IS THE TIME UP FOR ALIBABA AND TENCENT AS LEADERS OF THE CHINESE INTERNET?

As Alibaba and Tencent approach their twentieth birthdays will they be dislodged by the new generation of internet start-ups in China? Perhaps ride-hailing app Didi Chuxing, smartphone maker Xiomi or Meituan Dianping, which delivers food and other services may knock them of their perch.

As Chairman of Walpole Capital I am always looking at start-ups and given my nearly two decades of experience in China it seems a natural fit for me to look there as well. When I was last in China I was talking with some of the players there to see if there really was anyone that could take on the Big Two in China. And I came back with a fervent no to the question of the Big Two being knocked off their perch. So why is this? Well I believe there are three main reasons:

First, Tencent and Alibaba have assiduously invested in the next generation of technology companies: Tencent alone has a portfolio of more than 600 stakes and holdings across a range of sectors and industries. For Example with Didi Chuxing, the company that virtually kicked Uber out of China, has the Big Two both as shareholders.

Second, the giants have built not just conglomerates but ecosystems. Whether your app is selling music or restaurant reviews, you need traffic, which means plenty of start-ups are perfectly happy to work on their platforms. This symbiotic relationship is important to keeping start-ups on side, and turning them into revenue-spinners and investments. Ultimately, Alibaba and Tencent want to keep users on their platforms as long as possible – and the more entertaining apps they have, the easier that is to achieve. The power of the platforms can also be seen if they don’t support you. One of the reasons that Uber failed in China was that the Tencent platform didn’t effectively support it and lent it support instead to Didi – its own portfolio company.

Third is political. Beijing prefers to regulate a few big players rather than shoals of unruly ones. Peer-to-Peer lending, for example, offers a graphic illustration of what can happen when multiple players are unleashed: the sector has been hit by Ponzi schemes, evaporating funds angry investors. Hence, the People’s Bank of China continues to clamp down on the Fintech sector, moving last week to require balances held in customers’ electronic wallets to be lodged in a central custody account. Moreover Beijing also prefers a tight band of champions so that the country can forge ahead in areas prioritized by the state, such as artificial intelligence.

But one never knows – A wild card may still emerge! Having said that I am sure the duo look sufficiently entrenched to celebrate a few more birthdays as leaders of the Chinese internet!

http://harjeevkandhari.com/is-the-time-up-for-alibaba-and-tencent-as-leaders-of-the-chinese-internet/

China – The People’s Republic of Tech!

Fifteen Chinese startups reached unicorn status last year alone; effectively 30% of the world’s new billion dollar companies were created in China in 2017. While the world was focused on the Orange Muppet and Brexit, China was focused on what is most likely to prove the most significant shift of this century.  What I mean here is the transfer of global power from the west to China. China is busy re-shaping the world around economics and technology and placing itself at the centre of the debate in these issues. China is not focused on exporting its politics and ideology. It prefers to build, innovate and prevail through economics.  It is building its ascendance through prodigious mercantile and technological change and influence. Whilst the West is dealing is with its decaying infrastructure and political systems China is using its one party system to plan projects that can be barely fathomed in the West. Just look at the Belt and Road Initiative.  Even if they achieve half of what they say this will be one of the largest projects on earth. 

China’s Long Term strategy coupled with its huge population means that it has a natural advantage in tech.  It will lead the world in machine learning with its ambitious roadmap for AI published last year.  It just has so much more information than anywhere else on earth and it has more people online (and mobile!) than anywhere else so will have much more data for the machines to learn from! It is focused on Blockchain which plays to China’s significant geopolitical advantages. And finally it will lead the world in electric vehicles.  Just look at Didi alone that raised a further $4 billion to plough into AI, Electric vehicles and International Expansion. Didi today is also the world’s most valuable start up. Not only did it kick Uber out of China it also knocked it off the pedestal on the world stage by taking its title of the World’s most valuable private company.  China used to be accused, rightly so, of stealing technology and building me too companies. Those days are over! China now is focusing on innovation rather than imitation!  And having worked in China for nearly two decades let me tell you when they focus on something – they get it done!  Anyhow I am looking at Chinese tech startups for Walpole Capital so watch this space for more interesting information