Abroad-focused Chinese Firms Show Path to Growth in Tech Crackdown
The Chinese government's sweeping regulations targeting internet companies have sent a chill through nearly all major online businesses, including education, gaming and finance. A historic drop in prices of previously soaring China stocks indicates the era of unprecedented growth for giants like Alibaba (NYSE: BABA) and Tencent (HKSE: 00700) is over as the domestic market will likely be less concentrated in the future.
But while the new regulations circumscribe how much room for growth still exists in the Chinese market for verticals such as entertainment and e-commerce, domestic players still retain much of their strengths-namely mature and flexible business models, developed AI resources and data-based marketing-as they become limited to one direction for expansion: outward.
Hong Kong-listed Newborn Town (HKSE: 09911) is just one example.
While JD.com (NASDAQ: JD), Alibaba, Tencent and ByteDance look to emerging markets for growth opportunities, Newborn Town is among a group of fast-growing overseas-only firms that have already demonstrated an avenue for growth in applying Chinese advantages to global markets.
Among their products, live-streaming social app MICO and audio social app YoHo are well-known amongst young people in developing markets like the Middle East. Using fast-paced video and audio features, the apps offer strangers a fun way to connect and interact. MICO alone has garnered 100 million downloads worldwide.
Unlike larger players like ByteDance, Newborn Town has been exclusively focused on business outside of China soon after its inception in 2009. Nevertheless, by combining impressive development speed and AI efficiency, the company has generated over 160 million USD in revenue in the first half of 2021. Amid the worst year in history for Chinese tech firms, it posted a 6-fold revenue growth YoY in the first half of 2021.
"As Chinese companies shift more effort to bringing the country's talent and technologies to less saturated markets abroad, we're excited to see consumers in those regions get better mobile services and entertainment," said Li Ping, CEO at Newborn Town. "Being based where we are, we're privileged to have world-class AI engineers and developers, plus strong technology infrastructure, to bring cutting-edge products to the world."
The go-overseas model has been generating attention as other Chinese companies become household names-with their origin unknown to most users. One example is fashion e-commerce company Shein, which is quickly overtaking staple fast fashion brands. Its expected sales for 2021 are 15 billion USD, just one billion behind Zara.
According to SCMP Research's China Internet Report 2021, Shein's success can be attributed in large part to its strong data technology, which drives its extremely efficient supply chain, and social media-centric digital marketing. Both of these competencies, being near-universal among Chinese companies going global, make the report optimistic about the future growth prospects of this segment of the country's digital industry.
"Chinese technology will produce profound technology-induced economic transformation in the BRI region, today a near-synonym for the developing world," said Shirley Ze Yu, senior fellow with the Ash Center of Harvard Kennedy School, in the report. "Chinese technology companies bring technological infrastructure connectivity across this vast geographical region in telecommunications, smartphone usage, fintech, and smart logistics."
Like Shein, which has its official headquarters in Singapore, Newborn Town focuses heavily on data and localization, leveraging more than 10 operation centers outside of China, which provide a solid base for the company's development in the local market.
"We have always been in the business of bringing people together through meaningful experiences, and in the future, we will continue merging best-in-class AI technology with personal connections to drive growth," Li Ping added.
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SOURCE: Nanjing Sunglow Culture Development Co., Ltd.
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