Home / The Game / 2019 China tech look ahead: trade war likely to cast a shadow as AI, e-commerce, smartphone progress continues

2019 China tech look ahead: trade war likely to cast a shadow as AI, e-commerce, smartphone progress continues


The US-China trade war knocked the wind out of the Chinese hi-tech industry’s sails in 2018, threatening to slow down its expansion in everything from smartphones, wireless network equipment and self-driving cars to semiconductors, e-commerce and financial technology.

While a 90-day ceasefire period is in place for negotiators to end the war, major Chinese technology companies and national initiatives are expected to continue to face challenges in 2019 as the world’s two largest economies remain at loggerheads over global leadership in hi-tech innovation.

Here we take a look at the views of analysts, executives, and experts to see which sectors and companies will likely be in the spotlight in 2019 and what the big issues are expected to be.

AI gets political

Artificial intelligence, which involves computer systems performing tasks that simulate human intelligence, is expected to turn into a high-stakes political issue for China, as unresolved trade tensions prompt the US to tighten controls over the export of chips and other key technologies to the mainland.

That development could restrain the efforts of Chinese AI companies, which are dependent on foreign suppliers for major software and hardware components, according to Li Jingwang, an analyst with the China Academy of Science and Technology for Development.

China has five designated AI champions – Baidu, Alibaba Group Holding, Tencent Holdings, iFlyTek and SenseTime, the world’s most valuable AI start-up.

‘Made in China 2025’: China has a competitive AI game plan but success will need cooperation

Jeffrey Ding, China lead for the Governance of AI Programme at University of Oxford, said the export controls may also push Beijing to “ramp up efforts at promoting indigenous innovation, which may come back to bite American firms hoping to maintain access to the Chinese market”.

While the threat of such export restrictions looms, the increased adoption of AI in entertainment and education is predicted to help reshape those sectors in China.

Gong Yu, founder and chief executive of streaming video giant iQiyi, said AI has the potential to help reduce production costs and improve user experience, while Wang Yi, chief executive of New York-traded Laix, operator of English teaching app Liulishuo, said the development of “AI teachers” combined with advanced wireless networks can help make quality education available to any part of the world.

Meng Jing and Sarah Dai

E-commerce surges ahead

Chinese President Xi Jinping’s recent vow to open China’s economy, combined with the rising affluence of the country’s middle class, are poised to drive a surge in cross-border e-commerce transactions in 2019, according to senior industry executives.

“This signals that there will be a greater number of imports in the future, as tariffs and trade costs fall and consumer spending increases,” Kaola.com chief executive Zhang Lei said. Operated by Nasdaq-listed Chinese internet company NetEase, Kaola specialises in selected imported goods, from skincare to fashion accessories, for mainland consumers.

In his keynote address to the inaugural China International Import Expo in November, Chinese President Xi Jinping said China’s promise to buy more products and services from abroad is “not a temporary arrangement but a long-term consideration”.

Xi Jinping makes fresh promises to open China’s economy and boost imports

China’s total purchases of foreign goods would amount to US$30 trillion over the next 15 years, while its purchases of services would reach US$10 trillion in the same period, Xi said.

Apart from that government commitment, the expansion of China’s middle class is predicted to boost domestic demand for high-quality imported products.

That growth has prompted Tmall, one of the vast online retail platforms of Alibaba Group Holding, to establish in August 2017 an innovation centre, which Tmall president Jet Jing described as a facility to “help brands accelerate their product research and development” based on local consumer insights and market data.

“Those who can identify new consumption trends and expedite the process of product development can be successful in the digital era,” Jing said.

New York-traded Alibaba is the parent company of the South China Morning Post.

Beyond the increase in imported goods, China’s e-commerce sector is also looking to benefit from the rise of more affluent consumers in China’s middle class, who have started to embrace local fashion brands.

“Chinese consumers are now placing more emphasis on beauty versus the practicality of something they wear,” said Shark Chen, chief executive of social commerce fashion app operator Mogujie. The Nasdaq-traded company runs the Mogu app, which enables users to browse fashion content and shop for apparel online.

More duty-free spending power for China’s e-commerce consumers to help boost imports

Chen said this trend has caught on in China’s major cities, as well as in the small counties and villages across the countryside.

Increased domestic e-commerce activity is also expected to help directly connect more consumers and farmers online, an effort which social commerce company Pinduoduo is focused on.

The agricultural product market in China is worth over 5 trillion yuan (US$727 billion), but it is largely untapped by e-commerce players, according to Pinduoduo co-founder Dada.

“Less than 5 per cent of agricultural products benefit from the efficiency brought about by e-commerce and technology,” Dada said. “This penetration is low compared to categories like consumer electronics and apparel, which are above 25 per cent.”

