China Roundup: Beijing is tearing down the digital ‘walled gardens’

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

This week, China gets serious about breaking down the walled gardens that its internet giants have formed for decades. Two major funding rounds were announced, from the newly established autonomous driving unicorn Deeproute.ai and fast-growing, cross-border financial service provider XTransfer.

Tear down the walls

The Chinese internet is infamously siloed, with a handful of “super apps” each occupying a cushy, protective territory that tries to lock users in and keep rivals out. On Tencent’s WeChat messenger, for instance, links to Alibaba’s Taobao marketplace and ByteDance’s Douyin short video service can’t be viewed or even redirected. That’s unlike WhatsApp, Telegram or Signal that offer friendly URL previews within chats.

E-commerce platforms fend off competition in different ways. Taobao uses Alibaba’s affiliate Alipay as a default payments option, omitting its arch rival WeChat Pay. Tencent-backed JD.com, a rival to Alibaba, encourages its users to pay through its own payments system or WeChat Pay.

But changes are underway. “Ensuring normal access to legal URLs is the basic requirement for developing the internet,” a senior official from China’s Ministry of Industry and Information Technology said at a press conference this week. He added that unjustified blockages of web links “affect users’ experience, undermine users’ rights, and disrupt market orders.”

There is some merit in filtering third-party links when it comes to keeping out the likes of pornography, misinformation and violent content. Content distributors in China also strictly abide by censorship rules, silencing politically sensitive discussions. These principles will stay in place, and MIIT’s new order is really to crack anticompetitive practices and wane the power of the bloated internet giants.

The call to end digital walled gardens is part of MIIT’s campaign, started in July, to restore “orders” to the Chinese internet. While crackdowns on internet firms are routine, the spate of new policies announced in recent months — from new data security rules to heightened gaming restrictions — signify Beijing’s resolution to curb the influence of Chinese internet firms of all kinds.

The deadline for online platforms to unblock URLs is September 17, the MIIT said earlier. Virtually all the major internet companies have swiftly issued statements saying they will firmly carry out MIIT’s requirements and help promote the healthy development of the Chinese internet.

Internet users are bound to benefit from the dismantling of the walled gardens. They will be able to browse third-party content smoothly on WeChat without having to switch between apps. They can share product links from Taobao right within the messenger instead of having their friends copy-paste a string of cryptic codes that Taobao automatically generates for WeChat sharing.

Robotaxi dream

Autonomous driving startup Deeproute.ai said this week it has closed a $300 million Series B round from investors including Alibaba, Jeneration Capital, and Chinese automaker Geely. The valuation of this round was undisclosed.

We’ve seen a lot of publicity from Pony.ai, WeRide, Momenta and AutoX but not so much Deeproute.ai. That in part is because the company is relatively young, founded only in 2019 by Zhou Guang after he was “fired” by his co-founders at the once-promising Roadstar.ai amid company infighting.

Investors in Roadstar.ai reportedly saw the dismissal of Zhou as detrimental to the startup, which had raised at least $140 million up to that point, and subsequently sought to dissolve the business. It appears that Zhou, formerly the chief scientist at Roadstar, still commands the trust of some investors to support his reborn autonomous driving venture.

Like Pony.ai and WeRide, Deeproute is trying to operate its own robotaxi fleets. While the business model gives it control over reams of driving data, it’s research- and cash-intensive. As such, major Chinese robotaxi startups are all looking at faster commercial deployments, like self-driving buses and trucks, to ease their financial stress.

Cross-border trade boom

The other major funding news this week comes from Shanghai-based XTransfer, which helps small-and-medium Chinese exporters collect payments from overseas. The Series C round, led by D1 Partners, pulled in $138 million and catapulted Xtransfer’s valuation to over $1 billion. The proceeds will go towards product development, hiring and global expansion.

Founded by former executives from Ant Group, XTransfer tries to solve a pain point faced by small and medium exporters: opening and maintaining bank accounts in different countries can be difficult and costly. As such, XTransfer works as a payments gateway between its SME customer, the party that pays it, and their respective banks.

As of July, XTransfer’s customers had surpassed 150,000, most of which are in mainland China. The company of over 1,000 employees is also expanding into Southeast Asia.

While business-to-business export is booming in China, more and more products are also being directly sold from Chinese brands to consumers around the world. Some of the most successful examples, like Shein and Anker, use a different set of payments processors for their direct-to-consumer sales, which tend to be in bigger volume but smaller in average ticket value.

#alibaba, #alibaba-group, #alipay, #ant-group, #asia, #beijing, #bytedance, #china, #china-roundup, #geely, #jack-ma, #jd-com, #momenta, #online-payments, #robotaxi, #shanghai, #shein, #southeast-asia, #taobao, #tc, #tencent, #wechat, #xtransfer

App Annie and co-founder charged with securities fraud, will pay $10M+ settlement

The U.S. Securities and Exchange Commission (SEC) has charged App Annie, a leading mobile data and analytics firm, as well as its co-founder and former CEO and Chairman Bertrand Schmitt, with securities fraud. App Annie and Schmitt have agreed to pay over $10 million to settle the fraud charges which are related to “deceptive practices and making material misrepresentations about how App Annie’s alternative data was derived,” the SEC said.

App Annie is one of the largest sellers of mobile app performance data, offering details that are useful to developers, publishers, advertisers, and marketers — like how many times an app is downloaded, how often it’s used, the revenue it generates, and other competitive analysis and insights. This is what trading firms call “alternative data,” because it’s not detailed in their financial statements or other traditional data sources, the SEC explains. App Annie told app makers it would not disclose their data to third parties directly, but would rather use the data in an aggregated and anonymized way to provide app insights. Specifically, companies were told the data would be used to build a statistical model to generate estimates of app performance.

However, the SEC says from late 2014 through mid-2018, App Annie used non-aggregated and non-anonymized data to alter its model-generated estimates in order to make them more valuable to sell to trading firms. It also says that the company and Schmitt then misrepresented to its customers how it was able to generate the data, saying it did so with the appropriate consent from customers, and that it had effective internal controls to prevent the misuse of confidential data, ensuring it was in compliance with federal securities laws. Trading firms were making investment decisions based on this data and App Annie had even shared ideas as to how they could use the estimates to trading ahead of earnings announcements.

In the full complaint, the SEC further explains Schmitt had agreed to an internal policy where certain public company “Connect Data” — “Connect” being App Annies’ analytics product — would be excluded from its statistical model in late 2014. But he didn’t actually direct anyone at App Annie to document this policy until April 2017. And then when it was documented, it only said to exclude app revenue data from public companies whose app revenue exceeded 5% of the company’s total revenue. It never said to exclude app download or usage data.

The SEC says the documented policy was never properly enforced. It wasn’t until after App Annie learned of the SEC investigation in June 2018 that it amended the policy to exclude public company Connect Data from its estimate generation process, and began to fully implement the policy.

The investigation also discovered that App Annie engineers in Beijing, China were directed by Schmitt to manually alter estimates that would be of most interest to the company’s highest-paying customers. It did so by looking at the confidential Connect Data, which is one of the ways its estimates were able to be more accurate than rivals.

“The federal securities laws prohibit deceptive conduct and material misrepresentations in connection with the purchase or sale of securities,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division, in a statement. “Here, App Annie and Schmitt lied to companies about how their confidential data was being used and then not only sold the manipulated estimates to their trading firm customers, but also encouraged them to trade on those estimates—often touting how closely they correlated with the companies’ true performance and stock prices,” Grewal added.

The SEC says App Annie and Schmitt violated the anti-fraud provisions of Section 10(b) of the Exchange Act and Rule 10b-5. App Annie, without either admitting or denying the findings, consented to a cease-and-desist order and is paying a penalty. App Annie agreed to pay a penalty of $10 million. Meanwhile, Schmitt is ordered to pay a penalty of $300,000 and is prohibited from serving as an officer or director of a public company for three years.

Reached for comment, App Annie’s current CEO provided a statement:

“Since I have taken over as CEO, we have established a new standard of trust and transparency for the newly created alternative data market. App Annie is uniquely positioned to be the first to deliver on a unified data AI vision,” said Theodore Krantz, CEO at App Annie. “Many businesses may be unknowingly leveraging data reliant on confidential public company information without explicit consent which we believe puts companies using digital/mobile market data at significant risk. It is our opinion that the entire alternative data space needs to be regulated.”

In a newsroom post, the company also pointed out that the SEC investigation does not relate to its “current products,” nor did it relate to “our current relationships with customers.” And it says in the three years since the violating practices, it has appointed a new CEO and executive team, changed how it built its data estimates, and established a company-wide “culture of compliance,” which included the appointment of a Head of Global Compliance. It also documented its procedures for ensuring confidential data is excluded from its process of generating market estimates.

App Annie’s mobile market data solution was one of the first to serve the growing app ecosystem when it launched in 2010. Today, its firm counts more than 1,100 enterprise clients and over a million registered users, according to its corporate website.

The details of the complaint and settlement are below.

This story is breaking and may be updated. 

 

#app-annie, #app-store, #apps, #beijing, #ceo, #china, #co-founder, #computing, #director, #mobile-app, #officer, #software, #u-s-securities-and-exchange-commission

China roundup: Tencent takes on sites trying to circumvent its age limits

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

The enforcement of China’s new gaming regulations is unfolding like a cat-and-mouse game, with the country’s internet giants and young players constantly trying to outsmart each other. Following Didi’s app ban, smaller ride-hailing apps are availing themselves of the potential market vacuum.

Tencent and young gamers

The Chinese saying “Where there is a policy, there is a countermeasure” nicely encapsulates what is happening in the country’s tightening regulatory environment for video games. This month, China enacted the strictest rules to date on playtime among underage users. Players under the age of 18 were startled, scrambling to find methods to overcome the three-hour-per-week quota.

Within days, gaming behemoth Tencent has acted to root out these workarounds. It sued or issued statements to over 20 online services selling or trading adult accounts to underage players, the company’s gaming department said in a notice on Weibo this week.

Children were renting these accounts to play games for two hours at a few dollars without having to go through the usual age verification checks. Such services “are a serious threat to the real-name gaming system and underage protection mechanism,” Tencent said, calling for an end to these practices.

Educational games

China has mainly been targeting games that are addiction-inducing or deemed “physically and mentally harmful” to minors. But what about games that are “good” for kids?

When Tencent and Roblox set up a joint venture in China in 2019, the speculation was that the creator-focused gaming platform would give Tencent a leg up in making educational games to inspire creativity or something that would help it align better with Beijing’s call for using tech to do more social good. As we wrote earlier:

Roblox’s marketing focus on encouraging “creativity” could sit well with Beijing’s call for tech companies to “do good,” an order Tencent has answered. Roblox’s Chinese website suggests it’s touting part of its business as a learning and STEM tool and shows it’s seeking collaborations with local schools and educators.

If Roblox can inspire young Chinese to design globally popular games, the Chinese authorities may start regarding it as a conduit for exporting Chinese culture and soft power. The gaming industry is well aware that aligning with Beijing’s interests is necessary for gaining support from the top. Indeed, a member of the Chinese People’s Political Consultative Conference, an organ for non-political spheres like the business community to “put forward proposals on major political and social issues,” said in June that video games are “an effective channel for China’s cultural exports.”

The case of Roblox will be interesting to watch for reading Beijing’s evolving attitude toward games for educational and export purposes.

Didi challengers

Didi has had many rivals over the years, but none has managed to threaten its dominance in China’s ride-hailing industry. But recently, some of its rivals are seeing a new opportunity after regulators banned new downloads of Didi’s app, citing cybersecurity concerns. Cao Cao Mobility appears to be one.

