chinaprotocol | chinaauthorDavid WertimeChina NewsletterDavid Wertime and our data-obsessed China team analyze China tech for you. Every Wednesday, with alerts on key stories and research.9338dd5bb5
Get access to Protocol
I’m already a subscriber
Want to better understand the $150 billion gaming industry? Get our newsletter every Tuesday.
Are you keeping up with the latest cloud developments? Get Tom Krazit and Joe Williams' newsletter every Monday and Thursday.
David Wertime and our data-obsessed China team analyze China tech for you. Every Wednesday, with alerts on key stories and research.
Want your finger on the pulse of everything that's happening in tech? Sign up to get David Pierce's daily newsletter.
Do you know what's going on in the venture capital and startup world? Get the Pipeline newsletter every Saturday.
Do you know what's coming next up in the world of tech and entertainment? Get Janko Roettgers' newsletter every Thursday.
Hear from Protocol's experts on the biggest questions in tech. Get Braintrust in your inbox every Thursday.
Get access to the Protocol | Fintech newsletter, research, news alerts and events.
February 3, 2021
Good morning. This week in Protocol | China: why Clubhouse is a free-speech haven (for now), the backstory to ByteDance's big suit against Tencent and invasive facial recognition — for kids!
In case you're new here: Welcome. We're making the largest-ever Western newsroom investment in covering Chinese tech so we can tell you what's next at the intersection of technology, policy and business in the world's largest country. As part of that, each Wednesday, the Protocol | China newsletter will bring you news and analysis on the major companies, trends and people you need to know in China. Throughout the week, you'll find our stories and research on the Protocol | China site.
(Was this email forwarded to you? Sign up here.)
The Big Story
China gets the Clubhouse bug
China's elites at home and abroad joined first. Many have an overseas Apple ID and thus a way into the app. They're tech workers and product managers, but also activists and journalists.
- One big subject: politics. Late Tuesday night, Asia time, users in mainland China, Hong Kong and Taiwan stayed up to debate Chinese identity and democracy. Things got heated when it came to Hong Kong protests and China's handling of COVID-19.
- Clubhouse invite codes are now being bought and sold on auction sites like Xianyu. If you read Chinese (and have a Chinese bank or fintech account) you can pick up an invite code there for about $20.
- "My mom has 77 friends on Clubhouse," Protocol reporter Shen Lu said.
A lesson here: the importance of Western star power. When the appearance of a foreign businessman does more to juice elite Chinese interest in audio chat apps than founders who've worked on the problem for years — we're looking at you, YY — that tells us how globalized China's influence economy really is.
But this Clubhouse trend won't last. This is a sad, textbook case of the incompatibility of China's and America's tech systems. Yes, users around the world often want (some of) the same things, and to gather in the same places. But China's government won't tolerate this for much longer, as unregulated forums where citizens gather to compare notes and complaints makes Beijing nervous. Expect some sort of de facto, unannounced ban in the mainland soon.
- Still, there could be homegrown options now that the elites are interested: audio chat room platform YY has historically been a little more … down-market, but could catch on; and tech insiders are (predictably) already talking about copying Clubhouse, too.
Email us at email@example.com with your prediction for how long Clubhouse lasts in China — and why. Whoever makes the most accurate prediction gets Protocol-branded swag.
Up Now at Protocol | China
- Want to know what's really happening inside Chinese tech companies, from office spats to alleged deaths caused by overworking? Hop on Maimai, China's nationwide, uncensored water cooler convo. Users love it, but big tech hates it and is apparently trying to sue it into oblivion — Zeyi Yang reports.
- Meet the huge, lucrative and underserved market staring everyone in the face: China's seniors. Shen Lu has the goods on what works and what doesn't for a market that will represent 25% of all of China by the end of the decade. Important lessons there for how U.S. tech companies can best serve their own aging user bases, too.
- China's ed tech market is massive, driven by hope and angst among the parents of 240 million K-12 students. Shen Lu profiles Hou Jianbin, the ascetic founder of ed tech AI behemoth Zuoyebang, and his bid to amass China's largest question-and-answer database, whatever the cost.
