A Chinese e-commerce platform claiming to allow users to apply for a refund without returning the product, known as a “refund-only” policy,  faces a backlash from customers angered by the policy’s fine details. The platform has up to RMB 2 billion ($284 million) in refunds that have not been issued to shoppers who applied for the refund-only service, a user said in a recent Weibo post.

Why it matters: The spectacular promotion, garnering attention and criticism online, comes as China’s mainstream online retail platforms are working to minimize the impact of their refund policies. In this case, Numerous obstacles in the way of users’ succeeding with a  refund-only request have left consumers, expecting to achieve a “zero-cost purchase,” feeling cheated by the advertised offer.

Details: The platform, called Jingtaotao takes the first characters of China’s top e-commerce players JD and Taobao, promoted the deal on its standalone app saying it will “open up a new era of refund-only internet models.”

• Jingtaotao offers two drastically different prices for the same item. Apple’s new iPhone 16 with 128GB storage costs RMB 5,999 for regular buyers, but a steep RMB 39,994 for shoppers who intend to refund the cost of the phone after they receive it.
• The process involves consumers taking complex steps in practice. According to Chinese media reports, Jingtaotao only accepts users with paid membership for its refund-only policy, entailing setup fees from RMB 188 to RMB 28,888. 
• The company argued that it was legitimate to lure consumers onto its site with the refund-only plan, as “the initial costs of e-commerce platforms are very high,” as quoted in local news outlet NBD.

Context: The “refund-only” policy is an after-sales service popularized by Pinduoduo in 2021 with the aim of encouraging merchants to improve product quality and service. Taobao, JD, and Douyin made the same move at the end of last year amid fierce competition in China’s e-commerce sector.

Around 7.45 million delivery riders earned a total of RMB 80 billion ($11.3 billion) from Meituan last year, company chief executive Wang Xing said in an employee-facing memo on Tuesday, in which Wang listed the social contributions his food delivery giant had made.

Why it matters: Meituan handled 21.9 billion on-demand delivery orders in 2023, according to its annual report, which means its delivery workers made an average of about RMB 3.65 ($0.52) per delivery.

Details: In the internal letter, Wang mentioned that approximately 4.5 million of those 7.45 million riders are covered by national insurance for occupational injury, “We strive to improve the welfare of delivery workers,” he added.

• In China, the sudden death of a 55-year-old delivery rider earlier this month again brought up discussions about the protection of gig economy workers. Local media outlet The Paper reported that the man, surnamed Yuan in police reports, slept around three or four hours nightly, with the rest of his time spent at work. Some users debated whether his death counted as workplace injury.
• Meituan separates riders into two types, zhuansong in Chinese, meaning full-time workers directly hired by the company, and “flexible workers” with largely self-determined working hours. 
• Wang did not provide numbers of each type of Meituan delivery service provider in the email.
• For the company’s international-target operation KeeTa, the CEO revealed its service was No.1 by order volume in Hong Kong. KeeTa recently launched in Saudi Arabia, and Wang said previously that Gulf countries, Europe, and Southeast Asian markets are all under consideration for future expansion.

Context: Beijing-based Meituan’s revenue rose 21% year-on-year to RMB 82 billion in the second quarter this year, while profit for the same period reached RMB 11 billion, up from RMB 4.7 billion in the same period last year.

China’s Tsinghua University-backed Shengshu Technology has showcased a subject consistency feature for its AI video generation model Vidu, just over a month after the product became available for global users.

The AI company said the updated free feature ensures that elements from users’ uploads “remain consistent” in the video generation process, regardless of whether the model is processing human or non-human forms.

Why it matters: Shengshu appears to be positioning itself as a major player in the global AI video generation market, an industry that has seen the emergence of at least a dozen similar models in China following OpenAI’s sudden release of multiple demos produced by Sora. Sora is not yet widely available.

Details: As part of the technology updates, Vidu can now generate videos of up to 32 seconds, double its previous capacity. 

• Tang Jiayu, chief executive of Shengshu, told media attending Wednesday’s launch event that text-to-video models have uncontrollable limitations and are prone to producing videos that lack continuity.
• The technology that allows subjects to maintain coherence has had a “significant impact” on professional creative fields like animation, according to Shengshu. The Beijing-based startup has helped to bring down video production costs by approximately 97.5% in a real-world case, Tang claimed. 
• Tang also outlined the company’s business models at the event, noting that SaaS-based subscriptions and API portals are its two main revenue streams. Shengshu has received “tens of thousands of API access requests globally” since Vidu launched with support for both Chinese and English prompts on July 30. He added that revenue from the business sector surpasses that of the consumer-focused market.

Context: Like many of its Chinese counterparts, Shengshu Technology is backed by government-support funds and local tech giants. In June, it completed a Pre-A financing round worth hundreds of millions of yuan, with Beijing’s AI-centered fund, Baidu, and Ant Group among the investors.

Time magazine listed China’s cyberspace chief, Zhuang Rongwen, and ByteDance CEO Jiang Rubo in its latest TIME100 AI, featuring individuals that it deems to be the top 100 influential figures in artificial intelligence. Wang Xiaochuan, founder of Baichuan, one of China’s AI unicorns, also made the Time list.

Why it matters: This list gathers not only familiar academic and entrepreneurial names, but also AI innovators from China and beyond. The presence of Chinese names on the list is evidence of the prominent role the country is playing in the rapidly expanding field of AI.

Details: Ninety-one of those listed in 2024 were not featured on the list last year, according to the magazine, which is “an indication of just how quickly this field is changing,” according to Time.

• Time describes Zhuang Rongwen as “making history” last August, when China introduced regulations to govern generative artificial intelligence and approved several batches of domestic AI models for public service. As the director of China’s main AI regulator, the outlet says Zhuang’s decisions “shape whether China can keep pace with its Western counterparts.”
• “The list shows that Time recognizes Wang Xiaochuan’s long-term commitment to AI and our company’s multiple achievements in the field,” Baichuan AI said in an official post on WeChat (in Chinese).
• Beijing-based Baichuan is currently focusing on offering AI solutions to the medical industry based on its self-developed foundation models, the company said in a “strategy cooperation” agreement with Children’s Medical Center and Beijing Children’s Hospital. 
• Doubao, the ChatGPT-like chat tool created by TikTok maker ByteDance, has overtaken Baidu’s ERNIE Bot to become China’s most popular chatbot in recent months, according to QuestMobile data. 

Context: As of August, China has over 180 large language models available for general use, according to Wang Jingtao, vice minister of the country’s Cyberspace Administration. More than 564 million users have registered to use the AI-generated tools, Wang said in a meeting last month.

Stripe, the fintech giant known for its payment processing software, is looking to expand its presence in Asia, where cross-border trade is expected to continue growing.

In China in particular, cross-border e-commerce represents a significant potential revenue stream for businesses of all sizes. In 2023, the total import and export volume of the country’s cross-border e-commerce reached RMB 2.38 trillion, a 15.6% increase from a year prior.

Stripe, too, has seen strong growth in recent years. Sarita Singh, regional head and managing director for Southeast Asia, India, and Greater China,  said in Stripe’s annual regional event that the company’s growth reflects the expansion of the digital economy generally, which now accounts for 15% of global GDP.

Below are Singh’s comments on the surge of cross-border trade and Stripe’s role in Asia. The text has been condensed and edited for clarity.

Booming cross-border transactions

Stripe surpassed the $1 trillion milestone in total payment volume in 2023, and while we don’t break down our results by country, looking only at the aggregate level,  I can tell that cross-border businesses in China are doing very well globally, expanding into new markets, adopting new technologies, and offering new products and solutions to consumers all around the world. 

Last year, cross-border payment volume in Asia on Stripe grew more than 30%, and Stripe saw a 28% year-on-year increase in the number of Asian businesses that processed $1 million or more in payment volume on the platform.

What we are also seeing as a result is that Chinese businesses are innovative and creating whole new industries and whole new customer segments wherever they go. 

Not just e-commerce

We’re seeing growth not just in e-commerce but across a number of different industries. E-commerce is just one of them. It’s the one that we’re probably most familiar with, but it is not limited to e-commerce. We’re seeing really strong innovation come out of China, whether it’s in software, gaming, all sorts of digital assets, or physical assets that Chinese businesses are looking to trade internationally. 

For us, it’s less about industry, and more about business models and target markets. Because what we’re seeing is a lot of Chinese businesses are looking for new pockets of growth. There’s a lot of interest in going global. 

Financial activities

Moving the money globally becomes very important for businesses expanding internationally. They need to be able to collect payments from customers worldwide, manage and optimize these funds, handle taxes, and report accordingly. The final step involves paying out to suppliers or partners.

Stripe can help those financial activities. We build in all the regulations from each of the countries that Chinese businesses want to play in. The regulations are changing all the time. It’s really hard for Chinese cross-border businesses to ensure they adhere to all of the right local regulations. We build it into our technology and infrastructure so that Chinese businesses can focus on what they do best – running their own businesses.

East Buy, the e-commerce unit of China’s one-time private tutoring giant New Oriental, posted a net profit of RMB 1.7 billion ($239 million) in the 12-month period to May 2024, of which RMB 1.3 billion came from gains on the shedding of its education business, while profit from continuing operations declined nearly 70% to RMB 249.1 million for the fiscal year.

Why it matters: The latest earnings show that the Hong Kong-listed company is dealing with plummeting profits despite increasing revenue, leading to uncertainty over East Buy’s ability to sustain growth with the departure of Dong Yuhui, China’s top livestreaming influencer.

Details: According to the company’s annual results, “a large majority” of East Buy’s total transaction value in the past year came from TikTok sibling Douyin, which contributed RMB 14.3 billion, an increase of 43% from last year.

• East Buy currently has 29.65 million followers on Douyin, with the widely-used short video platform booking over 181 million orders for the company during the last 12 months. East Buy’s results did not note the number of active users of its standalone app, but declared that GMV from the platform represented only 8.4% of the total figure.
• The firm’s revenue recorded a 56.8% year-on-year rise to RMB 7.07 billion in the period from last June to May. 
• East Buy has been struggling since livestreaming star Dong’s namesake venture Time with Yuhui, previously a wholly-owned subsidiary of East Buy, was sold entirely to the presenter in July. Time with Yuhui now has 23 million followers on its Douyin account. In a statement at the time, East Buy CEO Michael Yu said he would make arrangements for payment of  the deal, comments largely interpreted as meaning that Dong would get a venture that was priced at RMB 76.6 million for free. East Buy has since cut ties with the key influencer.
• East Buy added in its annual report that it has distributed around RMB 129 million to Dong, comprising unallocated profits from Time with Yuhui that Yu promised to give Dong in July.

Context: Last December, East Buy fired former chief executive Sun Dongxu after his comments angered fans of Dong, one of the e-commerce platform’s top livestreamers. Sun implied in a social media post that Dong’s scripts were written by a team of writers. Days after the controversy, East Buy promoted Dong to a senior partner in the company and named him assistant of culture to the chairman, Michael Yu.

US retail giant Walmart has exited its eight-year holding in China’s JD, one of the country’s largest e-commerce platforms, according to an SEC filing from Walmart on Tuesday.  The American firm sold its shares for around $3.7 billion in the deal. 

JD’s Hong Kong-listed shares fell nearly 12% at the Wednesday opening. To stabilize the stock price, the company soon responded with a stock buyback plan worth $3.9 billion.

Why it matters: The ending of the relationship comes as Chinese online retailers face sluggish consumer spending and stagnant retail revenue growth.

Details: “This decision allows us to focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities,” Walmart said in a statement. Its strategic relationship with JD started in 2016 and further deepened in 2018 when both sides invested in the on-demand delivery firm DaDa.

• In the past few years, Sam’s Club has become a major revenue stream for WalmartChina as Chinese customers flooded to embrace membership-based warehouse supermarket chains that offer free samples and cost-effective prices.
• At least ten Sam’s Club stores will be open in China before the end of this year, public information shows, with store locations moving to third-tier cities in a marked difference from the chain’s slow expansion in its early days in China.
• JD noted it is “confident in the future cooperation” between the two companies, while the US retailer said it would continue a “business relationship” with JD, without offering a detailed explanation. JD-affiliated DaDa is exclusively in charge of the delivery operation of Sam’s Club when shoppers place orders online.
• As one of the titans that once dominated the Chinese e-commerce market, JD is now dealing with budget-centered Pinduoduo’s momentum amid a downturn in China’s consumer market. Since its 2021 high, the company’s stock price has lost nearly 70% of its value.

Context: Last week, JD posted a 1.2% revenue year-to-year growth to RMB 291.4 billion ($40.8 billion) while hitting a record high in net profit in the second quarter. Its retail business saw a 1.5% earnings gain during the period that included China’s second-biggest shopping festival 618. The retail unit recorded a 6.8% rise in net revenues in the same period last year.

Alibaba’s Southeast Asia-focused retailing unit Lazada made its first monthly profit in July, CEO James Dong announced at a Tuesday internal meeting, saying the positive status of the firm’s earnings before interest, taxes, depreciation, and amortization (EBITDA) “proves the effectiveness of Lazada’s business strategy,” an attendee told TechNode.

Why it matters: The achievement could be a precursor to Lazada achieving sustainable profitability as parent company Alibaba’s domestic performance stalls. Alibaba is set to post its second-quarter earnings on Thursday.

Details: “Lazada will continue to increase investment in the Southeast Asian market under a sustainable operating model,” Dong said on the meeting, according to the attendee.

• Lazada operates in Thailand, Singapore, Vietnam, Malaysia, Indonesia, and the Philippines, with its Thai business the first to achieve profitability in 2022.
• Parent company Alibaba does not disclose separate financial records for businesses under its international digital commerce group, where revenue comes mainly from AliExpress, Trendyol, and Lazada, consisting of customer management services, merchandising, and logistics services, according to Alibaba’s annual report. 
• Alibaba mentioned in its March quarter earnings report that Lazada’s loss per order narrowed significantly year-on-year during that period.

Context: E-commerce giant Alibaba has made at least ten investments in Lazada totalling nearly $8 billion since 2016. The retailer’s mature rivals like Shopee and TikTok Shop are also eyeing expansion in the Southeast Asia region, Lazada’s operating base.

• Temu, the budget-oriented retailing platform owned by PDD, entered the Thai market in August, one year after its expansion to Malaysia and the Philippines.
• Earlier this year, hundreds of Lazada workers were laid off amid overall workforce adjustments, with employees from all levels impacted, according to a CNBC report.

Low-profile AI firm MetaSota has received a fresh cash injection led by Ant Group, according to a LatePost report, as the Alipay owner adds the Chinese company to its artificial intelligence investment portfolio.

The over RMB 100 million ($13.9 million) round of fundraising propelled six-year-old MetaSota’s valuation to $150 million. 

Why it matters: The deal is the latest in a series of investments secured by Chinese artificial intelligence companies, despite amounting to considerably less than the billions of yuan committed to MetaSota’s rivals in the field in recent months. 

Details: LatePost reported that Baidu and Tencent also considered participating in the financing, but fintech giant Ant Group finally sealed the deal with investment fund Lightspeed China Partners.

• Another of MetaSota founder Min Kerui’s ventures, Chinese natural language analysis cloud service provider BosonNLP, was acquired by Ant Group in 2018. That same year, Min built MetaSota, since becoming a hub of artificial intelligence products including a legal AI translation tool and article generation software.
• In March, MetaSota launched an AI-powered search tool and received over 7 million visits, making it the third most-used tool in a flurry of AI products in China that month, trailing only Baidu’s ERNIE Bot and Moonshot AI’s Kimi, according to traffic-monitoring platform SimilarWeb.

Context: Beyond MetaSota, Ant Group has invested in at least six Chinese AI companies since ChatGPT kicked off the artificial intelligence product boom. Large model trainers ZhipuAI and Moonshot AI, video generation companies AIsphere and ShengshuAI, as well as chip firm MoffettAI have all received funding from the fintech giant.

Freshippo, Alibaba’s supermarket chain, has reportedly achieved four consecutive months of profit for the first time after a major restructuring of its operations. The brand has been the subject of persistent rumors that it would be sold off following the postponement of its proposed IPO last November, but recorded profits from March to June this year.

Why it matters: The performance comes on the back of significant cost-saving efforts, including downsizing and layoffs, in Alibaba’s grocery business. The company is positive that it could also be a sign of sustained profitability.

Details: In March, former CEO Hou Yi left Freshippo, the company that he founded nine years ago, with chief financial officer Yan Xiaolei taking on the CEO role. 

• According to Alibaba’s annual report, Freshippo exceeded RMB 59 billion ($8.2 billion) in total GMV in the fiscal year ending March 31, 2024, RMB 4 billion more than the previous year. Online transactions contributed over 63% to the chain’s GMV.
• A Wednesday LatePost report cited Yan as saying that the company aims to reach an annual GMV of RMB 100 billion in three years. “By then, Freshippo will have become one of the top retailers in China, and going public will be a natural step,” Yan was quoted as saying.
• In April, Freshippo resumed its Membership Activation and Renewal service, six months after the sudden suspension of the value-added campaign, and began a range of discount-oriented reforms. The original changes had caused dissatisfaction among members, as non-members were able to receive a general 20% discount by shopping in-store, whereas previously members enjoyed an exclusive 12% discount.
• Since its founding, Freshippo has experimented with various retail formats, including the membership store Hema X and convenience store-like Hema Mini, in an attempt to set itself apart from rival Sam’s Club, which focuses solely on paid membership. The LatePost report mentioned that Freshippo is planning to open 300 new discount stores before next March as it seeks expansion in lower-tier markets.

Context: Freshippo was one of three businesses originally planned to be the first to go public under Alibaba’s massive restructuring that split the tech giant into six units. But plans for an IPO were put on hold as a downturn in China’s consumer market impacted the brand’s slumping valuation.

China’s bubble tea brand Chagee is reaping the rewards after Zheng Qinwen, its health ambassador, won the country’s first Olympic tennis singles gold on Aug. 3.

Right after the 21-year-old Zheng won in Paris, Chagee said it would treat 6,666 customers to a free beverage to “Celebrate the moment, Zheng Qinwen, and Chinese tennis.”

Why it matters: Bubble tea makers have bet big on potential Olympic medalists, as they look to establish a brand presence and healthy connotations via the world’s largest sporting event. 

• Chagee and rival Heytea opened pop-up stores in Paris ahead of the summer games, while other Chinese counterparts ChaBaiDao and Auntea Jenny signed deals with members of China’s Olympics basketball and volleyball teams respectively.

Details: The fast-expanding Chagee signed Zheng as a health ambassador in April, and an official poster featuring Zheng with a tennis racket in one hand and a Chagee teacup in the other has been seen at the brand’s offline stores across the country since.

• Chinese dairy products producer Yili, an official partner of the Chinese team for Paris 2024, has suffered a number of marketing missteps during the Olympics however. The brand has been spotted placing advertisements erroneously stating that “Zheng Qinwen won the silver medal in the women’s singles tennis” and celebrating “Sun Yingsha’s table tennis gold” before the final matches; Zheng won gold while Sun claimed a silver medal. 
• The two advertisements were displayed in the busy Sanlitun area of Beijing. Yili apologized saying the placement was an “in-advance test” as they wanted to be the first to share the joy with audiences as soon as the competitions were completed.

Context: In 2022, Luckin Coffee benefited from Eileen Gu’s gold medal  at the Winter Olympics in Beijing. Chinese audiences generally knew little about the American-born free skier before the event, when the coffee chain announced Gu as its ambassador in late 2021. Luckin’s customized products for the athlete sold out in multiple stores across the country on the day of Gu’s win, according to local media reports.

If a newly released drama series had nearly 100 episodes, would you be willing to spend time watching it? What if each episode were only ten minutes or even two minutes long? In China, this type of short drama series allows you to enjoy a condensed version of a soap opera, packed with all the usual dramatic moments, but in the time it takes to watch a movie.

The ultrashort duration of these mini-dramas, primarily shown in vertical format, caters to the short attention spans characteristic of the short-video era.

This new way of storytelling developed rapidly in China during the Covid-19 pandemic. Kuaishou, the biggest competitor to ByteDance’s Douyin in the country, mentioned in its earnings report that in the fourth quarter of 2023, “heavy users of short dramas” on its platform reached 94 million. The group is defined by Kuaishou as those who watch over 10 episodes per day.

“Character arcs are out, cliffhangers are in”

Micro-dramas have surged as a fresh format that helps fill viewers’ fragmented down time, being seen as ideally suited to a commute or short trip on the bus or subway, while delivering eye-catching plots in seconds. The format has challenged the traditional approach to soap operas, which features well-known actors in major roles and long-form episodes.

Dean Burns, vice president of Shanghai Vancouver Film School, said that “character arcs are out and cliffhangers are in” as one of the reasons why micro-dramas have become popular, during a speech at ChinaJoy 2024, China’s biggest gaming convention. 

Short dramas are also in tune with the latest trend of mobile-first consumption and bite-size entertainment, according to Burns.

Male-oriented “Nanpin” and female-oriented “Nvpin” are the two major narrative styles in Chinese drama content, characterized by their focus on appealing to each gender’s supposed preferences. While “Nanpin” usually contains elements such as combat and fantasy, “Nvpin” depicts stories of female protagonists, attempting to reflect women’s desires and needs in scenarios such as in the workplace and in their romantic lives. 

Popular micro-dramas include My Wife and My Boss, I Got Married Without You, and The Double Life of My Billionaire Husband. These share common plot features including romance, conflict, and revenge. 

During this year’s Chinese New Year, a series called Hi, Mom took China’s social platforms by storm. It tells the story of a female college student who travels back to the 1980s, and shows the clash between her modern mindset and those of the past.

The ultrashort drama accumulated over RMB 12 million ($1.66 million) in user payment recharges within 24 hours, Chinese media outlets reported.

A Hi, Mom viewer who finished the series in two days told TechNode, “The plots made me addicted to it. It’s cool to watch honestly, but I feel like it’s kind of a waste of time once I’m done with it.”

Can micro-dramas make money?

Typically, viewers are free to watch the first few episodes of micro-dramas until, usually at the point of a cliffhanger, they are prompted to pay to unlock the remaining episodes.

But the question is, does producing mini-dramas make money? Do the user payments go directly to the production companies’ pockets?

In 2023, public data shows that China produced more than 3,000 online micro-dramas. “I think now participators may have rushed in too eagerly,” Lu Enwen, CTO of China-based marketing service provider Yujin Culture, told a forum at ChinaJoy. “Our data indicates that the percentage of people losing money in the industry has increased from 80% last year to 90% this year, or even 95%.”

He added there is too much homogenization at present in the industry, with many content producers focusing on skits.

Crazy Maple Studio, the parent company of ReelShort, a platform that provides micro-drama shows with English-speaking actors, reported only RMB 240,000 in net profit in 2023 despite enjoying rapid growth and being ranked the number three entertainment app in the US last November.

On the one hand, producers of short dramas rely on guiding users to pay to watch what happens next for monetization. On the other, they have to pay distributors first to place ads on various traffic platforms, such as Douyin and Kuaishou, in order to reach a wider user base.

According to media outlet Southern Weekly, 90% of the revenue in the industry has been spent on advertising fees, with industry profit margins below 10%.

At the ChinaJoy forum, several industry professionals noted that some companies are rapidly producing sensationalized micro-dramas. This is because companies can cover previous costs “as long as one or two out of ten projects succeed,” according to attended speakers, in large part thanks to the low initial investment required.

A recent revenge-themed short drama, Shi Gu Qian Jin, broadcast on the Baidu app, garnered around 20 million views in one week, revealed Yan Yusong, vice president of Hong Kong-listed Linekong Interactive Group, the producer of the micro-drama. However, he added, “This actually counts as a failed work [due to the relatively low view clicks].”

Going global

Outside of China, audiences are increasingly drawn to captivating, plot-twisting micro-dramas. With many of the short dramas circulated in the Western and Southeast Asian markets, although the actors are not of Chinese descent, the teams behind these dramas are often from China.

The phenomenon comes at a time when Chinese regulators are imposing stricter guidelines on the billion-dollar-drama industry.

“Most practitioners of overseas micro-dramas are Chinese because Chinese people are hardworking and can endure the high-intensity workload of short dramas,” Keson Su, vice president of MeetSocial, a digital marketing agency that primarily serves cross-border merchants, told the event at ChinaJoy.

The company has a micro-drama-focused division MeetForce, which Su serves as the head of. He noted that the firm has opted not to use Los Angeles as a filming base but instead has set up overseas bases in Eastern European countries such as Serbia. “We sometimes hire British actors to fly in for filming when there are specific requirements for a British accent,” he said.

Alibaba’s China-focused marketplace Taobao has joined the wave of Chinese e-commerce platforms launching cross-border operations with a plan to ship clothing globally for free. The platform will look to follow in the footsteps of the likes of Temu with an initial move to cover Asian territories including Hong Kong, Singapore, Malaysia, and South Korea.

Why it matters: The move illustrates Taobao’s efforts to tap into a broader global market while also engaging in competition with Pinduoduo at home.

Details: Taobao aims to reach Australian shoppers as early as the end of this year before expanding further afield. The program will look to attract Taobao merchants selling not only men’s, women’s, and children’s apparel, but also sports and outdoor clothing, as well as shoes and bags.

• Under the model, Taobao will heavily subsidize shipping fees, a strategy that Chinese companies frequently use when expanding overseas to challenge existing platforms embedded in local markets.
• Apparel merchants on Taobao can directly sell items to “billions of consumers worldwide” by joining the plan without the need for complex procedures, according to Taobao and Tmall Group.
• The program is set to adopt a so-called “half-fulfillment” model, which is also used by AliExpress and its counterparts Temu and Shein, supposedly liberating sellers from concerns about international logistics and delivery. 
• On the official application page, Taobao highlights “zero returns and zero refunds” as the biggest feature of the plan, sending signals to sellers that the platform will deal with any returns and further costs beyond the expense that merchants incur in sending items to Taobao’s China-based warehouses.

Context: Taobao sells items from numerous local clothing brands that its domestic rivals have no access to. Previously, people living outside China needed third-party transit resources to get items they bought from Taobao.

Chinese bubble tea chain Chagee has reportedly hired Li Tao, vice president of Starbucks China, paving the way for the rising brand’s further expansion, according to local media outlet 36Kr. However, the report was quickly denied by the company.

Founded in 2017, the bubble tea maker has found widespread success in China’s crowded ready-to-drink beverage industry through its addition of fresh milk to raw-leaf tea.

Why it matters: The reported move comes as Chagee mulls a US listing to widen its access to financing.

Details: The 36Kr report added that Chagee is also looking at hiring professionals from rivals such as Tims China (Tim Hortons’ China offshoot), while attempting to lure marketing staff from social media platform Xiaohongshu and tech giant Huawei.

• Chagee founder Zhang Junjie has set a goal of surpassing Starbucks China in terms of sales volume in 2024. In the first quarter of this year, Chagee made more than RMB 5.8 billion in gross merchandise value (GMV), slightly exceeding half of its total sales for 2023, Zhang told the public in May.
• For the same three-month period, Starbucks recorded a decline in both revenue and net profit, with earnings landing at $706 million, approximately RMB 5.1 billion. 
• Although Chagee has kept silent on its profit figures, local media outlet LatePost reported in May that the company earned a net profit of between RMB 800 million and RMB 1 billion in 2023, versus a loss around RMB 48 million on RMB 500 million revenue a year prior.
• Beverages are mostly priced at around RMB 20 ($2.75) at Chagee, the fourth-largest Chinese to-go beverage chain. Zhang recently revealed that the brand sold over 230 million cups of one of its flagship products, a jasmine green milk tea, in 2023. Chagee tends to use ancient Chinese idioms to name its beverages; the aforementioned jasmine drink is named with a four-character idiom that translates to “the difficulty of finding a soulmate.” The name alone doesn’t give buyers an immediate idea of the drink’s ingredients.

Context: The past 18 months has been a period of wild expansion for Chagee, which opened more than 3,500 new stores in 2023. It took the chain more than five years to open its first 1,000 stores and it has over 4500 in total as of May.

Alibaba has signed NBA star Tony Parker as an ambassador for Alibaba.com, its cross-border business-to-business retail platform, just days before the Paris Olympics, as the company tries to lure European customers and eyes further international expansion. 

Why it matters: The signing of Parker comes shortly after David Beckham became ambassador for AliExpress, and its connections with professional sports figures indicate Alibaba’s intention to expand its businesses to reach a larger user base.

Details: Alibaba.com, founded in 1999 as the Chinese tech giant’s first business, was designed to serve as a bridge between foreign wholesalers and Chinese manufacturers.

• Tony Parker made his entrepreneurial debut in 2019, after a legendary career marked by four NBA championships during his prime. Alibaba said Parker has a “powerful appeal” in the US and Europe.
• The NBA star’s advertisements for Alibaba can be found in Paris’ Charles de Gaulle airport and subway stations, and at well-known landmarks such as Avenue des Champs-Élysées.
• The ongoing UEFA Euro 2024 football competition has benefited Chinese merchants on Alibaba’s international-focused e-commerce platform AliExpress, according to the company. One AliExpress seller from Xiamen, surnamed Zhang, decided to increase their stock of soccer-related goods “soon after” Beckham was appointed as the platform’s global ambassador ahead of the tournament. Zhang has seen a tenfold increase in sales within one month, AliExpress said in a WeChat post.

Context: Global sports events are a significant traffic pool for Chinese brands looking to expand their business overseas, with prominent logos on the field and strong visitor flow rate as well as live viewer count making for fast results, as demonstrated by the spike in downloads of Temu after its Super Bowl debut in 2023.

Kuaishou, one of the main rivals to TikTok’s China sibling Douyin, showcased several fresh features for its text-to-video model Kling AI at the World Artificial Intelligence Conference (WAIC) in Shanghai last week, including the ability to generate videos up to 10 seconds. 

At WAIC, visitors queued to experience the Sora-like tool that is currently available by invitation only. Users sent simple prompts to generate videos, such as “a panda eating salmon” and “the Mona Lisa putting her glasses on with her hands”, with the resulting clips demonstrating Kling AI’s ability to render the inputs almost perfectly.

AI-generated videos have subsequently flooded the Chinese internet, with Kling AI being used to create clips featuring characters from historical films undertaking modern day tasks and spawning multiple memes.  

A video featuring Rong momo, a character from “My Fair Princess” who has become a well-known internet meme in China, feeding Princess Ziwei a chicken drumstick has gone viral on social platforms these days. The AI-generated video is based on the drama’s most famous scene in which Rong momo tortures Ziwei by repeatedly stabbing her with a needle.

Why it matters: Kuaishou will be hoping that its suite of self-developed large model series, including language model KwaiYii, image-focused Kolors, and video-centered Kling, will give it an edge as it continues to challenge to ByteDance’s Douyin and TikTok.

Details: More than 500,000 users have applied to help beta test Kling, senior vice president of Kuaishou Gai Kun revealed last weekend at a WAIC forum, with the number of videos generated reaching 7 million as of now. The Sora rival’s hype is such that English language posts teaching users outside of China how to apply for a Kling AI trial can be found on X, formerly known as Twitter.

• Kuaishou provided practical tips on the screen at the WAIC event, including advising users to use simple words and sentence structures and to avoid overly complex language. It also emphasized that its model is not sensitive to numbers, giving an example that if the prompt is “10 puppies on the beach,” the number might not be consistently maintained in its outputs.
• A member of staff from Kuaishou’s large language model team told TechNode that they were not at liberty to disclose the data used to train Kling AI, but indicated that it was open source.
• The TikTok rival meanwhile announced at WAIC that its Midjourney-like model Kolors would become open source, a move which Kuaishou said aims to contribute to a more prosperous ecosystem for the text-to-image generation community.
• Kuaishou’s investment in research and development has quadrupled over four years, with expenditure increasing from RMB 2.9 billion in 2019 to RMB 12.3 billion in 2023.

Context: Kuaishou, China’s second-largest short video company, launched its AI strategy in 2023, according to CEO Cheng Yixiao, who said that generative AI has a “very rich combination of business scenarios and huge value potential” for the content platform.

Editor’s note: ‘Landing AI’ is a series of special reports focusing on the field of Artificial Intelligence curated by TechNode. By investigating the development of AI landing in China and the behind-the-scenes stories of the industry, we’re going to dive deeper into everything that’s possible under the new wave of AI.

US-based private equity investment firm Matrix Partners has rebranded its China arm as MPC in English, the initials of Matrix Partners China, keeping the Chinese name unchanged starting from July 1. Matrix Partners is the latest dollar fund to make its China operations independent amid geopolitical concerns, following Sequoia, BlueRun, and GGV Ventures.

At the same time, the firm said it would also rebrand its Indian business to DZ47.

Why it matters: Matrix Partners’ renaming reflects greater independence for its China operations, according to the company, but stops short of a complete split from its international operations, the path that many of its US counterparts have opted for.

Details: “Each team’s leadership has operated with separate decision-making and separate back offices from inception,” the US-headquartered venture firm said in a notice, emphasizing that the renaming is driven by a desire to clarify “regional market dynamics” and a continued focus on “competing locally.” 

• In China, Matrix Partners’ investment reach includes companies in the Internet industry, healthcare, and retail fields, with Xpeng, Li Auto, and Ele.me being its best-known assets.
• The firm set up its China unit in 2008, managed by partners Zhang Ying, Xu Chuansheng, and Shao Yibo, 30 years after it was founded in Boston. MPC currently manages more than RMB 70 billion ($9.6 billion) worth of assets, its official website shows.
• The 16-year history of the early-stage-focused VC company in China has run alongside booming growth in the country’s Internet service industry. In an interview with local media outlet ChinaVenture, Zhang Ying said China’s faster economy and technological growth provided him with a “perfect starting point” for in-depth investment activities.
• Zhang added that he believes there will be a prolonged period ahead where investing in entrepreneurship will become “increasingly difficult,” due to the continued changes in the international landscape.

Context: In the past year, several US venture capital firms have split off their China arms as independent operations have felt increasingly like a better choice due to heightened geopolitical tensions and the increased likelihood of US-China technological decoupling.

Chinese artificial intelligence firm iFlytek on Thursday unveiled the latest version of its AI model, Spark 4.0, which the company benchmarked against OpenAI’s GPT-4 Turbo, saying it shows better performance than the US company’s most-advanced model in five aspects, despite lagging in terms of coding and multimodal abilities.

Why it matters: Trained exclusively on a home-grown computing platform that is co-built with telecom giant Huawei, Spark 4.0 can be seen as sending a signal that China’s AI industry has entered a new phase of self-sufficiency despite the US’s restrictions on the country’s access to the most advanced chips, according to iFlytek.

Details: The Hefei-based company finally fulfilled its commitment to upgrade its Spark model to the level of GPT-4 in the first half of 2024, eight months after the promise was made. At Thursday’s event, however, Chairman Liu Qingfeng acknowledged that the gap would “widen again”, possibly to more than a year, once GPT-5 is released, because of its larger parameter size, longer training time, and the increase in the amount of data used.

• “It is necessary to recognize the comprehensive gap between China and the US in the LLM in a scientific and rational way,” said Liu, “but also to have the confidence to catch up quickly to ensure there is no generation gap.”
• The company has seen over 400,000 overseas developers build products based on the Spark V3.5 model that was introduced in January, with 7.02 million developers having used it in total.
• In a key upgrade, the Spark app and its desktop version, both of which are by iFlytek’s model series, added a feature called “personal space” where foundation models are dedicated to generating individualized content that matches one’s personality. The mechanism operates on the premise that users can input their information on work, study, and life, or accumulate sufficient dialog records with AI bots for enhanced learning.

Context: While iFlytek said its Spark 4.0 model ranked number one in eight international mainstream test sets, rival Alibaba on the same day was also certified by the world-renowned open-source platform Hugging Face as topping the world’s open-source big model list for its Qwen-2, with Meta’s AI model ranked behind it in second.

China’s AI companies are rushing to win over OpenAI users in the country as the ChatGPT creator takes measures to block API traffic from countries and regions that it does not officially support. Affected regions include mainland China, Hong Kong, Russia, and Iran.

Why it matters: OpenAI’s latest announcement on API restrictions has been widely interpreted as targeting China, where  local enterprises and developers have been using OpenAI’s API to build products or services. On the other hand, the move is being regarded as an excellent opportunity for Chinese AI companies to woo these users.

Details: Developers in China have posted screenshots of a notice from OpenAI to various online communities that states, “Our data shows that your organization has API traffic from a region that OpenAI does not currently support.” The notice adds that OpenAI will block such access starting on July 9.

• API is an abbreviation for Application Programming Interface. Although Chinese IP addresses are not allowed to use OpenAI’s artificial intelligence software directly, local developers and companies have been able to create applications through OpenAI’s API platform, while individuals can change their IP address in order to get ChatGPT services. 
• Search giant Baidu, one of China’s leading AI companies, on Tuesday launched a program called Cloud in Hometown that grants additional tokens that equal the scale of their OpenAI usage to users who migrate from OpenAI to the company’s own ERNIE series model. 
• Baidu is also touting a zero-cost solution for developers to migrate from OpenAI, although it does charge a fee for further training, fine-tuning of prompts, and custom development services.
• Alibaba Cloud has also joined the fray with an alternative solution that it claims is “the most cost-effective” with 22 million free tokens for Chinese developers.
• Local AI startups, Zhipu AI, 01.AI, and Baichuan, have also launched exclusive offers for OpenAI users, with Tsinghua University-backed Zhipu being the most generous at time of writing with an offer of 150 million tokens for free.

Context: China has over one hundred AI models with parameters beyond 1 billion, according to data disclosed by the National Bureau of Statistics in March. Commercialization has become a key priority for the companies behind these models in recent months with a price war over tokens breaking out as the firms vie for potential clients.

E-commerce sales dropped 7.0% from a year ago during China’s second-biggest annual shopping event, the 618 festival, third-party data provider Syntun said in a report on Wednesday. The dip in the mid-year festival’s numbers came despite major player Alibaba achieving a historical record on 88VIP loyalty membership sign-ups and JD announcing that it had set a new record for both transaction volume and orders.

A total of RMB 742.8 billion ($102.3 billion) in merchandise volume was generated by the country’s online retailers as part of the event, according to Syntun, the first drop recorded since figures began in 2008, as Chinese consumers tighten their wallets amid economic uncertainty.

Why it matters: E-commerce platforms invariably choose to release consumption data that is favorable to them in an attempt to portray untouchable positions in a crowded industry.

Details: Led by emerging platforms Douyin (China’s TikTok sibling) and Kuaishou, livestreaming-based sales enjoyed continuous growth and popularity during the month-long 618 festival period, with accumulated sales rising 12.1% to RMB 206.8 billion compared to the same period last year.

• Alibaba’s Taobao said it saw 81 livestreaming channels operated by merchants and influencers sell goods valued at more than RMB 100 million each, and JD, which only began focusing on the shopping format in late 2023, noted growth of over 200% in orders placed via livestreams. Meanwhile, Xiaohongshu reported livestream orders more than five times those of last year as of June 18.
• Pinduoduo, a fast-rising platform fueled by its highly-affordable offerings, has tried hard to maintain its ultra-low price advantage during the 618 period, with the Temu sister app introducing a price-adjustment tool that allows it to automatically cut prices within a range set by merchants to ensure better exposure for their items.
• According to a screenshot of  a notice within Pinduoduo, “the feature can not be turned off until the end of the promotion on June 21, 2024 once it is turned on.” This language suggests  that low prices potentially come at a cost to merchants and supply chains.
• As the creator of the 618 festival, JD this year faced a major backlash from more than 50 local book publishers as it pushed its “low-price strategy” despite the publishers protesting that the company was discounting books to below-cost prices. Some publishers announced that they would refuse to supply JD in the future. Conflict between merchants and platforms have intensified as the former chase ever lower prices to attract customers.

Context: The 618 festival began more than a decade ago to celebrate the founding of JD, before being adopted by other platforms. Its sales peaked at nearly RMB 800 billion in 2023.

Major Chinese online retailers including Taobao and JD and emerging platforms like Xiaohongshu have said they saw positive metrics during China’s month-long 618 shopping festival, where low prices have taken center stage as merchants navigate the challenge of reduced consumer spending.

In an email, Alibaba sent to TechNode, the Taobao owner said it has seen “encouraging user engagement and growth” from merchants of all sizes.

Why it matters: The 618 shopping festival is the second largest online shopping event in China, with consumption levels during the event seen as a barometer of the country’s overall spending trends.

Details: Pinduoduo’s standout performance has turned it into a model for competitors, although the discount shopping app has become more aggressive recently as it looks to maintain its appeal. Before its main promotions began in late May, Pinduoduo quietly launched a system designed to automatically adjust prices within the range set by merchants, so that a product’s price drops if a competitor platform offers a lower price.

• At the same time, Taobao revamped its homepage to closely resemble that of Pinduoduo, its biggest rival. Changes include reducing the number of fixed channels, and highlighting algorithmically recommended items that it thinks users are likely to buy.
• In another key figure revealed by Alibaba, newly-added members of 88VIP, Taobao’s loyalty membership package, more than doubled in May compared to the previous month. The growth was fueled by additional value-added services such as access to unlimited free parcel returns. Taobao said more than 35 million users were recorded as part of the program in the first three months of 2024.
• JD, the platform that began the 618 shopping festival in celebration of its founding, this year partnered with Hunan TV for its evening gala three years after such last event was held. As part of the project, JD said it would hand out “heavyweight prizes” including resort stays and sports tickets to users who shopped on the app during the gala, which started at 8 p.m. on Monday. 
• Elsewhere, content-sharing platform Xiaohongshu reported triple orders on purchases made via its site compared with the same period last year.

Context: The main e-commerce players kicked off their 618 promotions in mid-May, but none have posted overall sales totals for the period.

A Chinese AI content creator has challenged cybersecurity firm 360 Security Technology over its use of an image of a woman wearing an ancient costume, which he claims he created via an AI model to showcase a “partially redrawn feature” on the company’s search engine.

The argument between creator DynamicWang and 360 Security escalated as the two parties failed to settle, with the company’s vice president Liang Zhihui saying it is willing to resort to legal action.

Why it matters: As the emerging technology of artificial intelligence is increasingly being used to create content, authorship attribution lacks a clearly defined legal framework.

Details: Even before DynamicWang publicly asked 360 Security to apologize over the alleged copyright infringement on June 8, the firm was in the midst of a public opinion storm, this time over its perceived disrespect toward women. When founder Zhou Hongyi introduced the repainting function at the company’s AI product launch on June 6, he used “sexy” as a prompt to ask the AI-powered search engine to redraw a woman’s breasts of the female in the controversial picture, which DynamicWang since claimed was based on his AI-generated work.

• The creator said 360 Security should acknowledge the infringement and compensate him with a symbolic RMB 1 ($0.14). He said the firm “stole” the image generated by his self-trained AWPortrait model.
• According to Liang, the author made a request to the company that he wants 360 Security paid him ten times the model price, together with the cost of compensation. 
• Local media outlet NBD quoted DynamicWang as interpreting the price to use his model as RMB 4,499 is for small- and medium-sized AI startups. This was not the price set for public-listed 360 Security, the creator said. 
• Each side has its own version of the story. While the creator mentioned compensation and apology were “prerequisites,” and buying the model was optional, Liang said purchasing the author’s AWPortrait model for ten times the price was “beyond our knowledge,” according to a WeChat screenshot of his conversation with DynamicWang. The current argument between the two sides is whether DynamicWang owns the copyright to the images generated by the model he trained. 
• In his latest Weibo post late Wednesday, the creator introduced himself as a photographer whose images are posted on Unsplash, Getty Images’ free gallery site, and that the training data he used to feed AWPortait model included his photography and Unsplash images, which he says means there are “no copyright issues” on his side.

Context: In January, the Beijing Internet Court granted copyright protection for an artificial intelligence-generated image, ruling that the image involved had an element of “originality” due to the plaintiff inputting multiple prompts and adjusting the parameters before generating a picture of a young woman through the text-to-image AI model Stable Diffusion. The ruling was seen as the first such AI-generated image copyright infringement case in China.

Chinese artificial intelligence company Zhipu AI on Wednesday announced its second price cut in a month, slashing the price tag of its “most popular model” by more than half. The company said it would now offer its GLM-4 model at a charge of RMB 0.10 ($0.014) per 1,000 tokens, but CEO Zhang Peng insisted the move was not part of “a simple price war.”

Why it matters: Offering ever lower prices to capture market share characterizes China’s AI sector at the moment, where over 200 large language models have been released since October 2023.

Details: Tokens are sequences of data that large language models use to process text. GLM-4-0520, the most advanced model built by Zhipu AI, has a context window of 128,000 tokens with RMB 1 for every 10,000 input tokens. The price of this advanced model was cut in May.

Generally, 1,000 tokens are equivalent to around 750 English words or 500 Chinese characters.

• The deep discounts are a result of “iterations of the models’ core technologies,” Zhang said at a Zhipu AI open day on Wednesday. In an interview on the same day, Zhang was quoted by local media outlet TMTPost as saying, “not only can we join [the price war], but we can do it without losing money.”
• The company, which is backed by leading Chinese academy Tsinghua University, has disclosed that it currently serves 300,000 enterprise-level customers, and on average its model family processing exceeds 40 billion tokens daily.
• On the consumer side, the firm has a GenAI app called Zhipu Qingyan that is powered by the company’s foundation model ChatGLM, with the app already having amassed 300,000 AI agents that can perform tasks such as creating mind maps and making schedules since its launch last August, the company said.

Context: Zhipu AI has received at least nine rounds of financial injections from Chinese state-backed funds, major tech companies, and well-known venture capital firms since it was founded in 2019. Those supporters include Alibaba, Tencent, Sequoia, and Hillhouse.

• The Beijing-based company also acts as an investor and has invested in seed and angel rounds in rival ModelBest, a firm similar to Zhipu AI that was founded by Tsinghua University graduates. 

TikTok eyes a shopping sales goal between $12 billion and $13 billion for the second half this year in the US, according to a 36Kr report on Tuesday. The high target was set after the short video platform fell far below expectations in the first five months.

The report quoted key data from Tabcut, a Chinese firm that tracks TikTok Shop’s performance, indicating that TikTok generated less than $2 billion in the US shopping business from January to May 2024.

Why it matters: The potential ban TikTok faces in America seems to have already hurt its growing e-commerce business in its largest user base country.

Details: TikTok, the international version of Douyin, was reportedly hoping to expand its US e-commerce business tenfold to as much as $17.5 billion this year, according to a January report from Bloomberg. TikTok has so far only accomplished 11.4% of its GMV goal in the past 5 months, the 36Kr report said.

• TikTok hosted a small closed-door meeting in Shenzhen in mid-May, 36Kr added, where it invited its key domestic sellers to convey a message that the platform “remains optimistic about its prospects in the US market despite facing a political headwind.” The company also assured attendees that TikTok has comprehensive contingency plans in place even in the “worst-case scenario.”
• As the latest effort to counter the US government’s request to divest or ban the app, TikTok parent ByteDance has appointed John Rogovin, a former lawyer of Warner Bros, as its global general counsel. The company sued the US government in May with the aim of blocking a law requiring it to sell its US operation or face a total ban. In the appointment announcement, TikTok said Rogovin will report to ByteDance CEO Liang Rubo, and indirectly to TikTok chief Shou Chew.

Context: TikTok Shop officially entered the US market in September 2023, although little official data has been given to the outside world regarding its merchants and sales. The platform has grown to 170 million users in the American market, according to figures released in January,  up from 150 million last year.

Tencent on Thursday launched an AI assistant app called Yuanbao, signaling the Chinese tech giant’s belated entry into the highly competitive artificial intelligence assistant field with an independent entry based on the company’s Hunyuan foundation model.

Yuanbao integrates artificial intelligence-based search, summaries, and writing competencies, and can be used to analyze documents, and basically engage with people based on prompts.

Why it matters: The opening of the independent app shows that Tencent has finally chosen to face competition head-on, several months after AI offerings from its rivals. Baidu’s ERNIE Bot has already amassed 200 million users, while ByteDance’s Doubao currently boasts over 26 million monthly active users.

Details: Tencent’s Yuanbao distinguishes itself from Baidu, Alibaba, and ByteDance’s products by offering direct access to content from the WeChat ecosystem, the company’s super app with nearly 1.4 billion monthly active users, which the firm says will give it superiority in terms of content timeliness and richness.

• WeChat, the all-in-one app, features a fan page functionality similar to Facebook’s, known as Official Accounts, where individual creators or enterprises can publish articles or information to subscribed users. The content cannot be directly accessed through mainstream search engines such as Baidu.
• Since its launch in September 2023, the parameter scale of Tencent’s Hunyuan large model has been upgraded from hundreds of billions to trillions, according to Tencent, and the pre-training corpus has increased to 70 trillion tokens.
• Based on the published guidelines of the Yuanbao app, the consumer-oriented assistant currently offers multiple AI agents, similar to GPTs, which can be selected for various functions, including English-speaking practice, daily life translation, and avatar generation.

Context: Last week, Tencent announced that it had made the lite version of its Hunyuan model free to access, while the price of its more powerful version has been reduced by 50% to 87.5%, as the firm joined a fresh price war among major Chinese tech companies.

• Tencent’s announcement comes just hours after iFlytek said its SparkLite API would be permanently free. In an interview with TechNode at the BEYOND Expo 2024, the firm’s vice president Wang Wei mentioned that the decision was made because “iFlytek should have a sense of social responsibility as a major company by making [AI] technology available for broader applications.”

China’s online retailer JD said it will hold a one-day 2 yuan ($0.28) campaign for millions of goods with free shipping during this year’s 618 event, set to begin on Friday, as cheap remains a main theme across the country’s e-commerce marketplaces and consumers care priorities.

Why it matters: The market pressure that JD faces has now intensified as Pinduoduo, which operates on the principle of low prices and user-friendly after-sales service, continued to nibble away at what was once China’s second-largest e-commerce retailer by market capitalization.

• Rarely seen in public, founder Richard Liu has recently returned to media headlines for his wolfish statements within the company. As JD rushes for its most important 618 event, Liu’s remarks on the company’s tendency to fire underperformers who don’t work hard have raised concerns about its ability to maintain growth.

Details: The company had a press conference about the 618 mid-year shopping festival on Tuesday, where JD promoted it will provide “saving to the extreme and cheaper shopping experiences” to customers.

• When JD and Taobao try to provide more cash subsidies to shoppers, Pinduoduo more straightforwardly implements its low-price advantage by urging merchants to cut prices, with those who do so getting higher search rankings during the shopping festival. The price war that has permeated the industry in the past two years seems like a bottomless pit for e-commerce participants.
• At the press event, JD invited several of its sales and procurement staff, a group responsible for finding products that cater to users’ interests, to bargain at minimal cost with suppliers, and finally promotes to shoppers, to share their work publicly. The sales and procurement employees have been frequently thrust into the public eye by JD after livestreaming conducted by some of them last Singles Day found initial success for the company that had seldom participated in live-commerce before.
• JD said in the latest official WeChat post that rich commodities, affordable prices, and careful services of its 618 festival are the result of the “tireless efforts” of this group of employees, just one day after the company announced a gradual annual fixed salary for procurement staff to 20-month pay.

Context: Sandy Xu, the current CEO of JD, revealed that its “10 billion yuan subsidy” channel has amassed over 100 million users since launched last March, while more than one million third-party sellers have operated online stores on the platform, which is in contrast to itself in previous years when JD’s self-operated stores the main within its ecosystem.

TikTok owner ByteDance has surprised the artificial intelligence industry with the ultra-low cost of its Doubao model, which the company said is capable of processing 2 million Chinese characters, equivalent to 1.25 million tokens, for RMB 1 ($0.14). OpenAI’s most advanced multimodal model, GPT-4o, also unveiled this week, comes in at $5 per million input tokens handled.

“A good model works well and is affordable to everyone,” Tan Dai, president of Volcano Engine,  ByteDance’s cloud computing services unit, said at an event on Wednesday. “Large usage polishes a good model and dramatically reduces the unit cost of model inference,” he added.

Why it matters: The radical pricing, which Tan explained is achieved through model structuring and hybrid scheduling of cloud computing power, is likely to initiate a price war in China’s AI field after a battle on parameters.

Details: ByteDance’s Doubao large model family consists of nine versions, ranging from a “lite version” to the advanced Doubao Pro, which is able to deal with up to 128,000 token inputs. The range also includes models centered on generating pictures and virtual characters.

• The company did not disclose how many parameters it used to train its most powerful Doubao Pro model.
• The Doubao LLM family shares the same name as ByteDance’s ChatGPT alternative, a free AI bot that the company says has 26 million monthly active users.
• The Doubao model is now open to external developers and other interested parties for cooperation via Volcano Engine, though this comes months after tech rivals Alibaba and Tencent gave enterprise customers access to their models last April and September, respectively.

Context: Earlier this year, ByteDance founder Zhang Yiming criticized employees for not being “sensitive enough” to the emergence of new technologies like ChatGPT in an internal meeting, saying that discussions among staff over ChatGPT only started in 2023. His remarks came after the company had already launched the Doubao chatbot in the second half of last year.

Fast fashion retailer Shein is refueling its IPO ambitions by pivoting to a London listing, as its US listing remains in limbo, according to a Reuters report which cited two sources. However, the China-connected company, which moved its headquarters to Singapore in 2022, is said to still prefer a public debut in New York.

Why it matters: The choice of London as a listing venue is being seen as the second best option for Shein, whose potential US IPO continues to be viewed as a bellwether for the geopolitical state of play between the US and China.

Details: Shein reportedly said it would update China’s securities regulator over any change in its listing aim, and file with the London Stock Exchange as soon as this month, according to Reuters.

• Political headwinds Shein faces in the US, its largest market by revenue, show no sign of diminishing. Republican Senator Marco Rubio in April asked Secretary of Homeland Security Alejandro Mayorkas to investigate Shein and Temu on claims that ultra-low prices on the two platforms are a result of “a combination of” intellectual property theft, trade exploitation, strong backing from the Chinese government, and alleged use of forced labor. 
• The push follows a February letter in which the senator urged the SEC to block Shein’s IPO unless the company disclosed more details on “business practices and risks to their business.”
• In 2023, Shein emerged as the third-biggest online fashion retailer by net sales in America, after Amazon and Walmart, data conducted by ECDB and Statista showed.
• A source quoted by Reuters said that China’s securities regulator told Shein early this year it would not recommend a US listing due to supply chain issues. Shein’s rise globally is largely thanks to its huge pool of China-based suppliers that lower costs and enable a fast turnaround on new item production.

Context: Last year, despite stronger scrutiny of its business operations, Shein recorded over $2 billion in profits – a figure that had more than doubled from the previous year. The company sold a total of approximately $45 billion worth of merchandise globally during the period, according to a Financial Times report.

• As part of Chinese regulations issued in February 2023, China-based companies, including those incorporated offshore, are required to go through an official review process if they seek to list overseas.

Baidu’s PR head, Qu Jing, has left the search engine giant after her controversial remarks on work culture exploded on Chinese social media. The surfacing of a series of videos made by Qu has led to the public casting doubt on the company’s corporate values.

“I’m not even obligated to find out if you cried or had a quarrel [with your boyfriend or husband], which does not serve my concern as a supervisor. I’m not your mother-in-law, also not your mum,” Qu commented in one of a series of short videos posted on Douyin, China’s TikTok sibling. 

All four of Qu’s controversial videos on the platform have since been deleted, but clips can still be found on Chinese social platforms and her comments have sparked a firestorm of attention and debate. 

Why it matters: The incident has escalated into Baidu’s biggest PR crisis in years. The company, which is facing a declining search engine share and is seeking an AI-centric transformation, has looked to calm public outrage in the wake of Qu’s comments.

