May 07, 2015 02:55 PM

Alibaba, Tencent Expand into Innovative Access

(Beijing) – Two of China's largest Internet companies, Alibaba Group Holding Ltd. and Tencent Holdings Ltd., have responded to Chinese government calls for more online innovation by expanding into local government and business incubator services.

In many areas of public service, from public transit information portals to online marriage license registration services, Tencent and Alibaba have been competing fiercely for local government contracts.

Tencent now offers options for paying utility bills, making doctor appointments and accessing public security and tax information to the public through its WeChat messaging application in the cities of Guangzhou, Shanghai, Wuhan, Foshan and Shenzhen. The company recently signed agreements with local governments in 11 other cities for similar services that are expected to launch soon.

On April 22, Alibaba opened an online platform that connects its mobile payment service, Alipay Wallet, e-commerce platform Taobao and the Twitter-like Sina Weibo, in which Alibaba owns a minority stake, to various services offered by local governments in 12 cities. The system makes it easier for consumers to pay utility bills.

Alibaba has been pushing into city government payment services since February 2014, when it earmarked 5 billion yuan for a big data and cloud computing system that serves government agencies in the southern island province of Hainan. Since then, Alibaba's cloud computing arm, Aliyun, has signed contracts with 13 cities to provide Internet solutions for the administrative systems.

As of January 1, WeChat had become an information and services access platform for about 41,000 government agencies around the country, while Sina Weibo was hosting platforms for about 130,000 government agencies.

On the business incubator front, Tencent Chairman Ma Huateng said in April that his company plans to invest in services that promote business start-ups and office parks. One goal is to encourage the use of Internet technology to help traditional businesses upgrade. Tencent plans to provide a Net platform that helps online software developers and service providers to start new businesses, he said.

Internet Plus

Tencent and Alibaba have gotten squarely behind the "Internet Plus" initiative cited by Prime Minister Li Keqiang in March in a major speech to the legislature. The government wants to integrate mobile Internet, cloud computing, big data and the Internet of Things so that they can be harnessed by traditional industries for new business opportunities.

Alibaba and Tencent are also partnering with hospitals to offer patients various online services such as appointment reservations, patient health record tracking and bill paying.

A virtual bridge built in April now links WeChat to an online payment platform serving all public hospitals in Beijing. Tencent also wants to let WeChat users electronically tap their public health insurance accounts to pay for hospital services.

Alipay Wallet offers a similar service in the eastern province of Zhejiang, whose capital Hangzhou is home to Alibaba's headquarters.

"Alipay Wallet is the only third-party payment provider that can make real-time settlements" through public health insurance accounts, said a health care business manager at Ant Financial Services Group, Alipay's parent.

Alibaba's Taobao platform is also hosting government services, said the company's public service specialist, Le Jiu. For example, the city of Qingdao's vehicle administration and a public security bureau in one of Nanjing's districts have started to offer services through Taobao.

Alibaba's follow-up move, Le said, could put these services under one roof. "Alibaba needs to integrate Taobao, Alipay and Weibo access through one unified solution," he said.

Tencent is mobilizing other resources to enhance local government relations, with the goal of becoming more deeply involved in government services support. It's helping local authorities build official web portals and launch business incubators. Tencent announced on April 29 that it plans to open incubators this year in 25 cities, including in Shanghai's Yangpu District, the capital's Changping District and in Tianjin's Binhai New Area.

Ren Yuxin, Tencent's chief operating officer, said the company hopes these incubators help start-ups generate enough business and income to create more than 100 billionaires.

Since 2011, Tencent has sponsored a platform called that helps online game and app developers promote their products. Ma said the platform has mainly targeted software companies but that it should expand its reach by promoting business innovation as well.

Hu Yanping, founder of the Internet information provider DCCI, said most incubator projects in China provide office space for start-ups but do not promote innovative services or management.

Combined revenues for all businesses on the platform totaled more than 20 billion yuan as of April, the company said, and 24 businesses have seen sales exceed 100 million yuan. More than 20 companies have already listed or have plans to go public.

Judging by the response so far, local government officials appear enthusiastic about cooperating with Tencent and Alibaba.

"We see opportunities for small and medium-sized enterprises in the platform Tencent has offered," said Dai Yuan, deputy mayor of Changzhou, a city in the eastern province of Jiangsu.

Lin Songtao, vice president of Tencent's mobile Net division, said new business incubators will offer start-ups support in the areas of customer access, technology, training, financing and government relations.

Lin said Tencent is seeking to partner with venture capital (VC) and private equity firms willing to support special funds that encourage new businesses. So far, Lin said, "more than 20 VCs with more than 100 billion yuan in capital have joined Tencent."

Said Ma: "Local governments offer space and policy support, while Tencent offers Internet support. Start-ups with only one idea for solving problems facing a traditional industry can come to us and we'll handle the rest."

On the Cloud

Meanwhile, Alibaba is selling cloud-computing services to local governments. In Guizhou Province, in the southwest, it has built a cloud-computing platform for the government through which data processing and analysis companies have been developing traffic-light control systems based on real-time data.

In Zhejiang, Aliyun and the provincial government partnered to build a portal that offers access to 9,000 kinds of government services. Government officials use the site to release information, and the public uses it to make requests for government services or to file complaints.

The Zhejiang project may become a model for similar programs elsewhere. To date, Alibaba has started working to build cloud computing platforms for local governments in 13 provinces.

Significant challenges remain in the area of computer software and hardware compatibility. Information systems at many government agencies around China are outdated, said a source close to a local government, making it hard for them to connect with Alibaba's cutting-edge cloud network.

"Sometimes, we found it is difficult to find the tech teams that built these systems" at government agencies, said an employee of Aliyun who asked not to be named.

Another challenge involves security. "Government agencies have strict information security requirements and will not allow any data transfer risks," the staffer said.

On the other hand, according to a person close to a government agency, cloud computing can help promote government information transparency.

"In the past, different agencies and different offices under the same agency didn't know what others were doing," the source said. "But now that all of this information is shared, processing things is easier and those who profit by helping government agencies communicate with each other will lose business."

(Rewritten by Han Wei)

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