Income tax computed at statutory EIT rate (25%)

41,395

14,88822,296

Effect of different tax rates available to different
jurisdictions(1,982)(2,006)(153)

Effect of tax holiday and preferential tax benefit on
assessable profits of subsidiaries incorporated in
the PRC(20,675)(7,367)(13,679)

Non-deductible expenses and non-taxable
income, net (i)1,980

13,51816,870Additional deductions of certain research anddevelopment expenses incurred by subsidiaries in
the PRC (ii)(8,305)(10,052)(8,282)

Withholding tax on the earnings distributed andanticipated to be remitted

4,612

5,026

5,312

Change in valuation allowance and others (iii)

12,25312,808(6,815)

Income tax expenses

29,27826,815

15,549Effect of tax holidays inside the PRC on basic earnings
per share

0.96

0.34

0.65

Effect of tax holidays inside the PRC on basic earnings
per ADS

7.65

2.73

5.22

(i) Expenses not deductible for tax purposes and non-taxable income primarily represent impairment of goodwill, a fine
imposed pursuant to the PRC Anti-monopoly Law (the “Anti-monopoly Fine”), investment income or loss and share-based
compensation expense.
(ii) This amount represents tax incentives relating to the research and development expenses of certain major operating
subsidiaries in the PRC.
(iii) Change in valuation allowance primarily represents valuation allowance for temporary differences associated with tax
losses and investments in certain equity securities and other investments. Besides, others primarily represents other tax
benefits which were not previously recognized as well as deferred tax effect for temporary differences in relation to certain
investments in equity method investees.

328

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

8.

Share-based awards(a) Share-based awards relating to ordinary shares of the Company
Share-based awards such as RSUs, incentive and non-statutory stock options, restricted shares,
dividend equivalents, share appreciation rights and share payments may be granted to any directors,
employees and consultants of the Company or affiliated companies under equity incentive plans
adopted since the inception of the Company. Currently, the 2014 Post-IPO Equity Incentive Plan (the“2014 Plan”), which was adopted in September 2014 and has a ten-year term, is in effect and governs
the terms of the awards. If an award terminates, expires or lapses, or is canceled for any reason,
ordinary shares subject to the award become available for the grant of a new award under the2014 Plan. Starting from April 1, 2015 and on each anniversary thereof, an additional amount equal
to the lesser of (A) 200,000,000 ordinary shares, and (B) such lesser number of ordinary shares as
determined by the board of directors becomes available for the grant of a new award under the 2014
Plan. All share-based awards granted under the 2014 Plan are subject to dilution protection should
the capital structure of the Company be affected by a share split, reverse share split, share dividendor other dilutive action. As of March 31, 2023, the number of shares authorized but unissued was
305,164,328 ordinary shares. Eight ordinary shares are issuable upon the vesting or the exercise of
one share-based award.

RSUs
A summary of the changes in the RSUs relating to ordinary shares granted by the Company during theyear ended March 31, 2023 is as follows:

Numberof RSUs

Weightedaverage
grant datefair value
US$Awarded and unvested as of April 1, 2022

60,676,287

201.17

Granted32,242,838

102.18Vested(23,281,792)

192.01

Canceled/forfeited(8,349,129)

179.85

Awarded and unvested as of March 31, 2023 (i)61,288,204

155.49

Expected to vest as of March 31, 2023 (ii)52,548,409

155.92(i) No outstanding RSUs will be vested after the expiry of a period of up to ten years from the date of grant.
(ii) RSUs expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding RSUs.

As of March 31, 2023, there were RMB18,725 million of unamortized compensation costs related to all
outstanding RSUs, net of expected forfeitures. These amounts are expected to be recognized over aweighted average period of 1.8 years.
During the years ended March 31, 2021, 2022 and 2023, the Company recognized share-based
compensation expense of RMB28,934 million, RMB30,313 million and RMB24,410 million, respectively,in connection with the above RSUs.

Fiscal Year 2023 Annual Report329

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

8.

Share-based awards (Continued)(a) Share-based awards relating to ordinary shares of the Company (Continued)
Share options
A summary of the changes in the share options relating to ordinary shares granted by the Company
during the year ended March 31, 2023 is as follows:

Numberof shareoptions

Weighted
average
exercise
price

Weighted
averageremaining
contractual
life

US$

(in years)

Outstanding as of April 1, 2022

7,373,334

75.39

3.5

Exercised(164,000)

26.00

—

Canceled/forfeited(80,000)

26.00—

Outstanding as of March 31, 2023

7,129,334

77.08

3.9

Vested and exercisable as of March 31, 2023 (i)5,471,334

78.51

3.3

Vested and expected to vest as ofMarch 31, 2023 (ii)

6,957,375

76.82

3.8

(i) No outstanding share options will be vested or exercisable after the expiry of a period of up to twelve years from thedate of grant.
(ii) Share options expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total
outstanding share options.

As of March 31, 2023, the aggregate intrinsic value of all outstanding options was RMB1,778 million.
As of the same date, the aggregate intrinsic value of options that were vested and exercisable
and options that were vested and expected to vest was RMB1,164 million and RMB1,724 million,
respectively.
During the years ended March 31, 2021, 2022 and 2023, the weighted average grant date fair valueof share options granted was nil, US$103.72 and nil, respectively, and the total grant date fair valueof options vested during the same years was RMB335 million, RMB306 million and RMB327 million,
respectively. During the same years, the aggregate intrinsic value of share options exercised was
RMB468 million, RMB137 million and RMB67 million, respectively.
Cash received from option exercises under the share option plans for the years ended March 31, 2021,
2022 and 2023 was RMB205 million, RMB109 million and RMB8 million, respectively.

330

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

8.

Share-based awards (Continued)(a) Share-based awards relating to ordinary shares of the Company (Continued)
Share options (Continued)
No share options were granted during the years ended March 31, 2021 and 2023. The fair value ofeach option granted during the year ended March 31, 2022 is estimated on the measurement dateusing the Black-Scholes model by applying the assumptions below:
Year ended
March 31,2022
Risk-free interest rate (i)1.93%-2.00%

Expected dividend yield (ii)0%Expected life (years) (iii)

3.71-7.14

Expected volatility (iv)

35.7%(i) Risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the expected
life of the share options in effect on the measurement date.
(ii) Expected dividend yield is assumed to be nil as the Company has no history or expectation of paying a dividend on its
ordinary shares.
(iii) Expected life of share options is based on management’s estimate on timing of exercise of share options.
(iv) Expected volatility is assumed based on the historical volatility of the Company in the period equal to the expected lifeof each grant.

As of March 31, 2023, there were RMB283 million of unamortized compensation costs related to theseoutstanding share options, net of expected forfeitures. These amounts are expected to be recognizedover a weighted average period of 3.2 years.
During the years ended March 31, 2021, 2022 and 2023, the Company recognized share-based
compensation expense of RMB159 million, RMB86 million and RMB490 million, respectively, inconnection with the above share options.

(b) Share-based awards relating to Ant GroupThe employees of the Company hold share-based awards granted by Ant Group and Hangzhou
Junhan Equity Investment Partnership (“Junhan”), a major equity holder of Ant Group. These awards
tied to the valuation of Ant Group and will be settled by respective grantors upon disposal of theseawards by the holders, vesting or exercise of these awards, depending on the forms of these awards.
In addition, Junhan and Ant Group have the right to repurchase the vested awards (or any underlying
equity for the settlement of the vested awards) granted by them, as applicable, from the holders
upon an initial public offering of Ant Group or the termination of the holders’ employment with theCompany at a price to be determined based on the then fair market value of Ant Group.
For accounting purposes, these awards meet the definition of a financial derivative. The cost
relating to these awards is recognized by the Company and the related expense is recognized over
the requisite service period in the consolidated income statements with a corresponding credit toadditional paid-in capital. Subsequent changes in the fair value of these awards are recorded in the
consolidated income statements. The expenses relating to these awards are re-measured at the fairvalue on each reporting date until their settlement dates. The fair value of the underlying equity is
primarily determined with reference to the business enterprise value, or BEV, of Ant Group which isbased on the contemporaneous valuation report, external information and information obtained from
Ant Group.

Fiscal Year 2023 Annual Report331Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

8.

Share-based awards (Continued)(b) Share-based awards relating to Ant Group (Continued)
During the years ended March 31, 2021, 2022 and 2023, the Company recognized expenses of
RMB17,315 million, a net reversal of RMB11,585 million and expenses of RMB668 million, respectively,
in respect of the share-based awards relating to Ant Group.
Starting from April 2020, the parties agreed to settle with each other the cost associated with certain
share-based awards granted to each other’s employees upon vesting. The settlement amounts under
this arrangement depend on the values of Ant Group share-based awards granted to the Company’s
employees and the Company’s share-based awards granted to employees of Ant Group, in which the
net settlement amount is insignificant to the Company.
Share-based awards relating to ordinary shares of the Company and Ant Group are generally subject
to a four-year vesting schedule as determined by the administrator of the plans. Depending on thenature and the purpose of the grant, share-based awards generally vest 25% or 50% upon the firstor second anniversary of the vesting commencement date, respectively, as provided in the award
agreements, and 25% every year thereafter. Share-based awards granted to certain management
members of the Company are subject to a vesting period of up to ten years.

(c) Share-based compensation expense by function
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)9.

Cost of revenue

11,224

5,725

5,710

Product development expenses

21,474

11,035

13,514

Sales and marketing expenses

5,323

3,050

3,710

General and administrative expenses

12,099

4,161

7,897

50,12023,97130,831

Earnings per share/ADS
Each ADS represents eight ordinary shares.
Basic earnings per share is computed by dividing net income attributable to ordinary shareholders by theweighted average number of outstanding ordinary shares, adjusted for treasury shares. Basic earnings per
ADS is derived from the basic earnings per share.
For the calculation of diluted earnings per share, net income attributable to ordinary shareholders for basic
earnings per share is adjusted by the effect of dilutive securities, including share-based awards, under thetreasury stock method. Potentially dilutive securities, of which the amounts are insignificant, have been
excluded from the computation of diluted net income per share if their inclusion is anti-dilutive. Diluted
earnings per ADS is derived from the diluted earnings per share.

332

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

9.

