Looking at digital leapfrogging
Image by Fred Pulver on Flickr

“Normal” periods of technological innovation show a gradual and stable path of development for cities, industries and countries. However, during periods of radical technological breakthroughs, big opportunities exist for actors to “leapfrog” various stages of development using new technologies. Digital technologies and ICTs in particular foster this prospect, potentially leading to huge leaps in development for laggards at the expense of incumbents.

Observations

  • The core idea behind leapfrogging is that actors have a linear model of growth and development ,can “leap” certain stages of development and thus often become leading nations instead of laggards. Generally, a few conditions have to be met: i) the development should be boosted by “radical innovation” so that lagging countries can leap leading actors; ii) lagging countries should have no “legacy infrastructure” that enables them to invest in “next-gen infrastructure” on which new innovations and business models can be leveraged; and iii) there must be an institutional framework that can deal with the process of “creative disruption” imposed on incumbent parties and sectors.
  • The seminal paper of Fudenberg, Gilbert and Stiglitz (1983) expanded on the conditions of leapfrogging in the case of patent races in industrial organization. Their model shows that cumulative experience that leads to product improvement, information lags that introduce uncertainty about the technological and research capabilities of competitors and multi-stage games in markets create the possibility for following firms to “leapfrog” industry leaders.
  • Brezis, Krugman and Tsiddon (1993) developed an endogenous growth model that examined how major technological change could lead to economic leadership shifts between countries. In contrast to incremental, “normal” technological change, whereby increasing returns to scale tend to accentuate leadership, a major technological breakthrough could radically upend the economic balance between countries (e.g. the invention of the steam engine in 19th century England, the development of semiconductors in 20th century United States). This is because leading countries (with higher wages) generally lack the incentive to develop and adopt the new technology, while low-wage lagging countries have an incentive to invest in the initially less productive technology and also lack the sunk costs of the incumbent leading nation. As the productivity and profitability of the new technology eventually pays off, the lagging country “leapfrogs” the leading nation to become a new economic leader based on the new techno-economic paradigm. Brezis and Krugman (1997) developed a similar model for metropolitan areas, in which leading cities can lose their leadership in times of radical technological innovations to upstart urban centers.
  • Joel Mokyr distinguishes between incremental technological improvements and innovations that build on each other (i.e. “microinventions) and result in technical systems, in contrast to radical technological breakthroughs (i.e. “macroinventions”) that seem to come out of nowhere. The latter is also associated with Carlota Perez’ concept of “technological revolutions”, Smihula’s ideas of “long waves of technological innovations” and Christensen’s concept of “disruptive innovation”.
  • The first five technological revolutions all emerged in the West during the Atlantic Era: the Industrial Revolution in 18th century England, the Age of Steam and Railways in the first half of the 19th century in England, the Age of Steel, Electricity and Heavy Engineering in the second half of the 19th century in Germany and the U.S., the Age of Oil, Automobile, and Mass Production in the first half of the 20th century in the U.S., and the Age of Information and Telecommunications in the second half of the 20th century in the U.S. These technological revolutions facilitated and sustained the position of the global hegemon of that time, showing the interrelationship between geopolitics and technological innovation. As we are moving towards a multipolar world order, and capital deployment and technological research are spreading across the world, the next technological revolution might emerge elsewhere or simultaneously across the world. It might begin in China, for example, which wants to leapfrog the U.S. and is technologically the most advanced nation. 

Analysis

The idea of leapfrogging is that companies, cities and countries do not follow a linear model of development in which they go through specific phases of development and growth. For example, the general development model of countries is that they transform from a local and traditional society, with most employment and value-added in agriculture (i.e. the primary sector), into an economy driven by urban industrial production (i.e. the secondary sector), finally moving towards a high-end service sector (i.e. the tertiary sector). This approach is not limited to industrial organization of economic growth as such. For example, in demographics, the general model is that countries first have high fertility as well as high mortality rates and low life expectancy, resulting in stable population growth. As countries develop and spend more on healthcare, fertility rates remain high but mortality rates decline and life expectancies rise, leading to high population growth and the so-called “demographic dividend”. Eventually, as work and life move towards modern industrial production in urban centers, fertility rates also come down, hence population growth stabilizes and society eventually starts ageing.

