China has some of the fastest-growing, most innovative tech firms in the world – and they want to expand into Western markets. Who are these firms? And what could their rapid expansion mean for us?
We closed Monday’s article with a glimmer of light of the UK’s beleaguered High Street. In the best traditions of all good thrillers, we left our heroine with the hope of being rescued: ‘the future is bright for retailers that heed the lessons of Toys-R-Us.’
Sadly, I am not so sure. I hate to snatch defeat from the jaws of victory, but the Chinese tech giants are on the march…
We have written about the American tech giants in previous articles – about Amazon’s opening of the Amazon Go store in Seattle, and about the increasing ‘techlash:’ the way in which the big tech companies seem to invade every part of our lives as they race to be the first company valued at one trillion dollars.
The Chinese tech giants
But what about the march of the Chinese tech giants? With Xi Jinping now confirmed as ruler of China for as long as he wants to be the ruler of China, it will be full steam ahead for projects like the giant One Belt, One Road infrastructure project. Not only will Chinese companies have a huge domestic market of 1.4bn people, they will also have access to emerging markets in Asia and Africa, and more developed markets in Europe.
So who are these Chinese tech giants? And what do they do? Here – at least from a Chinese perspective – are the ‘Magnificent Seven.’
Baidu is China’s answer to Google and therefore – by definition – an advertising colossus. But the company also does news, cloud storage, internet TV and a host of search products. It has also branched out into e-payments and food delivery in 70 Chinese cities. Like Google, its future may be in AI as it starts work on a self-driving car project in Silicon Valley.
Alibaba is an e-commerce giant, probably best known for its mammoth takings on Singles Day – China’s equivalent of Black Friday and Cyber Monday. Yahoo famously owns a 15% stake in Alibaba that is valued at $30bn – more than Yahoo’s core business is worth. China is the world’s biggest e-commerce market because it does not have the same retail infrastructure that the West does: but how many times have we documented the struggles that retail is now having? Do not bet against the West becoming as reliant on e-commerce as China is.
The ‘Facebook of China’ – but it is more than Facebook. Tencent was originally known for its instant messaging service, QQ.com which had over 200m users. But the successor to that, WeChat, has grown like crazy and has just passed the 1bn user mark to become the world’s second-largest social network behind Facebook.
WeChat is essentially a combination of WhatsApp, Facebook, ApplePay and Slack: as a recent convert to both ApplePay and Slack, that sounds good to me. WeChat is taking the Swiss Army Knife approach, and it is working: it is the place where people in China spend more social time than anywhere else, increasing numbers of tech vendors work in partnership with it and it is starting to make inroads in both India and the USA.
It is easy to see JD.com (not to be confused with JD Sports in the UK) as China’s answer to Amazon – but JD is more than that. Ten years ago the company made a bet that China’s evolving middle class would stop being price conscious and instead demand quality, so today it only carries items from the world’s leading brands. It also has its own shipping company, offering same-day delivery to over 600m customers in China. Like Amazon, JD is also looking at stores without checkouts – but whereas Amazon has one Amazon Go store in Seattle, JD has announced plans for 100 stores across China. And with an AI research centre opening in Cambridge and offices in London and Paris, JD’s assault on the West is already underway.
…or Didi Chuxing as it is officially known is the Chinese equivalent of Uber. It is China’s most popular ride-sharing app and does up to 25m rides a day, compared to Uber’s 2m. Valued at $16bn and with 5,000 employees, Didi claims to be saving 13m tonnes of carbon emissions a month simply through carpooling. It has 87% market share but has so far only reached 15% of the Chinese population, so its potential is enormous.
Huawei and Xiaomi
Huawei is now one of the world’s leading mobile device makers, with their share of the smartphone market on the rise outside China. It is also working on IT in Australia, a 5G network in Singapore and is partnering with Google to bring Daydream VR to Android. Huawei is well on its way to becoming one of the pre-eminent hardware makers in the world.
Xiaomi is Huawei’s biggest competitor: not Apple or Samsung, but a Chinese company that was only founded in 2010. Xiaomi has developed a fanatical following for its “Mi” brand of smartphones with over 170m users and 10m beta testers. The company is on its way to being a major consumer brand – described as a mix of Braun and Apple – also making flat screen TVs, fitness trackers and a pen that measures the quality of your water (not that they will be selling many to customers of Thames Water…)
That is a very brief overview of China’s leading tech companies: companies that are intent on expansion and which will undoubtedly change the shape of our lives. Just by reading the few paragraphs above you can see that their expansion will threaten the banks, the supermarkets and the shape of our town centres. Ten years from now they may even threaten the dominance of Apple, Facebook and Amazon. It emerged yesterday, for example, that Amazon are set to offer bank accounts in partnership with JP Morgan Chase: but WeChat will be a bank account on your phone…
Yes, there will be initial opposition to them entering our markets, but Western firms like Google are already partnering with the Chinese tech giants as they seek to limit the impact they will have.
The Magnificent Seven are on the march: they have moved from imitators to innovators. Whether that will be for good or ill only time will tell…