Cao Cao, a premium ride-hailing service under Chinese automaker Geely, announced this week a $589 million Series B raise. The round should give Cao Cao ammunition for subsidizing drivers and passengers. But amid the government’s spade of anti-competition crackdowns, internet platforms these days are probably less aggressive than Didi in its capital-infused growth phase around 2015.

The app ban seems to have had a limited effect on Didi so far. The app even saw a 13% increase in orders in July, according to the Ministry of Transport. While people who get new phones will not be able to download Didi, they still are able to access its mini app run on WeChat, which is ubiquitous in China and has a sprawling ecosystem of third-party apps. It’s unclear how many active users Didi has lost, but its rivals will no doubt have to shell out great incentives to lure the giant’s drivers and customers away.

DTC fast fashion

Venture capitalists are pouring money into China’s direct-to-consumer brands in the hope that the country’s supply chain advantage coupled with its pool of savvy marketers will win over Western consumers. July saw PatPat, a baby clothing brand, raise a sizable $510 million raise. This month, news came that up-and-coming DTC brand Cider, which makes Gen Z fast fashion in China and sells them in the U.S., has secured a $130 million Series B round at a valuation of over $1 billion. The news was first reported by Chinese tech news site 36Kr and we’ve independently confirmed it. 

DST Global led Cider’s new round, with participation also from the startup’s existing A16Z, an existing investor and Greenoaks Capital. Investors are clearly encouraged by Shein’s momentum around the world — its new download volume has surpassed that of Amazon in dozens of countries and is often compared side by side with industry behemoth Zara. Unlike a pure internet firm, export-oriented e-commerce has a notoriously long and complex value chain, from design, production, marketing and shipment to after-sales service. Shein’s story might have inspired many followers, but it won’t be easily replicated.

#amazon, #beijing, #china, #didi, #dst-global, #geely, #greenoaks-capital, #roblox, #shein, #tc, #tencent, #wechat

China roundup: Beijing wants tech giants to shoulder more social responsibilities

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

This week, the gaming industry again became a target of Beijing, which imposed arguably the world’s strictest limits on underage players. On the other hand, China’s tech titans are hastily answering Beijing’s call for them to take on more social responsibilities and take a break from unfettered expansion.

Gaming curfew

China dropped a bombshell on the country’s young gamers. As of September 1, users under the age of 18 are limited to only one hour of online gaming time: on Fridays, Saturdays and Sundays between 8-9 p.m.

The stringent rule adds to already tightening gaming policies for minors, as the government blames video games for causing myopia, as well as deteriorating mental and physical health. Remember China recently announced a suite of restrictions on after-school tutoring? The joke going around is that working parents will have an even harder time keeping their kids occupied.

A few aspects of the new regulation are worth unpacking. For one, the new rule was instituted by the National Press and Publication Administration (NPPA), the regulatory body that approves gaming titles in China and that in 2019 froze the approval process for nine months, which led to plunges in gaming stocks like Tencent.

It’s curious that the directive on playtime came from the NPPA, which reviews gaming content and issues publishing licenses. Like other industries in China, video games are subject to regulations by multiple authorities: NPPA; the Cyberspace Administration of China (CAC), the country’s top internet watchdog; and the Ministry of Industry and Information Technology, which oversees the country’s industrial standards and telecommunications infrastructure.

As analysts long observe, the mighty CAC, which sits under the Central Cyberspace Affairs Commission chaired by President Xi Jinping, has run into “bureaucratic struggles” with other ministries unwilling to relinquish power. This may well be the case for regulating the lucrative gaming industry.

For Tencent and other major gaming companies, the impact of the new rule on their balance sheet may be trifling. Following the news, several listed Chinese gaming firms, including NetEase and 37 Games, hurried to announce that underage players made up less than 1% of their gaming revenues.

Tencent saw the change coming and disclosed in its Q2 earnings that “under-16-year-olds accounted for only 2.6% of its China-based grossing receipts for games and under-12-year-olds accounted for just 0.3%.”

These numbers may not reflect the reality, as minors have long found ways around gaming restrictions, such as using an adult’s ID for user registration (just as the previous generation borrowed IDs from adult friends to sneak into internet cafes). Tencent and other gaming firms have vowed to clamp down on these workarounds, forcing kids to seek even more sophisticated tricks, including using VPNs to access foreign versions of gaming titles. The cat and mouse game continues. 

Prosper together

While China curtails the power of its tech behemoths, it has also pressured them to take on more social responsibilities, which include respecting the worker’s rights in the gig economy.

Last week, the Supreme People’s Court of China declared the “996” schedule, working 9 a.m. to 9 p.m. six days a week, illegal. The declaration followed years of worker resistance against the tech industry’s burnout culture, which has manifested in actions like a GitHub project listing companies practicing “996.”

Meanwhile, hardworking and compliant employees have often been cited as a competitive advantage of China’s tech industry. It’s in part why some Silicon Valley companies, especially those run by people familiar with China, often set up branches in the country to tap its pool of tech talent.

The days when overworking is glorified and tolerated seem to be drawing to an end. Both ByteDance and its short video rival Kuaishou recently scrapped their weekend overtime policies.

Similarly, Meituan announced that it will introduce compulsory break time for its food delivery riders. The on-demand services giant has been slammed for “inhumane” algorithms that force riders into brutal hours or dangerous driving.

In groundbreaking moves, ride-hailing giant Didi and Alibaba’s e-commerce rival JD.com have set up unions for their staff, though it’s still unclear what tangible impact the organizations will have on safeguarding employee rights.

Tencent and Alibaba have also acted. On August 17, President Xi Jinping delivered a speech calling for “common prosperity,” which caught widespread attention from the country’s ultra-rich.

“As China marches towards its second centenary goal, the focus of promoting people’s well-being should be put on boosting common prosperity to strengthen the foundation for the Party’s long-term governance.”

This week, both Tencent and Alibaba pledged to invest 100 billion yuan ($15.5 billion) in support of “common prosperity.” The purposes of their funds are similar and align neatly with Beijing’s national development goals, from growing the rural economy to improving the healthcare system.

#alibaba, #asia, #beijing, #bytedance, #china, #china-roundup, #didi, #gaming, #github, #government, #jd-com, #kuaishou, #ministry-of-industry-and-information-technology, #netease, #tc, #tencent, #xi-jinping

China roundup: Beijing takes stake in ByteDance, Amazon continues China crackdown

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

This week, investors’ concerns mount as news came that the Chinese government has taken a stake ByteDance, TikTok’s parent and one of the world’s largest private internet firms. Meanwhile, Amazon’s crackdown on Chinese sellers continues and is forcing many traders in southern China out of business, and the government passed a sweeping data protection law that will take effect in November.

A state stake

The Chinese government’s grand plan to assert more control over the country’s internet behemoths continues. This week, The Information reported that a domestic entity of ByteDance sold a 1% stake to a government affiliate in April. The deal was also recorded on Tianyancha, a database of publicly available corporate information, as well as the official enterprise registration index.

The move didn’t come abruptly. Beijing was mulling over small shares in private tech firms as early as 2017. The Wall Street Journal reported at the time that internet regulators discussed taking 1% stakes in companies including WeChat operator Tencent, Twitter-like Weibo and YouTube-like Youku.

In April 2020, WangTouTongDa, a subsidiary of China Internet Investment Fund, which is in turn controlled by China’s top internet watchdog, acquired a 1% stake in Weibo for 10 million yuan, according to Weibo’s filing to the U.S. securities regulator. Weibo did not mention WangTouTongDa’s relationship with the state in its filing.

Similarly, ByteDance sold a 1% stake to three entities set up by top regulatory bodies: China Internet Investment Fund; China Media Group, controlled by the Communist Party’s propaganda department; and the Beijing municipal government’s investment arm.

In response to Beijing’s move on ByteDance, Republican senator Marco Rubio urged President Joe Biden this week to block TikTok in the U.S.

Exactly how much power Beijing gains over ByteDance from taking the small stake remains fuzzy, but Weibo’s disclosure to investors offers some clues.

It’s critical to note that the government holds stakes in the domestic operating entity of both Weibo and ByteDance. Internet companies in China often set up offshore entities that are entitled to the financial benefits of their mainland Chinese operations through contractual agreements. The framework is called a variable interest entity or VIE. While the structure allows Chinese firms to seek overseas funding due to China’s restrictions on foreign investments, it has come under increasing scrutiny by Beijing.

Weibo said in the filing that WangTouTongda, its state-owned investor, will be able to appoint a director to the three-member board of its Chinese entity and veto certain matters related to content and future financings.

ByteDance likely has a similar arrangement with its state investor. The government did not obtain a stake in TikTok, which is a subsidiary of a separate offshore entity incorporated in the Cayman Islands, The Information pointed out. This should provide some reassurance to U.S. regulators, though concerns about Beijing’s sway in Chinese companies abroad probably won’t go away.

Indeed, the Biden administration in June replaced the Trump-era orders to ban ByteDance and WeChat with a more measured policy requiring the Commerce Department to review apps with ties to “jurisdiction of foreign adversaries” that may pose national security risks.

TikTok has been fighting accusations that it hands over user data to Beijing. ByteDance is the fourth-largest lobbying spender in the U.S. so far this year, just after Amazon, Facebook and Alphabet. Beijing’s investment is going to cost it more campaign efforts.

Beleaguered Amazon sellers

In May, I reported that Amazon shuttered some of its largest sellers from China over violations of platform rules, including using fake reviews and incentives to solicit positive reviews from customers. The crackdown drove China’s online exporters into a panic, and as it turned out, it wasn’t a one-off ambush from Amazon but a prolonged war. While the exact number of Chinese stores affected is not disclosed, industry observers such as Marketplace Pulse said “hundreds of” top Chinese sellers had been suspended as of early July.

Punished accounts are suspended, with their goods withheld and deposits frozen by Amazon. Companies in Shenzhen, home to the majority of the world’s Amazon sellers, laid off thousands of staff in recent months. The owner of a sizable seller in Shenzhen recently died by suicide due to the debacle, according to an acquaintance of the owner.

To sellers that have survived the crackdown, the attack by Amazon “would have happened sooner or later.” Most of the exporters I talked to came to the same conclusion: The Seattle-based titan now wants quality and design over generic products that compete solely on price and manipulation of ranking.

The Chinese government has taken note of the incidents. An official from the Ministry of Commerce compared the wave of store closures as Chinese exporters being “fish out of water” during a press conference in July.

“Due to differences in laws, culture and business practices around the world, [Chinese] companies are facing risks and challenges as they go overseas,” said Li Xingqian, director of foreign trade at the Commerce Ministry.

“We will help companies improve their risk control and comply with international trade standards.” Meanwhile, the official called for “the platform/platforms to cherish the important contribution from various companies and fully respect different trade entities.”

Data protection

And finally, China passed a sweeping data protection law this week that will strictly limit how tech companies collect user information, but the rules won’t likely have an impact on state surveillance. The regulation, which was proposed last year, will take effect on November 1. Read more about the rules here:

#amazon, #beijing, #bytedance, #china, #china-roundup, #tc, #tiktok

China roundup: Alibaba’s sexual assault scandal and more delayed IPOs

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

A sexual assault case at Alibaba has sparked a new round of #MeToo reckoning in China. Industry observers believe this is a watershed moment for the fight against China’s allegedly misogynist tech industry. Meanwhile, social media operators are still undecided on how to deal with the unprecedented public uproar against the powerful internet giant.

In other news, more Chinese tech companies have delayed plans to go public overseas after Didi’s fallout with Chinese regulators over its rushed IPO, including Tencent’s music streaming empire and one of China’s highest-valued autonomous driving startups.

Call for justice

Just past midnight last Sunday, an Alibaba employee posted on the company’s internal forum a detailed account saying her manager and a client had sexually assaulted her on a business trip. She took the case public after failing to obtain support from her superiors and human resources.

