China’s tech giants spread their wings abroad but keep share safe at home

The recent Uber acquisition drama in China has given a new twist to the country’s technology sector.

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The recent Uber acquisition drama in China has given a new twist to the country’s technology sector.

Domestic tech companies are straining at the leash to go global while also defending their home markets from foreign competitors.

Even before the Didi/Uber battle unfolded, China’s tech firms were making waves. The global industry has been anxiously watching to see if the Chinese behemoths play a big part in the mergers and acquisitions game as they look to gulp down foreign companies. Home-grown giants such as Alibaba, and Tencent with its WeChat platform, have expanded across several countries although they still have a long road to travel before making worldwide impact.

Meanwhile, Chinese majors in property, entertainment and heavy equipment are increasingly using the M&A route to acquire share of foreign markets.

But the country’s tech companies have been mostly pushing their own brands overseas instead of jumping on foreign names.

“Some Chinese tech companies have done well in Asian markets. Xiaomi is doing very well in India,” says Jacob Cooke, the head of the Beijing-based consulting firm, WebPresence in China.

“But many of them will find it difficult to impact western markets unless they come up with original designs and technology,” he adds.

“Copycats have very little respect [abroad].”

China’s tech companies have been later starters in western countries than others from places such as India, South Korea and Japan. But they have grown rapidly on the back of the nation’s economic growth and vast domestic market in the past two decades.

The government’s firewall, which puts restrictions on or simply bans western e-commerce giants such as Google, YouTube, Facebook and Twitter, has played a major role in keeping the domestic market reserved for Chinese companies, and boosting their growth. Although the firewall was built for political reasons, it has helped Chinese firms on the commercial plane.

For example, Baidu dominates the search engine market at home because Google is nowhere on the scene. Now, with slower growth at home, new global opportunities beckon.

In addition, protecting domestic companies from market erosion has become important. Apart from political reasons, the government is highly unlikely to open up the market for the likes of Google and YouTube any time soon.

“If Google is allowed, Baidu will surely loose market share although it will happen gradually over time,” Mr Cooke says, adding, “But Tencent’s WeChat has done well on its own merit and not just because Twitter is banned.” These days, WeChat is challenging WhatsApp in several overseas markets.

Jeffery Towson, a professor at Peking University, holds a somewhat different view. “For foreign internet companies, it is actually not the [Chinese] government that usually determines success or failure. It is most often the combination of ruthless local competitors and a little state help. Or simply not keeping up with rapidly changing [local] customers’ tastes.”

These are the some of the reasons why eBay, Expedia and Yahoo lost out in China, he says. In contrast, Google did pretty well in China while it was allowed, and LinkedIn is faring well this year. Uber put up an impressive fight before it fell to rival Didi. It is a complex situation and one cannot say foreign internet companies have no place in China, Prof Towson says.

Some big Chinese tech companies that dominate the home market include:

Alibaba: Founded by the former English teacher Jack Ma, Alibaba has risen to dizzying heights spreading its e-commerce platform across several countries. Alibaba, which has helped China to sell its low-cost goods across the globe through platforms such as Taobao, has annual average revenue exceeding US$16 billion. It recently bought Youku Tudao, a service similar to YouTube.

The group is trying to develop an ecosystem that includes logistics, payment services, cloud computing and targeted marketing services. Its AliExpress e-commerce platform is already doing business in markets such as Brazil and Russia.

Tencent: The company's most well known product is the WeChat massaging service, which has nearly 700 million users. Most of the users are in China but the service is gradually expanding to other Asian countries to challenge WhatApp. It has an annual revenue of $16 million.

The company also offers services that include digital content, mobile games and e-commerce.

Huawei: It is a giant, multi-product group competing with Apple and Samsung across the world in selling phones, tablets and other gadgets. It has offices in 100 countries. The Shenzhen-based company also runs a huge business offering heavy equipment for telecoms companies and is establishing mobile and fixed-line networks. Huawei is the leader in cloud computing in China, and is venturing out to other countries.

The company claims to have filed 3,898 patent applications last year, which is more than any similar company in the world.

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