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CEO Daily: Saturday May 13th

I spent most of last week in Guangzhou with Time Inc. colleagues making arrangements for December’s Fortune Global Forum. On Thursday, we stopped by WeChat, the popular messaging app developed by Tencent Holdings. I came away marveling anew at the pace and scale of technological innovation in China.

You can tell WeChat isn’t a typical Chinese company from the moment you set foot on its campus in Guangzhou Creative Park, a cluster of old textile factories redesigned by U.S. architecture firm M Moser Associates. The space exudes confidence and cool. WeChat is less an app than an operating system—and one that, since its launch in 2011, has become so ubiquitous and indispensable to Chinese consumers that it verges on a way a life. The list of things you can do with it is staggering: trade text and voice messages; create group chats; hail a taxi or ride-share; play video games; read the news; download emojis; make travel arrangements; order dumplings; pay the corner fruit-vendor; find a date; get rid of your acne; cure your hiccups; raise your IQ. Well, okay, those last few are debatable, but the other stuff is only the beginning. WeChat is emerging as China’s One App to Rule Them All.

WeChat’s size, efficiency and creativity make it a formidable force, and not just within China. (At the end of 2016, WeChat claimed 890 million active users, more than half of whom were logged into WeChat more than 90 minutes a day.) In a recent post on, Ben Thompson argued WeChat poses a long-term problem for Apple, the only major U.S. tech company to have succeeded in cracking the China market.In the U.S., consumers are willing to pay more for iPhones not just to get the device itself but because they value the superior quality of its operating system. In China, the operating system that matters is WeChat, which works fine on iPhones. Unfortunately for Apple, WeChat works just as well on cheaper Android phones, which means, says Thompson, that Chinese consumers face “no penalty to switching away from an iPhone.” Apple’s China sales fell 14% in the last quarter compared to a year earlier. In 2016, its China market share fell to 9.6%, from 13.6% the year before.

Many analysts think WeChat’s share of China’s mobile payment market will soon overtake that of Alibaba Group’s Alipay. In just the past two years, WeChat’s share of the mobile payment market has more than quadrupled to 37%, while that of Alipay has tumbled to 54%, down from 79%. Together the two tech giants control nine out of every ten renminbi Chinese consumers spent using their phones last year. And that was a lot of renminbi: In 2016, the value of China’s third-party mobile payments surged to $5.5 trillion, according to China-based forecaster iResearch. That’s 50 times the size of the U.S. mobile payments market, which Forrester Research estimates at $112 billion.

The battle between Tencent and Alibaba is spilling beyond China’s borders. Earlier this week, Tencent announced a partnership between WeChat and Silicon Valley startup Citcon to roll out a cashless payment service for Chinese travelers in the United States. WeChat now offers cashless payment in 15 other countries, including Japan and Singapore. Alipay offers cashless payment in 26 countries. In the past month, Ant Financial, Alibaba Group’s financial services arm, announced a tie-up between Alipay and U.S. card processing service First Data, and offered $1.2 billion to acquire MoneyGram, the U.S.-based cross-border payments.

The two giants waged a similar slugfest in the ride-sharing sector, with Tencent-backed Didi Dache squaring off against Alibaba-backed Kuaidi Dache. They spent hundreds of millions of dollars on promotions and rebates until agreeing in 2015 on a “strategic merger.” The new company, Didi Chuxing, turned its combined firepower on Travis Kalanick’s Uber, which surrendered and exited China last summer.

This year, the war between Tencent and Alibaba has erupted on a new front: bike-sharing. Tencent-backed Mobike (which uses WePay), and Alibaba-backed Ofo (which uses Alipay) dominate the sector. I saw evidence of the bike battle everywhere on the streets of Guangzhou this week. Mobike’s orange bikes seemed to outnumber Ofo’s yellow ones. But the colors are misleading: at the parent level, orange is Alibaba’s color, while WeChat’s is green. Reuters and Quartz offer good dispatches from the front lines. The two titans have taken their fight to Singapore and San Francisco, and are headed for the United Kingdom.

