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Protocol | China
The people, power and politics of Chinese tech, every Wednesday.

Will China remain crypto miner to the world?

​An image of a Bitcoin.

Good morning! China has released the first images taken by Zhurong, its Mars rover. (Still undiscovered on the Red Planet: intelligent life, habitable terrain or water.) China is the second country in the world to land a rover on Mars, after the U.S. But don't expect NASA to work with the China National Space Administration anytime soon: In April 2011, Congress prohibited NASA and the Office of Science and Technology Policy from coordinating with China via a short phrase inserted in a spending bill. It's called the Wolf Amendment, and while the original long ago expired, its language has continued to be inserted in annual spending bills since.

In this week's Protocol | China: Beijing doesn't want to be the world's crypto miner, SHEIN passes Amazon on the app download leaderboard, and Jack Ma's university meets its end.

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The Big Story

China is growing weary of crypto mining

Protocol reported in March that the provincial-level government in Inner Mongolia had soured on the energy-sucking activity. But it's not the only sub-national government in China taking aim at the practice.

  • Beijing's municipal government issued an emergency notice in April requiring mining businesses to share information about the amount of energy their activities consumed throughout 2020 before the end of the month.
  • Xinjiang is reportedly under "great pressure to reduce emissions," and most of its mining machines are reportedly being transferred to Sichuan, which makes extensive use of hydropower. But Sichuan miners recently went without power for three consecutive days due to a shortage of electricity in the province.
  • Inner Mongolia, Xinjiang and Sichuan are the three big mining regions; as they go, so goes the industry in China.

Beijing clearly views crypto mining as a threat to its goals. Specifically, carbon neutrality, which Xi Jinping has pledged to achieve by 2060, along with specific CO2 emissions reduction targets in the country's 14th five-year plan. This is a problem when 75% of the world's Bitcoin mining happens in China.

Officials know what's expected of them, even if Beijing may not be directly ordering provinces about what to do. The sensitive and highly anticipated 100th anniversary of the Communist Party is coming in July, and no one is in a mood to challenge the party line right now.

  • China's powerful State Council name-checked Bitcoin for the first time last Friday, calling for a crackdown on mining and trading in a meeting.
  • Sinocism pointed out that a Monday article in state media outlet Xinhua insisted that "more and more local governments" are stating that virtual currency mines are "not welcome" due to high energy consumption.

Companies are falling into line, too. Cryptocurrency companies are responding fast to Beijing's messaging. Leading trading platform Huobi announced on Sunday that it would suspend the sales and rental of crypto mining equipment to customers based in China, Reuters China reports. Cloud mining platforms BTC.TOP and Hashcow have also announced changes to its services, either moving mining equipment out of China or canceling unfulfilled sales.

But don't expect Beijing to change course anytime soon. The government has clearly made up its mind about cryptocurrency as a product that's environmentally unfriendly to "manufacture." That doesn't mean authorities won't invest in the assets. It doesn't mean China will prohibit crypto outright. It doesn't mean Beijing has soured on blockchain, or digital currency generally. It does mean, though, that China's not going to be crypto miner to the world for much longer.

On Protocol | China

  • Asian food delivery apps are blowing up in the United States. Chowbus. Fantuan. Yami. Weee. You might not have heard of them (yet), but members of the Chinese diaspora swear by these apps, the latter of which was recently valued at $2.8 billion. They're based in the U.S., Canada and the U.K., but are using tactics learned from companies like JD and Meituan to keep customer acquisition costs ultra low. Shen Lu has everything you need to know.
  • China is the future of mobile gaming. So if mobile's the future of gaming, China has a huge head start: The country leads the world in investment and adoption, with companies like Lenovo creating specialized phones designed to maximize the performance of esports professionals. Zeyi Yang has the story.

A MESSAGE FROM TALEND

"The time of reckoning between business and data value is now. Everywhere you turn, you hear about how companies are becoming data driven. Ask executives how they measure the health of their business, and they will list metrics based on data. But what does it all mean?"

