Chinese tech firms target overseas expansion – AVCJ Forum

“There are two themes Chinese tech companies are paying attention to right now: one is to penetrate lower-tier Chinese cities, and the other is to go abroad. The reason is very simple. If you look at the top-tier Chinese cities, they are quite developed. So where is the additional online traffic coming from?” said Ke Wei, a partner at Huaxing Growth Capital. “Companies are looking in these two directions to look for new customers to further enhance their businesses.”

Thanks to tech-savvy, young consumers – who are willing to spend money on mobile apps – many Chinese companies can turn profitable after a few years of operation. Some businesses have also developed advanced technologies, specifically in artificial intelligence, which can be commercialized not only in China but also globally, said Wei Zhou, founding and managing partner at China Creation Ventures.

Currently, there are two types Chinese companies that are expanding overseas. The first category are firms that have built a strong presence in China, such as smart phone maker Xiaomi, mobile beauty app Meitu and bike-sharing companies Mobike and Ofo. The second are start-ups that target the overseas markets from an early stage, observed Jing Wu, a partner at Qiming Venture Partners. Mobile app developer Apus - a Qiming portfolio company - is an example of the latter. Apus positioned itself as a global company from day one and now has more than one billion users worldwide.

“Chinese companies are able to build mobile applications that can gain traction quickly even in some less powerful or advanced mobile phones,” said Wu. “They target countries like India or Southeast Asia because these markets are at a stage where China was in five years ago. So Chinese companies know how to build mobile apps in these specific environments.”

This view was echoed by Huaxing’s Wei, who noted that Chinese companies are competitive in emerging markets - such as Brazil, India and even the Middle East - that are not strong on innovation. Mobile tools and content-related platforms such as local news aggregators and video apps are easily replicated overseas because they are transferable without language or cultural issues. Meanwhile, there are also opportunities for Chinese players in e-commerce and financial technology to expand overseas, Wei said.

JD.com expands into overseas markets – with a focus on Southeast Asia – through investments in third-party companies, with a view to building a stronger ecosystem around its e-commerce and financial technology core operations. It also hopes to help Chinese merchants on its platform move outside their home country. The online retailer previously invested Indonesian ride-hailing start-up Go-Jek, Vietnamese e-commerce platform Tiki, as well as UK-based luxury fashion site Farfetch.

“When we look at international expansion, China, in fact, is still growing very fast. I’m always amazed by our competitors and ourselves in terms of how fast we're still growing. You’re talking about RMB200 billion ($32 billion) in gross merchandise volume domestically for one of these platforms and they are still growing at 40% every year – that’s a crazy number. Any market we go into won't be as big as China. So we’re very selective in terms of forming partnerships in overseas markets,” said Winston Cheng, a president of international at JD.com.

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• Topics
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