The post quickly made its rounds through China’s social media platforms. People stayed up blasting Alibaba’s ignorance, toxic business drinking, and the pervasive objectification of women in the Chinese “tech industry,” which has grown so far-reaching that it’s just the contemporary corporate world.

A day later, on August 9, Alibaba swiftly fired the alleged perpetrator. Two managers resigned and the firm’s head of HR was given a “disciplinary warning.” Alibaba’s CEO Daniel Zhang said he felt “shocked, angry and ashamed” about the incident and called on the company to work with the police to investigate the case.

This is arguably the most high-profile #MeToo case embroiling a major Chinese tech company by far and one that seems to have beckoned the toughest response from the company involved. Alibaba is formulating company policies to prevent sexual assaults, which surprises many that the global tech behemoth didn’t already have those in place.

The case managed to garner widespread public attention in China thanks to social media. Within the first few hours, it seemed as though discussion around the incident was propagating organically and uncensored on microblogging platform Weibo, in which Alibaba owns a majority stake.

But people soon noticed that despite the severity of the event, it took days before the case climbed to the top of Weibo’s trending chart, a bellwether for the most talked about topic on the Chinese internet. The perceived delay recalls Weibo’s censorship of an extramarital affair involving Alibaba executive Jiang Fan last year.

Talang Qingnian, roughly “Surfing Youth,” a social media column under state paper People’s Daily, blasted in an article:

The slow buildup of discussion again raised suspicion over whether Alibaba has manipulated public discourse.

Ever since the Jiang Fan case, the country’s attitude has been very clear that capital must not control the media.

As the basic infrastructure for truthful news in China, Weibo should not be a tool for any stakeholder to manipulate public opinion.

The article fanned up more public outrage but was soon taken down, likely because its wording was too strong. The Chinese state media apparatus is vast and only a few outlets, such as Xinhua, consistently convey top-level leaders’ official opinions. It’s not uncommon to see the less authoritative state-affiliated publications back down on reports that have cause backlashes. Last week, an article from a state-affiliated economic paper removed a piece calling video games “spiritual opium,” a loaded description that had earlier tanked the stocks of Tencent and NetEase, and republished the article with a softer tone.

Smaller war chests

Regulatory uncertainties have always been flagged as a risk by Chinese companies seeking overseas listings, but it was largely up to foreign investors to decide whether they were worthwhile investments. China’s recent regulatory onslaught on its tech darlings, however, has become a real deterrent for Chinese firms’ IPO dream.

This week, reports arrived that NetEase Music, a popular music streaming service, and Pony.ai, an autonomous vehicle startup last valued at $5.3 billion, have respectively postponed their plans to list in Hong Kong and New York.

Beijing has become warier of its data-rich companies getting scrutinized by U.S. regulators. Last month, the U.S. securities regulator said Chinese companies that want to raise capital in the U.S. must provide information about their legal structure and disclose the risk of Beijing’s interference in their business.

Many Chinese tech firms have learned from Didi’s fallout with the government, which had reportedly told the ride-sharing company to hold off on its listing until it sorted out a data protection framework. Didi went ahead regardless, triggering a government probe into its data practice and tanking its shares, which now stand at $8 apiece compared to $16 around its debut in early July.

Beijing’s crackdown has affected every major player in China’s consumer tech sector, wiping as much as $87 billion off the net worth of the country’s tech billionaires, including Pony Ma of Tencent and Colin Huang of Pinduoduo, according to Financial Times. The government wants “hard tech” like semiconductors and clean energy, so it has made it clear to future entrepreneurs where they should allocate their energy. The new generation of startups is listening now.

#alibaba, #alibaba-group, #asia, #beijing, #china, #daniel-zhang, #netease, #sexual-assault, #sina-weibo, #tc, #tencent, #weibo

This Week in Apps: In-app events hit the App Store, TikTok tries Stories, Apple reveals new child safety plan

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry continues to grow, with a record 218 billion downloads and $143 billion in global consumer spend in 2020. Consumers last year also spent 3.5 trillion minutes using apps on Android devices alone. And in the U.S., app usage surged ahead of the time spent watching live TV. Currently, the average American watches 3.7 hours of live TV per day, but now spends four hours per day on their mobile devices.

Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In 2020, investors poured $73 billion in capital into mobile companies — a figure that’s up 27% year-over-year.

This Week in Apps offers a way to keep up with this fast-moving industry in one place, with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions, and suggestions about new apps and games to try, too.

Do you want This Week in Apps in your inbox every Saturday? Sign up here: techcrunch.com/newsletters

Top Stories

Apple to scan for CSAM imagery

Apple announced a major initiative to scan devices for CSAM imagery. The company on Thursday announced a new set of features, arriving later this year, that will detect child sexual abuse material (CSAM) in its cloud and report it to law enforcement. Companies like Dropbox, Google and Microsoft already scan for CSAM in their cloud services, but Apple had allowed users to encrypt their data before it reached iCloud. Now, Apple’s new technology, NeuralHash, will run on users’ devices, tatformso detect when a users upload known CSAM imagery — without having to first decrypt the images. It even can detect the imagery if it’s been cropped or edited in an attempt to avoid detection.

Meanwhile, on iPhone and iPad, the company will roll out protections to Messages app users that will filter images and alert children and parents if sexually explicit photos are sent to or from a child’s account. Children will not be shown the images but will instead see a grayed-out image instead. If they try to view the image anyway through the link, they’ll be shown interruptive screens that explain why the material may be harmful and are warned that their parents will be notified.

Some privacy advocates pushed back at the idea of such a system, believing it could expand to end-to-end encrypted photos, lead to false positives, or set the stage for more on-device government surveillance in the future. But many cryptology experts believe the system Apple developed provides a good balance between privacy and utility, and have offered their endorsement of the technology. In addition, Apple said reports are manually reviewed before being sent to the National Center for Missing and Exploited Children (NCMEC).

The changes may also benefit iOS developers who deal in user photos and uploads, as predators will no longer store CSAM imagery on iOS devices in the first place, given the new risk of detection.

In-App Events appear on the App Store

Image Credits: Apple

Though not yet publicly available to all users, those testing the new iOS 15 mobile operating system got their first glimpse of a new App Store discovery feature this week: “in-app events.” First announced at this year’s WWDC, the feature will allow developers and Apple editors alike to showcase directly on the App Store upcoming events taking place inside apps.

The events can appear on the App Store homepage, on the app’s product pages or can be discovered through personalized recommendations and search. In some cases, editors will curate events to feature on the App Store. But developers will also be provided tools to submit their own in-app events. TikTok’s “Summer Camp” for creators was one of the first in-app events to be featured, where it received a top spot on the iPadOS 15 App Store.

Weekly News

Platforms: Apple

Apple expands support for student IDs on iPhone and Apple Watch ahead of the fall semester. Tens of thousands more U.S. and Canadian colleges will now support mobile student IDs in the Apple Wallet app, including Auburn University, Northern Arizona University, University of Maine, New Mexico State University and others.

Apple was accused of promoting scam apps in the App Store’s featured section. The company’s failure to properly police its store is one thing, but to curate an editorial list that actually includes the scams is quite another. One of the games rounded up under “Slime Relaxations,” an already iffy category to say the least, was a subscription-based slime simulator that locked users into a $13 AUD per week subscription for its slime simulator. One of the apps on the curated list didn’t even function, implying that Apple’s editors hadn’t even tested the apps they recommend.

Tax changes hit the App Store. Apple announced tax and price changes for apps and IAPs in South Africa, the U.K. and all territories using the Euro currency, all of which will see decreases. Increases will occur in Georgia and Tajikistan, due to new tax changes. Proceeds on the App Store in Italy will be increased to reflect a change to the Digital Services Tax effective rate.

Game Center changes, too. Apple said that on August 4, a new certificate for server-based Game Center verification will be available via the publicKeyUrl.

Fintech

Robinhood stock jumped more than 24% to $46.80 on Tuesday after initially falling 8% on its first day of trading last week, after which it had continued to trade below its opening price of $38.

Square’s Cash app nearly doubled its gross profit to $546 million in Q2, but also reported a $45 million impairment loss on its bitcoin holdings.

Coinbase’s app now lets you buy your cryptocurrency using Apple Pay. The company previously made its Coinbase Card compatible with Apple Pay in June.

Social

An anonymous app called Sendit, which relies on Snap Kit to function, is climbing the charts of the U.S. App Store after Snap suspended similar apps, YOLO and LMK. Snap was sued by the parent of child who was bullied through those apps, which led to his suicide. Sendit also allows for anonymity, and reviews compare it to YOLO. But some reviews also complained about bullying. This isn’t the first time Snap has been involved in a lawsuit related to a young person’s death related to its app. The company was also sued for its irresponsible “speed filter” that critics said encouraged unsafe driving. Three young men died using the filter, which captured them doing 123 mph.

TikTok is testing Stories. As Twitter’s own Stories integrations, Fleets, shuts down, TikTok confirmed it’s testing its own Stories product. The TikTok Stories appear in a left-hand sidebar and allow users to post ephemeral images or video that disappear in 24 hours. Users can also comment on Stories, which are public to their mutual friends and the creator. Stories on TikTok may make more sense than they did on Twitter, as TikTok is already known as a creative platform and it gives the app a more familiar place to integrate its effects toolset and, eventually, advertisements.

Facebook has again re-arranged its privacy settings. The company continually moves around where its privacy features are located, ostensibly to make them easier to find. But users then have to re-learn where to go to find the tools they need, after they had finally memorized the location. This time, the settings have been grouped into six top-level categories, but “privacy” settings have been unbundled from one location to be scattered among the other categories.

A VICE report details ban-as-a-service operations that allow anyone to harass or censor online creators on Instagram. Assuming you can find it, one operation charged $60 per ban, the listing says.

TikTok merged personal accounts with creator accounts. The change means now all non-business accounts on TikTok will have access to the creator tools under Settings, including Analytics, Creator Portal, Promote and Q&A. TikTok shared the news directly with subscribers of its TikTok Creators newsletter in August, and all users will get a push notification alerting them to the change, the company told us.

Discord now lets users customize their profile on its apps. The company added new features to its iOS and Android apps that let you add a description, links and emojis and select a profile color. Paid subscribers can also choose an image or GIF as their banner.

Twitter Spaces added a co-hosting option that allows up to two co-hosts to be added to the live audio chat rooms. Now Spaces can have one main host, two co-hosts and up to 10 speakers. Co-hosts have all the moderation abilities as hosts, but can’t add or remove others as co-hosts.

Messaging

Tencent reopened new user sign-ups for its WeChat messaging app, after having suspended registrations last week for unspecified “technical upgrades.” The company, like many other Chinese tech giants, had to address new regulations from Beijing impacting the tech industry. New rules address how companies handle user data collection and storage, antitrust behavior and other checks on capitalist “excess.” The gaming industry is now worried it’s next to be impacted, with regulations that would restrict gaming for minors to fight addiction.

WhatsApp is adding a new feature that will allow users to send photos and videos that disappear after a single viewing. The Snapchat-inspired feature, however, doesn’t alert you if the other person takes a screenshot — as Snap’s app does. So it may not be ideal for sharing your most sensitive content.

Telegram’s update expands group video calls to support up to 1,000 viewers. It also announced video messages can be recorded in higher quality and can be expanded, regular videos can be watched at 0.5 or 2x speed, screen sharing with sound is available for all video calls, including 1-on-1 calls, and more.

Streaming & Entertainment

American Airlines added free access to TikTok aboard its Viasat-equipped aircraft. Passengers will be able to watch the app’s videos for up to 30 minutes for free and can even download the app if it’s not already installed. After the free time, they can opt to pay for Wi-Fi to keep watching. Considering how easy it is to fall into multi-hour TikTok viewing sessions without knowing it, the addition of the addictive app could make long plane rides feel shorter. Or at least less painful.