Learn more

Straight from China's web

  • A shopping "holiday" season that never ends. Chinese ecommerce companies have become experts at concocting new reasons to buy stuff. May 20 was once just another day, but because of the date's accidental similarity in Chinese to the phrase "I love you," it's morphed into a Chinese version of Valentine's Day and eventually, one of China's biggest online shopping holidays. It's followed by June 18 (known as 618), which JD has designated as a shopping holiday to commemorate its founding. This year, both JD and Tianmao, two of China's ecommerce giants, have turned 618 into a battleground for supremacy, with both companies announcing the start of the 618 shopping holiday last Thursday.
  • China's youth are sick of recommendation algorithms. Financial blog Shenran Caijing reports that China's youngsters are frustrated by wave after wave of algorithmic recommendations shredding their attention spans and sense of privacy. Popular countermeasures include "don't like, don't comment, don't follow, don't register," which minimizes one's digital footprint. Some people are dedicating a separate cell phone and a different phone number for particularly addictive apps.

On our radar

Meet ByteDance's quiet new helmsman

With sudden resignation of Zhang Yiming as ByteDance's CEO catching most everyone by surprise, observers are now scrambling to learn more about Liang Rubo, the new, discreet leader of the global tech powerhouse. Chinese publication Red Star News has pierced together some of Liang's past: He was college roommates with Zhang, and they shared one PC, for which they split the costs. Liang is the kind of geek who would actually make comments like, "My heart is filled with inexplicable joy when I'm writing code" on social media. ByteDance workers like the cut of Liang's jib, with one employee telling Protocol's Shen Lu that most were surprised but "quickly embraced the change" given Liang's rep for people skills.

Big Brother Beijing

Chinese tech is forced to end its 'university' obsession

On Monday, the Financial Times reported that Jack Ma will step down as the president of a corporate business school he created for startup founders called Hupan University. Scuttlebutt on the Chinese web circulating this past week says Hupan has quietly dropped references to "university" in its name, instead calling itself the Hupan Entrepreneurship Research Center. In the meantime, eight central government agencies, including China's Ministry of Education, issued a May 14 opinion that argued the reference to "university" in the names of training schools and nonprofit organizations founded by companies had "misled the public." Going forward, Chinese companies won't be able to register organizations with "university," "academy" or "college" in their names without prior approval. According to China Newsweek, by 2012 China had 1,186 such institutions.

One company you should know

Angelalign is all smiles as it readies for an IPO

Angelalign, known as the Chinese Invisalign, has passed the Hong Kong Stock Exchange's listing committee review and is due to become the first Chinese orthodontics product producer to go public, according to tech media outlet 36Kr. Orthodontics is another "gold sector" in the eyes of Chinese tech insiders, as Chinese people champ at the bit to receive cosmetic dentistry in a highly concentrated market. Angelalign's 3D-printed clear braces cost about half of competitor Invisalign's. In 2020, Angelalign reportedly surpassed Invisalign to become the top dog in China's orthodontics market.

China goes global

  • Shein atop the leaderboard. TechCrunch reports that Chinese cross-border ecommerce trailblazer Shein has surpassed Amazon in new downloads, to become the most-downloaded shopping app in the United States, per data from SensorTower and App Annie. (Of course, those numbers don't reflect the fact that many people have already downloaded the Amazon app.) The secretive company is reportedly valued at about $15 billion.
  • Middle Eastern youth are in love with Chinese apps. It's not just TikTok; Chinese tech companies are influencing over 100 million people in the Middle East every day. According to Chinese digital outlet Xiaguang She, as of early May 13 of the top 20 popular apps in Saudi Arabia were Chinese, ranging from dating apps to livestreaming platforms. Chinese companies are building on-the-ground teams in the Middle East and adjusting their apps to local cultures and traditions. (They're also bringing the brutal "996" work culture with them.)
  • Kuaishou is taking on TikTok abroad. In its first quarter report, publicly traded short-video platform (and ByteDance nemesis) Kuaishou disclosed its overseas expansion results for the first time. Kuaishou said its average monthly active users in overseas markets had exceeded 100 million in the first quarter of 2021, better than expected. The key overseas regions of focus: Southeast Asia and South America.

One more thing

A star turn for a once-obscure Chinese county

A county in southwestern Shandong Province, Cao County (曹县) has become an internet darling. It started with a Kuaishou influencer from Cao County, who shouted out a slogan in local dialect to kick off each live stream, roughly translated as, "Cao County of Shandong, fa-fa-fabulous!" According to Jiemian news, Cao County is home to the country's second largest "Taobao village" cluster, and is the nation's largest producer of Hanfu, traditional robes worn by the Han people in ancient times and now a trendy type of streetwear. The county leadership is tech savvy: It paid for a research trip to Kuaishou's headquarters in April, and the county governor has responded to Cao's fame by saying she "welcomes netizens to pay a visit."


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