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Hong Kong vs. Shenzhen - ChinaBriefs on Tour 3 - Taobao Life - Event Tips

Hello from Beijing & Hamburg, welcome to the new issue of the ChinaBriefs newsletter. With a trad
ChinaBriefs
Hong Kong vs. Shenzhen - ChinaBriefs on Tour 3 - Taobao Life - Event Tips
By ChinaBriefs Team • Issue #5 • View online
Hello from Beijing & Hamburg,
welcome to the new issue of the ChinaBriefs newsletter.
With a trade war in full swing and the frightening prospect of a tech cold war on the horizon, things are looking tough in China right now. At least, they should. But the recent quarterly reports of Chinese tech giants weren’t that bad: food delivery firm Meituan posted a first quarterly profit since its IPO, Alibaba reported far better-than-expected quarterly revenue & profit with revenue growth at a whopping 42% and even beleaguered Huawei still sold a lot of phones. What ever Trump is trying, so far it seems to cause more trouble for soybean farmers in the US than for these guys.
Here are the topics for today’s issue:
  1. To see the future of Hong Kong, look at Shenzhen.
  2. ChinaBriefs on the Road - Part 3.
  3. How much do you buy online?
  4. Charming China Podcast feat. ChinaBriefs.
  5. Event Recommendations for Sept / Oct 2019.
As always, we are looking forward to any kind of feedback!! So pls send us an email (feedback@chinabriefs.io) or leave a comment on one of our channels on TwitterFacebook and LinkedIn.
Thx & best wishes
B. & M.

P.S.:Have you ever wondered if a foreigner can use WeChat Pay in China? Then you’ll find the answer on our Digital China Weblog!

1. To see the future of Hong Kong, look at Shenzhen.
"Shenzhen Light show" by Aaron Greenwood on Unsplash
"Shenzhen Light show" by Aaron Greenwood on Unsplash
Hong Kong’s pro-democracy demonstrations have been in the news for weeks now and everybody is wondering, how Beijing will react. If you want to get an idea what the central government might plan to get the former British colony under its control - despite one countries, two systems - don’t look at tanks & soldiers, look at Shenzhen instead.
The mainland city just across the border of Hong Kong is an economic powerhouse, which surpassed its neighbor’s economy for the first time ever in 2018 and is billed as the “new Silicon Valley”. Check out this recent documentary by Bloomberg about “the most fascinating city in the world”.
By all accounts, Shenzhen is already quite impressive. But according to a document released last week by the State Council, China’s cabinet, this might be just the beginning. With wide-ranging reforms they plan to turn China’s hi-tech capital into “a pilot demonstration area of socialism with Chinese characteristics”, which you probably shouldn’t confuse with good old Soviet-style socialism. This one comes with “accelerated development of 5G wireless networks” and wants to turn Shenzhen into a “global benchmark in terms of innovation, public service and environmental protection.“
China to make Shenzhen into a model city with bolder reforms
China to make Shenzhen into a model city with bolder reforms
What this has to do with Hong Kong?
Basically Beijing plans to turn Shenzhen into a second Hong Kong - a hub no longer only for high tech, but for all kind of businesses and in direct competition with its neighbour - only now on the “right” side of “one country, two systems”.
At the same time, there are parallel plans to create the worlds biggest city at the Pearl River Delta with the Greater Bay Area (you know, greater than this other Bay Area) by integrating all those already huge cites from Macau and Hong Kong / Shenzhen to Guangzhou into one big mega-city - with a population of 70+ million people. 😳
Key Take away:
Beijing’s long term solution to the current predicament is probably to make Hong Kong irrelevant - first through turning Shenzhen into a “better” alternative and maybe later dissolving the two cities with different systems (Macau & HK) in one huge megalopolis - the Greater Bay Area. Problem solved - literally and way more elegantly than by deploying the People’s Armed Police.
Further reading:

(Btw, you can find a German version of this text on FOCUS / DLDdaily as this week’s ChinaBriefs Column.)