Generally, we perceive that companies, cities, and countries move along certain stages of development, in which incremental technological improvements and innovations drive growth and development. However, sometimes these actors make huge leaps along their path of development, in which case certain stages of development are skipped. Examples in the domain of urban development and industrial organization are South Korea’s digital TV industry or Israel’s high-tech ecosystem. With respect to specific domains of development in countries, we see Kenya’s huge boost of financial inclusion by mobile payments, Rwanda’s near-universal healthcare coverage using smartphones as a service point, Tanzania’s decentral “off-the-grid” power generation, China’s rapid development of the digital “new economy” (e.g. China’s booming sharing economy and fintech industry) and India becoming a digital superpower with a competitive IT sector because of massive public investments in its digital infrastructure. In the consumer domain, we perceive that Indian consumers are leapfrogging into digital practices that surpass those in developed countries (e.g. using voice interfaces, mobile commerce) or Myanmar’s embracement of mobility solutions for those who do not own their own transportation vehicles.

The idea of leapfrogging is that companies, cities and countries do not follow a linear model of development in which they go through specific phases of development and growth

Why is this concept of “leapfrogging” so important in our times? We have written before about the things that make our information age so special. First, it is that information and communication technology (ICT) enables hitherto disparate sources of information to converge and spread, almost limitlessly, across time and space. As the computer algorithms, communication channels and software protocols that produce digital goods and services are not fundamentally different from the digital data they manipulate, digital products and services are never “finished goods” as offline products are (e.g. Tesla’s car requires continuous updates, Google’s search engine is continuously improving) but permanent “semi-finished goods”. Furthermore, as data becomes the primary input in this production process and knowledge increases exponentially (e.g. the “Knowledge Doubling Curve“ will show a doubling of all human knowledge every day from 2025) companies and regions that know how to generate value from all this knowledge and information will quickly be able to become the leading actors of our digital economies (i.e. “digital conglomerates” or digital hubs).

Lastly, as a new technological revolution is in the making, with artificial intelligence (AI) at its core and combined with other technologies, such as 5G, cheap and miniature sensors and quantum computers, this could result in a new techno-economic paradigm (i.e. the sensor-based economy) that is being developed in other developing countries (e.g. China). For these countries, “digital leapfrogging” is becoming a powerful force of development, showing many non-linear paths of modernization and internal development. For example, using data from the World Bank on fertility rates and the KOF index of Information Globalization, we find a significant and exponential relationship between these two variables. One explanation could be that lower search costs driven by accessible digital information could increase educational chances for women in developing countries as well as enable them to acquire information on contraception, empowering them to have children later in life. Another example is that the network readiness is significantly correlated to social progress: the fact that more and more parts of our daily lives are now organized in online networks that transcend space and time could create more opportunities for excluded individuals (e.g. those living in remote areas) to search for employment, gain social capital and move out of poverty traps (e.g. using P2P lending to boost financial inclusion, or metropolitan areas seeing themselves as platforms for digital ecosystems with network effects). As such, leapfrogging could radically upend the economic order and paths of development and modernization as we know it.

