Liu Qiangdong freed from felony rape charges in US but company faces challenges ahead

Liu Qiangdong Photo: The New York Times

The year 2018 has been nightmarish for JD.com, China's second largest on-line shopping site following Alibaba, as well as its 45-year-old founder and business tycoon Liu Qiangdong.

Liu, also known as Richard Liu in the English-speaking world, was accused of rape by a young Chinese student while he was attending a University of Minnesota business program in August.

He was arrested in the early morning of September 1, but released without bail within hours and allowed to return to his country.

In the first trading day after Liu's arrest, JD.com's shares plunged by 6 percent, the biggest daily drop this year, which saw its market value shrinking by US$2.7 billion, according to China's influential finance magazine Caixin.

After months of investigation, US prosecutors on last Friday announced that they didn't find enough evidence to follow through with charges against Liu.

"As is the case in too many sexual assault incidents, it was a complicated situation," said Mike Freeman, the Hennepin County attorney. "It is also similar to other sexual assault cases with the suspect maintaining the sex was consensual."

Liu would have faced a prison sentence of up to 30 years if he was convicted of the charges.

"We are pleased to see this decision," JD.com said in a statement on its official Weibo account. "We will continue to provide high-quality services to our customers and be committed to generating benefits for our investors."

Liu made the first direct response to the decision last Saturday morning.

"This proves I violated no law. My interactions with this woman, however, have hurt my family greatly, especially my wife," said Liu in a post on his personnel Weibo account.

"I feel deep regret and remorse and I hope she can accept my sincere apology. I will continue to try in every possible way to repair the impact on my family and to fulfill my responsibility as a husband," he added.

Challenges ahead

The result could bring Liu back to a more visible role at JD.com, but many analysts said that he would face a host of challenges to win back the trust and confidence of the company's investors.

JD.com, financially backed by Walmart, Google, and China's tech giant Tencent, is a proud emblem for the country's rising online consumers, as well as a major partner to global brands, like Adidas and Samsung.

The company's shares have lost some 60 percent of their value this year as it struggles to shrug off the accusation against Liu as well as the impacts of a slowing Chinese economy.

JD.com reported lower-than-expected revenues in November and its first sequential fall in annual active customers since its listing in New York in 2014.

Sales for the third quarter of 2018 were 104.8 billion yuan (US$15.3 billion), a year on year increase of 25 percent, said the report.

JD.com faces increasing competition from its biggest rival Alibaba and new player Pinduoduo, which went public in the US in July after three years of establishment.

In the third quarter, Pinduoduo reported new users growth of 42 million and Alibaba, 32 million, while JD.com lost 8.6 million.

Meanwhile, JD.com's traditional advantage in logistics is challenged by the fast expanding of Alibaba's Cainiao and SF Express.

Liu's control over JD.com still firm

Liu owns 15.5 percent of JD.com, second to Tencent's 18 percent, but controls nearly 80 percent of shareholder votes at the company, meaning that no decisions can be made without a green light from him.

Caixin reported that Liu had attempted to delegate and decentralize his power since 2014, but the progress had been slow.


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