Details: News of Qu Jing’s departure was reported on Thursday night, just hours after she apologized in a post on WeChat Moments from her personal account.

• That apology letter did not mention Qu’s impending exit from the company, but saw her clarify that the videos “do not represent Baidu’s stance.” It stated that Qu did not obtain consent from the company before making the videos public.
• Qu Jing became the vice president and chief of communications at Baidu in 2021, after leading public and government affairs at Huawei and her previous work as a reporter for China’s state-backed Xinhua news agency, according to her  Wikipedia page. 
• In one video, Qu criticized a Baidu employee who refused to take a 50-day business trip during the height of the Covid-19 pandemic, when China imposed strict travel restrictions across the country. “How dare you tell me that your husband can’t stand it and needs you back [home]? I’m 10 or 20 years older than you and have two kids, [but] I feel neither bitter nor tired,” she said.
• Another video that went viral late Wednesday added fuel to the fire of public opinion, and bringing into question Qu’s ability as a PR chief. In the short video, Qu was recorded smacking a small paper figure with the letters SCMP written on it, widely regarded as referring to the South China Morning Post. The incident is suspected to be Qu venting her anger over a January report published by the newspaper linking Baidu’s ChatGPT rival ERNIE Bot with China’s military. However, TechNode has not been able to independently verify when the video was taken.

Context: Baidu, along with other major tech companies in China, has faced repeated scrutiny and criticism over its so-called wolf work culture in recent years. In one of the most notable examples, in 2019, Alibaba founder Jack Ma came under fire after he referred to the practice of “996”, working from 9 a.m. to 9 p.m. six days a week, as a “huge blessing”.

Alibaba’s marketplace Taobao has dropped its presale period for the upcoming 618 shopping festival, a promotional mechanism that it had been using for a decade to stimulate sales. Previously under the strategy, consumers were required to pay a deposit in advance, and then pay the final amount within a specified date range, but would not receive the goods until after the latter had cleared, leading to longer delivery times than usual. 

Why it matters: Alibaba is expected to focus on optimizing user experience during the mid-year shopping bonanza in an effort to offer more straightforward shopping steps akin to rival Pinduoduo. 

Details: According to local media outlet LatePost, Alibaba CEO Eddie Wu finally made the decision to cancel presale promotions after employees “overwhelmingly supported” the proposal in internal debates.

• The report added that presale deals would still appear in e-commerce livestreams, a major channel for presale items, mostly in the makeup category.
• The presale mechanism was seen as limiting for shoppers who wanted goods to be delivered immediately after placing their orders, a situation that has emerged as one of the sources of dissatisfaction during China’s largest shopping festivals. Taobao and Tmall have announced that they will kick off the country’s second-largest festival on May 20 this year, offering discounts for almost a month until June 18, or 618.
• Alibaba has also recently sharpened its focus on optimizing Taobao’s web-based platform, LatePost reported, after website version had been played down for years due to the popularity of mobile phones. Compared to the comprehensive shopping experience on mobiles and especially in app, Taboo’s website offers fewer features and consistently directed shoppers to download the app instead.
• “The only thing we’re doing at the moment is trying desperately to make up for some of the experiences we’ve lost in recent years,” said Zhao Kun, head of Taobao’s website, on Alibaba’s internal forum according to LatePost. The media outlet quoted his post as saying the team has launched more than 60 new features in less than two months. 

Context: The changes are in line with Alibaba’s newly revived “user first” approach, one of the two key strategic areas emphasized by Eddie Wu, who currently also holds the chief executive position at the tech giant’s domestic e-commerce group and its cloud computing unit.

China’s food delivery giant Meituan is hiring Arabic- and English-proficient talent for its likely entry into Riyadh, the capital of Saudi Arabia, as the company puts expansion beyond China on its agenda as domestic consumption falls. 

Meituan is set to launch KeeTa, the food delivery brand which it launched in Hong Kong last year, in its first Middle East destination in the coming months, Bloomberg reported on Friday. 

Why it matters: Meituan’s first expansion outside of China comes at a time when a string of Chinese companies have turned to overseas expansion amid uncertainty about the prospects of recreating the high growth situation that the tech sector has enjoyed at home for much of the past two decades. 

• “I think it may take us another 10 years to make a significant impact in overseas markets, and we are not in a hurry to do that,” said chief executive Wang Xing last month. “We will be evaluating very carefully the opportunities for that and the ways to get into the market,” he added.

Details: CEO Wang took direct control of the Beijing-based company’s global business in a February overhaul. He told investors on a fourth-quarter earnings call that Meituan is “very actively evaluating opportunities in other markets” after its Hong Kong entry saw “positive results.”

• Meituan executives, including Wang and Head of Strategic Overseas Investments Zhu Wenqian, visited Saudi Arabia for meetings with local government ministers and members of the Saudi royal family last May, according to a report by Chinese tech media outlet 36Kr, when they tried to assess whether the country was suitable for a food delivery pilot scheme.
• Meituan expects to compete directly with well-established platforms such as Delivery Hero, Deliveroo, and Jahez in the Middle Eastern country, where the online food delivery market is projected to grow at 5.62% annually, data from Statista shows.
• High subsidies from the company in order to provide customers with discounts have played a key role in Meituan’s initial success in Hong Kong under KeeTa since it landed in the region in May 2023. Last year, the platform captured a 21% market share by GMV in the territory, rapidly eating into rivals’ shares. 

Context: After recording its lowest stock price in a year in February, at slightly over HK$60, Meituan’s shares are slowly recovering. The company’s stock price is still just a quarter of its value at its peak in mid-2021 however.

TikTok CEO Shou Zi Chew told the platform’s users that “we aren’t going anywhere” after US President Joe Biden signed the sell-or-ban bill targeting the app into law, giving TikTok’s Chinese parent company nine to 12 months to divest.

“The facts and the Constitution are on our side and we expect to prevail again,” Chew said in a video on Wednesday.

Why it matters: The passing of the bill after months of threats is a clear wake-up call for other Chinese apps that see the US as a top destination for their business expansion or have already entered the market there.

Details: The countdown to the forced sale of TikTok began when Biden signed the bill on April 24, but the short video app’s 170 million American users will continue to have access to it during this period. TikTok is expected to robustly challenge the move in the US courts.

• The law comes as US Secretary of State Antony Blinken begins his visit to China, where he expects to meet the country’s foreign minister Wang Yi.
• Former editor-in-chief of Chinese media outlet Global Times, Hu Xijin, who is known for his nationalist stance, wrote on X that TikTok should “fight to the end”, hours after the Senate ruled on the platform on Wednesday. He said he believes it will be “meaningless” if ByteDance founder Zhang Yiming “loses this career and only gets some money.”
• On Wednesday, China’s Ministry of Foreign Affairs commented it had nothing more to add to the country’s stance on the TikTok ban as the government institution said it has already made clear its position that there would be “no fairness to speak of” if the US uses national security reasons to ban foreign companies.

Context: TikTok, along with its Chinese owner ByteDance, spent over $7 million on in-house lobbyists and digital ad campaigns this year in an effort to avert the bill passing, according to lobbying disclosure reports cited by CNBC.

An avatar of JD founder Richard Liu participated in its third livestreaming show on Monday as part of a promotional event for this year’s World Book Day. Although the virtual Liu’s nearly 40-minute-long slot made for only a short section of the 11-hour-long e-commerce event, its appearance still suggests that the company sees use of the avatar as a headline- and hype-generating strategy as it looks to boost consumption on its platforms. 

Why it matters: As JD gears up for June’s 618 event, China’s second-largest shopping festival, the attempt to introduce highly life-like digital personalities as sales anchors aims to reduce merchants’ operational costs and compete against rival platforms’ more-established human-hosted livestreams.

• The e-commerce giant will reportedly offer free services to merchants to try avatar-based livestreams during 618.

Details: “I am ‘procurement and sales manager Brother Dong,’” the digital Liu stated as part of Monday’s livestream. The avatar’s latest appearance featured a multi-camera set-up and added an interactive session after previous shows were criticized for its mechanical pronouncements and a lack of interaction with audiences.

• Liu’s avatar introduced five sets of books during the show, including China’s four classical masterpieces, detailing his personal reasons for recommending the novels and highlighting their “price competitiveness” on JD. Each book set was priced at less than 50% of the regular price if viewers bought through links showcased on the left of the screen.
• JD has received “lots of” cooperation inquiries from merchants and brands after Liu debuted his livestreaming avatar last week, according to the chief algorithm officer of JD Cloud’s own large language model ChatRhino, which powers the virtual Liu. Some CEOs also plan to collaborate in bringing their avatars to live shows, the executive added in an interview with China media outlet Yicai.

Context: Earlier this month, JD announced a RMB 1 billion investment, awarded in cash, to incentivize content creators in short videos and livestreaming, aiming to drive the development of content creation on its platform.

“Three, two, one! Show [shopping] link!” Richard Liu, founder of Chinese e-commerce company JD, debuted his livestreaming show on Tuesday – using an avatar in his likeness. The billionaire’s virtual doppelganger drove total sales volumes to exceed RMB 50 million ($6.9 million) in less than one hour, the company said.

Why it matters: JD is finally trying to capitalize on China’s online retail trend for combining content forms and shopping, with the firm making huge investment bets in new areas. Liu’s rare public appearance, albeit through an extremely life-like avatar, demonstrates the urgency of change for the company as it plays catch-up to rivals that have cultivated high-popularity influencers over many years.

Details: Liu’s avatar is powered by the company’s ChatRhino large language model, according to a WeChat post that JD published on Wednesday. The post added that its AI-driven virtual hosts now serve more than 4,000 brands.

• Liu appeared simultaneously in two live shows that lasted less than an hour each, showcasing a total of 13 products, including steak and milk. Although his virtual persona successfully replicated his habit of waving his hands while speaking, the segments where he introduced the products sounded mechanical, lacking interaction with the audience.
• Beijing-based JD experienced a sudden traffic explosion last November as its procurement and sales team joined livestreams as hosts to sell hot items including the iPhone 15 series at lower-than-market prices. Different from other e-commerce platforms, JD said its model has no additional costs such as advertising fees or commissions for invited hosts.

Context: JD’s revenue grew by 3.7% in 2023 to RMB 1,084.7 billion, significantly slower compared to its 27.6% growth in 2021 and a 9.9% increase in 2022, as the e-commerce space has been slow to recover post-pandemic due to belt-tightening by price-sensitive consumers.

China’s search engine operator Baidu said Tuesday the number of users of its AI-driven ERNIE Bot has doubled to over 200 million in four months, declaring itself a leader in artificial intelligence, as competitors rush into the sector. The company also added that ERNIE now handles 200 million daily queries.

Why it matters: Baidu’s chatbot has revived confidence in the company’s monetization of AI, with its 200 million users offering new potential avenues for growth. 

Details: Co-founder and CEO of Baidu Robin Li expressed confidence that natural language will emerge as the new programming language in the future in his speech titled “Everyone is a Developer” at the company’s AI Create conference on Tuesday.

• Baidu released three AI development tools during the event – AgentBuilder, AppBuilder, and ModelBuilder, underpinning Li’s view that developing apps should become “as straightforward as making a short video.” According to video demos showcased during the talk, these tools can even help users without any coding skills build apps.
• More than 190,000 AI apps were created through Baidu’s Qianfan cloud platform by over 85,000 businesses, the company claimed in the latest figure.
• In the speech, Li explained the “fine-tuning and post-pre-train methods” based on ERNIE 4.0, the firm’s current most advanced foundation model, enable the creation of models with better results at a lower cost compared to models tuned directly from open source models, which is why Li said he thought open-source models would become “more and more outdated.” His earlier comment that open source models “make little sense,”  recently sparked contention on social media among Baidu’s counterparts. 
• Rival Alibaba developed an open source large language model last August, becoming the first Chinese tech major to do so. Others, including startup 01.AI, founded by Kai-Fu Lee and Baichuan built by Sogou’s founder, both chose to make their billions-parameter models open source soon after.

Context: China’s regulator approved 117 large language models for generative AI services on March 25, according to the Cyberspace Administration of China (CAC). The scope of approvals signals stiff competition among tech companies scrambling to create potential from the technology’s commercial application.

• A recent chart finds Baidu, which was amongst the first batch to open its ChatGPT-like bot to the market last August, is being chased by rival company Moonshot AI-trained Kimi, which specializes in analyzing long text, in terms of total traffic. ERNIE Bot recorded 14.9 million clicks in March, while Kimi’s combined traffic surged by 321.58% to 12.6 million.

Moonshot AI, an artificial intelligence startup founded in China a year ago, has quickly narrowed the gap with rival Baidu’s ERNIE Bot in terms of users after upgrading its large language model Kimi to be able to handle text inputs of up to two million Chinese words in March.

According to a survey conducted by data website AIcpb, Kimi saw its combined website and app traffic top 12.6 million views last month, bringing its ranking up to second place behind Baidu’s chatbot, which received 2.29 million more views. 

Why it matters: The quadrupling of Kimi’s visit count in March meant the ChatGPT-like tool surpassed Alibaba’s competitor Tongyi Qianwen. Its ability to handle long texts is fueling Kimi’s popularity among users, raising hopes among its backers that it will soon break Baidu’s months-long hold on the top position in China’s AI sector.

Details: Moonshot focuses on longer textual inputs and outputs, a new battlefield for Chinese LLM companies. Alibaba opened up a free long-document processing feature that can handle 10 million characters following Kimi’s upgrade, while Baidu plans to support longer text conversations later this month.

• Less than 72 hours after Kimi claimed a technological breakthrough in handling 2 million Chinese characters, the chatbot experienced a service outage. The crash, which lasted at least two days, was blamed on “an abnormal increase in system traffic far exceeding the system’s capacity,” by the company, as users rushed to try out the new feature.
• In a recent interview with Tencent Technology, Moonshot founder Yang Zhilin noted that a focus on long texts was decided upon at the company’s inception. “It’s fundamental,” Yang said, noting that the core value of AI lies in personalized interaction, best achieved, he believes, not through fine-tuning but by supporting broader contexts.
• He also said that while there is “significant room” for expanding text length, focusing on the numbers alone is “meaningless.” Instead, reasoning, faithfulness, and clear instruction-following are what matters.

Context: Moonshot AI reportedly raised over $1 billion in funding earlier this year from existing shareholders such as Alibaba, Sequoia China, and Xiaohongshu, marking the largest single-round financing for a Chinese AI big model company to date. The company raised nearly RMB 2 billion ($277 million) last year.

Alibaba’s chair Joe Tsai commented that by not focusing on truly creating customer value, they had “stepped on our own foot” in recent years, when explaining why he thought the e-commerce giant had been “falling behind”. Tsai’s remarks were made in an interview with Nicolai Tangen, chief executive of Norway’s Norges Bank Investment Management, at a time when the Chinese tech giant has undergone frequent organizational restructures.

“We forgot about who our real customers are,” Tsai told Tangen. “Our customers are the users who use our apps, that are shopping, and we did not give them the best experience.”

Why it matters: Tsai’s conversation with Tangen ranged in topics from Alibaba’s internal reckoning and competitiveness in artificial intelligence, to China’s consumer market potential, in a major signal to the outside world that Alibaba is aware it needs to make changes to keep its customers.

Details: The biggest reorganization in Alibaba’s history, which began last March when it decided to split the group into six units and give multiple businesses the freedom to seek funds or go public, has been fraught with twists and turns. It has now suspended its logistics arm Cainiao’s Hong Kong IPO application and canceled plans to divest from its cloud operation.

• Tsai said China is “probably two years behind the top [large language] models,” with the US’s curbs on exporting high-end chips to China part of the reason the country is behind in the AI space. But he mentioned Alibaba has “made some efforts” when it came to the manufacture of high-end GPUs, while also sourcing chips from other players, without giving further details.
• In China, where consumers are highly price-sensitive, Tsai said he believed the ability to spend among Chinese “is there”, but that the downturn in the real estate and job markets has put a dent in consumers’ confidence and willingness to spend. He struck a more positive note when he said he still saw “great potential” for growth in China’s overall consumption rates that would eventually reach levels comparable with markets in the West. 
• The chair of Alibaba also noted in the interview that giving incentives and confidence to investors, as well as hired people, is “important”, especially for private businesses, and that the company is buying back stock at a rapid pace to bolster market value. Alibaba spent $4.8 billion on buybacks in the first quarter, the second-largest quarterly buyback amount in its history.

Context: Norges Bank Investment Management looks after Norway’s sovereign wealth fund,  a major Alibaba shareholder with a stake worth $3.5 billion at the end of last year. The world’s largest sovereign wealth fund also owns shares in Alibaba’s top competitors, PDD and JD. The fund raised its position in Temu parent PDD by 117.9% last year, compared to a less than 10% increase in its Alibaba holding.

Alibaba’s logistics operation Cainiao will double employees’ annual bonuses next year after the company announced it was canceling its planned IPO in Hong Kong. Wan Lin, chief of Cainiao announced the annual bonus decision late Tuesday in a staff-facing email, shortly after Alibaba said it was abandoning the subsidiary’s anticipated IPO.

Why it matters: Alibaba’s offer to buy remaining Cainiao shares up to $3.75 billion and the bonus incentive plan should give a double boost to investors and staff amid the unexpected listing withdrawal. Cainiao’s public offering was originally expected to be the largest IPO in Hong Kong in 2023.

• The unit filed its A1 filing with the Hong Kong Stock Exchange on Sept. 26 last year. When Alibaba announced the withdrawal of the IPO plan this Tuesday, it coincided with the last day of the six-month window during which the company was obligated to update its listing status.

Details: As part of the new incentive plan, Cainiao employees will receive their standard year-end bonus in April 2025, with an additional bonus of the same amount in August 2025. This plan will cover all of the firm’s regular employees who are on duty and eligible for the year-end bonus at that time.

• This year marks a crucial period for Cainiao’s “second venture journey,” according to Wan, which he said will require all employees to continue to “work hard together,” without providing further details on what this journey may entail.
• Joe Tsai, chair of Cainiao’s parent company Alibaba, told analysts the IPO abandonment was an internal decision made after evaluating strategy; he emphasized that the call was made without any influence from regulatory authorities, given the infamous halting of Ant Financial’s IPO in 2020. He highlighted a deep integration between Cainiao and Alibaba’s e-commerce businesses as important to the retailer’s priority of “winning in e-commerce by regaining market share and driving growth.”
• Cainiao is closely entwined with Alibaba’s core e-commerce operations. For instance, its logistics arm launched same-day delivery services for Tmall Supermarket last year. In a competitive landscape where domestic logistics firms vie to be known for efficiency and service excellence, customers in over 20 cities can now expect to receive their purchased items within half a day after they place orders through the online supermarket.
• Cainiao also plays an important role in facilitating Alibaba’s international expansion efforts as cross-border platform AliExpress extends its reach to overseas customers rival to Shein and Temu. This has pushed Cainiao to expedite its delivery services accordingly. Shoppers across multiple overseas markets, including the US, the UK, and the Netherlands, can currently receive parcels from China within five working days via the service.

Context: Driven by income from cross-border fulfillment solutions, Cainiao’s 2023 fourth-quarter revenue grew 24% from a year earlier to $4 billion. The company’s adjusted earnings before interest, taxes, and amortization (EBITA) reached RMB 961 million ($135 million) during the period, a $550 million improvement compared to the previous quarter.

Baidu has reportedly won a deal to power iPhones and other Apple devices in China using its generative artificial intelligence, domestic media outlet China Star Market reported on Monday, citing unnamed sources familiar with the matter. The Apple tie-up is a potentially major boost to the Chinese search engine giant’s vision of extra AI-generated revenue. 

Why it matters: China’s regulations have pushed Western tech companies to fully comply with the country’s rules if they want to lure the Chinese market, and that benefits Baidu, which serves many of the functions that Google does in the US and Europe. Following the Beijing headquartered firm’s rapid rise to prominence in the early 2000s, it appears poised to gain a major advantage from restrictions on Google once more.

Details: Apple previously engaged in discussions with Alibaba and another unnamed Chinese AI company, according to the China Star Market report, before finally tapping Baidu as its partner for AI services for its upcoming iPhone 16.

• Spurred by the news, Baidu’s Hong Kong-traded stock quickly rose over 6% ahead of the lunch break on Monday, although these gains were erased by more than half by the market close.
• On Weibo, China’s X-like microblogging platform, opinion was divided regarding Baidu’s AI tech being integrated into Apple devices. While some said the news meant that their interest in purchasing a new iPhone was lost instantly, others claimed it showed how good Baidu’s technology is.
• Baidu didn’t immediately respond to a request for comment from TechNode.
• The Chinese launch of Samsung’s Galaxy S24 series integrated Baidu’s AI chatbot Ernie to power its AI features such as content summaries and translations, but the collaboration has drawn scorn on social media. The device’s “Circle to Search” function, which is supposed to give detailed information about a certain part of an image or video that users long-press and circle, has been the subject of repeated complaints from users.
• In one viral example, a user on the Instagram-like social platform Xiaohongshu shared a video where they take a landscape picture and circles a reef in the center of the photo.  Baidu’s Ernie-driven AI provides a shopping link from an e-commerce platform, while Samsung’s Hong Kong version – powered by Google – displays the exact location of the image.

Context: Beijing-based Baidu, seen as China’s AI leader, is among the companies hoping to turn the much-hyped technology into a fresh revenue engine. Its chief executive Robin Li has said that  generative AI could add several billion yuan in incremental revenue for the firm in 2024. In the fourth quarter, Baidu’s AI-related revenue stood at RMB 656 million ($91.0 million).

Alipay owner Ant Group has appointed current chief financial officer Han Xinyi as its new president, according to an internal email from chairman and CEO Eric Jing on Tuesday. The move is part of the firm’s biggest overhaul since the cancellation of its IPO in late 2020, with the fintech company also deciding to grant three of its units operational independence.

Why it matters: The restructuring is likely to grant more flexibility for businesses within the fintech affiliate universe of Alibaba and is intended to unleash their growth potential under Ant’s globalization strategy.

Details: The reshuffle is “just one of many” in Ant’s future growth, said Jing, adding that, “we will create an environment that encourages more emerging businesses, and creates greater value for society” (our translation).

• Ant International, commercial database OceanBase, and Ant Digital Technology, the three “innovative businesses” that will become independently operated subsidiaries, will set up their own board of directors and reduce their reliance on the group.
• According to a report by Chinese media outlet LatePost, Ant will continue to offer technology and capital support to the three independent units as they are still making a loss, but they are set to launch stock option plans separately in an effort to retain talent.

Context: On Nov. 3, 2020, two days before Jack Ma-founded Ant’s scheduled dual listing debut which was supposed to take place simultaneously in Hong Kong and Shanghai, the major IPO was surprisingly halted by China’s financial regulator. 

• The announcement from the Shanghai Stock Exchange at the time noted that the actual controller, chairman, and CEO of Ant were “called in for regulatory talks by relevant authorities,” which it said might lead to the firm “not meeting the conditions for issuance and listing or the disclosure requirements.”
• China’s primary financial regulatory bodies fined Ant Group and its subsidiaries RMB 71.23 billion last July, a hefty fine that was seen as marking the end of the authorities’ close scrutiny of the fintech giant.

TikTok’s efforts to continue operating in the US under Chinese parent company ByteDance appear doomed after a majority of House lawmakers passed a bill that aims to force the Beijing headquartered tech firm to divest from the wildly popular short video platform or see it removed from app stores in the country. The bill still needs to pass the Senate, but President Joe Biden has indicated he will sign it into law if it reaches his desk. 

The Republican-controlled House of Representatives voted 352-65 on the bill. Of the 65 legislators who voted against it, 50 were Democrats, casting some uncertainty on whether the bill will pass in the Democrat-majority Senate. The potential legislation is also likely to face legal challenges from TikTok.

Why it matters: If ByteDance agrees to sell TikTok, one of China’s most successful apps worldwide, it would bring the Beijing-based company billions of dollars in immediate income, but the longer-term impact on the firm’s value is uncertain. The tug-of-war over the app also reflects the high-profile tensions between the US and China.

Details: TikTok labeled the House’s voting process “secret” in a statement released after the result. The platform insisted on characterizing the bill as a “ban”, while emphasizing that it hosts 170 million users and 7 million small businesses in the US market in a post on X, formerly Twitter.

• Chinese nationalist Hu Xijin, who previously served as editor-in-chief of the state-run Global Times newspaper, said in a recent social media post that the US’s concern over TikTok’s threat to national security is “grossly exaggerated,” and that this is a fact “everyone in the world knows.” The commentator implored the short video app not to “get weak in the knees,” adding that it will share a bright future if it wins this “war.”
• The video-sharing platform sent local users in the US a pop-up notification last week encouraging them to call their political representatives and urge them to fight against the bill. The average TikTok user in the US is an adult “well past college age,” chief executive Shou Zi Chew revealed in his testimony on Capitol Hill last March.
• While Biden has shown broad support for the bill – despite his election campaign recently joining the platform – his rival in the upcoming US presidential election, Donald Trump, has made a U-turn on the legislation, voicing concerns that banning TikTok would only empower Facebook owner Meta. “There are a lot of young kids on TikTok who will go crazy without it,” Trump said in a recent CNBC interview, despite his administration also previously attempting to force ByteDance to sell the app.

Context: According to OpenSecrets, a nonprofit organization that tracks lobbying data, ByteDance spent a record $8.74 million on federal lobbying last year, nearly double its spending in 2022.

Baidu co-founder Robin Li has used the example of a Tang dynasty poetry meter to demonstrate what he says is ERNIE 4.0’s superiority to OpenAI’s GPT-4 on Chinese language tasks. In an interview broadcast by Chinese state television last week, the Baidu chief executive said the company’s latest AI chatbot had shown higher aptitude when tasked with creating poetry in the form of a complex Tang dynasty scheme known as Qinyuanchun.

“If I asked GPT to compose a poem following the Qinyuanchun scheme, the tool would become totally confused,” Li said, “because it lacks the understanding of whether the first sentence should consist of four words or five.”

Why it matters: Li’s attempt to emphasize ERNIE’s competitive advantage in certain areas follows a raft of Chinese AI ventures receiving outside capital injections from Baidu’s rivals. His comments also come as OpenAI’s text-to-video model Sora kicks off a new round of AI mania worldwide.

Details: In the same interview, the CEO did acknowledge that ERNIE lags “a little bit behind” GPT in understanding English, as it hasn’t been trained on as much English language data.

• However, comparison is inevitable, and Chinese companies focusing on AI products have always benchmarked their products against OpenAI’s models. Such comparisons have often drawn scorn on Chinese social media, with Baidu itself often suffering in comparison to ChatGPT’s innovative progress. But Li told the CCTV show that he is “not angry” about the stark differences between ChatGPT and his firm’s self-built chatbot, adding that he hopes to change people’s perceptions within a year.
• Li also stated that, in his opinion, the profession of “programmer” will essentially cease to exist in the future as “everyone will possess programming abilities as long as one can speak.” English and Chinese will be the only two programming languages, Li predicted.
• Li also advised companies and entrepreneurs in the market to avoid engaging in the constant launch of large language models, which he regards as “repetitive labor.” He emphasized that “only applications truly create direct value.”

Context: Baidu’s investment in AI has yielded results in its financial reports, with its AI models and ERNIE chatbot contributing RMB 656 million ($91.5 million) to the firm’s revenue in the fourth quarter last year. However,  such contributions amounted to just 1.9% of the company’s total earnings.

• Li was speaking ahead of the one year anniversary of Baidu’s ERNIEbot, which launched on March 16 2023.

Alibaba is reportedly joining as a lead investor in the latest funding round for Chinese AI startup MiniMax, the second major investment deal that the e-commerce giant has made in the emerging sector in 2024.

China Star Market, the local media outlet that first reported the news, noted that the financing has yet to be finalized, while a Tuesday report by Bloomberg said that Shanghai-based MiniMax is seeking at least $600 million.

Why it matters: Despite Alibaba’s cloud computing department’s focus on its own large language model, Tongyi Qianwen, the company remains actively engaged with external investments, casting a wide net as it looks to increase its bets on potential leaders in the country’s artificial intelligence sector.

Details: Minimax, founded by former vice president of SenseTime Yan Junjie in December 2021, has already launched services akin to ChatGPT. It also provides various LLM capabilities for Chinese word processing software WPS and the lifestyle-sharing platform Xiaohongshu.

• The move comes after Alibaba led fundraising for Moonshot AI earlier this year, raising over $1 billion and making it the latest AI unicorn in China. In the record funding deal for Moonshot AI, Alibaba not only supported most of the funding but also contributed through computing power services. This move echoes Microsoft’s investment in OpenAI, where a significant portion was allocated through cloud computing services, according to CNBC.
• Two of China’s leading artificial intelligence startups – Zhipu AI and Sogou founder-built Baichuan AI – also received funding from Alibaba in 2023. 

Context: “Artificial intelligence” was mentioned three times in this year’s government work report, delivered by China’s Premier Li Qiang on Tuesday. Li highlighted ongoing innovations in the field since 2023, while also stressing the need to “deepen research and development applications of artificial intelligence” this year, signaling the Chinese leadership’s desire to accelerate the development of “new productivity”.

• Representatives from the technology sector also discussed AI in their proposals for the so-called Two Sessions, the Chinese government’s annual plenary meetings. For instance, Lei Jun, Chairman and CEO of Xiaomi, suggested integrating AI literacy education into the nine-year compulsory education curriculum and introducing AI general education courses.

A 48% drop in net profit from a year earlier overshadowed Baidu’s record revenue in the fourth quarter of 2023, which was led by advertising income, but also featured a minor contribution from earnings related to artificial intelligence. Baidu’s Hong Kong-traded stocks have plunged nearly 30% since last July.

Why it matters: A 6% year-on-year increase in advertising revenue is the main driver of the search engine giant’s revenue growth, as Baidu’s hopes that AI will serve as a significant revenue stream remain unconvincing to investors, in contrast to US tech firms that saw a share uptick based on an AI boom last year. 

Details: Baidu’s AI model and ERNIE chatbot added RMB 656 million ($91.2 million) to revenue in the fourth quarter of 2023, CEO Robin Li told investors on the firm’s earnings call, with incremental revenue expected to jump to several billion yuan in 2024.

• Li revealed that inference costs for the basic free-to-use ERNIE Bot 3.5, used to analyze how much computing is needed to generate output based on prompts,  are down 99% compared to last March. 
• ERNIE Bot 4.0, the paid version rolled out in October, remains Baidu’s most advanced generative AI bot. The chips Baidu has on hand are expected to advance the flagship bot to the “next level,” said Li.
• Baidu’s increased investment in and commitment to AI is also reflected in the fact that its R&D costs climbed 11% to RMB 6.3 billion last quarter. The company released data showing that its homegrown AI service has attracted a sizable number of business customers, reaching 26,000 as of December.

Context: Baidu’s ChatGPT-style service has recorded more than 100 million users given its first-mover advantage and integration with China’s largest search engine,. But competition has increased, as Baidu’s tech counterparts in the country have also bet strongly on generative AI and there are an increasing number of AI startups that have received large amounts of funding from its rivals, such as Moonshot AI.

Alipay hired a significant number of staff with expertise in advertising last year as it seeks a shift away from being a pure payment tool, according to a report by China Entrepreneur. Despite having over 700 million monthly active users, the payment app lacks the features to entice its huge user base to stay on the platform beyond making transactions.

Why it matters: Developing a sustainable content ecology based on short videos, livestreaming, and social engagement would pave the way to new revenue streams for Alipay.

Details: Alipay is reportedly beta testing a social feature called “Community of Interest”, where users with shared interests, ranging from camping, coffee, and hiking to fishing, can join groups to discuss or organize offline activities.

• This year marks the ninth anniversary of Alipay’s “Collect Wufu” (five kinds of fortune cards) campaign, a “digital temple fair” where users attempt to collect all five different fortune cards to share in a total of RMB 500 million worth of cash bonuses. Typically, participants receive anywhere from RMB 2 to RMB 3 each. 
• The platform boosted cash incentives during the recent nationwide Spring Festival holiday, adding an extra RMB 300 million to reward users for watching short videos and livestreams within Alipay while also pouring more than RMB 25 million into rewards for high-quality content creators, the company said in a statement.
• Neither Alipay nor third-party database platforms announced the app’s per usage hours during the eight-day Chinese New Year holiday period. However, according to data from the Ministry of Industry and Information Technology (MIIT), Alipay didn’t make the list of the top five most-used apps during the break, which comprised Douyin, WeChat, Kuaishou, Tencent Video, and news aggregator Jinri Toutiao.
• According to a report by QuestMobile, Alipay’s average daily usage per person only hit 7.8 minutes during the seven-day Spring Festival holiday in 2023.
• Taobao and Alipay are no longer as tightly bound as they once were, another reason Alipay needs to shift quickly to accelerate traffic monetization. It was reported recently that Alibaba’s e-commerce marketplace is gradually introducing an option to pay using rival platform WeChat, something it has long resisted.

Context: WeChat and Alipay were level in 2021 in terms of usage by mobile payment customers, but in 2022, WeChat took a 2.6% larger share of the market after expanding its range of payment scenarios, the latest figure from China’s payment & clearing industry association showed. 

The European Commission has opened a formal investigation into TikTok to assess potential violations of the Digital Services Act (DSA). Companies found in breach of the act could face fines of up to 6% of their global revenue.

Launched on Monday, the investigation into the Chinese-owned platform will involve looking at various aspects of TikTok’s operations including safeguarding of minors, ensuring advertising transparency, facilitating access to data for researchers, and managing the risks associated with addictive and harmful content.

Why it matters: The move extends the EU’s investigation of the ByteDance-led video-sharing app from previous concerns regarding its handling of disinformation related to content around Hamas and its management of children’s accounts, and intensifies the company’s immediate need to address the escalating scrutiny of major tech firms by the EU.

Details: TikTok was defined as a Very Large Online Platform (VLOP) by the European Commission under the DSA in April 2023, following its announcement of 135.9 million monthly active users in the EU.

• The European Commission believes that TikTok’s algorithms in the EU are designed to induce a “rabbit hole effect” on users, referring to the tendency of users to become immersed in online content and potentially distance themselves from real-life experiences.
• In response, TikTok said it will continue to work with experts and the industry to ensure young people are safe on its platform and that it looks forward to explaining this work in detail to the European Commission.
• The investigation comes just days after the short video app lost a court battle to suspend its designation as a gatekeeper, which requires companies with significant economic power and market influence to comply with a series of regulations under EU rules in the areas of advertising, user data, and intermediary services.

Context: In 2023, the Douyin sister app was fined €345 million in Ireland and £12.7 million in the UK by local regulators, who cited violations of the law in the platform’s handling of children’s account data.

Chinese tourists returned to outbound travel during the recent Year of the Dragon break as a range of data showed that the number of overseas transactions and tour bookings by Chinese citizens rebounded to the pre-pandemic levels seen in 2019. 

According to an Alipay email sent to TechNode, overseas transactions by users of the mobile payment platform from Feb. 9 to 12 were up 7% compared to 2019, with Hong Kong, Japan, and Macao being the top destinations for Chinese travelers based upon their Alipay spending.

Why it matters: By the numbers, China’s overseas tourism is making a solid recovery a year after the country’s authorities removed Covid-19 related restrictions on its citizens traveling abroad following more than three years of almost-closed borders. Major Southeast Asian countries loosening visa requirements for Chinese tourists has also had an impact.

Details: Chinese visitors could be spotted in more than 1,700 cities in 125 countries, said Beijing-headquartered online travel agency Qunar, ranging as far as Madagascar and Cuba. 

• Flight bookings to Thailand, Malaysia, and Singapore – three Southeast Asian countries that have recently waived visas for Chinese passport holders – have seen a huge surge on Qunar. Singapore leads the rise with a year-on-year growth of 2,900%.
• The return in popularity of overseas destinations comes as some domestic hotspots experienced travel issues. As the end of the national holiday loomed, a number of tourists found themselves “trapped” on Hainan island, one of China’s most popular tourist destinations, due to high-priced air tickets and congested roads during their return journeys. Many netizens joked, “Can’t afford to go to Hainan, but Southeast Asia is more cost-effective.” 
• Despite the eight-day holiday fueling long-distance outbound trips, overseas consumer spending made through Alipay only recovered to 82% of its 2019 level. Meanwhile, the enthusiasm for using messaging app WeChat to send digital versions of the red envelopes traditionally gifted around Lunar New Year cooled on Chinese New Year’s Eve on Feb. 9, as users sent and grabbed 5.27 billion WeChat red packets, significantly lower than the 14.2 billion sent seven years ago, the last time the Tencent-owned superapp released such data.

Context: The China Tourism Academy predicted earlier this month that the number of outbound tourists from the country in 2024 will reach 130 million, 50% up from the previous year.

Chair of iFlytek Liu Qingfeng told employees that the Chinese voice-recognition company has “resisted the extreme pressure from the US” and is entering “a new period of strategic opportunity,” at his firm’s annual general meeting. Speaking on Tuesday, Liu again benchmarked iFlytek’s upgraded Spark against GPT-4 Turbo, saying it expects to be as powerful as OpenAI’s most advanced model in the first half of 2024.

Why it matters: Liu’s confident tone throughout his speech is being seen as a sign that the company seems to have passed its dark days in the grip of US sanctions due to its “seizing of the strategic opportunity of large language models.”

Details: In his speech, Liu stated that the top goals for iFlytek in 2024 would be to be the fastest Chinese company to catch up with GPT-4, to “empower 10 million intelligent hardware terminals”, to produce “industry-leading applications taking the largest market share in six industries including education and finance”, and to “amass one million LLM developers to build an AI model ecosystem”.

• Liu’s address on Tuesday emphasized the importance of building “independent and controllable” home-grown AI foundation models, with the exec saying LLMs are a battlefield for gaining strategic advantage over the US.
• However, the company’s financial forecast offers a glimpse into the huge cost of achieving China’s ChatGPT alternative, with iFlytek’s net profit excluding extraordinary profit and loss expected to be down 71% to 81% to between RMB 80 million and RMB 120 million ($11.3 million to $16.9 million) in 2023 compared to the previous year iFlytek has claimed this is largely due to “firm investment” in core technology and industrial chain localization substitution.
• iFlytek also projected an up to 7% increase in revenue to RMB 20 billion for its financial year ending Dec. 31.
• iFlytek unveiled its Spark iteration model on Jan. 30, claiming it as the first such model to be built on the AI model training platform the company designed in cooperation with Huawei and which uses the Chinese telecom giant’s AI chips.

Context: The US government blacklisted A-share listed iFlytek in Oct. 2019, meaning China’s top artificial intelligence company was banned from buying critical components from US companies without US government approval.

TikTok turned against its former cooperation partner Universal Music Group (UMG) overnight after the world’s largest music copyright owner threatened to remove all of the music it owns from the video-sharing platform, which lambasted UMG’s “self-serving actions” and characterized them as putting their interests above those of artists, songwriters, and fans. 

Why it matters: The dispute would reportedly also affect TikTok sibling Douyin, potentially causing both platforms to have to remove Universal songs from the huge number of videos using them as background music. The falling out with UMG may also lead to a similar response from other music companies. 

Details: The collapse of the deal would likely remove the pop songs that myriad TikTok videos use as background music, affecting tracks by Universal artists including Taylor Swift and Billie Eilish, as well as Chinese language singers Stefanie Sun and Eason Chan.

• In an open letter, Universal said the success of TikTok has been largely rooted in the music created by “our artists and songwriters,” but revenue from the Chinese-owned company only accounts for about 1% of Universal’s income, which the letter claimed was a poor rate of compensation.
• According to media outlet Caixin, the three-year authorization contract between both sides signed in February 2021 was also applied to TikTok sister app Douyin in China, meaning Douyin users are no longer allowed to create videos using copyright-protected music from UMG starting from Thursday, unless the two parties reach a new deal addressing Universal’s concerns over higher pay for artists, AI creation, and user protection.
• In response, TikTok claimed Universal’s statement formed a “false narrative and rhetoric,” and blamed the music firm for leaving a platform that had served as a “free promotional and discovery vehicle for their talent.”

Context: This is not the first dispute involving a major tech platform and Universal-signed artists. In 2014, Taylor Swift decided to remove her entire discography from Spotify due to issues around royalty payments, with her boycott of the streaming service lasting three years.

The past year has seen Tencent’s TikTok-like short video service “deliver the expected results,” chairman and chief executive Pony Ma said at the tech titan’s annual staff meeting on Monday, while reaffirming his confidence in the company’s long-term development despite the sluggish general market.

Why it matters: In contrast to his sharp-tongued speech a year ago, where the emphasis was on cost-cutting, Ma’s more positive comments this year signal that he seems to think the company has overcome its challenging times.

Details: A year after Ma positioned WeChat Channels as Tencent’s major hope for the future, he said that the short video-sharing function has brought “lots of surprises” and committed to fully supporting livestreaming-based commerce in 2024. 

• In a half-hour speech that struck a positive tone, Ma mentioned recent news of Tencent buying land in the Haidian district of Beijing at RMB 6.42 billion as a “careful and calculated decision” due to the steady growth of the firm’s businesses. 
• Boasting 1.3 billion monthly active users, WeChat stands as the most powerful messaging app in China and comes with a flurry of social connecting features, but the app’s 12-year-old history gives Ma “great pressure,” especially as QQ, Tencent’s once-popular platform, undergoes a crucial transformation after 12 years in operation. Ma has called for WeChat, “the old tree”, to “sprout new shoots”.
• Ma also stated that Tencent’s current holding of the title of the world’s largest game vendor feels like “relying on the credit of our [previous] successes.” This sentiment comes amidst challenges from peers releasing new titles and the company’s relatively underwhelming offerings when it comes to fresh games, according to local media outlet Jiemian.

Context: Tencent shares have suffered in the past year but have not seen as big a slump as those of its Chinese internet peers, with the firm seeing a 16% decline in the value of its Hong Kong-listed shares. The company’s largest shareholder, South Africa-headquartered Naspers, added to the downward trend by cutting its stake in Tencent to less than 25% through frequent share selling in 2023.

Alibaba’s secondhand trading app Xianyu is on track to open an offline marketplace in the Gongshu district of Hangzhou, the resale operation’s latest eye-catching move after the platform was anointed one of Alibaba’s four “strategic-level innovation businesses” last November.

Why it matters: Alibaba is giving Xianyu three years to prove its value and operate as an independent subsidiary, with this attempt at a physical store seen as the first major step.

Details: The bricks-and-mortar flea market, scheduled to open this Sunday, will see local customers sell their used items and purchase items from other secondhand sellers directly, the platform said in a post on its official WeChat account.

• Xianyu says individuals can also list services such as running errands for others and walking dogs to earn extra money.
• The opening of the store aims to simplify communication between buyers and sellers, with sellers able to receive immediate payments via Alipay once their items are sold, unlike online where the process relies on a buyer clicking the “Received Goods” button for payment to proceed.
• Xianyu says the marketplace will accommodate digital products, outdoor sporting goods, clothing, and shoes, as well as luxury goods. However, trading in food and health products, pets, plants, and jewelry will be strictly prohibited.

Context: The popularity of Xianyu has been overshadowed by e-commerce retailers Taobao and JD in recent years as consumers have tended to seek brand-new goods, but, when it comes to collectible toys or cards, the platform has become a popular destination, especially for young people. This status has meant that Gen Z users, born between 1995 and 2010, account for more than 60% of Xianyu’s 500 million account holders, the company’s latest figures show.

• Alibaba CEO Eddie Wu in November identified Xianyu, along with 1688, DingTalk, and Quark as the company’s most promising businesses, saying he saw the potential for China’s largest secondhand trading platform to “become a lifestyle platform for consumers’ hobbies and interests.”

In a brief letter to Kuaishou staff from CEO Cheng Yixiao on Tuesday, the short video platform operator announced it had achieved its first yearly profitability since listing, and was offering staff vouchers of up to RMB 2,866 valid for purchases on Kuaishou as an expression of gratitude for employees’ efforts.

Why it matters: The rival to ByteDance’s Douyin (China’s TikTok sibling) accelerated its monetization efforts in real estate and short dramas after achieving its first quarterly profitability in the second quarter of 2023. Rapid growth of these sectors in turn appears to have boosted the Beijing-based company’s further attainment of quarterly profits.

Details: China’s second-largest short video platform, Kuaishou deepened its focus on the real estate industry in a recent restructuring following impressive sales results.

• The platform’s real estate operations saw housing agents and professional property influencers engage potential homebuyers via videos and livestreaming sessions, following up with on-site property viewings, and in some cases, remote contract signings resulting in the postal delivery of keys for their new house or apartment.
• According to data revealed by Kuaishou, during a one-month campaign in September, more than 5,500 properties were sold on the platform, valued at more than RMB 6.9 billion in total. In 2022, over 100 million users on Kuaishou watched real estate sales livestreams or related videos; total sales of the sector for that year surpassed RMB 10 billion.
• Mini web dramas, meanwhile, have served as another business sector with growth potential for Kuaishou. As widely popular short video platforms have reshaped user preferences for content delivering quick fire stimulation, short and cheap to make series with episodes lasting little more than five minutes, have gained favor with large Chinese audiences. 
• Kuaishou said last week that daily active viewers of its short dramas reached 270 million by the end of 2023, with 94 million people watching more than 10 episodes per day.

Context: In the first nine months of 2023, Kuaishou reported a net profit of RMB 2.79 billion compared with a loss of RMB 12.15 billion in the same period of the year before. 

Get ready for the annual insights from TechNode Content Team! The year 2023 can be considered a groundbreaking year in the technology field. As wrapping up this year, we gathered different insights from our content team. We’ll be presenting nine Q&As, with timely updates every Wednesday and Friday in the following weeks!

Today, our Q&A comes from Cheyenne Dong, reporter at TechNode. Cheyenne is a tech reporter now based in Shanghai. She covers e-commerce and retail, blockchain, and Web3.

1. Which company has impressed you the most in 2023?

OpenAI. OpenAI’s launch of ChatGPT at the end of 2022 led directly to the following year belonging to the wild year of generative artificial intelligence. Despite the subsequent launch of ChatGPT-like services by worldwide tech firms, OpenAI’s overwhelming success in AI has made it a challenge for rivals to keep up with its pace.

2. Which company has surprised you the most in 2023?

Alibaba. The Chinese e-commerce giant conducted eye-catching organizational overhauls throughout the past year, and each adjustment has been a big deal, both internally and to the public. What kind of energy the company will unleash in the new year to take on the competition in industries under its startling overhaul?

3. Which industry professional/entrepreneur/startup founder has left the most profound impression on you in 2023?

TikTok CEO Shou Zi Chew. He was able to face around five hours of questioning by dozens of US lawmakers in March.

4. What is the most memorable overseas event for you in 2023?

OpenAI’s CEO Sam Altman was in the center of media spotlight even before the board abruptly fired him, and this unexpected 72-hour-long firing event gives me a feeling that it’s more exciting than any TV series.

5. If you were to recommend one significant industry trend for everyone to follow, what would it be?

PDD’s market value exceeds that of Alibaba. This landmark event shows that Pinduoduo, which offers ultra-low-priced goods at a time of economic uncertainty, is emerging as the most challenging and disruptive force in China’s e-commerce sector.

6. What industry buzzword have you encountered the most in 2023?

AI, companies in almost every field are looking to rebuild their services and products with the power of AI.

7. Which phrase or sentence best summarizes your perspective on the field you’ve been following in 2023?

Juan or in the English context it can be understood as competition for even some small factors has reached unhealthy levels, like which platform offers ultra-low prices for the same items, delivery times, or providing near-zero threshold after-sales service.

8. What product/company/technology/industry are you most looking forward to next year?

OpenAI’s GPT-5.

9. Do you believe AI has the potential to threaten humanity?

Not at this stage, instead, human beings could be significantly more productive if they had better AI tools, but the future is not easy to predict.

After a more than $80 billion market value wipeout since last January, Meituan on Wednesday spent $51 million (HK$399 million) on its first share buyback since it listed in Hong Kong, in a bid to support investor confidence in the company’s resilience amid fierce competition in a local life sector replete with fresh entrants.

Why it matters: Meituan’s first share buyback since going public more than five years ago comes after executives warned of a slowdown in its main takeaway business in the fourth quarter and as Douyin, China’s TikTok sibling, swoops into its business segments. 

Details: The food delivery service provider bought back a total of 5.63 million Class B shares, costing an average of HK$71.07 each, according to its latest filings. Meituan’s stock price responded by rising 5.4% today in Hong Kong.

• Meituan announced in late November that it planned to repurchase shares on the open market beginning Dec. 1, anticipating a total buyback of up to $1 billion in the near future.
• Last year, the firm’s Hong Kong-listed stock slumped by more than half and dropped 82% from its 2021 peak. The trading price is unlikely to return to this peak in the short term as investors worry about ever tighter competition from ByteDance-owned Douyin.
• CEO Wang Xing, however, said in the firm’s latest earnings call that he believed Meituan was “undervalued at the current share price,” expressing confidence about the business he co-founded’s “long-term growth and value.”
• As of Sept. 30, Meituan held cash and cash equivalents of RMB 25.1 billion, its quarterly results showed.
• Meituan has yet to achieve consistent quarterly profitability, but like other Chinese tech companies, it is also seeking to expand business outside of mainland China, an endeavor which is still at the “investment stage,” according to Wang. Meituan’s sister app KeeTa has risen to become the second-largest food delivery platform in Hong Kong since its launch in May.

Context: Besides Meituan, China’s most valuable tech firms including Alibaba and Tencent have exhibited a downward trend in share price that has lost them hundreds of billions of dollars since their peak around 2021. Alibaba and Tencent conducted record buybacks last year, with e-commerce giant Alibaba repurchasing $9.5 billion of ordinary shares, and WeChat owner Tencent spending a total of HK$48.429 billion on buybacks in the same period, meaning the latter topped the Hong Kong stock market’s repurchase list.

TikTok is seeking to significantly expand its e-commerce business in the US, with plans to achieve a tenfold increase in merchandise sales in the world’s largest economy this year, a target of $17.5 billion, Bloomberg reported on Thursday, citing unnamed sources.

Why it matters: TikTok’s ambitious goal will see it push harder to redirect users’ attention from short videos to in-app shopping in a potential threat to established US e-commerce giant Amazon. The move also signals that the ByteDance-owned short video app, which has 150 million users in the US, will compete more directly with its Chinese counterparts Temu and Shein in 2024.

Details: The global value of goods sold on TikTok was expected to reach around $20 billion last year, according to Bloomberg, with its Southeast Asian platforms contributing the bulk of these sales. Singapore-based research company Momentum Works projected in mid-2023 that TikTok Shop was poised to capture a 13.2% share of the Southeast Asian e-commerce market by the year’s end.

• The highest selling products on TikTok Shop are mainly those that more easily lend themselves to promotion by video, such as clothing and beauty items, while its competitors offer a broader range, from kitchen utensils to digital products.
• Shortly after TikTok Shop went live in the US in September, the hit social media platform experienced early success at its first Black Friday and Cyber Monday events, with the major shopping days seeing more than 5 million new customers from the US make purchases on TikTok.
• Meanwhile, TikTok announced this week that transaction fees for merchants in most product categories will increase to 6% of each sale starting in April, and by July, these will rise again to 8%. TikTok Shop currently charges a commission of 2% plus 30 cents per transaction. The change is likely to have an impact on profit margins for store operators.

Context: Since its initial trial in 2021, TikTok’s foray into e-commerce has sought to replicate the proven path taken by its Chinese counterpart Douyin in the online retail field, guiding loyal users previously attracted by viral short videos to engage in shopping on the platform. 

• Indonesia, the first country in which TikTok Shop launched, banned online shopping on social platforms in September, pointing to the protection of small businesses and user data, and forcing TikTok Shop to suspend operations. Despite this setback, TikTok quickly made a comeback in Southeast Asia’s most populous nation through a deal with local company GoTo backed by a $1.5 billion investment.

China’s two largest bubble tea chains Mixue and GoodMe both filed prospectuses for Hong Kong listings on Tuesday, with the aim of broadening the companies’ financing access through share sales, providing vital support for the new-style tea brands to navigate an extremely competitive industry.

Why it matters: Three China-founded beverage retailers have now lined up to apply for IPOs in Hong Kong in less than five months, incluing fruit tea chain ChaBaiDao submitted its application last August, signaling that the industry leaders are betting big on store expansion and tea consumption in China’s delayed post-Covid economic recovery.

Details: Mixue, which also sells ice cream for RMB 2 (less than $0.3) per cup, generated RMB 15.4 billion ($2.17 billion) in revenue and recorded a net profit of RMB 2.5 billion in the first nine months of last year. Mixue’s numbers are nearly triple those of rival GoodMe on both metrics.

• With an eye-catching snowman logo, Mixue boasted 32,180 stores across China as of September 30, 2023, with over 55% of those stores in third-tier and below cities. GoodMe, a 13-year-old brand selling bubble tea mainly in second-tier and below cities, had opened a total of 9,001 stores by the end of 2023.
• The primary revenue streams for Mixue and GoodMe are driven by the sales of raw materials and equipment to franchisees; the former has derived over 98% of its income from this strategy in the past three years.
• According to GoodMe’s prospectus, revenue from directly operated stores in the first three quarters of 2023 accounted for only 0.1% of its total, while the income from selling goods to franchisees made up as much as 75%.

Context: Mixue shifted to exploring a Hong Kong IPO instead of a mainland China listing due to a lack of progress following a proposed RMB 6.5 billion Shenzhen IPO filing back in 2022. The tea chain’s decision to put its mainland listing on hold is widely seen as a sign that Chinese regulators have imposed strict rules discouraging companies that rely heavily on franchise business models from listing.

Alibaba’s China-focused online shopping platform Taobao is streamlining its refund process, in a move that mirrors rival Pinduoduo’s strategy for retaining customers.

The new rules for handling refund issues took effect on Tuesday, allowing the platform to use big data analysis of store quality and complaint frequency to handle returns and refunds directly when buyers make after-sales requests that meet certain conditions.

Why it matters: This update brings Taobao’s after-sales mechanism closer to that of rival Pinduoduo, with the company emphasizing a commitment to consumer rights and cutting the influence of merchants in the refund process. 

Details: Pinduoduo’s “Refund only” strategy has met with controversy in recent years. The approach, coupled with Pinduoduo’s consistent low-price strategy, has attracted a large number of price-sensitive consumers. Merchants on the other hand have come to find the platform’s rules too strict, generating widespread dissatisfaction.

• According to Taobao’s new rules, if a seller exceeds the agreed-upon delivery time or sends goods without the buyer’s consent, the system will allow the buyer to request a refund automatically. The platform also lets buyers apply for a refund if they refuse to sign for a delivery on arrival. Previously, refunds had to be processed via the seller.
• Taobao is providing a quick appeals channel for merchants however, permitting them to appeal refunds within a 30-day period.
• One merchant who sells on multiple platforms told local outlet Jiemian that shoppers have upped their expectations of e-commerce platforms since experiencing how simple it was to apply for a “refund only” on Pinduoduo, the domestic sibling of runaway e-commerce success Temu.

Context: In recent weeks, Alibaba executed an executive level overhaul at Taobao, its most-profitable Chinese e-commerce group. Alibaba CEO Eddie Wu tapped six young leaders to take charge of key operations at twin e-commerce sites Taobao and Tmall, after he took the reins of the business on Dec. 20.

• The flurry of adjustments follow publication of an employee memo by founder Jack Ma in which he wrote “I firmly believe Alibaba will change and reform.” 