Implications

  • Although leapfrogging provides huge potential to lagging actors, we have written before that we tend to overlook the resilience and strength of incumbent actors. For example, incumbent parties often have the capital for M&As or to “buy time” and catch up with the new entrants, they are typically well-known and trusted and have the political capital to lobby for regulations that raise barriers for new entrants.
  • Leapfrogging could easily lead to a kind of “techno-optimism” that digital technology will provide a solution to our problems by bringing huge gains in efficiency and new opportunities that arise from the process of “creative disruption”. However, we have written before that as technology is always embedded in social and cultural systems, significant “softer conditions” should be met before actors can leapfrog into new business, production and consumption models.
  • Furthermore, the concept of technological revolutions and technological breakthroughs fails to account for waves in economic growth and for the fact that technological innovations often emerge as the result of a cumulative process consisting of multiple technological developments. Likewise, the idea of radical technological breakthroughs or macroinventions that come out of nowhere seems to put too much emphasis on the “cult of the genius” that creates new paradigms and things ex nihilio instead of against the institutional and systematic background of technological innovations. See, for example, Thomas Hughes’ idea of “large technical systems” that stress the various stakeholders (e.g. investors, financiers, managers, researchers, politicians) that contribute to the development of large technical systems (e.g. the electricity network, the internet business).

The implementation of 5G is important for the upgrade of Alibaba & Tencent’s services

5G is the next generation of ultra-fast wireless technology, offering faster data rates, reduced latency, energy savings, cost reductions, higher system capacity, and massive device connectivity. It is expected to power industrial applications such as smarty city infrastructure and the industrial internet, but can also impact consumer services. For example, 5G will enable Tencent’s gamers to seamlessly stream PC and console-quality games on their smartphones without sacrificing processing power or battery life. For Alibaba’s short-video platform Youku, a 5G connection would mean that users can send high-resolution 4K video within a few seconds.

In fear of dependency on Western hardware, Alibaba has set up a semiconductor division

Resembling the States’concern, both Ma’s have outspoken their fear of western depencency when it comes to core technologies:

Alibaba’s Ma:

If we do not master the core technologies, we will be building roofs on other people’s walls and planting vegetables in other people’s yards.

Tencent’s Ma:

[China]’s digital economy will be a high-rise built on sand and hard to sustain if we don’t continue to work hard on basic research and key knowledge, not to mention the transformation from old to new forms of drivers or high-quality development.

In reaction, Alibaba’s R&D arm DAMO (Academy for Discovery, Adventure, Momentum, and Outlook) has set up its own semiconductor manufacturing business and unveiled its chip in July 2019. The chip is designed to process AI tasks such as image, video and voice analysis and will be used for tasks such as autonomous driving, smart cities and smart logistics.

 

Listen to this podcast for more information about 5G in China:

The implementation of 5G is important for the upgrade of Alibaba & Tencent’s services

5G is the next generation of ultra-fast wireless technology, offering faster data rates, reduced latency, energy savings, cost reductions, higher system capacity, and massive device connectivity. It is expected to power industrial applications such as smart city infrastructure and the industrial internet, but it can also impact consumer services. For example, 5G will enable Tencent’s gamers to seamlessly stream PC and console-quality games on their smartphones without sacrificing processing power or battery life. For Alibaba’s short-video platform Youku, a 5G connection would mean that users can send high-resolution 4K video within a few seconds.

In fear of dependency on Western hardware, Alibaba has set up a semiconductor division

Similar to the state’s concerns, Tencent’s and Alibaba’s Ma’s have expressed their fear of western dependency when it comes to core technologies.

“If we do not master the core technologies, we will be building roofs on other people’s walls and planting vegetables in other people’s yards.”
– Jack Ma (CEO Alibaba)

“China’s digital economy will be a high-rise built on sand and hard to sustain if we don’t continue to work hard on basic research and key knowledge, not to mention the transformation from old to new forms of drivers or high-quality development.”
– Pony Ma (CEO Tencent)

In reaction, Alibaba’s R&D arm DAMO (Academy for Discovery, Adventure, Momentum, and Outlook) has set up its own semiconductor manufacturing business and unveiled its chip in July 2019. The chip is designed to process AI tasks such as image, video and voice analysis and will be used for tasks such as autonomous driving, smart cities and smart logistics.

