Friday Tech Briefing: Google, Oracle, Pinduoduo
BIG TECH COMPANIES
1. Google Silent on Report of China Search Return Plan
What: Search giant Google LLC declined to comment on a widely cited media report saying the firm was preparing to launch a new China search engine. According to a report in The Intercept, Google has been developing a China-specific search engine under the code name Dragonfly since spring 2017. The search engine won’t return results on subjects deemed too sensitive by Beijing, which is required of all internet companies operating in China.
Why it’s important: Google shuttered its China search engine in 2010 after a high-profile spat over Beijing’s strict policies that require all internet companies to police themselves for sensitive content. The development of a China-specific search engine shows that Google has changed its view on the censorship issue under the new leadership of CEO Sundar Pichai.
Big picture: Google will face enormous challenges to re-enter the Chinese market. Facebook has been actively seeking permission to launch a Chinese version of its popular social networking site for the last few years, but has yet to receive permission from the Chinese government. (Source: Caixin)
2. Starbucks Forms Partnership with Alibaba to Boost Sales
What: Starbucks Coffee Co. and Alibaba Group announced a strategic “New Retail” partnership in Shanghai on Tuesday. Alibaba’s Ele.me will launch a delivery service in September for 150 Starbucks stores in Beijing and Shanghai. Meanwhile, Starbucks will establish “delivery kitchens” inside two branches of Hema, a supermarket chain owned by Alibaba. Alibaba’s Ele.me, Hema, Tmall, Taobao and Alipay apps will offer in-app functions allowing users to purchase Starbucks coffee online.
Why it’s important: Starbucks’s partnership with Ele.me was widely reported earlier this week, but the partnership with Alibaba is broader than many people expected. Starbucks seems particularly interested in establishing a presence in Hema, since this would allow it to reach local residents living near supermarkets in addition to the office workers that Starbucks has traditionally targeted.
Big picture: Starbucks has faced fierce competition from local coffee chains in China. Luckin Coffee, a 7-month-old startup based in Beijing, charges about 15% less on average than Starbucks and allows customers to order their drinks through a mobile application. (Source: Caixin, link in Chinese)
3. Partnering With Tencent, Oracle to Open First China Data Center in August
What: U.S. software giant Oracle announced that it will open its first China data center in August, in partnership with internet giant Tencent. Oracle will use the data center to provide cloud services in China, competing against similar services offered by Amazon, Microsoft, Alibaba Group and Huawei.
Why it’s important: Oracle first formed its data center partnership with Tencent in November 2016, and is a relative latecomer to the Chinese market. Microsoft and Amazon began offering cloud services in China in 2014 and 2016, respectively, meaning that Oracle will face fierce competition from both local and foreign tech companies. The Chinese government requires foreign firms offering cloud services to partner with local companies due to cyber security concerns. (Source: Caixin, link in Chinese)
4. Pinduoduo May Face Class-Action Suits in U.S.
What: Six U.S. law firms are looking into potential securities claims and may file class-action suits on behalf of people who bought Pinduoduo Inc. shares on Nasdaq, the firms said Thursday. One firm said that it is investigating potential claims related to allegations that Pinduoduo may have issued materially misleading business information to the investing public.
Why it’s important: The threat of shareholder suits adds to setbacks for the Chinese discount e-commerce site. After Pinduoduo’s high-profile Nasdaq debut July 26, authorities in China opened investigations into the company for allegedly selling counterfeit goods.
Big picture: Pinduoduo may become the latest Chinese company to face class-action litigation in the U.S. In December, online microlending platform Qudian was sued by law firms including Rosen and Faruqi & Faruqi for allegedly making false and misleading disclosures. In 2015, Chinese e-commerce giant Alibaba Group Holding Co. Ltd. was sued in the U.S. for making allegedly false disclosures related to fake products. The case was thrown out by the court in 2016. (Source: Caixin)
DEALS AND FUNDRAISING
5. Electric-Car Maker Xiaopeng Raises $587 Million
What: Electric-car startup Guangzhou Xiaopeng Motors Technology Co. Ltd. has announced that it raised 4 billion yuan ($587 million) in its latest fundraising round, giving it a valuation of around 25 billion yuan. In addition to its existing shareholders — Morningside Venture Capital and Primavera Capital Group — the company received support from venture capital groups including Hillhouse Capital Group and Eastern Bell Venture Capital in the B+ round.
Why it’s important: Xiaopeng is one of a bevy of electric-car specialists in China that have drawn immense investment interest as Beijing seeks to move the country away from fossil fuel-powered vehicles toward new-energy ones. The total funds raised by the Guangzhou-based company since its establishment in 2014 have exceeded 10 billion yuan.
Big picture: Many electric-car startups are racing to raise capital, as car manufacturing requires a huge amount of money to be spent in the process. Tencent Holdings Ltd.-backed Nio is preparing to raise up to $2 billion through a New York initial public offering by year end. (Source: Caixin)
6. Chinese Tech Takeover Abandoned in Face of Berlin Veto
What: Shandong province company Yantai Taihai Group Co. Ltd. dropped the planned purchase of a German machinery-maker after apparently anticipating that Berlin would block the deal. German media reports suggest that the Federal Government voted to block the acquisition due to “security issues” last week.
Why it’s important: This is the first deal Berlin has effectively blocked due to concerns about surrendering key technology. In July 2017, the German government strengthened its scope for investigating and blocking foreign acquisitions to include giving up technological know-how and access to “critical infrastructure” as part of potential national security threats.
Big picture: Germany’s move followed the trend of growing concerns in European capitals over Chinese money. In the U.K., China General Nuclear Power Group’s ultimately successful move to secure a 33.5% stake in the planned $26 billion Hinkley Point C nuclear power station was unexpectedly delayed for two months in 2016 over security concerns. (Source: Caixin)
7. China Begins Inspection of Online Animation, Music Streaming Providers
What: The Ministry of Culture and Tourism in China recently kicked off an inspection of 27 online animation and music streaming providers in China, including video streaming platforms Bilibili and Douyin. The inspection is aimed at cleaning up “vulgar” and “pornographic” content on those sites, and has already resulted in the deletion of 167 comic books, 4664 online music songs and over 100,000 videos.
Why it’s important: This is one of the latest operations targeting China’s short video industry. On July 30, Bilibili announced that its app has been removed from app stores in China since July 26 for distributing “unsuitable” content, as requested by Chinese authorities. Another 18 short video platforms were also ordered to clean up their content in the next month. (Source: People’s Daily, link in Chinese)
Compiled by Zhang Erchi
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