Chinese TikTok rival Kuaishou saw stocks fall by more than 15% in Hong Kong, the most since its February IPO. The company is another victim of an ongoing market selloff triggered by increasing investor uncertainty related to China’s recent crackdown on tech companies. Beijing’s campaign to rein in tech has also impacted Tencent, Alibaba, Jack Ma’s Ant Group, food delivery company Meituan and ride-hailing company Didi. Also related, Kuaishou shut down its controversial app Zynn, which had been paying users to watch its short-form videos, including those stolen from other apps.

Twitch overtook YouTube in consumer spending per user in April 2021, and now sees $6.20 per download as of June compared with YouTube’s $5.60, Sensor Tower found.

Image Credits: Sensor Tower

Spotify confirmed tests of a new ad-supported tier called Spotify Plus, which is only $0.99 per month and offers unlimited skips (like free users get on the desktop) and the ability to play the songs you want, instead of only being forced to use shuffle mode.

The company also noted in a forum posting that it’s no longer working on AirPlay2 support, due to “audio driver compatibility” issues.

Mark Cuban-backed audio app Fireside asked its users to invest in the company via an email sent to creators which didn’t share deal terms. The app has yet to launch.

YouTube kicks off its $100 million Shorts Fund aimed at taking on TikTok by providing creators with cash incentives for top videos. Creators will get bonuses of $100 to $10,000 based on their videos’ performance.

Dating

Match Group announced during its Q2 earnings it plans to add to several of the company’s brands over the next 12 to 24 months audio and video chat, including group live video, and other livestreaming technologies. The developments will be powered by innovations from Hyperconnect, the social networking company that this year became Match’s biggest acquisition to date when it bought the Korean app maker for a sizable $1.73 billion. Since then, Match was spotted testing group live video on Tinder, but says that particular product is not launching in the near-term. At least two brands will see Hyperconnect-powered integrations in 2021.

Photos

The Photo & Video category on U.S. app stores saw strong growth in the first half of the year, a Sensor Tower report found. Consumer spend among the top 100 apps grew 34% YoY to $457 million in Q2 2021, with the majority of the revenue (83%) taking place on iOS.

Image Credits: Sensor Tower

Gaming

Epic Games revealed the host of its in-app Rift Tour event is Ariana Grande, in the event that runs August 6-8.

Pokémon GO influencers threatened to boycott the game after Niantic removed the COVID safety measures that had allowed people to more easily play while social distancing. Niantic’s move seemed ill-timed, given the Delta variant is causing a new wave of COVID cases globally.

Health & Fitness

Apple kicked out an app called Unjected from the App Store. The new social app billed itself as a community for the unvaccinated, allowing like-minded users to connect for dating and friendships. Apple said the app violated its policies for COVID-19 content.

Google Pay expanded support for vaccine cards. In Australia, Google’s payments app now allows users to add their COVID-19 digital certification to their device for easy access. The option is available through Google’s newly updated Passes API which lets government agencies distribute digital versions of vaccine cards.

COVID Tech Connect, a U.S. nonprofit initially dedicated to collecting devices like phones and tablets for COVID ICU patients, has now launched its own app. The app, TeleHome, is a device-agnostic, HIPAA-compliant way for patients to place a video call for free at a time when the Delta variant is again filling ICU wards, this time with the unvaccinated — a condition that sometimes overlaps with being low-income. Some among the working poor have been hesitant to get the shot because they can’t miss a day of work, and are worried about side effects. Which is why the Biden administration offered a tax credit to SMBs who offered paid time off to staff to get vaccinated and recover.

Popular journaling app Day One, which was recently acquired by WordPress.com owner Automattic, rolled out a new “Concealed Journals” feature that lets users hide content from others’ viewing. By tapping the eye icon, the content can be easily concealed on a journal by journal basis, which can be useful for those who write to their journal in public, like coffee shops or public transportation.

Edtech

Recently IPO’d language learning app Duolingo is developing a math app for kids. The company says it’s still “very early” in the development process, but will announce more details at its annual conference, Duocon, later this month.

Educational publisher Pearson launched an app that offers U.S. students access to its 1,500 titles for a monthly subscription of $14.99. the Pearson+ mobile app (ack, another +), also offers the option of paying $9.99 per month for access to a single textbook for a minimum of four months.

News & Reading

Quora jumps into the subscription economy. Still not profitable from ads alone, Quora announced two new products that allow its expert creators to monetize their content on its service. With Quora+ ($5/mo or $50/yr), subscribers can pay for any content that a creator paywalls. Creators can choose to enable a adaptive paywall that will use an algorithm to determine when to show the paywall. Another product, Spaces, lets creators write paywalled publications on Quora, similar to Substack. But only a 5% cut goes to Quora, instead of 10% on Substack.

Utilities

Google Maps on iOS added a new live location-sharing feature for iMessage users, allowing them to more easily show your ETA with friends and even how much battery life you have left. The feature competes with iMessage’s built-in location-sharing feature, and offers location sharing of 1 hour up to 3 days. The app also gained a dark mode.

Security & Privacy

Controversial crime app Citizen launched a $20 per month “Protect” service that includes live agent support (who can refer calls to 911 if need be). The agents can gather your precise location, alert your designated emergency contacts, help you navigate to a safe location and monitor the situation until you feel safe. The system of live agent support is similar to in-car or in-home security and safety systems, like those from ADT or OnStar, but works with users out in the real world. The controversial part, however, is the company behind the product: Citizen has been making headlines for launching private security fleets outside law enforcement, and recently offered a reward in a manhunt for an innocent person based on unsubstantiated tips.

Funding and M&A

? Square announced its acquisition of the “buy now, pay later” giant AfterPay in a $29 billion deal that values the Australian firm at more than 30% higher than the stock’s last closing price of AUS$96.66. AfterPay has served over 16 million customers and nearly 100,000 merchants globally, to date, and comes at a time when the BNPL space is heating up. Apple has also gotten into the market recently with an Affirm partnership in Canada.

? Gaming giant Zynga acquired Chinese game developer StarLark, the team behind the mobile golf game Golf Rival, from Betta Games for $525 million in both cash and stock. Golf Rival is the second-largest mobile golf game behind Playdemic’s Golf Clash, and EA is in the process of buying that studio for $1.4 billion.

?  U.K.-based Humanity raised an additional $2.5 million for its app that claims to help slow down aging, bringing the total raise to date to $5 million. Backers include Calm’s co-founders, MyFitness Pal’s co-founder and others in the health space. The app works by benchmarking health advice against real-world data, to help users put better health practices into action.

? YELA, a Cameo-like app for the Middle East and South Asia, raised $2 million led by U.S. investors that include Tinder co-founder Justin Mateen and Sean Rad, general partner of RAD Fund. The app is focusing on signing celebrities in the regions it serves, where smartphone penetration is high and over 6% of the population is under 35.

? London-based health and wellness app maker Palta raised a $100 million Series B led by VNV Global. The company’s products include Flo.Health, Simple Fasting, Zing Fitness Coach and others, which reach a combined 2.4 million active, paid subscribers. The funds will be used to create more mobile subscription products.

? Emoji database and Wikipedia-like site Emojipedia was acquired by Zedge, the makers of a phone personalization app offering wallpapers, ringtones and more to 35 million MAUs. Deal terms weren’t disclosed. Emojipedia says the deal provides it with more stability and the opportunity for future growth. For Zedge, the deal provides?….um, a popular web resource it thinks it can better monetize, we suspect.

? Mental health app Revery raised $2 million led by Sequoia Capital India’s Surge program for its app that combines cognitive behavioral therapy for insomnia with mobile gaming concepts. The company will focus on other mental health issues in the future.

? London-based Nigerian-operating fintech startup Kuda raised a $55 million Series B, valuing its mobile-first challenger bank at $500 million. The inside round was co-led by Valar Ventures and Target Global.

? Vietnamese payments provider VNLife raised $250 million in a round led by U.S.-based General Atlantic and Dragoneer Investment Group. PayPal Ventures and others also participated. The round values the business at over $1 billion.

Downloads

Mastodon for iPhone

Fans of decentralized social media efforts now have a new app. The nonprofit behind the open source decentralized social network Mastodon released an official iPhone app, aimed at making the network more accessible to newcomers. The app allows you to find and follow people and topics; post text, images, GIFs, polls, and videos; and get notified of new replies and reblogs, much like Twitter.

Xingtu

@_666eveITS SO COOL FRFR do u guys want a tutorial? #fypシ #醒图 #醒图app♬ original sound – Ian Asher

TikTok users are teaching each other how to switch over to the Chinese App Store in order to get ahold of the Xingtu app for iOS. (An Android version is also available.) The app offers advanced editing tools that let users edit their face and body, like FaceTune, apply makeup, add filters and more. While image-editing apps can be controversial for how they can impact body acceptance, Xingtu offers a variety of artistic filters which is what’s primarily driving the demand. It’s interesting to see the lengths people will go to just to get a few new filters for their photos — perhaps making a case for Instagram to finally update its Post filters instead of pretending no one cares about their static photos anymore.

Tweets

Facebook still dominating top charts, but not the No. 1 spot:  

Not cool, Apple: 

This user acquisition strategy: 

Maybe Stories don’t work everywhere: 

#adt, #afterpay, #alibaba, #android, #ant-group, #api, #app-maker, #app-store, #apple, #apps, #australia, #automattic, #beijing, #biden-administration, #canada, #china, #cloud-services, #coinbase, #coinbase-card, #computing, #day-one, #dragoneer-investment-group, #driver, #dropbox, #duolingo, #emojipedia, #eta, #facebook, #fintech-startup, #food-delivery, #game-center, #game-developer, #general-atlantic, #general-partner, #georgia, #gif, #google, #hyperconnect, #instagram, #ios, #ios-devices, #ipad, #iphone, #italy, #itunes, #jam-fund, #justin-mateen, #kuaishou, #kuda, #law-enforcement, #london, #ma, #maine, #meituan, #microsoft, #middle-east, #mobile, #mobile-app, #mobile-applications, #mobile-devices, #online-creators, #onstar, #operating-system, #palta, #playdemic, #quora, #sean-rad, #sensor-tower, #sequoia-capital, #smartphone, #snap, #snapchat, #social-network, #social-networking, #software, #south-africa, #south-asia, #spotify, #stories, #target-global, #tc, #this-week-in-apps, #tiktok, #twitch, #united-kingdom, #united-states, #valar-ventures, #viasat, #vnv-global, #wi-fi, #wordpress-com, #zedge, #zynga

China roundup: Games are opium, algorithms need scrutiny

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

The question for the tech news cycle in China these days has become: Who is Beijing’s next target? Regulatory clampdowns are common in China’s tech industry but the breadth of the recent moves has been unprecedented. No major tech giant is exempted and everyone is being attacked from a slightly different angle, but Beijing’s message is clear: Tech businesses are to align themselves with the interests and objectives of Beijing.

Education curbs hit tech giants

The government’s motivation isn’t always ideological. It could lead to policies that rein in the unruly private tutoring sector in the hope of easing pressure on students and parents. Recent orders from Beijing have strictly limited after-school tutoring, though they also sparked a wave of sympathy for public school teachers who work at lucrative tutoring centers to compensate for their meager salaries.

The effects of the education crackdown are also trickling down to internet companies. For the past few years, ByteDance had been aggressively building an online education business through a hiring and acquisition spree in part to diversify an ad-based video business. Its plan seems to be in shambles as it reportedly plans to lay off staff in its education department following recent the clampdown.

The restraints are also hitting American companies. Duolingo, the language learning app, was removed from several app stores in China. While it’s not immediately clear whether the action was the result of any policy change, the government recently, along with its restraints on extra-curriculum, barred foreign curricula in schools from K-9.