Shares of Gaotu, a Chinese online education firm, slumped nearly 20% on Monday as a previous influx of livestreaming viewers returned to rival East Buy’s Douyin channel after a recent screenplay dispute at the latter, which had driven users to seek alternative platforms, came to an end.

Why it matters: The 58% surge in New York-listed Gaotu’s share price last week has now been halved with the previous surge seemingly an exception that does not accurately reflect the sustainable growth prospects of Gaotu’s e-commerce business at present.

Details: China’s Gaotu was once a provider of after-school tutoring courses, but transitioned to the live commerce sector a year ago, in a similar move to East Buy, which found viral success after blending online language lessons with e-commerce. Gaotu witnessed eightfold growth in followers on Douyin in the last two weeks, taking it to almost 2.5 million followers on the TikTok sibling platform.

• The East Buy exodus began as a protest over a controversy surrounding Dong Yuhui, the most influential host on the platform. His fans were dissatisfied with the company’s Douyin account operator attributing a Jilin province screenplay read by Dong during a livestream to the collaborative efforts of the team. Fans insisted that Dong was the sole author and should be accredited as such.
• In the following days, Dong failed to appear on East Buy’s livestreams, prompting a large number of fans to flood rival Gaotu’s platform as a way of expressing their dissatisfaction with East Buy’s treatment of their live commerce idol. One user even stated, “I will only go back if Dong continues to appear in East Buy’s livestreams.”
• However, the week-long infighting came to an end on Monday night when East Buy CEO Michael Yu announced his decision to promote Dong to the position of senior partner in the company while committing to the establishment of a separate studio for the top influencer. That evening there were wildly contrasting figures for the two rivals: East Buy’s livestream featuring Yu and Dong saw them sell goods worth RMB 1 billion and hit a peak of 3.8 million simultaneous viewers; at the same time, Gaotu’s livestream had fewer than 5,000 viewers.

Context: Gaotu’s current stock price is still nearly 97% lower than its peak in 2021, when the Chinese government introduced a policy known as “double reduction” that dealt an unprecedented blow to private for-profit educational companies, and prompted them to seek rapid transformation to stay afloat. East Buy, a subsidiary of New Oriental, found unexpected success with a livestream last June as a host, who was once a tutor, taught English and simultaneously sold products, gaining significant attention on the internet.

• In November 2022, Gaotu was warned by the New York Stock Exchange as its stock price remained below $1 for 30 consecutive trading days. A month later, the company initiated its first livestream on Douyin under the name Gaotu Jiapin, mainly selling agricultural products and snacks. Its revenues for the third quarter were down by nearly 60% compared to 2020.

Chinese tech giant Alibaba is doubling down on artificial intelligence to spur the growth of its e-commerce division, after founder Jack Ma wrote an internal memo saying the era of AI e-commerce “has just begun.” The company’s domestic and international retail businesses are testing multiple AI-driven tools and are on a hiring spree for AI-related roles, according to local outlet LatePost.

Why it matters: Alibaba hopes that by integrating generative AI into its core e-commerce business, it will further boost sales in the highly lucrative sector and create new forms of customer experience to up business retention rates.

Details: Taobao and Tmall Group have channeled their AI focus into four key areas:  marketing platform Alimama, customer apps, merchant apps, and industry-specific apps. Before the reorganization led by Alibaba’s chief technology officer Wu Zeming, there were around 20 teams within the group exploring AI-related businesses, the report said.

• This year’s Singles Day shopping festival, which started in late October, was a testing ground for Alibaba-created AI shopping assistants, including Taobao Wenwen, a chatbot designed for consumer-facing interaction that relies on its pre-trained generative ability to provide users with shopping recommendations. 
• The firm also introduced at least ten free tools for merchants to assist in their marketing and merchandising efforts during the month-long bonanza. While Alibaba kept silent on sales achieved during the festival this year, it announced that the Wenwen chatbot engaged with over five million users, and the merchant tools were used over 1.5 billion times.
• Enabling businesses to achieve lower operation costs through generative AI solutions is seen as a commonality among Alibaba’s AI products. Earlier last month, in a pilot launch event of Aidge, a tool facilitating features from translation and marketing to localized content and design, vice president of Alibaba International Zhang Kaifu said that it is dedicated to “simplifying global operations for small and medium-sized enterprises.” 
• Zhang also leads AI initiatives within Alibaba International Digital Commerce Group, overseeing a team of more than 100, according to LatePost, with one-third engaged in training large language models.

Context: AI appears to be a top priority in Alibaba’s strategy since new management took over in September. In his first letter to all staff, CEO Eddie Wu announced “user first, AI-driven” as his vision for the 24-year-old company, a business that has recently been overshadowed by rivals. “We will realign our operations and refocus our business around these two core strategies,” said Wu.

• An employee posted a critical note on an Alibaba internal forum after Temu parent PDD closed in on  the company’s market valuation late last month, a move that prompted Jack Ma’s rare appearance with him calling on staff to provide more constructive comments and suggestions, especially innovative ideas to the group.

Chinese tech giant Tencent is planning to expand its short video and livestreaming e-commerce team as sales surge, according to a Monday report by LatePost, which said WeChat’s in-app shopping feature has achieved a total of RMB 100 billion ($13.9 billion) gross merchandise volume this year via its TikTok-like short video service.

Why it matters: The figure shows Tencent has increasingly drawn in users to spend more time shopping on Video Accounts, a service that launched in beta mode in January 2020.

• According to the company’s president Martin Lau, Tencent could gain a competitive advantage by attracting “a pretty significant high-income and affluent customer base” on WeChat, who may not typically make purchases on other short video platforms.

Details: WeChat Video Accounts, Tencent’s short video feature also known as Channels, has been seen as the “hope” of the company since founder and CEO Pony Ma highlighted it in an end-of-year meeting in 2022.

• As a latecomer to livestreaming e-commerce, Tencent is set to further develop the basics of online shopping, including WeChat payments, LatePost reported. During the company’s latest earnings call, Lau said the livestreaming e-commerce playbook was “quite clear” despite involving many steps. Tencent wants, “to build it in a systematic way, step by step,” Lau added.
• While Tencent’s e-commerce sales have reached an impressive RMB 100 billion, it has a long way to go before catching up with rivals Kuaishou and Douyin, as the former boasted sales of nearly RMB 800 billion worth of goods in the first three quarters this year, while TikTok’s sibling app Douyin is expected to see more than RMB 2 trillion in goods sales this year.
• Video Accounts brought RMB 3 billion in advertising revenue in the second quarter, Tencent said, adding that the figure for the subsequent three months showed “strong growth” over the previous quarter, although exact figures were not disclosed. Kuaishou generated RMB14.35 billion in advertising revenue in the same period.
• Ad load, which sits at less than 3% for Channels compared to rival platforms that regularly exceed 10%, serves as a growth driver that translates into more revenue, according to Tencent’s Chief Strategy Officer James Mitchell.

Context: WeChat, which started as an instant messaging service, now offers users a rich ecosystem of services via its mini-programs (in-app mini-apps) and Video Accounts. Tencent’s hope is that it can continue to offer the company more routes to profitability.

• Lau highlighted that several hundred million users interact with over one million mini-programs on WeChat, which facilitated over RMB 1.5 trillion in gross merchandise volume (GMV) between July and September this year. 
• In an indication of the Tencent platform’s importance, iPhone maker Apple opened an official retail store within WeChat this July.

Food delivery giant Meituan has shown its ability to defend its moat advantage in local services amid a challenge from ByteDance-owned TikTok sibling Douyin, with the company achieving RMB 2 billion single-month livestreaming sales this October, up from the less than RMB 600 million recorded in July when it officially introduced its in-app livestream feature, local media outlet 36Kr cited multiple sources as saying in a Monday report.

Why it matters: Meituan, a newcomer to the livestreaming domain, is employing a high-subsidy strategy within livestream rooms to attract both customers and merchants. Despite the strong growth momentum indicated by sales figures, the company’s profit margin has seen a decline for two consecutive quarters.

Details: Livestreams conducted by Meituan itself are the main focus of the newly launched function, where hosts are sourced from external multi-channel network (MCN) companies and generate more than 70% of live gross merchandise volume (GMV), according to the 36Kr report. However, this balance is shifting as small- and medium-sized merchants flow in to sell vouchers via independent livestreams. 

• Around 30% to 40% of orders paid for on livestreams are ultimately verified at physical stores and converted into the shop’s sales, one source was cited as saying in the report. Another source, a Meituan service provider, claimed that the overall verification rate is about 60%, nearly double that of Douyin.
• Shen Quan Jie and Shen Qiang Shou are two major official livestream brands within Meituan’s food delivery segment, selling discounted takeout coupons, especially for well-known or chain restaurants. The former is a monthly promotional event occurring on the 18th of each month, while the latter livestreams for 12 hours every day, primarily targeting users in China’s first-tier cities.
• Meituan’s Hong Kong-traded shares have slumped over 50% this year, and the company’s stock experienced its largest single-day decline in over a year last Tuesday after executives warned of a slowdown in revenue growth for its core food delivery business in the fourth quarter.

Context: Meituan has increased its marketing expenses this year in an attempt to resist TikTok sister app Douyin’s push into the local life services sector, spending RMB 16.9 billion in the last quarter, a 62.5% increase from the first quarter. Meanwhile, the operating margin of its core local business has continued to decline over the last two quarters, dropping below 20% in the three months from July to September to 17.5%.

• Short video app Douyin first took a step into the local services space with food delivery trials two years ago. It has now expanded its reach to include everything from sightseeing tickets and leisure events to parent-child activities. Local media outlet LatePost previously reported that these services generated over RMB 100 billion in sales for Douyin in the first half of 2023.

A federal judge has blocked a law in the US state of Montana that sought to bar the use of TikTok, saying it “oversteps state power”, a month before the ban was due to take effect.

Why it matters: The move suggests efforts to prohibit use of the Chinese-owned video sharing app in the US will face significant legal challenges. Montana was the first state set to implement a blanket TikTok ban.

Details: In a statement, the US District Judge Donald Molloy said the ban targets “China’s ostensible role in TikTok” rather than protects Montana consumers.

• “We are pleased the judge rejected this unconstitutional law and hundreds of thousands of Montanans can continue to express themselves, earn a living, and find community on TikTok,” an account called TikTok Policy posted on social media platform X.
• However, the office of Montana’s attorney general signaled it was not giving up on a ban, saying “the analysis could change as the case proceeds,” and noting that it looked forward to “presenting the complete legal argument to defend the law.”
• The ByteDance-owned video platform filed a federal lawsuit against Montana in May, claiming the law “unlawfully abridges one of the core freedoms guaranteed by the First Amendment,” days after the state passed a law to ban the widely popular app across the state. Senate Bill 419, the initial ruling to ban TikTok in Montana from Jan. 1  2024, outlined a concern that the app accessed data against users’ will and shared it with the People’s Republic of China. An additional consideration for the ban was that it promoted dangerous social media challenges that threatened the health and safety of Montanans.
• TikTok’s Chinese links have been a focal point of running controversy in the US, where the app says it has 150 million users. Inadequate protection of minors’ data is another legal fight the platform has been dealing with.

Context: TikTok has continued to face criticism during its rise in the US, but its popularity and ad revenue point to a continued upward trend in use of the app nationwide. Its parent company ByteDance reportedly generated $54 billion globally in the first half of 2023, a figure close to Facebook owner Meta’s $60.6 billion. The video platform also officially launched an in-app e-commerce feature in September.

Fast fashion giant Shein has confidentially filed for an IPO in the US, Reuters reported on Monday, citing two sources. The move puts to an end long-running speculation around the China-founded company’s intentions to go public.

Why it matters: A successful listing for the fast-fashion giant would help Shein expand its global reach while diversifying its sources of funding.

Details: Shein has hired Goldman Sachs, JPMorgan Chase, and Morgan Stanley as lead underwriters for the share offering and expects to go public sometime in 2024, according to Reuters.

• The company’s current valuation is uncertain. In a $2 billion funding round in May, Shein was valued at $66 billion, a third less than its $100 billion valuation from a funding round a year earlier.
• Now headquartered in Singapore, the retailer sells everything from skirts to sweaters, typically for around $10 a piece, in more than 150 countries. Shein has actively sought to diversify its supply chain, moving away from reliance on China. The company began manufacturing in Turkey and Brazil this year and is in the process of planning for a factory and warehouse in Mexico.
• Under ongoing regulatory scrutiny in the US, its largest market, Shein faces allegations related to design infringement and the use of forced labor in its factories.
• Shein did not respond to TechNode’s request for comment.

Context: In 2022, eleven years after its founding, Shein recorded $23 billion in revenue and $800 million in net income, according to the Wall Street Journal. A company executive reportedly told investors in July that it had achieved record profitability in the first half of 2023 thanks in large part to strong sales in the US.

• In a bid to further expand its international presence, Shein acquired a one-third stake in Forever 21’s parent company in August, followed by the purchase of fast fashion brand Missguided and all of its intellectual property in October.

Baidu said on Tuesday it has “comprehensively reshaped” its product portfolios thanks to its AI foundation model ERNIE, resulting in increased operational efficiency, after the Chinese search giant company reported 6% year-on-year revenue growth to RMB 34.4 billion in the third quarter. However, the company’s cloud unit reported its first decline in revenue in almost three years.

Why it matters: Baidu pointed to artificial intelligence bringing about positive changes in key performance indicators across all of its businesses in its latest earnings report. The firm also highlighted that its ChatGPT-like service ERNIE Bot has already amassed 70 million users.

Details: Although the company’s overall growth was up, Baidu’s AI cloud revenue decreased by 2% in the three months to September. Robin Li, CEO of the firm, said this was due to weak demand in smart transportation projects, despite strong demand for generative AI. The figures marked the first decline in Baidu’s cloud business since it started announcing its earnings separately in the last quarter of 2020.

• Online advertising business, which accounts for over half of Baidu’s total earnings, experienced 5% year-on-year revenue growth during the period. This growth rate was slower than the preceding two quarters and lags behind some of its internet-focused peers.
• During the related earnings call, Li expressed confidence that Baidu’s current chip reserves could “keep improving ERNIE Bot for up to two years” amid the US’s tightening of curbs on advanced chip exports to China. He did, however, add that Baidu will still seek alternatives due to the pace of AI development in China being “inevitably” impacted by difficulties in acquiring the most advanced chips.
• The chief executive of Baidu warned a week ago that China’s rush to develop multiple large language models had led to a “wasting of resources,” and he again told investors on the call that “the best option on the market” is companies developing AI-native apps based on Baidu’s foundation model rather than training models themselves.
• Baidu also named JD CEO Sandy Xu as an independent director of its board effective from the beginning of 2024.

Context: Baidu’s large language model, ERNIE, was made available to the public at the end of August after receiving government approval. Last month, Baidu launched the latest version of its AI model, ERNIE 4.0, seven months after the release of its first version.

iPhone maker Apple has reportedly asked China’s major app developers to refrain from using gyroscopic motion, a feature that tracks the motion of a user’s phone, for advertising, as it all too readily redirects users to third-party apps on detecting even the slightest shake of a device. 

Why it matters: Open-screen advertising serves as a monetization method for many apps, while gyroscopic ads can boost the click-through rate of the target app. Those employing the feature have found that both parties can gain commercially, despite it taking control away from the user and thus impacting the user experience.

Details: Deployment of the function, criticized by numerous users, escalated during November’s three-week-long Singles Day shopping festival that has just ended. E-commerce platforms extensively used redirect ads across various apps, including the most widely used video and music streaming platforms, as well as social media apps. These ads can be triggered by clicking on an ad page or moving the phone, redirecting the user’s attention to another app.

• A netizen on Weibo, a Twitter-like platform, jokingly wrote that the redirection speed was faster than if they had directly opened the app.
• On-device gyroscopes help to achieve the ad redirect feature, though gyroscopes were originally designed to provide “experiences based on real-time, motion-based information in apps and games,” according to Apple.
• Another form of advertising similarly concealed within social media during China’s largest online shopping event was activated by Weibo blog comments – – individuals would write related comments and attach seemingly relevant webpage links. Once users clicked, they would find their phones had already opened advertised shopping websites. It remains uncertain whether this type of promotional tactic is directly linked to e-commerce sites.
• According to local media outlet Yicai, Taobao, JD, Pinduoduo, and Douyin have not explicitly said they received a notification from Apple, and Apple has not responded to the rumors.

Context: In February, China’s State Administration for Market Regulation made it clear in a guideline that advertisements should be clearly labeled using a closing icon, and should not deceptively induce users to click on or browse any advertisement. The new measures were supposed to further refine the norms of online advertising in China.

Chinese video giant ByteDance will conduct a new round of layoffs from its virtual reality arm Pico as demand for headsets was not “as fast as expected,” said chief executive Henry Zhou, acknowledging at an internal meeting that projections for VR had been overly optimistic.

Why it matters: This large-scale downsizing is the latest restructuring effort by ByteDance in response to dim prospects in the VR industry. Despite significant investments in technology and marketing over the past two years, which failed to yield satisfactory sales results, the company has stated its intention to keep its hardware team intact.

Details: The biggest overhaul since Pico was acquired by the TikTok owner two years ago was announced in a ten-minute meeting on Tuesday, with staff from sales, videos, and platform operations hit the most.

• Although the exact percentage of layoffs was not disclosed by the company, a source close to Pico told local media outlet VR Tuoluo saying around half of its VR staff would be affected.
• In February, Pico slashed nearly a third of its positions, equivalent to hundreds of jobs, mere months after ByteDance launched the flagship Pico 4 VR headset, benchmarked against Meta’s Quest 2. Recent layoffs will shrink the workforce to only a few hundred employees, down from a peak headcount of over 2,000.
• Affected employees will be compensated based on their years of service plus one month’s salary, according to Tencent News.

Context: ByteDance acquired Pico for approximately RMB 5 billion in 2021, and launched an extensive marketing campaign for the Pico 4 standalone VR headset when it was launched a year later. The company enlisted musician Leah Dou and ping-pong star Sun Yingsha as spokespeople, covering major shopping malls and bus stops with advertisements. 

• The TikTok owner has high hopes for its VR business, as Pico founder and president Henry Zhou said at last year’s launch event, expecting the headset to sell more than 1 million units eventually. However, early this year, the company lowered its sales target to “slightly over 500,000 units” due to disappointing initial results.
• The Pico 4 boasts a total of 561 apps, according to figures compiled by VR Tuoluo, surpassing Quest’s 532. The report quoted a source as saying ByteDance had spent at least several billion yuan on building a content ecosystem within Pico.

China’s most populated social media platforms on Tuesday announced they will soon remove anonymity for content creators that have over 500,000 followers, confirming rumors that stirred up heated debate over personal privacy in recent weeks.

Why it matters: The new policy will force bloggers with large fan bases to disclose their real names to the public on social media, in a change to the rules that will likely further deter discussion online in China, especially when it comes to finance news and current affairs.

Details: At least seven social platforms serving hundreds of thousands of users daily issued statements urging influencers to reveal their real identities. These included X-like platform Weibo, messaging app WeChat, video sites Douyin, Kuaishou, and Bilibili, as well as lifestyle-sharing app Xiaohongshu and search giant Baidu. 

• Weibo has outlined plans to first require creators specializing in content related to social affairs, finance, and legal matters, with more than 1 million followers to post using their real names,  before extending the rule to bloggers in other fields.
• Influencers who refuse to show their real names may be limited by account traffic and revenue, according to Weibo and WeChat.
• WeChat said the move will  enhance the credibility of top “self-media” accounts, while Weibo said that as these influencers have a far greater impact on public opinion than ordinary users, requiring real name identification will encourage them to “take on responsibilities that align with the influence of their words.”
• In recent years, China has strengthened the management of social media accounts run by individuals or organizations independent of state-control. Many of those accounts have amassed sizable fanbases.
• Short video apps Kuaishou, and TikTok’s Chinese sibling Douyin, were among the platforms that published simultaneous statements. Accounts with over 500,000 followers will be the first affected by real-name ID disclosure requirements. Kuaishou added that accounts mainly sharing personal daily life stories will be exempt.

Context: On Oct.21, users noticed that Weibo’s CEO Wang Gaofei gave his real name on  his social media page, a move later confirmed by the executive who said he had decided to first test the policy on his own account.

• A year ago, China asked that posts mentioning Russia’s invasion of Ukraine showed the location of the poster, in response to an incident in which a social media user faked his whereabouts, causing a stir in overseas media. Shortly after, the practice of displaying IP addresses was extended to individual users of Weibo and those of other social media platforms.

Chinese kitchen appliances brand Hauswirt said on Monday that it had sent a legal letter to JD after the retailer lowered the price of one of Hauswirt’s ovens “without authorization” amid intense online battles over price in the run-up to Singles’ Day. Hauswirt claims the reduction led to a dent in the company’s profits.

Why it matters: Competition over low prices in a bid to attract consumers has intensified as China’s biggest shopping extravaganza kicks off, with this case suggesting an increasingly dysfunctional and imbalanced e-commerce ecosystem.

• While JD’s staff have claimed that the platform subsidized the oven in question to sell it below its normal price, Hangzhou-based Hauswirt has stated that they are the ones who actually incurred the loss. 

Details: Hauswirt’s home beginner oven normally retails for RMB 699 ($95.50), but this week consumers can get it on JD for RMB 319.50, a discount of more than 50%.

• Top livestreaming influencer Li Jiaqi was also caught up in the fiasco after a WeChat screenshot, believed to have been posted by a member of JD’s sales staff, showed he had received a legal letter from Hauswirt. 
• The poster said the appliance brand had filed a complaint against him due to the sale price of the oven on JD being lower than the price the controversial livestream star advertised during his broadcasts, thus breaching Hauswirt’s lowest-price agreement with Li.
• The oven was set to be marketed on Li’s Taobao Live livestream on Oct. 26, according to a teaser on his official WeChat account earlier today. The post did not reveal the item’s exact price.
• Local media outlet Jiemian cited Li Jiaqi’s agency MeiOne as saying they didn’t sign a so-called minimum price agreement with Hauswirt and that “pricing of livestreamed goods rests with the brand.” However, it is not known whether MeiOne will still require other brands they cooperate with to promise the lowest price for their products in return for exposure on Li’s livestreams, a practice they have reportedly pursued in the past.
• As the high-profile spat continued, Hauswirt commented with three demands on JD’s official Weibo social media account on Tuesday, asking the e-commerce giant to withdraw the sale of the oven at half price, requesting that it exclude the brand’s entire product line from JD’s regular coupon offers, and urging JD to conduct an “internal review” to “rectify any unreasonable behavior.”
• At time of writing, the oven is currently being sold at RMB 699 on JD. JD did not respond to TechNode’s requests for comment.

Context: The conflict over pricing control between e-commerce channels is growing more prominent in China’s latest online price war. On the one hand, online retailers are pursuing low prices amid a less-than-stellar consumer recovery, but on the other, this is adding pressure to merchants that have set up online stores on multiple platforms.

• During 2021’s Singles’ Day festival, some users found that the same L’Oréal face mask product they bought via the country’s hottest livestreamers, Li Jiaqi and Viya, was more expensive than the cosmetics brand’s own livestream days later, which led the duo to publicly accuse L’Oréal of failing to deliver on its promise to offer them the lowest prices.

Chinese e-commerce platforms are racing to give consumers attractive deals during this year’s Singles’ Day festival, though the country’s biggest online shopping bonanza has slowly lost its luster as the pushing of low prices has become a standard marketing strategy throughout the year for platforms facing challenges in reviving consumer sentiment.

Why it matters: Emerging retailers such as Douyin and Kuaishou, along with established rivals Alibaba and JD, are turning to direct discounts for shoppers as the 11.11 pre-sale period kicks off because they continue to count on the mega event to encourage consumers to open up their wallets and submit their data, especially in the face of China’s uneven economic recovery.

Details: The Singles’ Day festival is now in its 15th year after it was first co-opted by Alibaba in 2009, who turned an organic, low-key celebration of singledom into a major consumerist event.

• While “low prices” remains a common advertising term for retail platforms, JD has taken a different approach during this year’s Singles’ Day by skipping the pre-sales period. In the past, this has been the standard way for major Chinese online retailers to record enormous sales sums on November 11th itself and allows consumers to pay an advance deposit for products to secure discounts.
• Alibaba is betting big on its premium program 88VIP, providing members with sizable coupons worth a total of RMB 20 billion ($2.74 billion), as the group fills with loyal consumers with high spending ability. 
• “We have a desire to return to our original intention of making Singles’ Day a joyful event for consumers,” said Trudy Dai, chief executive of Taobao and Tmall Group. The well-established Chinese e-commerce platform is introducing various entertainment shows and activities, including live music and cross-talk performances during the weeks-long event, to “create a more immersive shopping experience.”
• JD is once again offering a discount of RMB 50 for every RMB 299 spent, whereas Tmall is providing a similar deal for every RMB 300 spent. Alibaba also said its Tmall and Taobao site will grant a 15% price reduction in addition to the standard discount coupons. E-commerce upstart Douyin, TikTok’s sibling platform, has also adopted a similar strategy, emphasizing its commitment to giving “real price discounts.”
• Kuaishou was the first mainstream site to begin sales for this year’s Singles’ Day festival, commencing pre-sales on Oct. 18. The short video platform had previously announced that it would invest RMB 2 billion in cash subsidies. Apple’s iPhone 15 Pro, for example, can be purchased for a final price of RMB 8,009 if shoppers pay an RMB 100 deposit.

Context: In the third quarter, China’s economic growth outpaced expectations, indicating that a series of recent policy measures are aiding the initial recovery of the world’s second-largest economy. Retail sales increased by 5.5% last month, beating expectations and also surpassing the 4.6% growth recorded in August.

Baidu released the latest version of its AI foundation model ERNIE on Tuesday at the Baidu World 2023 conference, a mere four months after the previous release. At the launch, the tech giant claimed the capabilities of ERNIE 4.0 were as advanced as OpenAI’s GPT-4 model.

Why it matters: Baidu has emerged as one of China’s fastest companies in leveraging AI models to transform existing products, ensuring its prominence in the competitive space.

Details: Co-founder and CEO Robin Li showed off ERNIE 4.0 during a one-hour presentation, showcasing the model’s ability to generate advertising posters and marketing videos in real time. Li also asked it to write a martial arts novel based on prompts, underscoring the enhanced memory capabilities of the iterated model.

• Baidu did not disclose the number of parameters used to train the updated model at the event, merely saying that ERNIE 4.0 saw “similar improvements” in understanding and prompting capabilities, but without specifying whether this was compared to the previous iteration or to some other standard. The company said that enhancements in memory and reasoning are twice and three times that of understanding, respectively, but again didn’t clarify to what they were comparing the new model.
• The search giant has embedded AI capabilities into its flagship products including search and maps, introducing new upgrades in recent months. Li laid out his vision for Baidu, aiming to leverage AI-driven thinking to create native apps tailored for the AI era. He singled out Baidu Wenku, an online interactive document-sharing platform, as a product that has undergone radical transformation, evolving into a “productivity tool” that assists users in content creation.
• Baidu failed to launch new official plug-ins for its chatbot service ERNIE Bot this time, but the company mentioned that around 27,000 developers have applied to join the firm’s plug-in ecosystem platform since it was unveiled last month. The company first incorporated plug-in functionality into the ChatGPT-like service when it upgraded ERNIE to version 3.5 in June, and then added three more plug-ins two months later. 

Context: Rebuilding applications with large language models has been embraced by tech giants from Microsoft to Baidu and Alibaba. Robin Li sees the AI model as an opportunity to overhaul all of Baidu’s products, aligning with the vision of Daniel Zhang, former chairman and chief executive of Alibaba, who also stated that all Alibaba products would undergo a comprehensive upgrade through integration into its AI model.

• ERNIE Bot, powered by Baidu’s foundation model, was made fully accessible to the public on August 31, and has amassed a user base of 45 million, according to the company’s announcements on Tuesday.

Chinese video streaming platform Bilibili has proposed the goal of doubling its current daily active users (DAU), according to local media outlet LatePost. The target was discussed during a mid-year internal meeting, although the company did not specify a clear timeframe for its achievement.

Why it matters: User growth is crucial for content-based Bilibili as an increase in this figure could boost the firm’s advertising revenue and push to create new content, with the company aiming to achieve profitability by 2024.

• In the second quarter, Bilibili’s average DAU reached 96.5 million, marking a 15% year-on-year growth and an increase of 2.8 million compared to the previous quarter. However, its MAU has declined for two consecutive quarters. Despite this challenge, the company successfully reduced its losses by 51% year-on-year during this period, bringing them down to RMB 964 million.

Details: Increasing the supply of high-quality content, and expanding the scenarios available for Bilibili users are the platform’s core strategies for doubling its DAUs, LatePost reported.

• The first strategy aligns with a recent remark made by the company’s chief operating officer Li Ni, during the ANIME MADE BY BILIBILI 2023-2024 event. She emphasized that Bilibili’s investment in original content will “not decrease but only increase” over the next three years.
• Before directing investors to focus on the DAU to MAU ratio in 2022, CEO Chen Rui expressed his confidence during the earnings call over the Q4 2020 financial report that Bilibili could achieve 400 million monthly active users by the end of 2023. The figure exceeded 300 million in the second quarter of the previous year, and reached 324 million in the second quarter of this year.

Context: Bilibili, a long-form video platform primarily favored by Gen Z users, currently offers a wide range of content genres, including anime, TV shows, variety shows, documentaries, and live streaming. Notably, in response to the growing impact of short video platforms, Bilibili has bet big on shorter vertical videos over the past year, aiming to attract new audiences.

• Story Mode, the short video format on the platform, coupled with Bilibili’s pursuit of profitability has led to reduced incentives for content creators who regularly produce long videos with substantial influence on the platform. Several creators publicly announced this April that they would temporarily suspend content updates.
• The Chinese animated series Yao-Chinese Folktales, a collaboration between Bilibili and the Shanghai Animation Film Studio, went live on Jan.1 this year and has already accumulated over 290 million views on Bilibili. The company has announced the commencement of production for the second season of the animation.

Baidu on Saturday appointed its chief information officer Li Ying to lead the company’s AI speaker subsidiary, Xiaodu Technology, after the sudden resignation of former chief executive Jing Kun.

Why it matters: As the Vice President of Baidu, Li’s taking over as the top executive of Xiaodu may signify the strengthening of the company’s ERNIE Bot support for various artificial intelligence product lines under Xiaodu, with the tech giant betting big on its subsidiary’s potential for transformation in the AI field.

Details: Officially launched in 2015 as a smart life business group under Baidu, Xiaodu was spun off from the search giant in 2020.

• Xiaodu’s former CEO Jing Kun recently resigned for personal reasons, according to local media outlet Caixin. The report also noted that Jing was originally scheduled to give a speech entitled “The era of large models, Xiaodu reshaping smartliving” at Baidu’s annual event, Baidu World 2023, on Oct. 17.
• His successor, Li Ying, joined Baidu in 2004. The long-term Baidu employee has been involved in various businesses within the company, including natural language processing, complex search, and Baidu Maps, publicly available information shows. Li will report directly to Baidu’s chairman Robin Li.
• Before her new appointment, Li also led the rebuild of Baidu-developed instant messaging software product Infoflow based on the firm’s ChatGPT-like AI model, according to tech outlet 36Kr. The software is capable of performing AI-driven tasks such as meeting summary generation and intelligent coding after integrating Baidu’s ERNIE Bot.

Context: In May, Xiaodu teased its first smartphone, Qinghe, which is intended as a child-focused smartphone and features English-speaking and location tracking functions. Although the independent Baidu subsidiary stated on its official WeChat public account in February that Xiaodu-created devices would integrate all the capabilities of ERNIE Bot, Qinghe ultimately utilized “a large AI model for studying” developed by the company itself.

• In January, Xiaodu completed a Series B+ financing round participated in by the Chinese state-backed enterprise restructuring fund, with the company’s valuation reaching RMB 35.5 billion ($4.9 billion).
• More than 40 million households already use Xiaodu’s products, including speakers, televisions, as well as other smart home appliances, according to the company.

Alibaba is to boost its e-commerce business outside China with a $2 billion investment in its Turkish unit Trendyol, Reuters reported, quoting a statement from Trendyol on Monday. 

Why it matters: Alibaba’s decision to increase investment in Trendyol comes after the Turkish platform made an operating profit for the first time in the second quarter. The tech giant’s expansion into the Middle Eastern country, one that often serves as a bridge between Europe and Asia, will bolster its global business efforts.

Details: The financial commitment was made during a meeting between Michael Evans, president of Alibaba, and Turkish President Tayyip Erdogan. While details were not disclosed, the investment is expected to materialize “in the near future,” said Evans.

• Trendyol said in the announcement that the Chinese e-commerce giant intends to establish a data and logistics center in Ankara, the capital of Turkey, and an export operations center at Istanbul airport.
• Alibaba acquired major shares in Trendyol via a $728 million deal in 2018, and has invested a total of $1.4 billion in Turkey to date, according to Evans. Over the past five years, Trendyol, as the country’s largest e-commerce marketplace, saw its customers rise nearly threefold to 30 million. The platform boasts around 250,000 sellers, offering over 200 million items.
• Beyond its business focus on Turkey’s domestic market, the online marketplace made efforts to expand into Azerbaijan in May, a year after Trendyol’s entry into Germany. The platform is also gearing up for launches in the Netherlands, Luxembourg, and the UK soon, according to a report by Turkish media outlet Daily Sabah.

Context: In 2022, the size of the Turkish e-commerce market grew 110%, rising from 382 billion Lira in 2021 to 801 billion Lira last year, according to research conducted by the Turkish E-Commerce Association (ETİD). E-commerce accounted for a 16.5% share of the retail sector in 2022, in contrast to China’s more than 31%.

TikTok has officially launched its e-commerce business, known as TikTok Shop, in the US following months of testing, according to a blog post from the company published on Tuesday. TikTok is making a big bet on monetizing its more than 150 million users in the country, even as it faces increased scrutiny from US authorities.

Why it matters: The largest market for the short video platform, the US also represents the greatest political risk for the Chinese-founded company. TikTok will also encounter stiff competition from larger e-commerce rivals such as Amazon and from Chinese counterparts such as Shein and PDD-owned Temu.

Details: The shopping feature now enables TikTok’s US users to directly complete transactions through in-app links within videos or live streamings, eliminating the need to jump to external websites.

• More than 200,000 merchants have already signed up to sell goods on TikTok Shop during a nearly one-year testing period, with brands such as L’Oréal, Benefit, and Olay either already on board or planning to join TikTok Shop, according to Chinese media outlet Jiemian.
• TikTok offers various features to support content creators, brands, and merchants in enhancing their sales experiences. One such feature allows sellers to collaborate with creators through commission-based partnerships, all within the TikTok ecosystem. TikTok said that more than 100,000 creators have already registered for the Affiliate Program.
• While data privacy remains one of TikTok’s biggest challenges in the US, the company emphasized in the blog post that US user data is protected and stored in the country and managed by the US Department of State (USDS). Payment information for users in the States is also managed by USDS, as TikTok is committed to providing “a safe and secure environment,” the post stated. 

Context: TikTok’s e-commerce push was first launched in Indonesia in 2021, and has since been made available in the UK and multiple countries in Southeast Asia. A previous Bloomberg report noted that TikTok plans to quadruple its e-commerce merchandise sales to $20 billion by the end of this year.

• More than half of US states have banned the use of TikTok on government-issued devices, as the country’s officials and lawmakers have continuously expressed their concerns over the ByteDance-owned app’s sharing of user data in recent years. A US House committee voted in March to give President Joe Biden the power to ban TikTok, but a Reuters report last month said the bill had stalled in Congress.

China’s top livestreaming influencer Li Jiaqi has angered part of his fanbase after losing his temper with a consumer who questioned a product’s high price during a recent live broadcast. Li asked the viewer of the sales pitch to question if they had worked hard enough to afford the item, rather than niggle about the cost. 

Why it matters: The social media uproar about Li’s remark comes a year after the influencer returned to the public eye following an unexplained three-month absence for livestreaming platforms. The incident also comes less than two months before China’s largest annual shopping extravaganza, Singles Day, where domestic and international brands do their utmost to leverage the huge following top influencers like Li enjoy, in order to expand sales.

Details: Li was forced to apologize twice as his remarks created a PR storm, as the popular celebrity lost nearly a million followers in a day on the Twitter-like social media site Weibo, even though this number represents less than 5% of his total fans on the platform.

• On Monday night, Li apologized during his livestream a few hours after issuing a written apology. He cried, acknowledging that his inappropriate remarks were “disrespectful” to others and that everyone had the right to express their opinions about products marketed on livestreams.
• The controversial eyebrow pencil from Chinese cosmetics brand Florasis was priced at RMB 79 ($11) during Li’s livestream that day. After seeing a comment saying “Florasis products are getting more expensive,” Li responded “How could that be expensive? Domestic brands are struggling.” A clip of the comments spread widely on Chinese social media.
• Established in early 2017, Florasis positions itself as a brand combining “Chinese trends” and “Eastern makeup,” and is a top brand promoted by Li Jiaqi in his online live room. In 2018, Li earned the nickname ‘Lipstick King’ for his performance testing various lipstick colors,  making him the most popular salesperson online during China’s live e-commerce boom.
• Li first promoted Florasis goods in March 2019, with the brand collaborating closely with him ever since. The cosmetic maker’s gross merchandise volume (GMV) increased 5.4 times between 2019 and 2021, reaching total sales of RMB 5.4 billion RMB in 2021.
• Top domestic cosmetics brands that frequently collaborate with Li, including Florasis and Perfect Diary, told local media outlet Caixin that Li’s contribution to their income was less than 5%. Florasis has yet to issue an official response to Li’s outburst.

Context: Chinese netizens’ dissatisfaction with Li is largely due to their belief that his comments made a mockery of low-income groups, as consumers are particularly sensitive to prices amid domestic economic sluggishness. His first apology was also widely viewed as insincere and failing to grasp the source of many users’ anger.

• Li earned RMB 1.855 billion ($2.5 billion) in 2021, according to a September 11 report by Chinese news outlet Shanghai Securities News.

Correction: An earlier version of the article miscalculated the income of Li Jiaqi which is RMB 1.855 billion rather than the RMB 18.553 billion as mentioned.

Chinese search giant Baidu launched its ChatGPT-like service ERNIE Bot for public use on Thursday, as one of the first batches of companies given permission to allow regular access to generative AI bots, having filed details of its algorithms with the government. The move signals a softening of Beijing’s regulatory stance towards artificial intelligence.

Why it matters: The approval comes two weeks after China’s new AI rules took effect, paving the way for an initial eight companies to cater their generative AI services to over 1 billion Chinese internet users.

• For China’s dozens of homegrown AI large language models, being among the first to launch could potentially bring early player advantages, given the relatively small distinctions between each consumer-facing service.

Details: The first tranche of approvals has been granted to tech companies and research institutes headquartered in Beijing or Shanghai, from Baidu, ByteDance, and SenseTime to the state-backed Chinese Academy of Sciences and Shanghai Artificial Intelligence Laboratory.

• Local media outlet Beijing News reported on Thursday that, in addition to the first eight entities given approval, Shenzhen-based tech giants Huawei and Tencent, as well as Hefei-founded iFlytek, are readying to unveil their artificial intelligence bots to the general public.
• Alibaba, located in Hangzhou, is not listed on the approved entities, but a source from the company’s cloud unit revealed that its chatbot service, known as Tongyi Qianwen, has completed its filing process and is ready for rollout, according to tech outlet China Star Market.
• Baidu’s ERNIE Bot topped the free app download chart of Apple’s App Store 12 hours after its public availability announcement. The company is gearing up to introduce an array of fresh AI-native apps.

Context: China implemented detailed regulations for generative AI services on Aug. 15, making it clear that government approval of algorithms is a threshold that tech companies must cross before offering AI products to the public, as a way to better control content.

• In an earnings call last week, Baidu CEO Robin Li noted that the government “has increasingly recognized” ERNIE and ERNIE Bot, believing that this endorsement stands the company in good stead for a large-scale release.

PDD-owned Temu made a quiet debut in the Philippines this past weekend, its first Southeast Asia destination, bringing the budget shopping app into head-to-head competition with Chinese counterparts Lazada and TikTok Shop.

Why it matters: Temu’s expansion into Southeast Asia is expected to ignite an already heated e-commerce sector in the region with its aggressive marketing strategies, even as major players already in place have secured enviable market shares.

Details: Since its launch in the US last September, Temu has reached consumers in 38 countries across six continents with its China-produced goods. 

• Aligned with its advertising slogan, “shop like a billionaire,” Temu has entered the Philippines with significant discounts and free shipping, and has priced most items on the local site between PhP 50 and PhP 1,500 (under $0.88 to $27).
• Boston-headquartered Temu works with different third-party logistics providers for local delivery. In the case of the Philippines, Chinese media outlet Jiemian reported that Indonesia-founded J&T Express would oversee its last-mile logistics.
• Similar to its main competitor Shein, Temu leverages China’s supply chain network to offer international customers ultra-low-cost products. 
• An earlier report by local media outlet 36Kr quoted several sources as noting that Temu’s overall loss rate stands at around 60%, in contrast to Shein’s profitability over four consecutive years.

Context: The comparatively lower e-commerce penetration rate in Southeast Asia makes the region highly attractive to Chinese e-commerce companies, especially as they face a slowdown in domestic growth.

• Lazada, an online shopping platform that received over $1.1 billion in investment from its parent company Alibaba this year, saw double-digit order growth in Southeast Asia in the quarter to June. Alibaba’s International Digital Commerce Group, to which the business belongs, experienced a 41% year-on-year revenue growth during this period, making it one of the Chinese tech giant’s best performing segments.
• TikTok plans to invest “billions of dollars” in Southeast Asia over the next few years,  the company’s CEO Shou Zi Chew said in June, as the ByteDance-owned short video app faced increased scrutiny in the US. Recent research by venture capital firm Momentum Works predicts that TikTok Shop will seize a 13.2% stake in the Southeast Asian e-commerce market this year, suggesting a narrowing gap with Lazada, which is projected to hold a 17.7% market share in the region in 2023.

Chinese e-commerce giant JD on Wednesday lowered its free shipping threshold by almost half in an announcement labeled an “important notice” on its official WeChat account, as the retailer makes a further push in its low-price strategy.

Why it matters: Providing faster and cheaper delivery has become a new battleground among China’s domestic e-commerce platforms, as they bid to lure users from their rivals.

• “From day one of our existence, our core competitiveness, the essence of our business, has been low prices,” said JD CEO Sandy Xu on the firm’s latest earnings call. She said JD adheres to this principle, and that cost efficiency and customer experience are at the heart of the company’s business philosophy.
• “We welcome users to compare prices across platforms before they place their orders, as JD is confident in its supply chain capabilities and the low-price and high-quality services we can provide,” Xu stated.

Details: JD cut its minimum order requirement for free shipping by nearly half from RMB 99 ($13.8) to RMB 59, its first lowering of the free shipping threshold in seven years.

• As part of the shipping policy adjustment, JD’s paid members, known as the JD Plus cohort, will now have unlimited free deliveries no matter how much they spend, compared to the previous limit of five free shipment coupons per month.
• While JD Logistics has enjoyed a reputation for efficiency for years, Alibaba-owned rival Cainiao is ramping up efforts to expand its nationwide logistics network. In July, Cainiao launched a half-day delivery service in Hangzhou, Shanghai, and six other major Chinese cities, initially in partnership with Tmall Supermarket.
• The upgraded model rolled out by Cainiao, entitled 1212, ensures delivery by 9 p.m. on the same day and by midnight the next day based on orders made by midnight and midday, respectively. The format is several hours faster than JD’s traditional 211 program, which guarantees same-day delivery for orders submitted before 11 a.m. and next-day delivery (before 3 p.m.) for orders placed before 11 p.m.

Context: JD saw its total revenue grow 7.6% to RMB 287.9 billion in the quarter that ended in June, mainly thanks to China’s second-largest shopping festival 618, which boosted multiple e-commerce platforms’ sales through month-long discounts. The company’s retail segment only gained 4.8% growth in the second quarter following negative year-on-year growth in the previous quarter, casting a cloud over China’s fragile retail recovery. Revenue for its logistics unit however has experienced continuous quarter growth of over 30% since this year.

China’s Instagram-like lifestyle platform Xiaohongshu has merged its e-commerce and livestreaming operations, establishing a new trading division in parallel with its community division, according to a report by local media outlet LatePost.

Why it matters: With the platform having met its milestone of 100 million daily active users earlier this year, Xiaohongshu has moved to solidify its previously vague strategy in e-commerce, aiming to diversify a revenue stream that has to date relied mainly on advertising.

Details: Xiaohongshu’s chief operating officer, widely known by the nickname Ke Nan, will assume leadership of the new department.

• While gross merchandise volume (GMV) or order volume are key metrics that help mainstream e-commerce platforms monitor business tendencies, LatePost revealed that Xiaohongshu prioritizes tracking daily purchasing user numbers.
• Promoting purchases through high-quality posts and livestreamed content seems to be “a more fitting growth model for Xiaohongshu’s e-commerce effort,” LatePost cited an internal employee as saying. The reference to “high-quality content” is based on the soft-sell techniques employed by actresses Dong Jie and Teresa Cheung, which bolstered the platform’s presence in the livestreamed shopping arena this year.
• A senior member of staff at a multi-channel network (MCN) agency, which manages livestreamers, told LatePost that Xiaohongshu places less emphasis on fan numbers when seeking hosts, but instead appreciates those with aesthetic sensibilities or professional capabilities in certain fields.
• The actress Dong Jie for example, engages with livestream viewers relatively gently, sharing her feelings and experiences when using or wearing showcased products in a calm manner compared to some other personalities in the livestreamed e-commerce sphere. Items for sale undergo pre-selection by her team to ensure alignment with Dong’s personal style. Most are designer garments valued at several thousand yuan. 

Context: While safeguarding its community content ecosystem remains a priority, Xiaohongshu has kept a quiet eye on the evolving e-commerce arena in recent years. Reports in March noted that the platform had elevated livestreaming operations to a standalone division, a move that centralized the oversight of livestreamed content and e-commerce activities.

• The number of brand merchants selling on Xiaohongshu more than doubled from March to May this year compared to a year earlier, according to tech media outlet 36Kr.

Alipay, a digital payment service operated by Alibaba-affiliated Ant Group, is taking steps to monetize its 1 billion-strong user base by doubling down on livestreamed e-commerce, a route taken by many other Chinese platforms with vast user pools.

The fintech giant also announced an updated international version of Alipay on Thursday that promised to make it easier for foreign visitors to China to use the digital payment service using Visa, Mastercard, and other major credit cards.

Why it matters: Labeled an “important strategic partner” by Alibaba, Ant Group is focused on preparing for a Hong Kong IPO. This puts pressure on the Jack Ma-founded business to accelerate commercialization with a more diversified business ecosystem.

Details: The twin updates, unveiled on Thursday at this year’s Alipay Partner Conference, are a key part of the company’s expansion into “digital connectivity,” a term that refers to providing merchants with product and service interfaces such as mini-programs within their digital operations.

• The “living channel” on the payment app’s homepage serves as a hub where merchants and influencers share short videos, lifestyle content, and engage in livestreaming. The live rooms that promote goods are mainly conducted by the brands themselves, adopting a similar style to Taobao Live. Viewers are directed to brands’ mini-apps once they click on a link located at the bottom right of the live page, enabling them to place an order within Alipay.
• Alipay’s livestreaming product manager, Zhu Qinmei, told the conference that the company believes the average transaction value per user in Alipay’s livestreaming rooms could surpass the industry average by two or three times. Alipay has also mentioned an approach for sellers to upload their products to a centralized “product pool,” where influencers can select specific items for promotion within their individual live rooms.
• Mini-programs, which are effectively apps within a bigger app such as WeChat and Alipay, are increasingly regarded as vital drivers of business growth in China. The number of active mini-programs on Alipay has surged by 119% in the past year, according to He Yongming, vice president of Ant, while the gross merchandise volume (GMV) generated by merchant mini-programs has risen by 79%. Alipay has not yet disclosed the scale of total sales. By comparison, WeChat mini-programs achieved a transaction volume in the tens of trillions of yuan in 2022, marking a year-on-year growth of over 40%.
• As for the second announcement of the day, Alipay has updated its international version as it looks to enhance user experience for foreign customers, by integrating frequently-used travel services, including hotel booking, air ticket booking, ride-hailing, public transport, and exchange rate checking.

Context: The Jack Ma-backed Ant Group has reportedly been undergoing significant restructuring ahead of its listing in Hong Kong. This may involve the separation of certain non-core operations of its finance-related business. The decision comes after Ant was hit with a nearly $1 billion fine in early July, in a signal by the Chinese authorities that it was concluding its crackdown on the firm in the wake of its abrupt abandoning of what was expected to be the world’s biggest IPO in late 2020.

Douyin, TikTok’s Chinese counterpart, has established a new department dedicated to entertainment ventures, according to a Monday report by 36Kr citing multiple sources. The move aims to centralize the management of activities ranging from live-streaming programs and variety shows to dramas and music.

Why it matters: Douyin’s emphasis on cultural and entertainment content not only enriches its product ecosystem but, more importantly, helps the platform to further diversify its revenue streams.

Details: Chen Duye, head of the recently established division and previously in charge of Ocean Engine, ByteDance’s marketing platform for business promotions across its various apps, will directly report to Han Shangyou, who now holds a prominent position within Douyin.

• Live broadcasts, particularly sports events and concerts, will take priority within the newly-established department, according to 36Kr, due to Douyin getting a taste for broadcasting major events over the past year.
• Official data reveals that 10.6 billion cumulative viewers tuned in to watch the 2022 Qatar World Cup on Douyin. The leading short video platform reportedly spent over RMB 1 billion to secure broadcasting rights.
• Amid COVID-19 restrictions impacting offline entertainment, Chinese-operated short video platforms recognized online events as a source of growth. Douyin, along with competitors Kuaishou and WeChat Channel, organized various concerts and live events featuring renowned musical artists, which has proven effective in drawing user engagement.
• Variety shows, traditionally confined to television or long-form video platforms, have often been constrained by funding limitations during their pre-project phases in China. Nonetheless, the report highlights Douyin’s current efforts to create more original reality TV and variety shows, subsequently monetizing on an uptick in popularity. This involves various approaches, including live commerce activities on the platform and the introduction of content-charging within the platform.
• Short-form dramas have also become a growing focal point for Douyin and its rival Kuaishou, as they strategically monetize their extensive user base. According to data revealed by Kuaishou, by the end of 2022, short dramas on the app attracted up to 260 million active viewers a day, with paid users for short dramas increasing by over 480% in the first quarter compared to a year earlier. While both companies did not provide specific figures, Douyin reported a 72% year-on-year revenue growth in the same sector in 2022.

Context: As of last December, the China Internet Network Information Center reported that over 70% of the Chinese population had accessed short videos, highlighting the significant reach of these platforms as mainstream entertainment channels across the country. The report also noted that individuals spent an average of 2.5 plus hours on the platforms every day.

Chinese e-commerce giant Alibaba reported a solid quarterly performance on Thursday, attributed to improvements across all of its operations. Notably, its logistics unit Cainiao and digital media arm both achieved profitability for the first time. Total revenue reached RMB 234.16 billion ($32.3 billion), marking a 14% year-on-year increase and a 12.5% rise from the previous quarter.

Why it matters: Alibaba has successfully returned to double-digit growth after a year of relatively stable performance. This achievement comes despite a number of China’s economic indicators suggesting a gloomier overall picture. 

• Revenue growth in the June quarter was primarily driven by Taobao and Tmall, Alibaba’s most profitable businesses, with a significant surge in both the volume and value of orders. China’s second-largest online shopping event, the month-long 618 festival, was also included in this period.

Details: The results of the quarter to June mark the conclusion of Daniel Zhang’s leadership, as he prepares to fully focus on leading the company’s cloud business starting in September. The cloud and computer division experienced the slowest revenue growth (of 4%) among Alibaba’s six independent businesses, while the firm’s international commerce division saw the most rapid expansion with a robust growth rate of 41%.

• Zhang, who is also the CEO of Alibaba Cloud, stated that the 4% growth rate was partly influenced by a “revenue decline from a top customer,” during an earnings call. Nevertheless, he said he believes that the opportunity for AI-driven growth has “just begun.” Alibaba is among the first batch of Chinese companies to launch its own large model and ChatGPT-like tool.
• Despite the robust demand for AI cloud services, the supply of GPUs in the Chinese market fell short, according to Zhang. He added that the cloud and computing unit “only partially met” the demand for AI-related services received.
• Alibaba’s overall net profit experienced a significant 51% year-on-year increase between April and June, while the cloud division more than doubled its profits during the same period.
• Cainiao, which has initiated the process of going public, posted a profit for the first time, making RMB 877 million. This comes after the unit recorded a RMB 185 million loss in the same period last year. The logistics arm’s expansion efforts, both internationally and domestically, contributed to quarterly revenues of RMB 23.2 billion, up 34% year-on-year.
• Alibaba’s digital media and entertainment division also posted its first-ever quarterly profit, spurred by a post-pandemic resurgence in offline shows and cinema screenings. Coupled with an increase in subscription revenue from the streaming site Youku, these incomes helped to boost the unit’s balance sheet.

Context: These are the first quarterly results from Alibaba since the Hangzhou-based powerhouse split its business into six divisions in March. Daniel Zhang will step down as CEO and chairman of the group on Sept. 10, to be succeeded by Eddie Wu and Joe Tsai, who will assume the positions of CEO and chairman, respectively.

On Tuesday, Apple removed more than one hundred AI-related apps that offered ChatGPT-style services from its China App Store. In a notice sent to affected developers, Apple stated that the removal was “pursuant to orders by the Chinese government” as the related content is deemed “illegal” in China.

Why it matters: The targeted removal of AI-related apps comes two weeks before the implementation of China’s artificial intelligence regulations. The action may send mixed signals to AI developers who aim to offer AI tools for users in China while striving to comply with the country’s regulations.

• Dozens of generative AI apps were removed in a single day from China’s App Store, data from mobile application analysis platform Qimai shows, including apps powered by ChatGPT and domestic-grown iFlyTek’s AI chatbot SparkDesk.

Details: A source close to Chinese regulators said the reason for taking the apps off the store is that they are not standardized enough in terms of data collection and usage, according to local outlet China Star Market. The source added that it is expected to “take a long time” before these apps are allowed back to the store.

• A developer behind OpenCat, a popular AI app that had a rating of 4.8 before its removal early Tuesday, shared a screenshot from Apple entitled App Review on Twitter, which stated that the Chinese government has tightened regulations over deep synthesis technologies and generative AI. OpenCat, powered by ChatGPT, did not secure a license from the Ministry of Industry and Information, which may have contributed to its removal from the App Store.
• SparkDesk, an AI application developed by voice recognition company iFlyTek and built on its proprietary large language model, has been relaunched on the iOS Marketplace 12 hours after it was taken offline. 
• Search giant Baidu’s ERNIE Bot is still available for download on the Chinese App Store, with only those with invitation codes having access to the chatbot service.

Context: As the latest wave of artificial intelligence-related products continues to spread worldwide, governments are racing to keep pace with the rapidly developing technology. China is set to implement new AI restrictions starting August 15, aiming to regulate the development and deployment of AI within the country. 

• The new AI rules in China require companies providing generative AI services to the public to “adhere to core socialist values,” and refrain from publishing content that jeopardizes national interests or spreads false information. 
• The regulations also emphasize that AI-related services will be treated with an “inclusive and prudent attitude,” indicating an attempt to foster innovation while ensuring compliance.