Alibaba and Tencent and Censorship

Within their services and products, Tencent and Alibaba help the government by censoring keywords deemed politically sensitive, while in-house censors also delete posts and accounts. Tencent is quite active in censoring, as the company scored a zero out of 100 for WeChat’s lack of freedom of speech protection and lack of end-to-end encryption in a 2016 Amnesty International report on user privacy.

Alibaba and Tencent have high hopes for the cloud

For Tencent and Alibaba, the cloud started as a crucial component of their internal economy. Over the past few years they have branched out, offering their in-house products to businesses.
Today, Alibaba dominates cloud computing in China with a 43% market share. Under Jack Ma, Alibaba made cloud computing a key priority, and CEO Daniel Zhang plans to make cloud computing technologies an even bigger part of Alibaba’s corporate focus over the next couple of years (for more information see Alibaba’s company profile).
Tencent’s cloud business is the second largest in China, with an 11% market share, according to industry researcher IDC. The company entered the ‘cloud-game’ relatively late, and recently announced to spur its push in cloud computing by investing billions of dollars. This move can be seen as part of its overall strategy to shift focus from its consumer-faced business to the industrial internet. Its cloud-computing business should cater to industries such as retail, mobility, healthcare, and education.

Alibaba and Tencent are members of the National AI Team

Starting in 2017, the Chinese government recruited Alibaba, Tencent, Baidu and iFlyTek to lead key projects in the development of next-generation AI technologies. Alibaba’s cloud computing division was tasked with a smart city project to improve urban life (see Smart Habitat layer for more details), while Tencent has been designated to become a leader in AI-assisted medical diagnosis.
Government endorsement helped Tencent to launch its AI Medical Innovation System, an AI-powered diagnostic medical imaging service. The technology currently has accuracy rates of over 90% for preliminary diagnoses of esophageal cancer, 95% for lung sarcoidosis, and 97% for diabetic retinopathy. Several of Tencent’s AI departments, such as the AI Lab and Tencent Youtu Lab, collaborated to develop the image recognition, using the over 1 billion images on the company’s social network. After the success in healthcare, Tencent is looking to apply its AI knowledge to other applications, such as transportation solutions, security, and protection, as well as voice recognition.

In this episode of the ChinaEconTalk podcast, China expert Jeff Ding of the Future of Humanity Institute discusses the detour Tencent is making from the national champion designation [12:18-13:35]:

Alibaba and Tencent are working on the city of the future…

ET City Brain
The Chinese government designated Alibaba with the task of applying innovative technology to improve urban life. This resonated in Alibaba’s cloud-powered and AI-driven urban project “ET City Brain,” which aims to use AI to optimize city-services in real-time. One of Alibaba’s first pilots focused on reducing traffic congestion in Hangzhou. The video below shows how innovations within several layers of the Stack (think of Cloud Computing, Facial Recognition, and AI) are merged to improve traffic speed up to 11%.

PATH
A joint effort in the smart city area is PATH (Ping An, Alibaba, Tencent, Huawei), a smart city initiative in which these four Chinese tech giants apply their core technologies and an investment of 50M RMB in order to propel China into the global smart cities race (and of course to counter some major problems such as air pollution and congestion).

…but rural areas are also a key priority for Alibaba and Tencent

While smart digital applications are often first rolled out in #tier 1 or 2 cities, both Alibaba and Tencent are currently working on a Rural Strategy. Especially Alibaba sees tier 3, 4 and 5 cities and rural areas as an important new addressable market.
Striking examples are:

•  Tencent-backed WeDoctor and Alibaba’s Good Doctor are making healthcare more accessible for patients in tier 3 and 4 cities.
•  Alibaba invested 716 million USD in Huitongda Network, a platform that offers a variety of business models to help offline stores sell goods via e-commerce offerings, and also help online retailers sell directly to rural residents.
•  Alibaba launched Rural Taobao in 2014, allowing rural residents to buy and sell items online through the company’s Taobao online marketplace. Since its creation, Rural Taobao has expanded steadily, growing to cover 29 provinces, more than 700 counties, and over 30,000 villages.
•  Juhuasuan is Alibaba’s group-buying and flash-sale platform and will be repositioned as an online marketplace for consumers in tier-4, tier-5 cities and rural areas.