Games are opium

It could be tricky to read the top leaders’ minds because their messages could come through various government departments or state-affiliated media outlets, carrying different weights.

This week, Tencent is in the authorities’ crosshairs. About $60 billion of its market cap was wiped after the Economic Information Daily, an economic paper supervised by China’s major state news agency Xinhua, published an article (which was taken down shortly) describing video games as “spiritual opium” and cited the major role Tencent plays in the industry. Shares of Tencent’s smaller rival NetEase were also battered.

This certainly isn’t the first time Tencent and the gaming industry overall were slammed by the government for their impact on underage players. Tencent has been working to appease the authorities by introducing protections for young players, for instance, by tightening age checks several times.

Tencent, which has a sprawling online empire of social networks, payments and music on top of games, has also promised to “do [more social] good” through its products. And following the recent op-ed from the state paper, Tencent further restricted the amount of time and money children can spend inside games. But after all, the company still depends largely on addictive game mechanics that lure players to open loot boxes.

Tencent share prices over the past six months. Image Credits: Google Finance

Fix the algorithms

The other camp of tech companies feeling the heat is those dependent on machine learning algorithms to distribute content. The Propaganda Department of the Chinese Communist Party, the country’s watchdog of public expressions, along with several other government organs, issued an advisory to “strengthen the study and guidance of online algorithms and carry out oversight over algorithmic recommendations.”

The government’s goal is to assert more control over how algorithmic black boxes affect what information people receive. Shares of Kuaishou, TikTok’s archrival in China, tanked on the news. Since its blockbuster initial public offering in February, Kuaishou’s stock price has tumbled as much as 70%. Meanwhile, the Beijing-based short video firm is shuttering one of its overseas apps called Zynn, which has caused controversy over plagiarism. But its overseas user base is also rapidly growing, crystalizing in one billion monthly users worldwide recently.

End of “two-choose-one”

The week hasn’t ended. On Friday morning, The Wall Street Journal reported that the country’s antitrust regulator is preparing to fine Meituan, China’s major food delivery platform, $1 billion for allegedly abusing its market dominance. In 2020, Meituan earned 114.8 billion yuan or $17.7 billion in revenue.

Until recently, forcing suppliers to pick sides had been a common practice in China’s e-commerce world. Alibaba did so by forbidding sellers to list on rivaling platforms, a practice that resulted in a $2.75 billion antitrust penalty in April. We will see where the government will act next as it continues to curb the power of its tech darlings.

#alibaba, #asia, #beijing, #china, #china-roundup, #chinese-communist-party, #department-of-education, #duolingo, #gaming, #government, #kuaishou, #netease, #online-education, #tc, #tencent

China roundup: Keep down internet upstarts, cultivate hard tech

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

The tech industry in China has had quite a turbulent week. The government is upending its $100 billion private education sector, wiping billions from the market cap of the industry’s most lucrative players. Meanwhile, the assault on Chinese internet giants continued. Tech stocks tumbled after Tencent suspended user registration, sparking fears over who will be the next target of Beijing’s wrath.

Incisive observers point out that the new wave of stringent regulations against China’s internet and education firms has long been on Beijing’s agenda and there’s nothing surprising. Indeed, the central government has been unabashed about its desires to boost manufacturing and contain the unchecked powers of its service industry, which can include everything from internet platforms, film studios to after-school centers.

A few weeks ago I had an informative conversation with a Chinese venture capitalist who has been investing in industrial robots for over a decade, so I’m including it in this issue as it provides useful context for what’s going on in the consumer tech industry this week.

Automate the factories

China is putting robots into factories at an aggressive pace. Huang He, a partner at Northern Light Venture Capital, sees three forces spurring the demand for industrial robots — particularly ones that are made in China.

Over the years, Beijing has advocated for “localization” in a broad range of technology sectors, from enterprise software to production line automation. One may start to see Chinese robots that can rival those of Schneider and Panasonic a few years down the road. CRP, an NLVC-backed industrial robot maker, is already selling across Southeast Asia, Russia and East Europe.

On top of tech localization, it’s also well acknowledged that China is facing a severe demographic crisis. The labor shortage in its manufacturing sector is further compounded by the reluctance of young people to do menial factory work. Factory robots could offer a hand.

“Youngsters these days would rather become food delivery riders than work in a factory. The work that robots replace is the low-skilled type, and those that still can’t be taken up by robots pay well and come with great benefits,” Huang observed.

Large corporations in China still lean toward imported robots due to the products’ proven stability. The problem is that imported robots are not only expensive but also selective about their users.

“Companies need to have deep technical capabilities to be able to operate these [Western] robots, but such companies are rare in China,” said Huang, adding that the overwhelming majority of Chinese enterprises are small and medium size.

With the exceptions of the automotive and semiconductor industries, which still largely rely on sophisticated, imported robots, affordable, easy-to-use Chinese robots can already meet most of the local demand for industrial automation, Huang said.

China currently uses nearly one million six-axis robots a year but only manufactures 20% of them itself. The gap, coupled with a national plan for localization, has led to a frenzy of investments in industrial robotics startups.

The rush isn’t necessarily a good thing, said Huang. “There’s this bizarre phenomenon in China, where the most funded and valuable industrial robotic firms are generating less than 30 million yuan in annual revenue and not really heard of by real users in the industry.”

“This isn’t an industry where giants can be created by burning through cash. It’s not the internet sector.”

Small-and-medium-size businesses are happily welcoming robots onto factory floors. Take welding for example. An average welder costs about 150,000 yuan ($23,200) a year. A typical welding robot, which is sold for 120,000 yuan, can replace up to three workers a year and “doesn’t complain at work,” said the investor. A quality robot can work continuously for six to eight years, so the financial incentive to automate is obvious.

Advanced manufacturing is not just helping local bosses. It will eventually increase foreign enterprises’ dependence on China for its efficiency, making it hard to cut off Chinese supply chains despite efforts to avoid the geopolitical risks of manufacturing in China.

“In electronics, for example, most of the supply chains are in China, so factories outside China end up spending more on logistics to move parts around. Much of the 3C manufacturing is already highly automated, which relies heavily on electricity, but in most emerging economies, the power supply is still quite unstable, which disrupts production,” said Huang.

War on internet titans

The shock of antitrust regulations against Alibaba from last year is still reverberating, but another wave of scrutiny has already begun. Shortly after Didi’s blockbuster IPO in New York, the ride-hailing giant was asked to cease user registration and work on protecting user information critical to national security.

On Tuesday, Tencent stocks fell the most in a decade after it halted user signups on its WeChat messenger as it “upgrades” its security technology to align with relevant laws and regulations. The gaming and social media giant is just the latest in a growing list of companies hit by Beijing’s tightening grip on the internet sector, which had been flourishing for two decades under laissez-faire policies.

Underlying the clampdowns is Beijing’s growing unease with the service industry’s unscrutinized accumulation of wealth and power. China is unequivocally determined to advance its tech sector, but the types of tech that Beijing wants are not so much the video games that bring myopia to children and algorithms that get adults hooked to their screens. China makes it clear in its five-year plan, a series of social and economic initiatives, that it will go all-in on “hard tech” like semiconductors, renewable energy, agritech, biotech and industrial automation like factory robotics.

China has also vowed to fight inequality in education and wealth. In the authorities’ eyes, expensive, for-profit after-schools dotting big cities are hindering education attainment for children from poorer areas, which eventually exacerbates the wealth gap. The new regulatory measures have restricted the hours, content, profits and financing of private tutoring institutions, tanking stocks of the industry’s top companies. Again, there have been clear indications from President Xi Jinping’s writings to bring off-campus tutoring “back on the educational track.” All China-focused investors and analysts are now poring over Xi’s thoughts and directives.

#asia, #beijing, #china, #china-roundup, #enterprise-software, #government, #hardware, #industrial-robot, #made-in-china, #manufacturing, #northern-light-venture-capital, #robot, #semiconductor, #semiconductors, #southeast-asia, #tc, #tencent, #xi-jinping

China Roundup: What’s going on with China’s data security clampdown?

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

A tectonic shift is underway in how Beijing regulates and accesses the troves of citizen data collected by its tech giants. More details of China’s new cybersecurity rules have recently come to light as Didi, the SoftBank-backed ride-sharing dominator in China, became the target of the Chinese government’s latest effort to heighten data protection. This week, we look at what this changing landscape means to Chinese tech firms wooing investors in the United States.

Data sovereignty

The new wave of discussion around China’s cybersecurity rules started with the bombshell dropped on Didi. Just two days after its $4 billion IPO in New York, the ride-hailing giant was hit with a probe by China’s Cybersecurity Review Office on July 2. Two days later, the same government agency ordered the Didi app, which has amassed nearly 500 million annual users, to be yanked because it was “illegally collecting user data.”

The Cybersecurity Review Office is an agency within the Cyberspace Administration of China, the country’s top internet regulator. It has existed for a few years but its roles were only made clear in April 2020 when China put forward its rules on internet security reviews.

Didi appears to be the first target of the department’s enforcement actions. A memo of an “expert meeting” shared among Didi’s investors, which TechCrunch reviewed, said the ride-hailing firm had failed to assure Beijing its data practices were secure before going public in New York. A major concern was that Didi’s data, if unguarded by Chinese laws, could be subject to scrutiny by U.S. regulators. But a Didi executive claimed that the firm stored all its China data locally and it is “absolutely not possible” that it passed data to the U.S.

Before long, the Cybersecurity Review Office was onto other players that could similarly compromise the data security of Chinese users. On July 5, it put SoftBank-backed truck-sharing platform Full Truck Alliance and recruiting site Boss Zhipin — both of which recently IPO’ed in the U.S. — under the same review process as it did with Didi.

The probes were just the beginning. On July 10, the Cybersecurity Review Office unveiled the draft of a revised version of the data security review rules passed last year. One of the major changes is that any business commanding over one million users is subject to security checks if it is seeking an overseas IPO.

Just as the U.S. government frets over Chinese companies commanding Americans’ data, as in the case of TikTok, China is now making sure that its citizen data stays onshore and protected from U.S. authorities. Foreign players operating in China have to comply, too. Giants like Apple and Tesla have pledged and moved to store their Chinese user data within the country.

The new data rule is no doubt a stumbling block for Chinese companies that want to list abroad. TikTok owner ByteDance indefinitely put on hold its plans of a U.S. listing after Chinese officials told it to address data security risks, according to a report by The Wall Street Journal. But how about incumbents like Alibaba that have traded their stocks on Wall Street for years? And do the revised rules apply to companies listing in Hong Kong, which is being increasingly integrated with mainland China?

Also in the news

  • Tencent and Alibaba may tear down their “walled gardens.” According to The Wall Street Journal, the archrivals are considering opening their services to each other. This means users may be able to pay via Alipay on the WeChat app, which currently excludes Alibaba-affiliated Alipay. China has recently been working to rein in its tech darlings and already slapped anticompetition penalties on a cohort of tech firms. Jack Ma’s fintech behemoth Ant Group has been put on the spot and forced to restructure into a financial holding company that would potentially curb its profitability and subject it to more regulatory oversight.
  • TikTok tops 3 billion downloads from the App Store and Google Play, according to Sensor Tower. This makes the hit video platform the only app not owned by Facebook to cross the milestone across the two app stores, said the research firm, and it’s only the fifth one after WhatsApp, Messenger, Facebook and Instagram to achieve that. TikTok is also generating big bucks for ByteDance. Globally, it has made more than $2.5 billion in consumer spending since its launch.
  • Tencent ups its stake in food delivery giant Meituan to 17.2%The deal cost Tencent, a longtime patron of Meituan, $400 million. The proceeds will allow Meituan to invest further in “cutting edge tech” such as unmanned delivery cars and drones, an area where other tech firms have also made similar promises to automate parcel and food deliveries.
  • The smart vehicle craze continues. These days, hardly a week goes by without a major announcement by an autonomous driving or smart car company in China. The news last week came from Banma, which was set up by Alibaba and state-owned carmaker SAIC Motor to make internet-connected cars. It just raised $460 million from Alibaba and SAIC Motor, among others and claimed its technology now serves three million users. It raised its first round in 2018 with 1.6 billion yuan (around $250 million) and was already valued at over $1 billion at the time.

