Tag Archives: Bytedance

Foreign influences out of tutoring; what could be next?

Reassurances that the recent tutoring industry crackdown was aimed at easing Chinese parents’s financial burdens turns out to have been only partly true. As the latest purges of overseas tutors from these platforms show, the crackdown was also aimed at ending foreign influence in the industry.

Could the same follow-up action be reasonably expected of “spiritual opium”, online gaming? What might that mean for the hundreds of billions still locked up in VIEs such as Tencent?

Moreover, what about the pending Bytedance IPO? Could “inappropriate” short-form videos – probably bigger time-sucking distractions for the nation’s youth than games – be next for criticism by state-run media? If so, why would China want to allow that tool to fall under the influence of foreign investors?

The Greater Bay Area has been at the vanguard of private-sector development of industries such as online tutoring and gaming. This is the home of companies such as Tencent because of the ease in melding entrepreneurial minds in Shenzhen, China’s experimental city, with capital-raising minds in Hong Kong, China’s offshore financing center.

Those advantages are increasingly starting to be seen as baggage. The question every foreign investor in the GBA should be considering now is whether China is reversing the push of the past four decades into greater private-sector participation in the economy, while at the same time cleansing industries of their foreign influence. It is hard to avoid that conclusion after witnessing what has been happening here over the past few weeks.

Bytedance to set up new Shenzhen HQ

The tech giant best known for its video-sharing app TikTok has signed a “strategic cooperation” agreement with the Shenzhen government to set up a new Greater Bay headquarters in the city. 

Beijing-based Bytedance, which operates several machine learning-enabled content platforms with a total of 1.5 billion monthly active users worldwide, plans to build a research and development center at its new GBA HQ, according to local media. The company will focus on basic research while exploring new commercial applications, and it has promised innovation will flow from the new building. 

Shenzhen has already played an important role in Bytedance’s recent meteoric growth. It began as an Internet and AI company in 2012 and by 2017 had already set up a Shenzhen subsidiary for R&D and B2B services.

Today worth around US$75 billion, Bytedance is one of a growing number of Chinese companies setting their sights on overseas markets, including the US. As a core development engine for the GBA and a gateway to Belt and Road Initiative countries, Shenzhen represents an integral part of that expansion plan. 

Bytedance needs this expansion plan to work. It is facing increasingly fierce competition in the domestic market, with costs for user acquisition climbing steadily in recent years. But it does have a big base upon which to build. According to data by Sensor Tower, TikTok has hit 1.2 billion downloads worldwide, including 105 million in the US. In Q1, new users of both the Chinese and overseas versions of TikTok came in at 188 million, an increase of 70% over the same period of last year. The growth came mainly from India, in which TikTok currently claims a total of 200 million users.

Critics argue, however, that Bytedance needs to get its overseas user base up to half of its total to be considered truly global. A new headquarters in Shenzhen is a reflection of the company’s strategy for achieving this. The city is cheaper than Hong Kong, but increasingly plugged into international trends and talent via its links to “Asia’s World City”. 

The announcement is seen as another feather in Shenzhen’s cap. Besides Bytedance, online-offline ecommerce service provider Dmall, retail chain Wumart and British multinational DIY home improvement retailer B&Q have also recently set up their southern China headquarters in Shenzhen. 

Bytedance’s road to globalization

2015:Launched its global strategy

2016:Attempted to acquire the US social news site Reddit. Failed

Early 2017: Acquired the struggling US video-sharing application Flipagram.

End of 2017:Acquired Musical.ly, along with its 60 million US users.

China’s rich list tells stories of the GBA’s rise

Last year was the worst in a decade for China’s stock markets. Although many of the country’s highest flyers have recovered this year (so far), there is no escaping the fact that fortunes were reshuffled by the turmoil that gripped stocks in 2018. This much is evident by a “rich report” released by the Shenzhen-based business magazine New Wealth.

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