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China’s innovators

Life returned to almost-normal in downtown Guangzhou this morning following the Friday conclusion of the Fortune Global Forum. Delegates dashed for the airport. Security checkpoints were dismantled. There were actual pedestrians on the sidewalks.

I can’t improve on Alan’s excellent daily dispatches from the Forum. But a personal highlight came on Day Two, during a panel introducing founders of five startups chosen as winners of Fortune‘s first-ever China Innovation Awards.

The companies had been culled from a pool of nearly a hundred nominees. From that group, Fortune editors selected three winners in five categories: e-commerce and financial technology; healthcare; mobility and green tech; artificial intelligence; education, media and entertainment. After a full day of Shark Tank-style pitches, delegates to Brainstorm Tech International voted to choose a single winner in each category.

It fell to me to introduce winners to the Forum. At the last-minute, members of the programming team and I made a whimsical decision: rather than asking winners to rehash pitches for their companies, why not invite them to talk about themselves? What is it like to be an entrepreneur in modern China? What obstacles did they face? What drove them?

The conversation that followed was a revelation—by turns, funny, surprising and inspiring. Nearly everyone had a story about how friends, family, teachers or professional colleagues had tried to discourage them from taking the risk of striking out on their own. One founder complained about the travails of recruiting; hours are grueling at Chinese startups and, to hear him tell it, prospective hires fear signing with a new venture will doom their prospects for marriage. Another spoke of how difficult it had been to convince his wife that he should quit his U.S.-based job with a prominent multinational and return to China to launch his own business.

Even so, few reported difficulty securing funding, and none had any regrets. All agreed that, in China, opportunities for entrepreneurs are legion.

The optimism of that session was tempered by references in conversations during the Forum and Brainstorm Tech about the expanding power of China’s two Internet giants, Alibaba Group and Tencent Holdings. Over the course of the week, we heard from a host of Chinese “unicorns” that have accepted funding from at least one—and in some cases both—of the tech titans. Among them:, a food delivery service; Mobike and Ofo, bike-sharing ventures; Mobvoi, a maker of A.I.-enabled devices; and Baozun, which provides e-commerce services for merchants.

In today’s Wall Street Journal tech writer Li Yuan argues China’s tech behemoths “use their deep pockets to swallow startups and guard against potential disruptors.” In China, she contends, new ventures have become mere “pawns” in the expanding proxy war between Alibaba and Tencent, which are less interested in the profitability of the ventures themselves than they are in using acquisitions to gain control of customer data. Alibaba’s Jack Ma and Tencent’s Pony Ma both spoke at the Forum. Jack papered over their rivalry but Pony compared Alibaba to a greedy landlord apt to raise the rent whenever he felt like it.

In an essay in Barrons, former Google China head Kai-Fu Lee and McKinsey Global Institute director Jonathan Woetzel suggest Alibaba and Tencent are engaged in a high-stakes digital land grab. Lee and Woetzel stress the connection between amassing data and mastering AI: “As Chinese firms become more technically capable, the country’s market advantage is turning into a data advantage—critical to support the development of AI,” they write.

In a separate report released this month, Lee and Eurasia Group’s Paul Triolo suggest the AI rivalry to watch isn’t between Tencent and Alibaba but between China and the U.S. Lee and Triolo argue the U.S. and China are locked in a “two-way race for AI dominance” sure to make technology a “key source of trade friction between the two countries” in years to come. China, the report notes, “has put the full power of the state behind its drive for AI dominance.” Lee and Triolo fret that the fact that China has more Internet users than the U.S. and Europe combined “could give China an unassailable lead in amassing the huge data sets that lie at the heart of AI innovation.”

I don’t know about that. I do know, though, that I was impressed by the quiet confidence of Chao Xiaojuan, founder of BZN, whom Fortune selected as this year’s China Innovator of the Year. BZN, founded in 2015, describes itself as an Internet platform that provides “one-stop shopping” for corporate insurance. Chao was the only woman among the 15 finalists but said she did not feel that her gender had hindered her ability to launch a new company and never doubted that her venture would succeed.