2. ChinaBriefs on Tour - Part 3.
Welcome to the third and final leg of our tour through Digital China.
Our next stop in Beijing was Xiaomi (Xiǎomǐ 小米). Maybe this is a company that needs less of a formal introduction, first, because its mobile phones are already selling quite well in overseas markets and, second, they have started opening Mi Home stores in Europe and thus receiving wider press coverage in those regions. We were welcomed to the Xiaomi headquarter in Beijing by their international BD team led by Sandy Guo.
Xiaomi is famous in China foremost for its legendary founder and CEO, Mr. Lei Jun, who already has a number of successful startups and exits under his belt. Xiaomi started out as a mobile phone company by, admittedly, borrowing heavily from iPhone’s design philosophy - only sold at a much cheaper price points to China’s masses. Copying also Apple’s retail strategy they now have hundreds of stores worldwide, which still look much like the original.
Following in the footsteps of its early success with mobile phones, they have since been trying to build out an entire ecosystem of very cool home products ranging, from TV sets, to air conditioners, water purifiers, air purifiers, digitally-enabled light bulbs, robot vacuum cleaners, and many more. Only a fraction of those products get sold outside China. The idea behind this otherwise low margin business is to become an - what they called in their pre-IPO prospectus - internet service company. Based on their current stock price and revenue break-down, it seems they are still some distance away from this lofty goal.
Just last week Xiaomi released more info on a planned offensive for the German market - trying to capitalize on the recent troubles of rival Huawei. So, in the near future we can start watching Xiaomi from up close.
By the way, Xiaomi means Little Rice in Chinese and refers to a main staple of Chinese food subtly hinting at how important their products are for one’s daily life. If you want to know a bit more on the historical background of Xiaomi, please check this link.

After our Xiaomi visit, we went straight to the close-by offices of Horizon Robotics. Truth be told, this unicorn startup is one of those gems why digital discovery trips to China can be so valuable and insightful.
Started by Mr. Yu Kai, a graduate of the Technical University of Munich and one of the top AI scientists China has. He founded Baidu’s Institute of Deep Learning (IDL) and led the first autonomous driving project in China. At the Horizon HQ we were greeted by Gian-Marco Brizzolara, a recent Tsinghua Schwartzmann College graduate, one of the first foreign hires of the young company and a significant indicator of how Chinese tech companies these days eye global expansion early.
The company’s main area of expertise is AI edge computing with a focus on 2 use cases: autonomous driving and smart retail.
Edge computing means the ability to process data right there where the action is without the need to first upload data into the cloud thus creating lower latency, but also requiring extremely small and fast processing power. It also meant that the company had to develop their own AI edge processor since nothing of that capacity was on the market yet.
Just to give a few examples of the sheer processing power needed, especially in the areas of autonomous drive and retail, which is where the company is mostly focussed upon: An autonomous-driving vehicle typically generates 600-1,000 TB of data per day and it requires 16,000 trillion calculations on a typical paved road per day to support autonomous driving. Besides their own AI processor, Horizon Robotics is also developing in-house their own superior AI algorithms to be run seamlessly on their chips.
However, it is in the area of smart retail deployment where the company is driving significant revenue today. It helps retailers like the French Beaumanoire Group, Belle Shoes or YH Supermarkets to digitize their retail stores by using smart cameras enabled by edge AI processors. Typical applications are traffic counting and qualification as well as customer path discoveries and resulting in-store zoning recommendations.
Since facial recognition is at the core, the company is making sincere and conscientious efforts to consider the legal and psychological ramifications of an entry into the Western markets. It remains to be seen what the current trade / tech war means for this promising startup.
Horizon Robotics' early customers in retail: Belle Shoes and YH Supermarkets
Horizon Robotics' early customers in retail: Belle Shoes and YH Supermarkets
Sometimes it really is all about keeping the best for last. And so we saved the last stop for the World’s second most valuable startup - Bytedance.
Bytedance is currently valued at around 80 bn USD. It’s total amount of financing until to date is 4.3 bn USD. And unlike many of the other hot Chinese startups, it is already very profitable. Our host and organizer was Mayan Scharf. She was the first foreign hire and her story symbolizes the meteoric rise of this company: when she joined two and a half year ago the company headcount was 3,000 people. Now? More than 50,000!!!
The company became a household name in China for its addictive and algorithm powered news aggregator app “Jinri Toutiao”. Only after they bought Musical.ly and merged it into TikTok, their English language version of what’s known as Douyin in China: a short video app that is marching towards global domination and has today’s most powerful tech companies in Silicon Valley worried.
The company was founded in 2012 by Mr. Zhang Yiming and today is one of the growing number of Chinese tech companies eying global expansion. In the case of TikTok they are very successful doing so. Bytedance relies mostly on advertising for its revenues which reportedly was close to 8bn USD in 2018. The company plans an IPO soon. So keep an eye out for the prospectus. It might be an interesting stock to own.