Earnings per share/ADS (Continued)
The following table sets forth the computation of basic and diluted net income per share/ADS for thefollowing periods:
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions, except per share data)
Earnings per share
Numerator:
Net income attributable to ordinary shareholders forcomputing net income per ordinary share — basic

150,308

61,95972,509

(55)

(37)

(38)

150,253

61,922

72,471

21,61921,55820,980

363

229

134

Weighted average number of shares used in
calculating net income per ordinary share —diluted (million shares)

21,982

21,787

21,114

Net income per ordinary share — basic (RMB)

6.95

2.87

3.46

Net income per ordinary share — diluted (RMB)

6.84

2.84

3.43

Net income per ADS — basic (RMB)

55.63

22.99

27.65

Net income per ADS — diluted (RMB)

54.70

22.74

27.46

Dilution effect arising from share-based awards
operated by subsidiaries and equity method investees
Net income attributable to ordinary shareholders forcomputing net income per ordinary share — diluted
Shares (denominator):
Weighted average number of shares used in
calculating net income per ordinary share —basic (million shares)
Adjustments for dilutive RSUs and share options(million shares)

Earnings per ADS

Fiscal Year 2023 Annual Report333Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

10. Restricted cash and escrow receivables
As of March 31,
2022

2023

RMB

RMB

(in millions)
Buyer protection fund deposits from merchants on
the marketplaces (i)35,26832,962Others

2,187

3,462

37,45536,424(i) The amount represents buyer protection fund deposits received from merchants on the Company’s marketplaces, which
are restricted for the purpose of compensating buyers for claims against merchants. A corresponding liability is recordedin other deposits and advances received under accrued expenses, accounts payable and other liabilities (Note 19) on the
consolidated balance sheets.

11. Equity securities and other investments
As of March 31, 2022
Original
cost

Cumulative
net gains(losses)

Carrying
value

RMB

RMB

RMB

(in millions)
Equity securities:
Listed equity securities

93,5999,661

103,260

Investments in privately held companies

110,096(859)

109,237

27,153(7,366)

19,787

230,848

1,436

232,284

Debt investments:
Debt securities and loan investments

As of March 31, 2023
Original
cost

Cumulative
net gains(losses)

Carrying
value

RMB

RMB

RMB

(in millions)
Equity securities:
Listed equity securities

107,535

216

107,751

Investments in privately held companies

97,701(10,664)

87,037

Debt securities and loan investments

22,210(7,105)

15,105

Other treasury investments

40,736—

40,736

268,182(17,553)

250,629

Debt investments:

Details of the significant additions during the years ended March 31, 2021, 2022 and 2023 are set out in
Note 4.
334

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

11. Equity securities and other investments (Continued)
Equity securities
For equity securities which were still held as of March 31, 2021, 2022 and 2023, net unrealized gains(losses), including impairment losses, of RMB45,139 million, RMB(25,587) million and RMB(29,481) million,
respectively, were recognized in interest and investment income, net, for the years ended March 31, 2021,
2022 and 2023.
Investments in privately held companies include equity investments for which the Company elected toaccount for using the measurement alternative (Note 2(t)), for which the carrying value as of March 31,
2022 and 2023 were RMB99,270 million and RMB79,545 million, respectively.
For equity investments accounted for using the measurement alternative as of March 31, 2022, theCompany recorded cumulative upward adjustments of RMB26,759 million and cumulative impairments
and downward adjustments of RMB27,827 million. For these investments, the Company recorded upward
adjustments of RMB19,159 million and impairments and downward adjustments of RMB7,603 million
during the year ended March 31, 2022.
For equity investments accounted for using the measurement alternative as of March 31, 2023, theCompany recorded cumulative upward adjustments of RMB17,782 million and cumulative impairments
and downward adjustments of RMB26,922 million. For these investments, the Company recorded upward
adjustments of RMB4,205 million and impairments and downward adjustments of RMB13,266 million
during the year ended March 31, 2023.

Debt investments
Debt investments include convertible and exchangeable bonds accounted for under the fair value option,
for which the fair value as of March 31, 2022 and 2023 were RMB8,339 million and RMB7,167 million,
respectively. The aggregate fair value of these convertible and exchangeable bonds was lower than theiraggregate unpaid principal balance as of March 31, 2022 and 2023 by RMB3,248 million and RMB2,993
million, respectively. Unrealized gains (losses) recorded on these convertible and exchangeable bondsin the consolidated income statements were RMB1,573 million, RMB(3,112) million and RMB(262) million
during the years ended March 31, 2021, 2022 and 2023, respectively.
Debt investments also include debt investments accounted for at amortized cost, for which the allowancefor credit losses as of March 31, 2022 and 2023 were RMB4,336 million and RMB4,085 million, respectively.
During the year ended March 31, 2023, there were modifications, including alignment of the maturity date
and adjustments of numbers of collateral, to loans provided to a shareholder of an equity method investee
with principal amount of RMB4,931 million. Expected credit loss was assessed on an individual basis andwas based on the fair value of the shares pledged as collateral as of the reporting date, adjusted for
selling costs as appropriate, considering that repayment is expected to be provided substantially throughthe sale of collateral. The fair value of the collateral as of March 31, 2023 was RMB3,574 million. There is nocommitment to lend additional funds.
During the years ended March 31, 2021, 2022 and 2023, impairment losses (reversal of impairment losses)on these debt investments of RMB175 million, RMB3,225 million and RMB(356) million, respectively, wererecorded in interest and investment income, net in the consolidated income statements.
The carrying amount of debt investments accounted for at amortized cost approximates their fair value
due to the fact that the related effective interest rates approximate rates currently offered by financial
institutions for similar debt instruments of comparable maturities.
Other treasury investments comprise of investments in fixed deposits and certificates of deposits withoriginal maturities over one year for treasury purposes.
Fiscal Year 2023 Annual Report335

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

12. Fair value measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. To increase the comparabilityof fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used tomeasure fair value:
Level 1—

Valuations based on unadjusted quoted prices for identical assets and liabilities in
active markets.

Level 2—

Valuations based on observable inputs other than quoted prices included in Level 1,such as quoted prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets and liabilities in markets that are not active, or other
inputs that are observable or can be corroborated by observable market data.

Level 3—

Valuations based on unobservable inputs reflecting assumptions, consistent withreasonably available assumptions made by other market participants. Thesevaluations require significant judgment.

Fair value of listed equity securities are based on quoted prices in active markets for identical assets or
liabilities. Certain other financial instruments, such as interest rate swap contracts and certain option
agreements, are valued based on inputs derived from or corroborated by observable market data.
Valuations of convertible and exchangeable bonds that do not have a quoted price are generally
performed using valuation models such as the binomial model with unobservable inputs including
risk-free interest rate and expected volatility. The valuation of contingent consideration is performed
using an expected cash flow method with unobservable inputs including the probability to achieve
the contingencies, which is assessed by the Company, in connection with the contingent consideration
arrangements. Investments in privately held companies for which the Company elected to record using themeasurement alternative are re-measured on a non-recurring basis, and are categorized within Level 3
under the fair value hierarchy. The values are estimated based on valuation methods using the observabletransaction price at the transaction date and considering the rights and obligations of the securities andother unobservable inputs including volatility.

336

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

12. Fair value measurement (Continued)
The following table summarizes the Company’s assets and liabilities that are measured at fair value on arecurring basis and are categorized under the fair value hierarchy:
As of March 31, 2022
Level 1

Level 2

Level 3

Total

RMB

RMB

RMB

RMB

(in millions)
AssetsTime deposits (i)—233,724—

233,724

Wealth management products (i)—21,261—

21,261

—

1,529

—

1,529

Restricted cash and escrow receivables

Marketable debt securities (i)37,455——37,455

Listed equity securities (ii)

103,260——

103,260

Convertible and exchangeable bonds (ii)

—

1,067

7,272

8,339

Option agreements (iii)

—

1

825

826

Others (v)

2,196

2,402

8,292

12,890142,911

259,984

16,389419,284

Liabilities
Contingent consideration in relation toinvestments and acquisitions (iv)

—

—

829

829

Interest rate swap contracts and others (iv)

—

354

170

524

—

354

999

1,353

As of March 31, 2023
Level 1

Level 2

Level 3

Total

RMB

RMB

RMB

RMB

(in millions)
AssetsTime deposits and certificate of deposits (i)—332,971—

332,971

Wealth management products (i)—34,257—34,257

Restricted cash and escrow receivables

36,424——36,424

Listed equity securities (ii)107,751——

107,751

—

775

6,392

7,167

Convertible and exchangeable bonds (ii)

—

646

290

936

162

1,762

6,142

8,066

144,337

370,411

12,824

527,572

Contingent consideration in relation toinvestments and acquisitions (iv)

—

—

537

537

Others (iv)

—

182

132

314

—

182

669

851

Option agreements (iii)
Others (v)Liabilities(i) Included in short-term investments and equity securities and other investments on the consolidated balance sheets.
(ii) Included in equity securities and other investments on the consolidated balance sheets.
(iii) Included in prepayments, receivables and other assets on the consolidated balance sheets.
(iv) Included in accrued expenses, accounts payable and other liabilities on the consolidated balance sheets.
(v) Others primarily represent other investments with underlying assets measured at fair value.

Fiscal Year 2023 Annual Report337

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

12. Fair value measurement (Continued)
Convertible and exchangeable bonds categorized within Level 3 under the fair value hierarchy:
Amounts
RMB(in millions)
Balance as of March 31, 2021

9,645

Additions

1,915

Net decrease in fair value(2,734)

Disposal(1,225)

Conversion(162)

Foreign currency translation adjustments(167)

Balance as of March 31, 2022

7,272

Additions785

Net decrease in fair value(373)

Disposal(35)

Conversion
Foreign currency translation adjustments
Balance as of March 31, 2023

(1,492)
235
6,392

Contingent consideration in relation to investments and acquisitions categorized within Level 3 under thefair value hierarchy:
Amounts
RMB(in millions)
Balance as of March 31, 2021
Additions376

Net decrease in fair value(19)

Payment(1,746)

Foreign currency translation adjustments(14)

Balance as of March 31, 2022

829

Additions178

Net decrease in fair value(34)

Payment(445)

Foreign currency translation adjustments
Balance as of March 31, 2023

338

2,232

Alibaba Group Holding Limited

9537

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

13. Prepayments, receivables and other assets
As of March 31,
2022

2023

RMB

RMB

(in millions)
Current:
Accounts receivable, net of allowance

32,81332,134Inventories

30,08728,547

VAT receivables, net of allowance

23,77917,497

Prepaid cost of revenue, sales and marketing and other expenses

17,902

16,794

Advances to/receivables from customers, merchants and others

11,205

14,499Amounts due from related companies (i)12,188

9,042

Interest receivables

2,449

5,471

Deferred direct selling costs and cost of revenue (ii)

3,915

4,771

Others11,657

8,317

145,995

137,072

Operating lease right-of-use assets

78,05377,428Deferred tax assets (Note 7)

14,475

15,494Film costs and prepayment for licensed copyrights and others

12,4258,905

Prepayment for acquisition of property and equipment

3,592

3,976

Others

4,602

5,123

113,147

110,926

Non-current:(i) Amounts due from related companies primarily represent balances arising from transactions with Ant Group (Note 22),
including dividend receivable from Ant Group amounting to RMB3,945 million and nil as of March 31, 2022 and 2023. Thebalances are unsecured, interest free and repayable within the next twelve months.
(ii) The Company is obligated to pay certain costs upon the receipt of membership fees from merchants or other customers,
which primarily consist of sales commissions, and certain costs associated with cloud services. The membership fees andcloud services revenue are initially deferred and recognized as revenue in the consolidated income statements in the period
in which the services are rendered. As such, the related costs are also initially deferred and recognized in the consolidated
income statements in the same period as the related service fees and revenue are recognized.

