Issue 16 | December 18, 2017

An Original: What the Bytedance-Musical.ly Deal Means
Last month, our portfolio company Musical.ly merged with Chinese content giant Bytedance (Toutiao). In our opinion, Bytedance and Musical.ly are a natural fit. Combining the strengths of these two companies could help create an unprecedented global digital media company. Bytedance’s impressive portfolio of services outside China also represents a new way for Chinese companies to expand overseas, which can be understood as “Outbound 2.0.” Here’s why.

Toutiao musical.lyGoogle Sets Up AI Center in Beijing

Google has set up an artificial intelligence center in Beijing, which will be led by Fei-Fei Li, chief scientist for Google Cloud and a Stanford professor who runs the Stanford Artificial Intelligence Lab, and Jia Li, head of research and development for Google Cloud and former head of research for Snap.

Google first came to China in 2006, and halted its search service there after a spat with the government over its censorship policies. Since then, Google’s major services, including search, Gmail, and the Google Play app store, have been blocked in China.

Many of China’s homegrown technology giants, such as Baidu and Tencent, have set up their own AI research centers.

Li Fei-Fei Google China AI Center
Fei-Fei Li announcing the Google AI China Center

Andrew Ng Announces New Project: Transforming Manufacturing with AI

Andrew Ng, the former chief scientist at Baidu and a renowned figure in artificial intelligence, announced his new company Landing.ai, which focuses on bringing AI to the manufacturing industry. Landing.ai’s first strategic partner is Foxconn, the world’s largest contract manufacturer and maker of Apple’s iPhone. Ng says he’s been working with Foxconn since July.

Landing.ai is developing a wide range of AI transformation programs, including the introduction of new technologies, the reshaping of organizational structure, employee training, and more.

Ng acknowledged that, thanks to AI, the next wave of manufacturing jobs will be very different from the previous one and will require many workers to learn new skills. “The retraining of workers for the next generation of jobs in AI is a challenge that landing.ai is uniquely equipped to tackle,” wrote Ng in a Medium post announcing the project.

Tencent Buys 5% Stake in Brick-and-Mortar Supermarket Chain Yonghui Superstores
Tencent plans to buy a 5% stake in Yonghui Superstores (永辉超市 yǒng huī chāo shì) for $639 million, following rival Alibaba which had already teamed up with brick-and-mortar retailers. Tencent is the largest shareholder of the e-commerce giant JD.com, which is already an investor in Yonghui.

Last month, Alibaba bought a $2.9 billion stake in Chinese grocery retailer Sun Art Retail Group. Alibaba has also opened a chain of at least 20 offline supermarkets called Hema (盒马鲜生 hé mǎ xiān shēng). Each serves as not just a high-end supermarket, but also a food court and a fulfillment center for grocery delivery.

Yonghui has opened a similar chain called Super Species (超级物种 chāo jí wù zhǒng). Both Super Species and Hema offer grocery delivery under 30 minutes within a 3-kilometer radius. Read our blog post on what Yonghui and Hema supermarkets look like inside.

A Buzzword
雄安新区 (xióng ān xīn qū)
Xiongan New Area

This April, China’s central leadership announced a decision to establish the Xiongan New Area in Hebei province as a special economic zone. The new area, similar to the Shenzhen Special Economic Zone and the Shanghai Pudong New Area, is of national significance and “crucial for the millennium to come”, according to an official circular. Many of China’s tech giants—including Tencent, Alibaba, Baidu, and JD.com—are slated to set up offices in Xiongan.

The new zone is strategically located; Beijing, Tianjin, and Shijiazhuang are all within a half-hour’s commute. The site of the New Area was carefully chosen, after rounds of comparison and rigorous research.

Xiong an new area

Beijing’s population has reached more than 21 million, creating significant stress on the city’s infrastructure. The Xiongan New Area will aim to alleviate Beijing’s burden by taking over many of the city’s “non-capital functions,” according to a government official. This is part of the central leadership’s plan to advance the coordinated development of the Beijing-Tianjin-Hebei region (京津冀 jīng jīn jì).

Since the announcement of the special economic zone, housing prices in Xiongan have risen significantly, according to local press.