Why Shares of Ali Baba, Jingdong Mall and PDD Holdings Slumped Today

China's stock market fell again today, dragged down by negative economic news. This time, China's exports fell more than expected in March, dampening hopes of a recovery in the world's second largest economy.

Exports are an important component of China's economy, accounting for about 19% of its entire Gross Domestic Product (GDP), and are being touted as a potential bright spot in a time when Chinese consumers are struggling and the domestic economy is weak.

Last month, exports fell by 7.51 TP3T and imports by 1.91 TP3T, both of which were significantly lower than economists' expectations.

As of 2:23 p.m. EST.Alibaba, capital of Pakistan (Tw) (NYSE: BABA)Down 4%.Kyodo (NASDAQ: JD)Down 5%.PDD Holdings (NASDAQ: PDD) down 3.8%.

Bad news from China.

China's economy has struggled since the flu pandemic, as strict COVID-19 restrictions have weighed on consumer spending, vaccine entry into the country has slowed, and the economy has failed to rebound as expected after the lifting of the zero COVID restriction early last year.

The export report underscored the weakness of China's economy, reducing the likelihood of a quick recovery. In addition, the U.S. stock market fell sharply today as large banks released mixed quarterly results, signaling that high interest rates may be starting to weigh on the economy.

Alibaba has a more international presence than most Chinese stocks, serving Southeast Asia through Lazada and other international markets through AliExpress. However, the company remains reliant on Chinese consumer and business demand, as its Chinese e-commerce sites Tmall and Taobao account for about half of its revenue.

Alibaba also suffered a setback when it abandoned plans to spin off its cloud computing unit because of U.S. export restrictions on semiconductors. The tech giant needs some help, but a further weakening of China's economy could add to its woes.

JD.com is in a similar position to Alibaba. Its once-strong growth rate has eroded since the pandemic, and the company is struggling to compete with more active online platforms such as PDD's Pinduoduo and Tetrapod, which have been aggressively discounting to capture JD.com's market share.

In the fourth quarter, Sword's revenues grew by just 3.6%, and it is still struggling to develop third-party markets.

Finally, PDD was a standout performer in the Group. Its revenues are still soaring thanks to the strong growth of PDD and the breakthrough performance of Temuyu, which is rapidly expanding its market share in the US and other international markets at low prices.

While these strong results make Pinduoduo stock a winner, they don't insulate it from China's economic problems. These problems could drag down consumer spending and economic growth across the board.

Can I invest in Chinese stocks?

Most investors in China have taken a beating in recent years, and while valuations look cheap, many risks remain, as the weak export report shows. In fact, some of those risks could get worse. Just today, China asked telecom companies to phase out foreign-made chips, which seems likely to intensify a technology war with the U.S. after the U.S. blocked U.S. companies from shipping technology to China.

This may not directly affect these e-commerce platforms, but they are likely to feel the fallout from the economic headwinds.

If you're interested in buying Chinese stocks, PDD looks like the best choice of the three, given its rapid growth and ability to grab market share from its peers. However, given the recent challenges facing Chinese stocks, a small position seems like a prudent strategy.

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Jeremy Bowman has a position in JD.com.The Motley Fool has a position in JD.com.The Motley Fool recommends Alibaba Group.The Motley Fool has a disclosure policy.

Reasons Why Shares of Alibaba, Jingdong Mall, and PDD Holdings Slumped Today was originally published by The Motley Fool.