Fiscal Year 2023 Annual Report339

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

14. Investments in equity method investees
Amounts
RMB(in millions)
Balance as of March 31, 2021

200,189

Additions

8,964

Share of results, other comprehensive income and other reserves (i)18,822

Disposals(1,237)

Distributions (ii)

(5,329)Transfers

5,159

Impairment loss (iii)(6,201)

Foreign currency translation adjustments
Balance as of March 31, 2022
AdditionsShare of results, other comprehensive income and other reserves (i)(725)
219,6424,990
677

Disposals(1,192)Distributions (ii)

(11,645)

Transfers

1,046

Impairment loss (iii)(8,310)Foreign currency translation adjustments

2,172

Balance as of March 31, 2023

207,380(i) Share of results, other comprehensive income and other reserves include the share of results of the equity method investees,
the gain or loss arising from the deemed disposal of the equity method investees and basis differences arising from equity
method investees. The amount excludes the expenses relating to the share-based awards underlying the equity of theCompany and Ant Group granted to employees of certain equity method investees.
(ii) Includes dividend declared by Ant Group amounting to RMB3,945 million and RMB10,519 million for the years ended March
31, 2022 and 2023, respectively (Note 13).
(iii) Impairment loss recorded represents other-than-temporary decline in fair value below the carrying value of the investmentsin equity method investees. The valuation inputs for the fair value measurement with respect to the impairments include
the stock price for equity method investees that are listed, as well as certain unobservable inputs that are not subject tomeaningful aggregation.

As of March 31, 2023, equity method investments with an aggregate carrying amount of RMB32,949 million
are publicly traded and the total market value of these investments amounted to RMB38,725 million. Asof March 31, 2023, the Company’s retained earnings included undistributed earnings from equity method
investees of RMB44,076 million.

340

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

14. Investments in equity method investees (Continued)
For the years ended March 31, 2021, 2022 and 2023, equity method investments held by the Company inaggregate have met the significance criteria as defined under Rule 4-08(g) of Regulation S-X. As such, theCompany is required to present summarized financial information for all of its equity method investments
as a group as follows:Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)Operating data:
Revenue

657,065

541,712441,495

Cost of revenue(474,123)(371,076)(297,895)

Income from operations

55,89638,00627,163

Net income (loss)

95,224113,970(86,761)

As of March 31,
2022

2023

RMB

RMB

(in millions)
Balance sheet data:
Current assets

624,045591,660

Non-current assets

870,394803,288

Current liabilities

426,170409,055

Non-current liabilities

118,575

115,399

Noncontrolling interests and mezzanine equity

16,05914,023

15. Property and equipment, net
As of March 31,
2022

2023

RMB

RMB

(in millions)
Building, property improvements and other property

106,794

123,276

Computer equipment and software

94,539100,563

Construction in progress

43,67545,129Furniture, office and transportation equipment and others

20,554

21,631

265,562

290,599

Less: accumulated depreciation and impairment(93,756)(114,568)

Net book value

171,806

176,031

Depreciation expenses recognized for the years ended March 31, 2021, 2022 and 2023 were RMB25,550
million, RMB25,470 million and RMB24,654 million, respectively.

Fiscal Year 2023 Annual Report341

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

16. Intangible assets, net
As of March 31,
2022

2023

RMB

RMB

(in millions)User base and customer relationships

47,941

48,155Trade names, trademarks and domain names

39,08039,301

Non-compete agreements

14,436

12,636Developed technology and patents

7,088

6,639

Licensed copyrights (Note 2(x)) and others

8,384

8,893

116,929

115,624

Less: accumulated amortization and impairment(57,698)(68,711)Net book value

59,231

46,913

During the years ended March 31, 2021, 2022 and 2023, the Company acquired intangible assets
amounting to RMB20,750 million, RMB1,000 million and RMB285 million, respectively, in connection withbusiness combinations, which were measured at fair value upon acquisition. Details of intangible assets
acquired in connection with business combinations are included in Note 4.
The estimated aggregate amortization expenses for each of the five succeeding fiscal years and thereafter
are as follows:
Amounts
RMB(in millions)
For the year ending March 31,
2024

12,530

2025

8,086

2026

4,935

2027

4,645

2028

4,256

Thereafter

12,461
46,913342

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

17. Goodwill
Changes in the carrying amount of goodwill by segment for the years ended March 31, 2022 and 2023 wereas follows:Corecommerce

China Internationalcommerce commerce

Local
consumer
services

Cainiao

Digitalmedia andCloud entertainment

Innovation
initiatives
and others

Total(in millions of RMB)
Balance as ofMarch 31, 2021

223,014

—

—

—

—

2,044

58,673

9,040

292,771

2,506

523

—

—

—

254

—

—

3,283

—

—

—

—

—

—

(25,141)—(25,141)

Allocation of goodwill (ii)(224,407)

174,424

17,63020,292

16,346815—(5,100)—Foreign currencytranslation adjustments(1,113)

—

(169)

—

—

(50)

—

—

(1,332)

Balance as ofMarch 31, 2022—

174,947

17,461

20,292

16,346

3,063

33,532

3,940

269,581

Additions

—

—

97

—

85

394

7

—

583

Impairment

—

—

—

—

—

—

(2,714)—(2,714)Foreign currencytranslation adjustments

—

9

593

—

6

33

—

—

641

Balance as ofMarch 31, 2023—

174,956

18,151

20,292

16,4373,490

30,825

3,940

268,091

Additions
Impairment (i)(i) During the year ended March 31, 2022, considered the changes in market conditions, the Company performed quantitative
impairment tests on certain reporting units under the Digital media and entertainment segment and recognized impairment
charges of RMB14,754 million relating to one listed reporting unit and RMB10,387 million relating to one unlisted reporting
unit. The fair value of the listed reporting unit was determined based on its market capitalization, adjusted for control
premium. The fair value of the unlisted reporting unit was determined based on the discounted cash flow analysis using theassumptions including the future growth rates and the weighted average cost of capital. No further impairment charge wasrecognized relating to these reporting units during the year ended March 31, 2023.
(ii) During the year ended March 31, 2022, the Company allocated its goodwill primarily as a result of the change in segments(Note 26).

Gross goodwill balances were RMB299,201 million and RMB300,425 million as of March 31, 2022 and 2023,
respectively. Accumulated impairment losses were RMB29,620 million and RMB32,334 million as of March
31, 2022 and 2023, respectively.
In the annual goodwill impairment assessment, the Company concluded that the carrying amountsof certain reporting units exceeded their respective fair values and recorded impairment losses ofnil, RMB25,141 million and RMB2,714 million during the years ended March 31, 2021, 2022 and 2023,
respectively.
The goodwill impairment is presented as an unallocated item in the segment information (Note 26)
because the CODM of the Company does not consider this as part of the segment operating performancemeasure.

Fiscal Year 2023 Annual Report343

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

18. Deferred revenue and customer advances
Deferred revenue and customer advances primarily represent service fees prepaid by merchants orcustomers for which the relevant services have not been provided. The respective balances are as follows:
As of March 31,
2022

2023

RMB

RMB

(in millions)Deferred revenue

32,08535,350

Customer advances

38,38839,50570,47374,855

Less: current portion(66,983)(71,295)

Non-current portion

3,490

3,560

All service fees received in advance are initially recorded as customer advances. These amounts aretransferred to deferred revenue upon commencement of the provision of services by the Company andare recognized in the consolidated income statements in the period in which the services are provided. In
general, service fees received in advance are non-refundable after the amounts are transferred to deferred
revenue. Substantially all of the balances of deferred revenue and customer advances are generally
recognized as revenue within one year.

344

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

19. Accrued expenses, accounts payable and other liabilities
As of March 31,
2022

2023

RMB

RMB

(in millions)
Current:
Payables and accruals for cost of revenue and sales andmarketing expenses

107,205

103,369

Other deposits and advances received (i)55,20054,964

Payable to merchants and third party marketing affiliates

26,79831,425

Accrued bonus and staff costs, including sales commission

28,34329,000

Payables and accruals for purchases of property and equipment

17,032

15,625

Amounts due to related companies (ii)

7,783

10,383

Other taxes payable (iii)

8,761

6,997

Operating lease liabilities (Note 6)

4,994

5,667

Contingent and deferred consideration in
relation to investments and acquisitions

2,045

901

203

107

13,096

17,512

271,460

275,950

30,25928,548Contingent and deferred consideration in
relation to investments and acquisitions

990

1,058

Others628

773

31,87730,379Escrow money payable
OthersNon-current:
Operating lease liabilities (Note 6)(i) Other deposits and advances received as of March 31, 2022 and 2023 include buyer protection fund deposits received frommerchants on the Company’s marketplaces (Note 10).
(ii) Amounts due to related companies primarily represent balances arising from the transactions with Ant Group (Note 22). Thebalances are unsecured, interest free and repayable within the next twelve months.
(iii) Other taxes payable primarily represent VAT and PRC individual income tax of employees withheld by the Company.

