Good morning. China reportedly has developed a hypersonic missile, with an August test of the planet-orbiting tech. It's emblematic of the extent to which the tech race is a geopolitical and national security question too.
In this week's Protocol | China: another internal firewall that could soon come down, DingTalk's rise to the top of the workplace heap and Alibaba's fancy new chip.
China's internet is becoming less siloed
While China is becoming more isolated from the digital commons, with the Great Firewall of censorship that surrounds it getting ever higher, its own internet actually seems to be becoming more unified.
The latest wall to potentially fall? Regulators at the powerful Ministry of Industry and Information Technology may soon ask Tencent and ByteDance to make their platforms searchable by third parties, Bloomberg reported on Monday.
- Currently, to search for content on Tencent's WeChat or ByteDance's Douyin, a user has to go to each platform's own search engines.
- A new rule could require all results — including "hundreds of millions of articles" on WeChat — to be searchable via third-party platforms like Baidu.
Who would win from this potentially massive change?
- Baidu would likely benefit the most, as it's China's preeminent search engine, one whose star has dimmed as web users have spent ever more time within WeChat's closed ecosystem.
- It would also be great news for researchers hoping to better understand China, scholar Graham Webster wrote on Twitter.
- It's probably a net benefit for young internet companies generally. There are likely great business ideas out there about how to sort and order this new stream of information.
And who would be less enthusiastic about the ramifications? It's not so good for WeChat, or for firms like Pinduoduo focused on "private traffic," which means keeping people locked within WeChat mini apps.
And there are more walls that could fall. Barriers between search engines are just one example of the blockades that regulators want to tear down.
- Cross-platform link-blocking has kept users within a single ecosystem by making it impossible to "click out."
- Exclusive agreements have locked vendors into one ecommerce platform and limited their markets.
- Now both are targeted in rules issued in August by China's powerful State Administration for Market Regulation.
Expect more regulatory pushes in 2022 to de-silo China's Internet. Regulators may be calculating that a wave of new innovation awaits if they can loosen Big Tech's hold.
On Protocol | China
Why did LinkedIn leave China? The answer goes back to 2014, when the platform launched into China with a thud. It was never able to become as big and successful as it had hoped — meaning the moral compromises it made to keep good with Beijing weren't worth the headache. David Wertime has the analysis.
Everything you need to know about the Yuanxin IPO. Health tech is huge in China right now, and Yuanxin's hoping to be one of the biggest digital health care companies to IPO in the past two years. Zeyi Yang has the goods.
There is public outcry at WeChat's privacy practices. The company scrambled to explain why it was quietly collecting information about users' photo albums after a tech blogger checked activity logs using a third-party app. Shen Lu traces the fallout.
A MESSAGE FROM TRELLO
If your organization wants to belong to that class of innovators during future times of change, there are methods you can use to continue innovating even when the waters are murky. Just like with running, you have to make innovation a daily habit in your company—not just an activity you practice when the conditions are right. Here are four ways you can set yourself up for success.
China Goes Global
Kuaishou consolidates. Chinese short-video platform Kuaishou is merging three of its overseas versions — Kwai Middle East, Kwai Latin America and Snack Video in Southeast Asia — as it frets over the high costs of overseas expansion, the Chinese publication LatePost reported Tuesday. A strong rival to ByteDance at home, Kuaishou has struggled to launch an equally successful platform overseas to do battle with the global smash TikTok. By combining all of its different apps aimed at different markets, Kuaishou is turning to a growth strategy that more closely resembles that of TikTok.
Saudi Arabia's green energy city welcomes Huawei. Over the weekend, Huawei and a Chinese power plant construction company signed deals with Saudi Arabian partners to build a 1,300 megawatt-hour energy storage project, the largest in the world. The project will be built in Neom, a $500 billion city-state concept that's designed to be entirely powered by renewable energy. Saudi Arabia has long welcomed Huawei's presence; in January, the company announced it would open its largest overseas flagship store in the capital city, Riyadh.
Big Brother Beijing
Sony is punished for choosing the wrong date. Chinese authorities said last week that they had fined Sony Group's Chinese venture 1 million RMB (about $155,500) for violating advertising laws, Nikkei Asia reported. Back in June, the Japanese electronics giant announced that it would hold a new smartphone launch event in China on July 7. The problem: July 7 is also the anniversary of the 1937 Marco Polo Bridge Incident, a Sino-Japanese conflict commonly seen as the start of the full-blown war that followed. The fine specifically cited a clause in China's advertising laws that prohibits ads from "harming the dignity and interests of the nation."
Tencent will set up an outside committee on privacy. Responding to mounting concerns about privacy violations, including complaints raised as recently as last week, Tencent announced Friday that it's setting up a third-party committee to supervise its privacy protection practices. The committee will consist of 15 individuals, ranging from legal experts to industry association representatives to members of the media. The application window is open through this Friday.Straight From China's Web
DingTalk is one of China's most-used apps. Alibaba's workplace communication app has reached 500 million users — roughly 35% of China's population — the company said last Wednesday. It says it has also been used by over 19 million enterprises, schools and organizations. The app experienced exponential growth last year when the pandemic forced many schools and companies to instate remote communication systems for the first time. It's officially one of the most-used apps in the country and Alibaba's most successful venture in the communications sector.
Unauthorized "Squid Game"-like games gather steam on Roblox China. Netflix may be banned in China, but Roblox is not. And available on the Chinese version of Roblox is a game called Xianyu Game, closely modeled on the Korean Netflix hit show. Tech publication PingWest reported it's become a hit, and is probably the first breakout moment for Roblox China since its July launch.
Internet traps, materialized. A comedy sketch that mocks the annoying traps on Chinese apps and online platforms went viral over the weekend. The sketch (available on YouTube but with only Chinese subtitles) takes on dozens of online phenomena that have long annoyed Chinese users, including common privacy violations, minutes-long ads on streaming platforms, unreasonable charges for basic services and annoyingly scripted livestreaming dramas.
On Our Radar
Meet Alibaba's latest chip. The advanced 5-nanometer processor called Yitian 710 is designed for use in data centers and cloud servers. It won't be sold for commercial uses but instead will be used in the company's own servers. This move resembles ones made by Alibaba competitors Huawei and Amazon, both of which also develop their own in-house chips to power their massive cloud servers.
ByteDance laid off hundreds of employees from its advertising businesses. On Monday, Chinese publication Baobian reported that the company was laying off local advertising teams across several cities. The layoff may be a result of the challenges ByteDance faces in expanding into location-based services, the home base of another Chinese tech giant, Meituan. A ByteDance representative later confirmed that the layoff news is true and "part of the company's strategic adjustment."
One More Thing
The latest ed-tech pivot: clothing. A Monday deep-dive in the Chinese publication LatePost shed new light on how ed-tech companies are struggling to cope with the country's sudden ban on tutoring services. The most pitiable pivot: Yuanfudao, once one of the most successful live tutoring platforms, is exploring manufacturing down jackets. Sources told LatePost that the company has already hired five people for a clothing design team, and a Yuanfudao-related company has acquired a clothing retailer.