“China is experiencing an ongoing consumption upgrade as people look for different ways to enhance their lifestyle. (…) We are now seeing more and more consumers in China’s less-developed regions becoming sophisticated shoppers. They are demanding the same high-quality products as those in top-tier cities.”

– Jiang Fan, President of Tmall and Taobao

Tencent and Alibaba aim for a friction-free consumer interaction through voice

Both Alibaba and Tencent are investing in new consumer interfaces. For example, they are discovering the power of voice as an interface, and more specifically the smart speaker;

Alibaba’s voice assistant is called Tmall Genie. The device is on the market as a regular speaker since 2017 but is also available as a mirror (Tmall Genie Queen) as a device in connected cars (Tmall Genie Auto), and with a built-in monitor (Tmall Genie Family).

The Voice Assistant will become an increasingly important player in our life. I believe that in the coming decade, it will be connected with more devices and be the point of connection for different scenarios in our life, using voice commands to control our homes, vehicles and our personal devices.”

– Miffy CHEN, General Manager, Alibaba AI Labs

Two years after Alibaba, Tencent launched its smart speaker Xiaowei. The launch of Xiaowei is seen as a move of Tencent into diversifying its products and services into more business and industries (such as the B2B and IoT market). Besides, Xiaowei (in English ‘WeChat italking’) will link WeChat users with Tencent’s services available through QQ and WeChat.

Tencent and Alibaba are investing in facial recognition technology

Based on the number of facial recognition patents, Tencent is more active in the field of face recognition than Alibaba. Nevertheless, both companies have already implemented facial recognition in real-life situations.
Tencent is working closely with government in implementing facial recognition. For example, some provinces are issuing electronic identification cards for their citizens using WeChat’s facial recognition technology. The mobile IDs can be used for authentication instead of carrying physical ID cards – mandatory for citizens at all times in China – for travel booking, real name registration at internet cafés, and other security checks. Furthermore, amid tighter scrutiny by the Chinese government, Tencent uses facial recognition to detect minors in relation to concerns that excessive video gaming is damaging public health.

In 2017, Alipay unveiled its facial recognition payment service ‘Smile to Pay.’ The company says that as facial recognition technology takes the place of QR codes, “paying by smiling” will most likely experience explosive growth over the next three years. Statistics from Alibaba during 2018’s shopping festival around singles day also suggest that payments through the face and fingerprint scans now make up 60% of all transactions.

Alibaba’s Smile To Pay system in KFC:

Alibaba and Tencent are developing their own social credit systems

The best-known private system is Sesame Credit, developed by Ant Financial, an affiliate of Alibaba. Sesame Credit is a scoring system that generates individual credit scores for consumers by tapping into Alibaba Group and Ant Financial’s vast online ecosystem and other personal credit information sources. Sesame Scores, which range from 350 to 950 points, are calculated based on five factors – credit history, behavioral preference, fulfillment capability, personal attributes and social network – and are indicators of the users’ creditworthiness. Although the system’s focus is on creditworthiness, a low score can have an impact beyond loans (e.g. being banned from certain hotels) and a government blacklist has also been integrated. At the same time, a high score gives members the possibility to relax in special lounges at China’s train stations or to use bike sharing platforms HelloBike and Ofo deposit free.

Listen to this NPR podcast on the rollout of a Chinese Social Credit System and the role of Alibaba in it:

Tencent is also testing a credit scoring feature for WeChat Pay. Similar to Alibaba’s Sesame Credit, its score is calculated based on WeChat Pay’s pool of data, particularly on personal consumption behaviour. According to Tencent, the purpose is to “provide services that make people’s lives simpler and more convenient.” Users with high scores will be rewarded with perks such as waiving of deposits for rental services and hotels, and paying for services and goods after delivery.

