The year 2017 was great for many tech firms in China. Tencent briefly outdid Facebook in market valuation reaching a $500 billion valuation mark. Toutiao shot up from obscurity on the international scene with its parent Bytedance buying Musical.ly. Alibaba spread its wings further into Asia, Didi started its global expansion, Huawei overtook Apple as the second largest smartphone seller.
There were those who did not have such a good year. Many companies that jumped on China’s sizzling “sharing economy” trend folded in a matter of months. Fintech companies were hit by regulatory constrictions with e-commerce and financial platform Qbao found itself accused of running a Ponzi scheme.
And then there were those who just wish 2017 never happened. Here are the top tech fails in China for 2017.
We could say that LeEco has had a rollercoaster year… if that rollercoaster suddenly fell apart in the middle of the ride and all the passengers started jumping out in panic. LeEco’s early signs of trouble started in October 2016 when it started running out of cash, partly because of its hyped-up overseas expansion. As one of LeEco’s previous employees explained, the company failed on multiple fronts of its quest for globalization. But the troubles likely began earlier with the company shuffling funds between subsidiaries to cover losses and present itself in a good light.
In between, there was a series of dramatic twists, including the troubles of ride-hailing company Yidao which was relying on LeEco’s financial support to subsidize rides. In October, LeEco’s listed arm changed its name to New Le Shi to distance itself from its founder Jia Yueting. Meanwhile, the panel who approved the listing in the first place was put under investigation.
The latest news from YT Jia, who has been blacklisted in China, is that he has refused to come back to Beijing to deal with debts sending his wife and brother instead. Interestingly enough, in a social media post explaining his decision not to come to Beijing, Jia has blamed his financial woes on a bank that has sued LeEco for being “just two weeks late on an RMB 30 million interest payment.” Jia has also transferred controlling shares of Faraday Future to his nephew Jiawei Wang in order to keep the company from potential legal action.
Bike rental hit China 2017 with a bang. Suddenly, China’s entire urban population became hipster overnight with colorful gearless bicycles becoming a popular mode of transportation. But the autumn saw the death of many bike rental companies, including Bluegogo.
The company made its name on the international scene after its failed attempt to expand overseas at the beginning of 2017. Since then, the company was followed by a string of bad luck resulting in Bluegogo’s users worrying over lost deposits, its workers worrying over their jobs and, finally, the sale of the company to ride-hailing giant Didi.
Bluegogo wasn’t the only one that bit the dust—at least six other bike rental businesses shuttered during the big bike rental explosion. While China’s two biggest players in the field ofo and Mobike occupied the 1st tier of the bike rental market according to user numbers, Bluegogo belonged to the 2nd tier of Chinese bike rental companies. Along with Coolqi, which has suffered a nearly identical fate as Bluegogo, other members of the tier were Youon and Hello Bike.
Unlike their failed competitors, this duo decided to overcome difficulties by merging. The tactic seems to have worked: Hello Bike just announced a round of financing worth RMB 1 billion. This may be the reason why ofo and Mobike, are under pressure to join forces.
3. Bitcoin exchanges
Chinese regulators have watched bitcoin and other cryptocurrencies explode in the country with the kind of enthusiasm reserved for emails from Nigerian princes. The People’s Bank of China (PBOC) started cracking down on cryptocurrency as early as January 2017 when it started investigations into China’s three largest exchanges: OKCoin, Huobi, and BTCC. This continued in February when the exchanges were forced to freeze bitcoin withdrawal for four months.
In September, initial coin offerings (ICO) became the next victim of regulation after a spike in scammy ICO schemes that would put Ponzi to shame. Bitcoin exchanges got their final verdict the same month when they were forced to close shop. In response, many Chinese traders have resorted to peer-to-peer exchanges on the private over-the-counter market but they too have recently met with a crackdown. PBOC’s latest move was to dampen incentives for bitcoin mining this week although the practice has not yet been banned.
The future of cryptocurrencies in China is not completely bleak, however. Cryptocurrency trade has earned a reputation of an element of instability and a tool for siphoning off money out of the country but the PBOC it also recognizes its potential. The central bank has already tested its own digital notes exchange platform while blockchain has become a fixture in the government’s development plans.
OKCoin, Huobi, and BTCC have moved trading to their international divisions with Huobi announcing it will expand its cryptocurrency exchange business with the help of Japanese financial institution SBI Group. BTCC’s CEO and co-founder Bobby Lee has recently stated that it’s only a matter of time before China lifts its crypto exchange ban. Maybe not such a bad year after all?