Fiscal Year 2023 Annual Report345

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

20. Bank borrowings
Bank borrowings are analyzed as follows:
As of March 31,
2022

2023

RMB

RMB

(in millions)
Current portion:
8,841

7,466

US$4.0 billion syndicated loan denominated in US$ (ii)25,331

27,393Long-term other borrowings (iii)

12,913

24,63038,24452,023

Short-term other borrowings (i)Non-current portion:(i) As of March 31, 2022 and 2023, the Company had short-term borrowings from banks which were repayable within one
year or on demand and charged interest rates ranging from 0.6% to 12.5% and 1.6% to 12.5% per annum, respectively.
As of March 31, 2022 and 2023, the weighted average interest rate of these borrowings was 2.8% and 2.7% per annum,
respectively. The borrowings are primarily denominated in RMB.
(ii) As of March 31, 2022 and 2023, the Company had a US$4.0 billion syndicated loan, which was initially entered into with agroup of eight lead arrangers. The loan was priced at 85 basis points over LIBOR with maturity in May 2024. Certain related
floating interest payments are hedged by certain interest rate swap contracts entered into by the Company. The proceeds ofthe loan were used for general corporate and working capital purposes (including acquisitions). In May 2023, the loan terms
were modified such that the interest rate of the loan was adjusted to 80 basis points over Secured Overnight Financing Rate(“SOFR”) with a credit adjustment spread and the maturity of the loan was extended to May 2028 in July 2023.
(iii) As of March 31, 2022 and 2023, the Company had long-term borrowings from banks with weighted average interest rates of
4.1% and 3.8% per annum, respectively. The borrowings are primarily denominated in RMB.

Certain other bank borrowings are collateralized by a pledge of certain buildings and property
improvements, construction in progress and land use rights in the PRC with carrying values of RMB19,617
million and RMB23,767 million, as of March 31, 2022 and 2023, respectively. As of March 31, 2023, theCompany is in compliance with all covenants in relation to bank borrowings.
In April 2017, the Company obtained a revolving credit facility provided by certain financial institutions for
an amount of US$5.15 billion, which has not yet been drawn down. The interest rate on any outstanding
utilized amount under this credit facility was calculated based on LIBOR plus 95 basis points. This facility
is reserved for general corporate and working capital purposes (including acquisitions). In June 2021,
the terms of this credit facility were amended and the amount of the credit facility was increased to
US$6.5 billion. The expiration date of the credit facility was extended to June 2026. Under the terms of theamended credit facility, the interest rate on any outstanding utilized amount will be calculated based on
LIBOR plus 80 basis points. In May 2023, the interest rate was adjusted to SOFR with a credit adjustment
spread plus 80 basis points.

346

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

20. Bank borrowings (Continued)
As of March 31, 2023, the borrowings will be due according to the following schedule:
Principal amounts
RMB(in millions)
Within 1 year

7,466

Between 1 to 2 years

30,057

Between 2 to 3 years

4,787

Between 3 to 4 years

2,570

Between 4 to 5 years

4,490

Beyond 5 years

10,15959,529

21. Unsecured senior notes
In November 2014, the Company issued unsecured senior notes including floating rate and fixed rate notes
with varying maturities for an aggregate principal amount of US$8.0 billion (the “2014 Senior Notes”), of
which US$1.3 billion was repaid in November 2017, US$2.25 billion was repaid in November 2019 andUS$1.5 billion was repaid in November 2021. The 2014 Senior Notes are senior unsecured obligations
that are listed on the HKSE, and interest is payable in arrears, quarterly for the floating rate notes andsemiannually for the fixed rate notes.
In December 2017, the Company issued unsecured fixed rate senior notes with varying maturities for an
aggregate principal amount of US$7.0 billion (the “2017 Senior Notes”), of which US$0.7 billion was repaid
in June 2023. The 2017 Senior Notes are senior unsecured obligations that are listed on the Singapore Stock
Exchange, and interest is payable in arrears semiannually.
In February 2021, the Company issued unsecured fixed rate senior notes with varying maturities for an
aggregate principal amount of US$5.0 billion (the “2021 Senior Notes”). The 2021 Senior Notes are seniorunsecured obligations that are listed on the Singapore Stock Exchange, and interest is payable in arrears
semiannually.

Fiscal Year 2023 Annual Report347

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

21. Unsecured senior notes (Continued)
The following table provides a summary of the Company’s unsecured senior notes as of March 31, 2022
and 2023:
As of March 31,

Effective

2022

2023

RMB

RMB

interest rate

(in millions)
US$700 million 2.800% notes due 2023

4,439

4,800

2.90%

US$2,250 million 3.600% notes due 2024

14,256

15,4103.68%

US$2,550 million 3.400% notes due 2027

16,091

17,3973.52%

US$1,500 million 2.125% notes due 2031

9,469

10,2342.20%

US$700 million 4.500% notes due 2034

4,400

4,754

4.60%

US$1,000 million 4.000% notes due 2037

6,300

6,807

4.06%

US$1,000 million 2.700% notes due 2041

6,256

6,761

2.80%

US$1,750 million 4.200% notes due 2047

11,014

11,8984.25%

US$1,500 million 3.150% notes due 2051

9,448

10,206

3.19%

US$1,000 million 4.400% notes due 2057

6,290

6,795

4.44%

US$1,000 million 3.250% notes due 2061

6,296

6,803

3.28%

Carrying value

94,259101,865

668

665

94,927

102,530

Less: current portion of principal amounts of unsecured
senior notes—(4,801)

Non-current portion of principal amounts of unsecured
senior notes

94,927

97,729Unamortized discount and debt issuance costs
Total principal amounts of unsecured senior notes

The effective interest rates for the unsecured senior notes include the interest charged on the notes as wellas amortization of the debt discounts and debt issuance costs.
The unsecured senior notes contain covenants including, among others, limitation on liens, consolidation,
merger and sale of the Company’s assets. As of March 31, 2023, the Company is in compliance with allthese covenants. In addition, the unsecured senior notes rank senior in right of payment to all of theCompany’s existing and future indebtedness expressly subordinated in right of payment to the notes
and rank at least equally in right of payment with all of the Company’s existing and future unsecured
unsubordinated indebtedness (subject to any priority rights pursuant to applicable law).

348

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

21. Unsecured senior notes (Continued)
As of March 31, 2023, the future principal payments for the Company’s unsecured senior notes will be due
according to the following schedule:
Principal amounts
RMB(in millions)
Within 1 year

4,801

Between 1 to 2 years

15,431

Between 2 to 3 years—

Between 3 to 4 years—

Between 4 to 5 years

17,488Thereafter

64,810102,530

As of March 31, 2022 and 2023, the fair values of the Company’s unsecured senior notes, based on
Level 2 inputs, were US$14,067 million (RMB89,319 million) and US$12,523 million (RMB85,886 million),
respectively.

22. Related party transactions
During the years ended March 31, 2021, 2022 and 2023, other than disclosed elsewhere, the Company had
the following material related party transactions:

Transactions with Ant Group and its affiliates
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
Amounts earned by the Company
Cloud services revenue (i)

3,916

5,536

8,409

Administrative and support services (i)

1,208

1,165

565

Annual fee for SME loan business (ii)

954

708

—

2,427

2,358

2,831

8,505

9,767

11,805

Payment processing and escrow services fee (iii)

10,598

11,824

12,484

Other amounts incurred (i)

4,509

3,542

2,271

15,107

15,366

14,755Marketplace software technology services fee and   other amounts earned (i)Amounts incurred by the Company

Fiscal Year 2023 Annual Report349

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

22. Related party transactions (Continued)
Transactions with Ant Group and its affiliates (Continued)(i) The Company has other commercial arrangements and cost sharing arrangements with Ant Group and its affiliates on
various sales and marketing, cloud, and other administrative and support services.
(ii) Pursuant to the SAPA, the Company entered into software system use and service agreements with Ant Group in 2014,
under which the Company would receive annual fees for SME loan business for a term of seven years. In calendar years
2018 to 2021, the Company received or will receive annual fees equal to the amount received in calendar year 2017, which
was equal to 2.5% of the average daily balance of the SME loans made by Ant Group and its affiliates during that year. The
annual fee payment by Ant Group in relation to SME loan business was terminated in December 2021.
(iii) The Company has a commercial agreement with Alipay whereby the Company receives payment processing and escrowservices in exchange for a payment for the services fee, which was recognized in cost of revenue.

As of March 31, 2022 and 2023, the Company had certain amounts of cash held in accounts managed by
Alipay in connection with the provision of online and mobile commerce and related services for a total
amount of RMB8,987 million and RMB7,080 million, respectively, which have been classified as cash andcash equivalents on the consolidated balance sheets.

Transactions with other investees
The Company has commercial arrangements with certain investees of the Company related to cloudservices. In connection with these services provided by the Company, RMB2,411 million, RMB1,826 million
and RMB1,462 million were recorded in revenue in the consolidated income statements for the years ended
March 31, 2021, 2022 and 2023, respectively.
The Company has commercial arrangements with certain investees of the Company related to marketing
services. In connection with these services provided to the Company, RMB1,394 million, RMB976 million and
RMB382 million were recorded in cost of revenue and sales and marketing expenses in the consolidated
income statements for the years ended March 31, 2021, 2022 and 2023, respectively.
The Company has commercial arrangements with certain investees of the Company related to logistics
services. In connection with these services provided by the Company, RMB1,732 million, RMB1,728 million
and RMB1,140 million were recorded in revenue in the consolidated income statements for the years ended
March 31, 2021, 2022 and 2023, respectively. Costs and expenses incurred in connection with these services
provided to the Company of RMB11,068 million, RMB13,120 million and RMB14,750 million were recordedin the consolidated income statements for the same periods, respectively.
The Company has extended loans to certain investees for working capital and other uses in conjunction
with the Company’s investments. As of March 31, 2022 and 2023, the aggregate outstanding balance of
these loans was RMB3,000 million and RMB2,345 million, respectively, with remaining terms of up to four
years and interest rates of up to 10% per annum as of March 31, 2022, and remaining terms of up to three
years and interest rates of up to 10% per annum as of March 31, 2023.
The Company provided a guarantee for a term loan facility of HK$7.7 billion in favor of Hong Kong Cingleot
Investment Management Limited (“Cingleot”), a company that is partially owned by the Company, inconnection with a logistics center development project at the Hong Kong International Airport. As of March
31, 2022 and 2023, HK$3,413 million and HK$5,233 million was drawn down by Cingleot under this facility,
respectively.