TikTok is set to expand its online retail business to the US in early August, according to the Wall Street Journal, in a bid to replicate rivals Shein and Temu’s success in the world’s second-largest e-commerce market. The short video app was thought to be ready to launch the service earlier this year, but delayed the move in May amid concerns from merchants over geopolitical tensions, as previously reported by the WSJ.

Why it matters: The move indicates that TikTok is aiming to earn more revenue from its largest audience market, despite continued threats by American politicians over what they see as the firm’s links to the Chinese authorities. The short video operator has reportedly set a goal for its global e-commerce operation to increase its total sales more than fourfold this year to $20 billion.

Details: On a page called TikTok Shop Shopping Center, users can browse and purchase products, though the model differs slightly from its initial plan to establish a third-party sellers’ platform.

• TikTok will store and ship products for Chinese manufacturers and merchants, from clothing and electronics to kitchen utensils, while also being responsible for marketing, transactions, logistics, and after-sales services, according to the WSJ report.
• Under the so-called “full-service model,” which is currently used by Chinese cross-border e-commerce platforms such as Temu, the popular short-form video streaming platform would only pay Chinese suppliers once US-based clients have placed orders to avoid “inventory buildup.”
• TikTok’s first expansion of its e-commerce outside of Asia came in the UK in 2021, but selling products through live streaming or short videos – a popular approach in China – has not fully appealed to consumers in that country.

Context: The short video app, owned by Beijing-based ByteDance, is used by over 150 million users in the US. However, as TikTok steps up its presence in the country’s e-commerce market, it is facing increasingly strict regulatory scrutiny. The Biden administration in March demanded TikTok be sold or potentially face a national ban in its largest market.

• Last September, Temu launched in the US and quickly found success. But it has been in an intense public dispute with Shein, the low-profile fast-fashion giant established in China, in recent months. Temu sued Shein this month in a federal court, accusing it of violating antitrust laws. This came after Shein sued Temu last December, alleging that it had hired social media influencers to defame Shein.
• TikTok’s entry may escalate this competition further, as some of the professional buyers, warehouses, and order managers recruited by TikTok have been poached from these two competitors, according to the WSJ.

At least six Chinese tea chain companies are gearing up for IPOs, Bloomberg reported on Monday. Expanding at a rapid pace, China’s biggest bubble-tea chain Mixue is among them, with Zhejiang-based XSQ Tea, which has just a fraction of the former’s 28,000 stores, also looking to go public.

Why it matters: For these freshly made tea beverage companies, choosing to list in Hong Kong or the US may make their path to IPO easier while reducing the likelihood of regulatory scrutiny. Meanwhile, their concentrated entry into the capital market highlights the importance of raising funds for companies that rely heavily on investment to expand in scale, especially as China’s post-pandemic consumption recovery appears to be running out of steam.

Details: XSQ Tea, and new-style tea retailers GoodMe, Auntea Jenny, and ChaBaiDao each have more than 6,000 outlets, and are planning to be listed in Hong Kong, while Sichuan-based Chagee is preparing for a US IPO. Mixue is yet to decide on its listing location, Bloomberg reports.

• Last September, Mixue filed its prospectus to Shenzhen Stock Exchange, but the company seems to have been excluded from listing on China’s A-share market. The report cited Shen Meng from Beijing-based investment bank Chanson & Co., who mentioned that food and beverage chains, especially those that are “burning money” to scale up, were reportedly on the ban list.
• Chagee, the only company reported to be set on a US offering, has the largest international presence among the six firms. The six-year-old company operates over 70 stores in Malaysia, Thailand, and Singapore, accounting for nearly 4% of its total number of outlets.
• Aside from Mixue, the financing amounts for the companies are unlikely to exceed $500 million, according to Bloomberg.

Context: Under the banner of being the first tea drink firm of its kind to go public, Nayuki, a Chinese freshly made tea chain established by a married couple in 2015, made its Hong Kong listing debut two years ago. However, the company has not yet achieved profitability and is experiencing mounting losses, leading to a significant decline of about 70% in its stock price from its IPO level.

• Seeking expansion outside of China and embracing the franchise model are the two most common strategies employed by bubble tea chains to achieve further growth amidst increasingly intense competition. HeyTea, Nayuki’s top competitor, previously refused to open franchises but has now adopted an open approach to recruit partners in non-first-tier cities and multiple overseas cities. Similarly, Nayuki, concerned about its profitability, has recently chosen to put aside its reservations and attract franchisees.
• In China, the size of the new-style tea beverage market more than doubled in the five-year period from 2017 to 2022, with the total number of stores reaching nearly 500,000 across the country, data from China Chain-Store & Franchise Association showed. The market is expected to amount to RMB 145 billion in 2023.

China’s biggest travel agency Ctrip on Monday introduced a vertical AI large model designed for the tourism industry. The AI-driven model, called Xiecheng Wendao, allows users to ask Ctrip travel-related questions. The company’s chair James Liang said the model is in its early stages and still “requires a long process of iteration.”

Why it matters: Many companies are fine-tuning existing general large models with industry-specific data to cater to their specific needs. Ctrip, in this case, said its specialized model is built on an undisclosed general model, filtering 20 billion high-quality unstructured streams of tourism data along with its own structured real-time data and search algorithms.

Details: Ctrip’s AI model will offer recommendations on destinations, hotels, and sightseeing, the firm said at the Monday launch event, and also can offer real-time search results for flights and hotels.

• The country’s biggest travel services provider did not reveal the specific number of parameters used to train Xiecheng Wendao, with Liang emphasizing that parameters are not as critical for a vertical model compared to other data integrations.
• Ctrip said users often take up to 11 days to research and decide on travel plans on average, as pre-journey planning is often the most time-consuming and complex part of the process. Liang further claimed that this is an area where generative AI can significantly improve efficiency.
• Although Chinese tech majors have been quick to release their own AI models and services, the country is yet to have a local AI tool as widely popular as OpenAI’s ChatGPT has been outside of China. Baidu, the local search giant, is still restricting its ERNIE Bot service to internal testing after releasing it four months ago. Ctrip’s AI model is also in a testing phase; users currently have to apply to use it.

Context: Chinese companies are increasingly turning to industry-specific models, in a variation on the race to create artificial intelligence chatbots similar to ChatGPT. It seems a safer path for domestic firms to utilize the rapidly-growing technology, especially in a country that has recently taken a major step to regulate generative AI content.

• James Liang, also an economics professor at Peking University and a researcher of demography, expressed his concerns over China’s long-term innovativeness at the press conference, according to local media outlet Caixin. While he said innovative work and emotional work cannot yet be replaced by AI, low fertility rates are hurting China’s future innovation potential.

China’s e-commerce giant JD on Thursday introduced its own large AI model ChatRhino during the JD Discovery tech summit. Positioned as a vertical AI model that offers industry-specific use cases, JD’s AI offering arrives a few months later than rivals Alibaba and Baidu.

Why it matters: JD is the latest Chinese tech major attempting to upgrade its offerings with AI and large models. The company said ChatRhino combines 70% generalized data and 30% native intelligent supply chain data, targeting a number of sectors including retail, finance, education, and government. 

• “Large models shouldn’t just be limited to toys for chatting, writing poetry, or painting,” Cao Peng, chair of JD’s technology committee and president of JD Cloud, said at the launch event.

Details: CEO Sandy Xu, who took office in May, emphasized at the summit that ChatRhino has shown “clear practical results” within JD. The company has already utilized the AI model to enhance customer service, facilitate code writing, and improve product recommendations, she added.

• JD plans to expand its large AI model (also known as large language model, LLM) capacities for commercial applications to corporate clients in early 2024.
• JD’s healthcare unit also unveiled a specialized model called Jingyi Qianxun based on ChatRhino on the same day, the name of which means asking doctors thousands of times in Chinese. The model, designed for the medical industry, is capable of “quickly adapting and learning from various healthcare scenarios,” which will serve as a technological foundation for remote medical services, according to the company’s description.
• The e-commerce giant also showcased its ambition to develop humanoid robots, which will be a key exploration direction for the JD Explore Academy. In a pre-recorded video presented at the launch event, a robotic arm seamlessly poured a glass of water for He Xiaodong, director of the Academy, in response to his prompt.
• He Xiaodong also stated that while JD has been making technological preparations in AI for several years, the introduction of their own large model was delayed as the company prefers to focus more on industry-focused, specialized models rather than a general-purpose model. 

Context: Beijing currently is home to approximately half of the more than 80 large models available in China, according to Jiang Guangzhi, the director of the Beijing Municipal Bureau of Economy and Information Technology, who delivered a speech at the Global Digital Economy Conference held in Beijing earlier this month.

• With the rising trend of large model development kicked off by OpenAI last November, Chinese authorities are actively encouraging innovation in generative artificial intelligence while also formulating detailed regulations to ensure that ChatGPT-style services operate under oversight.

Renowned computer scientist and venture capitalist Kai-Fu Lee on Monday unveiled his new artificial intelligence startup, 01.AI (Lingyi Wanwu in Chinese), providing long-awaited details about his plans to “build an AI 2.0 platform and applications”. In an official announcement shared on theWeChat account of Lee’s VC firm Sinovation Ventures, the Beijing-based company said it had chosen “the most difficult path” of developing its own large language model (LLM).

Why it matters: In the lengthy official post, Lee wrote that he believes AI-powered LLMs present a “historical opportunity” that China cannot miss. Lee hopes the startup will develop a domestically-grown model capable of producing products similar to OpenAI’s ChatGPT. 

Sinovation Ventures quoted Lee as saying China will see a variety of high-quality and creative applications once the country has truly native, high-quality LLMs, much like the era of mobile internet. 

Details: 01.AI details its model training strategy in seven major modules, including pre-training, post-training, AI infrastructure, and multi-model technology. The firm hopes to equip each module with top-notch technical experts to build an LLM with greater capabilities.

• Within three months, the company has already achieved model testing of tens of billions of parameters, and is currently in the process of expanding to 30 to 70 billion parameters. Launched in March, rival Baidu’s ERNIE Bot has recorded 260 billion parameters.
• “Many of the current batch of open-source models in China claim to have similar capabilities to ChatGPT, yet are limited to simple conversations. They tend to struggle with complex tasks,” the startup stated in the WeChat post. Lee emphasized the need to develop homegrown LLMs by extensively incorporating Chinese language data in order to keep competitive in this field.
• 01.AI was formally founded on May 16, according to corporate database Qichacha, with Ma Jie, former head of Baidu’s metaverse unit, holding a 99% stake, and Sinovation the remaining 1%.

Context: The vast success of OpenAI’s ChatGPT has prompted Chinese tech majors, startups, and research institutions to join the race to create something similar. Data from a state-backed scientific institution shows that China had at least 79 LLMs with parameters exceeding 1 billion as of late May.

• In February, a month before Kai-Fu Lee announced his plan to found an AI startup, Wang Huiwen, co-founder of Meituan, surprisingly entered the market and stated his intention to build China’s version of OpenAI. However, at the end of June, Meituan announced the acquisition of Wang’s fledgling AI company, Light Year, for $234 million in cash and RMB 367 million in debt assumption, shortly after Wang left Meituan’s board of directors citing “personal health reasons.”

Alibaba’s logistics arm, Cainiao, on Wednesday launched a new express delivery service that will put it in a position to compete directly with delivery companies such as JD Logistics and SF Express. The major move comes a week after Alibaba appointed Joe Tsai as the group’s chairman. Cainiao CEO, Wan Lin, unveiled the new service during Cainiao’s annual Global Smart Logistics Summit, promising that it will offer half-day, same-day, and next-day doorstep deliveries, along with other “high-quality” services.

Why it matters: Wan stated that the company was once “deeply conflicted” about whether to establish its own domestic logistics operations. However, as Cainiao has begun preparations for a listing in Hong Kong, it has become crucial for the firm to become sustainable and competitive in China’s crowded delivery industry.

• Cainiao is expected to pursue an independent IPO within the next 12 to 18 months, according to Alibaba’s latest financial results.

Details: The new service, named Cainiao Express, is an expansion of the express delivery previously provided exclusively to select Alibaba-owned businesses such as Tmall Supermarket, Freshippo, and Tmall Global; e-commerce merchants on Taobao regularly rely on third-party courier services.

• During the summit, Cainiao Express announced partnerships with Chinese dairy company Adopt A Cow, beer manufacturer Tsingtao Brewery, and Intime Retail.
• Joe Tsai, the chairman of Cainiao, and soon-to-be chairman of Alibaba in September, said in a pre-recorded video that Alibaba hopes to continue driving economic growth through online consumption, as it remains the most important force for economic development. Tsai also emphasized the crucial role of “efficient logistics operations.”
• Cainiao is also actively gearing up overseas expansion plans in collaboration with Alibaba’s global online platform AliExpress, saying they will launch a global delivery service this year that promises cross-border parcel deliveries within five working days.

Context: Building an independent express network and creating cost-effective express services requires heavy upfront costs, as well as higher operational costs. 

• JD’s logistics arm JD Logistics has not yet achieved profitability despite being known for prompt and trustworthy fulfillment. In 2022, it recorded a yearly loss of RMB 1.09 billion.

Chinese online retailer JD on Monday announced changes to its senior executive line-up, involving its logistic arm and healthcare unit, days after releasing ambitious growth targets at its 20th-anniversary celebration last week.

Hu Wei, former chief executive of JD Property, will succeed Yu Rui, who resigned for personal health reasons as CEO of JD Logistics, on June 26. Additionally, the chief financial officer of JD Health, the drug store operator, will assume the position of CEO for JD Property.

Why it matters: The top-level changes come at a time when JD experienced its lowest-ever pace of revenue growth. Just a month prior, the Beijing-based company made a surprise management reshuffle, with chief financial officer Sandy Xu replacing Xu Lei, who had served as CEO for only a year. 

• Executives now face challenges on multiple fronts in their pursuit of JD’s ambitious growth goal, which it has called “35711 Vision” and was announced on June 18.
• As part of the plan, JD plans to establish three enterprises with more than RMB 1 trillion ($140 billion) in revenue and RMB 70 billion in net profit over the next two decades.

Details: In 2022, JD achieved a milestone by surpassing the trillion-dollar revenue mark, with revenues totaling RMB 104.62 billion. The company also recorded a net income of RMB 10.4 billion thanks to strict cost-cutting measures, compared to a loss of RMB 1.04 billion a year prior.

• JD currently has two Hong Kong-listed affiliates, JD Health, which went public at the end of 2020, as well as JD Logistics, which was listed a year later. The drug store operator’s total revenue amounted to RMB 46.7 billion in 2022 while achieving a net profit of RMB 380 million. However, the logistics unit has not yet recorded a profit despite having nearly three times the revenue of JD Health.
• JD also has majority control of Dada group, the Nasdaq-listed delivery and retail company, which is also yet to turn a profit.
• JD’s property and industrial units are gearing up for Hong Kong listings, according to the e-commerce firm’s March filing. A previous Reuters report cited sources as saying the two firms are valued at $1 billion each. Under the company’s “35711 Vision,” JD intends to bring seven publicly listed companies with at least RMB 100 billion in market cap over the next 20 years.
• Meanwhile, Yan Xiaobing, former head of JD’s international business, is reportedly back at the company after leaving a year ago. Yan will lead a newly-created team that merges grocery chain 7Fresh and group-buy businesses into a unit called “innovative retail.”

Context: Alibaba, a major rival to JD, has conducted several rounds of structural and management changes this year. Earlier this month, Alibaba appointed Joseph Tsai as chairman and Eddie Wu as CEO, succeeding Daniel Zhang. Alibaba also announced in late March that it will split its operations into six standalone units, each managed by a different chief executive and able to pursue separate IPOs or external funding.

• Both JD and Alibaba, as China’s leading e-commerce firms, have seen increased top-level reshuffles and ongoing restructuring efforts in recent months as they aim to stay competitive amid a larger economic slowdown and increased competition.

Major Chinese e-commerce platforms have kept quiet on the gross merchandise volume (GMV) figures for the month-long 618 shopping festival, a key indicator of success in years past. JD said the event “exceeded expectations and set a new record,” while Alibaba’s e-commerce group said it saw users’ willingness to spend more time browsing on Taobao as their “greatest achievement” from this year’s festival. 

Why it matters: Third-party data provider Syntun said total sales during 618 from Tmall, JD, and Pinduoduo increased 5.4% from a year prior to RMB 614.3 billion ($85.6 billion), signaling that China’s consumption growth is on a slower pace than expected, as consumers spend their money more cautiously.

Details: The mid-year shopping festival is still a major event to observe changing consumer trends and tastes. According to various surveys, this year’s event shows that livestream shopping has become increasingly influential in consumers’ shopping decisions. 

• Data produced by Syntun shows that the cumulative sales generated from live commerce platforms including Douyin and Kuaishou reached RMB 184.4 billion during the 618 period, representing a 27.6% year-on-year increase. 
• According to a survey conducted by local media outlet Yicai involving approximately 400 respondents, nearly two-thirds stated that they primarily shopped on livestreams. 
• Alibaba’s Taobao saw its daily average number of views of short videos on the platform surge by 113% compared to the same period last year, while the number of active influencers grew by 200%.
• Low cost was another major theme emphasized by e-commerce platforms during this 618, as businesses offer discounts to boost sales. 
• A survey conducted by the media outlet Southern Metropolis Daily also revealed that consumers have varied ideas of what constitutes low cost. Close to 60% of respondents believe that it refers to products with ultimate cost-effectiveness, where the brand, quality, or after-sale services are superior despite the product having a comparable price. One-third of respondents consider it the lowest price for the same item across all platforms, while 11.5% perceive it as products priced at an absolute minimum, such as goods costing RMB 9.9.

Context: JD recorded an overall transaction volume of RMB 379.3 billion during last year’s 618 festival. However, its annual growth of 10.3% was a new low, slowing from the previous year’s 27.7% increase.

• Chinese retail sales grew by 12.7% year-on-year in May, according to data released by the National Bureau of Statistics, lower than the expected 13.6% and also lower than April’s 18.4%. Fu Linghui, a spokesperson for the bureau, stated that retail sales showed a “stable growth momentum,” and any growth rate decline was mainly due to starting at a higher base than the previous year.

China’s 618 shopping festival, the country’s mid-year online deals event, is coming to a close after a month-long campaign. This year’s 618 is the first major shopping event since China reopened in December, offering some insight into China’s current consumer sentiment. 

It’s also an interesting test for Chinese e-commerce giants Alibaba, JD, and Pinduoduo, all of whom have recently undergone management adjustments. Each company continues to face significant growth pressure in the face of fierce competition.

Alibaba, JD competing on lower prices with Pinduoduo

This year’s 618 festival encapsulates the escalating price war in China’s e-commerce industry. With the slowdown in economic growth, consumers are actively seeking cost-effective products. In response, multiple Chinese e-commerce platforms have followed Pinduoduo’s marketing strategy by offering higher discounts to attract buyers.

During the month-long mega promotion, Alibaba customers have received a discount of RMB 50 (about $7) for every RMB 300 spent across Tmall stores. In addition, Taobao has introduced an “RMB 10 billion subsidy” project, adopting a similar approach and bearing the same name as Pinduoduo’s signature campaign. Through this channel, products were directly sold at lower prices without the usually complicated coupon application.

JD, with former CFO Sandy Xu recently taking over as CEO, offered the most generous discounts compared to other platforms. Buyers have been able to get RMB 50 back for every RMB 299 spent. Prior to the festival, Trudy Dai, CEO of Alibaba’s newly independent Taobao Tmall Commerce Group, expressed the platforms’ commitment to making a “historical investment” in this year’s event, while JD announced its intention to undertake “industry-wide investment efforts” during the festival.

Pinduoduo, known for selling ultra-low prices goods, prominently displayed a slogan on its 618 promotion interface that roughly translates to “no need to compare with other platforms because we offer the lowest prices.” Pinduoduo has also been offering RMB 30 off for every RMB 200 spent.

“Encouraging consumption became the priority for the government, the market, and the e-commerce platforms in all aspects,” said Fabian Sinn, a managing partner at e-commerce marketing firm Genuine. “As a result, there were more subsidies and more affordable prices to attract consumers and stimulate the market’s economic recovery.”

Retail sales, as a key figure indicates consumer confidence, rose 12.7% in May, falling short of market expectations and down from 18.4% in April. The recovery in China’s consumption sector is not as strong as it appears.

The rise of Pinduoduo, which has steadily gained market share in an e-commerce industry once dominated by Taobao and JD, has combined with the emergence of live commerce platforms like Douyin and Kuaishou in recent years to have a significant impact on price-sensitive consumers. These consumers now consider the price differentials and after-sales services offered by various shopping outlets when making their purchasing decisions.

Copying from each other’s playbooks

In a heated competition, Chinese e-commerce platforms are copying strategies from each other. Rising content commerce platforms like Douyin and Kuaishou are copying from the majors, trying to offer more serious online shopping experiences like Taobao and JD on their apps, adding new dedicated shopping sections rather than directing people to shop while they are watching content like they used to. While majors like Alibaba and JD are trying to offer more video entertainment and content, making the shopping experience more casual in their apps. 

Douyin and Kuaishou, known for stimulating consumption via livestreaming and short videos, have focused on leveraging various promotional activities to drive sales through dedicated shopping channels called “marketplace,” where product listings can be displayed in columns. 

Wei Wenwen, president of Douyin’s e-commerce unit, recently highlighted at the TikTok sibling’s ecosystem conference that the GMV generated from the “marketplace” accounted for over 30% of its total sales in 2022.

Douyin and Kuaishou “have been steadily capturing more market share, despite offering similar products to other major platforms,” Jacob Cooke, CEO of WPIC, an e-commerce tech and marketing firm that helps foreign brands sell in China, told TechNode.

“People use these short-video apps for entertainment and knowledge acquisition,” added Cooke, “and the platforms have cleverly integrated e-commerce so that users are exposed to brands and products that relate to their interests, which has been a catalyst for impulse buying and consumer engagement.”

Mainstream shopping sites are adopting a content-driven approach as a defensive strategy to promote sales. The content-based browsing was repeatedly emphasized by Trudy Dai at the 618 Merchant Conference held on May 10. Dai promised that Taobao would provide a wide range of products, short videos, and livestreaming services to enhance user engagement.

Alibaba is investing heavily in its content ecosystem. The e-commerce giant announced at the Merchant Conference that over 50,000 new livestreaming hosts would make their debut during the annual mid-year discounts on Taobao and Tmall. 

Notably, on May 31, US tech giant Apple made its first foray into livestreaming on Tmall, an event that drew 1.28 million viewers. Football celebrity Messi also joined Taobao Live for nearly 20 minutes on June 14, as part of his Chinese trip schedule, which drew over 2.5 million viewers and even caused the stuttering of the livestream event when Messi came onto the scene.

JD Live is also leveraging top influencers to attract user transactions. Smartisan Technology founder Luo Yonghao, who previously had an exclusive partnership with Douyin, joined JD’s livestream on May 31 and helped sell goods for more than RMB 150 million.

Douyin is reportedly abandoning its goal of achieving RMB 100 billion ($14 billion) in total sales this year, as the business’ progress in the first half of 2023 has only reached one-tenth of the yearly target, falling extremely short of internal expectations.

Local media outlet LatePost first reported the news on June 10, citing a source close to the matter. While GMV is no longer the most important metric for the unit, the report said that exploring various ways to successfully run the food delivery business is now a more urgent priority for TikTok’s Chinese sibling.

Why it matters: Due to a lack of its own delivery logistic team, Douyin has relied on selling higher-priced set meal kits (which cut down the frequency of deliveries) and third-party delivery companies to offer its food delivery service. The approach is currently presenting challenges in scaling up the business.

Details: Starting in mid-2022, the short video platform has been testing food deliveries in Beijing, Shanghai, and Chengdu. Users in these three cities are able to order food for delivery within Douyin. But unlike market leaders Meituan and Alibaba’s Ele.me, restaurants selling goods on the Douyin platform need to use delivery riders from another service or deliver the food themselves, making the delivery cost run higher.

• Typically priced over RMB 100, meal kit takeaways are designed for several people to share and have longer delivery times compared to other platforms that prioritize individual sales and more timely delivery.
• In contrast to Meituan, which recorded a peak of 60 million in daily order volume for food deliveries last August, Douyin’s takeaway orders have experienced limited growth, with its average daily order volume from January to March reportedly remaining at around 10,000 to 20,000 units.

Context: Meituan and Ele.me now dominate the food delivery market in China, holding a more than 90% share of the market between them, highlighting the challenge for Douyin. Meituan has already begun a counteroffensive to maintain its leading position in the face of this new challenger.

• In March, Meituan introduced a marketing event called Shen Qiang Shou for merchants, which is currently being trialed in Shenzhen and Beijing. The promotional event allows users to purchase discounted coupons through Meituan’s own livestreaming or short-form videos, which can be redeemed for real goods within a specified timeframe.
• For consumers, Meituan conducts regular live commerce promotional events on the 18th of every month, with influential merchants selling discounted goods with the aim of stimulating demand. According to a Meituan statement, takeout vouchers worth RMB 86 million were sold on its first livestream shopping event, which lasted 11 hours on April 18.

TikTok has announced that it has 8.5 million monthly active users in Australia, in the short video platform’s first disclosure of its user numbers in the country. The platform, owned by Beijing-based tech firm ByteDance, also said TikTok is being utilized by 350,000 businesses as a marketing tool to reach and engage new clients in Australia.

Why it matters: The figure suggests that more than 30% of the Australian population is using TikTok. Australia banned TikTok on government-issued devices in April.

Details: Australia joined more than 10 countries (including the US, the UK, Canada, New Zealand, France, Denmark, and India) in banning the use of the ByteDance-owned short video platform on government devices in April.

• Australia’s Attorney-General’s Department said in April that TikTok poses “significant security and privacy risks to non-corporate Commonwealth entities” due to its extensive collection of user data.
• Lee Hunter, TikTok’s Australia and New Zealand general manager, said the company was “extremely disappointed” by the government-level ban, attributing the decision to “politics” instead of facts.
• TikTok set up an Australian branch office in mid-2020 when the video-sharing platform experienced massive user growth in overseas markets. 
• TikTok announced it had 150 million monthly active users in the US three days before a congressional hearing in the country attended by TikTok CEO Shou Zi Chew on March 23, in an attempt to emphasize the platform’s wide reach across the US and counter a potential nationwide ban. 

Context: TikTok has long been questioned by Western countries on whether it shares users’ data with the Chinese government.

• Over half of US states have announced bans on using TikTok on official devices. Montana authorities have announced their intention to begin blocking all residents from accessing the platform from January 2024. TikTok filed a lawsuit against the Montana government shortly after the bill passed in May.
• TikTok is also under scrutiny in Vietnam. The country’s Ministry of Information and Communications stated on Monday that it is holding probes into allegations of illegal and irregular activities by TikTok, and is expected to make a public announcement in July upon completion of the official investigation.
• The Vietnamese government frequently requests social media platforms such as YouTube, Facebook, and TikTok remove content it considers illegal, and regularly reports on the number of links or videos removed by each platform. In April, the information ministry said that TikTok may face a ban in the country if it fails to comply with instructions to remove content it deems to be in violation of its rules, according to local media outlet VnExpress.

Chinese short-video platform Kuaishou reported impressive growth in home appliance sales on the platform as China’s mid-year 618 shopping festival gets underway. Kuaishou saw single-day GMV of home appliances on June 1 top RMB 100 million ($14 million), a 42-fold increase compared to last year, data from the company showed.

Why it matters: Kuaishou is seeing results from the continued expansion e-commerce on the platform. In 2022, the Chinese short video platform generated over RMB 900 billion from its livestream commerce business. 

• Chinese content platforms, whether short video apps such as Douyin and Kuaishou or social content apps like Xiaohongshu, are increasingly looking at e-commerce as a way to commercialize their popularity. 

Details: In the first three days of June, the GMV growth rate of household appliances that have high unit prices on Kuaishou increased by nearly 500% from a year earlier, making it the category with the largest increase, according to data released by the firm.

• On June 1, 15 merchants selling home appliances saw their total sales exceed RMB 1 million. Chinese brands TCL, Haier, and Aucma were the top three brands in terms of sales volume.
• Taking the Haier 470L refrigerator as an example, users can purchase it for RMB 3,599 in Haier’s official store on Kuaishou. This price is consistent with the flagship Taobao store of the brand. But users can earn cashback of RMB 300 after they complete their order on Kuaishou. However, the same refrigerator is priced at RMB 3,099 on value-oriented platform Pinduoduo.
• In 2022, the repurchase rate of Kuaishou’s e-commerce business was basically stable at 70%, according to data compiled by Southwest Securities. Meanwhile, Kuaishou recorded over 100 million monthly active paying e-commerce users in the third quarter of 2022; it did not update these figures in its latest earnings report. 
• The Douyin rival launched the “Stream Initiative” program this January, which aims to help merchants identify their target customer base through KOL (influencer) distribution and accurately recommend merchants’ self-operated livestreams to potential clients.
• Since the first quarter of 2023, Kuaishou has started to charge commission revenue from influencer distribution.

Context: Categories with higher unit prices, such as home appliances and consumer electronics, are currently showing more growth on Chinese mainstream live-commerce platforms, although the timeframe of the statistics differs from platform to platform.

• TikTok sister app Douyin saw GMV generated from the home appliance industry increase 808% compared to the same period last year during this year’s 618 pre-sale period, which started from May 25 and lasted five days. Douyin saw seven home appliance brands surpass RMB 50 million in sales on the platform.

DingTalk, Alibaba’s workplace communications platform, is now inviting enterprise customers to test its new AI functions in the app. The AI functions are capable of generating text, images, and meeting summaries, as well as organizing meeting notes and creating chatbots based on provided materials. 

Why it matters: Chinese tech majors have been keen to showcase their AI capabilities since ChatGPT’s launch made it a global phenomenon. DingTalk is one of the first major workplace communication apps to integrate AI functions into its offering. ByteDance’s Feishu (known as Lark in the overseas market) also announced in April that it will integrate a new similar AI assistant called “My AI” into the app, but has yet to begin open testing. 

Details: Users can access AI capabilities by typing the forward slash “/” in DingTalk. The company first showed off DingTalk’s AI-powered capabilities in a demonstration in April.

• The AI assistant is capable of summarizing previous conversations in a group chat within 10 seconds, the company said on its official WeChat account. Tech outlet 36Kr tested the tool and reported that the AI assistant can accurately summarize text-based conversations, but has limited abilities in understanding multi-modal content.
• Additionally, the AI assistant is able to recognize patterns and text to generate small applications like forms and surveys based on simple prompts.
• In document writing scenarios, the AI assistant can perform tasks such as continuation writing, summary generation, proofreading, content enrichment, and tone adjustment. It can also assist in creative writing in various scenarios. But according to multiple outlets that have used the function, the generated content still requires manual refinement and linguistic optimization.

Context: Alibaba also announced on Thursday that it is integrating its ChatGPT-like service into a meeting assistant called Tingwu that focuses on converting speech and videos to text in real-time.

• Despite facing stiff competition in the collaborative office software market, DingTalk has managed to remain competitive. According to QuestMobile, DingTalk recorded 199 million monthly active users in April, ahead of Tencent’s Enterprise WeChat with 102 million MAUs and ByteDance-owned Feishu with 12 million MAUs. 
• During Alibaba’s large AI model Tongyi Qianwen’s launch event, Daniel Zhang, Alibaba’s chairman and CEO and the head of its cloud business, said that all businesses across the company should upgrade their offerings with the AI model.

ByteDance co-founder Zhang Yiming has set up an investment fund called Cool River Venture in Hong Kong, targeting tech-related investments.

Why it matters: Since stepping down as CEO of ByteDance in 2021, Zhang has kept a low profile, rarely making public appearances. Incorporated on May 22, the fund signals a move by Zhang to diversify his wealth.

• As Zhang launches systematic personal investment, ByteDance’s widely popular global app TikTok is facing massive challenges over privacy issues and security concerns.
• On May 17, Montana became the first state in the US to ban downloads of TikTok, with legislation taking effect on January 1, 2024. TikTok has filed a lawsuit against the state, arguing that the ban violates constitutional and other laws.

Details: Zhang Yiming remains the second richest person in China with a net worth of $45 billion according to Forbes’ 2023 list of the 10 richest Chinese billionaires. Zhang was surpassed only by Zhong Shanshan, the founder of drinks brand Nongfu Spring, whose wealth is valued at $68 billion.

• Galaxy LLC, registered in the Cayman Islands, is the sole shareholder of Cool River Venture, the Hong Kong companies registry shows.
• In May 2021, 38-year-old Zhang announced he would step down from the role of CEO at TikTok’s parent company, ByteDance. “The impact of technology on society is growing,” he said in a company-wide letter, expressing his interest in the emerging fields of virtual reality, life sciences, and scientific computing.
• A person close to Zhang, cited by 36Kr, stated that since ChatGPT took the world by storm last November, Zhang has been “staying up late” reading papers on AI.
• Zhang established a RMB 500 million education fund in his hometown Longyan in southeast China’s Fujian province after his resignation. His aim is to support vocational and arts education. He added another RMB 200 million to the fund this month.

Context: Setting up a personal investment fund or family office, or taking roles in other venture capital firms has been a popular trend among successful Chinese tech founders to manage their wealth.

• Alongside Meituan’s co-founder Wang Xing and Li Auto’s CEO Li Xiang, Zhang Yiming is a limited partner of Beijing-based venture capital firm Source Code Capital. Wang Xing led a $530 million funding round for Li Auto as an angel investor in 2019.
• Joe Tsai, Alibaba’s co-founder, has been managing his wealth and investments through his Hong Kong-based family office, Blue Pool Capital. Tsai’s family office investments range from sports and healthcare to crypto and blockchain.

Kuaishou, China’s second-largest short video firm, has achieved a quarterly profit for the first time since its listing in early 2021, thanks to strong growth of its short video drama series, recovery ad revenue in China, growth in e-commerce revenues, and narrowed losses overseas. The company reported an adjusted net income of RMB 42 million ($6 million) in the January to March period, compared to a loss of RMB 3.722 billion a year earlier.

Why it matters: It is still uncertain whether Kuaishou can sustain its profitability going forward. The company’s first quarter profit was driven mostly by growth and recovery in the Chinese market, which generates 98% of the company’s revenue. Kuaishou has managed to narrow losses by 55% in its overseas revenue. 

Domestic business: Short soap opera-style video series are a key offering that sets Kuaishou apart from other short video platforms, both in its domestic and overseas operations. These short video series, catering to mobile video audiences, have attracted more advertisers for the company and become a growth driver. In the first quarter of 2023, revenue from advertising sponsorship of Kuaishou’s short video dramas increased by more than 300% year-over-year.

• Kuaishou launched a total of 55 short video dramas during the 2023 winter break period. Among them, a show called Donglan Snow accumulated 100 million viewers within a record-breaking 40 hours of its launch, according to the company’s earnings report.
• Beijing-based Kuaishou has been profitable for four consecutive quarters in its domestic business, with operating profit standing at RMB 963 million during the latest quarter. 
• Kuaishou’s advertising business generated revenue of RMB 13.1 billion, marking a 15.1% yearly increase. Online marketing services and livestream business accounted for nearly 90% of Kuaishou revenue in the quarter that ended in March, while the e-commerce sector is gradually providing a boost to the short video platform. 
• Kuaishou’s livestream business revenue grew 18.8% reaching RMB 9.32 billion, and the number of monthly paying livestream users increased by 6.4% to 60.1 million in the first quarter of 2023.
• With an increasing number of monthly active paying e-commerce users and a rising average order price, Kuaishou’s e-commerce business achieved total sales of RMB 2.25 trillion in the first quarter. This contributed to a yearly growth of over 50% in other services, including e-commerce, totaling RMB 2.834 billion.
• Cheng Yixiao, the founder and CEO of Kuaishou, also told an earnings call that the company’s large language model is in the “training phase” and is leveraging the firm’s “previous technical expertise in AIGC algorithms and LLMs.” Kuaishou has already established an LLM model research and development team to explore the application of AI technology in its products.

Overseas business: Kuaishou’s overseas operations are currently focused on Latin America, with the short-form video app Kwai running in countries such as Brazil, while it also operates the SnackVideo app in Indonesia. This quarter, Kuaishou’s revenue outside of China grew more than six times year-over-year to RMB 338 million. The firm’s overseas business has maintained an extremely high growth rate for nearly a year, recording a 1,328.5% increase in revenue growth in the second quarter of last year alone.

• However, its overseas business remains in the red, even as its operating loss narrowed by 55.42% year-on-year to RMB 823 million in the first quarter.
• The TikTok rival did not release the latest data on daily active users and user time spent in markets including Brazil and Indonesia, but said “both have improved.” As of last June, overseas daily active users spent an average of more than 60 minutes a day.
• Kuaishou has also launched a content model in Latin America called TeleKwai, which aims to provide distribution opportunities for short video pieces created by local producers and content creators, usually under two minutes in length.

Alibaba has approved a full spin-off of its cloud arm, with the unit set to become an independent publicly listed company. The Chinese tech giant has also approved moves by its logistic unit Cainiao and grocery brand Freshippo (Hema) to explore IPOs in the near future, according to an official announcement as part of its March quarter earnings release on Thursday.

The separation of Alibaba Cloud will be done through a stock dividend distribution to shareholders, the company said, adding that it foresees the process being completed within a year. Alibaba is targeting a public listing for Cainiao in 12 to 18 months, while Freshippo is due to be listed in the next six to 12 months. 

Why it matters: The plan to spin off the cloud computing unit into a separate entity and allow the listing of Cainiao and Freshippo follows Alibaba’s announcement in late March that it was splitting the company into six standalone units while maintaining central control. The e-commerce giant said the major reorganization was aimed at making its operations more nimble and effective as it faces heated competition and sluggish revenue growth.

Details: With the spin-off of its core units, Alibaba is transforming from operating multiple group businesses into “a holding company that focuses on capital management,” the company’s CEO Daniel Zhang stated on the Thursday earnings call. Alibaba also announced that it has established a capital management committee at the board level to “undertake a comprehensive capital management” of the overall firm.

• As one of Alibaba’s most important growth engines, Alibaba Cloud is expected to go public within 12 months. In the quarter ending on March 31, the cloud computing unit recorded its first-ever decline in revenue, with a year-on-year decrease of 2% to RMB 18.6 billion, accounting for 9% of the group’s total revenue. The unit is still the group’s second-largest after its core China commerce unit.
• Cainiao, Alibaba’s logistics arm, has not yet achieved profitability. It posted an adjusted EBITA loss of RMB 319 million in the first quarter, though this represented a narrowing of 65% compared to the same period last year.
• Freshippo, which operates a network of supermarkets across the country, has established “well-defined business models, and a clear path to profitability,” Alibaba said in its latest earnings report. 
• Alibaba’s board has also approved the Alibaba International Digital Commerce Group, which consists of Lazada, AliExpress, Trendyol, and others, to explore external financing.
• Each of Alibaba’s six major business groups is now independently managed by its own CEO and board of directors. Daniel Zhang does not appear on the board of directors’ list of the six groups other than at the cloud unit. Wang Jian, the founder of Alibaba Cloud, has returned as the chairman of that group. In addition, Alibaba founding member Joe Tsai has been approved as the chairman of the board of directors for Cainiao Group.

Context: Alibaba posted a modest 2% increase in overall revenue to hit RMB 208.2 billion ($30.12 billion) for the January to March period, which fell short of market expectations. The growth rate is the lowest that Alibaba has experienced since it went public in 2014.

• The China commerce division, the biggest contributor to Alibaba’s total revenue, saw its revenue decline 3% year-on-year to RMB 136.1 billion during the first quarter. The earnings report also noted a “mid-single-digit” yearly fall in the GMV of online physical goods on Taobao and Tmall.

Xiaoice, an AI chatbot brand formerly operated by Microsoft, announced on Tuesday that it is looking for 300 individuals to agree to be digitally cloned as part of a new AI trial.

The process of creating AI clones, which embed the tester’s own personality, voice, and appearance, needs as little as three minutes of data collection, the company claims. Xiaoice has opened registration on WeChat and said it is looking for influencers, experts, and ordinary people. 

Why it matters: Li Di, CEO of Xiaoice and a former Microsoft executive, thinks AI-powered personal avatars can become a major consumer-facing business model for companies. 

Details: The program is open for Chinese and Japanese participants, with the first batch of clones set to be operational within a month. The company plans to expand the scale of GPT clones to 100,000 people by the end of the year if the initial 300 AI clones are controllable, according to Caixin.

• Testers who sign up for the clone program are required to provide links to their social media accounts, such as Douyin, Kuaishou, Bilibili, Xiaohongshu, and Weibo.
• The company’s GPT model was developed and completed half a year ago, according to Xiaoice’s announcement, ranking first in terms of downloads among open-source large-scale GPT models in Japan.
• Using AI technology to create digital clones of real people carries ethical and legal implications. As yet undefined is which party will be held accountable should a clone say or engage in inappropriate or illegal activities. 

Context: AI technology has continued to generate new uses and applications in various sectors. Recently, Snapchat influencer Caryn Marjorie employed the GPT-4 API to develop her own AI clone. For $1 per minute, her fans can interact with the chatbot, Caryn AI, earning the influencer a reported $71,610 in revenue from a week of beta testing.

• In China, users have trained AI on popular Mandarin singer Stefanie Sun’s voice and created AI cover versions of various hit songs, with many going viral on video site Bilibili. Though Sun has not publicly responded to the use of her AI-generated voice in these songs, users have expressed concern about the legality of the practice.
• Microsoft span off its chatbot platform Xiaoice in 2020, having established it in 2014. The self-sustaining startup has since completed three rounds of financing, with the latest round in November securing RMB 1 billion from investors including Sequoia Capital.

Alibaba Cloud has reportedly hired back its founder Wang Jian, a decade on from his departure. The cloud computing unit is seen as Alibaba’s new growth engine but has recently experienced stagnant growth and faces increased competition from the cloud computing units of China’s state-run telecommunications companies.   

Alibaba Cloud didn’t immediately respond to TechNode’s requests for comment.

Why it matters: Wang Jian’s return comes at a time when Alibaba’s cloud unit saw revenue growth slow significantly in recent years, going from 92.5% in 2018 to only 7.3% in 2022. Although Alibaba Cloud remains the largest cloud service provider in China and Asia, it is losing market share to rivals, such as the cloud units of Huawei and China Telecom, a state-owned telecommunication provider.

Details: Wang, an academician at the Chinese Academy of Engineering and an expert in human-computer interaction, founded Alibaba Cloud in 2009 under Jack Ma. He stepped down as the president of the tech giant’s cloud arm four years later after the unit established its own proprietary cloud computing products. He is set to “take an important role” at the company once more, SCMP reported, though the details have not been officially confirmed by Alibaba.

• Alibaba unveiled its ChatGPT alternative Tongyi Qianwen last month under the purview of its Cloud unit, with the workplace communication app DingTalk and smart speaker Tmall Genie the first consumer-facing products to use the new AI chatbot. Alibaba plans to integrate the AI service into all of its products.
• In April, Alibaba Cloud announced its biggest-ever price cuts, reducing the cost of core cloud products and services prices by up to 50%, in a bid to attract more customers amid rising competition. 
• The Cloud unit is playing an increasingly prominent role in the development of Alibaba’s various businesses, providing AI capabilities through cloud computing services for their customers and internal business teams.
• In March, Wang publicly referred to the relationship between artificial intelligence and computing as like television and electricity, saying that “for technologies like ChatGPT, computing is the key.”

Context: As the first Chinese company to develop its own cloud computing tech, Alibaba has opened up a new segment for Chinese tech giants to compete in, but it’s also facing various problems in recent years. The unit suffered its “longest large-scale outage” in a decade on Dec. 18 2022. The more than 12-hour-long service breakdown affected multiple government and media websites in Hong Kong and Macao. Alibaba CEO Daniel Zhang took over the Cloud division after the incident. 

• Alibaba underwent a major restructuring in March, with the firm divided into six separate business units, including the Cloud unit. The move seemingly gives each unit the chance to pursue its own IPOs. 
• A decade ago, even some of the biggest companies in China tech were skeptical of Chinese tech companies developing their own cloud computing products and services. At a 2010 tech conference attended by the founders of both Baidu and Tencent, Jack Ma claimed that Alibaba would cease to exist if the company did not develop cloud computing itself. Baidu founder Robin Li took a completely different view, referring to cloud computing as “old wine in a new bottle”; Tencent founder Pony Ma echoed Li’s indifference about the technology. 

Investing in the crypto market carries inherent risks, even as the traditional banking system increasingly recognizes the significance of blockchain technology. Establishing a sandbox environment for this emerging industry to thrive and creating the necessary conditions for mass adoption of Web3 is crucial for its future growth and development.

At the BEYOND Expo 2023 tech conference held in Macao, Leo Li, the Web3 Ecosystem Development lead at Alibaba Cloud, and Zheng Bin, the deputy CEO of ICBC (Macao), discussed the development potential of Web3, and the role of the digital yuan in striking a balance between innovation and regulation.

Their comments have been edited and condensed for clarity.

Leo Li, Web3 Ecosystem Development Lead, Alibaba Cloud

Those of you who have a crypto wallet, please raise your hand. Okay, it appears to be around 5%. What does this indicate? It suggests that most people are not yet using crypto wallets, which serve as the basic entry point for Web3. But is the trend towards adoption inevitable? In my opinion, it is inevitable because Web3 offers an experience that maximizes personal value and profit. Its fundamental difference from Web2 is its emphasis on value. Web3 is a technology that aligns closely with our inherent human nature; therefore, I am very optimistic about its future.

Today, we all have a basic understanding of, or have used OpenAI’s ChatGPT. It does present barriers to entry, but the value it brings outweighs those barriers, motivating people to use it. In comparison, most people don’t have a crypto wallet and don’t use Web3 technology because it is not yet widespread.

Web3 is a robust and cutting-edge technology that can benefit the public, but in a framework that lacks regulation or compliance, various human desires can emerge, including the FTX fallout. The event occurred in an unregulated environment, and I don’t think it would occur in traditional banks.

The absence of regulation is the reason why we say that Web3 is fundamentally a decentralized technology. However, I think it still needs some form of regulation to inspire public confidence and achieve mass adoption.

Zheng Bin, Deputy CEO, ICBC (Macao)

I believe the use scenarios for the digital yuan can be divided into two main categories. For domestic use, the digital yuan may not bring significant changes to people’s daily experiences, but it does offer some advantages, such as legal tender status and mandatory acceptance by merchants in certain environments or scenarios. Merchants have no reason to refuse the digital yuan as it is a legal currency.

At the same time, establishing connections with foreign countries is of strategic significance. Many countries have their own frameworks for digital currency. The digital yuan’s ability to serve as a bridge between different digital currencies presents a valuable opportunity for the yuan to disrupt or shape the existing currency system that has evolved over many years. From a  personal standpoint, this is a very good strategic opportunity.

How can we achieve a balance between innovation and regulation? The digital yuan as I just mentioned is a good example of striking such a balance. It leverages blockchain technology but does not rely entirely on it to establish its credibility. It ensures anonymity but can also be traced if regulatory authorities require it. It has integrated and resolved certain contradictions, resulting in the current outcome, and I think this may become one of the possible directions for the future development of the entire industry.

With its peak daily order volume for food deliveries surpassing 60 million last year, Meituan continues to sit pretty at the top of the tree when it comes to China’s local life services sector. The app spans everything from movie tickets and restaurant bookings to medical appointments, and recorded a total of 677.9 million users making transactions in 2022.

Yet Meituan’s dominance is increasingly facing challenges. Major Chinese companies including social media platform Xiaohongshu and ByteDance-owned TikTok sibling Douyin have been making inroads into the local life services market as Covid restrictions have eased. By linking consumers with nearby service providers or merchants and encouraging them to make purchases digitally before going to have the experience offline, these newcomers are looking to such transactions as a way to monetize their huge user bases.

For the moment, Meituan claims to be unperturbed. Meituan CEO Wang Xing described Douyin’s expansion into food delivery as having “a limited impact” on the company during its Q1 earnings call. However, the delivery platform recently made takeout livestreaming a monthly event and has launched group-buy delivery services in what many see as a bid to stay competitive in the face of these new entrants.

The total size of the local life services market is expected to reach RMB 35 trillion in China by 2025, though its online penetration rate was only 12.7% in 2021, according to data from Chinese research firm iResearch and cited by Chinese media outlet 21jingji, meaning there’s still plenty to play for.

Here’s a short introduction to new players in this vibrant market.

Xiaohongshu

Experience-sharing lifestyle platform Xiaohongshu, the latest major entrant to this competitive sector, has over 260 million monthly active users. The platform has maintained a thriving user base and sense of community for years and serves as a lifestyle search engine for many of its users. Now, it is making one of the biggest moves in the local life sector.

Xiaohongshu is currently inviting caterers and service providers to test the sale of group-buying packages on its platform. Participating merchants can sign up without paying a deposit or commission to Xiaohongshu for revenue earned through the service, according to tech media outlet GeekPark. Meanwhile, the platform’s influencers are able to earn commission by posting information about retailers that offer group buy options.

If the Shanghai-based company can leverage its feed algorithms while encouraging users to complete transactions within the app, it may see Xiaohongshu emerge as a serious challenger to Meituan, while also accelerating the company’s monetization quest. In 2020, 80% of Xiaohongshu’s revenue was generated by ads, the Financial Times previously reported, citing research firm LeadLeo, but the company is increasingly looking to diversify its revenue streams.

READ MORE: Xiaohongshu bets on e-commerce livestreaming to accelerate monetization: report

Douyin

Douyin has made significant strides in expanding its presence in the local life market, with its services sector reportedly generating over RMB 77 billion ($11.1 billion) in total sales last year, while advertising revenue amounted to just RMB 8.3 billion.

Growth in the platform’s brightest business continues to be strong. Local media outlet 36Kr reported that the unit generated more than RMB 10 billion in GMV in every single month in the first quarter of this year.

The TikTok sibling app has expanded its offerings to include group-buy delivery, sightseeing tickets, hotel reservations, and manicures in recent months. In mid-2022, Douyin allowed short video viewers to order meals directly on the app through a mini-program operated by Alibaba’s food delivery service Ele.me. In March, the service was introduced to 15 new cities, expanding the service to a total of 18 locations in China.

These efforts reflect the fact that ByteDance, Douyin’s owner, is stepping up its push to monetize users on the widely popular platform.

The head of Douyin’s local life business, Zhu Shiyu, recently stated that life services was a vast market worth more than ten trillion yuan, and that only a small proportion of transactions were currently being conducted online.

Kuaishou

Kuaishou, another leading short video-sharing platform in China with 366 million daily active users, has been expanding its presence in the local life services space in an effort to also capture market share, although it currently has less of a presence than rivals Douyin and Meituan.

Kuaishou had been active in offering lifestyle services in Shanghai, Qingdao, and Harbin, with Hangzhou the next major city to see local services rolled out. Kuaishou aims to provide local life services for different cities through a replicable model developed through experimentation. The short video operator incentivizes local merchants to sign up for the service while supporting local influencers who are willing to promote shops on the app.

Xiaogu, head of Kuaishou’s local life business unit, noted that since it entered the Qingdao market on Feb. 10, it has added over 300 local businesses. Kuaishou reportedly recorded around RMB 5 million in local sales in the seaside city in its first month, and already saw some influencers generate around 200,000 yuan in a single month.

China’s service sector has made a promising start to its recovery from its Covid-induced doldrums as the country saw tourism and spending surpass pre-pandemic levels during the five-day Labor Day holiday that ended Wednesday.

Why it matters: About 274 million domestic trips were made during the holiday, the second longest holiday since Covid restrictions were lifted last December, China’s Ministry of Culture and Tourism announced on Wednesday. Figures recorded over the period signal the country is seeing a resurgence in offline services and long-haul travel.

Details: Chinese domestic travel revenue surged to RMB 148.1 billion ($20.3 billion) during the May holiday, but while this marked a 128.9% year-on-year increase, per capita spending has only recovered to 90% of 2019 levels, government data showed.

• China’s trains took around 120 million passengers around the country between April 27 and May 3, according to data released by China State Railway Group.
• First-tier cities including Beijing, Shanghai, and Hangzhou were the most popular destinations this holiday, while third- and fourth-tier cities also experienced an unusual influx of tourists. 
• For example, Zibo – a city in eastern China’s Shandong province famous for its affordable local barbecue – saw its hotel reservations up more than 20 times compared to the 2019 level, data from travel service provider Qunar showed, as cited by media outlet NBD. Hotel reservations in third- and fourth-tier cities in general increased by more than 150% compared to the same period in 2019. 
• Asian countries and regions were the main destinations for Chinese outbound tourists during the holiday. Reports from Tencent’s WeChat-affiliated payment platform Weixin Pay sent to TechNode showed Hong Kong, Macau, and Japan as having the largest increases in offline payments compared to 2019. Japan saw the highest increase in average daily transactions through Weixin Pay in-store, by 141%. In Hong Kong SAR and Macao SAR, the average daily spending amount with Weixin Pay in-store registered the biggest growth (of 137%), while the number of transactions increased by 118%.
• Alipay, China’s largest digital payment platform, also reported a surge in spending by Chinese consumers using the platform for travel-related purchases during the first three days of the holiday. Overall spending increased by 70% compared to the same period in 2019, Alipay said.

Context: The recent holiday was China’s first in three years in which large scale travel was unimpeded by the Covid pandemic or restrictions imposed to prevent the virus’ spread. The lengthy pandemic severely hampered the country’s spending and dampened travel enthusiasm nationwide.

Chinese search giant Baidu said on Tuesday that ERNIE Bot, its competitor to ChatGPT, has achieved a 10-fold improvement in inference efficiency just one month after its release, while reducing the cost of large language model (LLM) inference to one-tenth of its original level. Inference, which refers to the process of running LLMs, mostly takes place on graphics processors or GPUs.

Why it matters: Baidu isn’t alone in looking to offer lower-cost AI products. Other tech majors in China such as Tencent and Alibaba have announced recently that they are introducing lower-priced AI products due to efficiency gains in the field.

Details: This development enables more small and medium companies to access large model technologies at reduced prices through tech firms’ cloud services. Meanwhile, the efficiency gains allow the tech giants to grab cloud market share at a low cost.

• Baidu plans to “significantly lower” the threshold for enterprises deploying large models through three services, the company said in a Wednesday statement sent to TechNode. These services include using the inference capability of ERNIE Bot directly, training industry-specific large models via high-quality and accurate business data, or unveiling models in Baidu’s cloud service for more stable and efficient operation.
• E-commerce giant Alibaba is also looking to boost revenue from its newly unveiled model Tongyi Qianwen, with the firm announcing on Wednesday that it will launch an AI co-development program for customers covering the transportation, petrochemical, and telecommunications industries.
• On the same day, Alibaba’s cloud unit also announced its largest price cut amid the expansion of China’s cloud computing market. The prices of its core products are set to be reduced by 15% to 50%.
• Tencent, another tech heavyweight in the country, has rolled out a digital human-production platform that it says can reduce production costs from millions to thousands of yuan within 24 hours.

Context: Since OpenAI’s ChatGPT gained worldwide popularity, numerous Chinese tech companies have declared an intention to enter the field of generative AI based on large models. However, training such models can be pretty expensive. According to a report by state-owned financial services company Guosheng Securities, training GPT-3 costs about $1.4 million per session, while over $2 million is needed when training larger LLMs.

Meituan delivery workers in Shanwei, a city in southern China’s Guangdong province, have entered a sixth day of strikes in protest at Meituan’s diminishing benefits and rewards, according to various Chinese media reports and Shanwei delivery workers’ posts on Chinese social media. 