Tencent and Alibaba contribute to the State’s innovation goals

Although Tencent and Alibaba are originally consumer-focused companies, they are expanding their businesses to the ‘industrial internet’, which involves the broader adoption of advanced consumer and industrial applications that take advantage of next-generation technologies for business purposes.

For instance, Tencent is teaming up with Huawei Technologies, a Chinese multinational technology company that provides telecommunications equipment and sells consumer electronics, to accelerate innovation in core technologies, such as AI and cloud computing.

Meanwhile, last year Alibaba’s CEO Jack Ma called for Chinese traditional manufacturers to fully embrace what he called the “New Manufacturing” model. New Manufacturing involves a transformation of traditional manufacturing industry by integrating technology capabilities in the internet, data, AI, cloud computing and IOT. “Proposing the New Manufacturing model is not because Alibaba plans to enter the manufacturing industry, but rather to help manufacturing companies to innovate and upgrade,” Ma said during the 2018 Cloud Computing Conference in Hangzhou. “During this shift, the current manufacturer-oriented industry will transition to a new era led by customers, where small and medium-sized enterprises can benefit the most.”’

Incubators
Furthermore, both Alibaba and Tencent invest heavily in startups and support emerging companies with incubator programs. Tencent’s WeStart for example operates innovation spaces where it offers start-ups office space to rent and incentives such as tax exemption for three years and favorably-priced access to Tencent’s products and infrastructure. Furthermore, the company assists start-ups to target government-backed support programs. Meanwhile, Alibaba’s Cloud division teamed up with the U.S. workspace operator WeWork to develop an incubation program for 20 foreign startups to enter China, and assist 30 Chinese companies to expand overseas.

Alibaba and Tencent investments in electric vehicles

Alibaba, Tencent and several other Chinese companies have joined efforts to meet China’s ambitions concerning green growth of the automotive industry. They have setup car-sharing services T3, which is powered by renewable energy, called T3.

Other examples of investments in the green future of this industry are Alibaba’s leading role in the 2.2B RMB funding round in Xiaopeng Motors, a Chinese electric car maker that aims to speed up the development of electric vehicles. Alibaba elaborates on this investment: “As a clean energy vehicle start-up, the investment in Xiaopeng Motors fits with Alibaba’s strategic focus in the automotive sector. Under our open-platform approach, we will continue to work with a range of automotive manufacturing partners to benefit Chinese consumers”.

Alipay and Wechat transformed China’s Digital payment landscape

China is a country where Visa and Mastercard are (still) banned, and it has an underdeveloped banking system. As a result, Chinese society remained largely cash-based for a long time. Nevertheless, when China started to manufacture cheap mobile phones, Alibaba and Tencent successfully set-up their own mobile payment solutions known as Alipay (by Alibaba) and WeChat Pay (by Tencent).

Users of these payment solutions link their bank cards to the wallet inside the app. Once linked, they are able to use the wallet as a debit card for direct payments in stores or for online purchases. Furthermore, users can transfer money from their bank account to create a balance on the wallet.

The digital solutions provided by Alibaba and Tencent made it extremely easy for consumers to pay with their mobile phone. In 2018, over 85% of purchases made in China were on mobile payment platforms.
In physical shops, merchants offer consumers the opportunity to pay with WeChat Pay and Alipay mostly with QR codes.

Alibaba and Tencent are incorporating the next wave of Chinese entrepreneurs

Established in the late nineties, with founders around 50 years old, Alibaba and Tencent are classic examples of companies that stem from the previous generation. Alibaba and Tencent realize though that today’s wave of entrepreneurs is bringing products and services that appeal to Generation Z, and this is the reason they are heavily investing in innovative startups within and beyond the Chinese border. Furthermore, to arm themselves against newcomers, Alibaba and Tencent are combining their strengths to secure their position (see section 1).