350

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

22. Related party transactions (Continued)
Transactions with other investees (Continued)
The Company’s ecosystem offers different platforms on which different enterprises operate and theCompany believes that all transactions on the Company’s platforms are conducted on terms obtained inarm’s length transactions with similar unrelated parties.
Other than the transactions disclosed above or elsewhere in the consolidated financial statements, theCompany has commercial arrangements with SoftBank, other investees and other related parties toprovide and receive certain marketing, cloud and other services and products. The amounts relating tothese services provided and received represent less than 1% of the Company’s revenue and total costs andexpenses, respectively, for the years ended March 31, 2021, 2022 and 2023.
In addition, the Company has made certain acquisitions and equity investments together with relatedparties from time to time during the years ended March 31, 2021, 2022 and 2023. The agreements foracquisitions and equity investments were entered into by the parties involved and conducted on fair value
basis. The significant acquisitions and equity investments together with related parties are included in
Note 4.

23. Restricted net assets
PRC laws and regulations permit payments of dividends by the Company’s subsidiaries incorporated in the
PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards
and regulations. In addition, the Company’s subsidiaries incorporated in the PRC are required to annually
appropriate 10% of their net income to the statutory reserve prior to payment of any dividends, unless thereserve has reached 50% of their respective registered capital. Furthermore, registered share capital andcapital reserve accounts are also restricted from distribution. As a result of the restrictions described above
and elsewhere under PRC laws and regulations, the Company’s subsidiaries incorporated in the PRC are
restricted in their ability to transfer a portion of their net assets to the Company in the form of dividends.
The restriction amounted to RMB194,576 million as of March 31, 2023. Except for the above or disclosed
elsewhere, there is no other restriction on the use of proceeds generated by the Company’s subsidiaries tosatisfy any obligations of the Company.

Fiscal Year 2023 Annual Report351

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

24. Commitments(a) Capital commitments
The Company’s capital commitments primarily relate to capital expenditures contracted for purchaseof property and equipment, including the construction of corporate campuses. Total capitalcommitments contracted but not provided for amounted to RMB39,272 million and RMB21,924 million
as of March 31, 2022 and 2023, respectively. The capital expenditures contracted for are analyzed asfollows:
As of March 31,
2022

2023

RMB

RMB

(in millions)
No later than 1 year

25,438

16,826Later than 1 year and no later than 5 years

13,781

5,092

53

6

39,272

21,924More than 5 years(b) Investment commitments
The Company was obligated to pay up to RMB12,456 million and RMB11,570 million for businesscombinations and equity investments under various arrangements as of March 31, 2022 and2023, respectively. The commitment balance as of March 31, 2022 and 2023 primarily includes theremaining committed capital of certain investment funds.

(c) Other commitments
The Company also has other commitments including commitments for co-location and bandwidth
fees, licensed copyrights and marketing expenses. These commitments are analyzed as follows:
As of March 31,
2022

2023

RMB

RMB

(in millions)352

No later than 1 year

37,22937,210Later than 1 year and no later than 5 years

17,347

21,288More than 5 years

2,446

3,559

57,022

62,057

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

24. Commitments (Continued)(c) Other commitments (Continued)
As a marketing initiative, the Company entered into a framework agreement with the International
Olympic Committee (the “IOC”) and the United States Olympic Committee in January 2017 for a longterm partnership arrangement through 2028. Joining in The Olympic Partner worldwide sponsorshipprogram, the Company has become the official “E-Commerce Services” Partner and “Cloud Services”
Partner of the IOC. In addition, the Company has been granted certain marketing rights, benefits
and opportunities relating to future Olympic Games and related initiatives, events and activities. The
Company committed to provide at least US$815 million worth of cash, cloud infrastructure services
and cloud computing services, as well as marketing and media support in connection with various
Olympic initiatives, events and activities, including the Olympic Games and the Winter Olympic Gamesthrough 2028.

25. Risks and contingencies(a)

The Company is incorporated in the Cayman Islands and considered as a foreign entity under PRC
laws. Due to legal restrictions on foreign ownership and investment in, among other areas, valueadded telecommunications services, which include the operations of Internet content providers,the Company operates its Internet businesses and other businesses through various contractual
arrangements with VIEs that are incorporated and owned by PRC citizens or by PRC entities owned
and/or controlled by PRC citizens. The VIEs hold the licenses and approvals that are essential for
their business operations in the PRC and the Company has entered into various agreements with the
VIEs and their equity holders such that the Company has the right to benefit from their licenses andapprovals and generally has control of the VIEs. In the Company’s opinion, the current ownership
structure and the contractual arrangements with the VIEs and their equity holders as well as theoperations of the VIEs are in substantial compliance with all existing PRC laws, rules and regulations.
However, there may be changes and other developments in PRC laws, rules and regulations.
Accordingly, the Company gives no assurance that PRC government authorities will not take a viewin the future that is contrary to the opinion of the Company. If the current ownership structure of
the Company and its contractual arrangements with the VIEs and their equity holders were foundto be in violation of any existing or future PRC laws or regulations, the Company’s ability to conduct
its business could be impacted and the Company may be required to restructure its ownership
structure and operations in the PRC to comply with the changes in the PRC laws which may result in
deconsolidation of the VIEs.

(b)

The PRC market in which the Company operates poses certain macro-economic and regulatory risks
and uncertainties. These uncertainties extend to the ability of the Company to operate or invest
in online and mobile commerce or other Internet related businesses, representing the principal
services provided by the Company, in the PRC. The information and technology industries are highly
regulated. Restrictions are currently in place or are unclear regarding what specific segments ofthese industries foreign owned enterprises, like the Company, may operate. If new or more extensive
restrictions were imposed on the segments in which the Company is permitted to operate, theCompany could be required to sell or cease to operate or invest in some or all of its current businesses
in the PRC. These uncertainties also extend to the PRC’s regulations relating to anti-monopoly andanti-unfair competition. In December 2020, the State Administration for Market Regulation of the
PRC (the “SAMR”) commenced an investigation on the Company pursuant to the PRC Anti-monopoly
Law. Following the investigation, in April 2021, the SAMR issued an administrative penalty decisionof the anti-monopoly investigation into the Company and imposed a fine of RMB18.2 billion, which
was accrued for as of March 31, 2021. The amount has been paid as of March 31, 2022. The SAMR
also issued an administrative guidance, instructing the Company to implement a comprehensive
rectification program, and to file a self-assessment and compliance report to the SAMR for threeconsecutive years.
Fiscal Year 2023 Annual Report353

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

25. Risks and contingencies (Continued)(c)Because of the Company’s equity interest in and close association with Ant Group and overlappinguser bases, regulatory developments, litigation or proceedings, media and other reports, whether or
not true, and other events that affect Ant Group could also negatively affect customers’, regulators’,
investors’ and other third parties’ perception of the Company. In April 2021, Ant Group announced
that it would apply to set up a financial holding company to ensure its financial-related businesses
are fully regulated. To implement the rectification plan and comply with applicable new measuresand rules, Ant Group may be required to spend significant time and resources and make changes
to its businesses, which could materially and adversely affect its business operations and growthprospects. In July 2023, PRC regulators announced a RMB7.07 billion fine for Ant Group and Ant Grouphas completed the related work on the rectification. Changes in Ant Group’s business and future
prospects, or speculation of such changes, as well as additional regulatory requirements placed on
Ant Group, could in turn have a material adverse effect on the Company.

(d)

The Company’s sales, purchase and expense transactions are generally denominated in RMB and asignificant portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely
convertible into foreign currencies. In the PRC, foreign exchange transactions are required by law to
be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of
China (the “PBOC”).
Remittances in currencies other than RMB by the Company in the PRC must be processed through the
PBOC or other PRC foreign exchange regulatory bodies and require certain supporting documentationin order to effect the remittance. If the foreign exchange control system prevents the Company fromobtaining sufficient foreign currencies to satisfy its currency demands, the Company may not be able
to pay dividends in foreign currencies and the Company’s ability to fund its business activities that are
conducted in foreign currencies could be adversely affected.

354

(e)

In the ordinary course of business, the Company makes strategic investments to increase the service
offerings and expand capabilities. The Company continually reviews its investments to determine
whether there is a decline in fair value below the carrying value. Fair value of the listed securities issubject to volatility and may be materially affected by market fluctuations.

(f)Financial instruments that potentially subject the Company to significant concentration of credit risk
consist principally of cash and cash equivalents, short-term investments, restricted cash and equity
securities and other investments. As of March 31, 2022 and 2023, substantially all of the Company’s
cash and cash equivalents, restricted cash, short-term investments and other treasury investments
were held by major financial institutions located worldwide, including Chinese mainland and Hong
Kong S.A.R. If the financial institutions and other issuers of financial instruments held by the Company
could become insolvent or if the markets for these instruments could become illiquid as a result of asevere economic downturn, the Company could lose some or all of the value of its investments.

(g)

During the years ended March 31, 2021, 2022 and 2023, the Company offered a trade assurance
program on the international wholesale marketplaces at no charge to the wholesale buyers andsellers. If the wholesale sellers who participate in this program do not deliver the products in theirstated specifications to the wholesale buyers on schedule, the Company may compensate thewholesale buyers for their losses on behalf of the wholesale sellers up to a pre-determined amountfollowing a review of each particular case. In turn, the Company will seek a full reimbursementfrom the wholesale sellers for the prepaid reimbursement amount, yet the Company is exposed
to a risk over the collectability of the reimbursement from the wholesale sellers. During the years
ended March 31, 2021, 2022 and 2023, the Company did not incur any material losses with respect
to the compensation provided under this program. Given that the maximum compensation for eachwholesale seller is pre-determined based on their individual risk assessments by the Company
considering their credit profile or other relevant information, the Company determined that thelikelihood of material default on the payments are not probable and therefore no provisions havebeen made in relation to this program.

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

25. Risks and contingencies (Continued)(h)In the ordinary course of business, the Company is from time to time involved in legal proceedings
and litigations in relation to disputes relating to trademarks and other intellectual property, among
others. In 2017, Beijing Jingdong Shiji Trading Co., Ltd. and Beijing Jingdong 360 E-commerce Co., Ltd.
sued Tmall China, Zhejiang Tmall Network Co., Ltd. and Alibaba Group Holding Limited for abuse of
dominant market position. The plaintiffs requested the three defendants to cease relevant acts andclaimed a substantial amount of damages in the original complaint. In March 2021, the plaintiffs
amended their claim to seek higher damages. The case is pending in Beijing High People’s Court
and the potential damages are not reasonably estimable at the current stage. There are no legal
proceedings and litigations that have in the recent past had, or to the Company’s knowledge, areprobable to have, a material impact on the Company’s financial positions, results of operations or
cash flows. The Company did not accrue any material loss contingencies in this respect as of March
31, 2022 and 2023.