He said Pinduoduo is working to remove “redundant layers of intermediaries” so that farmers can make better margins off their products, while consumers pay less.

– Zen Soo

Smartphones enter 5G era

Major Chinese smartphone brands will be looking to ratchet up the delivery of smartphones based on 5G technology in 2019, as large mobile network operators around the world step up testing and development of their next-generation wireless infrastructure.

“This is a big opportunity for all mobile phone brands,” said Pete Lau, the founder and chief executive of OnePlus.

Huawei Technologies, ZTE Corp and OnePlus, the first Chinese smartphone company to sell its premium model through a major US telecommunications carrier, have joined Samsung Electronics among the first big brands to announce plans to release 5G handsets in 2019.

With Chinese brands among those on the front lines of delivering 5G smartphones, hopes are high that this development will help smash people’s general perception that domestic brands are only good for inexpensive, low-quality mobile phones.

Why some Chinese consumers think an iPhone is worth two Huaweis or three Xiaomis

“I am very optimistic for the new year,” Lau said. “The global market for high-end mobile phones is very large, such as in the US, Europe and India.”

Still, a prolonged US-China trade dispute could throw a monkey wrench into these plans. Chinese smartphone suppliers remain dependent on a range of US software and hardware components, including chips.

In 2018, the Chinese smartphone market – the world’s largest – was dominated by Android handset makers Huawei, Oppo, Vivo and Xiaomi, with a combined 80 per cent share.

Global smartphone shipments are predicted to grow 2.6 per cent in 2019, from 1.42 billion units in 2018, according to technology research firm IDC. It said “continued developments from emerging markets, mixed with potential around 5G and new product form factors, will bring the smartphone market back to positive growth”.

– Li Tao

Chinese EVs up, ride-hailing under microscope

Chinese electric vehicle start-ups are making a run for potential Tesla buyers in the country, as their first mass-produced cars are set for delivery and at a cheaper price.

That rush is predicted to open the doors for the “smart car era” in the world’s second-largest economy, according to William Li Bin, chairman and chief executive of EV start-up NIO.

“The next two years will provide a crucial window for Chinese electric car makers to promote their brands in the global arena,” he said.

China’s car market, the world’s largest, has seen a growing crowd of new players in recent years. Venturing into ground previously dominated by foreign car makers such as General Motors, Toyota Motor Corp and Volkswagen, Chinese start-ups are investing billions of dollars in advanced technologies ranging from autonomous driving to bespoke smart features such as voice control, with the aim of taking on large EV rivals like Tesla, which is building a plant in Shanghai, its first factory outside the US.

‘Made in China 2025’: world’s biggest auto market wants to be the most powerful maker of electric cars

China’s ride-hailing market, meanwhile, is poised for more changes in 2019 in the wake of a regulatory overhaul and efforts to shore up public faith following two alleged murders committed by drivers of industry leader Didi Chuxing.

“There will be a race to meet higher safety and service expectations from riders and drivers,” said Bu Zheng, chief security officer of Didi Chuxing.

“Safety and reliability will become the new yardstick of success for industry players,” Bu said. “To achieve that, we need to not only invest in new technologies but also learn from other offline operators on risk assessment and emergency responses.”

– Sarah Dai

Cryptocurrency market slump continues

The global cryptocurrency crunch is predicted to continue after about US$500 billion was wiped off the value of the more than 2,000 forms of digital money in the market the past year.

“We expect this bear market to persist into 2019, when the true value and utility of decentralised applications and their cryptocurrencies can be realised by users and enterprises,” said Jehan Chu, co-founder and managing partner of Kenetic Capital, a Hong Kong-based blockchain investment firm.

“Until then, the market’s confidence in current price levels will be tested and subject to severe fluctuations like we saw in the past weeks.”

Cryptocurrency market rife with ‘pump-and-dump’ schemes, study shows

Bitcoin, the world’s biggest form of cryptocurrency, fell more than 70 per cent in value in 2018.

That slump has kept regulators around the world uncertain about the state of the cryptocurrency market. Early in 2019, the US securities regulator is expected to decide the fate of what would be the first-ever bitcoin exchange-traded fund, after it rejected multiple other applications on the grounds of potential market manipulation.

On the developer side, one of the areas that is likely to further changes in 2019 is use of blockchain as decentralised databases, according to a research note by Sunny King, the creator of Proof of Stake, a type of algorithm for cryptocurrency blockchain networks. “Many systems we use in our daily lives are built on databases – like our bank accounts, online shopping portals and the apps on our phones and tablets,” King said. “Decentralised databases are even more flexible and resilient, and open up all sorts of new and exciting business models.”

