Showcasing Chinese Internet giants going global

By Benjamin Cavender

China's World Internet Congress offers a huge chance for Chinese companies to showcase the technology that they have been developing and implementing over the last 12 months and to illustrate just how far internet giants like Alibaba and Tencent have gone in terms of turning China into the world's most innovate internet economy.

The congress, which is held in Wuzhen, is themed around how the digital economy can be used to bridge economies and promote trade and information sharing, and central to this will be the work that China's tech leaders are currently doing both in China and in neighboring countries where they are investing heavily.  China's top internet focused technology companies Alibaba, Baidu, and Tencent will all be present along with foreign companies like Facebook which are important on a global stage but which would like more access to markets in China.

Richard Yu, CEO of Consumer Business Group of Huawei, addresses The Super-connected Era Forum: Innovation, Intelligence and Revolution during the fourth World Internet Conference in Wuzhen, east China's Zhejiang Province, Dec. 4, 2017. The fourth World Internet Conference (WIC) is held in Wuzhen from Dec. 3 to 5.[Photo: Xinhua]

This year's conference should be of interest to world governments and companies as China is now cementing its role as a global leader in development and implementation of internet technology.  Over the past 12 months especially China has emerged as a leader in development of mobile payments solutions, use of machine learning and AI within online retail, and in developing effective online to offline strategies and logistics technology all of which have the possibility of having a transformative effect on unbanked consumers, and consumers who previously have had poor access to technology or goods and services.  Chinese technology leaders like Alibaba, Tencent, and Baidu are now expanding aggressively into neighboring countries both through acquisition and through greenfield development of technology solutions designed for consumers in east Asia, south Asia, and Africa and the congress should provide a good opportunity to share what they are doing and to highlight further chances for cooperation.

Looking back to China’s internet economy, e-commerce is expected to represents at least 34% of retail spending in China by 2018, and is still growing at a rate that far outpaces overall retail spending in the market.  Meanwhile companies like Alibaba, JD.com, and Tencent are investing heavily in merging online solutions with offline solutions, for example Alibaba just increased its stake in Sun-Art, China's largest hypermarket retailer which should give it access both to a trove of online data about consumer purchasing habits as well as physical retail space that it can send the right products to or ship from to consumers' doors.  They are also pursuing mobile first e-commerce options like mobile wallets, instantaneous small loans, and other services that could potentially be of huge benefit to consumers in neighboring countries.  

These services have already been a hit at home and 12 months have been busy for China's internet players.  Tencent, well-known for its WeChat platform is now the first Asian company to be worth over $500 billion USD in large part due to the growth of its messaging and e-commerce offerings and Alibaba is close behind following a $25 bln USD haul on Single's Day.  While most of their growth has come from business that they do within China's borders but in the years ahead expect to see both companies move strategically into Southeast Asia, India, and Africa in a bid to become the e-commerce providers to the next billion emerging middle class consumers.  

China has always had fairly strict internet rules with which foreign and domestic players have to comply if they want access to the 750 million internet users in China.  This has allowed Chinese firms that are used to compliance with government directives to thrive at home but in the past they have been more cautious about expanding overseas.  Now as China attempts to cement trade ties through it’s neighbors via the One Belt One Road initiative internet technology coming out of China will play a major role in development strategies.

Much of the mobile first e-commerce technology that has been developed for China can be easily adapted to fit consumer needs in emerging markets in the region so from an economic development standpoint the congress provides an excellent chance to build cooperation around internet policies and to engage in sharing of technology and best practices.  Right now a lot of China’s neighbors are leery of allowing its internet giants too much access to their markets as there are concerns about security and about domestic internet industries being taken over.  However, my view is that for the most part they would be better off accepting service access and investment from Chinese internet players as this will actually strengthen innovation and allow a lot of internet startups in emerging markets to get access to the capital they need to grow and develop.  The most positive result from the congress would be that China’s technology leaders gain a better understanding of the needs of neighboring countries while foreign firms and governments become more comfortable with the technology that is emerging in China as there is room for synergy.

(Benjamin Cavender is director of China Market Research Group)