This concludes our three part series of “ChinaBriefs on Tour”. You can find the complete report on the Digital China Weblog.
We regularly facilitate similar DigitalChina discovery tours - to the cities mentioned above, but also to others like Shenzhen or Chengdu - usually as a tailor-made event for a specific group or company.
If you are interested in such a trip and would like to know more about how we could support you, just drop us a line…

3. How much do you buy online?
This week, we got some shocking insights into my family’s spending habits on Taobao…
Taobao 淘宝 and TMall 天猫 are the two main ecommerce platforms operated by the Alibaba Group: Taobao as a C2C and TMall as B2C platform for brands. Jointly they control more than 60% of China’s total ecommerce market.
Taobao was set up back in the day to counter the insurgent Ebay resulting in Ebay’s departure only a few years later. Just recently they added a new function called “Taobao Life” 淘宝人生 that allows each user to see precisely how many days ago they have joined Taobao, how many orders they have placed and, lo and behold, how much the total spend was during this time… 😱
Typical example of a Score on Taobao Life
Typical example of a Score on Taobao Life
Immediately, this feature went viral on Weibo with netizens being outraged by how much of their well earned Renminbi ended up in Taobao’s coffers. Well known news portal Radii China came up with a story that precisely captured what many shopaholics thought - aptly titled: “I could have bought a house”.
Ok, for us it was not exactly an entire house but enough to make us think a bit what and how much we order on Taobao and whether it’s all really necessary.
Key Take away:
Imagine what would happen if a handy summary of your complete spending history would be available on Amazon? Then ask yourself why it isn’t it? Probably because someone like Jeff Bezos wants to keep you from thinking evil thoughts like spending less. Now compare this to Jack Ma and Alibaba’s transparency!
5. Charming China Podcast feat. ChinaBriefs
Check out the latest episode of the Charming China Podcast featuring yours truly. We had a little chat about Digital China, our little project and why Germans are probably pretty save from state surveillance…!? 😉 (Sorry, German version only)
6. Event Recommendations for Sep / Oct 2019
DACHINA Markendialog, Hamburg - 06.09.2019
“Brand Thinking in the Digital Age” is the title of this year’s DACHINA Markendialog - an annual conference right at the intersection of ChinaBriefs: 400+ experts from China and Germany will meet in Hamburg to discuss digital marketing.
If you want to participate, just click here and apply for an invitation.
FUTURE CANDY Tour to China, 27.10. - 03.11.2019
Innovation agency FUTURE CANDY is offering a trip to Beijing, Shanghai and Shenzhen. Visiting Chinese digital champions in a small group of like minded people is probably the best way to get a first impression.
If you want to visit Digital China this autumn, check out the FUTURE CANDY website for more info.
Did you enjoy this issue?
ChinaBriefs Team

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