Home' Trinidad and Tobago Guardian : May 11th 2014 Contents SBG20 INTERNATIONAL
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt MAY 11 • 2014
Alibaba, the e-com-
merce giant planning
a blockbuster share
sale in the US, shook
up China's vast but
sleepy retailing indus-
try by popularising
online shopping. Now
it and China's other Internet companies are
mounting challenges in areas from banking
The new wave of change was triggered by
the abrupt shift of Chinese Internet users to
surfing the Web via smartphones or tablets.
Some 81 per cent of China's 618 million Inter-
net users now go online wirelessly. Companies
such as Alibaba that arose in the era of the
desktop computer-based Internet are scram-
bling to roll out mobile-friendly services.
The services Web users flock to are usually
privately owned, while they are leaving behind
traditional state-owned companies that control
many industries. Video websites compete
with state TV, online financial services draw
deposits away from banks and instant mes-
saging apps take revenue from government-
owned phone carriers.
"I try to buy everything online," said Cao
Ying, a 30-year-old software engineer in
Like many young professionals, Cao lives
through her smartphone. Grocery shopping,
paying bills, finding a taxi: whatever Cao
needs is just an app away.
"I'm one of those people who are driving
shopping centres out of business," she said.
Some Chinese leaders welcome the com-
petition as a tool to make the government-
dominated economy more productive. In the
1990s, Beijing encouraged desktop comput-
er-based online commerce that shook up
retailing. Today, China's leaders are allowing
a wave of disruption to flow from mobile
Internet. Still, it is unclear how far the trend
will be allowed to run if politically favored
companies are threatened. A commentator
for state television called online financial serv-
The shift to mobile Internet is "putting a
lot of pressure on traditional retailers and
banks to offer a better service," said Ben
Cavender, an analyst for China Market
Research Group, a consulting firm in Shang-
The fiercest competition is among a trio
of giants that dominate China's Internet:
Alibaba Group in e-commerce, Tencent Hold-
ings in games and Baidu Inc in search.
Since the start of last year, they have spent
more than US$7 billion to create or acquire
e-commerce, social networking and other
mobile services. The flurry of deals is also
bringing them into head-to-head competition
with each other for the first time.
"These three used to be like three mountains
in the Chinese Internet business. But now
they have to get into a major war against each
other," said Bing-Sheng Teng, a specialist in
corporate strategy at the Cheung Kong Grad-
uate School of Business in Beijing.
The three are little known outside China.
But that is likely to change. Alibaba filed Tues-
day for a US initial public offering that analysts
say might raise up to US$20 billion and be
among the biggest IPOs ever.
The rise of e-commerce in China gave mil-
lions of households wider access to clothes,
books and consumer electronics in a society
that in the 1980s still required ration tickets
for some supermarket items. That was aided
by Alibaba's launch of an online payment sys-
tem, Alipay, which filled the gap for the shop-
pers who lacked credit cards. The company
launched retail website Taobao in 2003.
Still growing at an explosive rate, online
shopping is forecast by consulting firm McK-
insey to triple from 2011 levels to US$400
billion a year by 2015.
At the centre of the transformation are
Alibaba founder Jack Ma and his chief rival,
Tencent founder Ma Huateng. Ma Huateng's
net worth is estimated by Forbes at US$13.4
billion and Jack Ma's at US$10 billion.
"Neither one has succeeded by moving
slowly or cautiously," said Gilles Ubaghs, a
researcher for consulting firm Ovum. "It's
been a matter of, Let's throw everything at
this and grow as fast as we can."
In the next tier of competitors are enter-
tainment portals Sohu.com Inc and Sina Corp,
security company Qihoo 360 that operates a
popular mobile browser and video site Youku
Alibaba is the biggest spender, laying out
US$3.9 billion since the start of 2013. In
March, it moved into Tencent's territory by
paying US$800 million for control of Chi-
naVision, a Hong Kong producer of films, TV
programs and mobile games. The next month,
the company, along with a fund run by Jack
Ma, invested US$1.2 billion in Youku Tudou.
Tencent moved into Alibaba's territory in
February by paying US$250 million for a 15
per cent stake in China's No 2 e-commerce
Baidu already controlled a video site, iQiyi,
and has invested US$2.4 billion since mid-
2013 in an e-book store, a group buying site
and a distributor of smartphone apps.
The latest battleground is in online pay-
ments and finance.
The volume of payments using mobile
phones soared 800 per cent last year compared
with 2012 to 1.3 trillion yuan (US$220 billion),
according to research firm Analysys Interna-
tional. Alibaba's Alipay accounted for 70 per
cent of that, with Lakala, owned by computer
manufacturer Lenovo Group, in second place
at 18 per cent.
Zhang Liqi, a 28-year-old employee at a
fast food chain, said she always turns to her
phone to check for restaurants with discounts
before dining out with friends.
"And everyone just takes out our mobile
phones to pay the bill," she said.
Alibaba and Tencent, whose payments serv-
ice Tenpay competes with Alipay, have
expanded into online finance services with
accounts accessible by smartphone that pay
up to 6.0 per cent interest. That is double
the best rate offered by banks---and then only
if money is locked up in a one-year certificate
Along with eight other companies, Alibaba
and Tencent were picked in March by the
government to become investors in China's
first privately financed banks since the 1949
communist revolution. AP
shakes up stodgy
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