– Zheping Huang

Micro loans trend gathers pace

Demand from China’s young consumers is poised to further boost the growth of online micro lenders in the world’s biggest internet market.

“This comes as a clear benefit to the consumer finance industry,” Jay Xiao Wenjie, chief executive of US-listed LexinFintech, said. “The sector has experienced enormous growth in the past few years, and I expect this trend to continue in 2019 with regulatory support.”

Young people in China increasingly rely on credit for daily consumption items, which is made convenient by mobile payment apps that require only a few taps on a smartphone screen.

Chinese millennials are buying hamburgers on instalment, fuelling micro loan industry

This would be in line with efforts by Beijing to make consumption the driving force of economic growth. The government has already directed policies and resources in September towards encouraging innovation in consumer finance and to broaden the development of consumer loans.

“This market is still largely untapped,” Xiao said. “Advanced technologies, including big data and AI, now enable fintech players to assess the creditworthiness of people without a credit history, and provide a streamlined loan application process.”

China’s consumer finance market is projected to grow to US$1.6 trillion by the end of 2020, which is equivalent to the GDP of Mexico, representing a compound annual growth rate of 18 per cent, according to market research company Oliver Wyman.

– Celia Chen

Steady funding for tech firms

Smart investors are expected to pay more attention to shifts in strategy in the hi-tech sector, ensuring that funding channels are available to both start-ups and large enterprises, according to senior venture capitalists.

“The golden decade (2008-2018) for start-ups may have ended in China, but the next decade is coming [with new opportunities],” said Bob Xu Xiaoping, founding partner of ZhenFund, one of China’s most active venture capital firms.

While smaller venture capital firms were complaining about a shortage of funds in the market during the past year, bigger firms continued to pursue projects that injected billions of dollars into their funds, he said.

A range of industries, such as health care and education, have shown growing adoption of artificial intelligence and the so-called internet of things, according to Jixun Foo, founding partner of Beijing-based GGV Capital. “That means investors should have a stronger cross-discipline ability,” Foo said.

– Yingzhi Yang

Advanced logistics to power retail

China’s logistics industry is gearing up for a major transformation as more connected devices, under so-called internet of things (IoT) initiatives, power advances in the retail sector.

“In 2019, IoT will be the most important technology trend in the logistics field,” said Gu Xuemei, chief technology officer of Alibaba Group Holding logistics affiliate Cainiao Network.

Companies such as Cainiao and e-commerce firms like JD.com and Amazon.com have started experimenting with smarter methods of delivery, including the use of drones and driverless vehicles.

“The digitisation of the logistics industry will become the key driving force behind the continued evolution of the retail sector,” Gu said. “IoT technology will accelerate traditional logistics industry innovation, as sure as birds have wings.”

– Zen Soo

Fintech initiatives lift small businesses

In 2019, more small business owners around the world will be able to upgrade their operations, thanks to the wider availability of advanced financial technologies.

“Take AI for example – by using well-trained chatbots, [businesses] can provide world-class customer services to handle enquiries and orders, forgoing the high cost of setting up call centres,” Cheng Li, chief technical officer of Ant Financial Services, said.

Hangzhou-based Ant Financial, operator of Alipay, is an affiliate of e-commerce giant Alibaba Group Holding.

“Mobile payments are becoming ubiquitous, which will enable more small companies to receive, pay and transfer money almost anywhere around the world,” Cheng said.

He added that responsible technology companies can help more small companies automate processes by promoting digital upgrades in financial services and supply chain services.

– Zen Soo

Huawei has a bull’s eye on its back

Huawei Technologies, the world’s largest telecommunications equipment provider, is facing greater scrutiny over cybersecurity after US President Donald Trump was said to be considering an executive order to declare a national emergency that would bar US companies from using network gear from Huawei and ZTE Corp.

That move, which was reported by Reuters last week based on information from sources familiar with the matter, would mark the latest step by the Trump administration to cut Huawei and ZTE out of the US market. The US alleges that the two companies work at the behest of the Chinese government and that their equipment could be used to spy on Americans.

The executive order, which has been under consideration for more than eight months, could be issued as early as January and would direct the Commerce Department to block US companies from buying equipment from foreign telecoms gear makers that pose significant national security risks, sources from the telecoms industry and the administration told Reuters.

Huawei’s chairman posts bullish new year address, citing record revenue growth in face of difficulties

“Distrust of Chinese technology appears to be growing, and it seems that Huawei can’t do anything about it,” Paul Haswell, a partner who advises technology companies at international law firm Pinsent Masons, said. “China’s reaction to the arrest of [Huawei chief financial officer] Sabrina Meng Wanzhou has only reinforced the perception that Huawei is connected to the Chinese government.”