To ensure regular services, Meituan has brought in workers from neighboring cities to Shanwei. The transferred drivers were offered a reward of RMB 10 ($1.45) per order with RMB 200 per day guaranteed, which is more than two times the pay of local drivers, according to screenshots shared on short video platform Douyin. 

A Douyin user called Tukushuhai commented in a video post on Tuesday that some riders from outside the city were unfamiliar with Shanwei’s road conditions, which resulted in delivery time overruns and user complaints.

Why it matters: Meituan’s problems with its workers comes at a time when other Chinese tech majors such as ByteDance and Alibaba are accelerating their moves into the life services sector. ByteDance began testing delivery services via TikTok sibling app Douyin in selected cities in the first quarter of this year. 

Details: A Meituan delivery worker in Shanwei who participated in the strike and preferred to remain anonymous told TechNode that the company had deleted “hundreds” of strikers’ work accounts, preventing them from logging into Meituan’s worker-specific app and therefore cutting off their income during the strike.

• According to a benefit document shared with TechNode by the Meituan worker, the delivery service used to offer a local worker subsidy for long-distance orders. For example, RMB 7 would be added onto a payment for any order between 3.6 kilometers and 4.5 kilometers (2.8 miles) away; a payment of up to RMB 13 was made for orders over  6.6 km away. The source said that Meituan had recently adjusted its benefits for local workers, so that only RMB 3.7 extra would be offered for trips of more than 5.0 kilometers, a third of the previous sum. 
• Moreover, workers can now be fined RMB 50 if they choose not to work on rainy days, with the fine “repeated every time the system monitors their offline status,” the source said.
• Shanwei saw heavy rainfall last week. The official Shanwei weather channel issued a precautionary notice asking residents to prepare for heavy rainfall from April 18 to April 21.

Context: According to Meituan’s earnings report, the company’s core local commerce unit (which includes food delivery, hotel and travel bookings, and in-store purchases) generated RMB 70.6 billion in delivery service income in 2022, while delivery-related costs reached RMB 80.19 billion, suggesting that the revenue generated from the delivery service was insufficient to cover delivery workers’ costs.

• Revenue from Meituan’s core local commerce sector consists of delivery services, commission, and online marketing, and is the main source of revenue for the company.
• Meituan has been subsidizing delivery workers’ wages with the money it earns from the service fees the platform charges merchants. In 2019, 80% of such income was used to pay rider salaries, according to an announcement made by the company in early 2020.
• Meituan lowered its rates for merchants in May 2022, following Chinese regulators’  request that delivery platforms reduce their service fees to help catering firms lower their operating costs during the pandemic. The Beijing-based firm said at the time that it was aiming for full transparency nationwide when charging commissions by the end of 2022.

Major Chinese microblogging platform Weibo is set to launch an artificial intelligence-powered creation assistant in the second quarter, executives announced at the firm’s annual creator festival in Changsha on April 15.

One of China’s largest social platforms, Weibo plans to unveil a host of incentives aimed at helping creators monetize their content during the two-day festival held in the central Chinese city.

Why it matters: Weibo has been under significant pressure from lifestyle platform Xiaohongshu as well as short video apps, with the platform recording falling total revenue and advertising income for several consecutive quarters. Its upcoming AI assistant and a series of monetization incentives for creators aim to improve efficiency in content creation while increasing creators’ earnings, a move the company hopes will help it stay competitive.

• “We want more growth to secure revenue for content creators on our platform,” said Cao Zenghui, senior vice president of Weibo, at the creators festival.
• Creators from Weibo saw their ad endorsements fall 6% year-on-year to RMB 1.5 billion ($220 million) in 2022, which Weibo claimed was down to the impact of Covid-19 and falling customer demand.

Details: Weibo plans to invite 100 creators with more than 5,000 original blog posts to be the first to use the AI assistant when it launches in the second quarter.

• Cao called AI-generated content a new trend and opportunity in content creation, saying “AI will not replace human creators but become their assistant,” according to local media outlet IThome.
• The number of Weibo creators with over 10,000 followers hit 1.4 million in the quarter ending in December, of which 11% had more than 100,000 followers and 24,000 had more than 1 million followers.
• The AI tool will learn creators’ writing styles and assist them in picking titles and suggesting special effects, according to IThome. It will also help them with topic selection when creating articles and videos, and with setting up a livestream.
• Weibo creators currently get a 20% share for posting original graphics and 15% for creating original videos as advertising endorsements, National Business Daily reported on April 17. Weibo noted at the festival that it will implement a 5% cashback incentive policy by the end of this year with the aim of boosting creators’ incomes.

Context: Weibo had 586 million monthly active users by the end of 2022, which the latest earnings reports show was twice the number of Xiaohongshu. However, Xiaohongshu users have been recorded as spending nearly 20 minutes longer every day on the app than users on the Weibo app. As of last July, the average daily use time of Weibo was 36.43 minutes, according to statistics from analytics company Qianguan and cited by local media outlet 21Jingji.

Chinese food delivery and life services giant Meituan launched an enterprise edition on Thursday, offering a one-stop shop for companies to manage employees’ meal, work trip, and transport expenses. The service, mainly focused on dining options for corporate clients, plays on one of Meituan’s core strengths.

Why it matters: Meituan’s pivot to business clients brings the Beijing-based firm new areas for revenue growth as it faces greater competition from rivals in the local services sector, including ByteDance’s Douyin, which has been testing food delivery services in some Chinese cities with plans to expand nationwide.

Details: The new app evolved from Meituan Shangqitong, a platform initially designed for Meituan’s own employees, before being opened up to a broader user base from early 2021.

• As of March 2023, nearly 10,000 businesses across 20 industries had used the platform, including banking, new energy, software, and express delivery firms, according to a report by local media outlet 36Kr.
• Meituan said (in Chinese) the enterprise platform can save employees an average of 4.4 hours in filing for reimbursements, and improve finance-related efficiency by 90%.
• Wang Puzhong, senior vice president of Meituan, noted at the launch that the company aims to make business consumption “as easy as using Meituan [consumer app].”
• The enterprise edition team currently has hundreds of members, and is expanding rapidly, 36Kr reported in late March. Kang Kai, head of the unit, is also the general manager of Meituan’s enterprise business department, and will report to Wang Puzhong.

Context: In 2022, Meituan’s annual revenue stood at RMB 220 billion ($32.1 billion), with its core local businesses, which include food delivery and no-demand delivery service Meituan Instashopping, contributing over 70% of total revenue.

• Meituan plans to offer food delivery in Hong Kong later this year under a separate brand, as the Beijing-based company seeks growth beyond its domestic market.
• Ride-hailing platforms Didi and Amap also offer enterprise solutions to simplify the reimbursement process for business travel and rides hailed for business customers in China.

Tech giant Alibaba unveiled its Tongyi Qianwen AI chatbot on April 7, joining the rush of Chinese tech majors to bring out a home-grown large-scale model to compete with ChatGPT. The service, launched without any advance notice, is currently only available to corporate clients and a limited number of media outlets on an invite-only basis.

The chat application is described on its official website as “an efficiency assistant and idea-generator.” The site offers little in the way of specific details about Alibaba’s new product, simply asking visitors for a phone number and email address by which to request an invitation code. 

Why it matters: Alibaba is the second major Chinese tech company to use a self-developed large-scale model to unveil a chat application following the launch last month of Baidu’s ERNIE Bot. It is expected that other local tech heavyweights, including SenseTime, Huawei, and JD, will soon introduce their own alternatives to ChatGPT.

• Tongyi Qianwen has been developed by Alibaba’s research institute DAMO Academy, part of its newly-independent cloud computing arm. The company didn’t specify how many parameters the model is trained on. In 2021, Alibaba released the multi-modal M6 model and claimed it was the first AI model in China to break 10 trillion parameters (ChatGPT has 175 billion parameters).

Details: As with rivals ChatGPT and ERNIE Bot, Tongyi Qianwen can generate articles and poems in response to user prompts. It can also write outlines, find complimentary expressions, offer recipes, and write in various styles and tones. A number of Chinese media outlets have tested the bot and compared its performance with Baidu’s ERNIE Bot and ChatGPT.

• Tongyi shows a different mode of thinking to OpenAI’s ChatGPT. When asked by media outlet DoNews how to cover the latest advances in the AI industry as a tech reporter, Tongyi Qianwen’s responses are more specific, suggesting reports on important events in the field and interviews with experts and entrepreneurs. In contrast, ChatGPT emphasizes learning and updating relevant knowledge rather than in-depth answers.
• Tongyi Qianwen and ERNIE Bot perform better than ChatGPT at answering complicated questions in Chinese. The former has the ability to have multiple rounds of conversation on certain common sense questions and is able to provide sources for its responses, according to a report by local media outlet QbitAI. By comparison, Baidu’s bot can sometimes offer confusing answers, the report noted. There are slight differences in the three tools’ responses to questions in Chinese.
• Both ERNIE and Tongyi Qianwen performed worse in programming compared to ChatGPT. In a test input by tech media outlet Chaping, where the request was to write code to create a button that changes color with each click, Alibaba and Baidu’s chatbot services failed to write the full code, while ChatGPT successfully created the feature.
• Tongyi Qianwen currently doesn’t support multi-modal generation, while Baidu’s chatbot ERNIE Bot has audio, image, and video creation capabilities.

Context: Major Chinese tech companies and entrepreneurs are joining the AI chatbot race after search giant Baidu’s high-profile release of ERNIE Bot last month. 

• Artificial intelligence start-up SenseTime has unveiled a new range of AI products called SenseChat today, according to local media outlet IThome.
• Chinese e-commerce giant JD will launch an industrial version of ChatGPT named ChatJD this year, with a focus on retail and finance applications, the company’s vice president He Xiaodong said at a recent summit in Hangzhou.
• Alibaba announced a split into six independent groups in late March, including its cloud division, which now has the autonomy to raise funds and seek an IPO. The cloud computing unit is directly overseen by Alibaba CEO Daniel Zhang.

Correction: An earlier version of this article misidentified Tongyi Qianwen as the first AI model with 10 trillion parameters, it was Alibaba’s M6 model, first released in 2021.

Chinese tech giant Alibaba will reportedly launch its large-scale model next week at the Alibaba Cloud Summit on April 11 in Beijing, with an industry application model expected to follow on April 18. A source at the firm’s cloud unit confirmed to TechNode that the summit is scheduled for April 11, but declined to say whether it would debut a ChatGPT rival at the event.

Why it matters: As one of the biggest companies in China, Alibaba’s move to introduce a ChatGPT-like product would further increase the buzz around AI chatbot technology in the country, following search giant Baidu’s release of chatbot service ERNIEBot and an enterprise-facing large model platform last month. Alibaba has a wide range of businesses that could use AI and has been investing in cloud computing infrastructure since 2009.

Details: In February, Alibaba said it was working on a ChatGPT-style tool and that it was undergoing internal testing.

• In a sign of the summit’s significance, Alibaba CEO Daniel Zhang, who also oversees the group’s cloud computing unit, will attend the event along with Alibaba Cloud’s chief technology officer Zhou Jingren and president of Alibaba Cloud Global Sales Cai Yinghua.
• The summit comprises one main and multiple sub-forums, as described on its official website, with three keynote speeches and a series of yet unspecified major announcements aimed at showcasing cutting-edge computing, data, and intelligent technologies, as well as the acceleration of industrial innovation. 
• On Tuesday, Niaoniao, a Chinese stand-up comedian, shared a video which she claimed showed pre-trained big model developed by Alibaba that had cloned her voice. The AI-generated voice was seen being used by Alibaba’s voice assistant TmallGenie, answering common questions in a way that closely imitated the woman’s speaking style. Niaoniao claimed that Alibaba’s research institute DAMO Academy trained the voice using about an hour of her recordings over a week.
• Alibaba has already integrated the large-scale model into various product lines across the company and tested it internally, Zhejiang Daily reported on Tuesday, citing an employee who claimed the results were “impressive”.

Context: The popularity of ChatGPT has spurred tech majors and AI entrepreneurs in China into action. A number of Chinese AI experts have recently left roles at China’s tech majors, including JD, Alibaba, and ByteDance, to form new AI enterprises amid the continued hype around ChatGPT. Former Google China head Kai-Fu Lee and Meituan co-founder Wang Huiwen have also launched separate AI-focused businesses.

• Baidu debuted its AI-powered chatbot service ERNIE Bot on March 16, becoming the first Chinese tech company to offer a rival to OpenAI’s ChatGPT. However, only people with an invitation code currently have access to the tool. The search giant has seen its Nasdaq-listed shares rise by 21.7% this year.
• China’s telecommunication giant Huawei is set to introduce its Pangu pre-trained large-scale model in the near future, local media outlet IThome reported on Tuesday, which include NLP (Natural Language Processing), CV (Computer Vision), and Scientific Computing models. 

Several popular content creators on the Chinese video site Bilibili recently announced they were taking a pause in updating their channels, citing a decrease in income as the main reason. The news soon spread on Chinese social media and developed into a wider discussion on the relationship between Bilibili and its video creators, with some claiming a creator exodus while others seeing it more as an individual phenomenon. 

Similar to YouTube, Bilibili largely relies on user-generated videos. The loss-making platform is facing increasing pressure to turn a profit and has promised to reach break-even by 2024. 

Why it matters: With profitability goals in sight, Bilibili has been adopting multiple strategies, including reducing incentives for some creators and introducing a short video format called Story Mode. These new strategies have hit creators with fewer followers and clout the most. 

• In 2022, the Shanghai-based company spent RMB 9.1 billion ($1.3 billion) on revenue-sharing with creators, its latest filing showed, accounting for half of Bilibili’s cost of revenues. Bilibili had more than 3.8 million video creators by the end of 2022. 

Details: Back in January 2018, to spur growth, Bilibili launched a creative incentive program to encourage creators to “make high-quality videos,” whereby the streaming site provides cash bonuses to creators based on views and engagements. Since last year, in an effort to reduce losses amid an economic downturn, Bilibili has reduced creator incentives, and prioritized commercial advertising and other integrated marketing. 

• Those changes have hit some regular creators hard. Creators with more than 1 million followers mainly rely on business advertising to generate income, while those with fewer fans depend more on creative incentives.
• Some Bilibili creators have previously expressed dissatisfaction with reduced incentives publicly. In March 2022, a creator named Shudashi, who produces knowledge-related content, wrote that his earnings from the platform had been reduced by over 40% for a video. Before the adjustments, the creator said one of his videos with more than 100,000 views on Bilibili would earn him about RMB 1,600. Shudashi has 47,000 followers on the platform as of writing.
• A creator who once considered Bilibili a major source of income published a post on Monday and said that the creators who announced they were stopping updating content in the last few days were mostly working full-time with a team to support. The decline in commercial advertising partnerships and the high cost of creating long-form videos are the main reasons several creators chose to take a break, according to the creator.

Context: Bilibili launched a TikTok-like service called Story Mode in 2021 in an attempt to expand profits. Despite the effort, the YouTube-like video platform is facing increasing competition from short-video platforms such as Douyin and Kuaishou, as well as other grassroots online platforms like Xiaohongshu. 

Chinese tech giant Tencent has launched an AI-powered video editing tool called Zenvideo, integrating a variety of features for short-form video creators, such as text-to-video generation and digital narration.  

Why it matters: With its growing emphasis on short video, Tencent is looking to further challenge current market leaders in the sector such as Kuaishou and ByteDance’s TikTok sibling Douyin. Tencent’s new offering comes with similar capabilities to ByteDance’s CapCut, which recently surpassed 200 million monthly active users in the US.

Details: Zenvideo is available to use both through web browsers and WeChat’s mini-program, but is more powerful as a web app. The version within Tencent’s superapp has comparatively limited AI features, only supporting AI painting and digital narration. 

• The video editing tool allows users to create short-form videos, with a range of editing options such as filters, visual effects, and digital avatars.
• Unlike ByteDance’s video editing toolCapCut (Jianyin in the Chinese market), Tencent’s new tool can be operated on the web without the need to download an app. Furthermore, users can import Tencent licensed video and audio clips and use them as long as the final work is published on Tencent’s open content platforms. For example, users are able to use music from Tencent’s streaming platforms and take clips from popular Tencent Video TV shows such as The Three-Body Problem and Red Sorghum and edit them for free within Zenvideo. 
• According to a notice within the tool, Tencent plans to share revenue with video creators as an incentive to attract more content creators.

Context: This week, Tencent’s super app WeChat also announced several changes to its ecosystem, especially for its short video section WeChat Channels. 

• WeChat Channels has an average daily user time of about 40 minutes, which is less than one-third of the two leading short video platforms Douyin and Kuaishou. The latter reached a new high of 134 minutes in the fourth quarter of last year, its latest financial results showed.
• Regarded as “the hope of the whole company” by Tencent CEO Pony Ma, WeChat Channels is planning to launch a paid subscription service and share revenue with creators of short videos. This move is likely to heat up the competition among similar platforms.

The global hype surrounding ChatGPT has sparked a rush among Chinese AI experts and internet entrepreneurs to launch their own startups, each with a claim of working on the transformative potential of ChatGPT-style models.

Here is a list of Chinese tech specialists who have recently made announcements regarding new ventures in AI technology:

Meituan co-founder Wang Huiwen

Meituan co-founder Wang Huiwen started an AI startup called Guangnian Zhiwai (meaning beyond light years) in February and quickly secured support from Meituan’s current CEO Wang Xing. The startup will acquire AI Infrastructure company OneFlow Technology, through a stock swap, local media outlet Caixin reported on Monday.

OneFlow is both the name of the acquired company and the product name of its deep learning framework, whose competitors include Baidu’s PaddlePaddle and Facebook’s PyTorch.

The acquisition demonstrates the Chinese tech executive’s openly-stated ambition to create the Chinese version of OpenAI, ChatGPT’s parent company backed by Microsoft.

Despite only publicly announcing his entrance into the artificial intelligence field less than two months ago, Wang has already secured a commitment from Meituan CEO Wang Xing, his long-term ally, to invest in the A-series round of fundraising for Guangnian Zhiwai, and take a seat on its board.

“I do not understand AI technology currently, and I’m trying to learn,” Wang Huiwen wrote in a social media post on the microblogging platform Jike in February. He later updated his social media platform with news that the newly-launched company has three co-founders, including a co-creator with an infrastructure background, a co-creator with an algorithm background, and himself.

Ex-ByteDance AI Lab head Wang Changhu

Wang Changhu, former director of ByteDance’s AI Lab, is also reportedly starting a new venture that will specialize in generative AI using a visual multi-modal algorithmic platform for generative AI. 

The visual-related direction aligns with Wang’s expertise. He had previously developed visual, pan-AI, and business solutions during his time at ByteDance, which were applied to the company’s news aggregation app Jinri Toutiao, as well as to short video platforms Douyin and TikTok.

While at the Beijing-based firm, Wang also played a significant role in launching an AI tool called Lingquan, which supports image and text recognition to combat “vulgar content” on apps.

After working at ByteDance for four years, he left in late 2021 to join major Chinese property developer Longfor Group, where he was appointed as general manager in charge of the AIoT artificial intelligence engine team.

Former Google China president Kai-Fu Lee

Kai-Fu Lee, a renowned AI talent and entrepreneur, has founded a new AI startup called Project AI 2.0 to build not only a Chinese version of ChatGPT but an ecosystem for AI-powered productivity tools.

The former president of Google China sees ChatGPT as a major breakthrough in deep learning, with AI offering the opportunity to reconstruct almost all existing applications.

Several technical experts who have led teams at major tech companies have reportedly expressed interest in joining Lee’s newly-launched project.

Ex-Alibaba AI expert Jia Yangqing

Jia Yangqing, a prominent figure in the AI field and author of the deep learning framework Caffe, has resigned as vice president of Alibaba to pursue his own startup venture. Jia’s entrepreneurial direction will focus on AI infrastructure.

A well-known expert in AI and cloud computing, Jia previously worked for Google and Meta before joining Alibaba. He also led the development of PyTorch and TensorFlow during his time at Google and Meta. While studying for a computer science doctorate at UC Berkeley, he wrote Caffe, a widely adopted open-source deep-learning framework, used by multiple major tech companies including Adobe, Microsoft, and Nvidia.

Former Kuaishou exec Li Yan

In 2022, Li Yan, ex-lead of Kuaishou’s multimedia understanding unit, left the short video company after seven years and founded Yuanshi Technology to develop a large multimodal model. The AI start-up confirmed this to local media outlet 36Kr earlier this month.

Li was seen as the core of Kuaishou’s AI tech development, having formed a deep learning team in late 2015 with the support of the then-CEO of the company Su Hua. 

The initial goal of the team was to use algorithms to detect pirated and offensive video content and later expanded its focus to include the development of algorithmic models for various types of speech, text, and images.

Former JD Cloud & AI chief Zhou Bowen

Zhou Bowen, the former president of JD’s Cloud & AI unit, wrote on Feb. 26 that he was looking for talented individuals with a strong belief in “AI’s ability to change the world” to join his startup, Xianyuan Technology. 

Three days later, the Beijing-based company, which was founded less than two years ago, announced it had secured hundreds of millions of yuan in an angel round led by Qiming Venture. 

“China’s answer to ChatGPT doesn’t necessarily need an OpenAI imitator, but it certainly needs a team with a clear vision to help accelerate the development of AI technology and industry digital intelligence,” Zhou wrote in his WeChat post announcing the financing.

Tencent’s super app WeChat plans to share revenue with short video creators and launch a paid subscription service on its short video product WeChat Channels, the Shenzhen-based company announced on Tuesday night at a public event. Tencent also announced the launch of a new Quora-like question section in WeChat. 

Why it matters: Tencent is expanding its monetization efforts with regard to WeChat’s short video section, after seeing rapid growth in the channel but also facing direct competition from rivals Douyin and Kuaishou. This strategy aligns with CEO Pony Ma’s speech late last year in which he hailed short videos as “the hope of the company.”

Details: Zhang Xiaochao, leader of the WeChat Channel unit, spoke first at the event and shared that in the three years since its launch, the short video section of the super app has seen creators grow two times more active, while creators with more than 10,000 fans grew more than four times in 2022. Leaders from other WeChat units — WeChat Pay, WeChat mini-programs, office automation-focused WeCom, and WeChat search — also spoke at the event. 

• In 2022, the value of goods sold through livestreams on WeChat surged by 800% and creators who earned income through videos increased nearly three times, Zhang said.  
• Increasing earnings for content creators is a priority for WeChat Channel’s next phase of development. Zhang said WeChat will soon launch a paid subscription feature, which will allow creators to set up a paid content section where users can pay a monthly subscription fee. This will help creators quickly set up their own commercialization subscription system, Zhang added. 
• Additionally, creators will have the option to access Tencent’s advertising system, which can display content-related ads in the comment section. This incentive is part of Tencent’s aim to attract more influencers.
• WeChat is also planning to roll out a new question function called Wenyiwen (meaning “ask a question” in Chinese), similar to a Quora-style Q&A platform. The feature will aggregate high-quality answers to common questions. Tencent added that more than 800 million monthly active users utilize its search feature, which saw a 54% year-on-year growth in search volume in 2022.

Context: With just over 1.3 billion monthly active users, all-in-one messaging app WeChat primarily monetizes via livestreams, e-commerce, and advertising on its short video section Channels. 

• Total time users spent on WeChat Channels exceeded the time they spent on WeChat Moments (a Facebook-like timeline function) in the quarter ending Dec. 31, Tencent’s latest filing showed.
• Tencent conducted its first test of paid-to-watch livestreaming in January 2022, with users required to pay approximately RMB 10 ($1.45) to access a live feed of an NBA game. However, compared to rivals Kuaishou and Douyin, which have already furthered their attempts at paid content, Tencent is still lagging behind. 
• Kuaishou, for instance, has a separate “paid content” section on its app and recorded 59.6 million paid subscribers in the third quarter of 2022. Meanwhile, ByteDance-owned Douyin has operated a paid business model for watching short dramas since November 2021.

ByteDance has hired Yang Hongxia, former head of the team overseeing Alibaba’s large AI multi-model M6, to lead its AI Lab and to build its generative large language model (LLM), local tech media outlet 36Kr has reported.

Prior to joining Chinese e-commerce giant Alibaba, Yang received her doctorate in statistical science from Duke University and worked as Yahoo’s principal data scientist. Her expertise in cognitive intelligence helped Alibaba launch its 10-trillion-parameter M6, improving the search and recommendation accuracy of shopping app Taobao and payment app Alipay, according to Yang’s account to the ISI World Statistics Conference.

Why it matters: ByteDance is keen to develop its own AI language model, as the success of ChatGPT pushes tech majors to re-evaluate the application of AI in their products and services to stay competitive. 

• ByteDance has tapped Yang to lead its language generation model team, a person familiar with the matter told 36Kr, and she is expected to report directly to the company’s vice president Yang Zhenyuan.

Details: ByteDance is reportedly planning to prioritize imaging and language in its AI model, with the former to be integrated into its short video platform Douyin and video-cutting tool CapCut, the company’s two most successful apps alongside Douyin sibling platform TikTok.

• Zhu Wenjia, who currently serves as the head of global search and development for TikTok, has been appointed to oversee the large language and image model teams.
• M6, an abbreviation of MultiModality-to-MultiModality Multitask Mega-transformer, was introduced by Alibaba’s Damo Academy in March 2021. The model contains 10 trillion parameters and is pre-trained to perform multiple tasks, including generating clothing designs based on prompts, offering concise descriptions of e-commerce goods, and answering common questions, the AI model’s website shows.

Context: Major tech companies and AI startups are chasing experienced AI talent as they rush to develop their own AI offerings.

• Yang resigned from Alibaba for personal reasons last September, following the departures of several scientists, such as Jin Rong, ex-Alibaba vice president and associate dean at Damo Academy, and Wang Gang, head of the group’s auto driving lab.
• Another Alibaba VP, Jia Yangqing, also confirmed he had quit the tech giant on Tuesday, with the aim of pursuing a new AI infrastructure venture.

Kai-Fu Lee, former president of Google China and now CEO of Sinovation Ventures, announced on Monday that he’s building a new AI company called Project AI 2.0 that will focus on developing ChatGPT-like apps, as well as an ecosystem for AI-powered productivity tools. 

Lee shared his thoughts on the latest AI trends, including the concepts of AI 1.0 and 2.0 on March 14, at Sinovation Ventures’ headquarters in Beijing. He said he considers ChatGPT to be a major breakthrough in deep learning, driving AI into the 2.0 era.

Why it matters: As a renowned AI expert and venture capitalist, Lee said he sees AI as providing an opportunity to reconstruct almost all existing applications, just as Microsoft redesigned Microsoft Office into Copilot, giving Word, Excel, and other mainstream productivity tools AI and generative capabilities.  

• Lee founded Sinovation Ventures in 2009. One of its AI startups, AInnovation, was founded in 2018 to develop artificial intelligence products for manufacturing, telecommunications, and finance industries, and went public in Hong Kong last January.

Details: Lee is currently seeking global talent in the fields of large language models (LLMs), natural language processing (NLP), multi-modality, AI algorithm, and infrastructure. The newly established company is also seeking fundraising.

• Sinovation Ventures has confirmed that multiple technical experts with experience in leading teams in major tech companies have expressed interest in joining the project, according to Chinese media outlet Yicai.
• “Every field can rewrite their existing apps with the aim of creating a more profitable model,” Lee said in his Sinovation Ventures speech, adding that the generative capabilities of AI 2.0 will ultimately reduce costs to almost zero.
• Lee sees three phases of AI application development. The first phase of popular AI apps is more likely to appear in content, where the margin for error is more tolerable. AI would then be used in more demanding fields such as finance and education, to assist automatic trading and language teaching for example. The third phase would be automatic AI, with AI capable of being applied wherever it’s needed.  
• Lee also sees AI providing opportunities to companies that are ten times bigger than those of the mobile internet era, and accessible to Chinese participants for the first time. 
• During the speech on March 14, Lee indicated that if he were at Microsoft, he would prioritize transforming Office tools first rather than just focusing on embedding GPT into search, a piece of advice that coincided with Microsoft’s announcement of Copilot, a reworked Office with AI ability, three days later. 

Context: Lee is the latest tech leader in China tech to turn his attention to launching AI startups. Meituan co-founder Wang Huiwen is setting up an AI startup Guangnian Zhiwai to develop an alternative to ChatGPT, with his closest ally Wang Xing, who is also a co-founder of Meituan, committing himself to invest in Series A financing of the startup.

Chinese search giant Baidu on Thursday introduced its artificial intelligent chatbot ERNIE Bot, with the company’s founder Robin Li demonstrating the capabilities of the chatbot in several pre-recorded clips.

“ERNIE Bot is not a tool for China-US confrontation,” Li said at the launch event, claiming instead that it was the result of Baidu’s years of effort in the field of artificial intelligence.

The chatbot service is currently available by invitation only, but Baidu announced that its cloud computing unit will immediately begin offering application programming interfaces (API) to enterprise clients. The company said that 30,000 corporate users applied for the ERNIE Bot Enterprise Edition API testing within an hour of the launch event, however investors appeared disappointed at the lack of a live demonstration, with Baidu’s stock price dipping slightly before the end of Thursday trading. 

Baidu did not specify when its ERNIE Bot service will be publicly available.

Why it matters: Baidu has become the first major Chinese tech company to unveil a comprehensive AI chatbot service that has the potential to rival ChatGPT, with the launch event taking place just a day after OpenAI released its new AI model GPT-4. 

• Li highlighted the commercial potential of the chatbot with Baidu’s cloud service saying that ERNIE Bot will “fundamentally change the rules of the game in the cloud computing industry.” He also predicted that Model as a Service (MaaS) would eventually replace Infrastructure as a Service.
• In 2022, Baidu AI Cloud generated RMB 17.7 billion ($2.57 billion) in revenue, representing a 23% increase compared to the previous year. The figure accounts for 14.3% of Baidu’s full-year revenue.

Details: Li showcased the capabilities of the ERNIE Bot via a series of pre-recorded videos where it was able to perform various tasks including coming up with a name for a newly established company, writing a poem, and generating images as well as videos based on prompts.

• Li noted that Baidu’s chatbot is good at processing Chinese rather than English. During an earnings call in February, he also mentioned that ERNIE 3.0, the underlying technology of its chatbot, is a “very localized” AI foundation model for the Chinese market.
• ERNIE Bot is built on Baidu’s deep-learning model ERNIE, which was released in 2019. It currently has 650 companies signed up as ecosystem business partners who will have priority access to it.
• The absence of a live review during the launch event seemingly disappointed investors, causing Baidu’s Hong Kong shares to decline by 6.36% at the end of Thursday’s session. Despite this setback, the firm’s Hong Kong-listed stock is up nearly 24% so far in 2023.

Context: ERNIE Bot’s launch day landed between two significant events involving other tech giants. US startup OpenAI unveiled its newest and most advanced AI model, GPT-4, without any prior announcement on Wednesday, and Microsoft launched Copilot, an Office suite that utilizes the power of GPT-4, just hours after Baidu’s ERNIE unveiling.

• ERNIE Bot can be applied to a variety of scenarios and applications, including search, AI cloud, and autonomous driving, Li said in his speech on Thursday.
• Baidu reportedly prioritized the development of the ERNIE system and diverted all of its “scarce resources” towards it before the rollout. On Friday, local media outlet 36Kr cited several sources as stating that the Beijing-based company was continuing to train the chatbot right up to the press conference, and has yet to finalize discussions over how the service will be monetized.

READ MORE: Alibaba, Baidu, NetEase, iFlytek…Chinese companies rushing to prove they have tech similar to ChatGPT

Xiaohongshu will turn its livestream shopping business into an independent unit, local media outlet LatePost reported on Mar. 10, as part of efforts to accelerate its monetization campaign. The head of the lifestyle app’s new department will also be in charge of the firm’s community ecology.

Why it matters: Xiaohongshu’s recent adjustment indicates a push for further monetization at a time when the country’s mainstream shopping platforms have seen live commerce thrive. The move follows the recent livestreaming e-commerce success of Chinese actress Dong Jie on the platform, which demonstrated to Xiaohongshu the possibility of diversifying its revenue growth path amid uncertainty over whether the company will file for an IPO.

Details: Xiaohongshu first tested its livestreaming e-commerce feature in mid-2019, officially launching it in 2020 at a time when China was experiencing a boom in livestream selling. However, the company was initially cautious about the emerging sector, with particular concerns about its impact on Xiaohongshu’s community ecology.

• Seen as China’s equivalent to Instagram, Xiaohongshu is now approaching 100 million daily active users, according to LatePost. The lifestyle-sharing platform attempts to position itself as a calm and high-quality community where users are able to share recommendations for food and sightseeing.
• Xiaohongshu’s livestreaming business hasn’t gained much attention over the past two years while Taobao, Douyin, and Kuaishou made major gains in the field courtesy of  breakthrough star hosts such as Li Jiaqi. But Xiaohongshu has won traction recently after Chinese actress Dong Jie delivered a less aggressive live shopping experience, helping the platform find a unique voice in the sector. 
• Xiaohongshu reportedly generates 80% of its revenue from advertising, primarily through ads designed to build brand awareness. LatePost reports that the firm is now weighing up whether to attempt to lure more brands to sell goods on the platform, as it looks to drive direct consumer purchases that can be completed without leaving the app.

Context: Live commerce is now a key driver of revenue growth for video platforms. Xiaohongshu, founded in 2013, was slower to monetize than its competitors Douyin and Kuaishou, only beginning the process cautiously in late 2019.

• In 2022, ByteDance generated RMB 330 billion in revenue from its advertising business in China, with more than RMB 120 billion coming from live commerce on TikTok sibling app Douyin, according to LatePost. Revenue from viewers rewarding hosts surpassed RMB 130 billion in the same year.
• Kuaishou recorded RMB 8.9 billion in revenue from its livestreaming business in the third quarter of 2022, accounting for 38.5% of the firm’s total quarterly revenue.
• In late 2021, Xiaohongshu was reportedly considering listing in Hong Kong after the startup suspended its initial plan for a US IPO. But the Chinese company told the Financial Times last November that it “has no IPO plans currently.”

Chinese social e-commerce app Xiaohongshu is gaining traction in the livestream shopping sector thanks to Chinese actress Dong Jie, who generated over RMB 30 million ($4.3 million) in sales in a livestream on Feb. 24, with many goods costing thousands of yuan per unit. 

Dong sold out of all products in six hours. Her performance, seen as less aggressive than those of her livestream shopping rivals, has garnered significant attention for Xiaohongshu, with some observers believing it may have finally found a way to differentiate itself from mainstream e-commerce platforms after quietly launching the livestream shopping feature in mid-2019.

Why it matters: Dong’s success could give Xiaohongshu’s livestream e-commerce business a significant boost, opening up a new revenue stream for the company. Many e-commerce platforms made their livestream shopping breakthrough through star hosts. For example, Alibaba-owned Taobao’s live commerce became a phenomenon after host Li Jiaqi gained mainstream attention; Kuaishou found success through star host Xin Ba.  

Details: Although Dong has so far only streamed twice, she sold more than RMB 50 million and RMB 30 million worth of products during the two sessions, according to Xiaohongshu. The celebrity attracted 2.2 million viewers to her latest livestream on Feb. 24. For comparison, Chinese tech celebrity Luo Yonghao attracted 48 million viewers and generated RMB 110 million from his debut on Taobao Live last October. 

• Selling high-end fashion items, Dong’s livestream style resonated well with Xiaohongshu’s user base, which comprises mainly urban women with greater purchasing power. As of November 2021, the platform has 200 million monthly active users, with 72% aged below 35 and living in major Chinese cities. The percentage of female users on Xiaohongshu was around 70% in 2022.
• Compared to livestreams on other Chinese platforms, Dong’s featured pricier goods, such as apparel, jewelry, and cosmetics, mostly priced at more than RMB 300, with some branded clothing items even going for as much as RMB 5,000. For example, one of the outfit combinations she tried on sold for nearly RMB 10,000.
• This is a much higher price point compared to rival platforms. Users on average spent about RMB 100 to RMB 300 per livestream on the three main platforms Taobao, Douyin, and Kuaishou in 2021, according to a report from the research arm of Ping An Securities. 
• “Dong Jie streams in a soft and quiet voice, and it’s the most comfortable livestream I’ve ever seen,” one viewer wrote on Xiaohongshu. Dong’s livestream was in keeping with the tone of her Xiaohongshu account, which she created in January 2021 and has used to share her personal outfits, skincare tips, and recipes over the course of nearly 150 posts. 
• In 2022, Xiaohongshu saw the number of live streamers on the platform grow 337% year-on-year, and the number of live shows increase by 214%, the Shanghai-based firm announced on March 6.

Context: Xiaohongshu’s income heavily depends on digital advertising, with 80% of its revenue in 2020 coming from ads, and the rest coming from e-commerce, according to figures from Chinese research firm LeadLeo cited by the Financial Times.

As China and its economy regain momentum after three years of strict Covid control policies, the country’s top lawmakers and political leaders are meeting in Beijing this week to discuss the country’s governance, economy, budget, and various key issues. The meeting is part of a week-long annual gathering known as the “two sessions,” or lianghui.

Increasing domestic demand is a top priority for the government in 2023. In 2022, China failed to reach the 5.5% GDP growth rate target it set last year (China grew 3% instead). For 2023, China has set an annual GDP growth target of 5% and hopes that its people will spend more to support the country’s economy. 

Much of this year’s growth plan is centered around stimulating consumer spending. Particularly in areas related to technology, the country is relying on people to make more big-ticket purchases like cars, and spend more on various shopping platforms, while building more network infrastructure this year. These include continuing to increase the steady growth of new energy vehicles and charging stations, supporting newer models of e-commerce, building 5G network infrastructure in smaller cities, and constructing national data centers in planned regions. 

Buy more EVs

China will continue to push the adoption of electric vehicles as part of its stimulus package to boost consumption and to “enhance its leadership position” in the new energy vehicle industry, policymakers said in this year’s annual government work report. It will also promote the wider use of battery swap technology and continue to support the battery industry.

The two sessions is also an opportunity for enterprise leaders (both private and state-owned) to present policy recommendations to the country’s top political and advisory bodies. 

Most proposals from leaders of domestic auto companies have echoed the government line. Feng Xingya, general manager of GAC, a manufacturing partner of Toyota and Honda in China, urged the government to roll out supportive policies to reduce the construction cost of battery swap facilities and push for a standard battery design among different manufacturers. CATL chairman Zeng Yuqun called for the establishment of a quality assessment framework to pave the way for the spread of lithium-ion batteries for grid energy storage.

Lei Jun, CEO of Xiaomi and also a delegate to China’s top legislative body the National People’s Congress (NPC), suggested that China issue data security standards for automobiles and promote data sharing among companies for intelligent connected vehicles. In addition, He Xiaopeng, CEO of Xpeng Motors, called for new legislation to clarify liability in traffic accidents involving autonomous driving cars. 

Shop more online 

Expanding consumption is key to China’s 5% economic growth this year, as the country tries to recover after stringent Covid-19 controls slowed economic growth. The country’s economic planner sees huge potential for e-commerce platforms as drivers of growth.

Strong export growth in the first half of 2022 has boosted China this year, with the country’s total trade of goods reaching a record high of RMB 42.07 trillion ($6 trillion). In particular, cross-border e-commerce exports grew by 11.7%, reaching RMB 1.55 trillion in 2022, reflecting the rise of overseas retail as a major component of China’s export trade. This year, the government pledged more support for cross-border e-commerce and overseas warehouse development in the annual report. 

For the domestic market, Chinese authorities vowed to guide the development of new models such as live commerce and on-demand retail, and lead the sector towards high-quality growth.

Wang Yinxiang, an NPC deligate from Cao county, a garment and coffin manufacturing hub in eastern Shandong province, found in her search that e-commerce in her rural county has helped increase the average lifespan of people in the region. The county is known for being a Taobao village (where at least 50 households own shops on Alibaba’s e-commerce platform Taobao).

Build more 5G, data centers, and other infrastructure 

This year, China will continue to upgrade to modern infrastructure systems such as 5G, data centers, and the Internet of Things. Specifically, China will focus on expanding internet networks in small- and medium-sized cities. The government aims to accelerate the development of 5G and broadband networks, and achieve greater integration of cloud networks. In addition, the country will continue the expansion of data centers and data hubs planned under the national data center project the “East-to-West Computing Capacity Diversion Project,” aiming to move more data processing from the country’s prosperous but land-scarce eastern regions to the country’s less-developed but sparse western regions.

In addition to networking and data infrastructure projects, the country also said in its work report that it plans to support the construction of smart highways, civilian space infrastructure, and a commercial space launch center on the southern island of Hainan. 

Voice recognition company iFlytek CEO Liu Qingfeng proposed that China should accelerate the construction of artificial intelligence models to enjoy the AI boom. Liu pointed out that while Chinese institutions and enterprises have published a series of large-scale models, the intelligence level of the large-scale models is still significantly lower than OpenAI’s ChatGPT. He asked China to accelerate the development of AI.

Duoduo Video, a vertical short video offering from Chinese e-commerce company Pinduoduo has reportedly recorded comparable watch time statistics to Tencent’s WeChat Channels, sparking a sudden uptick in attention from Chinese tech media. Local media outlet 36Kr said in a Wednesday report that the video section on Pinduoduo’s shopping app is seeing users spending about 30 minutes a day watching, a number that puts it roughly on a par with tech giant Tencent’s similar platform. 

Why it matters: Pinduoduo’s use of short vertical videos is another example of Chinese online retailers’ increasing competition with content platforms such as Kuaishou and ByteDance’s Douyin, as the latter two ramp up in-app shopping functions. Alibaba’s Taobao shopping app also has an embedded content section called Guangguang, using a combination of photos, articles, and videos to attract more users. 

Details: Pinduoduo added the short video section to its app in February 2022, according to a report from Chinese media outlet Jiemian. Pinduoduo incentivizes users to watch more videos by giving out cash rewards, which users can withdraw directly to other digital wallets.

• In a recent test, TechNode found Pinduoduo gives out significant cash rewards to newer users. Our reporter, a new user of the section, earned RMB 10 (about $1.5) after watching less than one minute of short videos. But the app only allowed the user to withdraw a small fraction of the earned reward (up to RMB 0.6) and encouraged them to log on more frequently to increase the withdrawal amount. 
• Duoduo Video is now led by a person who worked for Douyin before joining Pinduoduo in around 2021, the 36Kr report said. Pinduoduo is committed to investing in the business, not expecting commercial results in the short term, the report said, citing a source close to Pinduoduo.

Context: As China enters a relatively slower growth period, competition among the country’s top tech companies is heating up, with more cross-sector rivalry. For example, ByteDance’s Douyin, the equivalent of TikTok in China, has recently increased its investment in offering on-demand services, a core business offering of the life services giant Meituan. 

• Known for offering generous discounts and ultra-low prices, Pinduoduo saw great growth last year, with revenue up 65.1% year-on-year to RMB 35.5 million in the third quarter of 2022. But the company is facing more challenges from established online retailers such as JD and Alibaba. JD is set to launch a subsidy program worth billions of RMB and applicable to almost all items sold on its platform. Pinduoduo launched a subsidy program in 2019. 
• Taobao Deals, Taobao’s budget shopping platform, is set to form 50 offline service spots in industrial cities across China to help boost supply of quality products in nearly 900 categories, local media outlet 21Jingji reported on Feb. 27.

Chinese video streaming site iQiyi achieved an annual profit for the first time in 2022, according to its earnings report posted on Wednesday. The Baidu-backed long-video platform posted a non-GAAP net profit of RMB 1.3 billion ($186.2 million) and a 5% fall in revenue from the previous year to RMB 29 billion.

The Nasdaq-listed company is eyeing “high-quality growth” in 2023, aiming for simultaneous growth in operating profit and revenue, its CEO Gong Yu said in a related earnings call.

Why it matters: iQiyi has been losing money since its founding in the early 2010s. Its current profitability is largely thanks to aggressive cost-cutting since the end of 2021, fine-tuning content production, and new subscriber growth. Its competitors Tencent Video and Youku have yet to turn an annual operating profit.

Details: iQiyi managed to decrease its revenue costs by 19% in 2022. The platform produced a number of widely popular original video series, and grew its members to 120 million, offsetting some of its losses in ad revenue as the content business as a whole saw less ad expenditure last year. 

• Membership service revenue — the primary revenue source for iQiyi, accounting for 60% of its revenue — increased by 6% to RMB 17.7 billion. Meanwhile, the company’s revenue generated by online advertising services and content distribution decreased by 25% and 14%, respectively.
• The continuing cost-cutting measures have contributed to a significant reduction in iQiyi’s expenses, with both administrative expenses and R&D expenses falling more than 20% in 2022.
• iQiyi’s subscription membership grew by more than 10 million in the fourth quarter of 2022, and its total number of subscriptions was close to 120 million by the end of December.
• Some of iQiyi’s video series that reached a wide audience in 2022 include A Lifelong Journey, Love Between Fairy and Devil, New Life Begins, and Wild Bloom.
• Earlier this year, the video site also received acclamation for its original series The Knockout. Executives believe the success of the hit drama is replicable, saying leading original content production ability and operational capability are key to iQiyi’s competitive strengths. Streamed last month, The Knockout followed a fictional hunt for corrupt local officials and has garnered more than 300 million views. 

Context: Although The Knockout has proven an early 2023 hit for iQiyi, the steaming site has faced multiple controversies over membership rights in recent months.

• The growth in iQiyi’s membership service revenue is due in part to subscription fees rising over the past three years, with increases ranging from RMB 3 to RMB 20, a move that spurred rivals Tencent Video, Youku, and Mango TV to follow suit.
• Facing criticism from a government-backed consumer council and a lawsuit by one of its users, iQiyi dropped a plan to restrict access to high-definition screens among its paid members unless they paid an extra fee for the service.
• On Feb. 15, iQiyi announced that it would incorporate Baidu’s artificial intelligence chatbot Ernie Bot into its content search, promotion, and novel creation services.

MOSS, a ChatGPT-style chatbot platform developed by Fudan University’s Natural Language Processing Lab, crashed a day after its launch on Monday due to high demand, forcing the lab to set up an invitation-only waitlist to use the AI tool.

The model, similar to OpenAI’s ChatGPT, was named MOSS after a quantum computer in the hit Chinese science fiction film Wandering Earth. Rolled out on Monday, MOSS was seen as ChatGPT’s first Chinese rival, but its server crash means it will no longer be directly available to the general public. 

The team at Fudan University apologized for disappointing users of the experimental software, issuing a statement on the chatbot platform that read, “MOSS is still a very immature model and has a long way to go. Our academic research lab is unable to make a model with similar capabilities to ChatGPT.” 

Why it matters: Amid a wave of excitement in the Chinese tech sphere around ChatGPT, MOSS’s overwhelmed server illustrates the technical and modeling challenges that Chinese research teams and tech companies will need to overcome before they can successfully develop and operate their own ChatGPT-like tools.

• MOSS has followed in the footsteps of ChatGPT almost entirely, a core member of the Fudan University team Zhang Qi told local media outlet Yicai. Zhang stated that gathering real data from users to enhance the model and assist in subsequent research was the team’s main incentive for opening MOSS to the public.  

Details: MOSS is able to perform a variety of natural language tasks based on user instructions, ranging from answering questions to text generation and summarization, as well as code reviewing and generation, according to examples posted by the Fudan MOSS team on GitHub.

• ChatGPT has up to 175 billion parameters, while MOSS has only 16 billion.
• Currently, MOSS performs better in English than Chinese because its model base has learned over 300 billion English words, and only about 30 billion Chinese words, The Paper reported on Tuesday, citing the research team.
• The Fudan team is set to make MOSS’s code and model parameters open-source after their initial validation is completed, and said on Github that this could be as soon as March. 

Context: At least ten Chinese tech companies are competing to develop large-scale conversational language models like the ChatGPT, but none have launched products yet. Baidu’s ERNIE Bot is expected to launch as soon as March.

• ChatGPT is estimated to have reached 100 million monthly active users in January, and is said to have crashed its servers several times in its first week due to mass user demand.

READ MORE: Alibaba, Baidu, NetEase, iFlytek…Chinese companies rushing to prove they have tech similar to ChatGPT

Baidu is weighing whether to embed its ChatGPT-like service Ernie Bot into its main search platform, similar to Microsoft’s Bing, or launch it as an independent service, local media outlet 36Kr has reported, citing multiple Baidu employees.

Why it matters: Baidu’s reported indecision on Ernie Bot reflects the unpredictability surrounding the launch of artificial intelligence-powered chatbots, as the search giant looks to avoid some of the missteps seen with Bing and Google’s recent projects.

Details: Baidu, which has increasingly put AI capabilities at the heart of its strategy in recent years, announced in early February that its Ernie Bot tool would go live in March.

• Led by Baidu’s chief technology officer Wang Haifeng, the Ernie Bot team includes Wu Tian, supervisor of the company’s deep learning platform PaddlePaddle, as well as Wu Hua, technical leader of Baidu’s natural-language processing department.
• Ernie Bot is currently Baidu’s highest-priority project, according to 36Kr. The report cited Baidu employees as saying that all of the “scarce resources” being used to train deep learning models have now been diverted to its large-scale machine-learning Ernie system, which will power Baidu’s version of ChatGPT.
• The company is reportedly also seeking to combine AI-generated content with its blog-style platform Baijiahao as well as with short video content.
• Nearly 300 leading companies from sectors spanning internet, media, insurance, and auto have announced their inclusion in Baidu’s ChatGPT-style Ernie Bot ecosystem.

Context:  Baidu is part of a crowded field of Chinese companies to have announced their own AI chatbot projects in the wake of the huge popularity of ChatGPT.

• The search giant has also announced that its first electric vehicle model will launch using its new conversational artificial intelligence technology, with the intention of providing a ChatGPT-like experience that enables natural conversation between owners and their vehicles.
• AI-powered chatbot services rely on large and diverse data sources to train. Based on PaddlePaddle and the Pengcheng Cloud Brain II computing power system, Baidu launched the largest single model in the Chinese language at the end of 2021 with 260 billion parameters, a parameter figure that has exceeded GPT-3’s total by 50%, Baidu said.
• Meanwhile, Baidu has built a knowledge database of over 5 billion entities and 550 billion facts in recent years as the company’s largest business – search – has generated a huge pool of resources.

READ MORE: Alibaba, Baidu, NetEase, iFlytek…Chinese companies rushing to prove they have tech similar to ChatGPT

On Thursday, Chinese tech giant Tencent dismissed reports claiming that it was disbanding parts of its XR team, with the Shenzhen-based company saying that it is set to change the hardware development path of its XR business by making some personnel adjustments.

Why it matters: Tencent is the latest tech company to overhaul its metaverse-related activity, a move that comes less than a year after the company established its XR unit and follows its failed attempts to acquire AR hardware maker PICO and gaming phone maker Black Shark. XR hardware usually requires large amounts of capital over a long period of time, but as Tencent continues to cut costs and focus mainly on software, the company has been more cautious with its investments.

Details: Local media outlet 36Kr first reported on Thursday that Tencent was disbanding part of its XR team, which was established in June 2022. The report said that employees in the unit would be given two months to find new opportunities inside or outside of the company. However, Tencent later dismissed the report, saying it was simply making personnel adjustments within the unit.

• As of January 2023, there were still about 300 employees working on Tencent’s XR business, including tasks related to basic platform, content, Vision Labs, media technology, art and design, business decision, and spatial audio technology, according to 36Kr.
• Shen Li, previously the head of Tencent’s XR project, left the company in November 2022, with part of Tencent’s XR business suspended in January, 36Kr reported. 
• Shen, previously head of Tencent game studio NExT Studios, was one of the few people in the company’s XR unit with experience in VR hardware development, due to his work at French video game developer Ubisoft and at Epic Games before joining Tencent in 2013.
• Sources told 36Kr that Tencent’s XR project has few employees with hardware backgrounds and that the tech giant is hesitant about developing its hardware business.
• In early 2022, it was reported that Tencent intended to acquire gaming phone maker Black Shark, but the plan was abandoned a few months later, seemingly after the deal failed to get approval from the authorities.

Context: The global metaverse frenzy, kickstarted in 2021, caused Chinese tech firms to race to become front-line players in the sector, but lower-than-expected sales and user metrics are making them reconsider and adjust their investments.

• Tencent’s founder Pony Ma warned all employees at the end of 2022 that any business unit within the company could be cut if it isn’t self-sustaining.
• Pico, a Chinese VR headset maker acquired by ByteDance in 2021 and reportedly a one-time Tencent target, has also cut hundreds of jobs, with some teams reduced by as much as 30%, South China Morning Post reported on Thursday, citing two unnamed sources.
• ByteDance rolled out new VR headsets Pico 4 and 4 Pro last September, with Pico founder and president Henry Zhou saying he expected to eventually sell more than 1 million headsets. While the TikTok owner is yet to reveal sales or shipment figures, International Data Corporation (IDC) shows Pico’s market share reached about 15% in the third quarter of 2022; Meta’s market share fell to about 75% from 90% a year ago according to IDC.
• Microsoft ended its industrial metaverse project recently with the company reportedly shifting its focus to prioritize short-term projects instead. Redundancies at its metaverse team were part of the firm’s broader layoff of 10,000 employees announced in January, The Information reported on Feb. 9.

Guangzhou-based agricultural drone producer XAG recorded triple-digit growth last year in its overseas markets, with revenue from Latin America increasing 248% year-on-year and that from Southeast Asia growing by 155%. The company didn’t disclose its specific sales totals.

Why it matters: Markets outside China are a new revenue stream for XAG, which has been losing money for years. While the drone maker’s revenue continued to grow between 2018 and the first half of 2021 largely thanks to the Chinese government’s support of smart agriculture, its net loss continued to widen during this period, according to a prospectus filed in November 2021.

Details: Farm drones are the main source of revenue for XAG, accounting for more than two-thirds of its total revenue since 2018, and are also the company’s main offering overseas.

• XAG is eyeing expansion in Vietnam and Brazil, the firm’s overseas business head told Chinese media outlet Caixin, as the former is a global top three rice exporter and the latter a major soybean exporter.
• Southeast Asia and Latin America are popular destinations for Chinese agricultural tech companies going offshore, as governments in these regions have more relaxed regulations for farm drones, and thus fewer policy barriers for companies promoting them, Caixin wrote, citing an industry source.
• By contrast, the European Union, US, and UK have stricter regulations when it comes to agricultural aircraft. So far, the US Federal Aviation Administration has exempted one of XAG’s farm drones from flying restrictions. In the UK, two XAG drones, the P40 and V40, were granted operational authorization by the country’s Civil Aviation Authority in January. 

Context: In November 2021, XAG filed for an IPO on the Shanghai Stock Exchange, intending to raise RMB 1.51 billion, before withdrawing the application last April. 

• XAG recorded a net loss of RMB 60.85 million ($8.88 million) in 2020, an eight-fold expansion from 2018, and had lost nearly RMB 25 million more than that by half way through 2021. The firm said it has not yet reached profitability due to high investment costs in research and development, and because its new product line was still in the promotional phase.
• XAG has held six rounds of fundraising to date, with investors including Baidu Capital and Softbank Vision Fund, an industry fund with a state background from Guangzhou. More than RMB 300 million was secured by the company from GL Ventures, a VC fund under Hillhouse Capital Group, in March 2021.
• In the domestic market, XAG chooses to promote its agricultural drones via a direct service model, while rival DJI cooperates with external vendors to sell drones to farmers and agricultural service companies.

On Monday, Shanghai-based online grocery company Dingdong Maicai reported its first quarterly GAAP profit, posting a figure of RMB 49.9 million ($7.3 million) for the fourth-quarter. The company’s revenue for this period was up 13.1% from last year, reaching RMB 6.2 billion.