Enjoy the weekend!

Clay Chandler

Technology and Trade

Swapify: Tencent Music Entertainment and Spotify are exchanging equity stakes of just under 10%. Tencent has previously offered to buy Spotify, but was rebuffed by the Swedish-owned music provider. The exchange is the latest in a slew of overseas investments by Tencent. Financial Times

Everything is awesome: Lego has won its first copyright case against a copycat Chinese toymaker, a move that a Lego company spokesperson said was an important indication of China’s focus on intellectual property protection and the creation of a favourable business environment for firms operating in China. BBC 

A foothold for Boots: Walgreens Boots Alliance will be taking a $418m stake in Chinese pharmaceutical retail company Sinopharm Holding Guoda Drugstores, which operates over 3,500 stores and has 20,000 employees in China. The investment will give Walgreens a 40% stake the company and a foothold in China’s fast-growing retail pharmacy sector. Wall Street Journal 

Open wide. Foreign investors will soon have “significantly” widened market access, vice premier Wang Yang said this week, who pledged to speed up an upcoming timetable and roadmap for the opening of key sectors, and the protection of the legal rights and fair competition for foreign firms. The announcement comes after China raised foreign ownership limits in local financial firms in November. Reuters 

China In the World

In the arena: Apple CEO Tim Cook is optimistic that some of the apps removed from its Chinese app store this year will be restored. Speaking at the Fortune Global Forum this week, Cook reaffirmed his commitment to freedom as an American, but stressed that companies operating in foreign countries have to abide by local laws and regulations or stay on the sidelines. Fortune

Champ or scamp? Chinese bike-sharing start-up Mobike has received a United Nations Champions of the Earth awards for its promotion of market-driven solutions to air pollution and climate change. Sceptics, however, point to the mounds of abandoned and damaged Mobike bicycles piling up on street corners around the world. TechNode 

Andale! Didi Chuxing, China’s Uber equivalent, has chosen Mexico as the first stop for its global expansion, according to a Reuters source. After Uber, the Chinese company is the world’s second-most highly valued, venture-backed private firm in the world and owns stakes in Uber rivals around the world, including Lyft in the US, Brazil’s 99, India’s Ola, Singapore-based Grab, and Careem in the Middle East. Reuters 

City of bikes. After making its first American foray in September, Ofo is squeezing onto Paris’ crowded bike-sharing market from this week. The Chinese start-up has placed 100 bright yellow bicycles on the streets of Paris, where all combustion-engine cars will be banned by 2030, and will raise that number to 1,000 bikes by year-end. Reuters 

In Case You Missed It

China says it’s open for business. Foreign firms say it’s not that simple. New York Times

Maybe China Can’t Take Over the World Bloomberg

This Jack and Pony Show Must End Bloomberg

Inside China’s big tech conference, New Ways to Track Citizens New York Times

Toutiao is making fake news to train its anti-fake news AI TechNode

China In The World

Influential:  Time picks Chinese president Xi Jinping as No. 3 in its annual ranking of Person of the Year. Time

Too influential? Australia’s ban on foreign political donations reflects “typical anti-China hysteria and paranoia”, the Chinese embassy in Australia said this week, and is the result of fabricated news stories by local media about the “so-called Chinese influence and infiltration in Australia”. Australian prime minister Malcolm Turnbull said earlier this week that the ban aims to curb external influence on Australian politics, singling out China as a source of them. The Guardian 

Feeling unwelcome: American firms are less optimistic than before about China’s business climate, according to a survey by the U.S.-China Business Council, which represents 200 U.S. companies doing business with China. Despite climbing profits due to the recovery of the Chinese economy, the firms are still concerned about Beijing’s restrictions on market access and opaque regulatory policies for foreign companies. AP 

Summaries by Debbie Yong. @debyong

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