On November 11, TechNode was proud to host the 6th annual TechCrunch International City Event in Shenzhen. As part of the conference, TechNode’s English team put together an afternoon of in-depth content as part of the Emerge side stage, including topics such as cloud gaming, mass customization and customer-to-manufacturer (C2M), and the relationship between the China and India tech ecosystems.
It was a chance to reflect on the last year, and where China’s tech is going. I gave a short presentation on what I believe to be the megatrend for 2019: going global. I know, I know, you’ve probably heard this already for year’s now and, if you’re in touch with China’s startups and tech majors, the term chuhai (going overseas) is probably hackneyed at this point.
Bottom line: While giants like Alibaba and Tencent have made significant investments abroad since at least 2011, 2019 was the year China tech could be palpably felt on the global stage. While many have been quietly expanding, Bytedance’s were some of the first content products to not only take off, but also gain significant attention from users, journalists, and politicians around the world. China is not only getting attention for its money, but also its clever implementation of technology. What’s next for China tech, however, is uncertain. As the trade war continues with no end in sight, China’s companies are receiving more scrutiny. Global investments, especially in the US, are decreasing. As always, though, the ride promises to be an interesting one.
A brief timeline:
- 2011: Tencent acquires a 92.78% stake in League of Legends developer Riot Games, based in the US, for $230 million.
- 2016: Alibaba purchases Singapore-based e-commerce platform Lazada for $1 billion.
- 2016: Bytedance invests in India’s largest vernacular content aggregation platform, Dailyhunt.
- 2017: Alipay officially launches in Southeast Asia with merger of helloPay (originally under Lazada) into Ant Financial.
- July 2018: Bytedance launches Helo in India.
- 2018: WeChat Pay officially launches in Malaysia, allowing users to directly bind their Malaysian bank cards to WeChat’s payment platform.
- Aug 2019: Transsion, the Shenzhen-based smartphone maker and largest in Africa, creates the Future Hub incubator for African startups. The smartphone maker has already made significant investments in browser company Phoenix, content aggregator Scoop and music service Boomplay.
Companies going global: It’s not just Alibaba, Tencent, and Bytedance—other companies like JD.com are making big investments overseas. Yet others, including Cheetah Mobile and UC Browser are global first:
- Huawei already has significant market share in Europe for telecoms equipment and smartphones. In February, they announced the creation of a data center in Egypt to service Middle Eastern and North African (MENA) users.
- JD.com has invested in its own operations in SEA as well as a $19 million investment in Thai fashion brand Pomelo.
- YY purchased Bigo, an AI technology company in Singapore, for $1.45 billion in March 2019.
- Others go global first, establishing home markets overseas:
- Cheetah Mobile claims to have 68% of its user base outside of China.
- JollyChic, a China-based e-commerce platform, is one of MENA’s most popular with 35 million users in the region.
Global doesn’t mean US: Focusing on the Western developed world, as we can see above, is a mistake. All the opportunities for real growth are in the developing world. Indeed, as we see below, it’s the developing world that benefits the most from China’s money and its models.
Money going global:
- As of June 2019, Chinese VC firms have invested $667 million in Southeast Asia year-to-date.
- As of July 2019, total investment by Chinese firms in Southeast Asia reached $1.78 billion.
- In 2018, Indian startups raised $5.6 billion from Chinese investors.
- Alibaba has made investments totaling $1.35 billion in India, while Tencent and Shunwei (Xiaomi founder Lei Jun’s VC firm) have made investments totaling $1.25 billion and $33.6 million, respectively.
- The UAE has established a $10 billion joint strategic investment fund between Abu Dhabi investment group Mubadala, China Development Bank, and the Chinese State Administration of Foreign Exchange.
- Al Waha Fund of Funds invested an undisclosed amount into a $250 million fund managed by Beijing-based MSA Capital.
- Shaka Ventures, based in Nairobi and Nigeria, is founded by Chinese investors and has made three investments to date of up to $1 million each.
- Hillhouse Capital recently lead a Series A of $30 million for Lori, Africa’s “Uber of trucks.”
Models going global: You don’t need the Chinese majors’ money or their support to start rolling out similar models. Already bike and scooter rentals are taking off outside of China. In the US, electric scooters are more popular than pedal bikes—Americans aren’t exactly the biggest fans of exercise.
In Southeast Asia, companies like Grab and Gojek, who both started with ride-hailing a la Didi and Uber, are also trying to become super-apps with both offering meal delivery, grocery and medicine delivery, and mobile payments. Gojek has gone a step further and now includes O2O services like massage, laundry, and car repair as well as movie and tourism ticketing.
In Hong Kong, there are at least eight different payment providers vying for supremacy, while Vietnam has at least 10 trying to do the same. Earlier this year, I spoke with a Brazilian VC who was keen to learn more about mobile payments in China as their firm sees this as a next step for consumer services in the country.
Chinese style e-commerce is also gaining traction, especially in Southeast Asia, with similar logistics, warehousing, and payment challenges that China once experienced.
The turning point: While many tech majors are trying to crack global markets with services, Bytedance is the first the breakthrough as a global household name.
TikTok, formerly Musical.ly (built in Shanghai), is to date the most successful global content product made by a Chinese company.
But the company’s success has provoked suspicion. Previously, Bytedance products in India, including TikTok and Helo, were under scrutiny for data transfer to China as well as content linked to sexual harassment and political violence. In the US, Huawei was already the go-to whipping boy until US Senator Marco Rubio called on CFIUS to investigate Bytedance’s 2018 acquisition of Musical.ly after they were accused of censoring content related to the Houston Rockets and protests in Hong Kong.
Just recently, a congressional advisory body published recommendations on dealing with the rise of China’s AI capabilities and Xi Jinping announced official support for the country’s blockchain initiatives. The fact that Chinese companies are getting so much scrutiny means that China’s tech has truly arrived on the global stage.
What’s next?: China’s arrival doesn’t mean that everything will be rosy for the country’s entrepreneurs, investors, and tech majors. Already the US has rolled back two major acquisitions by Chinese companies, China’s share of global investment is down to 2% as of April 2019 from a high of 21% in 2015, and data sovereignty is becoming more an issue.
Indeed, the world seems to be learning an approach China was the first to implement: the balkanization of the internet. Not only are some countries implementing stricter internet controls, but many US companies are making their services inaccessible to EU customers due to the costs of GDPR compliance.
Things change fast in tech. But the course we’re on now is that by the end of the next decade, the future of growth—in particular in developing countries—will be centered around Chinese models, not Western ones.
—Additional research by David Cohen