Big Brother Beijing
- The waters get muddier in China's semiconductor industry. Late last week, tech website 36Kr published an investigation into Wuhan-based chipmaker HSMC, whose leadership reportedly tricked local government into investing over $1 billion. It shows how new companies in China game the system and grab fistfuls of RMB from a government desperate to grow its own semiconductor industry. Now, top execs have fled, leaving taxpayers and employees holding the bag.
- ByteDance's lawsuit against Tencent could set a major precedent. The news broke Tuesday of ByteDance's legal complaint, which accuses Tencent of preventing content from Douyin (China's TikTok equivalent, which ByteDance owns) from appearing on WeChat. ByteDance founder Zhang Yiming and Tencent founder Pony Ma have been feuding since 2018, but there's a bigger issue: Can China's big tech platforms ban competing sites? The practice is widespread for now, but the legal challenge comes "months after Beijing unveiled draft regulations aimed at rooting out monopolistic behavior among internet companies," Bloomberg reports.
- Chinese ed tech took a gut punch: On Monday, China's Ministry of Education announced that students at primary and secondary schools must turn over their phones during class. Teachers will also be banned from assigning or allowing students to do their homework on their phones, the South China Morning Post reports. But studying is one major use the under-18 set has for their phones. Ed tech giants Zuoyebang and Yuanfudao can't be happy.
Tracking the B.A.T.H.
- Tech titans are letting R&D investment slide. Aggregated data shows Alibaba, JD.com and Tencent's research and development investment has been rising in absolute terms, but not fast enough to keep up with spiraling revenue, putting investment at less than 10% of turnover. Baidu and Huawei, by comparison, are considered "hardcore" tech companies, with R&D investment above 15% over the past several years.
- Will Huawei remain on the entity list? Republicans want to know after Commerce Secretary nominee Gina Raimondo declined to confirm whether Huawei would stay on the Commerce blacklist.
China Goes Global
- Xiaomi is suing the U.S. government. The smartphone company sued the Treasury and Defense departments in a D.C. court last week. Xiaomi says its November designation as a "Communist Chinese Military Company" was made without due process. This is the first legal challenge by a Chinese company to that interagency blacklist.
- American tech money is still gushing into China. Crackdowns by a newly empowered CFIUS over the past two-plus years have essentially shut down a number of Chinese-backed VC funds keen to invest in Silicon Valley. But with U.S.-based, China-focused GGV Capital raising $2.5 billion — its largest funding round ever — and Qiming Ventures raising $448 million in 2021, there's plenty of cash flowing in the other direction. According to TechNode, GGV will focus those funds on sectors including "new retail, cloud-based enterprise services and social media.")
- China's handheld games are raking in cash abroad. Sensor Tower data released Monday shows a total of 37 Chinese handheld games earning more than $100 million abroad in 2020, up from 25 games the year before.
One Trend You Should Know
AI is reinventing the workplace. Not in a good way.
A deep dive into China's "office automation systems" by Caijing E-law (translated here by Sixth Tone) paints a damning portrait of harsh, arbitrary and inflexible computerized management that wastes worker time, kills morale and pushes (effective) middle managers into irrelevance. See, for instance: wage cuts of 30% for workers who don't complete enough tasks and seats that measure heart rate and other vitals to spot slackers. The market for this software in China is fast-growing — projected to pass $3 billion this year — but the report suggests too many companies are jumping into automation too fast, using computers to litigate workplace ethics, determine strategy and other things that computers aren't (yet) good at.
Straight From China's Web
Facial recognition gets weird(er)
Who's paying attention in class? A nationwide debate is happening over whether using surveillance tools to spot minor disciplinary violations is "campus informatization" or "campus prisonization." It started after a Henan high school published an eerily detailed list on WeChat of student infractions. But it really began nine years ago, when the Ministry of Education's 10-year plan essentially established a $15 billion annual "smart campus" market. Remember that a lot of the spookiest tech is aspirational, and schools are making their own decisions about how to use it; parental outcry could keep this from getting more Orwellian.
One More Thing
I want this. If it ever works.
Chinese smartphone maker Xiaomi boasted last week via a cool video that its "revolutionary air-charging technology" will one day soon juice your devices through the air as soon as you get near remote charging stations that look like a cross between a modem and a minifridge. But this kind of charging has been promised for years and never really worked.
Thanks for reading. Tell your friends and colleagues to subscribe here, and send tips, feedback and ideas to firstname.lastname@example.org. See you next week.