(i)

The global outbreak of the COVID-19 pandemic continued to have a significant negative impact on
the global economy in the year ended March 31, 2023, which has adversely affected the Company’sbusiness and financial results. From early 2020 to early 2023, the COVID-19 pandemic triggered aseries of lock-downs, social distancing requirements and travel restrictions that significantly andnegatively affected our various businesses in China, particularly the Company’s China commerce
and local consumer services businesses. The Company’s key international commerce businesses also
experienced a negative impact. The COVID-19 pandemic also presented challenges to the Company’sbusiness operations as well as the business operations of the Company’s merchants, business
partners and other participants in the Company’s ecosystem, such as closure of offices and facilities,
disruptions to or even suspensions of normal business and logistics operations, as well as restrictions
on travel. Starting in December 2022, China has lifted most of the COVID-19-induced travel restrictions
and quarantine requirements. From late December 2022 to early 2023, certain parts of China
experienced COVID-19 resurgence, which caused significant disruption to the Company’s business
operations in these regions. It is not possible to determine the impact of the COVID-19 pandemic on
the Company’s business operations and financial results going forward, which is highly dependent
on numerous factors, including the frequency, duration and spread of the outbreaks of the COVID-19
pandemic (including any new variant with different characteristics) in China or elsewhere, actions
taken by governments, the response of businesses and individuals to the pandemic, the impactof the pandemic on business and economic conditions in China and globally, consumer demand,
the Company’s ability and the ability of merchants, retailers, logistics service providers and otherparticipants in the Company’s ecosystem to continue operations in areas affected by the pandemic
and the Company’s efforts and expenditures to support merchants and partners and ensure thesafety of the Company’s employees. The COVID-19 pandemic may continue to adversely affect theCompany’s business and results of operations.

(j)

The Russia-Ukraine conflict has resulted in significant disruptions to supply chains, logistics andbusiness activities in the region that has negatively affected our international commerce business
and Cainiao’s international logistics business. The conflict has also caused, and continues to intensify,
significant geopolitical tensions in Europe and across the globe. The resulting sanctions imposed
are expected to have significant impacts on the economic conditions of the countries and markets
targeted by such sanctions, and may have unforeseen, unpredictable secondary effects on global
energy prices, supply chains and other aspects of the global economy. The conflict may adversely
affect our business, financial condition and results of operations.

Fiscal Year 2023 Annual Report355

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

26. Segment information
The Company presents segment information after elimination of inter-company transactions. In general,revenue, cost of revenue and operating expenses are directly attributable, or are allocated, to eachsegment. The Company allocates costs and expenses that are not directly attributable to a specificsegment, such as those that support infrastructure across different segments, to different segments mainlyon the basis of usage, revenue or headcount, depending on the nature of the relevant costs and expenses.
The Company does not allocate assets to its segments as the CODM does not evaluate the performance ofsegments using asset information.
The following tables present the summary of each segment’s revenue, income from operations andadjusted earnings before interest, taxes and amortization (“Adjusted EBITA”) which is considered as asegment operating performance measure, for the years ended March 31, 2021, 2022 and 2023:
Year ended March 31, 2021
China
commerce (i)Internationalcommerce

Local
consumer
services (i)Cainiao

Digitalmedia andCloud entertainment

Innovation
initiatives
and others

Total
segments

Unallocated (ii)Consolidated(in millions of RMB, except percentages)
Revenue

501,379

48,85135,74637,25860,55831,1862,311

717,289—

717,289

Income (Loss) fromoperations

197,232(9,361)(29,197)(3,964)(12,479)(10,321)(7,802)

124,108(34,430)

89,678Add: Share-based   compensation expense

14,505

4,223

4,972

1,956

10,205

3,281

2,518

41,6608,460

50,120Add: Amortization of   intangible assets

1,922

206

7,852

1,195

23

922

83

12,203

224

12,427

Add: Anti-monopoly Fine

—

—

—

—

—

—

—

—

18,22818,228

213,659(4,932)(16,373)(813)(2,251)(6,118)(5,201)

177,971(7,518)

43%

(10)%

(46)%

(2)%

(4)%

(20)%

(225)%

Innovation
initiatives
and others

Total
segments

Unallocated (ii)Consolidated

Adjusted EBITA (iii)
Adjusted EBITA margin (iv)Year ended March 31, 2022
China
commerce (i)Internationalcommerce

Local
consumer
services (i)Cainiao

Digitalmedia andCloud entertainment(in millions of RMB, except percentages)

Revenue

591,580

61,07844,616

46,10774,56832,2722,841

853,062—853,062

Income (Loss) fromoperations

172,536(10,655)(30,802)(3,920)(5,167)(7,019)(9,424)

105,549(35,911)

69,638Add: Share-based   compensation expense

7,078

1,569

2,556

1,396

6,297

1,520

1,839

22,255

1,716

23,971

Add: Amortization of   intangible assets

2,817

95

6,154

1,059

16

809

456

11,406

241

11,647

—

—

—

—

—

—

—

—

25,141

25,141

182,431(8,991)(22,092)(1,465)

1,146(4,690)(7,129)139,210(8,813)

31%

(15)%

(50)%

(3)%

2%

(15)%

(251)%

Add: Impairment of goodwill
Adjusted EBITA (iii)
Adjusted EBITA margin (iv)356

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

26. Segment information (Continued)
Year ended March 31, 2023
China
commerce (i)Internationalcommerce

Local
consumer
services (i)Cainiao

Digitalmedia andCloud entertainment

Innovation
initiatives
and others

Total
segments

Unallocated (ii)Consolidated(in millions of RMB, except percentages)
Revenue

582,731

69,204

50,112

55,681

77,20331,482

2,274

868,687—

868,687

Income (Loss) fromoperations

172,191(8,429)(23,302)(3,622)(5,151)(4,638)(9,409)117,640(17,289)

100,351

Add: Share-based   compensation expense

7,969

2,716

3,672

2,218

6,561

1,756

1,658

26,5504,281

30,831

Add: Amortization and   impairment of   intangible assets

4,702

93

5,609

1,013

12

1,008

844

13,281

223

13,504

Add: Impairment of goodwill

—

—

—

—

—

—

—

—

2,714

2,714

Add: Equity-settled   donation expense

—

—

—

—

—

—

—

—

511

511

184,862(5,620)(14,021)

(391)

1,422

(1,874)(6,907)

157,471(9,560)

32%

(8)%

(28)%

(1)%

2%

(6)%

(304)%

Adjusted EBITA (iii)
Adjusted EBITA margin (iv)

The following table presents the reconciliation from the Adjusted EBITA to the consolidated net income forthe years ended March 31, 2021, 2022 and 2023:
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
177,971

139,210

157,471

Unallocated (ii)

(7,518)(8,813)(9,560)Share-based compensation expense(50,120)(23,971)(30,831)

Amortization and impairment of intangible assets(12,427)(11,647)(13,504)—(25,141)(2,714)(18,228)

—

—

—

—

(511)

Consolidated income from operations

89,67869,638100,351

Interest and investment income, net

72,794(15,702)(11,071)

Interest expense(4,476)(4,909)(5,918)Other income, net

7,582

10,523

5,823(29,278)(26,815)(15,549)

6,984

14,344(8,063)

143,284

47,07965,573

Total Segments Adjusted EBITA

Impairment of goodwill
Anti-monopoly Fine
Equity-settled donation expense

Income tax expenses
Share of results of equity method investees
Consolidated net income

Fiscal Year 2023 Annual Report357

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

26. Segment information (Continued)
The following table presents the consolidated depreciation and impairment of property and equipment,
and operating lease cost relating to land use rights by segment for the years ended March 31, 2021, 2022
and 2023:
Year ended March 31,
2021

2022

2023

RMB

RMB

RMB

(in millions)
China commerce (i)9,790

13,043

10,880International commerce

1,180

1,473

1,757

Local consumer services (i)

1,161

1,237

1,314

872

992

1,147

Cloud

11,161

7,613

9,093

Digital media and entertainment

1,109

956

912

Innovation initiatives and others and unallocated (ii)

1,116

2,494

2,696

Consolidated depreciation and impairment of property
and equipment, and operating lease cost relating toland use rights

26,38927,80827,799Cainiao(i) For the year ended March 31, 2023, the Company reclassified the results of Instant Supermarket Delivery business, which
was previously reported under the China commerce segment, to the Local consumer services segment in order to conformto the way that we manage and monitor segment performance. Figures for the years ended March 31, 2021 and 2022 werereclassified to conform to this presentation.
(ii) Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocatedto individual segments.
(iii) Adjusted EBITA represents net income before (i) interest and investment income, net, interest expense, other income, net,
income tax expenses and share of results of equity method investees, (ii) certain non-cash expenses, consisting of sharebased compensation expense, amortization and impairment of intangible assets and impairment of goodwill, and (iii)
Anti-monopoly Fine, as well as equity-settled donation expense, which the Company does not believe are reflective of theCompany’s core operating performance during the periods presented.
(iv) Adjusted EBITA margin represents Adjusted EBITA divided by revenue.

Details of the Company’s revenue by segment are set out in Note 5. As substantially all of the Company’s
long-lived assets are located in the PRC and substantially all of the Company’s revenue is derived fromwithin the PRC, no geographical information is presented.
As of March 31, 2023, the Company was in the process of implementing a new organizational andgovernance structure. Following the implementation of the new organizational structure, the segment
reporting will be updated to reflect the new reporting structure that will be reviewed by the CODM.