Alibaba and Tencent are SOE-investors

As a testing-ground of the mixed-ownership reform, Tencent and Alibaba have both invested in China Unicom, the country’s second-largest wireless telecom operator. These investments are financial, but are also intended to improve the services of state firms. For example, Alibaba and Unicom launched a cloud knowledge venture in order to meet demand from SOEs and governmental institutions in China for innovative technology solutions. Tencent and China Unicom are amongst other things, working on a network security platform.

Tencent’s hometown is a Special Economic Zone

Tencent’s hometown Shenzen was appointed one of the first Chinese area’s to be a SEZ. Tencent – founded in 1998 – witnessed the effects of the nomination: the share of high-tech industries in its total industrial output increased from less than 10% in 1990 to nearly 40% in 1998. Companies could make use of incentives such as access to quality infrastructure, corporate income tax exemptions, exemptions from tariffs on high-tech equipment and special treatment for employees. Other companies that arose in this area were Huawei and ZTE ( global telecommunications equipment, networks and mobile devices company).

Alibaba and Tencent endorse the Communist Party

Tencent released a mobile game titled ‘Clap for Xi Jinping: An Awesome Speech’, in which players have 19 seconds to generate as many claps as possible for Xi.

In 2019, Alibaba reportedly developed the popular Communist Party propaganda app ‘Xuexi Qiangguo’ (in English: study to make China strong). Alibaba staff is said to be responsible for developing and maintaining the app that includes news, videos, livestream and community comments.

Confucian philosophy & Daoism underlie Alibaba’s corporate culture

Without the philosophy of Buddhism, you cannot do well when your business grows to a certain extent. If you do not know the philosophy of Daoism, you have no chance of winning during competitions. If you do not understand Confucian philosophy on the construction of organizational system, you have no chance to be sustainable when your company grows to a certain size.”

– Jack Ma, Founder and CEO Alibaba

Alibaba’s Founder and CEO is strongly influenced by China’s idea of the good life. He always carries a copy of the Tao Te Ching, the foundational text of Taoist philosophy, is a big fan of Tai Chi, and has held meetings with the senior executive team of the company in a temple. Under the eyes of Buddha, the focus would naturally be how to help others, to help ever more people.
Furthermore, Ma actively spreads the Taoist way of thinking among company employees. In the early days, all of them had a Kung Fu nickname (Kung Fu and Taoism are closely linked), Jack Ma’s being “Feng Qingyang”, which refers to an “unpredictable and aggressive” swordsman.
According to Brian Wong, Alibaba’s vice president of global initiatives, an understanding of the principles behind the philosophies do help in having a better grasp of why the Chinese tech market works the way it does. “China is much more about integrating as opposed to taking over or competing in the traditional sense,” Wong explains. “We want to create and integrate.”

Rare earths are none of Tencent’s and Alibaba’s business

Rare earths are none of Tencent’s and Alibaba’s business. Apart from Alibaba’s semiconductors, both companies do not produce goods, and therefore they are not investing in, or owning, rare earths.

Tencent has dipped its toes in vertical drama

Tencent first dipped its toes into the vertical drama category in 2018, releasing short series like My Boyfriend-ish Sister and My Idiot Boyfriend. These entertainment shows are specifically designed for the mobile screen.

Example of vertical drama by Tencent
Source: V.QQ (2018)

Alibaba and Tencent go big on blockchain

Alibaba and Tencent, together with internet giant Baidu and telecom company Huawei, have all filed information about their blockchain cloud services and issued white papers that stress the importance of developing blockchain-based cloud services as internet providers for third parties. Last year, Alibaba topped the list of the most patent applications focused on blockchain-related technologies in the world, with over 90 patent applications.

Tencent has been building blockchain services since their first white paper in 2017, and developed their TrustSQL platform as a product, service, and an application layer to provide digital asset management and authentication. Furthermore, Tencent has partnered with Intel to develop a blockchain for Internet of Things applications, while starting to test blockchain financial applications with the Bank of China in 2017.