Why it matters: The latest financial result shows that online grocers like Dingdong Maicai – which use front-end warehouses as their main operation model, something the industry has long viewed as costly and unprofitable – can still achieve profitability.

• In the October-December period of 2021, the company recorded a net loss of RMB 1.1 billion.

Details: Dingdong Maicai’s profit is largely thanks to increased revenue from its own-branded meal kits, as well as cost reductions. A company executive emphasized on the earnings call that the profitability is sustainable.

• The company’s total operating costs and expenses decreased by 5.6% year-on-year to RMB 6.16 billion during the fourth quarter, the financial report shows, with fulfillment expenses down 16.4% to RMB 1.5 billion, while sales and marketing expenses saw a significant decrease of 74.5% to RMB 91.1 million.
• Dingdong recorded a yearly revenue of RMB 24.22 billion in 2022, up 20.4% compared to the prior year, while its cash and cash equivalents and short-term investments also increased by 24.1% to RMB 6.49 billion.
• Dingdong Maicai achieved profitability in every month of the fourth quarter, according to the NYSE-listed firm’s chief scientific officer, Yu Le, who disclosed a GAAP net profit of RMB 10 million for November.

Context: Founded in 2017, Dingdong Maicai reported its first non-GAAP net profit of RMB 20.6 million in the second quarter of 2022.

• The company has created new revenue streams by developing its own branded ready-to-cook meal kits. It set up a meal kit unit last February, upgrading it to a primary-level department of the company.
• Shanghai has strategic importance to Dingdong Maicai. The city contributed 45.8% of Dingdong’s GMV in 2022, exceeding RMB 12 billion. Meanwhile, the executive team expects to generate revenue of over RMB 20 billion from the city alone in the long term. By comparison, the grocery platform undertook a mass withdrawal from smaller Chinese cities last year aimed at relieving profit pressure.
• In 2022, Alibaba’s supermarket chain Freshippo achieved profitability with its main grocery brand Hema Xiansheng for the first time, after seven years of investment.

On Feb. 10, China’s National Press and Publication Administration (NPPA) released its approval list of domestic online games for February 2023 on its official website, with titles by Tencent, ByteDance, and NetEase among those given the green light.

Why it matters: The new list is the ninth batch of games approved in China since the NPPA resumed its issuing of licenses in April 2022 following an eight month pause. As with January, the number of new licenses this month exceeded 80, higher than any month in 2022 and a sign that China’s gaming regulators may be returning to a more consistent approach to approvals after months of uncertainty. 

Details: Some 87 new domestic games have been granted licenses by the NPPA, including 79 mobile games, seven PC titles, and one game for Nintendo Switch. 

• Tencent’s high-profile new game King Chess, a strategy battle mobile game that is part of the company’s attempts to build an Honor of Kings “universe,” was among those gaining approval. The official WeChat account for the game claimed on Feb. 10 that it is still in development and will undergo beta testing in the near future. 
• NetEase, another Chinese gaming giant that has struggled for new title approvals in the past 18 months, saw the mobile version of its massively multiplayer online role-playing game Fantasy Westward Journey make the list of February approvals.
• ByteDance has three new titles on the list: The Leader of the Battle from its publisher Ohayoo; Matrix: Out of Control by wholly-owned subsidiary Nuverse; and Hyper Instant Connection by its newly acquired company C4Games (all titles our translations). 

Context: China’s gaming industry has been sluggish over the past year due to tightening regulations on the industry and strict limits on young gamers.

• The total revenue of the video games market in China slumped 10.33% to RMB 265.9 billion in 2022, while game users declined slightly, down 0.33% year-on-year to 664 million, according to a report by the country’s semi-official games industry association.
• In August 2021, Chinese authorities restricted the weekly gaming hours for minors under the age of 18 to one hour a day on Fridays, weekends, and public holidays.
• China’s eight-month gaming license freeze was lifted in April 2022, but new approvals remained limited throughout the year. Just 513 game licenses, including 468 domestic games and 45 imported games, were issued over the course of 2022, 38% fewer than in 2021 and only a third of those approved in 2020, according to Caixin’s calculations. Tencent, one of the biggest gaming companies in the world, didn’t receive its first major approval of the year until November.

Despite not being officially available in China, the AI chatbot service ChatGPT has dominated headlines in the country. This week, days after search engine giant Baidu announced it will launch its own ChatGPT-like service in March, at least five other major Chinese tech firms revealed plans to tool up with the powerful AI technology. 

Starting with Alibaba, the e-commerce giant Alibaba said it is developing its own AI chatbot. NetEase’s online learning unit Youdao said it will launch a similar AI service focused on the education industry, and JD, another e-commerce major, boasted that its rich experience in AI means it can soon incorporate these technologies into its services. 

Developed by OpenAI, ChatGPT is an AI chatbot that can answer natural language questions with human-like responses. It is built on GPT-3, the third iteration of a language model trained on a large amount of data. 

The feverish popularity of ChatGPT has sent investors chasing related stocks on China’s stock market. The market is already experiencing a boost in so-called “ChatGPT concept stocks.” 

On Chinese social and search platforms, ChatGPT has also become the top search keyword. On Feb. 4, daily searches for “ChatGPT” on WeChat increased 515.7% to nearly 38 million, and the search volume kept growing rapidly in the following days,  seeing 2.5 times the number or 95 million searches only five days later. 

As advanced AI technology gains momentum to disrupt the status quo, Chinese tech companies are not the only ones racing to prove their ChatGPT-like abilities. Google introduced on Tuesday its AI chatbot Bard,  while ChatGPT’s main investor Microsoft launched a new version of its search engine Bing on Tuesday with ChatGPT built in. 

Baidu: Baidu said on Tuesday that it will launch its own AI chatbot tool called “ERNIE bot” or Wenxin Yiyan in Chinese. The bot will be built based on the company’s large language model ERNIE, which was launched in 2019. Some see Baidu’s service as the most likely one to come close to ChatGPT. 

NetEase: NetEase’s online education team Youdao said it has been working on applying AIGC (AI-generated content) technology to teaching scenarios such as AI oral English teaching and Chinese essay revision. The company expects to launch a relevant demo version of the product soon, which will mark the first landing of AIGC technology and a ChatGPT-like model in China’s online education scene.

iFlytek: Responding to investors’ questions, the company that specializes in speech recognition and natural language processing technologies said it has a solid accumulation of relevant AI technology. For example, in 2022, iFlytek won first place in the authoritative evaluation of several cognitive intelligence fields such as CommonsenseQA 2.0 and OpenBookQA. Meanwhile, iFlytek has developed a series of pre-training language models which include 40 general fields of cognitive intelligence.

Alibaba: The online retail major said on Wednesday that it’s conducting internal testing on a ChatGPT-like service, and the tool is likely to be used in combination with the group’s workplace communication and collaboration tool DingTalk.

JD: Beijing-based e-commerce platform JD said it sees ChatGPT as an “exciting and cutting-edge exploration,” adding it will incorporate the related methods and technology into its products, especially in customer service.

ByteDance-owned video-sharing platform Douyin, China’s equivalent of TikTok, plans to offer its “group-buying delivery” service in more cities, but has no timeline for a national rollout, TechNode has learned.

Why it matters: The gradual entry into the food delivery sector of Douyin, the most popular short-form video app in China with nearly 700 million daily active users, poses a serious challenge in an industry which has been dominated for years by Meituan and Alibaba’s Ele.me.

• “We would consider expanding the [“group-buying” packages] feature to more cities in the future depending on the testing results, and there is no detailed timeline yet,” a spokesperson from Douyin’s life services unit told TechNode on Wednesday.

Details: In contrast to the food delivery services offered by its established competitors, Douyin’s “group-buying delivery” service enables merchants to promote and sell food packages that are generally for two or three people, via short videos or livestreams. Packages are then delivered to paying customers within a selected time frame.

• The feature was tested last December in three cities – Beijing, Shanghai, and Chengdu – before the launch of a self-registration service for local merchants in January.
• Merchants can use the third-party courier platforms that Douyin cooperates with, including SF Express’s SFTC, JD-backed Dada, and Shansong, or choose to deliver themselves.
• The group-buying packages fall under the short video platform’s local life services unit, which encompasses the food and restaurant, in-store business, and hotel and tourism segments. The emerging unit expects total sales to reach RMB 150 billion ($22.2 billion) in 2023, twice its actual GMV of RMB 77 billion in 2022, tech media outlet 36Kr reported earlier this year.
• Only merchants with physical stores can take up the feature in Douyin, which is available at a cost of 2.5%, and 5% to 10% in service fees to the platform and service providers respectively, local media outlet Jiemian reported on Tuesday. If the merchant uses a delivery service in cooperation with the platform, they have to pay about RMB 8 per order.

Context: China’s takeaway market has continued to grow in size in recent years, with Meituan dominating the industry to date. According to a report conducted by Zhiyan Consulting, Meituan took a 69% share of China’s food delivery market in 2020, while Ele.me accounted for 26%.

• Douyin tested a food delivery mini-program called “Xindong Waimai” in 2021, partnering with well-known brands such as HeyTea and KFC, but the platform was never officially launched.

ByteDance has moved Douyin’s vice president Zhi Ying to lead TikTok’s products and content business as TikTok becomes an increased focus of its parent company’s attempts to diversify revenue streams, according to a Wednesday report by local media outlet 36Kr.

Why it matters: Zhi Ying’s move reflects the importance of TikTok to ByteDance’s revenue growth, with the Beijing-based company set to involve more of its successful executives in TikTok’s development. In December, ByteDance also moved Chen Xi, former head of news app Jinri Toutiao, to head up TikTok’s e-commerce product development.  

Details: Zhi Ying worked for PricewaterhouseCoopers and Uber before joining ByteDance in 2016, where she led the operation and marketing of short video platform Huoshan. Later, she moved to oversee Douyin’s marketing and ran the company’s video-sharing app Xigua video.

• Zhi is “very competent and has a strong management style, while also being good at expanding business,” sources told 36Kr.
• Several TikTok managers, including those in charge of user growth, content style, and live-streaming, now report to Zhi, while she herself reports directly to Zhu Wenjia, head of TikTok’s products and technology.
• ByteDance’s revenue growth slowed in 2022 and the daily active user growth of its products was lower than expected, CEO Liang Rubo acknowledged at an all-staff meeting held in December. TikTok’s sister app Douyin has not publicly updated its user base numbers since it announced in September 2020 that it had more than 600 million DAU. 
• TikTok currently has over 1 billion users worldwide, with the short video app having a global penetration rate of less than 20%, while Douyin has reached nearly 54% in China, LatePost reported in October last year, citing a TikTok staff member.

Context: ByteDance is sending more senior executives from China with successful track records to TikTok at a time when US officials continue to heighten scrutiny of the app. TikTok CEO Shou Zi Chew is reportedly due to appear before the US Congress next month in connection with the platform’s privacy and data security. 

• More than 25 states in the US have banned TikTok on government-owned devices and a US House panel is set to vote in February on a total ban aimed at blocking TikTok from operating in the US.
• ByteDance is also seeking to expand into overseas markets with its team management platform Lark due to profitability challenges in the domestic market, Chinese media outlet Jiemian reported in early January.

Chinese search engine giant Baidu is working on a ChatGPT-like bot service to embed in its search engine. Baidu’s CEO Robin Li believes that artificial intelligence tech has reached a tipping point and will produce “a generational revolution in the search experience,” China Star Market reported Monday, citing unnamed sources. 

Why it matters: With its own deep-learning platform (PaddlePaddle) and large-scale pre-trained model (Wenxin or Ernie in English), Baidu is one of the few Chinese tech companies investing heavily in generative AI as the technology becomes more mainstream. 

• Led by Baidu’s mobile eco-business group as well as the technology platform group, the development of an AI-powered chatbot tool project started last December, but the gap between its current performance and ChatGPT is still obvious, a staff member from Baidu told local media outlet Caijing.

Details: ChatGPT, an artificial intelligence chatbot service debuted by OpenAI last November, is built on OpenAI’s large-language model GPT-3, and can output human-like responses in seconds. The aim is for Baidu’s version, which is using its large-scale model Ernie as a foundation, to do the same. Baidu’s upcoming chatbot is being trained with both Chinese and English sources, according to the Wall Street Journal.

• Robin Li is confident that Baidu will be able to embed ChatGPT-like technology into its search engine, admitting that integration is more complicated than the chatbot technology itself, China Star Market wrote, citing a speech by Li given at an internal talk.
• The implementation of a ChatGPT-style service embedded in search services still depends on Baidu’s subsequent research and development investments, a source close to the firm told the outlet.
• For years, Baidu’s research expenses as a percentage of total revenue have remained at around 20%. The company also saw its new AI businesses account for an increasing share of its revenue in the last three years.
• Baidu declined to comment on the chatbot service when reached by TechNode on Tuesday.

Context: Since launching in late 2022, ChatGPT quickly sparked wide discussion, attracting 1 million users in just five days, and pushing many tech companies to prepare for the revolutionary potential of artificial intelligence technology.

• On Jan. 23, Microsoft announced it would offer a multi-year, multi-billion dollar investment in OpenAI, and plans to integrate ChatGPT into its own search engine, Bing.

As millions of Chinese re-emerged from the sudden wave of Covid-19 infections experienced after China relaxed control measures in early December, the country’s consumption and travel saw promising rebounds during the week-long Lunar New Year holiday (Jan. 21 to Jan. 27). This recovery may set the stage for major Chinese tech companies to recover some of their losses in the coming months. 

Why it matters: China’s major mobile payment platforms, WeChat Pay and Alipay, each saw about a 20% yearly increase in transactions. Meanwhile, food, travel, and entertainment businesses saw a similar yearly increase during the festive period, with spending on restaurants and movies returning to 2019 levels. 

Details: The Lunar New Year holiday this year marked the first time in three years that people were able to travel freely across the country. Although it is traditional for people to reunite with their families during the period, since early 2020, the Chinese government had discouraged people from traveling home due to fears of large outbreaks of Covid-19.

• Offline transactions also rebounded after authorities relaxed stringent pandemic measures. Tencent’s WeChat reported a 23% increase in the volume of offline commercial payment transactions during the 2023 Chinese New Year holiday compared to last year.
• Ant Group’s Alipay recorded a nearly 20% increase in mobile payment volume in tier-3 and other lower-tier cities for the week-long break.
• Data from the China Cuisine Association showed a 24.7% year-on-year increase in revenue for surveyed catering businesses during the seven-day Lunar New Year holiday, a 1.9% rise compared to the same period in 2019. Customer flow also largely returned to 2019 levels.
• The Lunar New Year box office this year reached RMB 6.76 billion ($990 million), second only to the record RMB 7.84 billion taken in 2021, and a 15.7% increase from 2019. 
• The country saw 308 million domestic trips during this year’s holiday, a 23.1% increase from the previous year, but the number of trips and domestic tourism revenue were still down by more than 25% on 2019 levels.
• Civil aviation transported 9 million passengers between January 21 and 27, a 79.8% year-on-year increase, according to the Civil Aviation Administration of China.

Context: An executive meeting of the State Council held on Jan. 28 emphasized consumption as the main driver of the economy. Multiple provinces and administrative regions, including Shanghai and Guangdong, have made reviving consumption and boosting growth a priority, with Guangdong projecting a 6% increase in total retail sales of consumer goods for 2023. 

• China reported 3% GDP growth for 2022, one of the worst rates in decades, with final consumption expenditure contributing only 32.8% to economic growth, down significantly from 2021.
• In 2022, China saw a massive increase in bank savings, reaching a record of RMB 17.84 trillion, nearly doubling the RMB 9.7 trillion recorded in 2019, as strict Covid controls suppressed consumer spending.

China saw smartphone sales slump 14% in 2022, marking the fifth consecutive year of decline, according to a Friday report by Hong Kong-headquartered consultancy firm Counterpoint.

Why it matters: Chinese smartphone sales reached their lowest level in a decade as consumers delayed replacing their smartphones due to sluggish macroeconomic conditions and Covid-19 containment measures.

• China’s smartphone industry still faces tough challenges in the short term amid supply chain disruption and weak consumer confidence, with gradual improvement expected in the second half of 2023, according to Chinese consultancy CINNO Research.

Details: The top three companies in the Chinese smartphone market last year were Vivo, Apple, and Oppo, holding 19.2%, 18%, and 17.5% of the market respectively.

• Huawei’s former subsidiary, Honor, was the only brand to record year-on-year sales growth in 2022, up 38% from the previous year. The report noted that the brand’s strong growth was largely due to its low base in 2021.
• Despite Apple’s sales decline in China, the US tech giant was the second-largest mobile phone brand in the country for the full year, with a 3% year-on-year drop in sales. In the fourth quarter of 2022, Apple achieved its “highest quarterly share ever” in China at 23.7%, the report noted.
• Foxconn’s major plant in the central Chinese city of Zhengzhou, the world’s largest iPhone factory, was hit by significant worker unrest related to Covid outbreaks and payment issues in the fourth quarter, which forced Apple to delay shipments of its iPhone 14 series. 
• Huawei outperformed rival brands in the October-December period. While all other top brands saw double-digit percentage sales drops, the Chinese tech giant’s sales grew 15%.
• China smartphone sales plunged 11% during Singles’ Day 2022, the largest online shopping festival and usually the peak sales period, Counterpoint said in a November report.

Context: Chinese smartphone shipments also reflect an uncertain market, with total shipments of about 286 million units in 2022, down 13.2% from a year earlier and the largest drop ever, market research firm IDC said on Sunday. This is the first time shipments have fallen below 300 million since 2013.

• The slump in China’s smartphone market is also in line with the industry’s global performance. IDC data shows global smartphone shipments dropped 11.3% from the previous year to about 1.2 billion units in 2022, the lowest figure in a decade.

Finding new revenue streams outside China became urgent for major Chinese online retailers as Covid control measures and a turbulent domestic regulatory environment hurt economic growth and consumer confidence in the country.

Shein, which started as a small cross-border wedding dress supplier, turned into a unicorn worth $100 billion by April 2022, demonstrating a successful path for other shopping platforms trying to sell outside of China. 

Chinese overseas-focused online shopping apps were a bright spot in a year otherwise characterized by high inflation and weak demand in the world’s major economies. 

Fast fashion giant Shein maintained strong growth despite sustainability, imitation, and labor rights controversies, while the more established Alibaba saw its turnover decline in Europe despite narrowed losses in Southeast Asia. Pinduoduo-backed Temu, seemingly out of nowhere in September, shot to the top of the US app downloading chart by the end of 2022. ByteDance-owned TikTok tried to navigate the same successful path as its sister app Douyin in e-commerce, but with less impressive results in the UK.

Here’s what you need to know about the overseas adventures of Shein, Temu, TikTok Shop, and Alibaba in 2022.

Shein

Shein was the most popular fast-fashion brand worldwide in 2022, according to research conducted by price comparison site money.co.uk, which shows that Shein experienced tremendous global growth over the year. The company reportedly surpassed its full-year 2021 sales of $15.7 billion just midway through 2022 and was expected to have made sales of $24 billion by the end of the year.

In April, Shein received a $100 billion valuation from General Atlantic, Tiger Global Management, and Sequoia Capital China, but as one person who declined to invest in Shein at a roughly 30% discount told Financial Times, the firm may well have been overvalued.

The company’s continued problems over environmental and sustainability issues overshadowed its initial preparations for a possible IPO in the US as soon as 2024, as investors increasingly bet on companies that are more responsible in those areas. Shein became increasingly vocal in its commitment to environmental, social, and governance efforts, planning to eliminate a quarter of emissions by 2030 and pledging $15 million to improve factory standards.

Every day, Shein posts thousands of new items for sale and relies on third-party suppliers in China for its low clothing prices. However, the company has faced controversies over appropriating designs from independent and emerging fashion designers. Shein or its Hong Kong-based parent company Zoetop Business Co., have been named in at least 50 federal lawsuits in the past three years, according to a June report by the Wall Street Journal.

In other moves, Shein opened pop-up stores in multiple major cities worldwide in 2022. Local media reported seeing long queues, Shein fans chasing particular items, and limited shopping time due to limited stock. But Shein said it “remains digital-first,” a Shein spokesperson told TechNode.

The buzz around Shein shows no signs of abating in 2023, and the company seems to be expanding its business model, reportedly exploring a marketplace platform that would enable other merchants to sell directly to customers, in a move to compete more directly with e-commerce giants like Amazon and Alibaba-owned AliExpress.

Temu

Less than four months after its launch, Temu, the cross-border e-commerce platform owned by Pinduoduo, has already shown strong appeal with its big discounts and generous coupons, and for most of the past two months, it has been the most downloaded app in the US. 

Temu’s sales growth rate cannot be underestimated. In October, its average daily sales generated more than $1.5 million, reportedly slightly below internal expectations. Temu reached a peak weekly GMV of over $40 million around Black Friday, with sales topping $10 million in the first week of November, according to data provider Sandalwood.

Temu came to the US with super-low prices when the country’s consumers were facing high inflation. Temu’s China-focused sister app, Pinduoduo, has long relied on low prices to quickly capture market share from established retailers like Alibaba and JD. The platform didn’t respond to TechNode’s question on whether its ultra-low prices were sustainable. While gaining fast popularity, Temu is also facing customer complaints about long delivery times, incorrect orders, and “unresponsive” customer services, according to a report by the Time magazine.

Pinduoduo debuted its 10 billion subsidy campaign – in which the company subsidizes high-volume items down to a competitive price compared to other platforms – during 2019’s June 18 online shopping festival, China’s second-largest annual e-commerce event. The initiative became Pinduoduo’s signature and a regular program after it proved to drive user growth.

This significant subsidy is recorded as “sales and marketing expenses” in its financial reports and has remained above RMB 10 billion per quarter since 2021, reaching RMB 14.05 billion, or 40% of total revenue, in the third quarter of 2022.

The marketing-for-growth strategy has resulted in continued user growth for Pinduoduo, with the company achieving an annual profit for the first time in 2021, six years after its founding.

TikTok Shop

In 2022, TikTok expanded its e-commerce business in Southeast Asia, initially finding success in the region, but facing setbacks in Europe.

According to a report by Chinese online media outlet LatePost, TikTok made more than $1 billion in total sales in the first half of 2022 — equivalent to more than half of the RMB 12 billion GMV goal the company set for its e-commerce business this year.

The sales growth achieved by TikTok was mainly driven by its Southeast Asian markets, especially Indonesia — the largest e-commerce market and economy in the region. TikTok Shop already had tens of thousands of sellers in the country, most of whom were micro, small, and medium-sized enterprises, by November 2022, said Desey Muharlina Bungsu, fashion and category lead of TikTok Shop Indonesia, at a TikTok Shop event in November.

The reception in the UK, its first market in the West, was quite the opposite. Different work cultures, as well as market conditions, exacerbated TikTok Shop’s woes. The Financial Times said TikTok Shop had “struggled to gain traction” in the country, reporting that influencers had dropped out of the scheme.

TikTok’s e-commerce business hit $200 million in monthly GMV in the Indonesian market, while only $24 million in the UK, LatePost reported.

Consumers were more receptive to live commerce in Southeast Asia, which helped TikTok find success in the region, with a survey conducted by market research firm Ipsos revealing that 71% of Indonesian consumers had accessed live commerce events, and 56% had made purchases during such events.

However, Shopee and Alibaba-owned Lazada still dominate most e-commerce markets across Southeast Asia. In Malaysia, Shopee holds 71% of the region’s overall e-commerce web traffic, followed by Lazada at 18% and PGMall at 9%, tech news site Tech Wire Asia said.

TikTok Shop made a quiet test debut in the US in November 2022. The short video platform’s ambitions to push e-commerce business in the US market appeared cautious and low-profile, with no officially confirmed full rollout, and only brands or merchants with an invitation code can sign up.

Meanwhile, it remains to be seen how well American consumers embrace the new shopping feature that enables merchants, brands, and influencers to showcase and sell products directly via in-feed videos.

Alibaba

The Chinese e-commerce giant’s overall performance in international commerce retail in 2022 was muted, with revenues in the first three quarters essentially flat compared to the same period a year earlier, up just 1.6% to RMB 31.15 billion.

According to details revealed in the company’s earnings report for the first three quarters of 2022, Trendy, Alibaba’s shopping platform in Turkey, recorded the most significant growth among all other international retail units, maintaining a growth rate of more than 40% in each of the three quarters. A precise order volume was not disclosed.

In the quarter ending September 2022, Southeast Asia-focused Lazada’s order growth posted its first year-over-year decline in orders in two years, which Alibaba said was largely affected by a lifting of Covid-19 restrictions that lured consumers back to offline channels. The platform saw exponential growth in the January to March period in 2021 as the initial Covid wave forced many people to shop online. Despite a slowdown in growth, Lazada managed to narrow the loss per order by 25% compared to last year.

Alibaba-owned AliExpress recently gained notable success in South Korea, with the app ranked first in terms of downloads in the shopping section in the country’s app store, according to Chinese media outlet The Economic Observer, citing mobile data analytics provider App Annie.

A person in charge of the platform’s Korean market told the media that AliExpress currently has nearly 3 million monthly active users, which covers around 10% of the country’s e-commerce users.

But the tech giant said it faces challenges in Europe amid supply chain and logistics issues resulting from the ongoing Russia-Ukraine conflict. Moreover, the EU’s removal of tax exemptions for cross-border packages under 22 euros also hurt AliExpress’s orders.

Although the Chinese e-commerce giant has been in Europe for more than a decade, AliExpress has captured only a small market share in the region, with 4% in Western Europe at 4% (compared to Amazon’s 20%) while holding 5% in Eastern Europe in 2021, according to Reuters.

ByteDance-owned short-video platform Douyin, China’s equivalent to TikTok, has set RMB 150 billion ($22.2 billion) as its annual target for local life service sales in 2023, twice its actual gross merchandise volume (GMV) of RMB 77 billion in 2022, Chinese media outlet 36Kr reported on Jan. 15. Douyin’s local life services unit head told 36Kr that the figure of 77 billion for last year was inaccurate, but declined to give specific data. 

Why it matters: Climbing sales for local life services – encompassing food delivery, travel bookings, and other retail sales – point to the business becoming increasingly important for Douyin’s revenue growth in 2023 as the platform continues to take on established delivery and life services giant Meituan. ByteDance CEO Liang Rubo previously acknowledged that the company saw slower revenue growth than expected in 2022, while growth in daily active users for its products was also lower than the targets set early in the year.

Details: Douyin is confident of hitting the full-year 2023 sales goal of RMB 150 billion for its local life services unit, as internal estimates show the unit’s GMV ceiling to be between RMB 260 billion to RMB 280 billion, a source told 36Kr.

• The food and restaurant segment comprises half of Douyin’s life services sales target, with in-store business and hotel and tourism expected to bring in RMB 45 billion and RMB 30 billion, respectively.
• The business development team at Douyin’s local life services unit has shrunk from 3,000 to around 1,000 personnel as the video platform pushes more work to help merchants improve their operational capabilities onto third-party service providers, the report cited an unnamed source as saying. Douyin subsequently denied that this downsizing had taken place.
• The local life services division underwent a new round of organizational restructuring after ByteDance put former products and commercialization strategy leader Zhu Shiyu in charge of the unit last October. Notably, the business development team was resegmented by industry, instead of geographic region.
• Douyin’s widespread popularity is largely thanks to its addictive algorithms. A person close to the platform told media outlet Huxiu that each new Douyin user enriches the labeling process, and that this method is also now being applied to local life services. The unit divides users into three categories: people who purchased a certain product, people who searched for, followed or liked a certain product, and potential customers based on their age, work, and lifestyle.

Context: Douyin’s entry into local life services, which began in 2021, is seen as a big threat to industry giant Meituan, which brought in RMB 129 billion in revenue from core local commerce, including food delivery, in-store purchases, and hotels and travel in the first three quarters of 2022.

• Douyin still performs weakly in terms of the order completion rate of its group buy offerings, which at only 60% in 2022 is unchanged from 2021. Meituan’s rate, by comparison, is nearly 90%.
• Douyin users are seemingly still hesitant about the platform’s content-driven group buying feature, in which users purchase coupons prior to consumption via in-feed videos, the 36Kr report noted. Users can apply for a refund if they decide not to use the coupons, but take-up has still been slow compared to Meituan, where users usually buy coupons after completing in-store consumption.
• Some agents in Meituan’s low-tier markets have asked merchants to pick a side as competition hots up, encouraging them to cooperate with either Douyin or Meituan, according to 36Kr.
• In December, China’s three major express courier platforms – JD backed-Dada, SF Express’ SFTC, and Shansong – announced that they would begin providing same-city logistics services for Douyin’s local life services arm in a major expansion of ByteDance’s push in the sector.

All businesses under Tencent’s content unit achieved profitability at the end of 2022, according to a report by local media outlet LatePost. The platform and content group (PCG) unit includes Tencent Video, which turned profitable for the first time according to the report, and Tencent News, which saw a turnaround in the October-December period after a difficult first three quarters.

Why it matters: The division’s profits are largely thanks to Tencent’s ongoing and widespread cost-cutting measures and provide a key insight into how the tech giant intends to weather the macroeconomic slowdown. The several billion in profit from the unit is likely to provide a bright spot in the tech giant’s 2022 annual financial report. However, it does not mean PCG employees can rest easy, with continued profitability remaining far from certain and Tencent CEO Pony Ma previously warning he would cut any part of the business that was unable to sustain itself.

Details: LatePost reported that reaching profitability across the PCG will enable Tencent to “increase its annual profit to several billion yuan” for 2022. Established in 2018, the platform and content division integrates Tencent’s online video business unit (including long-form video platform Tencent Video, short-video app Tencent Weishi, Tencent app store Yingyongbao, and Tencent Comics), Tencent News, instant messaging app QQ, QQ Browser, Sogou search engine, and Sogou Pinyin Input. 

• In 2022, Tencent conducted at least three large-scale layoffs, with the PCG, which has the largest workforce, being the hardest hit. LatePost’s report said employee numbers were down from over 20,000 to less than 10,000 in the division.
• At the same time, the PCG has significantly tightened its requirements for the setting up of new projects. New initiatives, such as an original video project, must now be able to prove they can make five times their cost in revenue to be approved; previously, this requirement was set at twice the cost, a PCG employee told LatePost.
• Brands’ reduced advertising budgets amid a broader economic slowdown are hurting Tencent’s media ad revenue, with LatePost citing a source as saying that variety shows produced by Tencent Video, which rely heavily on such advertising, are essentially now losing money. The long-form video platform is trying to save money on buying original show concepts by shifting to a payment model based on an initial fee followed by performance-related incentives to copyright holders and developers.
• Tencent News, one of the tech giant’s best-known units, has seen a major turnaround after losing money for most of 2022. The unit reportedly returned to profitability in October after it adjusted to focus on high-quality content and algorithm recommendations following Jonathan He’s arrival to head up the team in May.
• The report says that QQ Browser, another unit within the PCG, finally turned profitable after it reduced promotional costs by over RMB 2 billion. The browser holds a small market share of just 4.87% in China, compared to Chrome’s 41.65%, according to traffic analysis website Statcounter.
• “PCG has made a solid step forward in its survival,” Tencent COO Ren Yuxin reportedly told an internal year-end conference, adding that this didn’t mean the unit could slacken off.

Context: Tencent recorded year-on-year declines in both its domestic gaming revenue and advertising revenue in the first three quarters of 2022, after Chinese regulators tightened time limits on young gamers and effectively froze the issuing of new game licenses. 

• There are signs for optimism however, as the government focuses more on the economy after the loosening of Covid control policies, and regulators granted more gaming licenses at the end of 2022.
• In a year-end speech to staff on Dec. 15, Tencent CEO Pony Ma reportedly lambasted areas of the business he deemed to be underperforming, saying “there would not be much time left for them.” 
• The tech giant undertook multiple job cuts earlier last year, with Tencent’s earnings showing that it had 108,836 employees by the end of September, 6.3% lower than in the first quarter of this year.

Tencent’s short-video product WeChat Channels reported impressive growth at its annual flagship event on Tuesday. The unit saw a 200% yearly growth in the total number of video views, and an 800% growth in total gross merchandise value (GMV) from livestream shopping content. 

Why it matters: WeChat Channels’ strong growth in creator numbers and view counts offers a wider basis for monetization plans. Tencent will likely see the short-video unit play a bigger role in its advertising revenue, with CEO Pony Ma recently declaring it “the hope of the whole company.”

Details: The total time users spent on WeChat Channels exceeded 80% of the time they spent on WeChat Moments (a feature similar to Facebook timeline) in 2022. The messaging app hasn’t revealed the amount of time users spend on the Moments feature since 2019, when WeChat founder Allen Zhang said the figure had been roughly the same over the years at an average of 30 minutes per day.

• WeChat saw the total view counts of its video unit increase by 200% from last year, and the number of creators with over 10,000 followers was up 308%.
• WeChat also posted significant growth in its live-commerce business, saying GMV grew more than eight times from last year, and the average unit price exceeded RMB 200 ($29.5), similar to last year’s.
• For livestreaming, executives said the number of users and time spent watching jumped 300% and 156%, respectively. The video unit has already livestreamed multiple concerts by popular singers, speeches by public figures, and major sports events to the public. Last April, the Chinese rock star Cui Jian’s livestreamed concert attracted more than 46 million viewers, setting a viewing record for live online concerts at the time. 

Context: Tencent urgently needs to find a new revenue growth point as it faces slow growth in video games and advertising operations. The company’s overall revenue has declined in the last two quarters. The company’s CEO Pony Ma sees WeChat Channels as a major source of hope for the future of Tencent, with the unit already initiating various attempts to monetize.

• Similar to rivals Douyin and Kuaishou, WeChat’s short-video unit have attempted to accelerate the commercialization process in multiple ways: livestream e-commerce, in-feed ads, encouraging users to tip livestreamers, and charging merchants a 1% to 5% commission fee, which started on Jan. 1.
• Launched in 2020, WeChat Channels positioned itself as a short-video platform for personal video content, largely thanks to its integration with Tencent’s WeChat super app.

Major Chinese video streaming platform iQiyi recently announced a membership price increase and rival Youku began limiting membership logins to a single device in the latest moves by China’s mainstream long-form video sites to try and improve their profitability amid heated competition with short-video apps. 

Why it matters: The push by mainstream video platforms to increase membership prices, limit member account logins, and tighten control over content investment all highlight the struggle of long-form video platforms to achieve profitability as they face increased competition from short-form video apps such as Kuaishou and ByteDance’s Douyin. They also demonstrate the pitfalls of such adjustments: both iQiyi and Youku’s new policies have triggered a wave of user complaints.

Details: iQiyi’s new membership rates have increased by as much as RMB 20 ($2.95). The Baidu-backed video streaming platform said the price increases would help fund better quality content. 

• Long-form video platforms mainly rely on paid membership and advertising revenue generated by content. For iQiyi, membership accounted for 56% of its revenue in the third quarter of 2022.
• Led by Tencent Video, iQiyi, and Youku, Chinese long-form video platforms have increased their membership prices at least twice since the end of 2020. iQiyi’s continuous monthly subscription price has gone up 67% to RMB 25 during this time. Youku raised prices for the first time in five years last June, with some fees increasing by nearly 30%.
• The number of paid members using Tencent Video has been decreasing for five consecutive quarters, with the long-form platform recording 120 million paid users at the end of September, a decrease of 7% on the same date last year. 
• Tencent Video has also tightened the assessment criteria for its content production unit, with investment in TV series and a show’s membership conversion rate now included when evaluating projects, local media outlet Tech Planet cited a producer as saying in a report on Jan. 9. 

Context: With cost-cutting and efficiency measures, iQiyi achieved three consecutive quarters of profitability in 2022, while Youku and Tencent Video’s losses continued to narrow. 

• iQiyi reported a net profit of RMB 187.2 million in the June-September period of 2022, with hugely popular fantasy romance drama “Love Between Fairy and Devil” helping the company attract more than 10 million new paid subscribers, according to the company’s own data.
• Despite iQiyi’s performance surpassing expectations in recent quarters, reports that Baidu plans to sell its 53% stake in the video platform persist.
• After a long-time copyright dispute between short- and long-form video platforms, many of the latter group now allow approved short-video platform partners to edit or produce spin-off videos from their exclusive copyrighted content. LeTV and Kuaishou reached a cooperation agreement in 2022, for example, as did iQiyi withTikTok sister app Douyin.
• Tencent is among a number of mainstream video platforms to have made a significant investment in new content as part of China’s streaming wars, with the firm signing a RMB 1.8 billion ($284 million) deal with Beijing Jetsen Technology, China’s largest film copyright holder, to purchase the streaming right to 6,332 films and TV shows last year.

Freshippo said it achieved profitability with its main grocery brand Hema Xiansheng for the first time in 2022, after seven years of investment, according to an internal letter to employees from Freshippo chief executive Hou Yi seen by local media outlet Jiemian. 

Why it matters: At a time when many other tech-funded grocery chains are still finding ways to break even, the Alibaba-owned chain’s news of partial profitability is a milestone in the ultra-competitive fresh grocery industry.

Details: Hou said that the company had realized “the profitability of Hema Xiansheng,” calling it “a big step for new retail” without revealing Freshippo’s current customers or sales figures. He added that Freshippo aims to serve one billion consumers and reach RMB 1 trillion ($145.2 billion) in sales nationwide in the next ten years.

• Freshippo will continue to expand in the new year Hou said, maintaining double-digit growth in store openings for Hema Xiansheng and its membership store Hema X. Its discount store Hema Outlets aims to complete “full coverage” of all suburban towns in Shanghai by the end of 2023. 
• Hema Neighborhood, the company’s local grocery pick-up business, will gradually shift from a direct to a franchise-based model.
• Hou also highlighted Freshippo’s focus on developing its own branded products in 2022, saying that Freshippo-owned brands already account for 35% of the goods it sells, and will soon exceed 50%. He said he sees those brands as a core strategy of differentiation for the chain. 
• Nevertheless, Hou has also pledged to continue bringing “the best products worldwide” to China, according to a report by local media outlet NBD on Dec. 17, following a European tour in which the executive looked to source beer, chocolate and cookies for the grocery chain.

Context: Freshippo was launched in 2015 as Alibaba looked to leverage its expansive logistics network and enter the fresh produce market. It runs on a model of using offline stores as warehousing, sorting, and distribution centers, in contrast to its competitors’ use of a front-end warehouse model, which often carries higher fulfillment costs. 

• Local life services giant Meituan, which operates an express delivery service for fresh groceries called Meituan Macai, adjusted its strategic focus to “retail plus technology” in 2021, but the new initiatives segment to which Meituan Maicai belongs continues to record huge losses. The segment lost RMB 22.6 billion in the first three quarters of 2022, and made a yearly loss of RMB 38.4 billion in 2021.
• Another Freshippo competitor, NYSE-listed Dingdong Maicai, achieved its first non-GAAP profit of RMB 20.6 million in the April-June period of 2022 but then reported a loss of RMB 345 million in the following quarter. The company’s ability to sustain profitability therefore remains in doubt.
• China’s Covid lockdowns helped drive sales growth for express grocery delivery retailers in 2022. According to a report conducted by consumer insights consultancy Kantar Worldpanel, express grocery sales improved 11.7% in the third quarter of 2022 compared to the same period in 2021, with the frequency of orders placed by users on integrated platforms including Meituan, Ele.me, and JD increasing significantly during this time.

A week after Tencent’s co-founder Pony Ma emphasized that short video is key to the tech giant’s future, the company’s short video service WeChat Channels announced that it is set to charge e-commerce merchants a 1% to 5% commission fee in the coming year, according to a report by local media outlet Tech Planet.

Why it matters: Tencent’s rebounding profit growth in the July-September period after four consecutive quarters of decline is a sign of the company’s gains from its ongoing cost-cutting measures, but finding new revenue streams remains a priority. With 800 million monthly active users, WeChat Channels (a TikTok-like short video platform within the messaging app) provides a clear monetization opportunity.

• Tencent recorded its first-ever quarterly revenue decline of 3% year-on-year in the second quarter of 2022 and a 2% decline in the following quarter. Weak online advertising revenue was the main factor dragging down the company’s growth.

Details: The total value of live commerce sales generated from WeChat’s short video platform is between RMB 40 billion to RMB 50 billion ($57.5 billion to $71.9 billion), a service provider close to the unit told Tech Planet. 

• The report said Tencent’s short video platform will charge different service fees based on different categories, with the highest rate of 5% applying to personal care, underwear, sports and outdoors, baby and maternity, and home and kitchen.
• Tencent is offering new merchants preferential policies, with the commission reduced to 1% for transactions of RMB 1 million or less during the first 30 days.
• TikTok’s sister app Douyin has been charging 1% to 10% for technical services fees since February 2020, while rival Kuaishou requires merchants to pay 5% of the actual transaction value of an order.

Context: Tencent has seen users’ total time spent on WeChat Channels exceed 80% of the time spent on WeChat Moments (the app’s friend feed). The total number of viewers of video on the platform increased by 200% compared to the same period last year, the firm’s President Martin Lau said on the company’s second-quarter earnings call.

• WeChat’s video unit set up a live-commerce team last July, with its daily transaction value reportedly reaching RMB 100 million for the first time in September.
• In addition to the emerging role of the e-commerce business, video account ads are also being regarded as a major way for Tencent to expand its revenue. Lau said he expected quarterly revenue from in-feed ads to surpass RMB 1 billion in the fourth quarter.
• WeChat has launched a variety of advertising formats for businesses, including WeChat Moment ads on users’ friend feeds, official account ads, mini-program ads, video account ads, and search ads, with two to five options in each format.

Richard Liu, founder of Chinese online retailer JD, is set to become more involved in the daily management of the company in 2023, according to local media outlet Huxiu, whose report cited an unnamed source.  

In a recorded company meeting, the firm’s former CEO told staff that the company should refocus on the low-price strategy that helped it rise to prominence, while expressing frustration over executives’ tendencies to exaggerate their own performances. Many staff were surprised by Liu’s direct tone, the report noted, adding that he used phrases such as “feeling cheated by some mid-level leaders.”

Why it matters: JD is facing intense competition from cut-price e-commerce platform Pinduoduo and the growth of social e-commerce at companies such as short video giants Douyin and Kuaishou. JD’s yearly revenue growth rate has slowed from 20% in the first quarter of 2022 to 3% and 5% in the second and third quarters of the year, a significant drop from last year’s 36% annual growth rate. 

• Although Liu stepped down as JD’s CEO in April this year, he has seemingly retained plenty of control, launching a series of drastic actions in recent months, including giving more benefits to grassroots staff, cutting senior executives’ salaries, and making major personnel adjustments. 

Details: In his nearly 90-minute speech, Liu criticized what he claimed was the company’s currently out-of-focus strategy and overall organizational inefficiency, according to Huxiu’s report.

• Liu pointed out that competitive pricing is the key strategy of JD and that the company should focus more on how its products are being priced.
• Some of JD’s business teams have already removed the “per customer transaction” target from employees’ key performance indicator, a move in line with Liu’s emphasis on the value of “low price”. Previously, pursuing higher unit prices was a key goal for these teams.
• Liu also expressed frustration with how some top management figures had allegedly dressed up results with PowerPoint slides and new terminology. “Then you find out they’re liars,” Liu said, highlighting that the company’s results had fallen far short of its goals.
• The billionaire founder reportedly asked management executives to “return all strategies to cost, efficiency and experience.”

Context: Liu’s emphasis on a low-price strategy quickly gave JD a foothold in China’s booming e-commerce market in the company’s early days, but it was also the main reason behind the company’s persistent loss-making. The Beijing-based e-commerce giant didn’t achieve an overall full-year profit until 2019.

• Richard Liu began to distance himself from his JD management role in late 2019 after facing sexual misconduct charges in the US. The case was settled in October, after he reached an undisclosed agreement with his accuser. 

Tencent’s founder and CEO Pony Ma has warned employees that any part of the business could be shut down if it underperforms, adding that short video is key to the tech giant’s future. Ma made the remarks at a Dec. 15 internal staff meeting held online. Part of his speech was first reported by the Chinese news outlet Jiemian on Thursday.

Why it matters: Focusing on profitability has become even more important as Tencent’s core revenue streams in advertising and gaming have been hit by the macroeconomic slowdown and Chinese regulators’ tightening of gaming limits for young people. Tencent’s billionaire co-founder insisted the company should make cost-cutting a long-term habit, a clear bellwether for current sentiment in China’s tech sector.

Details: Pony Ma, who rarely expresses frustration at internal meetings, was unrelenting in his criticism of some of the company’s best-known and established units, such as Tencent News, according to Jiemian’s report. He also emphasized that Tencent should continue to focus on its core businesses while making short videos its new priority.

• For Tencent News, Ma stated that if the business couldn’t be self-sustaining, “there would not be much time left for them.” Ma did note however that the unit had begun to turn around in October after he made a “high demand” regarding profitability to Jonathan He, the new Tencent News head, who replaced Wang Shimu in May.
• Ma indicated that he expects Chinese regulators to continue issuing limited numbers of video game licenses, asking the firm’s gaming unit to focus on making high-quality games and “not to waste any chance of getting a license.”
• According to Jiemian’s report, Ma told employees that he regards WeChat’s short video channel as “the hope of the whole company”. He said Tencent will incorporate e-commerce features into its short video channels in the near future. He also said that the rapid development of short video in recent years is forcing the company to adjust its investment strategy for longer-length videos.
• Ma reportedly went on to turn his attention to what he described as the “corruption” faced by the internet company, labelling the situation as “shocking”. Tencent fired nearly 70 employees in 2021 over claims of commercial bribery and embezzlement, local media outlet Yicai reported earlier this year. Among the 70, more than a dozen were referred to the authorities for suspected criminal activity.

Context: In the April-June period this year, Tencent posted its first quarterly revenue decline since it went public in 2004, with revenue falling another 2% year-on-year the following quarter. Tencent’s core gaming revenue and revenue from its online advertising business both recorded year-on-year declines in the first three quarters of 2022, hit by China’s economic slowdown and ongoing regulatory scrutiny.

• Ma’s remarks followed another round of layoffs at the company in November, with Reuters reporting the layoff affected Tencent’s video streaming, gaming, and cloud businesses. The tech giant undertook multiple job cuts earlier this year, with Tencent’s earnings showing that it had 108,836 employees by the end of September, 6.3% lower than in the first quarter of this year.
• Tencent has shut down at least 16 products in 2022, including digital collectible platform Huanhe, video player QQ Player (which had run since 2008), and free WiFi software Tencent WiFi-Manager. It also cut 29 games, four of which have been online for more than a decade, according to local media outlet Times Finance (in Chinese).

On Tuesday, Chinese electric-vehicle maker Nio announced that certain data related to its users and vehicle sales in China before August 2021 had been leaked and was being illegally sold by third parties on the internet.

Why it matters: Nio said in its statement that it deeply regrets the incident. The company also said it has set up a dedicated hotline and an email address to respond to the data leakage. Moreover, a Nio customer service representative told Chinese media CLS (in Chinese) that it will not take the initiative to seek out customers to compensate but will take responsibility for the losses incurred. 

• The alleged cyberattack on Nio comes at a time when Chinese authorities are demanding companies step up efforts to protect personal information and strengthen corporate responsibility. 

Details: The EV maker said in the Chinese version of the Tuesday statement that it received an email on Dec. 11 from hackers demanding $2.25 million worth of bitcoin in exchange for not disclosing Nio’s internal data.

• “Nio deeply regrets that this incident happened, and will continue to work with government authorities to investigate the incident,” the Shanghai-based company said in the statement, adding that it was committed to protecting data security and the privacy of its users.
• In April, the auto manufacturer reported that one of its employees used the company’s internal server to mine Ethereum, which it says had affected the security of Nio’s system and business information.

Context: Automakers are facing increased threats from data breaches and their impacts — affecting customers’ lives and bruising companies’ reputations.

• Japanese automaker Toyota admitted in October that the personal information of nearly 300,000 customers had been leaked after one of its development subcontractors improperly handled the source code of the auto manufacturer’s official connectivity application T-Connect.
• In August, German auto parts manufacturer Continental said it had been targeted by a cyberattack that resulted in 40 GB of files being stolen. Bloomberg cited Germany’s Handelsblatt newspaper as saying that the leaked data may include information related to customers of Volkswagen, Mercedes-Benz, and BMW.

As China rapidly dismantles its Covid zero measures that have gone on for almost three years, consumers are feeling a number of major impacts. Notably, fever-reducing drugs and rapid antigen test kits are in short supply through both online and offline channels, especially in major Chinese cities. Backlogs in courier services, delays in food delivery, and even the accumulation of trash in neighborhoods are now also being witnessed in Beijing, one of the first batches of cities seeing wide infection, and a growing number of other cities.  

Last week, Chinese authorities began loosening the country’s stringent Covid-19 policies, which have helped keep infections low since the initial pandemic outbreak but have also led to reduced individual movement and shocks to the economy. In the latest sign of change, China’s National Health Commission announced on Wednesday that it will no longer count asymptomatic cases, saying accurate data is now impossible to capture given the reduction in mass testing. 

While some analysts are hopeful the shift in policy will help revive China’s economy and remove some of the recent supply chain disruptions in the country, consumers in major urban centers are experiencing a particularly bumpy period of adjustment.

Rush for fever drugs 

Drugs used to significantly reduce fevers, including Ibuprofen and Tylenol – as well as canned peaches and lemon-related foods that are rich in Vitamin C – are currently out of stock on online shopping platforms such as Taobao and JD.

The shortages have led consumers to explore creative ways to buy these essentials for the ongoing Covid-19 winter wave.

Early this week, some users on social e-commerce platform Xiaohongshu went viral for sharing a little-known method for buying fever and cold drugs from pharmacies in remote areas at the original price.  

One Xiaohongshu user claimed that people could easily get Ibuprofen when modifying their location on life services platform Meituan to counties in the southwest of China in provinces such as Yunnan, Sichuan, and Guangxi. They could then ask couriers to pick up the goods from the pharmacy and mail them to their home location, albeit with a delivery wait of two or three days.

While such a move allows people thousands of miles away to get the fever drugs that are now scarce in many Chinese cities, it has led to a succession of stock-runs in more remote areas.

Users were unable to search for content related to purchasing drugs in other places in Xiaohongshu from Tuesday afternoon, according to the Chinese media outlet Jiemian.  

Strict nationwide controls have been imposed on individuals buying antipyretic, cough, antiviral drugs and antibiotics since the beginning of the Covid pandemic, with authorities focusing on finding infected persons as early as possible. Anyone looking to purchase these medicines has been required since early 2020 to register their personal details with the pharmacy selling them. 

In January in Beijing, for example, new rules required purchasers of such drugs to undergo a nucleic acid test within 72 hours or receive a risk alert preventing them from entering public places.

Such curbs have dissuaded many from buying these drugs in the last two years, but with Covid infections now surging across the country, demand for the products has suddenly sky-rocketed.

Saya, who lives in Shanghai, told TechNode that a friend of hers working in Hong Kong has recently started to help people on the mainland who can’t buy over-the-counter drugs – including antigen test kits and cold medicine – from local pharmacies. The friend then packages the medicine up and sends the goods by courier to the buyers, who can expect to receive them in as little as two weeks for a shipping fee of around HK$ 200 ($26).

Meanwhile, Hong Kong newspaper Ming Pao reported early this week as saying the panic buying among mainlanders has already affected the city, with local pharmacies also running low on fever-reducing drugs.

According to The Paper, Meituan’s medicine channel has launched a “city-wide drug search” feature in Beijing, Shanghai, and six other cities with soaring demand.

Delivery services under pressure

China’s sudden reopening has also presented on-demand delivery and courier service providers with multiple new challenges. 

In addition to the rush to buy fever-related drugs, consumers across the country have turned to online delivery services for daily necessities, with few willing to visit high-density locations such as supermarkets and shopping malls. In addition to this sudden uptick in demand, employees responsible for sorting and distribution at courier firms are themselves testing positive for Covid, causing staffing shortages.

As of Dec. 11, more than 400 distribution points nationwide were still closed, according to an official statement from the State Post Bureau.

More than 1,000 couriers temporarily mobilized by e-commerce giant JD arrived in Beijing on Wednesday, aiming to help ease delivery issues in the city. The company says hundreds more will follow this week.

Several Beijing residents told TechNode that they can still order take-out on Meituan and Alibaba’s Ele.me as usual, but that the delivery time is longer than before. – Some said that food deliveries that used to take an average of 40 minutes to receive now have a wait time of at least 90 minutes.

In an attempt to stabilize its services in Beijing, Meituan is reportedly hiring part-time couriers. Meanwhile, the food delivery has said it is providing couriers with antigen test kits, ibuprofen, and VC effervescent tablets in 23 cities.

For Alibaba-owned supermarket chain Freshippo, half of the clerical staff in Beijing have been reassigned to support positions like packing, with some store employees working part-time as delivery riders, local media outlet China Times reported on Tuesday.

As much of the world grapples with slow growth and high inflation in 2022, Hurun Research Institute’s annual Global 500 list shows the damage that has been inflicted upon the world’s top companies in the past year. 

The top 500 companies lost $11 trillion — a 19% drop in valuation from 2021 and equivalent to all of the value they created last year. Energy companies enjoyed strong growth, while retail and e-commerce were the hardest hit. Companies from four countries accounted for 80% of the loss: US firms lost $5 trillion, Chinese firms $2.9 trillion, and German and Japanese businesses lost $600 billion each. 

Overall, 35 Chinese companies made the list in 2022, 12 fewer than the previous year. Sixteen companies dropped out of the list, including some notable leaders in their sectors such as short video platform Kuaishou, pharmaceutical company WuXi Biologics, electric vehicle maker Nio, ride-hailing giant Didi, and video content platform Bilibili. 

Four Chinese companies made onto the list for the first time. They are: Shein, Webank, JD Technology, and Tongwei.

Here’s what you need to know about the four new entrants: 

1. Shein

Ranking: #355

Fast fashion retailer Shein broke into the Hurun Global 500 list for the first time with a valuation of $40 billion, ranking at number 355.

Formed by Chinese entrepreneur Chris Xu in 2008 as an online wedding dresses platform, the business expanded to women’s fashion and took on the brand name Shein four years later. Today, it has become one of the biggest names in fast fashion.

The e-commerce site was valued at approximately $15 billion in 2020, according to figures from PitchBook Data Inc. cited in the Wall Street Journal; the US newspaper also stated that Shein’s valuation has risen nearly sevenfold in two years, hitting $100 billion this April. Shein’s total sales are expected to grow by 50% to $30 billion in 2022, the Wall Street Journal cited a source close to the company as saying in early November.

Various factors contributed to Shein’s rapid rise: low prices, a constant flow of new products per day, and popularity among TikTok users.

Shein is able to maintain lower prices than rivals Zara and H&M as it sells most of its products directly to consumers. The firm produces 700 to 1,000 new products in small batches per day, with mass production carried out only when an item sees high sales volume.

The fast fashion platform has received 7.5 billion views on TikTok with the hashtag #Sheinhaul, well ahead of the 4.2 billion views for #Zarahaul.

2. WeBank

Ranking: #433

As the first private internet bank in China, WeBank has been valued at $33 billion according to the Hurun Global 500 list.

Co-founded by Tencent in 2014, WeBank has attracted a significant number of users in a short period of time, relying on the tech giant’s messaging super apps WeChat and QQ. The digital bank posted more than 320 million active users by the end of 2021.

Weilidai and Weiyedai are the two main services the Shenzhen-based firm profits from; the former targets micro loans to individuals and the latter provides loans to small businesses. WeBank also offers auto loans.