358

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

27. Reconciliation between U.S. GAAP and International Financial ReportingStandards
The consolidated financial statements are prepared in accordance with U.S. GAAP, which differ in certain
respects from International Financial Reporting Standards (“IFRS”). The effects of material differences
between the consolidated financial statements of the Company prepared under U.S. GAAP and IFRS are as
follows:

Reconciliation of Consolidated Balance Sheets (Extract)
As of March 31, 2022

Amounts asreported under
U.S. GAAP

Consolidation
and businesscombinations(i)

Equitysecurities
without readily
determinable
fair value(ii)

Equitymethodinvestments(iii)

Redeemable
Operating noncontrollinginterests
leases(vi)(v)

Share-based
awards(iv)

Amounts
under IFRS

(in millions of RMB)
Equity securities and other investments

223,611

—

4,474

4,303

—

—

—

232,388

Prepayments, receivables and other assets

113,147

(392)

—

38

(2,248)(1,389)—109,156

Investments in equity method investees

219,642(241)—(8,088)———211,313

Intangible assets, net

59,231(3,004)

—

—

—

—

—

56,227

Goodwill

269,581(47,022)

—

—

—

—

—

222,559

Total assets

1,695,553(50,659)

4,474(3,747)(2,248)(1,389)—1,641,984

Deferred tax liabilities

61,706(1,025)

591

(936)

—

—

—

60,336

Other liabilities

31,877

—

—

—

—

(3)

11,54943,423

Total liabilities

613,360(1,025)

591

(936)

—

(3)

11,549623,536

Mezzanine equity

9,655

—

—

—

—

—

(9,655)—

Total shareholders’ equity

948,479(8,314)

3,691(2,811)(2,248)(1,386)(2,139)935,272

Noncontrolling interests

124,059(41,320)

192

—

—

—

245

83,176

Total equity

1,072,538(49,634)

3,883(2,811)(2,248)(1,386)(1,894)

1,018,448

Total liabilities, mezzanine equity and equity

1,695,553(50,659)

4,474(3,747)(2,248)(1,389)—1,641,984

Fiscal Year 2023 Annual Report359

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

27. Reconciliation between U.S. GAAP and International Financial ReportingStandards (Continued)
Reconciliation of Consolidated Balance Sheets (Extract) (Continued)
As of March 31, 2023
Amounts asreported
under
U.S. GAAP

Equitysecurities
Consolidation without readily
and business determinable
fair value
combinations
(ii)
(i)

Equitymethodinvestments(iii)

Share-based
awards(iv)

Redeemable
Operating noncontrollinginterests Hyperinflationleases
(vi)
(vii)
(v)

Amounts
under IFRS

(in millions of RMB)

360

Equity securities and other investments

245,737

—

3,609

5,537

—

—

—

—

254,883

Prepayments, receivables and other assets

110,926

(310)

—

(482)

(1,819)(1,758)—712

107,269

Investments in equity method investees

207,380(241)—(2,303)

—

—

—

—

204,836

Property and equipment, net

176,031

—

—

—

—

—

—

353

176,384

Intangible assets, net

46,913(2,541)

—

—

—

—

—

432

44,804

Goodwill

268,091(47,033)

—

—

—

—

—

2,400

223,458

Total assets

1,753,044(50,125)

3,609

2,752

(1,819)(1,758)—3,897

1,709,600

Deferred tax liabilities

61,745

(920)

450

84

—

—

—

—

61,359Other liabilities

30,379

—

—

—

—

(2)

10,627—41,004

Total liabilities

630,123

(920)

450

84

—

(2)

10,627—640,362

Mezzanine equity

9,858

—

—

—

—

—

(9,858)——

Total shareholders’ equity

989,657(9,198)

2,860

2,668

(1,819)(1,756)(1,832)

1,560

982,140

Noncontrolling interests

123,406(40,007)

299

—

—

—

1,063

2,337

87,098

Total equity

1,113,063(49,205)

3,159

2,668

(1,819)(1,756)

(769)

3,897

1,069,238

Total liabilities, mezzanine equity
and equity

1,753,044(50,125)

3,609

2,752

(1,819)(1,758)—3,897

1,709,600

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

27. Reconciliation between U.S. GAAP and International Financial ReportingStandards (Continued)
Reconciliation of Consolidated Income Statements (Extract)
Year ended March 31, 2022

Amounts asreported under
U.S. GAAP

Consolidation
and businesscombinations(i)

Equitysecurities
without readily
determinable
fair value(ii)

Equitymethodinvestments(iii)

Redeemable
Operating noncontrollinginterests
leases(vi)(v)

Share-based
awards(iv)

Amounts
under IFRS

(in millions of RMB)
Cost of revenue(539,450)———(2,807)900—(541,357)

Product development expenses(55,465)———(5,260)——(60,725)

Sales and marketing expenses(119,799)———(1,494)

1—(121,292)

General and administrative expenses(31,922)———(2,639)117—(34,444)

Amortization of intangible assets(11,647)

472

—

—

—

—

—

(11,175)

Impairment of goodwill(25,141)

14,754

—

—

—

—

—

(10,387)

Income from operations

69,63815,226——(12,200)

1,018—

73,682

Interest and investment income, net(15,702)—(7,892)

2,002

—

—

137

(21,455)

Interest expense(4,909)

—

—

—

—

(1,722)(1,022)(7,653)

Income tax expenses(26,815)

(24)

1,030

260

(2,321)

93—(27,777)

Share of results of equity method investees

14,344——(3,563)

(111)

—

—

10,670Net income

47,07915,202(6,862)(1,301)(14,632)

(611)

(885)

37,990Net loss attributable to noncontrolling interests

15,170(7,483)

(192)

—

602

—

67

8,164

Accretion of mezzanine equity

(290)

—

—

—

—

—

290

—

Net income attributable to ordinary
shareholders

61,9597,719(7,054)(1,301)(14,030)

(611)

(528)

46,154

Fiscal Year 2023 Annual Report361

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

27. Reconciliation between U.S. GAAP and International Financial ReportingStandards (Continued)
Reconciliation of Consolidated Income Statements (Extract) (Continued)
Year ended March 31, 2023
Amounts asreported
under
U.S. GAAP

Equitysecurities
Consolidation without readily
and business determinable
fair value
combinations
(ii)
(i)

Equitymethodinvestments(iii)

Share-based
awards(iv)

Redeemable
Operating noncontrollinginterests Hyperinflationleases
(vi)
(vii)
(v)

Amounts
under IFRS

(in millions of RMB)

362

Revenue

868,687

—

—

—

—

—

—

2,332

871,019

Cost of revenue(549,695)

—

—

—

(53)

1,126

—

(2,309)(550,931)

Product development expenses(56,744)

—

—

—

(68)

—

—

(184)

(56,996)

Sales and marketing expenses(103,496)

—

—

—

(34)

2

—

(708)

(104,236)

General and administrative expenses(42,183)

—

—

—

51

82

—

(152)

(42,202)

Amortization and impairmentof intangible assets(13,504)

463

—

—

—

—

—

(5)

(13,046)

Income from operations

100,351

463

—

—

(104)

1,210

—

(1,026)

100,894

Interest and investment income, net(11,071)—(1,022)

849

—

—

73

734

(10,437)

Interest expense(5,918)

—

—

—

—

(1,651)

(765)

(8)

(8,342)Other income, net

5,823

—

—

—

—

—

—

2,294

8,117

Income tax expenses(15,549)(24)

56(1,478)

542

71

—

(182)

(16,564)

Share of results of equity method investees(8,063)

—

—

5,915

9

—

—

—

(2,139)Net income

65,573

439

(966)

5,286

447

(370)

(692)

1,812

71,529Net loss attributable to noncontrollinginterests

7,210

(207)

(107)

—

(7)

—

725

(480)

7,134

Accretion of mezzanine equity

(274)

—

—

—

—

—

274

—

—

Net income attributable to ordinary
shareholders

72,509232(1,073)

5,286

440

(370)

307

1,332

78,663

Alibaba Group Holding Limited

Notes to Consolidated Financial Statements
For the Years Ended March 31, 2021, 2022 and 2023

27. Reconciliation between U.S. GAAP and International Financial ReportingStandards (Continued)(i) Consolidation and business combinations
The Company consolidates an entity when the Company obtains control over the entity and deconsolidates the entity upon
the loss of control. Under U.S. GAAP, control generally exists when the Company obtains a controlling financial interest overan entity, whereby the usual condition is ownership of over 50% of the voting shares. Under IFRS, de facto control exists
when the Company has the practical ability to direct the relevant activities of the entity, even if the Company owns less than
50% of the voting shares.
The Company recognizes noncontrolling interests to reflect the portion of equity of a subsidiary that is not attributable to theCompany. Under U.S. GAAP, noncontrolling interests are measured at fair value and full goodwill in relation to the acquireeis recognized in a business combination. Under IFRS, the Company can elect, on a transaction-by-transaction basis, tomeasure noncontrolling interests at the noncontrolling interests’ proportionate share of the acquiree’s net identifiable assets
and partial goodwill is recognized to reflect the controlling interests only.
(ii) Equity securities without readily determinable fair value
Under U.S. GAAP, the Company can elect, on an instrument-by-instrument basis, to apply the measurement alternative torecord the investments in equity securities without readily determinable fair values at cost, less impairment, with subsequentadjustments for observable price changes recognized in the consolidated income statements. Under IFRS, these investments
are measured at fair value with changes in fair value recognized in the consolidated income statements.
(iii) Equity method investments
The Company generally applies the equity method to account for equity investments over which it has significant influence.
Under U.S. GAAP, significant influence is presumed to exist for an investment in limited partnership or unincorporated entity,
unless the investment is so minor that the Company has virtually no influence over the entity’s operating and financial
policies. Under IFRS, significant influence is presumed to exist for an investment of over 20% of the voting rights of an entity.
The Company records its share of the post-acquisition results of its equity method investees and adjusts for the basis
differences that exist between the carrying values of the equity method investments and the Company’s proportionate shareof the carrying value of the investee’s net assets. Adjustments are made to the financial statements of the equity method
investees prepared under U.S. GAAP in order to conform to the Company’s accounting policies under IFRS and to reflect thebasis differences of the equity method investments under IFRS, if different from those under U.S. GAAP.
(iv) Share-based awards
The employees of the Company hold share-based awards relating to an equity method investee of the Company that were
granted and will be settled by related parties or economic interest holders of the Company. Under U.S. GAAP, the cost
related to these awards is recognized over the requisite service period, with subsequent changes in fair value of theseawards recognized in the consolidated income statements. Under IFRS, these awards are not considered as share based
payments of the Company and the cost relating to these awards is not recognized.
The Company accounts for income tax effects of share based awards that ordinarily give rise to tax deduction. Under U.S.
GAAP, deferred taxes for these awards are measured based on share-based compensation expenses recognized in the
consolidated financial statements. Under IFRS, deferred taxes for these awards are measured based on future tax deduction
estimated at the end of each reporting period.
(v) Operating leases
Under U.S. GAAP, the amortization of right-of-use assets and the interest expense related to lease liabilities are recorded
together as lease expense and recognized in the consolidated income statements on a straight-line basis. Under IFRS,
the right-of-use assets are amortized on a straight-line basis while the interest expense related to lease liabilities arerecognized in the consolidated income statements using effective interest method.
(vi) Redeemable noncontrolling interests
Equity interests issued by certain subsidiaries of the Company are redeemable. Under U.S. GAAP, redeemable equity
interests are classified as mezzanine equity if the redemption is outside the Company’s control and as noncontrollinginterests if equity interests issued by finite-lived subsidiaries are mandatorily redeemable only upon liquidation. Under IFRS,
these redeemable equity interests are generally classified as financial liabilities.
(vii)Hyperinflation
Under U.S. GAAP, when the Company determines that a subsidiary is operating in a highly inflationary economy, thefinancial statements of this subsidiary are remeasured prospectively as if its functional currency was the functional currencyof its immediate parent company. Under IFRS, the financial statements of the subsidiary operating in a highly inflationary
economy are restated in terms of the measuring unit current at the end of the reporting period.