Huawei and ZTE have become embroiled in the wider US-China trade war, with their network gear being put under a microscope by Washington and its allies for alleged security and espionage concerns. Beijing, however, regards these moves as an attempt by the West to restrain the growth of Chinese hi-tech companies.

“The executive order will have more implications for Huawei in terms of losing business from tier-2 and 3 wireless carriers in the US in the near term,” Neil Shah, research director at Counterpoint, said. “But that should be a drop in the ocean for Huawei.”

Huawei vows to push on with 5G development despite bans, Meng Wanzhou arrest

Despite the pressure from the US government and being barred from taking part in 5G projects in major economies, Huawei is set to achieve record revenue of US$108.5 billion in 2018 and record smartphone shipments in excess of 200 million units, according to Guo Ping, one of the company’s rotating chairmen.

Still, the reported action by the Trump administration could set a precedent that would see the major economic and political allies of the US follow suit.

“Telecoms network operators [in other developed economies] will think twice or thrice before contacting either Huawei or ZTE in future,” Shah said. “This could also mean that operators would gain more bargaining power over Huawei and ZTE [on network equipment deals].”

– Li Tao

Tencent takes leap of faith

Tencent Holdings, which derives two-thirds of its revenue from online gaming and social media, is expected to flesh out its strategy to focus on activities related to the industrial internet over the next 12 months.

The Shenzhen-based company had earlier announced plans to pursue investments in areas such as smart retailing, education, corporate finance, car services and the digitisation of traditional industries.

Pony Ma Huateng, the chairman and chief executive of Hong Kong-listed Tencent, said at the company’s annual staff meeting earlier this month that the industrial internet does not exist in isolation.

“It is our wide connections in the consumer internet that will enable us to serve business and government clients better,” Ma said. “This ability will be our talisman and our edge in future competition.”

Tencent CEO Pony Ma tells staff that ‘responsibility’ was the main lesson learned from a tough year

The strategy was reinforced by the company’s latest restructuring after six years, which saw it form a new business group devoted to cloud and smart industries. Another new group combines its social media, mobile internet and online media operations. Four existing business groups – corporate development, interactive entertainment, technology and engineering, and WeChat – remain unchanged.

The shift to the industrial internet was a “natural extension” of the company’s long-time strategy to connect people, Tencent president Martin Lau Chi-ping said at the same meeting.

“When we connected the users and services seamlessly in the early days of the mobile internet, a huge amount of data was generated, to be analysed by artificial intelligence,” Lau said. “As we provide cloud services for enterprises and connect users through mini programs, the capabilities of various industries will be improved.”

While user growth for Tencent’s flagship app WeChat may not be able to maintain its fast pace after reaching a user base of more than 1 billion, transaction volume on the app’s digital wallet – WeChat Pay – is predicted to rise on the back of online transactions through mini programs.

As prospects for new video game licences remain uncertain because of new government regulation, Jason Zhou, analyst at Guotai Junan Securities, predicted in a recent report that Tencent’s online games business will slow down from 2018 to 2020.

– Iris Deng

Challenge looms for JD.com

JD.com, China’s second biggest e-commerce company, faces a challenge to win back the trust and confidence of investors after its shares nearly halved in value in 2018 amid increased competition, concerns over the US-China trade war and the US arrest of its CEO and founder on rape allegations.

Richard Liu Qiangdong, who serves as the company’s chief executive, was recently cleared of felony rape charges in the US, after the investigation by authorities in Minneapolis, Minnesota, turned up insufficient evidence to follow through with charges.

Although Liu has been cleared, analysts are looking for more clarity on strategy from the company, which recently announced a restructuring of its main shopping site.

JD.com restructures amid rising competition, slower growth and investor concerns

“JD’s valuation has been affected by the Minnesota event and the company’s weakened fundamentals in the second half of 2018,” Mae Huang, an analyst at SWS Research, said in a report. “We believe JD’s share price is unlikely to recover significantly in the short term.”

Nasdaq-listed JD.com reported lower-than-expected revenue in November because of increased spending and its first sequential fall in annual active customers since going public in 2014.

“JD is still struggling to turn a profit … its growth has started to decelerate and it is investing heavily in artificial intelligence, an area that will not immediately contribute a profit,” William Li, a senior analyst at Beijing-based data research company Context Lab, said last week.

– Celia Chen

Follow us @SCMPTech on Twitter for the latest in China and Asia tech news

Article Provided By

About admin

Check Also

Ace Combat 7: Skies Unknown (PS4) REVIEW

[ad_1] OUR LATEST VIDEOS No video game has ever made me physically perspire to the …

Gatwick drone cops blasted by Government for shambolic probe as police U-turn and admit there WAS a drone all along

[ad_1] THE government has slammed bungling cops over the Gatwick drone probe shambles after they …