According to Webank’s 2021 annual report, it achieved a revenue of RMB 26.99 billion that year, with net interest income accounting for 66.6% of total revenue. The internet bank recorded a net profit of RMB 6.88 billion in 2021, up 38.9% year-on-year; for comparison, Alibaba-backed MYBank posted RMB 2.09 billion net profit in 2021.

3. JD Technology

Ranking: #483

As the fintech arm of e-commerce retailer JD, JD Technology was reorganized in January 2021 on the basis of the former JD Digits, JD Cloud, and artificial intelligence units. The company mainly provides digital solutions to financial institutions and enterprises as well as local governments.

JD Digits filed for IPO on Shanghai’s Star Market in September 2020, with a valuation of up to RMB 200 billion. However, the firm later withdrew its IPO application in the middle of the process after Ant Group’s abruptly terminated IPO brought regulatory uncertainty to the country’s fintech sector.

The main source of revenue for JD Digits is its financial businesses. According to the prospectus filed by the firm at the time, it recorded a total revenue of RMB 10.33 billion in the first half of 2020, of which the revenue of two credit products – JD Jintiao and JD Baitiao – was RMB 2.64 billion and RMB 1.79 billion respectively, accounting for a combined 43% of the total revenue.

Reuters reported last month that the JD fintech unit is seeking Chinese regulatory approval for a new attempt at a Hong Kong listing as soon as the end of this year, adding that the size of the IPO is likely to be smaller than the previously suggested $2 billion.

4. Tongwei Co. Ltd

Ranking: #483

Based in the southwestern Chinese province of Sichuan, Tongwei is mainly engaged in the production and sale of agricultural feed. The company is also the world’s largest polysilicon supplier.

In the first three quarters of 2022, Tongwei achieved a net profit of RMB 21.73 billion, 1.65 times that of the last full year. The figures saw Tongwei better LONGi Green Energy Technology, the leader in the solar photovoltaic industry. LONGi posted RMB 10.98 billion in net profit in the January to September period, compared with a net profit of RMB 9.09 billion for the full year of 2021.

Tongwei attributed its rapid growth in the past two years to the continued strong market demand for high-purity crystalline silicon products, which has driven up market prices significantly.

The price of silicon materials has increased by 315% in the past three years, from RMB 73/kg in early 2020 to RMB 303/kg in the third quarter of 2022, according to Chinese financial and stock information provider Eastmoney.

Meanwhile, the company’s solar cell unit – which makes the core component for photovoltaic power generation – saw significant year-on-year growth in production and sales, enabling it to maintain strong market competitiveness.

Chinese bubble tea chain Naixue (formerly known as Nayuki) has acquired a 43.64% stake in rival Lelecha for RMB 525 million ($75 million), becoming the largest shareholder in the company, Shenzhen-based Naixue announced on Monday.

Why it matters: Together with HeyTea, Lelecha is one of Naixue’s direct competitors with similar brand positioning – and the move is a sign of consolidation in the new-style tea industry against the backdrop of a macroeconomic slowdown and consumers tightening their spending. 

Details: Naixue’s acquisition of a 43.64% stake in Lelecha will make it the company’s largest shareholder, though a statement from Naixue made it clear that Lelecha will continue to operate independently. Naixue’s equity acquisition price values Lelecha at around RMB 1.2 billion ($171.5 million), a 30% cut from the RMB 1.71 billion valuations reached by the company during its latest financing round in July 2020.

• The consolidation comes after both companies have been affected by Covid resurgence and related control measures this year in China. Naixue posted revenue of RMB 2.05 billion in January to June period, down 3.8% from the last year, while it saw operating profit plunge 49.2% to RMB 196 million during the same period. The firm’s share value has fallen more than 55% since its debut last June.
• Chinese media 36Kr reported that Lelecha was breaking even before the Covid-19 outbreak, but Naixue’s announcement on Monday showed that during the pandemic, Lelecha losses after tax totaled RMB 20.6 million and RMB 18.2 million in 2020 and 2021, respectively.
• The acquisition announcement also disclosed that Lelecha has separate plans to list in the US or Hong Kong in the next five years.
• Naixue recently changed its name from the Japanese-sounding Nayuki to its Chinese pinyin, joining a trend of mainland Chinese companies who once imitated Japanese counterparts in “de-Japanifying” its brand. 
• To find new growth points, Naixue made an unexpected move this July by introducing Naixue coin and virtual stock linked to its actual stock price, allowing consumers to enjoy bubble tea while making investments. The company also launched ready-to-drink products earlier this year, following a similar move by rival HeyTea.

Context: China’s new-style tea market has boomed in recent years, with the overall market size expected to reach RMB 200 billion by 2030, up from RMB 77.29 billion in 2020, according to iiMedia Research.

• Chinese tech media outlet Linexian Insight cited data from consulting firm CIC and ranked HeyTea as the country’s most popular high-end new-style tea brand in 2020, comprising 27.7% of the market, followed by Naixue with a market share of 18.9%.
• The major competitors in the market continue to eye expansion as a path to growth. Naixue operates a total of 973 stores nationwide, a number that will rise to more than 1,000 by the end of the year. HeyTea, which previously adhered to a direct sales model, recently announced it would begin to welcome franchises. Meanwhile, Lelecha is expected to expand its current 140 stores to 158 before the Spring Festival in late January.
• HeyTea and Naixue, which position themselves as high-end brands, reduced 16% to 23% of their average beverage prices at the beginning of 2022 as they looked to attract a broader consumer group.

Tencent-backed Tims China, the Chinese venture from coffee giant Tim Hortons, saw its revenue increase 67.9% to RMB 182.1 million ($25.5 million) for the third quarter of 2022, while its net loss widened by 72.4% from last year to RMB 195 million, according to the firm’s first financial report since listing on the Nasdaq following a SPAC merger in September. 

Why it matters: The nearly 70% revenue growth in the third quarter shows the Chinese arm of Canadian coffee shop Tim Hortons’ aggressive expansion plan has already translated into sales figures, with the company’s adjusted store earnings margin seeing an increase of 4.1%. However, it remains to be seen whether Tims China can maintain the momentum.

Details: Tim Hortons has a total of 486 stores in China as of September, covering 27 major cities. Tims China opened 46 new stores between June and September, on average opening one store every two days.

• The company’s operating expenses grew significantly with the increase in the number of stores nationwide. Company-operated store costs and expenses increased by 36.3% to RMB 299.9 million in the third quarter, while its marketing expenses saw a 70.5% increase to RMB 24.9 million, with the figure accounting for 8.1% of total revenue.
• Covid resurgence and strict control policies in China continue to hit retail sales in the country. Tims China reported reduced operating hours and temporary store closures in the quarter. The financial report pointed out that the firm temporarily closed an average of approximately 23 stores per day during the period, though this was better than the 138 stores closed per day during the previous quarter.
• Lockdowns have also led retailers in China to become more flexible with their sales channels. Tims China’s home-delivery orders recorded an increase of 111.1% compared to the same period last year as consumers’ reliance on delivery services soared.

Context: According to Chinese market research firm iiMedia Research, the market size of China’s coffee industry is expected to maintain a 27.2% annual rise in growth to reach RMB 10,000 billion by 2025. The huge growth potential of the Chinese coffee market has led major domestic and international coffee brands to regard the world’s second-largest economy as a significant growth frontier. 

• Tim Hortons’ competitors in China are also expanding in a yet-to-be-fully penetrated coffee market. Starbucks opened its 6,000th store in the country this September, and local coffee brands backed by domestic venture capital including Luckin, Seesaw, and Manner Coffee have all witnessed huge growth in the past few years.
• As it continues to expand its number of stores, Tims China is also actively partnering with local grocery retailers to leverage their influence to create new avenues of revenue growth. For example, the coffee shop operator plans to bring bottled coffee drinks to Alibaba’s Freshippo consumers in China starting this December, following similar moves by Starbucks and Costa, whose bottled drinks are available in convenience stores and supermarkets in most major Chinese cities.
• Statistics from market research company Statista show that Starbucks Coffee held the largest share of the freshly ground coffee market in China at 36.4% in 2020, followed by Luckin Coffee and Costa with 6.8% and 2.3% respectively. Tim Hortons held just 0.5% at the time.

Major Chinese tech companies like Xiaomi and Baidu are increasing their offerings in fictional short video series, an area in which established short-video platforms Douyin and Kuaishou excel. These short dramas are typically low-budget, under 10 minutes per episode, made for verticle viewing and target mobile users. Many of these short video dramas are adapted from web fiction, some are original content. 

Local online media Tech Planet reported on Monday that ByteDance, Baidu, and Xiaomi have recently increased their offering in short video series and are looking to “deeply cultivate the online literature and short drama industries”.

Why it matters: The adaptation of web fiction and online literature into new “mini-dramas” offers Chinese internet companies a new model for monetization amid sluggish advertising growth – potentially attracting new users and increasing time spent on the app. Tencent, Kuaishou, and Alibaba are all considering expanding their presence in the sector according to the report.

Details: The report said that Baidu, Xiaomi, and ByteDance are keeping the production cycle for these short video series within 10 days, with production costs mostly within hundreds of thousands of yuan (under $1,400). 

• The report said Xiaomi has recently launched an app called “Duohua short video (our translation)” allowing paid users to watch short video series, which are still mainly provided by third parties. The Chinese phone vendor acquired e-reader service provider Duokan Technology in 2012 and now offers third-party web novels through the app.
• Baidu’s online free novel app Qimao also plans to start a short video business, and has been hiring related talents recently, the report said.
• TikTok’s parent company ByteDance started its online novel business in 2015. Its free literature app Tomato Novel has reached 93.27 million monthly active users as of December 2021, and the Beijing-based firm also has at least eight paid novel apps. The company uses Douyin, which has more than 600 million active daily users, to distribute short video series.
• Douyin also sees the online novel business as a new way to tap into more potential users, with TikTok’s sister platform testing a dedicated novel channel on the homepage of its tablet app this June, which allowed users to select and read e-books. 
• Short-video platform Kuaishou also excels in short video series. There are more than 2,000 series with over 100 million views on the platform, with genre spanning from romance, country to animation.
• Kuaishoul also launched its first novel app Kuaishou Free Novel this September.
• Kuaishou and Douyin have already launched numerous short series, with the former stating in its creator meeting held in July that the number of daily users watching Kuaishou mini-series has surpassed 260 million, and half of these users watch more than 10 episodes on the app every day.
• Chinese long-form video platforms, including Youku, iQiyi, and Tencent video, have also invested in short series productions and added a quick link to this content type on their apps’ home pages.

Context: China’s web literature market size has exceeded RMB 30 billion with 502 million users by the end of 2021, according to a report conducted by the Chinese Academy of Social Sciences.

• Major internet companies recorded a slowdown in advertising growth amid sluggish macroeconomic environment, for example, Kuaishou posted a 6.2% growth in advertising revenue in the third quarter, compared to a 32.6%, 10.5%  growth year-over-year in the first and second quarter this year, respectively.

More than 20 small- and medium-sized digital collectible platforms in China are shutting down as funds and interest dry up in the industry, Chinese media outlet Caijing reported on Wednesday. Due to the country’s strict rules regarding cryptocurrencies, Chinese platforms refer to NFTs as digital collectibles. 

“The nature of NFT platforms determines that its profit model depends on liquidity,” Liu Yang, a counsel at Deheng Law Offices in Beijing, told TechNode. “Due to the lack of new funds to enter this industry currently, the fees for platform profits are far from able to cover the users’ losses, and the collapse is inevitable.”

Chinese regulators have yet to take a clear stance on NFT trading. It is still allowed in the country. However, in April, with the rising popularity of NFTs in China, there were warnings from three official banking associations to make investors aware of fraud associated with investing in NFTs.

Why it matters: Bigger platforms like Tencent have recently pulled out some NFT projects. The new closing wave highlights the slowdown of hype around digital collectibles and the difficulties of maintaining investment amid regulatory uncertainty. 

In July and November, Tencent News and QQ music shut down their NFT trading feature without any advanced notice. And in August, Tencent closed its digital collectible platform Huanhe only a year after launching. Huanhe strictly limited non-profit transfers to other users. At the same time, most of the platforms allow buyers to trade their collectibles privately after purchase, offering the opportunity to profit from these digital collectibles.

Huanhe gave users two options when it decided to shut down – a full refund or continuing to hold collectibles, but it was difficult for small- and medium-sized platforms to provide full refunds, with most of them only refunding 5%-30% of the original purchase price.

Half of these closing platforms were set up within six months before shutting down, records on Chinese corporate data provider Qichacha show. In their announcements, most platforms attributed dwindling users as part of the reason for exiting.

Such a slowing trend has been evident since this summer. According to local media outlet Jiemian, Huanhe’s newly released digital collections had been slow to sell since June, which is quite a different situation from the platform’s earlier collectibles, which sold out in just a few minutes.

Many users have been negotiating with the platform, trying to recover their losses with minimal success. 

Xiaoye is an investor in a platform that has only been in existence for two months, and the platform announced on Oct.31 that it will only buy back 10% of the initial cost of the collectibles.

Xiaoye told TechNode that he learned about this platform through a WeChat group, where someone said collectibles would appreciate in value after users are able to trade in the secondary market.

“But after investing almost RMB 1,000 into it, the collectibles that I held were at a price far below the initial price,” Xiaoye said, adding that he cannot accept only getting 10% back and he will continue to complain.

In China, it’s not a difficult task to build an NFT platform. Through a quick online search, TechNode found a company that promises to build an NFT platform business. One of the firm’s staff said it only takes RMB 39,000 ($5445) to build an H5 site supporting NFT trading, and it can be active in as little as three days.

The number of digital collectible platforms reached 2,303 as of Nov.15 in China, according to a report by think tank 01Caijing.

The platforms make money through the initial price of collectibles, as well as by commission, which is generally 5% of the secondary transaction price. By comparison, the maximum commission charge for stock trading is 3‰, and crypto exchanges generally charge 0.2%.

ByteDance-owned Douyin has achieved its yearly target set for local life service ahead of schedule, reaching RMB 50 billion ($6.98 billion) GMV in October, Chinese media outlet 36Kr reported, citing several unnamed sources.

Why it matters: The short video app, which has more than 600 million daily active users, introduced functions like ordering food and tickets, and booking travels directly into it. These moves put the content giant in direct competition with Meituan and Ele.me — two established local service players.

Details: Douyin’s local life unit has now provided a variety of daily services, including buying food ordering recommendations and sightseeing tickets, and booking hotels, parent-child activities, and sports and fitness events. Users can complete those purchases in the video app. 

• The 36Kr report said short videos contributed nearly 50% to the platform’s fast-growing life services sales, while live-streaming and search contributed 35% and 18% to the total GMV growth, respectively.
• A direct link to purchases can appear in the bottom left corner of a related short video. For example, a user watching a video of a plate of steamed fish might see a link to a nearby restaurant serving the same or a similar dish. Those links can nudge users to place orders without leaving the current app.
• Douyin is also reportedly piloting food delivery and group buying delivery services in the southwestern Chinese city of Chengdu soon. But merchants still need to contact couriers themselves for delivery if they currently get takeout orders in the city.

Context: The popular short video platform is being used by merchants as a new way to get a broader range of consumers, while Douyin is also expecting to accelerate the monetization process from the local lifestyle unit, which has huge development potential.

• The overall market size of China’s internet local life service industry has reached RMB 2.6 trillion, growing 15.1% from a year earlier, according to a report conducted by consulting firm Qianzhan, with the figure expected to reach RMB 4 trillion by 2025. 
• The line between content platforms and retail platforms is increasingly blurring, for example, Meituan also tested a short video function this May. 
• Moreover, established players are seeking partnerships in the hope of defending their advantages. Meituan and Kuaishou reached “strategic cooperation” last December after rival Douyin set up the life service as the company’s core business. In August this year, Douyin and Ele.me also announced cooperation, though it has not yet been implemented.

Correction: an earlier version of this article miscalculated the US dollar amount of the GMV.

Though sometimes not as visible, family offices are having an influential impact on the investment industry, as their existence allows the assets of wealthy families to have a positive social impact while generating financial returns.

At the BEYOND Expo 2022 tech conference, held online in the BEYOND Metaverse, Rochel Leah Bernstein, Founder of RLB Partners; Michael Smith, Partner at Regeneration.VC; and Andrew Rubinstein, Founder of Shorewind Capital, joined moderator Robert Grimaldi, CEO at Ad Infinitum, to discuss how family offices impact the tech industry and explore investment strategies for family offices over the next two years.

Andrew Rubinstein, founder of Shorewind Capital

Family offices play a big role in the tech industry, a lot of them are investors themselves in those big VC funds. I think they do that for two reasons: One, for their own sort of investment returns, so they can kind of invest directly in some of the companies that those venture funds will first invest in and identify the winners. So they absolutely played a role, though they tend to be more behind the scenes, because they don’t have to put in as much effort into marketing, one because they don’t have to go invest or they don’t have to go raise outside capital. And two, their value-add is sort of inherent in their family name a lot of the time, so if you’re a small venture fund you sort of have to position yourself to entrepreneurs, to say we can add value by doing X, Y and Z. If you’re a family office with a big name behind you, you don’t really have to make that pitch as much of the time. So they definitely play a big role both in the sense that they invest in many of those companies directly and in the venture funds that source them.

My sense is that family offices are a little bit more sort of risk-off right now. I think part of that is because they don’t know exactly how to value their current portfolio, because if they were investing in round seeds stages, a lot of those companies probably are a little bit overvalued. And because they’re private companies, they don’t really have to get remarks until they go and raise subsequent funds, so a lot of family offices are fairly content to sit on the sidelines right now and say let’s see how the dust settles and kind of evaluate exactly how much our portfolio is right now. For us, we’re a family investment vehicle but we’re also a new venture fund on the block. We launched fourteen months ago and we’re excited that valuations are coming down, we’re also excited that other venture investors are staying on the sidelines a bit more because it means we get more access to deals we otherwise wouldn’t.

As I continue my investment career, I’ll always be someone around the family, I still want to prioritize at the center of that Venn diagram, or drift more to just we’re looking purely for returns. And I think that’s probably something that a lot of family offices deal with because they have flexible mandates where they can invest in anything from an early stage, private to public. So trying to hone in on your vision as a family office, or just as individuals within a family office, I think is pretty key to help kind of guide you towards exactly how you want to spend your time.

Rochel Leah Bernstein, founder of RLB Partners

There’s a risk aversion piece I’m definitely seeing, but the interest in co-invest is very strong. So what I do hear a lot behind closed doors is a desire for people to see each other’s deal flow within families and to sort of share what they’re looking at because there is more trust. The other thing I’ve seen in the last, I would say, two years since Covid-19 is more of an interest in mental health, healthcare, and education, those are spaces that are really shifted. There’s more of a desire to look at edtech and sort of alternative sources of education and more equity around education. From a public health perspective, a lot has changed. I’m seeing more and more offices that are trying to leverage their networks and their resources to solve some really big global problems because everyone was affected. I have a family office friend who came out of Shanghai and was incredibly traumatized by the lockdown. It was shared with me that it had such an effect on his mental health and he is now really interested in some of these spaces he had never looked at before. So I think it left an indelible impact on all of us and how we think about how we leverage capital for social good.

I’ve been passionate about child protection and child sexual abuse prevention and impact investing for years, but I think during Covid-19 I was especially terrified. I use that word deliberately because children globally were essentially locked up, often with people that were hurting them, whether that’s domestic violence or child sexual abuse or poverty or other issues. So I believe that we’re going to see a tremendous uptake in reporting child sexual abuse globally within the next fifteen years. Considering the average length of disclosure of seventeen years, I believe we’re about fifteen years out from a massive crisis. And in such an anemic space, I’ve sort of doubled down on my focus on both raising dollars for advocacy and for lobbying, legislation, and parent education, because I do believe that parents ultimately sit at the nexus of all of the institutions and all of the places that their child exists.  So I feel called to really spend a lot of my time and energy on [the issue].

And it is global, I was actually in Asia recently and someone approached me and said you know I looked you up and we don’t know how to talk about that here and it’s not a topic that we know how to address. And it really hit me very hard, sort of emotionally, thinking about how many children and how many families were affected by Covid-19 from a safety and a mental health perspective. The other thing that we’re seeing increasing worldwide is also suicide and adolescent suicide, and so for me, those are areas that I spend a lot of time on, from an investing perspective, advocacy, and philanthropy.

The last thing I’ll say is that I think we really need to focus as an investment community on unity. We see so much divisiveness and so much heat in our world. I know it sounds cheesy, but whatever ways we can come together and bring our stories and our cultures and what unites us as humanity together for the planet, for humanity, for human health, for our children, for the future, is something that I think would be incredibly important for all of us as family offices and investors and philanthropists to be focusing on.

Michael Smith, partner at Regeneration.VC

When you look at all the different places that family offices invest, it’s a big question. But from our day-to-day within climate tech, it’s actually become a very good time with this recent climate bill, with a lot of momentum on corporate and regulatory, tailwinds.  So we’re seeing a flood of interest coming in and people wanting to learn more and how do they get smart and how do they figure out who are the right managers and the right opportunities to focus on, and where things are really headed. So there are a few bright spots, but overall there’s just a whole heck of a lot of uncertainty and most family offices have that ability to be long view.

I remember a few months back before things were getting really choppy, it was like “oh I’m so over-indexed in venture” because I’m having all these good outcomes and I’m just trying to figure out how to get a better balance to my portfolio construction and things like that. This is changing day by day, but right now it’s been exciting to see all the interest with what we’re doing within the family office community.

We won’t change how we’ve been doing things in the next 12 to 24 months. When I started focusing on the same issue, I got to know what was happening with this crisis in a way that really motivated me to fully focus on doing everything I could to address it. Regeneration in our work with pine valley is really an expression of that, and it’s not a short-term issue. This is very much a long view issue, so our goal is thinking how over the next 10, 20 years, how do we move the needle on putting atmospheric carbon back into natural systems and regenerating, planning, and building more resilient structures and adapting to changes were already feeling right now. So the time is not to slow down now depending on all the different indicators and where they’re going. This is really urgent and important work that we do take it very, very seriously.

E-commerce giants Alibaba and JD kept silent on their Singles Day sales totals this year, the first time they chose not to publicize the data from their gross merchandise volume (GMV) performance. Alibaba said the results were “in line with last year’s GMV performance,” while rival JD claimed its growth rate exceeded the industry average.

Why it matters: The decision of Alibaba and JD, the two main participators in the year-end shopping festival, to not disclose their sales totals is in stark contrast to previous years when both have been quick to trumpet the amount of money brought in. The move comes against the recent backdrop of the Chinese authorities’ reining in of tech companies and could also indicate an underwhelming performance after years of rocketing growth. 

Details: Although the two major players failed to publicly confirm their sales totals, Chinese media outlet Yicai cited statistics from Xingyun Data on Nov. 13 showing that overall sales across all platforms during this year’s Singles Day hit RMB 1.1 trillion ($157.1 billion), up 13.7% year-on-year. 

• Sales from China’s top e-commerce platforms, including Alibaba’s Tmall, JD, and Pinduoduo, increased just 2.9% to RMB 934 billion, Xingyun Data reported.
• The total value generated by the live e-commerce arms of short video platforms Douyin and Kuaishou was RMB 181.4 billion, an increase of 146.1% over the same period last year, according to Xingyun.
• Douyin’s e-commerce arm has declined to release specific GMV figures since it began participating in Singles Day in 2019, instead offering alternative statistics. According to the data provided by Douyin on Nov. 12, the cumulative hours of live e-commerce on the platform during this year’s event increased by 50% to 38.21 million hours compared to last year, with 7,667 live rooms seeing sales surpass the RMB 1 million mark this year.
• Alibaba said in its press release that they saw strong growth this year in categories including sports and outdoors, pet products, collectible toys, and jewelry. 
• Sales of consumer electronics and home appliances also grew across the major e-commerce platforms this year. Mobile phones and home appliances were generally the categories to break RMB 100 million first on multiple platforms, though this is due to the high unit price.
• “A combination of economic and regulatory factors are leading the platform companies to emphasize customer loyalty and sustainability instead of GMV,” Jacob Cooke, CEO of e-commerce marketing firm WPIC, told TechNode. He added that the platforms are also hesitant to celebrate their GMV numbers amid the government’s common prosperity and anti-monopoly drives. Cooke’s company frequently helps foreign brands to sell on Chinese platforms.

Context: Over the past two years, China’s tech companies have been dealing with weak consumption, especially after many local governments imposed strict Covid control measures earlier this year. Data from China’s National Bureau of Statistics showed that the total retail sales of consumer goods were only up 0.7% year-on-year from January to September.

• Logistics is limited in many areas amid rising Covid cases, which has also affected consumers’ shopping enthusiasm to some extent.
• In 2021, Alibaba recorded its slowest-ever growth since the company appropriated Singles Day and turned it into a consumerist festival, with sales increasing 8.5% from 2020 to RMB 540.3 million. Earlier this year, JD also saw the slowest expansion in its GMV total for its 618 shopping festival since it first disclosed figures for the event in 2017.

In the run-up to this year’s Singles Day shopping festival, a number of high-profile livestream stars moved freely between different major platforms like Taobao and Douyin, highlighting newfound cross-platform freedom in China’s online retail sector.

Why it matters: This trend shows Chinese livestream retail sector is being more open amid increased antitrust pressure from regulators. Previously, there was a tacit agreement within the industry that top livestreamers were bound to certain platforms. The loosening provides new opportunities for e-commerce stars, platforms, and for brands.

Details:  Livestreamers being able to sell products across different platforms helps them avoid overdependence on a single platform and also means that they can gain support from other platforms in driving traffic, shorten the time needed to monetize their livestreams, according to a research report by Zhao Lingyi, chief analyst of retail e-commerce at securities firm Shenwan Hongyuan, and cited in Chinese media outlet Chinese Securities Journal on Monday. Livestreamers earn commissions on the products they promote and can also convert virtual gifts from their fans into cash. 

• Ahead of this year’s Singles Day shopping festival, some top livestream stars who used to stream exclusively on Douyin (the Chinese version of TikTok) joined Taobao Live. They include Chinese entrepreneur Luo Yonghao, New Oriental Education’s founder Yu Minhong, and Taiwanese singer and fitness trainer Will Liu (or Liu Genghong). For example, Luo Yonghao alternated with different stand-up comedians from the same company to do a series of e-commerce livestreams on both Douyin and Taobao’s platforms during this period.
• Alibaba said in a Nov. 7 press release that top stars and celebrities joining Taobao Live is “a strong testimonial of its unparalleled commerce infrastructure and holistic solutions for ecosystem partners.”

Context: The livestream e-commerce industry has grown rapidly since the beginning of the Covid-19 pandemic. According to a report released by consulting firm iResearch in 2021, the total revenue of China’s live e-commerce industry will hit RMB 1.2 trillion ($166 billion) by the end of 2022, with the figure expected to increase to RMB 4.9 trillion in 2023.

• Though running businesses on multiple platforms enables merchants to potentially reach bigger audiences, it has also raised concerns over the homogenization of content on e-commerce platforms.
• Alibaba’s Taobao platform has promised more support and cash incentives for influencers and new hosts, and the company says new hosts are a major growth driver, with the pre-sale value generated by this group growing by 684% year-on-year for this year’s Singles Day festival. 
• Chinese regulators have tightened tax scrutiny of e-commerce stars since last year, with top e-commerce influencers Viya and Cherie halting livestreaming after being fined for tax evasion. 
• Since early 2021, Chinese regulators have looked more closely at tech majors’ merger deals and imposed fines on various deals and unfair competition practices. And one of the notable punishments was Alibaba getting fined RMB 12.8 billion in April 2021 over antitrust practices including “forced exclusivity.”

In a world of increasing challenges and uncertainties, women investors are making prudent choices to help build a more resilient future. Yet there is still a lot of work to be done when it comes to diversity in the venture capital industry.

At the BEYOND Expo 2022 tech conference, held online in the BEYOND Metaverse, Helen Wong, managing partner of AC Ventures; Shuo Chen, general partner of IOVC; and Gwendolyn Regina, investment director of BNB Chain, discussed the path for women in the investment field and offered their advice for young entrepreneurs.

Their comments have been edited and condensed for clarity.

Helen Wong, Managing Partner, AC Ventures

When it comes to investment, women do make different results from men. I think women are as capable as men, but in certain areas, women are maybe more in tune with.

In general, I wouldn’t say that there’s a gender bias, I’ve seen people who are very good at analyzing business models and they are female, and I’ve seen very good ones that are male as well. So we just shouldn’t have this gender bias toward investing.

On the whole, there’s no difference between women and men, but there are maybe certain characteristics which are different, for example on the board of a company, female board members I’ve seen tend to have more empathy, they are able to put aside the egos. Generally, many female board members don’t have as big an ego, and they can communicate more effectively.

When I started my career in venture capital in Silicon Valley, I still remember a very prominent male VC who told me that it’s harder to succeed as a female VC because most of the founders were male and they prefer male VCs. So I think it’s sometimes chicken and egg: do you have female GP funds that would invest more in women or would you have more female founders and then make it easier for females to become GPs as well?

When I came to China, it was quite a pleasant change because there were a lot more women in the workforce. Even though we are still the minority, on the whole there have been very successful female VCs in China. I do think that over time, what I’ve seen is that there’s been a lot more awareness of this issue and a lot more emphasis on trying to do the right thing, which is good both for women and as well as for the funds that you may have overlooked a certain demographic group, so I do believe that we’re moving in the right direction.

At AC Ventures, we found that we have 40% of our founders are female and 40% of the ones in high senior management positions are also female. This is without setting up any gender-focused fund and even prior to me joining the firm, so I think that a lot of progress has been made and it would be nice if one day we don’t even have to talk about this topic and we just have no gender bias at all.

Do not let any gender bias prevent you from achieving your dream. You might encounter it, but you know it’s not something that should hold you back, and do see if there are other people that can help you – you don’t have to feel that everything is just falling on your own shoulders, whether it’s child care or other aspects. Find people to help you along the way to mentor you; people have gone through the same challenges as you, so it would be very helpful.

Shuo Chen, General Partner, IOVC

It’s really hard to put stereotypes to what female founders versus male founders are like because I’ve seen folks that break the stereotype, whether female founders or male founders, but at the high level, I would say a couple of things. First, it acknowledges that female founders have received less funding, at least in the US. We’ve seen that actually out of all the venture capital that has been written out just in terms of the proportional split, more money has gone to male founders throughout the pandemic and less money than before in history written to female founders, which I think means that there is an opportunity to identify female founders running startups that are relatively undervalued just because female founders as a population are receiving less capital.

And then the second part is that we’ve seen the data in the US, over a decade-long longitudinal study, that companies that have a female co-founder on the team tend to be 67% more likely to stay alive ten years later than if it was an all-male team.

On a board level, on American boards of public companies, if they have one additional female board member, they are significantly less likely as a company to get into situations of fraud and get in trouble and be persecuted for all of that, so it is proven – whether it is among co-founders or board members – that additional diversity of thought is helpful.

As we think about supporting female founders, we should make sure that we have an equitable system set up from day one. If you keep on building a legacy system, technical debt just builds up further and further, but I have a lot of faith in younger generations not having that diversity debt from day one because I think at least the Gen Z founders who we work with now are much more thoughtful about including a diverse team and when you have a diverse group of co-founders you are more likely to hire a more diverse team of employees. Those kinds of effects ripple throughout the ecosystem.

We should better feature role models like Helen and Gwen here, because it’s really hard to be what you can’t see, and if you never even knew this was a possibility, how can you ever even aspire to be that?

I had no idea what venture capital was for most of my educational career, I think it was really after I had accidentally stumbled into entrepreneurship that I even knew that being an investor was a career path. So getting exposure as early as possible to all these career options and seeing other amazing women is such an important point.

In terms of advice for young entrepreneurs when they start careers, I would mention if relationship building or even the concept of networking feels like too many things, just break it down into a super manageable piece that you feel you can repeat on either a weekly or monthly basis. For example, if it means reaching out and catching up with someone once a month, if that feels manageable, then stick to that and make sure you do it once a month. If that feels like too much, make it once a quarter to reach out to someone and make sure you maintain that relationship, so if you just set one area of focus that you feel is important and helpful to you and stick to that habit and repeat it regularly that adds up to tremendous benefits in the long run, I couldn’t recommend that more.

Gwendolyn Regina, Investment Director, BNB Chain

(Moderator: Shuo brought up a point that females get fewer funds than males when it comes to doing startups. Do you think setting up female-focus funds to support investing in female advanced startups is a good way to promote women’s entrepreneurship?)

Female-focus funds, I mean to each our own right. I think there are many funds without biased agendas and focused on investing in underrepresented minorities, which are all good in different ways.

There’s some systemic bias against underrepresented minorities in general, so I think I probably would not do a female-focus fund, but for people focusing on women-focus funds. Because looking at a targeted segment does really make sure that you’re more open-minded, you’re almost forcing your team and people who are joining your fund to be more open-minded, it’s almost like a key thing if I tell you not to think of a pink elephant, you will think of a pink elephant, right? So not saying that investing in underrepresented minorities, females or others included but more like there is a certain positive to be said about female-focused funds.

(Moderator: In addition to female-focused funds, do you think there’s a better way to promote female entrepreneurship in this ecosystem?)

Many many different ways, and in general we need education on all the stats that show again mentioned. This is education that we need across the board to feed to males as well, so I do think that there is value to just be more inclusive from the get-go and educate the non-represented, the non-minorities essentially, so in this particular case talking about gender, we just need more people to be more aware, because we cannot assume that just because a female you know that there is a lack or know that they’re underrepresented, this is gender-free bias to some extent, so we do need all kinds of people to be more aware of the stuff that we’ve talked about.

And I would say that if you face bias, it reflects more on them than you, so don’t let that affect your own self-confidence. And I would say, in general, people who create bias often do so just because they lack awareness, in a sense ignorance, so doing some education on your part also helps the other person and the other person can be grateful. 

Chinese local service platform Meituan initiated a new round of layoffs involving core business units after cutting up to 20% of staff in April this year, Chinese media outlet LatePost reported on Thursday.

Why it matters: Meituan faces high losses in its group buying business, leading it to continue laying off staff in related units. Meanwhile, the company also significantly reduced its campus hiring starting in September, with the actual number of hires less than half of the 5,000 planned. Chinese internet companies often replace higher-paid employees with cheaper ones to reduce operating costs.

Details: The redundancies mainly affected people from the Beijing-based company’s group buying unit called “Meituan Select,” according to LatePost’s report. 

• This round of adjustment also involves Meituan Select’s management level. Hua Fang, who is responsible for products on the platform, has notably been on a long leave recently. Hua’s position was taken over by Zhang Peng, who previously led the company’s search and recommendation efforts.
• The group-buy unit has been unable to achieve profitability while losses continue to expand. The operating loss of Meituan’s new initiatives reached 48% in the April-June period. Meituan Select was rebranded to next-day delivery supermarket business in October.
• Laid-off employees will be compensated based on their number of years of service to the company plus one month’s salary.
• Meituan is also saving money on employee-related benefits. For example, the report said that some department leaders recently recommended that their subordinates leave work earlier to reduce commuting costs. (The company reimburses taxi fares after 9:30 p.m.) 

Context: After the massive layoffs in April, Meituan’s marketing expenses in the second quarter decreased by RMB 1.86 billion yuan, down 17.1% year-on-year.

• Meituan’s 2021 annual report shows that employee benefits expenses became the second-largest expense, followed by food delivery-related costs, totaling RMB 34.77 billion ($4.8 billion) in 2021, an increase of 61.4% year-over-year. The increase in the number of employees also led to a jump in sales and marketing expenses, research and development expenses, and general and administrative expenses, which rose 46.4%, 41.0%, and 24.8%, respectively, compared to the previous year.

On Monday, Chinese online retailers kicked off the annual November 11 Singles Day shopping festival. The festival, originated by e-commerce giant Alibaba in 2009, has long been a major retail event across the industry. This year, amid a slowing economy, weakening consumer demand, and growing competition from short-video platforms, established retailers are shifting their focus away from chasing high growth in gross merchandise volume (GMV). 

For this year’s Singles Day festival, new e-commerce giants Douyin, Kuaishou, and Pinduoduo are increasing their rivalry with stalwarts Alibaba and JD. The crowded market has given merchants and consumers more choices, while the latter is more concerned about better deals in a year when budgets might be tight. Chinese livestream hosts are also diversifying their appearances as platforms cultivate new stars following the fallout from scandals affecting several top hosts. Moreover, Chinese tech giants are keeping a lower-than-usual profile as they continue to navigate pressure from both China’s tech crackdown and the capital markets. 

Deep discounts amid a competitive market

As China’s largest e-commerce shopping festival, Singles Day is popular with consumers because of its perceived discounts. The major platforms continue to offer straightforward price cuts and faster home-delivery services this year, with the most obvious being that they’re offering the deepest discounts.

“It’s worth for platforms to offer discounts be up as high as possible as Singles Day is always a big headline event for them over massive GMV figures,” said Jacob Cooke, co-founder and CEO of e-commerce and technology consultancy WPIC.

Among some of the main developments for this year’s Singles Day:

• Alibaba buyers get an RMB 50 ($6.8) discount for every RMB 300 spent across its stores, the deepest discount in recent years, compared to an RMB 30 discount for every RMB 200 spent last year.
• JD has launched a promotion on all categories with customers able to get RMB 50 back for every RMB 299 spent.
• Douyin has launched a deposit pre-sale period this year, an initiative introduced by Alibaba in 2018, where buyers can pay a deposit to reserve products ahead of the event, with the transaction completed once the final payment is made on the day itself. Meanwhile, the platform is also offering RMB 30 off for every RMB 50 spent for the first time.

Douyin’s growing presence during Singles Day

While ByteDance’s Douyin is still dwarfed in terms of sales by e-commerce giant Alibaba, its fast growth has made it a notable rival. The platform only took three years to achieve a gross merchandise value of one trillion yuan, a figure which took Taobao 14 years to achieve, albeit in different economic circumstances.

Chinese consumers are increasingly shopping across platforms. In a Singles Day survey by consultancy Bain & Company, 69% of the 3,000 surveyed customers said they planned to shop across three or more platforms, up from 56% in 2021. Some 37% plan to use five or more platforms on this year’s event, the survey found.

Statistics from the e-commerce database Dianshubao showed two leading platforms — JD and Alibaba’s Tmall — accounted for 92.15% of the total GMV generated on Singles Day in 2021. But Cooke said Douyin could grab a significant market share this year. “The platform has proven over the last while that they have been gaining in certain big categories like fashion,” he added

This year, Douyin is targeting an annual GMV of RMB 1.7 trillion according to local media outlet 36Kr, an increase of RMB 1 trillion from 2021.

The TikTok sister app, which has nearly 700 million daily active users, initially drew “new traffic” to its e-commerce business mainly through merchandise from third-party platforms such as Taobao and JD. In October 2020, it stopped directing buyers to other platforms to complete their purchases and accelerated its e-commerce push through in-app features instead. 

Douyin’s growing presence makes it more attractive for brands, and many are planning to invest more in their Douyin presence. Japanese clothing brand Uniqlo has turned to the platform to reach more consumers amid slowing demand in September, offering users a new, direct way to buy Uniqlo merchandise through the app.

Wenjing Liu, a managing partner at e-commerce marketing firm Genuine, said her clients have adjusted their sales strategies this year, hoping to use sales channels like Douyin to increase Singles Day revenue.

“This year, the split will be 70% to 75% on Tmall and 25% to 30% on Douyin, compared to last year when we had 5% to 10% on Douyin and 90% to 95% on Tmall,” she predicts.

Douyin also added shopping to ByteDance news aggregation app Jinri Toutiao ahead of this Singles Day, allowing users to shop within the widely popular news aggregator.

Top livestreamers return to Taobao

After disappearing for three months from June 3, livestream e-commerce superstar Li Jiaqi made a surprise return on Sept. 20. Li and another top livestreamer Viya together generated nearly RMB 20 billion in sales in 2021. This year has been challenging for top livestreamers — in addition to Li’s disappearance, Viya stopped livestreaming after being fined for tax evasion; another top e-commerce influencer, Cherie, also halted her popular livestreams in similar circumstances. They have yet to return.

An Alibaba employee told TechNode that Li Jiaqi’s return had helped bring back a sense of confidence to livestream e-commerce on its platforms and boosted the active stocking of beauty merchants. Li’s team has even created a new TV show to tell customers how they can bargain on prices with big brands.

In addition, more celebrities, influencers, and company executives are entering e-commerce livestream rooms and diversifying their appearances on multiple platforms. 

Ahead of this Singles Day, Taobao poached former Douyin livestreamers including Luo Yonghao, Yu Minhong, and Hong Kong actress Cecilia Cheung. A source who is familiar with the matter previously told local media outlet China Star Market that Taobao had purposefully contacted MCN agencies of stars who have long had alliances with Douyin and Kuaishou ahead of this year’s Singles Day.

In response to why Douyin’s top livestreamers chose Taobao over Douyin, Chui Xue, president of Taobao and Tmall’s industry development and operation center, told Jiemian that it is the norm for merchants to run their businesses on multiple platforms.

The future of Singles Day

Last year, online retailers reported a gross merchandise value of RMB 540 billion, with Alibaba reporting 8.45% yearly growth, its slowest in nine years. 

618, a mid-year shopping festival started by JD, is seen as an essential indicator for sales predictions for Singles Day. This year, the cumulative amount of orders placed on the platform increased by 10.3% to RMB 379.3 billion, the slowest growth rate since the e-commerce giant first disclosed data from the 618 events in 2017.

Two years ago, Chinese consumer spending recovered quickly from the first outbreak of Covid-19. However, it has taken a greater hit this year as pandemic control measures continue and the larger economy slows. In addition to weak demand and sluggish growth, Chinese tech giants have been treading carefully after Chinese policymakers tightened regulations on the sector. Last year, e-commerce giants have tacitly chose to downplay their GMV figures, intentionally keeping a low profile.

Such trends are continuing this year. Taobao has obscured the number of viewers on its livestreams for the first time, with more than 10 million people showing up as simply “10 million +”. Some users who hadn’t updated to the latest version of the app said they could still see more than 460 million people watching Li Jiaqi’s livestream return on Oct. 24, but those with the newest update merely saw “10 million +”. Li’s management company subsequently sent lawyer’s letters to a media outlet it saw as spreading “unverified” data after it reported enormous GMV figures for the sales event. 

From Wenjing Liu’s perspective, Singles Day will still hold a big piece of the yearly revenue, but “other events, channels, and sales strategies are developing fast, and that is where the real growth potential for brands lies”.

While Cooke said Singles Day is still going to be the largest shopping festival day in the world “for a very long time,” adding that he’s never even seen a sense of “going down”.

Pinduoduo’s overseas e-commerce platform Temu has surpassed $1.5 million in average daily gross merchandise value (GMV) after its launching in September, Chinese media outlet 36Kr reported on Thursday. Although the figure fell slightly short of internal expectations, the company remains confident of catching up with or even overtaking rival Shein in the next five years, the report said.

Why it matters: Temu’s goal of reaching total sales of $30 billion in five years highlights its ambition to challenge Chinese overseas fashion retailer Shein. Shein took 14 years to achieve the sales number. 

Details: Temu aims to reach $300-500 million in GMV by year-end, according to 36Kr, citing sources familiar with the matter. The company is also targeting total value of products sold in $3 billion in 2023.

• There are currently around 30,000 merchants on Temu, with 300,000 to 400,000 items being sold in 24 top-level categories. The report cited a Temu employee as saying that the platform is accelerating its attempts to attract more merchants and expanding into more items.
• According to SensorTower, Temu ranked first for downloads in the shopping section of Apple’s App Store in the US on Oct. 17, followed by Amazon Shopping, Shein, Walmart and Fetch Rewards. It currently ranks fifth in the US Apple App Store.
• Instagram and Facebook are Temu’s main customer acquisition channels, with 36Kr reporting that the two platforms both account for 30% of Temu’s traffic. Shein’s cost of customer acquisition on Facebook was around $35 in the first half of 2022, while Temu’s cost was 30% to 40% higher, 36Kr stated.

Context: Pinduoduo’s Temu is regarded as a competitor to Shein, which created a successful business model by selling fast fashion clothing at ultra-low prices through a flexible supply chain. 

• Temu offered substantial discounts to attract new users upon its launch, including 30% off on customers’ first three purchases, free shipping, and even a 40% discount for both people if someone shares a link with a friend. These initiatives have resulted in Temu’s current average loss per order hitting $30, making it difficult to achieve a profit in the short term.
• Temu is also investing heavily in marketing. With an advertising budget of RMB 1 billion ($140 million) in September, Temu’s returns are modest when measured by its average daily GMV. The company has reportedly earmarked more than RMB 7 billion to help push the Temu brand next year.
• While Shein achieved half of its $30 billion annual sales target in the first half of the year, the company’s net profit margin for the period was slightly lower than last year’s 6%. For reference, Uniqlo’s parent company Fast Retailing Co posted a net profit margin of 12.37% in the fiscal year 2022, similar to Zara owner Inditex Group’s figure of 12.1% in the February-July period this year.

Chinese video platform Bilibili has expanded its livestream shopping ahead of Singles Day after launching a shopping zone in the live streaming section on Oct.14, local media outlet Tech Planet reported on Monday.

Why it matters: As Bilibili aims to become profitable by 2024, expanding in livestream shopping aligns with the company’s overall strategy to pursue commercialization. The Shanghai-based company has tested several features associated with the business since last year. Timing the expansion ahead of Singles Day, reflects the company’s desire to use the annual shopping festival to bring a jolt of excitement to its live shopping business.

Details: Bilibili livestream rooms currently offer products from its self-operated stores, as well as from third-party platforms such as Alibaba’s Taobao and JD, a similar strategy that Douyin and Kuaishou applied to their e-commerce business in the early stages to save on supply chain expenses.

• The company’s live e-commerce belongs to the live sector, rather than falling under the e-commerce business structure.
• Bilibili started testing a shopping cart feature in its livestream pages last December in selected live rooms, letting users add items into a shopping cart embedded in livestreams. The feature has now expanded to most live rooms.
• The youth-focused video site is converting content creators into real-time livestreamer through a rewards plan, with the company offering an RMB 50 ($6.9) reward to content creators for the first time they begin live commerce.
• Many of the livestream content has little to do with items recommended in the shopping cart. For example, a content creator started a livestream on “the dream of the red chamber,” while recommended goods in the livestream interface vary from snacks to home supplies and skincare products.

Context: Bilibili’s revenue is mainly composed of value-added services, advertising, games, and e-commerce. E-commerce revenue accounted for 12.2% of the total revenue in the second quarter of this year, up 4% from last year.

• Bilibili has experienced two consecutive quarterly revenue declines in 2022. The company’s net losses have widened in the past two years, with a loss of RMB 6.8 billion last year, an increase of 119% from the year before. In the first half of 2022, the company has already logged RMB 4.3 billion in losses. 
• According to AdChina, e-commerce sales from livestreaming in China are expected to skyrocket to RMB 624 billion by 2023, showing that live commerce still has huge room for growth in the country.

With less than two months to go until 2023, the wildly short video platform TikTok is reportedly setting a goal of reaching more than 1.05 billion daily active users (DAUs) worldwide by year-end. The platform will have to add more than 200 million DAU to achieve this goal.

A TikTok spokesperson told Chinese media outlet LatePost that the company hopes TikTok to be as dominant in the international market as its Chinese version Douyin in China. Douyin’s market penetration rate in its home market is 54%, while TikTok is less than 20% globally.  

After acquiring Musical.ly in the year of its launch in 2017, TikTok exploded in popularity and became the fastest-growing social app. But despite the rapid growth, TikTok hasn’t earned revenue that matches the size of its user base. ByteDance CEO Liang Rubo acknowledged and said last month that TikTok’s monetization has fallen short of expectations.

Unlike Douyin’s unmatched competitive edge in short video and retail in the Chinese market, TikTok faces heated competition from global giants like Google and Meta. In 2021, the platform raked in nearly $4 billion in revenue, mostly from advertising, while Meta’s Instagram, which has 500+ million daily users, made an estimated $47.6 billion in revenue in 2021.

Why it matters: TikTok has amassed over 1 billion monthly active users in just under five years – faster than Facebook, Instagram, and Youtube to achieve this milestone. But from a monetization perspective, TikTok still pales in comparison to these tech giants.

TikTok almost relied on Douyin to provide technical support at the beginning of its attempt at monetization in 2020, hoping to replicate Douyin’s model in its home market for the international market. However, such reliance has slowed TikTok’s monetization since its product requests often get prioritized after Douyin’s. 

Fierce competition from Google and Meta

Similar to social media competitors like Meta, advertising is a key revenue driver for TikTok.

The company officially launched advertising on TikTok in 2020, but due to an initial lack of independent tech support, coupled with strong global competitors, monetizing progressed slower than expected.

According to LatePost, TikTok’s reliance on Douyin’s tech support caused many of its product demands prioritized after Douyin. It wasn’t until 2021 that TikTok started to build its own advertising and support system.

A TikTok monetization staffer told LatePost that the platform has reached users on a scale comparable to Google and Facebook in major markets, but is unable to provide the same level of precision in customer acquisition. This is partly due to Google apps’ and Android phones’ wide reach, which allows Google to better portray its users, thus helping advertisers target their audience more precisely.

Facing TikTok’s sudden rise, Meta has been betting on its TikTok clone Reels since its launch in 2021. Meta CEO Mark Zuckerberg noted that ad monetization for Reels is progressing faster than expected, crossing the $1 billion annual revenue run rate in the April-June period.

Bringing e-commerce to Brazil

TikTok’s e-commerce business recently planned to move up its timeline of entering the Brazil market, shifting from the second half of 2023 to the first half, LatePost reported.

The report added that Huang Yuanjian, former head of internationalization products at ride-hailing giant Didi Global, will be in charge of marketing operations for TikTok e-commerce in Brazil.

The platform will also face competition in Brazil. Bloomberg data refers to MercadoLibre and Lojas Americans holding 48% of Brazil’s e-commerce market share as of 2021, with other e-commerce platforms having a smaller share. Alibaba, for example, has only a 3.2% market share in the country. In addition, TikTok rival Kuaishou also said last month that it has identified Brazil as a priority region for monetization.

On Oct. 16, top leaders of the Chinese Communist Party gathered in Beijing to meet for the 20th Party Congress. The week-long meeting, held every five years, attracts 2,340 delegates from the party to discuss high-level changes and topics, including the nation’s tech developments and strategy.

Chinese President Xi Jinping’s two-hour-long report formed the most significant part of the meeting. He reminded delegates that the next five years will be crucial for China to make breakthroughs in “high-quality economic development, achieve greater self-reliance and strength in science and technology, and make major progress in creating a new pattern of development.” 

China has set out a long-term development goal of realizing socialist modernization before 2035. To get there, the party believes that the country needs to develop its tech sector further and bring tech innovation into traditional sectors. 

In his speech, Xi said China needs to build a modernized industrial system that serves the “real” economy, set up a national strategy that helps drive innovation, and ensure new developments are eco-friendly and sustainable. 

Build a modern industrial system

Xi emphasized that a modernized industrial system would be key for the country to achieve “high-quality development” and increasing domestic demands.  

He stated that China needs to advance new industrialization and become stronger in manufacturing, aerospace, transportation, cyberspace, and digital development. His speech also emphasized that China should develop integrated clusters of new growth tech areas, such as next-generation information technology, artificial intelligence, biotech, new energy, new materials, high-end equipment, and green industry. The country also needs to improve its ability to secure the supply of strategic resources, Xi said.

China needs to find ways to make such developments serve the real economy, like integrating modern services with advanced manufacturing and modern agriculture and integrating the digital economy with the real economy, according to Xi. “We must continue to focus on economic development of the real economy when pursuing economic growth and promoting a new type of industrialization,” he said. 

Push an innovation-driven development strategy

Xi acknowledged that China has recorded major achievements in several core tech sectors and growth in cutting-edge areas such as human spaceflight, supercomputers, deep sea exploration, satellite navigation, quantum information, nuclear power technology, large aircraft manufacturing, and biomedicine. Yet China’s tech industry still lacks technological innovation, he said.

He emphasized that China needs to improve its technology innovation system, creating an open innovation system with global competitiveness. He also declared the establishment of a new innovation-driven development strategy, including conducting original, industry-leading scientific research and making China an attractive country for technological innovation as well as a talent center.

The country plans to implement a number of national major scientific and technological projects to enhance the capacity for independent innovation, with hopes of becoming a global innovation leader by 2035. It will also create a “positive environment” conducive to the growth of tech-based small and medium-sized enterprises, Xi said.

According to Xi, innovation is at the “core” of China’s modernization.

Transition to green and low-carbon development

Xi said the country needs to find a development model that also protects the environment, pursuing economic growth while cutting carbon emissions, reducing pollution, expanding green development, protecting ecology, and conserving resources. 

Other major efforts under Beijing’s climate initiative include carefully promoting hydropower facilities given their large environmental impact, actively developing nuclear power safely and orderly, improving the official CO2 emissions calculation tool, and establishing a national carbon trading scheme. In addition, China continues to head toward carbon neutrality by shifting toward green energy vehicles. Xi vowed to promote a low-carbon lifestyle and step up the green revolution in the transportation sector.

In 2021, China’s ambition to become a leader in global climate actions faced major setbacks as operations of heavy industries such as steelmaking experienced a widespread power crunch. At this year’s congress, the central government addressed concerns around economic stability and strength, with Xi saying that China will steadily reach peak carbon and carbon neutrality, implementing control measures “in a planned and step-by-step manner.”

Xi said that the country would continue to speed up the establishment of a clean energy revolution while enhancing the “clean and efficient use of coal,” given its natural resource restraints. The strategy is meant to see a gradual reduction of total emissions as well as carbon intensity, which refers to the amount of energy consumed per unit of economic growth.

The commitment comes months after the central authorities in February extended the deadline for domestic steelmakers to reach peak carbon emissions by five years to 2030 and pledged to correct any “campaign-style” carbon reduction moves by local governments in August. Only a third of China’s provinces and municipalities met their carbon reduction goals during the first half of 2021, leaving as many as 18 regional governments enforcing power rationing and idling operations of energy-consuming industries later in the year.  

Major companies and brands are investing money and technology into the metaverse with visions of endless marketing and promotion potential – from NFTs and avatars to games and digital products. As the technology is still growing and evolving, how can we learn from those who are already diving into this virtual world? And what are the experiences of major brands inside the metaverse?

Jim Feng, VP of NBA China, joined moderator Hanson Wang, the Deloitte China Metaverse CoE leader, to discuss the business practices of big brands in the metaverse and share their views and methodology when analyzing the metaverse market. The discussion took place at the BEYOND Expo 2022 tech conference, held online at BEYOND Metaverse.

The text below has been condensed and edited for clarity.

Jim Feng, NBA China VP

We believe the metaverse does have huge potential value for products especially to increase different experiences that we cannot experience in our real life. VR is a very good example. If you wear and watch VR, it will create another world for you, something that you can never imagine until you try it out. 

Though there are still some technological boundaries of VR that might be too heavy to wear, and sometimes the resolution of goggle glasses is not that cool, but fundamentally it just creates a new experience to compare with our real life. There are so many things we already have in real life. It’s very hard if we want to create a new world or experience, but once you create it, you have a new industry like the cell phone or the Internet. Nobody knows what the future will look like at the beginning here, but people need to keep polishing and improving the experience, the quality value of the content, and the production value of the content. Once it passes the line, then it will become a new part of our life.

