Beijing Unrest is growing in China’s big tech companies. The latest quarterly figures make it clear how badly the internet platforms are suffering from increasing regulation and corona restrictions: The e-commerce giant Alibaba grew at nine percent in the first three months, the slowest since its IPO in 2014. At the search engine company Baidu, the increase was only one percent. Social media giant Tencent’s revenue was virtually flat.
One of the rare (semi-)public expressions of opinion by Tencent founder and boss Pony Ma shows how great the uncertainty is in the management floors. On the social media app Wechat, part of his empire, Ma shared an article with his contacts that paints a bleak picture of the Chinese economy. A screenshot of it found its way to the public and was shared many times. In it he emphasized the paragraphs on the problems of the Internet economy with the comment “very clear”.
“Some netizens seem to think that companies can go bankrupt but not lay off employees,” it says. They would only consider semiconductors and so-called hardcore technologies as economically relevant, neglecting food, clothing, transportation and housing, which they considered “too mundane or insignificant”.
The article does not directly criticize the Chinese government. But it is clear that he is targeting the regulatory interventions that favor high-tech industrial technologies such as semiconductors, artificial intelligence and robotics over consumer services such as e-commerce and social media offerings. But the latter is the core business of Alibaba and Tencent.
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>>> Read here: China is becoming a pioneer in tech regulation – and strengthening its control options
By focusing on industrial high-tech applications, Beijing wants to reduce its dependency on foreign technologies, especially from the USA – and thus its own vulnerability. The striving for more technological self-sufficiency is likely to have increased further due to the western sanctions against Russia after its attack on Ukraine.
China’s authorities should switch to computers from domestic manufacturers
An order at the beginning of May to central government agencies and state-owned companies to replace computers from non-Chinese manufacturers with domestic brands within two years showed just how great the distrust has become. In a recent opinion piece, the state-run newspaper People’s Daily urged China to use more domestically developed software.
The statements made by the Tencent founder and boss show how great the uncertainty is.
(Photo: picture alliance / Song Fan/Imag)
The big tech platforms are also increasingly investing in new business areas such as cloud applications. Alibaba, Baidu, Huawei and Tencent are the four largest cloud service providers in China, which held 80 percent of the market among themselves last year.
As the latest annual reports show, this is now paying off. Market leader Alibaba Cloud made a small profit between January and March for the first time since it was founded in 2009. In its last fiscal year, which ended in March, Alibaba’s division had grown faster than its core business, e-commerce in China. However, the latter still accounted for almost 70 percent of sales and practically all profits.
Asia Technonomics
In Germany, there is still much broader and more detailed reporting on economic and innovation trends from the USA than from Asia. Wrong, we think. In our weekly Asia Techonomics column, we therefore want to bring you closer to the most exciting innovation and economic trends from the most dynamic region in the world.
According to the International Monetary Fund (IMF), the entire Asian region lost 1.6 percent of its economic output last year – far less than the USA or Europe. This decline will be far more than compensated for in the current year with expected growth of 7.3 percent. Asia is thus consolidating its economic importance for the world.
As Europe slips into the third Covid wave, infection and death numbers have been far better in Asia since the pandemic broke out. Last but not least, the corona crisis has shown that it is worth taking a closer look at Asia in order to learn for your own country.
We see that our readers are interested in exactly these topics. That’s why we want Asia Techonomics to take a look every week from now on at new technology ideas from Japan or China, billion-euro corporations that are stirring up the stock market in South Korea or Indonesia, tech investments in the Indian market, tests from cuddly robots to laboratory meat restaurants. Nicole Bastian wishes you a lot of fun!
It’s no different with the other tech giants. Baidu’s cloud services generated 45 percent more sales in the first quarter than in the same period last year. And at Tencent, too, the fintech and business services area, which includes cloud offerings, grew while overall sales almost stagnated. But the corporations are still dependent on the profits from their core business to finance investments in new technologies – and to create new jobs.
In the Asia Techonomics column, Nicole Bastian, Dana Heide, Sabine Gusbeth, Martin Kölling and Mathias Peer take turns writing about innovation and economic trends in the most dynamic region in the world.
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