#alibaba, #alibaba-group, #alipay, #ant-group, #asia, #beijing, #bytedance, #china, #didi, #food-delivery, #jack-ma, #meituan, #saic-motor, #smart-car, #tc, #tencent, #the-wall-street-journal, #tiktok

Kai-Fu Lee’s Sinovation bets on Linux tablet maker Jingling in $10M round

Kai-Fu Lee’s Sinovation Ventures has its eyes on a niche market targeting software developers. In April, the venture capital fund led a $10 million angel round in Jingling, a Chinese startup developing Linux-based tablets and laptops, TechCrunch learned. Other investors in the round included private equity firm Trustbridge Partners.

Jingling was founded only in June 2020 but has quickly assembled a team of 80 employees hailing from the likes of Aliyun OS, Alibaba’s Linux distribution, Thunder Software, a Chinese operating system solution provider, and active participants in China’s open source community.

The majority of the startup’s staff are working on its Linux-based operating system called JingOS in Beijing, with the rest developing hardware in Shenzhen, where its supply chain is located.

“Operating systems are a highly worthwhile field for investment,” Peter Fang, a partner at Sinovation Ventures, told TechCrunch. “We’ve seen the best product iteration for work and entertainment through the combination of iPad Pro and Magical Keyboard, but no tablet maker has delivered a superior user experience for the Android system so far, so we decided to back JingOS.”

“The investment is also in line with Sinovation’s recognition and prediction in ARM powering more mobile and desktop devices in the future,” the investor added.

Jingling’s first device, the JingPad A1 tablet based on the ARM architecture, has already shipped over 500 units in a pre-sale and is ramping up interest through a crowdfunding campaign. Jingling currently uses processors from Tsinghua Unigroup but is looking into Qualcomm and MediaTek chipsets for future production, according to Liu.

On the software end, JingOS, which is open sourced on GitHub, has accumulated over 50,000 installs from users around the world, most of whom are in the United States and Europe.

But how many people want a Linux tablet or laptop? Liu Chengcheng, who launched Jingling with Zhu Rui, said the demand is big enough from the developer community to sustain the startup’s early-phase growth. Liu is known for founding China’s leading startup news site 36Kr and Zhu is an operating system expert and a veteran of Motorola and Lenovo.

Targeting the Linux community is step one for Jingling, for “it’s difficult to gain a foothold by starting out in the [general] consumer market,” said Liu.

“The Linux market is too small for tech giants but too hard for small startups to tackle… Aside from Jingling, Huawei is the only other company in China building a mobile operating system, but HarmonyOS focuses more on IoTs.”

Linux laptops have been around for years, but Jingling wanted to offer something different by offering both desktop and mobile experiences on one device. That’s why Jingling made JingOS compatible with both Linux desktop software like WPS Office and Terminal as well as the usual Android apps on smartphones. The JingPad A1 tablet comes with a detachable keyboard that immediately turns itself into a laptop, a setup similar to Apple’s Magic Keyboard for iPad.

“It’s a gift to programmers, who can use it to code in the Linux system but also use Android mobile apps on the run,” said Liu.

Jingling aspires to widen its user base and seize the Chromebook market about two from now, Liu said. The success of Chromebooks, which comprised 10.8% of the PC market in 2020 and increasingly ate into Microsoft’s dominance, is indicative of the slowing demand for Windows personal computers, the founder observed.

The JingPad A1 is sold at a starting price of $549, compared to Chrome’s wide price range roughly between $200 and $550 depending on the specs and hardware providers.

#android, #asia, #beijing, #china, #funding, #gadgets, #hardware, #ipad, #kai-fu-lee, #linus-torvalds, #linux, #mediatek, #operating-system, #operating-systems, #shenzhen, #software-developers, #tc, #trustbridge-partners

Apple’s new encrypted browsing feature won’t be available in China, Saudi Arabia and more: report

Apple announced a handful of privacy-focused updates at its annual software developer conference on Monday. One called Private Relay particularly piques the interest of Chinese users living under the country’s censorship system, for it encrypts all browsing history so nobody can track or intercept the data.

As my colleague Roman Dillet explains:

When Private Relay is turned on, nobody can track your browsing history — not your internet service provider, anyone standing in the middle of your request between your device and the server you’re requesting information from. We’ll have to wait a bit to learn more about how it works exactly.

The excitement didn’t last long. Apple told Reuters that Private Relay won’t be available in China alongside Belarus, Colombia, Egypt, Kazakhstan, Saudi Arabia, South Africa, Turkmenistan, Uganda and the Philippines.

Apple couldn’t be immediately reached by TechCrunch for comment.

Virtual private networks or VPNs are popular tools for users in China to bypass the “great firewall” censorship apparatus, accessing web services that are otherwise blocked or slowed down. But VPNs don’t necessarily protect users’ privacy because they simply funnel all the traffic through VPN providers’ servers instead of users’ internet providers, so users are essentially entrusting VPN firms with protecting their identities. Private Relay, on the other hand, doesn’t even allow Apple to see one’s browsing activity.

In an interview with Fast Company, Craig Federighi, Apple’s senior vice president of software engineering, explained why the new feature may be superior to VPNs:

“We hope users believe in Apple as a trustworthy intermediary, but we didn’t even want you to have to trust us [because] we don’t have this ability to simultaneously source your IP and the destination where you’re going to–and that’s unlike VPNs. And so we wanted to provide many of the benefits that people are seeking when in the past they’ve decided to use a VPN, but not force that difficult and conceivably perilous privacy trade-off in terms of trusting it a single intermediary.”

It’s unclear whether Private Relay will simply be excluded from system upgrades for users in China and the other countries where it’s restricted, or it will be blocked by internet providers in those regions. It also remains to be seen whether the feature will be available to Apple users in Hong Kong, which has seen an increase in online censorship in the past year.

Like all Western tech firms operating in China, Apple is trapped between antagonizing Beijing and flouting the values it espouses at home. Apple has a history of caving in to Beijing’s censorship pressure, from migrating all user data in China to a state-run cloud center, cracking down on independent VPN apps in China, limiting free speech in Chinese podcasts, to removing RSS feed readers from the China App Store.

#apple, #asia, #beijing, #belarus, #china, #colombia, #craig-federighi, #egypt, #firewall, #government, #great-firewall, #internet-censorship, #internet-security, #internet-service, #isp, #kazakhstan, #philippines, #saudi-arabia, #security, #south-africa, #tc, #uganda, #vpn

Tencent helps Chinese students skip prohibitively low speeds for school websites overseas

Hundreds of thousands of Chinese students enrolled in overseas schools are stranded as the COVID-19 pandemic continues to disrupt life and airlines worldwide. Learning at home in China, they all face one challenge: Their school websites and other academic resources load excruciatingly slowly because all web traffic has to pass through the country’s censorship apparatus known as the “great firewall.”

Spotting a business opportunity, Alibaba’s cloud unit worked on connecting students in China to their university portals abroad through a virtual private network arrangement with American cybersecurity solutions provider Fortinet to provide, Reuters reported last July, saying Tencent had a similar product.

Details of Tencent’s offering have come to light. An app called “Chang’e Education Acceleration” debuted on Apple’s App Store in March, helping to speed up loading time for a selection of overseas educational services. It describes itself in a mouthful: “An online learning free accelerator from Tencent, with a mission to provide internet acceleration and search services in educational resources to students and researchers at home and abroad.”

Unlike Alibaba’s VPN for academic use, Chang’e is not a VPN, the firm told TechCrunch. The firm didn’t say how it defines VPN or explain how Chang’e works technically. Tencent said Chang’e rolled out on the app’s official website in October.

The word “VPN” is a loaded term in China as it often implies illegally bypassing the “great firewall.” People refer to its euphemism “accelerator” or “scientific internet surfing tool” otherwise. When Chang’e is switched on, iPhone’s VPN status is shown as “on”, according to a test by TechCrunch.

Tencent’s Chang’e website ‘accelerator’ helps Chinese students stuck home get on their school websites faster. Screenshot: TechCrunch

On the welcome page, Chang’e asks users to pick from eight countries, including the U.S., Canada, and the U.K., for “acceleration”. It also shows the latency time and expected speed increased for each region.

Once a country is picked, Chang’e shows a list of educational resources that users can visit on the app’s built-in browser. They include the websites of 79 top universities, mostly U.S. and the U.K. ones; team collaboration tools like Microsoft Teams, Trello and Slack; remote-learning platforms UDemy, Coursera, Lynda and Khan Academy; research networks such as SSRN and JSTOR; programming and engineering communities like Stack Overflow, Codeacademy and IEEE; economics databases from the World Bank and OECD; as well as resources for medical students like PubMed and Lancet.

Many of these services are not blocked in China but load slowly on mainland China behind the “great firewall.” Users can request sites not already on the list to be included.

Accessing Stanford’s website through Chang’e. Screenshot: TechCrunch

Chang’e appears to have whitelisted only its chosen sites rather than all traffic on a user’s smartphone. Google, Facebook, YouTube and other websites banned in China are still unavailable when the Chang’e is at work. The app, available on both Android and iOS for free, doesn’t currently require users to sign up, a rare gesture in a country where online activities are strictly regulated and most websites ask for users’ real-name registrations.

Services accessible through Chang’e. Screenshot: TechCrunch

The offerings from Alibaba and Tencent are indicative of the inadvertent consequences caused by Beijing’s censorship system designed to block information deemed illegal or harmful to China’s national interest. Universities, research institutes, multinational corporations and exporters are often forced to seek censorship circumvention apps for what the authorities would consider innocuous purposes.

VPN providers have to obtain the government’s green light to legally operate in China and users of licensed VPN services are prohibited from browsing websites thought of us endangering China’s national security. In 2017, Apple removed hundreds of unlicensed VPN apps from its China App Store at Beijing’s behest.

In October, TechCrunch reported that the VPN app and browser Tuber gave Chinese users a rare glimpse into the global internet ecosystem of Facebook, YouTube, Google and other mainstream apps, but the app was removed shortly after the article was published.

#alibaba, #app-store, #apple, #apple-app-store, #asia, #beijing, #china, #firewall, #fortinet, #great-firewall, #tc, #tencent, #vpn

JD.com, Meituan and Neolix to test autonomous deliveries on Beijing public roads

People in a Beijing suburb will begin to see autonomous delivery mini-vans across their neighborhood, moving cautiously alongside human delivery riders belting down the streets.

Beijing has greenlighted JD.com, Meituan, and Neolix to trial self-driving delivery vehicles on designated public roads in the Yizhuang Development Area, an economic and technological growth pilot initiated by the municipal government of the capital city, according to an announcement made by local authorities at a mobility conference on Tuesday. Yizhuang has aggressively rolled out 5G coverage in part to prepare the infrastructure for autonomous driving ventures.

All three companies are using dainty box-on-wheels vehicles similar to those of Nuro to shuffle goods around. Three-year-old Neolix, backed by Chinese electric vehicle startup Li Auto, focuses on making self-driving vehicles for retail, surveillance and other city services, while both JD.com and Meituan are tech heavyweights that find unmanned delivery increasingly important to their existing core business.