The NBA is already trying different things in China, and my suggestion for those big brands wishing to start or to continue their pilot of the metaverse in the Chinese market is that they have to comply with the law in China. And regulations can be different from territory to territory, so don’t just assume that what works in other regions will work here in China. Companies have to be very conservative and explore what the regulations allow, and the type of restrictions.

Companies or brands also need some good partners and some reliable big companies. Lastly, they should be conservative, patient, and accumulate in small ways.

ByteDance-owned Douyin e-commerce is testing a new budget retail offering, selling selected products under RMB 9.9 ($1.38) to attract buyers, Chinese media outlet TechPlanet reported on Tuesday.

Why it matters: The new budget section signals Douyin’s ambition in getting a larger share of lower-tier markets. A heated area that is also being pursued by other major e-commerce giants like Alibaba’s Taobao and JD, while Pinduoduo, known for its extremely low pricing, is currently the leader of this segment.

Details: The new budget section is accessible via a button on the home page of the mall channel in Douyin’s lite version app (our translation) to some users. The report said that the firm’s e-commerce platform has invested heavily in the project. 

• According to a statement released by Douyin recently, this special deals channel aims to provide a consumption scenario that meets users’ high cost-effectiveness needs along with improving user retention.
• Douyin requires participating merchants to have an order volume of no less than 1,500 in the past 30 days.
• The channel is divided into various zones, all items are priced under RMB 9.9 zone, with a zone priced even under RMB 4.9. The channel covers categories from household, clothing, shoes and bags, food and beverage, to digital accessories. Some products can be purchased for merely RMB 1.9 (less than half a cent), including shipping.

Context: As the market in first- and second-tier cities gets increasingly saturated, lower-tier markets have become a growth area for e-commerce platforms to tap into potential consumer power, but making the transition is not easy.

• Alibaba’s budget shopping platform Taobao Deals is the company’s main force in this market, and it reached 300 million annual buyers in March. However, the app is facing difficulties in trying to increase its market share as Alibaba is unlikely to commit the same scale of resources to the platform’s growth as it has in the past.
• JD’s Jingxi also focused its business on lower-tier cities, but Richard Liu, the firm’s chairman and CEO, acknowledged Jingxi’s failure in July of this year, and the business group was broken up after only about two years of operation. Chinese media outlet 36Kr previously reported that two of JD’s executives advocated abandoning the lower-tier markets to focus on intra-city retail, while Liu still wanted to continue.

The total amount of money invested in Web3, which is widely regarded as the next generation of the internet, reached more than $23 billion in 2022, according to Crunchbase data. Though venture capital seems to be slowing down their Web3 funding rush, Web3 is still among the most interesting areas for VCs.

Three guests from Web3 and investment companies spoke with moderator ShinWei Teh, an Investment Banker at Credit Suisse, about whether Web3 investment is all hype or based on science, as well as how to evaluate the performance of Web3 companies and other Web3-relate questions at the BEYOND Expo 2022 tech conference, held online in BEYOND Metaverse.

The text below has been condensed and edited for clarity.

Haseeb Qureshi, Managing Partner, Dragonfly

One word to describe my latest thoughts on the recent development in the Web3 space is macro.

We’ve seen this entirely different macro environment coming and beating down on all risk assets since last November. Crypto, of course, is the quintessential risk asset, so it’s been at the center of the macro fire stream that’s been hitting almost every asset class. At this point, we obviously just saw the Fed raise rates, markets once again are trying to digest what exactly is going on and crypto is no different. What Nasdaq did, you probably know what crypto did that day.

I think there’s going to be some time until we get out of this macro environment and there’s some return to normalcy, and I think crypto can get some room to breathe again, but I think until we get past this macro instability, this is going to be what crypto looks like for the probably the next six to twelve months.

In my opinion, there hasn’t been too much money invested in Web3 if you look into the return for folks investing in January. Anybody who invested money in January has lost money because the entire industry has gone down as with almost every asset class. 

If you are investing in tech generally in January, the money is also down quite a lot. Now, you could argue that’s a sign people were putting too much money into these assets,  but the right way to think about it is there’s an adjustment of the price of risk because of interest rates and the macro environment.

The reality about what makes crypto and Web3 so powerful is that Web3 is pure software innovation, which means that your cost structure is extremely slim. It doesn’t require a lot of capital, you don’t need to build plants, manufacture anything, and invest a ton into hardware for the most part, so that makes the space very capital efficient. 

As the valuations have come down over the last six months, what we’ve seen is a lot of late-stage capital that was really crowding the market late last year, and I felt there was way too much money in the space and teams that really didn’t need to raise as much capital as they did end up becoming overfunded.

A lot of growth capital is pulled back, if you look at the big groups that were throwing money at the top like SoftBank, Tiger, and a lot of these players, they’ve pulled back. What you have left is that most of the capital that’s still investing into crypto are the crypto native investors, who spend all their time in this industry, who understand very deeply the technology and have a better ability to discriminate where exactly the R&D money being well spent and where is it being malinvested. 

So I think in the long run there’s a ton of applications that need to get built, but they have to get built at the right time with the right level of resources. Giving people a bunch of money right now when the infrastructure is not fully in place yet is mostly going to result in the money sitting around not really doing anything useful. So the pipelining of investments is very important, it’s too easy to make bad investments in Web3, which is part of why it’s so difficult to invest in this industry.

Milton Santiago, Global Head of Digital Services, SVB

I’ll use education to describe my thoughts on Web3. What I’ve seen over the last six months is a hunger and an appetite of people in all classes and all lifestyles – consumers, business people, and executives who want to know more about the Web3 space, and they’re really driven to understand how this could transform their business.

I remember an article that I read saying 82% of CEOs felt that Web3, cryptocurrencies, and the metaverse are something they need to invest in now and over the next three years. So there is a voracious appetite to learn more about how they can do so during this time when we have advancements in speed if you think about the internet speeds that we have now. If you think about the cell phone speeds equipped with  5G, they enable a form of AI, Web3, and AR that we could never have had before, like the phone that you have in your pocket, something like this that could provide so much value and immersive experience, not only to do business but to express yourself and to share, is changing the way we communicate and it’s changing the way we do business. And that appetite is just every single person I talk to asks me what should I think about when it comes to Web3, crypto, metaverse, and how could this influence my business, so it’s education.

In terms of how to evaluate the performances of Web3 companies, user sentiment is an important part. You can’t underestimate the power of marketing of communication and value. I have two more things really well with more traditional businesses and that is the roadmap, which isn’t meaning roadmap short-term here, but we’re talking long-term, so the problem that you solve today, a need, or uncover an unsatisfied want tomorrow, so having a long road plan that gets communicated, that drives adoption, that drives user sentiments, which is going to create a really solid foundation when it comes to any type of company that is focused on Web3.

And then the last thing is going to be brass facts, kind of traditional things. If you have a utility roadmap, obviously, it’s like what’s the revenue model look like? What’s the profitability of the solution at times to invest in an organization or in a solution that may not have the highest margins? But if I’ll have user sentiment so solid in a solid roadmap, it goes down to term,  instead of being a short-term win, it becomes a longer win. And there are so many examples in the market today where if you have those kinds of ingredients that really deliver a very sound solution that will frankly survive any market condition, because these cycles that we see have existed for years and the companies that survive are those that really focus on those things.

XIAO Feng, Chairman of Hashkey

The word to describe my thoughts on Web3 is “application.” Before 2022, investments in Web3 were more focused on infrastructure. And since Ethereum2.0 promises to process 100,000 transactions per second, meaning that all the technical foundations are in place for a major explosion of applications, I think as the Web3 infrastructure matures and create real values, VCs will shift their focus on a wide variety of other applications.

For now, the real investors in the Web3 space are still some pioneers, and there’s a large number of institutional investors have not entered the space yet. But in my opinion, Web3 application-level funding in the future will reach tens of billions of dollars to support its growth.

I am optimistic about the future development of Web3, no matter in the short, medium, or long term. And I believe it’s a combination of technological innovations that can bring disruptive paradigm change, which is not simply a marginal improvement to traditional things.

Besides, since international geopolitical turbulence and structural inflation may last for the next two years, Bitcoin’s natural ability to fight inflation and protect against geopolitical turmoil could be more fully recognized by the market.

Beijing-based private equity firm Hillhouse announced the launch of a new seed project named Aseed+ on Wednesday, planning to invest 100 early-stage startups in the next three years, in industries ranging from manufacturing, new energy, and new materials to biotechnology and carbon neutrality.

Why it matters: Hillhouse established its venture capital brand GL Ventures in 2020 to expand early-stage investments. This newly launched project is the private equity firm’s separate seed investment business. Amid a macro environment filled with increasing uncertainty, Hillhouse is entering into seed investment. 

Details: Aseed+ aims to provide targeted support for early-stage entrepreneurs, covering integrated services including business incubation, market validation, business acceleration, and subsequent rounds of financing, according to the Wednesday statement released by Hillhouse.

• Led by founding partner Li Liang, who is responsible for hard-tech and climate change investments at Hillhouse, the project will specialize in deals ranging from $2 million to $3 million.
• Zhang Lei, founder of Hillhouse, said in a statement that today’s early stage investment has already transformed from “discovering value” to “discovering + creating value,” and added that investment institutions need to push themselves to the front lines of technology and industry innovation.
• A Chinese financial advisor told Chinese media outlet LatePost that Hillhouse is securing investment opportunities at a low cost using this strategy, and that the Aseed+ team likely includes investors from the firm’s venture capital teams. The advisor added that the areas the project is focusing on are also the fields state-owned funds currently paying attention to.

Context: There has been a valuation bubble in the primary market for emerging industries in recent years, so making early-stage investments can be a better choice for investment institutions in the current climate.

• Sequoia Capital China, the venture capital firm known for its bets on ByteDance and Alibaba Group, launched startup accelerator YUÈ last month to cultivate emerging startups in China. Meanwhile, Source Code Capital also announced a new business that focuses on investing fresh companies from their early stage in June.

Founded in 2014, crypto gaming developer and investor Animoca Brands has become one of the leading companies in the metaverse in the last two years, with the company’s portfolio growing to almost 400 investments in Web3-related projects, including Dapper Labs, Decentraland, and Axie Infinity.

Meanwhile, Animoca Brands’s valuation has soared from $10-20 million when it was delisted from the Australian Stock Exchange in 2020 to $6 billion today. Yat Siu, Animoca’s co-founder and chairman, talked about why they are bullish on Web3 gaming and whether the play-to-earn gaming model is sustainable at the BEYOND Expo 2022 tech conference, held online at BEYOND Metaverse.

The text below has been condensed and edited for clarity.

Jon Russell: How do you see “play-to-earn games” at the moment? Is that completely gone, or can it come back in the next ten years?

Yat Siu: The main point of “play-to-earn games” is that there’s financial value in the transactions that you do inside games that’s visible to the end user if they so choose. One important thing to understand is that the gaming industry today is almost a 200 billion dollar business, of which roughly a hundred and ten billion dollars is being spent on growing and advertising, basically growing these games usually through app installs and so on.

The other thing is that most of the revenue comes from the conversion of less than 3%, I think it’s about 1.9% to 2.7% as the industry average at this point, that means all of you here were probably playing games on a regular basis, but the vast majority never paid for these games. So how is it possible that a game company that never charges can make money? Well, that’s the model, 97% never pay anything for the 3% that do.

And that’s one of the magic elements that rewards the 97% of players who play for free because they contribute to the network effect. Imagine you’re going to Call of Duty and you’re the only player on the field, you’re not going to pay right? You need people to shoot right? So who are the people who shoot the ones who play for free who are having fun and enjoyment, but actually, they’re working inside the game providing entertainment for the other people. And so the question then becomes how much is that worth?

In 2021 when the value increased the way that it did, people got very excited and started to run ahead of themselves in terms of market value, which by the way in all capitalist market economies happens to be the same, whether it’s real estate market overheating or when those commodity prices are overheating. Historically, you do get that element coming through when there is an open market that doesn’t mean that just because real estate prices are overheating in certain national economies that real estate as a whole is a fad, it’s a fundamental business. But people at one point were actually making almost multi-years of their annual salaries in the Philippines, but they weren’t working, so yes that’s wonderful but is that sustainable? Probably not, I mean now they’re back to something maybe more realistic, relative to the economic size that economy provides, which doesn’t mean they’re not making anything, and also more importantly, it’s a useful choice, but I can still play something, have fun and if I wish to cash out I can do so as well.

And then I go back to the example of the 110 plus billion dollars spending app installs and that’s what’s so superior about Web3 games and why we’re so bullish about the long-term future, is that money is being spent right now entirely on Facebook, Apple, Google. All these platforms that basically extract from the network. How much are they putting back into the very industry – in this case gaming – that they take profit from? Almost nothing.

Now here, the model in Web3 gaming is you’re not paying Google that money, you’re paying your players the money to stay and play the game. And maybe you cash out, but the chances of you re-contributing back into the gaming ecosystem are far, far higher. The major conglomerate whose sole purpose is to extract value from you, then the macro is that there are only millions of players in Web3 gaming today, and the trend of player growth is definitely going to continue, that’s one of the reasons why we are so bullish because from our perspective we haven’t even scratched the surface yet.

Jon Russell: Is it realistic to believe that companies in the Web3 space can overturn the kind of dominance that Facebook and Apple have? How’s this going to happen?

Yat Siu: We think that’s going to happen because it’s the better outcome for the end user.

When you think about Web2, everything was centered around user experience because the paradigm was zero value, so in a world where you’re competing with a zero cost of playing a game, zero cost of entry social network, zero cost of whatever, the only battle to be fought is based on user experience: how can we get smoother, faster, easier to enter.

And in Web3 that paradigm has somewhat come in as well, where people are like it has to be a much better user experience than Web2. How do we do that? I think the short answer is you don’t, of course, you have to make it a good experience, but the paradigm is user value. In other words, if I’m making more value from this one it doesn’t have to just be monetary value, but this value is an experience, then I will go to that option instead.

Look at a place like the Philippines for instance, where you have millions of people who have been on board, they don’t have a bank account or a credit card, they are financially excluded, and here they are using a crypto wallet that completely defeats the argument that this is so complicated. 

Despite all these complications I haven’t found anyone who’s gone in and then comes out saying, “oh my goodness, this is rubbish I should never go back in there again.” Maybe there’s a few, but the vast majority of people I know are going into that rabbit hole never to come out for that very same reason: it is just a better experience and more of a value generator.

Jon Russell: I guess based on the investments that you’ve made, gaming is going to be the big bridge for Web3. 

Yat Siu: I think gaming has already been a big bridge and will continue to be so. We’re also really bullish on education, but with gaming in particular there are billions of people who already have an assumption that they should own their virtual goods and that’s why it seems to be such an easy one.

And Asia as a whole is going to lead that charge, much like Asia led free-to-play because many people in Asia and the gaming world are very welcoming to it. For instance, in the West, there are quite a few gaming companies who wish to enter that space but there’s been resistance from the players. 

And I think the resistance from the players comes from a different lens, which is what we’re witnessing in places like the US: a rising tide of broadly anti-capitalist sentiment. So NFTs and crypto has been viewed as sort of this capitalist rich-get-richer type of tool which is not a fair statement, but it is the belief at the moment. Whereas in Asia, it is viewed as an opportunity—it’s another avenue of capitalism, it’s another avenue of growth. I’m excited about that prospect and I think that this region could very well lead in this space in the mid-term.

As the world faces an array of challenges and consumers and citizens become ever more conscious of the social and environmental impact of the companies that dominate their lives, having a robust economic, social, and governance (ESG) policy in place has become an essential component for any company looking to IPO. 

At the BEYOND Expo 2022 tech conference, held online in the BEYOND Metaverse, Joe Lai, co-head of APAC IBCM and Credit Suisse; Allen Lau, Capital Market Services Group – National Leader at Deloitte; and Winnie Han, Senior Vice President of HKEX, discussed whether it’s a good time to go public in the current climate and why ESG has become mainstream.

The text below has been condensed and edited for clarity.

Allen Lau, Capital Market Services Group – National Leader at Deloitte

I think ESG is one of the hot topics in the market. It’s not just a local, but a global agenda and ESG has become an increasingly important investment area for the global investment community.

The Chinese government has a 2060 target for decarbonization, which also drives the importance of ESG in the market as well. That’s why we expect more ESG companies are coming up and drive more potential listing of ESG companies in the future.

Regarding how ESG creates challenges or perhaps helps companies when it comes to going public, ESG is at the beginning of its popularity in the global capital markets, but the professional investment community is now more familiar with the business models of these companies’ investment products and portfolios, and also impact the value of ESG on the company’s valuation, so these should be the factors that we consider during the IPO process. 

However, ESG is relatively new to a number of retail investors, and in markets like Hong Kong and the mainland, which are still quite dominated by retail investors, it might take more time for them to understand and get familiar with the business models of these companies and the impact and the related investment risk.

Besides, the market doesn’t have many of these ESG companies with their shares yet, so being able to identify comparable stocks in the secondary market to conduct evaluation exercises for those potential issues will also be challenging, which also means that there still remains some uncertainty about how these companies or ESG elements will be valued when they go public. 

But on the other hand, there’s actually another opportunity for these ESG companies to take advantage, being the first batch of ESG companies listed.

Joe Lai, co-heads of APAC IBCM and, Credit Suisse

With the new ESG rules on all these new disclosure requirements, I don’t think it will impact the type of company that would be qualified to list in Hong Kong or people’s willingness to list in Hong Kong, because the Hong Kong market is very internationalized with ample quality, so I wouldn’t think any kind of incremental ESG requirement would actually impact the issuer’s willingness to come to Hong Kong. Therefore in terms of the types of companies, ESG disclosure rules won’t create any change to the kind of industry or the geographical origin of the listing applicants that we see here in Hong Kong. 

But one thing is important: all the listing applicants will probably need to have a very strong ESG mindset because, at the end of the day, a lot of these disclosures are basically disclosing what you have done to promote the ESG concept, but what’s fundamental is actually what kind of governance the company has in place to ensure the company is compliant and can fulfill the international ESG standard.

Overall, people who wanted to come to the Hong Kong market are already aware of the importance of fulfilling certain ESG requirements, so I think we’re making a lot of progress. At least from my end as an underwriter, we don’t feel it creates any difficulty for us to pitch our client to list in Hong Kong versus other markets.

Winnie Han, Head of China Issuer Services, Senior Vice President, HKEX

As a regulator, we have been promoting ESG among our more than 2,500 listed companies. We also introduced the ESG reporting guide back in 2013, then revised the guide in 2020 to require ESG commitment and disclosures for all environments and social PPI on a comply or explain basis.

We also provide a detailed online director training program, guidance materials, and webinars about ESG to help our listed companies build a more sustainable business sense and put their ESG principles into practice.

So the above measures continue to upgrade our market quality and show our focus on building a sustainable business and investing long-term. We have already welcomed some leading EV brands to list here in Hong Kong, for example, Xpeng and Nio. We are seeing more from the sector and the industrial value chain, including upstream players, and we think you will see more ESG-related issuers listing in Hong Kong as soon as later this year.

Charles Li, former Chief Executive of the Hong Kong Exchanges and founder of Micro Connect, spoke at the BEYOND Expo 2022 about how he sees a wave of disruption on the horizon for traditional financial services in the Internet era. He also explained how Micro Connect is set to ride that wave, helping global capital access China’s small business sector in the hopes of gaining sustained growth, opportunity, and quality.

The BEYOND Expo 2022 opened online in the BEYOND Metaverse on Wednesday. As Asia’s largest and most influential tech event, the Expo will have more than 40 talks and panel discussions where leaders and experts across sectors dive deep into the topics of consumer tech, health tech, global investments, sustainability, and Web3.

Please find below the transcript of the opening day speech from Charles Li, Chairman and founder of Micro Connect. The following transcript has been edited for clarity:

Hello, everybody, my name is Charles Li. I’m Chairman and Founder of Micro Connect. I’m really very pleased to be able to speak at the BEYOND International Technology Innovation Expo in Macau, and on the subject of what’s next, I’ll be very happy to share some of the experiences and insight that we have developed over the last couple of years since I left the Hong Kong exchanges.

I have been in finance for more than 25 years now, including 11 years running the Hong Kong stock exchange. And I think that experience gave me tremendous insight as to how the financial system works in our economy and in our society.

I think that the modern Wall Street model, which has worked wonderfully for over 100 years now, is probably one of the most important human innovations in our society because we try to organize capital into big corporations and then divide them up into stocks and shares so that they can be held by the public.

On the one hand, you concentrate finances so that centralized markets are able to allocate them to important, large corporations to develop the economy. On the other hand, the shareholding system allows that capital to be distributed and held by the general public. That model works for the industrial age, because the economy at the grassroots level is unclear, and very difficult to gather information from, so you need a centralized, institutionalized, professionally staffed Wall Street to organize everything together so that information can be discovered, price can be discovered, and execution can be delivered in the traditional financial market sort of systems.

But I think what’s next is the most interesting question: whether or not what we have seen happening in e-commerce, in social media, whether the revolutionary changes and disruptions that we have witnessed over the last two decades could potentially similarly disrupt the traditional Wall Street model.

I think we all know that in the Industrial Age, we all needed to go to a department store, because the department store aggregated all the goods and merchandise together, so that we all went to the central market to buy what we needed. But in the Digital Age, the Internet Age allows that distribution and commerce to be conducted online via digital technologies, and then allows logistics to be developed so that we are able to actually shop at home and have our goods delivered, and have marketplaces, online marketplaces, to allow money and goods to be exchanged. That’s a fundamental disruption of traditional finance and traditional commerce.

And I believe that we are now coming to the age where similar disruption is going to happen to financial services as well. Because at least in China today, the entire economy has largely become cashless. What that means is that most of the financial activities in China, even at the smallest business level, are completely digital, which means that they’re completely transparent. With the digitalization of the businesses at the grassroots level transparent and digital, the question becomes do we still need to force the little guys to organize into big corporations?

And many of them never will. Millions of them never will.

China has 17 million small businesses, and I think it is time now for us to actually have the opportunity to completely change the face and change the structure of financial services, to allow finance for the first time to be actually connected as sustainable capital to provide growth, and a firm growth and CapEx and development at a small businesses level.

And more importantly, that allows the global investment community to be able to finally access the longest sustained growth opportunity and quality returns from a blue ocean of small businesses that have not yet currently been available because of the concentrated nature of our financial services. So at Micro Connect, we’re trying to innovate a complete new way of delivering financial services.

Instead of using the traditional product, the traditional discovery processes, and the traditional delivery processes, we actually adopted a completely new way of doing it. It’s what we call a new operating system, a micro star, and has five key elements. It’s a new product. There are two arms, and there are two maps. That really is the new micro star operating system to do finance differently.

First of all, why did we want to focus on small businesses? It is very clear, small businesses largely reside in the consumer sector. And that entire sector and the small businesses contribute to close to 60% of China’s GDP, 70% of government revenues, and close to 80% of employment. So it is clearly the sector where the most vibrant part of China’s economy currently exists and grows, and capital needs to find a way to access that tremendously important sector.

And we set up our mission to achieve that. The way to do so is, as I said, a new system that we call micro star, which consists of five key elements: one product, two arms, and two maps. The one product is called a daily revenue contract, DRC. This is not debt, because as investors we have to share the downside.

And it’s not equity, because equity is not economically feasible for us to execute the small levels on a large scale. But it is a daily direct contractual arrangement to pay back your revenue, in exchange for an upfront CapEx investment. So it’s called a daily revenue contract, DRC.

It’s a completely new asset class that is fit for purpose, and very helpful to small businesses. Meanwhile, the daily recovery of returns allows the investors to take transparent, distributed, reliable, risk-managed and diversified high-quality returns.

So it’s really a win-win for all, kind of a new product.

But that product’s unique nature requires two very different systems of ensuring delivery, and on that distributed level we have to be able to collect on the investment.

So there are two arms, one arm is in charge of collecting money digitally, directly from the revenue from the little businesses. And that sort of a digital account split system in the various consolidated payment systems in China is highly advanced and highly feasible and is actually being practiced by many industries, so we just intend to utilize the existing technology and systems to allow our investors to be able to secure the daily digital connection of returns.

On the other hand, when the money is collected, we want to make sure that we have a modern new kind of exchange, where the underlying infrastructure is a blockchain, allowing us to authenticate that every single dollar that is collected every day into the system is irrevocably recorded in the blockchain, and belongs to the investors who choose to invest in any particular segment, in any particular store, for any particular period.

So that ultimate penetrated regulatory oversight, through technology, is the way that we are able to do this on scale, with efficiency, with very minimal human and costly management and delivery, monitoring, and enforcement systems, which would not be feasible economically for the small businesses.

The newest micro star system also has two what we call maps, basically navigation. And those two maps are specialized terms, essentially describing an engine that allows us to deploy such huge numbers of a small investment individual size on a large scale with efficiency; the other map is allowing us to find ways to make sure that we are able to accurately project economic and financial performances of particular kinds of businesses and particular locations so that investments can be rolled out not only with scale and efficiency, but with accuracy and quality, so that the investment can continue on a sustainable basis.

This new way of doing things has never been tried before but because of the digitalization of China, it is highly feasible.

We have started the journey, we have invested in over 1,000 stores in China across over 100 different sectors, largely focused on the four large industries: retail, consumer, services, and cultural activities. Those are the sectors where it’s the basic needs of everyday life of the Chinese consumers, despite all the challenges and despite all the perceptions that small businesses in China are risky individually and may not necessarily be investable.

As a whole, if we’re able to build a portfolio large enough, diversified enough, distributed enough, we will truly be able to find a new way of investing, a new paradigm of financial services, that is transparent, distributed, diversified, and sustainable. Most importantly, because the fact that we are able to do so in such a distributed manner – impacting potentially hundreds of thousands, and potentially millions of small businesses – our aspiration is that in the next 10 years, we are able to create and fund a million small businesses with a million annual revenues, which in turn will be able to create and maintain at least 10 million jobs.

This sort of an investment, new investment paradigm, will likely allow us to promote impact investing, ESG mapping, so that through investing, we’re not only doing good, we can also do well.

And that is really, is our dream and that is something that we’re now on the journey to achieve, and I think that is only possible because of the deep and widespread digitalization and technology evolution in China particularly in the payment industry. I think with that, we can see that China’s consumer sector, which may be the furthest away from Wall Street in the traditional financial services methodologies, thanks to technology, probably will become the closest and most likely going to become the most successful, because they are able to give us a way to invest simply, more efficiently, more equitably, and more inclusively.

And I hope that we will be back again to update you on our progress, and I hope that we will be able to travel on that journey together with many of you who have similar dreams and aspirations.

Thank you very much, we really appreciate the opportunity to speak at this great expo.

As more and more people pay attention to long-term investment, investing in ESG has become an important trend in the era of sustainable development, Hillhouse Capital founder Zhang Lei said on Wednesday during the BEYOND Virtual event. Zhang added that sustainable investment not only requires investment institutions to consider ESG in their investment targets but also requires long-term capital to support outstanding companies.

On Wednesday, the BEYOND Expo 2022 opened online at BEYOND Metaverse. As Asia’s largest and most influential tech event, the Expo will have more than 40 talks and panel discussions where leaders and experts across sectors dive deep into the topics of consumer tech, health tech, global investments, sustainability, and Web3.

Please find below the transcript of the opening day speech from Zhang Lei, founder and CEO of Hillhouse Capital. The following transcript has been edited for clarity:

Good morning! It’s my great honor to meet all of you at BEYOND Expo, 2022. The theme of the expo is “What’s Next”. I’m invited to share my opinions about the future. In the face of current changes and uncertainty, everyone hopes to find the “gold key” to solve the problems.

We actually see more and more people pay closer attention to long-term development, climate change, and social responsibility. ESG has become a certain future. According to the data statistics, the global ESG investment scale in 2020 reached around $100 trillion, a 14-fold increase compared with that of the year 2006.

Hillhouse Group, as an innovative industrial investment institution, is always insisting on the philosophy —“to invest for a better world.” On the one hand, by exploring optimized resource allocation, we pursue environment, justice, society, and other long-term values. On the other hand, we choose fellow travelers with great insight to achieve a win-win result of social value and economic value through sustainable innovation.

I believe the most sustainable ESG investment will surely become a more important trend and create great value. So, in this era of sustainable development, what can we institutional investors do? I’d like to share my ideas with you.

First, the foundation should be strengthened. Just like the basic support of new infrastructure, the entire internet networking and data center, for example, to the digitization of industrial manufacturing industry and intelligent industry, the ESG also needs the support of infrastructure, including the establishment of data quantification, information disclosure, and valuation systems.

Institutional investors can, during the management of investment process and the selection of investment targets, take the ESG into consideration, and through self-build capacity and investment cooperation, especially the digital capacity, to build the ESG infrastructure in your investment ecosystem and the sustainable database.

We can introduce a digitized ESG performance system for many corporate investees, which will help relevant corporate investees to collect their ESG data and do industrial benchmarking. Thus, an information disclosure system that meets international standards will be established to help investees lay a foundation for sustainable development by leading investees to collect and accumulate data.

Meanwhile, as an Asian framework to strive for evaluating carbon emission reduction performance, we at Hillhouse also adopt the quantification method. As for reducing carbon emissions, based on the carbon criterion of product and technology, taking the growth prospects and our carbon emission anticipation, the whole carbon emission reduction pattern is formed. By estimation, our understanding about each carbon emission reduction path and efficiency helps the group discover the industrial value and promote new perspectives.

And under the background of carbon peaking and carbon neutrality, only by making the carbon emissions clear can we shoot the arrow right at the target of its reduction.

Hillhouse invested in the first provider in China who focuses on the solutions to carbon emission management software and consulting, deploying infrastructure service of carbon neutrality to help more enterprises make carbon emission reduction plans with a high input-output ratio, to realize efficient tracing and disclosure of carbon emission reduction results.

Second, innovation should be insisted on. We always believe that technology is an ultimate solution to sustainable development. During this process, what institutional investors should do is to support technology innovation and green technology with long-term funds in terms of key domains and key phases of sustainable development, to encourage and attract more institutions to play a role in and support technology development. Thus, an assembly effect of innovation will be formed to finally solve social and environmental problems during the development process.

In terms of carbon neutrality, for example, by comprehensive research and profound insight and selection of industries with key influence on and significance to the promotion of carbon neutrality, we discovered those excellent companies that can solve their key problems by technology and business model innovation. We invest in them, empower them, and continuously help them to grow.

We recently invested in a company developing perovskite and gold laminated photovoltaic cells. We help the group overcome the “Death Valley” of primitive technology innovation from 0 to 1.

And based on our DVC, Deep Value Creation, a low-corruption after-investment service system, we support their R&D engineering talent expansion and help their connection of industrial resources so that they will indulge in the industrialization of photovoltaic industry.

Finally, talents should be focused. Talents are always precious resources. The booming ESG market will surely trigger heavy demands for ESG talents. To my knowledge, the total number of American companies that hired Chief Sustainability Officers in 2020 exceeded that of the previous three years. 

As for industries, we published a research report to list investment opportunities in 8 key industries realizing carbon neutrality, including electricity, transportation, industry, new material, architecture, agriculture, negative carbon emission, information communication, and digitization.

Numerous professionals are needed. According to International Energy Agency, up to 2030, clean energy investment driven by carbon neutrality will create 14 million working posts. As the data show, in the past 5 years, recruiting numbers for green skills globally increased by 8%, several times that of the GDP growth rate, while obvious vacancies show in terms of talent supply.

In the future, like finance and HR departments, the carbon management department will become a basic functional department. We need to pay special attention to the topic of sustainable development and put forward new requirements to the talents.

The ESG involves climate, society, governance, technology, and even finance, so it’s not enough to master the knowledge of only one industry. Talents shall have international insight. Those compound innovative Carbon Talents with multi-subject knowledge and insight will definitely become the real core in the process of sustainable development.

Last year, Hillhouse, together with more than 10 investees, including CATL, LONGi, BYD, and Carbonstop, which are also representatives in the field of carbon neutrality, held special carbon neutrality job fairs in several universities across the country.

This year, we will join hands with 42 manufacturing companies to hold joint on-campus job fairs. We hope that with our talent empowering service, we can help investees find better Carbon Talents to provide core impetus to the sustainable innovation of enterprises.

Sustainable development is related to the future of every one of us. Hillhouse is willing to play a key role in the promotion of prosperous sustainable development and be a partner in the practice of ESG.

Thank you!

Chinese short video platform Kuaishou has undertaken an organizational restructuring in recent weeks after setting up a new management committee in early August.

Why it matters: Kuaishou’s latest reshuffle, one of a number of organizational adjustments the company has made over the past year, reflects the firm’s emphasis on e-commerce and local life services as major avenues for new growth.

Details: CEO Cheng Yixiao will lead Kuaishou’s e-commerce unit from mid-September, in a sign of this sector’s growing importance within the company. The Douyin rival has also upgraded its local life services unit, carving it out as an independent business department and placing it under the leadership of Xiao Gu, Kuaishou’s senior vice president and former head of the e-commerce sector.

• The internal adjustment will also see Kuaishou increase the operating budget for local life services, according to Chinese media outlet LatePost, with the newly established department set to build its own sales team and actively approach more service providers as it looks to compete with Douyin.
• Kuaishou’s e-commerce GMV reached RMB 680 billion ($97 billion) in 2021. Caixin previously reported that the company set a 2022 GMV target of RMB 900 billion, but reached just RMB 366.3 billion in the first half of this year.
• Overseas business is also now a priority for Kuaishou, after the company created a new department for international commercialization in March. Local media outlet Jiemian reported last week that the department has divided overseas markets into three tiers, with the top tier occupied by Brazil and Indonesia, countries where Kuaishou has the largest daily active user numbers outside of China.

Context: Advertising revenue generated by its e-commerce business has allowed Kuaishou to grow its income despite a sluggish macro environment in which most Chinese internet companies have seen a sharp decline in advertising.

• As China’s economy slows, Kuaishou is also focusing on commercialization and attracting local advertisers in Latin America, Southeast Asia, and the Middle East, largely avoiding European and American markets where TikTok is dominant.

As Chinese fast-fashion platform Shein continues to see rising sales in the US, the company plans to build three large distribution centers in the country, which could reduce shipping times to its customers by three or four days, The Wall Street Journal reported on Thursday.

Why it matters: The plan to build more large-scale distribution centers in America highlights the importance of the US market to Shein, as well as the firm’s phenomenal growth in the region. A flexible supply chain has been a key factor in Shein’s success to date, and the brand needs shipping services to keep pace with its soaring sales. The expansion will also allow Shein to retain and build up its competitive advantage as it faces more competition. 

• While rivals such as Asos, Boohoo, and OhPolly offer next-day delivery services, Shein’s consumers have to wait at least a week for their orders to be delivered.

READ MORE: How Shein became China’s ‘TikTok for e-commerce’

Details: Shein is planning to open a new 1.8 million square foot distribution center in southern California by the spring of 2023, along with a third distribution center being planned in the Northeast, according to a report by The Wall Street Journal.

• This new facility would join Shein’s current distribution center, located in Whitestown, Indiana, where the company plans to expand its space from 1 million square feet to 1.5 million square feet, the US media outlet reported. 
• The company released a study on Thursday on its economic impact in Whitestown, predicting that its newly expanded warehouse would generate $175 million annually for the Indianapolis economy and create more than 1,000 jobs by the end of 2022 when Shein hopes the facility will be fully operational. 
• The Wall Street Journal also cited George Chiao, Shein’s US operation president, as saying that the company is planning a hiring spree in the country over the next few years. Shein currently has more than 400 employees in the United States, 25 times the number it employed in 2019.

Context: Known for its ultra-low prices and fashionable clothing and accessories, Shein’s focus on the overseas e-commerce market has seen it become one of the hottest retail companies in the world, but it is also now facing unprecedented competition. 

• Shein has completed seven rounds of funding since 2013. In its Series F funding in April, the company reportedly raised $1 billion to $2 billion at a valuation of $100 billion.
• Shanghai-based Pinduoduo officially launched its e-commerce platform Temu in the US earlier this month, with a model that appears to closely follow the Shein approach with low prices and discounts of up to 30%.

Correction: an earlier version of this article misspelled George Chiao.

Alibaba’s budget shopping app Taobao Deals has adjusted its key business metric twice in less than six months, Chinese media outlet LatePost reported on Tuesday. In April, the app elevated gross merchandise value (GMV) as its most important metric and pivoted away from focusing on user growth after reaching 300 million annual buyers. Two months later, it changed again to focus more on the monthly active users (MAU) instead.

Why it matters: Taobao Deals is facing a challenging situation as it competes for growth. The platform reached over 300 million users this year. But with Alibaba Group unlikely to commit the same scale of resources to the growth of the platform as it has in the past, the standalone app will need to find new ways to expand its market share and achieve profitability amid pressure from strong competitors, such as Pinduoduo.

• Taobao Deals uses the consumer-to-manufacturer (C2M) business model that connects manufacturers directly with customers to help lower costs, the same business model that fuelled the rise of Pinduoduo. Soft-launched in 2018, Taobao Deals is Alibaba’s effort to reach users in less affluent regions and compete with the growing reach of Pinduoduo. 

Details: The significant shift in the key metric means Taobao Deals focuses more on increasing user retention and activity than user growth. LatePost reported that the department responsible for user growth has also been reduced.

• Daniel Zhang, CEO of Alibaba, said in the first quarter earnings call that the huge quarterly investment (in the tens of billions of yuan) in Taobao Deals has brought Alibaba about 60 million new users in the past year.
• More than 70% of the app’s external budget has been spent on new user growth in the past two years. However, the proportion dropped by around 30% to 40% this year, seriously slowing user growth.
• Taobao Deals’ single-quarter new user growth shrunk during the January to March period, from the previous 30 million to 40 million range to just over  20 million. The company has yet to disclose its user figures publicly for the second natural quarter.

Context: In less than two years, Taobao Deals has achieved annual growth of more than 200 million active buyers — an impressive result for a mature company like Alibaba. All of the other Alibaba’s e-commerce sites have been seeing annual active consumer (AAC) growth of less than 20 million every quarter since the first quarter of 2019. 

• Taobao Deals occupies only a fraction of the market share compared to the dominant incumbent Pinduoduo. Pinduoduo’s annual active buyers reached 900 million in the second quarter this year, nearly three times the growth of Taobao Deals.
• There is a 70% to 80% overlap between the user base of Taobao Deals and Pinduoduo, and with Alibaba simultaneously trying to reduce costs and increase efficiency, Taobao Deals can face more difficulties in trying to increase its market share.

Chinese tech majors Tencent and ByteDance were the top-grossing publishers in global mobile app stores for the first half of 2022, according to a report by business insight firm Sensor Tower.

The global mobile app market is highly centralized, with 91% of revenue coming from the top 1% of publishers. Over the years, such centralization has been shrinking; the market share of the top 1% has hit its lowest point since 2019.

Why it matters: Tencent and ByteDance have dominated the global mobile markets for years with their trending game titles and the internationally phenomenal video app TikTok. The two majors have invested heavily outside of China, launching new services and acquiring studios in recent years.

• Despite the highly centralized nature of this market, top players are losing shares and creating more space for newcomers.

Details: By analyzing 900,000 publishers on the Apple App Store and Google Play, Sensor Tower found that the top 1% of publishers accounted for 79% of all downloads and 91% of revenue on the two platforms in the first half of 2022. The remaining 99% shared 21% of the market.

• Tencent was the top-grossing publisher in game and non-game categories, earning about $3.3 billion in the first half of 2022. The figure is almost 153% larger than ByteDance, which came second on the chart with $1.3 billion in revenue.
• Tencent was also the most profitable gaming app publisher in the same period, generating over $2.6 billion, thanks to its popular titles like Honor of Kings and PUBG Mobile​​. Tencent accounted for around 10% of revenue from all top game publishers.
• In the gaming category,106,000 publishers introduced new titles in the first half of 2022. While the top 1% of gaming publishers took over 79% of the market globally with 22 billion downloads.
• In non-game apps, ByteDance’s TikTok remains the global app bestseller and most downloaded in the first half of 2022, helping to boost the company’s revenue growth. 
• In August, TikTok and Douyin, two short video apps owned by ByteDance, pulled in more than $306 million from the global Apple App Store and Google Play, contributing to the first-place ranking in the global mobile non-game revenue list, a figure 1.8 times that of the same period last year.

Context: Revenue from mobile apps saw a 2.2% decrease semi-annually (in Chinese) in the first half of 2021, a total of $65 billion less than in the second half of 2021. It is the first fall in revenue since 2019, according to Sensor Tower.

• The fall was mainly due to a revenue decrease from mobile games, which hit $41.3 billion in the first six months of 2022. The US, Japan, and China are the top three markets for mobile games, with the former two seeing over 8% less revenue compared to the second half of 2021.
• Tencent has been ambitious this year, making major moves in the overseas gaming market. The firm announced new progress with its partner Ubisoft, which just doubled its holding shares in new mobile titles. It also invested in notable publisher and developer FromSoftware, and acquired Sybo, maker of popular game title Subway Surfers.
• TikTok also has great expansion plans in the overseas market, with a particular focus on e-commerce business. Since it launched TikTok e-commerce in Indonesia in February 2021, it has expanded local and cross-border business in Thailand, Vietnam, Malaysia, the Philippines, and Singapore. TikTok also cooperated with e-commerce giant Shopify last August, allowing users from the US and Britain to buy goods directly through the app.

Nearly a quarter of China-founded VCs make the Hurun Global VCs list.

Some 25 China-founded venture capital funds made it to the Hurun Global Venture Capitalists 2022 Half-Year Report released on Tuesday, which selected 121 VCs that have captured the largest number of unicorns and gazelles in their portfolios. (A gazelle company is a fast-growing enterprise with at least $100,000 in base revenue and four years of sustained revenue growth.)

US investment firms accounted for 71% of the list, while Chinese firms took 21%, and Singapore firms took 3%. Two Chinese VCs made it into the top 10. Tencent ranked fourth, behind Sequoia Capital, Softbank, and Tiger Global, investing in 122 unicorn and gazelle companies. CICC ranked fifth on the list with 115 investments.

The listed Chinese VCs invest in diverse industries, with biotechnology, smart manufacturing, and e-commerce as key industries that many pay attention to. The top 10 Chinese VCs on the list are Tencent, CICC Capital, Hillhouse Capital, Qiming Venture, CITIC Capital, Alibaba, Shunwei Capital, Yunfeng Financial, Dinghui Investment, and 5Y Capital.

Here’s what you need to know about the five top-ranking Chinese VCs from the list: Tencent, CICC Capital, Hillhouse Capital, Qiming Venture, and CITIC Capital.

1. Tencent

Ranking: #4

Tencent Investment is a corporate venture capital arm of the Chinese tech giant Tencent. The firm has helped fund more than 1,300 companies, with a preference for investment in social networks, online games, e-commerce, and healthcare sectors.

Key bets include Pinduoduo, DiDi, Keep, Xiaohongshu, Webank, HeyTea, XSKY, and Discord. 

Facing regulatory pressure and a slowing economy, Tencent Investment has been divesting recently,  selling its stakes in Chinese e-commerce giant JD, Southeast Asian tech firm Sea, and the A-shares listed Huayi Brothers. There have also been reports that Tencent may sell most of its shares in Meituan. However, Tencent has officially denied it, with representatives saying that Tencent hasn’t set any target amount for reducing holdings and the company is not under external pressure concerning its portfolios.

In addition, Tencent itself has also suffered a cut in holdings by its majority shareholder Naspers Group this year.

2. CICC Capital

Ranking: #5

CICC Capital has invested in 115 unicorns and gazelles, as defined by Hurun, an increase of 55 compared to six months ago. 

Beijing-based CICC Capital was a late participant in the venture capital party, forming in 2017, but has grown into one of the leading private investment managers in China. According to enterprise data site ITjuzi, CICC’s investments mainly focused on the healthcare and advanced manufacturing sectors. CICC has invested a total of 118 companies in these two sectors, with total investment hitting nearly RMB 12 billion ($1.72 billion).

CICC has invested in unicorn companies such as United Imaging and Horizon Robotics, as well as gazelle companies such as CH Biomedical and Dera.

3. Hillhouse Capital

Ranking: #12

Founded in 2005 by Chinese investor Zhang Lei, Hillhouse Capital’s investments included some leading technology companies worldwide, such as Uber, Airbnb, Tencent, JD, and Meituan. The firm also focuses on the health tech industry with investment in biotechnology companies such as BeiGene. Hillhouse Capital has participated in a total of eight fundraising rounds for BeiGene since 2014.

Hillhouse Capital’s top 10 stocks are Yatsen, Vipshop, iQiyi, Ke Holdings, Cytek Biosciences, JD, Gossamer Bio, IMAB, On Holding, and BeiGene. Seven of these are US-listed Chinese firms.

Since the first quarter of 2021, the firm has reduced its holdings of iQiyi, Pinduoduo, Uber, Uxin, Tuya, and Huazhu Hotels Group, while increasing its holdings in Yatsen, as well as Vipshop, Legend Biotech, and Alibaba during the past year. 

As of the second quarter of this year, Hillhouse Capital held 64 stocks, with biotech, cloud computing, new energy, and other technology-based enterprises accounting for more than half of its total.

4. Qiming Venture

Ranking: #24

Founded in 2006, Qiming Venture now manages 11 US Dollar funds and seven RMB funds, with $9.4 billion in capital raised. Qiming Venture focuses on investing in healthcare, technology, and consumer industries, primarily involving itself in Series A and Series B funding.

According to Hurun, Qiming Venture has funded 59 unicorns and gazelles. Xiaomi, CanSinoBIO, Meituan, Bilibili, and Roborock have all received investments from Qiming Ventures.

5. CITIC Capital

Ranking: #25

Hong Kong-based CITIC Capital manages over $17 billion of capital. The firm has invested in 52 global unicorns and gazelles, as defined by Hurun, with medical technology, semiconductors, and intelligent manufacturing among its most promising investment directions.

The firm’s prominent portfolio hits include Express, Airdor, Quicktron, and XtalPi.

On Thursday, the annual World Artificial Intelligence Conference (WAIC) officially opened in Shanghai. This year’s conference places a heavy focus on the trendy topic of the metaverse, aiming to demonstrate the integration of artificial intelligence with the metaverse and to look at what the future holds for these technologies.

Ken Hu, rotating chairman of Huawei, said at the opening ceremony that AI can only realize its greatest value when it is deeply integrated into operation scenarios across all industries. He also called for building a computing power network, connecting different data and computing centers across the nation. Meanwhile, he pointed out that because powerful machine learning models are costly to develop and time-consuming, industries and academic researchers should team up and collaborate to cut down “duplicated investment and development.”

Robin Li, co-founder and CEO of Baidu, discussed various AI implementations the search engine company adopts, such as autonomous driving and content generation. He said some of the video content on Baidu are generated by AI based on published articles. Those AIGC (AI-generated content) costs only a tenth of the cost of human-created content and a fraction of the speed.

“AI is critical in the metaverse due to the metaverse’s needs to adapt to changing environments and user preferences,” Qualcomm president and CEO Cristiano Amon said at the ceremony, adding that the processing of massive data in the metaverse will push the expansion of AI processing capability to edge computing, which will result in more large-scale deployment of AI applications.

One of the highlights of WAIC 2022 on the ground is the “Metaverse Core Exhibition,” which focuses on the AI+Metaverse industry ecosystem, and in particular, examines the two dimensions of virtual experience and reality display. Some of the key technology displayed include various chips for AI models and servers, large-scale machine learning models, autonomous vehicles, and surgical robots, among others. Here are some of the highlighted products from our visits to the event:

1. Baidu’s machine learning model Wenxin 

Artificial intelligence has entered the era of developing large-scale machine learning models since 2018, integrating smaller and dispersed models into a powerful one. 

In 2020, OpenAI’s NLP model GPT-3 kickstarted the AI large-scale model arms race. Google, Microsoft, Meta (formerly Facebook), Huawei, Alibaba, Huawei, and other tech giants have all become involved in it. 

Baidu’s large-scale model “PCL-BAIDU Wenxin” is a generalized model developed by Baidu for various general scenarios and combined with the capabilities of the Baidu Knowledge Graph. It is widely used in the energy, finance, and aerospace sectors. Baidu also uses the model to offer AI painting to consumers. 

Taking the creative service platform “Yige” as an example, it can generate paintings based on the user’s text inputs. Two minutes after TechNode’s reporter entered “Godzilla in the Moonlight,” the system created seven different styles of paintings and labeled corresponding use cases.

This application is currently at the internal testing stage and is expected to be open to users for payment in the future, according to the official introduction. Compared with foreign AI painting products such as Google’s Imagen, Baidu’s “Yige” has a strong ability to generate images for different styles, and it also understands Chinese semantics better. 

2. Ant Group’s privacy computing technology  “SecretFlow”

As data become a key resource in society, many industries are facing new challenges in ensuring cybersecurity and data security. Against this backdrop, privacy-preserving computing can be a key technology to balance data security and data circulation, involving numerous professional technology stacks.

In July, Chinese fintech giant Ant Group officially made its privacy-preserving computation framework “SecretFlow” open source for global developers.

According to Ant Group’s on-site staff at WAIC, SecretFlow is an integrated work of privacy-preserving computation technology and application that the Chinese tech giant has precipitated for six years, incorporating more than a thousand patents and covering all mainstream privacy computing technologies. SecretFlow has made a major breakthrough in Trusted-Environment-based Cryptographic Computing (TECC), which can achieve modeling and analysis of one billion dense samples per hour. 

3. Biren BR100 GPU chip 

Shanghai-based Biren Technology, a domestic high-end GPU chip unicorn revealed its first general-purpose GPU chip series, the BR100 at this year’s WAIC.

The BR100 is based on the original chip architecture developed by Biren Technology, with a 7nm process that can accommodate 77 billion transistors, and this product is the first to adopt chiplet technology and PCIe 5.0 PCI Express, as well as supporting CXL protocols in China. 

A representative from the firm told TechNode that the BR100 will be major a rival to the forthcoming Nvidia H100, which will be affected by a new US ban on exports of high-end GPU chips to China, though Biren is yet to confirm when its new chip will go into mass production. 

This chip will be mainly deployed in data servers to provide computing power for large-scale AI training scenarios, smart cities, and the metaverse.

4. Westwell’s driverless vehicle Q-Truck

As a company that’s gone global from Shanghai, Westwell Technology uses artificial intelligence and driverless technology to explore developments in autonomous logistics.

The company’s Q-Truck, the world’s first intelligent battery-swap driverless commercial vehicle, can fully recharge in as little as 6 minutes without the need for a human to intervene in the process.

According to Westwell, the Q-Truck has a load capacity of 80 tons and a battery life of 200 kilometers. What’s more, the fleet system is able to manage multiple unmanned trucks at the same time, achieving mixed operation between driverless and manned vehicles due to the integration of digital systems.

5. HiScene’s industrial AR glasses and software 

As one of the leading industrial AR companies in China, HiScene presented its AR glasses HiAR H100, AR remote communication and collaboration platform HiLeia, and AR real-time spatial editor PinNotes at WAIC this year.

The majority of HiScene’s user cases are in factories and various manufacturing industries. Helping technicians to do more accurate remote inspections and other remote duties. 

With PinNotes, users can directly add associated virtual content to reference objects in the physical world via AR glasses or cellphones, which will then be saved to the AR platform and can be read out for re-editing and viewing, bringing users an experience of spatial interconnection, virtual-real integration and intelligent interaction.

Chinese e-commerce company Pinduoduo reported RMB 31.44 billion ($4.69 billion) in revenue in second-quarter earnings, a 36% growth from last year, and far exceeded the expected average of $4.1 billion, compiled by Yahoo Finance. 

The Nasdaq-listed company also saw an impressive 268% growth in its quarterly net income, bringing in RMB 8.9 billion.

Why it matters: The company attributed its good performance to “consumption recovery” in recent months as China refrained from extended and widespread lockdowns. During the earnings call, Pinduoduo said revenue growth came from increases in online marketing services and transaction services and that the growth in profitability is due to a few “short-term” and “one-off” external factors that may not repeat in the future. 

• Known for offering bargaining prices, Pinduoduo has managed to report better-than-expected earnings this quarter compared to its rivals, reflecting a more careful consumer spending sentiment in the current economic environment.

Details: Pinduoduo’s almost three-fold increase in net income in the second quarter is mainly due to the improvement of gross margin and some short-term factors. “So, for the past quarter alone, our profitability was mainly attributable to several external factors, mostly short-term or one-off in nature,” said Vice President Liu Jun.

• Meanwhile, Pinduoduo’s total operating expenses as a percentage of revenue decreased to 47% this quarter, down from 57% in the same period last year. Liu Jun pointed out that many short-term factors, such as project delays and lower business activities, caused such a decrease. “So it is unlikely to continue,” he said.
• It was reported previously that Pinduoduo plans to launch a cross-border e-commerce platform in September, which will first target the United States. “Overseas business is one of the opportunities that we see, we believe that it is a direction that is worth trying out for us,” Lei Chen, chairman and CEO of Pinduoduo, said in the earnings call, adding that the company will not simply repeat what others have done in this field.
• The company’s merchandise sales continued to contract, decreasing 97% from RMB 1.96 billion to RMB 50.7 million. The contraction of the merchandise business, which requires the company to shoulder most of the cost, has improved its gross margin.
• Shares of Pinduoduo surged after the company posted strong results, rising nearly 15% by the stock’s close.

Context: Compared to the two leading Chinese e-commerce giants, Pinduoduo handled the pandemic resurgence relatively well. Alibaba and JD recorded flat revenue and 5.4% growth year-on-year, respectively, in the second quarter, and both had their slowest growth rates in history.

• The Shanghai-based Pinduoduo was one of the few e-commerce companies that managed to continue offering its services during Shanghai’s Covid lockdown from March to June. Its community group-buy service Kuaituantuan played a vital role for Shanghai residents in solving lockdown food shortages. 

Meituan is planning to merge its e-commerce business units and the group buying unit known as Meituan Select, Chinese media outlet Caijing reported on Wednesday.

Why it matters: Facing fierce competition in its core business, Meituan is combining two relatively weaker and similar units to concentrate on new growth points. In April, Meituan Select suspended operations in four loss-making western Chinese provinces and Beijing as the community group-buy sector continues to consolidate. 

Details: Meituan Select and Meituan’s e-commerce unit both started operations in 2020. The two units are fighting an uphill battle to compete with more established players — Select competes with Pinduoduo, while the e-commerce unit faces giants like Alibaba and JD. The two businesses share some supply chains, the report said, and the merger could result in better collaboration.

• Meituan’s e-commerce offering is relatively weak compared to the company’s core life services and food delivery offerings. The unit brings in a small number of users, orders, and merchants, and hasn’t made much of a splash in the industry, according to Caijing’s report, citing several unnamed Meituan employees.
• Since 2021, Meituan has been expanding into “new initiatives,” including the group-buy unit Meituan Select, but so far the new units have been losing money. According to the company’s 2021 financial report, its aggregated operating profit of RMB 20.3 billion ($ 3.0 billion) from core businesses like food delivery and in-store, hotel and travel segments was completely offset by a loss of RMB 38.4 billion from these new initiatives.
• The company declined to comment when reached by TechNode on Friday.

Context: Meituan faces heated competition in its core business of offering on-demand life services. Moreover, Meituan’s food delivery business –one of its main income sources, accounting for more than half of total revenue – has a low operating margin, less than one-sixth the size of its in-store, hotel and travel business. 

• In local life services, ByteDance’s Douyin has teamed up with Alibaba’s Ele.me to explore more scenarios, according to a statement released last Thursday. ByteDance has high hopes for its local life services, reportedly setting an annual target of RMB 50 billion for the business this year.