Trade talks between the U.S. and China appear to have bogged down in recent days, in part over U.S. concerns China isn’t doing enough to prevent its companies from ripping off American technologies.
But I find no small irony in the fact that, even as negotiators from the two countries haggle, the founder of one of America’s biggest tech companies—none other than Mandarin-speaking Mark Zuckerberg—signaled Wednesday in a 3,300-word blog post that he hopes to copy the business model of WeChat, the super app pioneered by Chinese technology giant Tencent Holdings.
Zuckerberg made no mention of Tencent or WeChat in his post. And many analyses of his manifesto assume the Internet company whose business model he most hopes to expropriate is Snapchat. “It’s another instance of Facebook copying Snapchat,” wrote Todd Spangler in Variety. “Facebook Just Shoplifted Snapchat’s Best Idea,” blared the headline on Kara Swisher’s column in The New York Times. (Snapchat founder Evan Speigel’s disdain for Zuckerberg is well known.)
But I agree with Adam’s take in Friday’s Data Sheet: “Facebook hopes to keep making billions off its namesake platform and add new business models to its encrypted communications and messaging services, namely payments and e-commerce, which is WeChat’s model in China.”
WeChat, developed by Tencent’s Allen Zhang in 2011, often is described as China’s “one app to rule them all.” It allows people to message each other via one-on-one texts, audio or video calls, and form groups of up to 500 to discuss whatever issues they like. But they also can use WeChat to: schedule appointments; hail a car; make restaurant reservations; buy groceries; wire money to friends; book a hotel; buy insurance; invest; and much, much more.
WeChat now claims 1.1 billion monthly active users. If you live within China’s “Great Firewall,” it’s just about impossible to get through the day without a WeChat account. Business Insider’s Harrison Jacobs, who recently spent six weeks in China, describes the difference between his life before and after downloading the app as “like being able to see after spending a week blind.” At the moment, no digital platform in the West comes close to matching WeChat’s all-encompassing functionality.
For Facebook, expropriating the WeChat model won’t be easy. As the Times’ ace China tech correspondent Li Yuan points out, WeChat’s business model differs radically from Facebook’s in that it “isn’t dependent on advertising for making money.” Instead, WeChat relies on on its mobile payments system (which Facebook lacks) and charges commissions for services provided via its platform.
Zuckerberg asserts that he is looking for a way for Facebook to pivot to privacy. But if he is seeking to emulate WeChat, which amasses data about a far broader range of user activities than Facebook does now, his company may end up knowing more about us than ever.
More China news below.
Economy and Trade
Still a long way to Mar-a-Lago. The U.S. trade deficit with China rose to a 10-year high in December. That’s not necessarily a bad thing, but President Trump views the deficit as proof that China is “winning” on bilateral trade. Negotiations between the two powers drag on and Chinese officials are reportedly wary of any quick solution to the trade war. Some broad agreements have been made, but the final details are trickier and President Xi’s anticipated trip to Mar-a-Lago could be put on hold until the finer points are figured out. New York Times
Belt and Rome Initiative. Italy is set to become the first G7 nation to endorse China’s Belt and Road Initiative (BRI) by signing an MOU on the project with Beijing by the end of the month. A representative for the U.S. national security council warned Italy the MOU could “end up harming Italy’s global image in the long run.” President Xi Jinping will arrive in Italy on March 22 for his first visit as president. Financial Times
A little holiday weight. China exports dropped 20% in February over the same month last year – well above the 4.8% estimated by economists in a Reuters poll. But February data is often weak, due to the weeklong Chinese New Year’s (CNY) holiday that falls in the month. Last year, however, February exports were up 44.5%. CNY fell on Feb 16 that year, so the effect on trade wasn’t seen until March. That partway explains this year’s disappointing results, but China’s economy is facing strong headwinds. Wall Street Journal
Slow down, there. China Premier Li Keqiang set a target of 6% growth for GDP this year, announcing the target in a report to the National People’s Congress – China’s parliament – Tuesday. That’s a lower target than the “about 6.5%” set for last year. To achieve its goal of doubling the economy from 2010 levels by 2020, China needs to expand at an annual rate of 6.2%, estimate economists and Morgan Stanley. South China Morning Post
Innovation and Tech
So, sue me. At a press conference on Thursday Huawei Rotating Chairman Guo Ping announced the company is suing the U.S. government – confirming news leaked to the New York Times days earlier. Huawei claims Washington’s ban on the use of Huawei products in government agencies is unconstitutional and wants to see evidence supporting Washington’s claim that Huawei poses a security threat. Fortune
Taking bytes. Bytedance, the $75 billion parent company of short video app TikTok and news aggregator Toutiao, is creeping into Baidu’s search space. Bytedance recently updated the search function on Toutiao. Now users can glean content from across the web through the app’s internal search bar. Bytedance is also planning a Slack-like messaging service in the U.S. and overseas. The Information
Electric dreams. Tesla’s Shanghai Gigafactory will start production in May, says the head of Shanghai’s Economic and Information Technology Commission. A plant normally takes up to two years to complete and Tesla only broke ground on the factory in January. This week, the American carmaker secured $500 million in Chinese bank loans to push construction forward. Meanwhile, Tesla rival NIO – a Shanghai-based EV start-up – dropped plans to build its own factory. NIO will continue manufacturing with its state-owned partner, JAC Motors. Quartz
In Case You Missed It
Politics and Policy
Pressure mounts in Canada. Huawei CFO Meng Wanzhou appeared in court in Vancouver on Wednesday to be assigned a date for her extradition hearing. The hearing will be on May 8. Meng’s extradition is likely to proceed as Canada traditionally honors extradition requests from the U.S. However, Chinese authorities announced last week that the two Canadian citizens they have detained since Meng’s arrest in Vancouver are now suspected of working together to steal state secrets. Bloomberg
That’s a rap? Concurrent meetings of China’s top legislative body, the National People’s Congress (NPC), and the top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC) are underway. The annual meetings, dubbed the Two Sessions, set China’s objectives for the year ahead, including targets for GDP growth and military spending. This year, state news agency Xinhua made the bizarre decision of releasing an English rap video in praise of the Two Sessions. Caixin