Meituan’s self-driving delivery vehicle / Photo: Meituan via WeChat

Online retailer JD.com hires its own in-house delivery staff while Meituan relies on a national network of riders to bring restaurant takeout to customers. Both have been working on autonomous driving technologies internally in recent years and are also testing small fleets of delivery drones in China.

Neolix will place 150 delivery robots on Beijing roads by June. JD.com declined to disclose its deployment number. Meituan can’t be immediately reached for comment.

At the Tuesday event, authorities from the Beijing pilot zone also laid out rules for operating zero-occupant delivery vehicles in the area. The robots are categorized as “non-motor vehicles,” which suggests they will be moving next to bicycles and electric scooters instead of faster-moving cars. Road conditions in Chinese cities are often much more complicated than in the United States, even on sidewalks and bike lanes thanks to unpredictable pedestrians, unleashed pets, and reckless scooter riders.

Importantly, the rules also stipulate that the robots need to have safety drivers “on the spot and remotely.”

Neolix’s delivery robot / Photo: Neolix via WeChat

JD.com says its technology allows every remote safety driver to monitor up to 50 operating delivery robots simultaneously. Its vehicles will carry packages from logistics centers and supermarkets to nearby office buildings, residential complexes and school campuses. Customers will then fetch their order directly from the van using a pick-up code sent to them through a text message ahead of time.

Neolix’s vehicles in the pilot area, in comparison, act more like mobile vending machines peddling snacks and lunchboxes to workers around office complexes. Users can place their order on a little screen attached to the robot, pay by a QR code and get their warm bento or ice cream instantaneously.

#artificial-intelligence, #asia, #automation, #beijing, #china, #electric-vehicles, #jd-com, #li-auto, #meituan, #nuro, #robotics, #self-driving-cars, #take-out, #tc, #transportation

Facebook co-founder Saverin’s B Capital doubles down on SaaS in China

B Capital Group, the six-year-old venture capital fund formed by Facebook co-founder Eduardo Saverin and Bain Capital veteran Raj Ganguly, is doubling down on China as it looks to allocate $500 million to $1 billion of its fund into Chinese tech companies over the next few years.

With $1.9 billion assets under management, B Capital is going after enterprise software providers in China, an area that has seen “explosive growth” but is still only a “fraction the size of the U.S. SaaS market,” Ganguly said in an interview with TechCrunch.

The idea that Chinese companies are reluctant to shell out for software is “very backward-looking thinking”, he added.

One force fueling the boom of B2B companies in China is surging labor costs. As such, B Capital is hunting down software that could make labor and business operations more productive, and subsequently, give companies a competitive edge. Covid-19 accelerated the shift, as well-digitized companies had proven much more resilient to disruptions caused by the pandemic.

B Capital is able to discern what enterprises need thanks to its close partnership with Boston Consulting Group, which has a raft of customers ranging from healthcare, finance to transportation looking to digitize.

These large corporations “understand that their internal technology can’t be the only solution and they have to look to the outside and be willing to partner with early-stage, high-growth, or late-stage tech companies,” Ganguly suggested. They are also more willing to pay for software compared to scrappy, cash-strapped startups.

B Capital began deploying capital in China early this year and has already closed three deals. It’s stage-agnostic — though growth-stage startups are the focus — and plans to back 15-20 projects in China over the next few years. About 15 of its investment and operating employees are based out of Hong Kong and Beijing. It has around 110 staff worldwide.

Ganguly declined to disclose the names of its Chinese investees at this stage but said they include a biotech company, an automotive parts business, and an e-commerce enabler. Leveraging BCG’s expertise, the biotech company is learning how it can bring actual drugs to market faster. And the automotive business is similarly working with BCG to figure out its pricing and go-to-market strategy.

Going global

Overall, B Capital looks for opportunities in healthcare, fintech, industrial digitalization, and other horizontal enterprise services. Chinese startups that interest B Capital most are also those with the intention and ability to cross borders.

“Biotech is the area that we’ve been the most impressed by what’s happening in China and how that technology can be exported to other countries,” Ganguly said. B Capital has backed one biotech startup with offices in both Shanghai and Cambridge, Massachusettes, and is on track to close a deal with another that also straddles China and the U.S.

The other target is e-commerce, which Ganguly described as “cross-border by its nature” because a product is often sourced in one country, made in another, and then sold in a third market.

The investor is certainly right about the potential of cross-border e-commerce in China, where consumers have a big appetite for imported goods and manufacturers look for new ways to sell globally.

China is also in a good position to export its enterprise software, similar to how Indian counterparts have succeeded overseas, said Ganguly. The difference is that few Indian corporations are willing to pay big bucks for software, which forces B2B entrepreneurs to seek market abroad, whereas China’s domestic companies have an increasing demand for SaaS.

Despite ongoing geopolitical complications, Ganguly is optimistic that the world “is still moving towards globalization” over the long term.

“Certain innovation cycles have started in Silicon Valley and spread to places like China and Southeast Asia. But frankly, other innovation cycles have started in China and gone to South and Southeast Asia and the U.S. We think that China’s enterprise [software], artificial intelligence and biotech are some of the best technology that we’ve seen.”

But these globalizing companies must be able to adapt, hire talent outside their core market, get regulatory approvals, and build the right distribution networks, the investor suggested.

“I think that there are aspects of globalization that have become very politicized, and I think that’s unfortunate but understandable. Our belief is that businesses that we invest in have the ability to cross borders. Sometimes that means going from China to South and Southeast Asia, and sometimes that means extending to the U.S. Sometimes it just means the ability to import or export their products or software, and even staying in China where they can sell their technologies overseas.”

#asia, #b-capital-group, #bain-capital, #beijing, #china, #cross-border-e-commerce, #e-commerce, #e-commerce-enabler, #enterprise-software, #globalization, #private-equity, #raj-ganguly, #shanghai, #south-asia, #southeast-asia, #tc, #venture-capital

Crypto asset manager Babel raises $40M from Tiger Global, Bertelsmann and others

Three years after its inception, crypto financial service provider Babel Finance is racking up fundings and partnerships from major institutional investors. The startup said Monday that it has closed a $40 million Series A round, with lead investors including Zoo Capital, Sequoia Capital China, Dragonfly Capital, Bertelsmann and its Asian fund BAI Capital, and Tiger Global Management.

For years, traditional investors were reluctant to join the cryptocurrency fray. But in 2020, Babel noticed that many institutions and high net worth individuals began to consider crypto assets as an investment class.

Babel, with offices in Hong Kong, Beijing, and Singapore, wanted to capture the window of opportunity and be one of the earliest to help allocate crypto assets in investors’ portfolios. But first, it needed to win investors’ trust. One solution is to have reputable private equity and venture capital firms on its cap table.

“It’s more of a brand boost so we can attract more institutions and build up credibility,” Babel’s spokesperson Yiwei Wang said of the firm’s latest financing, which is a strategic round as Babel had “reached profitability” and “wasn’t actively looking for funding.”

To vie for institutional customers and wealthy individuals, Babel plans to spend its fresh proceeds on product development, compliance and talent acquisition, seeking especially banking professionals and lawyers to work on regulatory requirements. It currently has a headcount of 55 employees.

Mainstream investors are jumping into the crypto scene partly because many see bitcoin as a way to hedge against “solvency and credibility risks” amid global economic uncertainties caused by Covid-19, said Wang. “Bitcoin is not something controlled by the government.”

The other trigger, Wang explained, was what shock the industry in February: Elon Musk bought $1.5 billion in bitcoin and declared Tesla would begin accepting the digital token as payments. That sparked a massive rally around bitcoin, sending its price to over $40,000.

Babel’s evolution has been in line with the trajectory of the industry. In its early days, the startup was a “crypto-native” company offering deposit and loan products to crypto miners and traders. These days, it also runs a suite of asset management products and services tailored to enterprise clients around the world. It’s applying for relevant financial licenses in North America and Asia.

As of February, Babel’s crypto lending business had reached an outstanding balance of $2 billion in equivalent cryptocurrency, the firm says. It has served more than 500 institutional clients and sees about $8 billion in direct trading volume each month. 80% of its revenues are currently derived from institutions. The goal is to manage one million bitcoins within four years.

#asia, #babel-finance, #beijing, #bertelsmann, #bitcoin, #cryptocurrencies, #cryptocurrency, #decentralization, #digital-currencies, #financial-technology, #funding, #sequoia-capital, #sequoia-capital-china, #singapore, #spokesperson, #tc, #tiger-global-management

Laiye, China’s answer to UiPath, closes $50 million Series C+

Robotic process automation has become buzzy in the last few months. New York-based UiPath is on course to launch an initial public offering after gaining an astounding valuation of $35 billion in February. Over in China, homegrown RPA startup Laiye is making waves as well.

Laiye, which develops software to mimic mundane workplace tasks like keyboard strokes and mouse clicks, announced it has raised $50 million in a Series C+ round. The proceeds came about a year after the Beijing-based company pulled in the first tranche of its Series C round.

Laiye, six years old and led by Baidu veterans, has raised over $130 million to date according to public information.

Leading investors in the Series C+ round were Ping An Global Voyager Fund, an early-stage strategic investment vehicle of Chinese financial conglomerate Ping An, and Shanghai Artificial Intelligence Industry Equity Investment Fund, a government-backed fund. Other participants included Lightspeed China Partners, Lightspeed Venture Partners, Sequoia China and Wu Capital.

RPA tools are attracting companies looking for ways to automate workflows during COVID-19, which has disrupted office collaboration. But the enterprise tech was already gaining traction prior to the pandemic. As my colleague, Ron Miller wrote this month on the heels of UiPath’s S1 filing:

“The category was gaining in popularity by that point because it addressed automation in a legacy context. That meant companies with deep legacy technology — practically everyone not born in the cloud — could automate across older platforms without ripping and replacing, an expensive and risky undertaking that most CEOs would rather not take.”

In one case, Laiye’s RPA software helped the social security workers in the city of Lanzhou speed up their account reconciliation process by 75%; in the past, they would have to type in pensioners’ information and check manually whether the details were correct.

In another instance, Laiye’s chatbot helped automate the national population census in several southern Chinese cities, freeing census takers from visiting households door-to-door.

Laiye said its RPA enterprise business achieved positive cash flow and its chatbot business turned profitability in the fourth quarter of 2020. Its free-to-use edition has amassed over 400,000 developers, and the company also runs a bot marketplace connecting freelance developers to small-time businesses with automation needs.

Laiye is expanding its services globally and boasts that its footprint now spams Asia, the United States and Europe.

“Laiye aims to foster the world’s largest developer community for software robots and built the world’s largest bot marketplace in the next three years, and we plan to certify at least one million software robot developers by 2025,” said Wang Guanchun, chair and CEO of Laiye.

“We believe that digital workforce and intelligent automation will reach all walks of life as long as more human workers can be up-skilled with knowledge in RPA and AI”.

#artificial-intelligence, #asia, #automation, #beijing, #business-software, #chatbot, #china, #enterprise, #lightspeed, #lightspeed-venture-partners, #robotic-process-automation, #saas, #sequoia-china, #uipath

Facebook caught Chinese hackers using fake personas to target Uyghurs abroad

Facebook on Wednesday announced new actions to disrupt a network of China-based hackers leveraging the platform to compromise targets in the Uyghur community.

The group, known to security researchers as “Earth Empusa” “Evil Eye” or “Poison Carp,” targeted around around 500 people on Facebook, including individuals living abroad in the United States, Turkey, Syria, Australia and Canada. Through fake accounts on Facebook, the hackers posed as activists, journalists and other sympathetic figures in order to send their targets to compromised websites beyond Facebook.

Facebook’s security and cyber espionage teams began seeing the activity in 2020 and opted to disclose the threat publicly to maximize the impact on the hacking group, which has proven sensitive to public disclosures in the past.