What fascinates me is that in all three of these sectors—mobile payments, ride-hailing, and bike-sharing—Chinese tech firms aren’t just innovators, they’re innovation leaders, and the competition with each other for domination in their home market has unleashed a scramble to conquer markets overseas.

Enjoy your weekend. More China links below.

Clay Chandler
@clay chandler

Politics and Policy


  • Is China “bent on world domination”? Washington Post Editorial Page editor Fred Hiatt thinks so, “but not with missiles and aircraft carriers but by controlling solar energy, cloud computing and other industries of the future.”  He credits this bleak vision to the American Chamber of Commerce in China, which sent a delegation to Washington recently to warn that “China’s aggressive mercantilist policies are one of the most serious threats facing the future of U.S. technology sectors.” Hiatt quotes veteran China hand James MacGregor as saying China’s goal is nothing sort of “domination of the industries of the future.” That’s an amazing reversal. I used to cover economic policy for the Post. I remember MacGregor bringing the AmCham China delegation to the paper and telling us that he was hopeful about the U.S. – China relationship and that the best way to strengthen it was to admit China to the World Trade Organization.  The Washington Post


  • U.S sends a delegation to China’s “New Silk Road” summit: Trump has dispatched a team led by White House senior adviser Matt Pottinger to Beijing t0 attend the “One Belt, One Road” summit, China’s biggest diplomatic gathering of the year. Some analysts see China’s Belt and Road initiative as an effort to use infrastructure programs to counter U.S. global influence in Asia, Africa, the Middle East and Europe. Pottinger, a fluent Mandarin speaker who tangled with  Chinese security police during his years as a Beijing correspondent for The Wall Street Journal, has been a pointed critic of China’s authoritarian government in the past. Reuters


  • U.S. strikes a watered-down trade deal with China. The Trump administration struck a set of trade deals with China in electronic payments, beef and poultry, but side-stepped larger issues that might have complicated relations between the two countries at a time when Trump is hoping to enlist Xi Jinping’s help in containing the nuclear threat in North Korea. The deals will allow Chinese companies to export cooked poultry products and promise China access to liquified natural gas from the U.S. There were no agreements on steel, aluminum, auto parts or the sort of technology issues raised by the American Chamber of Commerce in China.  New York Times


  • Trump’s lonely trade warrior. The Wall Street Journal’s Bob Davis says Trump hawkish trade advisor Peter Navarro is still pushing for concessions from China and Mexico even though his boss says he no longer thinks China is a currency manipulator and has abandoned his threats to slap steep tariffs on Chinese imports. Trump decided last month to scrap the National Trade Council, the agency he created for Navarro to run, and has replaced it with Office of Trade and Manufacturing Policy. Navarro declined to respond to suggestions he’s been marginalized. “I don’t worry about getting outmaneuvered. I just worry about getting things done.”  The Wall Street Journal 

Technology and Innovation


  • Is Tesla building a factory in China? Guangdong’s local newspaper, the Southern Metropolis Daily, citing multiple sources, said the electric vehicle maker is planning to build a factory in the province. The paper reported that the factory site has been chosen and “the plan is waiting for approval from [the] relevant department in local government.” Tesla denied the report. Elon Musk made an unexpected visit to China in late April, and met with vice premier Wang Yang, one of the country’s top economic officials. Musk has predicted China could eventually become China’s biggest market. In March, Tencent paid $1.78 billion to secure a 5% stake in Tesla.  CNBC


  • Chinese engineers offer to build Trump’s wall in less than a year and for 60% less. Ma Yihe, founder and chairman of WinSun, a construction company based in China’s Jiangsu province, tells South China Morning Post contributor Zigor Almada that 3-D printing techniques to could dramatically shorten construction time and lower costs of Trump’s promised wall along the U.S.’s southern border with Mexico. South China Morning Post