Fiscal Year 2023 Annual Report363

Further Information
Our annual report is available for viewing on the websites of the Hong Kong Stock Exchange at w w w.hkexnews.hk
and our website at w w w.alibabagroup.com.
In addition, we will provide hard copies of our annual report to shareholders, including ADS holders, free ofcharge upon request.
The following table sets out the exhibits filed with our annual report on the Form 20-F.

364

Exhibit Number

Description of Document

1.1

Amended and Restated Memorandum and Articles of Association of the Registrant as
currently in effect

2.1

Registrant’s Form of Ordinary Share Certificate

2.2

Deposit Agreement, dated as of September 24, 2014, between the Registrant, thedepositary and holders and beneficial holders of American Depositary Shares evidenced
by American Depositary Receipts issued thereunder, including the form of American
Depositary Receipt

2.3

Form of American Depositary Receipt evidencing American Depositary Shares (included in
Exhibit 2.2)

2.4

Indenture, dated as of November 28, 2014, between the Registrant and Bank of New York
Mellon as Trustee

2.5

Fifth Supplemental Indenture, dated as of November 28, 2014, between the Registrant
and Bank of New York Mellon as Trustee

2.6

Sixth Supplemental Indenture, dated as of November 28, 2014, between the Registrant
and Bank of New York Mellon as Trustee

2.7

Form of 3.600% Senior Notes Due 2024 (included in Exhibit 2.5)

2.8

Form of 4.500% Senior Notes Due 2034 (included in Exhibit 2.6)

2.9

Indenture, dated as of December 6, 2017, between the Registrant and Bank of New York
Mellon as Trustee

2.10

Second Supplemental Indenture, dated as of December 6, 2017, between the Registrant
and Bank of New York Mellon as Trustee

2.11

Third Supplemental Indenture, dated as of December 6, 2017, between the Registrant andBank of New York Mellon as Trustee

Alibaba Group Holding Limited

Further Information

Exhibit Number

Description of Document

2.12

Fourth Supplemental Indenture, dated as of December 6, 2017, between the Registrant
and Bank of New York Mellon as Trustee

2.13

Fifth Supplemental Indenture, dated as of December 6, 2017, between the Registrant andBank of New York Mellon as Trustee

2.14

Form of 3.400% Senior Notes Due 2027 (included in Exhibit 2.10)

2.15

Form of 4.000% Senior Notes Due 2037 (included in Exhibit 2.11)

2.16

Form of 4.200% Senior Notes Due 2047 (included in Exhibit 2.12)

2.17

Form of 4.400% Senior Notes Due 2057 (included in Exhibit 2.13)

2.18

Description of Securities Registered under Section 12 of the U.S. Exchange Act

2.19

Sixth Supplemental Indenture, dated as of February 9, 2021, between the Registrant andBank of New York Mellon as Trustee

2.20

Seventh Supplemental Indenture, dated as of February 9, 2021, between the Registrant
and Bank of New York Mellon as Trustee

2.21

Eighth Supplemental Indenture, dated as of February 9, 2021, between the Registrant andBank of New York Mellon as Trustee

2.22

Ninth Supplemental Indenture, dated as of February 9, 2021, between the Registrant andBank of New York Mellon as Trustee

2.23

Form of 2.125% Senior Notes Due 2031 (included in Exhibit 2.19)

2.24

Form of 2.700% Senior Notes Due 2041 (included in Exhibit 2.20)

2.25

Form of 3.150% Senior Notes Due 2051 (included in Exhibit 2.21)

2.26

Form of 3.250% Senior Notes Due 2061 (included in Exhibit 2.22)

4.1

Form of Indemnification Agreement between the Registrant and its directors andexecutive officers

4.2

Form of Employment Agreement between the Registrant and its executive officers

Fiscal Year 2023 Annual Report365Further Information

366

Exhibit Number

Description of Document

4.3

Form of Share Retention Agreement between the Registrant and certain members ofmanagement

4.4

Second Amended and Restated 2014 Post-IPO Equity Incentive Plan

4.5

Schedules of Material Differences of Contractual Arrangements of Representative Variable
Interest Entities of the Registrant

4.6

English translation of Loan Agreement, between Hangzhou Zhenxi Investment
Management Co., Ltd. and Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018

4.7

English translation of Exclusive Call Option Agreement entered into by and amongHangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd.
and Zhejiang Tmall Network Co., Ltd., dated January 10, 2018

4.8

English translation of Shareholder’s Voting Rights Proxy Agreement entered into by andamong Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology
Co., Ltd. and Zhejiang Tmall Network Co., Ltd., dated January 10, 2018

4.9

English translation of Equity Pledge Agreement entered into by and among Hangzhou
Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. andZhejiang Tmall Network Co., Ltd., dated January 10, 2018

4.10

English translation of Exclusive Services Agreement entered into between Zhejiang Tmall
Network Co., Ltd. and Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018

4.11

Share and Asset Purchase Agreement by and among the Registrant, Zhejiang Ant Smalland Micro Financial Services Group Co., Ltd. (currently known as Ant Group), Yahoo! Inc.,
SoftBank Corp. and the other Parties named therein, dated August 12, 2014

4.12

Amendment to Share and Asset Purchase Agreement by and among the Registrant,
Ant Small and Micro Financial Services Group Co., Ltd. (currently known as Ant Group),
SoftBank Group Corp., Jack Ma, Joseph C. Tsai, and the other Parties named therein, dated
February 1, 2018

4.13

Second Amendment to Share and Asset Purchase Agreement by and among theRegistrant, Ant Small and Micro Financial Services Group Co., Ltd. (currently known as Ant
Group) and SoftBank Group Corp., dated September 23, 2019

4.14

Third Amendment to Share and Asset Purchase Agreement by and among the Registrant,
Ant Group Co., Ltd., SoftBank Group Corp. and the other parties named therein, dated
August 24, 2020

4.15

Fourth Amendment to Share and Asset Purchase Agreement by and among theRegistrant, Ant Group Co., Ltd., SoftBank Group Corp. and the other parties named therein,
dated July 25, 2022

Alibaba Group Holding Limited

Further Information

Exhibit Number

Description of Document

4.16

Amended and Restated Commercial Agreement by and among the Registrant, Ant Group
Co., Ltd. and Alipay.com Co., Ltd., dated July 25, 2022

4.17

Second Amended and Restated Intellectual Property License and Software Technology
Services Agreement by and among the Registrant, Ant Small and Micro Financial Services
Group Co., Ltd. (currently known as Ant Group) and Alipay.com Co., Ltd., dated September
23, 2019

4.18

Cross License Agreement by and between the Registrant and Ant Small and MicroFinancial Services Group Co., Ltd. (currently known as Ant Group), dated September 23,
2019

4.19

Third Amendment and Restatement Agreement, dated May 16, 2023, in respect of a
US$4,000,000,000 Facility Agreement dated March 9, 2016

4.20

Second Amendment and Restatement Agreement, dated May 16, 2023, in respect of a
US$6,500,000,000 Facility Agreement dated April 7, 2017

4.21

Amendment and Restatement Agreement, dated September 21, 2022, relating toa HK$7,653,750,000 term loan facility between Alibaba Group Services Limited, as
Guarantor, and the other parties named therein, dated May 17, 2019

8.1

List of Subsidiaries and Consolidated Entities of the Registrant

11.1

Code of Ethics of the Registrant

12.1

Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

12.2

Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

13.1

Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002

13.2

Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 200215.1

Consent of PricewaterhouseCoopers — Independent Registered Public Accounting Firm

15.2

Consent of Fangda Partners

15.3

Consent of Maples and Calder (Hong Kong) LLP

15.4

Certification by the Chief Executive Officer Pursuant to Item 16I(a) of Form 20-F

Fiscal Year 2023 Annual Report367

Further Information

368

Exhibit Number

Description of Document

101.INSXBRL Instance Document

101.SCHXBRL Taxonomy Extension Schema Document

101.CALXBRL Taxonomy Extension Calculation Linkbase Document

101.DEFXBRL Taxonomy Extension Definition Linkbase Document

101.LABXBRL Taxonomy Extension Label Linkbase Document

101.PREXBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Alibaba Group Holding Limited

Alibaba.com

Alibaba Cloud

Alibaba Health

Alimama

Amap

A-NIU

Alibaba Cloud Bao

Dear Deer

Derdo

Amap

Banma

Cainiao

Damai

DingTalkEle.meXiaogenban

Caixiaoniao

Microphone

Ding Sanduo

Exiaobao

FliggyFreshippo

IntimeJuhuasuanLazadaFliggyFreshippo

YinxiaoTai

Zhangxiaoju

LazzieLingxi Games

Lingyang

Orange Lion Sports

Pingtouge

Quark

Lingxiaoxi

Lingxiaoyang

Chengxiaoshi

Ping Sanyong

Quark Baobao

RT-mart

Shuqi

TaobaoTaocaicai

Taobao Deals

Fa Ge

Xiaoqi

TaodollCai Cai

LuoboteTao Piao Piao

Tmall

UC

XianyuXunxi

Tao Piao Piao

Tmall Doll

UU

XianyuXixiaomeng

Youku

1688

Sammi

YUAN

Alibaba Group Holding Limited

Alibaba Group Holding Limited
NYSE: BABAHKEX:	9988 (HKD Counter) 89988 (RMB Counter)

Alibaba Group Holding Limited

Fiscal Year

Fiscal Year 2023 Annual Report2023
Annual Report