Though Facebook says social engineering efforts on the platform are “a piece of the puzzle,” most of the hacking group’s efforts take place elsewhere online. They focus on attempts to gain access to targets’ devices with watering hole attacks and lookalike domains, including a fake Android app store offering prayer apps and Uyghur-themed keyboard downloads.

When downloaded, those fake apps infected devices using two strains of Android trojan malware, ActionSpy and PluginPhantom. On iOS devices, the hackers leveraged malware known as Insomnia.

While the hackers targeted a small number of users relative to what the company sees in disinformation operations, Facebook stressed that a small, well-chosen group of targets can result in huge impacts. “You can imagine surveillance, you can imagine a range of secondary consequences” Facebook Head of Security Policy Nathaniel Gleicher said.

The Uyghurs are a predominantly Muslim ethnic minority in China that continues to face brutal repression from the Chinese government, including being forced into labor camps in the country’s Xinjiang province.

Facebook declined to link what it observed to the Chinese government, saying that it defers to the broader security community to make those determinations when it lacks the technical indicators to do so itself. Researchers believe that adjacent hacking campaigns are Beijing’s efforts to extend its surveillance of communities it already subjugates within China’s bounds.

#beijing, #china, #computer-security, #cybercrime, #facebook, #malware, #security, #social-engineering, #spyware, #tc, #trojan-horse

Boss of Chinese gaming titan NetEase calls for shared parental leave

China’s relaxation of its one-child restriction has not delivered the population targets set by its policy planners. In 2019, the birth rate in China slumped to a seven-decade low, which experts attribute to changes in social attitudes, skyrocketing living costs as well as a demanding work culture.

One way to fix China’s demographic crisis is to lighten mothers’ burden, said Ding Lei, founder and CEO of NetEase, the second-biggest gaming company in China which also runs a popular music streaming service.

Ding made the proposal at China’s annual parliament session this week, comprising the meetings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC). Each spring, delegates from a wide range of backgrounds, including political elites and tech billionaires, gather in Beijing for the legislative meetings informally known as the “two sessions.”

Ding is a member of the CPPCC, which includes other tech bosses like Tencent’s Pony Ma, Xiaomi’s Lei Jun and Baidu’s Robin Li. Ding suggested efforts should be directed to address costly childbearing, short maternity leave, an undersupply of children’s healthcare, an underdeveloped childcare system and other “practical pain points” to take burdens off women’s shoulders.

Ding further advocated for shared parental leave “at one’s discretion” to “give men more responsibilities in parenting.” The country, he argued, should bear women’s reproductive costs and the number of nursery facilities should be increased.

Most provinces in China have introduced paternity leave in recent years, but the length and implementation efforts vary across regions. In Guangdong, home to NetEase and Tencent, fathers are entitled to up to 15 days of paid paternity leave. Shanghai, on the other hand, falls on the lower end of the spectrum with 10 days.

But some experts argue the one-week average for fathers is far from enough to liberate new mothers, who receive a minimum of 98 days of paid maternity leave but could get more depending on where they reside. NetEase’s family leave policy is in line with national and regional regulations, a company representative told TechCrunch.

Occasionally, China’s tech giants disclose or give hints about their gender ratio. In 2019, 35% of NetEase’s 20,000 employees were women, the company says, and about 25% of its top management were female in the year. Online travel agent Ctrip, which prides itself on benefits for female employees, said in 2018 that over 60% of its staff were female. Jack Ma, a frequent speaker at female leadership forums, pledged in 2019 that females must make up more than 33% of Alibaba staff.

#asia, #beijing, #china, #gender-balance, #jack-ma, #netease, #parental-leave, #pony-ma, #robin-li, #tc, #tencent

China launched its national carbon trading market yesterday

Yesterday, China flipped the switch on a nationwide carbon trading market, in what could be one of the most significant steps taken to reduce greenhouse gas emissions in 2021 — if the markets can work effectively.

China is the world’s largest emitter of greenhouse gases and its share of the world’s emissions output continues to climb.

As the Chinese government works to curb its environmental impact, policies like a carbon trading system could spur the adoption of new technologies, increasing demand for goods and services from domestic startups and tech companies around the world.

Carbon markets, implemented in some parts of the U.S. and widely across Europe, put a price on industrial emissions and force companies to offset those emissions by investing in projects that would remove an equivalent portion of greenhouse gases from the atmosphere.

They’re a key component of the 2015 Paris Agreement, but they’re also a controversial one. That’s because if they’re not implemented properly and managed effectively they can be a “massive loophole” for emitters, as Gilles Dufrasne, policy officer at Carbon Markets Watch, told Time last year.

This is especially true of China. Corruption in China is endemic and the country has long sacrificed environmental policy and stewardship at the altar of economic growth. China’s not alone in making that calculus, but the decisions have happened at a scale orders of magnitude larger than almost any other nation (with the exception of the U.S.)

The efficacy of the policy is also effected by the hierarchies that exist within the bureaucracy of the Chinese Communist Party. As ChinaDialogue noted, the measures were issued by the Ministry of Ecology and Environment, which carry lower legal authority than if they came from the NDRC, the leading governing body for macroeconomic policy across China and the overseer of the nation’s major economic initiatives.

That said, no country as large as China, which accounts for 28% of the world’s greenhouse gas emissions, has ever implemented a national carbon emissions trading market.

BEIJING, CHINA – MARCH 20: Chinese President Xi Jinping delivers a speech during the closing session of the National People’s Congress (NPC) at the Great Hall of the People on March 20, 2018 in Beijing, China. (Photo by Lintao Zhang/Getty Images)

China first started testing regional emissions trading systems back in 2011 in Shenzhen, Shanghai, Beijing, Guangdong, Tianjin, Hubei, Chongqing and Fujian. Using a system that instituted caps on emissions based on carbon intensity (emissions per unit of GDP) rather than an absolute emissions cap, the Chinese government began rolling out these pilots across its power sector and to other industries.

After a restructuring in 2018, the plan, which was initially drafted under the auspices of the National Development and Reform Commission was kicked down to the Ministry of Ecology and the Environment. The devolution of China’s cap and trade emissions program came as the United States was withdrawing from the Paris Agreement amid an abdication of climate regulation or initiatives under the Presidency of Donald Trump.

Initially intended to begin with trading simulations in 2020, China’s emissions schemes were derailed by the COVID-19 pandemic and pushed back to the back half of the year with an implementation of actual trading starting yesterday.

For now, the emissions trading system covers China’s power industry and roughly 2,000 energy generation facilities. That alone represents 30% of the nation’s total emissions and over time the trading system will encompass heavy industry like cement, steel, aluminum, chemicals and oil and gas, according to ChinaDialogue.

Initially, the government is allocating emissions allowances for free and will begin auctioning allowances “at the appropriate time according to the situation.”

That kind of language, and concerns raised by state-owned enterprises and financial services firms flagging the effect carbon pricing could have on profitability and lending risk shows that the government in Beijing is still putting more weight on the economic benefits rather than environmental costs of much of its industrial growth.

That said, a survey of market participants cited by ChinaDialogue indicated that prices are expected to start at 41 yuan (US$6.3) per ton of CO2 and rise to 66 yuan per ton in 2025. The price of carbon in China is expected to hit 77 yuan by 2030.

Meanwhile, a commission on carbon prices formed in 2017 and helmed by the economists Joseph Stiglitz and Nicholas Stern indicated that carbon needed to be priced at somewhere between $40 and $80 by 2020 and somewhere in the $50 to $100 range by 2030 if the markets and prices were to have any impact on behavior.

No nation has actually hit those price targets, although the European Union has come the closest — and seen the most reduction in greenhouse gas emissions as a result.

Still, the plan from the Chinese government does include public reporting requirements for verified company-level emissions. And the existence of a market, if the government decides to put real prices in place and consequences for flouting the system, could be a huge boon for the monitoring and management equipment startups that are developing tech to track emissions.

As the analysts at ChinaDialogue note:

“The hardest part of carbon pricing is often getting it started. The moment that the Chinese government decides to increase ambition with the national ETS, it can. The mechanism is now in place, and it can be ramped up if the momentum and political will provided by President Xi’s climate ambition continues. In the coming years, this could see an absolute and decreasing cap, more sectors covered, more transparent data provision and more effective cross-government coordination. This is especially so with energy and industrial regulators who will need to see the ETS not as a threat to their turf, but as a measure with significant co-benefits for their own policy objectives.”

#articles, #beijing, #chemicals, #china, #chinese-communist-party, #donald-trump, #energy, #europe, #european-union, #greenhouse-gas-emissions, #oil-and-gas, #president, #shanghai, #shenzhen, #steel, #tc, #united-states, #xi

Signal and Telegram are also growing in China – for now

As fears over WhatsApp’s privacy policies send millions of users in the West to Signal and Telegram, the two encrypted apps are also seeing a slight user uptick in China, where WeChat has long dominated and the government has a tight grip on online communication.

Following WhatsApp’s pop-up notification reminding users that it shares their data with its parent Facebook, people began fleeing to alternate encrypted platforms. Telegram added 25 million just between January 10-13, the company said on its official Telegram channel, while Signal surged to the top of the App Store and Google Play Store in dozens of countries, TechCrunch learned earlier.

The migration was accelerated when, on January 7, Elon Musk urged his 40 million Twitter followers to install Signal in a tweet that likely stoked more interest in the end-to-end encryption messenger.

The growth of Telegram and Signal in China isn’t nearly as remarkable as their soaring popularity in regions where WhatsApp has been the mainstream chat app, but the uplift is a reminder that WeChat alternatives still exist in China in various capacities.

Signal amassed 9,000 new downloads from the China App Store between January 8 and 12, up 500% from the period between January 3 and 7, according to data from research firm Sensor Tower. Telegram added 17,000 downloads during January 8-12, up 6% from the January 3-7 duration. WhatsApp’s growth stalled, recording 10,000 downloads in both periods.

Sensor Tower estimates that Telegram has seen about 2.7 million total installs on China’s App Store, compared to 458,000 downloads from Signal and 9.5 million times from WhatsApp.

The fact that Telegram, Signal, and WhatsApp are accessible in China might come as a surprise to some people. But China’s censorship decisions can be arbitrary and inconsistent. As censorship monitoring site Apple Censorship shows, all major Western messengers are still available on the China App Store.

The situation for Android is trickier. Google services are largely blocked in China and Android users revert to Android app stores operated by local companies like Tencent and Baidu. Neither Telegram nor Signal is available on these third-party Android stores, but users with a tool that can bypass China’s Great Firewall, such as a virtual private network (VPN), can access Google Play and install the encrypted messengers.

The next challenge is actually using these apps. The major chat apps all get slightly different treatment from Beijing’s censorship apparatus. Some, like Signal, work perfectly without the need for a VPN. Users have reported that WhatsApp occasionally works in China without a VPN, though it loads very slowly. And Facebook doesn’t work at all without a VPN.

“Some websites and apps can remain untouched until they reach a certain threshold of users at which point the authorities will try to block or disrupt the website or app,” said Charlie Smith, the pseudonymous head of Great Fire, an organization monitoring the Chinese internet that also runs Apple Censorship.

“Perhaps before this mass migration from WhatsApp, Signal did not have that many users in China. That might have changed over the last week in which case the authorities could be pondering restrictions for Signal,” Smith added.

To legally operate in China, companies must store their data within China and submit information to the authorities for security spot-checks, according to a cybersecurity law enacted in 2017. Apple, for instance, partners with a local cloud provider to store the data of its Chinese users.

The requirement raises questions about the type of interaction that Signal, Telegram, and other foreign apps have with the Chinese authorities. Signal said it never turned over data to the Hong Kong police and had no data to turn over when concerns grew over Beijing’s heightened controls over the former British colony.

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