BUSINESS Digital futures

BUSINESS

Digital futures

Global Times

01:27, October 29, 2019

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A woman stands in front of an AI service robot at CES Asia 2019 in Shanghai on June 13, 2019. (Photo: VCG)

Chinese internet firms have been actively expanding their foothold over recent years in overseas markets, although making inroads in Europe has not been as easy as in some other markets. However, there is huge potential for the prospect of China-EU cooperation in the digital economy and cyberspace governance, industry observers said.

Expanding overseas has been the obvious path for domestic firms after the industry witnessed two decades of rapid growth. Since China achieved a fully functional connection to the internet in 1994, the country has produced several global-level tech firms, including Baidu, Alibaba and Tencent (BAT), ranked among the top performers in the world.  

By June, the country had 854 million internet users, more than the entire population of Europe, up 25.98 million compared with the end of 2018. The internet penetration rate has reached 61.2 percent according to the China Internet Network Information Center. Meanwhile, 99.1 percent of internet users use smartphones to access the web. 

A report on China's mobile internet going global, released by Beijing-based market consultancy iResearch in 2018, showed that some 720 domestic internet firms had expanded overseas by the end of the fourth quarter of 2017. Most firms take the initial leap into overseas markets in India or Southeast Asia. 

In comparison, the large and mature European markets remain challenging for domestic players.

"Various languages and cultures as well as relatively complex cyberspace regulation policies in Europe are not favorable to achieve a scale economy, which is a key criteria for internet firms to choose where to explore growth," Cheng Maiyue, director of the Wuzhen Institute, an internet industry think tank, told the Global Times.

"It is important to balance investment and output. Besides, there is rising competition in the European markets," Cheng said.

US internet firms including Google, Facebook, Twitter, and Amazon already dominate the market in Europe.

"I don't think that Chinese internet firms have no intention to expand their presence in Europe. On the contrary, Europe is usually a key point in Chinese companies' global expansion," said Luigi Gambardella, founder and president of China Association for Digital, a business-led International Association aimed at intensifying cooperation in Information and Communications Technology (ICT). 

"Due to the complexity of businesses' globalization, it would be difficult to explain the reasons in one or two sentences. However, I believe Chinese internet companies' interest in Europe is growing and will continue to grow if their global ambitions swell," Gambardella told the Global Times in a recent interview.

Chinese firms have natural advantages in serving Chinese clients, which explains why Chinese mobile payments are almost omnipresent in Europe's tourism-related sites to service the increasing number of Chinese tourists, who are inclined to spend more than other travelers, Gambardella noted.

He added that firms would be successful if they had a "unique selling point and successful marketing" that could target Europeans. He cited the example of the short-form video app Douyin, known as TikTok overseas, which is owned by Chinese startup ByteDance.

In the latest ranking of non-game apps for the third quarter released by market research firm Sensor Tower, TikTok reached No.2 in terms of downloads. WhatsApp was No.1 but Facebook and Instagram dropped to No.4 and No.5.  

A PR representative from ByteDance said TikTok does not report user numbers when the Global Times asked for information on its user base in Europe.

According to Cheng, TikTok is a potential global internet player with Chinese origins, which has yet to fully demonstrate its value as a marketing tool, as now it mainly focuses on entertainment video content.

"The era of [Chinese firms] simply replicating Silicon Valley's business model is out and only those who can innovate with real competence and serve local demand can survive through the next phase of the competition and thrive. There are still plenty of opportunities for domestic players to stand out," Cheng noted.

"The era of the internet is full of opportunities. This rule would also apply to Chinese firms which seek to expand in Europe," Gambardella said.

The effect of going global by simply replication what worked in China has been waning over recent years, analysts said. 

The internet has become more integrated with industrial upgrades, different from the previous consumer-oriented model, as the former relies more on high technologies. 

Artificial intelligence (AI), big data, the Internet of Things (IoT) and 5G are the next technologies for domestic internet players if they want to gain a global foothold. 

Cheetah Mobile, a Chinese mobile internet company that develops mobile applications and provides security software, has been transforming toward an AI-powered industrial internet.

The firm launched a smart service robot called GreetBot last year. The robot has been operating in more than 20 other venues, providing services such as smart guidance, shopping assistance and conference support. 

The average daily count of voice interactions has reached 2 million, while all interactions total 130 million, Cheetah Mobile said.

"We have applied AI-related business in various scenarios domestically and want to export more products and services to overseas markets, including Europe," Vincent Li, director of global marketing at Cheetah Mobile, told the Global Times.

The firm has nearly 500 million monthly active users globally with overseas users accounting for 70 percent.

Closer ties

Physical trade between China and the EU has been an important component of bilateral trade and economic relations, but now virtual trade, represented by the rising digital economy, is set to herald a prosperous future between the two blocs, experts said.

The EU is China's largest trading partner, and China is the bloc's second-largest trading partner behind the US. 

According to the latest data released by China's General Administration of Customs, China's trade value with the EU reached 3.57 trillion yuan ($505 billion) in the first three quarters of 2019, up 8.6 percent year-on-year.

"Currently, the EU's overall level in the digital economy area still lags behind. However, looking ahead, the new trends, including key technologies with AI and IoT at their core, will become a crucial part of services trade in bilateral trade between China and EU as it provides important value for both sides," Cheng said.

Europe is a key region with its own advantages to conduct digital cooperation, according to Cheng. 

"It is not as sensitive as the US in terms of technologies. Plus, it may provide two-way value exchange with China compared with other markets like Southeast Asia and Africa, where Chinese firms tend to be the leaders in exporting their technologies and business model," he said. 

Amid the uncertainties clouding global economic growth, digitalization has obviously grown into a major economic driver. 

According to the China Internet Development Report 2019, the scale of China's digital economy reached 31.3 trillion yuan in 2018, accounting for 34.8 percent of the nation's total GDP.

Apart from the broad prospects in digital cooperation, the two sides should also learn from each other in cyberspace governance. "Smart regulation, via new technologies, is quite important for both parties in further enhancing the effectiveness," Cheng noted.

"China and the EU have great potential to work together on cyberspace," said Gambardella. For instance, cyber security legislation is an area where policymakers and industry have much to win from dialogue and exchanges. 

Meanwhile, the Chinese and EU approaches could further be harmonized. A further suggestion is to explain the rules and learn about solutions to minimize regulatory burden, which otherwise risk stifling new initiatives, according to Gambardella.

Li from Cheetah Mobile said the strict laws and regulations in Europe on cyber security will help Chinese firms to become more in line with international standards in terms of safe system operations and management.

In 2013, China and the EU signed the China-EU 2020 Strategic Agenda for Cooperation, in which the two sides targeted supporting and promoting the establishment of a peaceful, secure, resilient and open cyber space, promoting mutual trust and cooperation through such platforms as the China-EU Cyber Taskforce.


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