Issue 19 | January 8, 2018

Join Us at Two China-Related Events
1. The GGV Capital-ZhenFund CES Reception, featuring Hans Tung (managing partner at GGV Capital) and Anna Fang (partner and CEO at ZhenFund)

Time: 7-10pm, Tuesday, January 9
Location: Las Vegas (the specific location will be included in the RSVP confirmation email)
Register at ces.ggvc.com.

2. Meet the founders of Xiaopeng Motors, Musical.ly, Clobotics, Liulishuo, Momenta, Kujiale, and PETKIT (moderated by Hans and Zara)

Time: 3-6pm, Saturday, January 13
Location: Bishop Auditorium, Lathrop Library, 518 Memorial Way, Stanford CA
Register at ggvstanford.splashthat.com.

Tech Giants Address Public Outcry Over Data Privacy Concerns
Last week, several Chinese tech giants faced backlash over their handling of users’ personal data, challenging the notion that Chinese consumers do not care about data privacy.

After a public figure said last week that Tencent chairman Pony Ma “is watching us through WeChat every day because he can see whatever he wants,” WeChat released a statement saying that it does not spy on user conversations nor retained records.

Alipay, the payments arm of Alibaba affiliate Ant Financial with 520 million users, apologized for making the opt-in to its social credit scoring service the default when users opened a digital spending profile in its app. This move had angered some people who felt Alipay misled them into handing over their personal data. The issue came to light after a lawyer’s complaint on social media went viral. Alipay has since then tweaked the settings, making the agreement statement more prominent on the page.

Some Chinese netizens complained last week that the media giant Toutiao, which uses AI-powered algorithms to recommend content to users, has been eavesdropping on their conversations. A user said he was talking about strawberries with his wife and immediately started seeing strawberry-related content on Toutiao recommended to him, even though he had not browsed related topics on the app. Toutiao issued a statement saying that it does not have the technology to eavesdrop on users’ conversations, even when users opt to allow the app to access their microphones.

Collectively, these incidents illustrate that Chinese users are becoming more aware of data privacy issues. Chinese tech giants will be forced to operate under more public scrutiny than ever.

US Blocks MoneyGram Sale to Ant Financial on National Security Concerns
Alibaba’s Ant Financial is calling off its $1.2 billion acquisition of US-based money transfer company MoneyGram, after failing to gain approval from Washington’s national security panel, which is increasingly obstructive toward Chinese investment in US firms.

The Committee on Foreign Investment in the United States (CFIUS) withheld its approval for the deal on concerns over the safety of data that can be used to identify US citizens.

The demise of the deal, which occurred despite Jack Ma’s cordial meeting with Donald Trump last year, is the latest in a string of Chinese acquisitions of US companies that have failed to clear CFIUS, and an example of political concerns trumping business factors at a time when the White House has toughened its stance on Chinese investments.

JD.Com To Form Joint Venture With Meili
JD.com, one of China’s e-commerce giants, is forming a joint venture with Meili, an online fashion retailer popular among women. The new platform, expected to be launched in February, will focus on capitalizing on Tencent’s WeChat to generate traffic (Tencent is an investor in both JD.com and Meili). Merchants selling through the new platform will gain access to JD’s logistics network. Chen Qi, Meili’s CEO, will become the chairman of the new joint venture.

Meili is the result of a merger between Meilishuo (a GGV portfolio company) and Mogujie, two of the largest social e-commerce platforms in China. Mogujie has already seen great success on WeChat. When users open their WeChat Wallet, Mogujie’s mini-program is embedded within the “Women’s Style” section, making Mogujie one of the most-used mini-programs of all times.

Mogujie WeChat mini program

The deal is JD’s latest effort to expand into fashion and win over more female customers. Just last month, JD.com teamed up with Tencent to invest $863 million in the third-largest e-commerce platform in China, Vipshop.

Two sides have emerged on China’s e-commerce battlefield: Alibaba on one side, and the Tencent-JD-Vipshop-Meili-Pinduoduo alliance on the other.

Beijing to Build $2.1B Technology Park for AI
Chinese authorities announced they will build a technology park dedicated to developing artificial intelligence in Beijing within five years. The park will be situated in suburban Mentougou district in western Beijing, covering 135 acres.

With an estimated investment of $2.1 billion, the park is expected to attract about 400 enterprises, with an estimated annual output value of about $7.7 billion. The park will focus on developing areas such as super-high-speed big data, cloud computing, biometric identification, and deep learning. It will also have 5G mobile internet, a super computer, and cloud services, according to Xinhua.

The news follows the Chinese government’s announcement last July that laid out plans for the country to become a world leader in AI by 2030. Click here to view GGV Managing Partner Jenny Lee’s deck on AI trends in China.