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Alibaba lending a helping hand to Russia go big in online shopping

Published Date | 2018 September 12

Chinese firm Alibaba ties with Russian firms on e-commerce platform that will use Moscow’s own payment system
Russia: Chinese e-commerce giant ‘Alibaba’ signed a new strategic partnership with a number of Russian firms, which will form a new e-commerce platform and utilize Russia's own payments system. The partnership is intended at incorporating Russia's key consumer internet and e-commerce platforms. This partnership will have a positive impact on the retail and e-commerce sector in the near future. China's top e-commerce player will form a joint venture with Russia's sovereign wealth fund Russian Direct Investment Fund (RDIF), telecom company MegaFon and internet firm Mail.Ru Group. Alibaba will contribute a vague amount of cash and its existing business in the country, AliExpress Russia. The deal was declared in a joint statement during the Eastern Economic Forum (EEF), an event in Vladivostok where Chinese President Xi Jinping met Russian President Vladimir Putin. Under consents from Europe and the United States, Russia has been looking to build closer political and business ties with China. Beijing in turn wants to outspread its economic impact across Asia and Europe through its striving Belt and Road initiative. That comprises building infrastructure, like ports and railways, and also developing a "digital Silk Road" through high-speed internet networks and e-commerce. If the business deal is accepted, Alibaba will own 48% of AliExpress Russia, while MegaFon will control 24%. Mail.Ru Group, which is placing its ‘Pandao’- online shopping business into the joint venture, will possess 15%, and Russia's sovereign wealth fund will ensure 13%.The Russian market has plenty of prospective to grow. The agreement, anticipated to be formalized in the first quarter of 2019, will use Russia's payments system known as Mir, according to Kirill Dmitriev, the head of the RDIF. Mir was developed in late 2014 after Western sanctions were levied on Russia for its annexation of Crimea and its alleged role in the destabilization of eastern Ukraine. Mir is used in Russia along with international payment systems like MasterCard and Visa. According to the market insights of BlueWeave Consulting, the idea is to create a one-stop destination for consumers to shop, socialize, communicate and play games, all under the same online ecosystem. It also equated the endeavor to a digital version of China's Silk Road initiative. Jointly, the parties will inoculate strategic assets, leadership, new capital, resources and expertise to generate an unparalleled value proposition for consumers, merchants and internet users through Russia and the CIS (Russian Commonwealth), as well as speed up the development of Russia's briskly growing digital economy. By associating with Russia's leading consumer internet platform, AliExpress Russia will influence Mail.Ru Group's 100 million internet users across its social media, messaging, e-mail and online games properties. Therefore, this collaboration will enhance the Russian e-commerce market and will have a potential growth in the near future.