The rising costs of carbon emissions

Global efforts to reduce greenhouse gases typically rely on emissions norms, taxes and subsidies. More recently, carbon trading systems covering a broad spectrum of the economy have apparently been taking effect as well. In theory, these allow for an efficient allocation of resources, but it took years of learning-by-doing to make the European trading system, the world’s first and biggest, function properly. Today, other countries are adopting a similar approach and this is likely to bring significant emissions reductions and create opportunities for carbon saving technologies.


  • The EU Emissions Trading System (ETS) has been in place since 2005 as a “cap-and-trade” system. In this system, a total amount of carbon credits (or allowances) is distributed across European businesses each year. Some of these are allocated (for free), especially in sectors where emissions savings are difficult to achieve, while others are auctioned. At the end of each year, each company has to prove it can cover all of its actual carbon emissions with the credits it has received, bought at the initial auction or purchased from other businesses (the “trade” part) with excess credits. If approved, international (non-EU) investments in carbon savings may also be used to cover one’s own emissions.
  • Every year, the total amount of credits available throughout the EU (i.e. the “cap”) is lowered in order to force businesses to decrease their overall emissions. From 2021, the yearly reduction will be 2.2% and total emission should be down by at least 40%, compared to 2005 levels. Currently, the system covers about 45% of all carbon emissions in the EU (it applies to major polluters only).
  • At the outset, too many allowances were available (and too many allocated for free) and allowances were traded far too cheaply to be of any effect. More recently, additional measures (e.g. removing excess allowances from the system) have driven the price to a more effective ~€26 per ton and there continues to be debate over setting a minimum “price floor” to prevent a new collapse in the future (e.g. due to an economic crisis or a Brexit scenario in which British companies are able to dump credits on the European market).
  • The ETS is supposed to cover the entire European industry, but not all sectors are treated equally. Power companies have to buy all their allowances from auctions (although exceptions are made for the poorest member states), while airlines, for instance, get most of their allowances (~85%) for free because zero-emission flying is still a long way off. Also, the system only covers the production-end of value chains and this can produce undesirable results. To illustrate, a construction company may choose to save costs by using less insulation material and thus pass on the costs of heating (and hence of emission credits) to the building’s end-user.
  • After several experiments in major cities (e.g. Beijing, Shanghai and Shenzhen), China plans to introduce a nationwide carbon trading scheme in 2020. It will start with the power sector and expand to other industries over time. The U.S. cap-and-trade system is as yet limited to the state-level (e.g. California). A recent plan to introduce a similar system in the state of Oregon was quashed by Republicans frustrating the voting procedure.
  • Various nations have introduced carbon taxes, mostly in the form of additional fuel taxes in specific sectors (e.g. transportation). The prices per ton vary greatly, although the bulk remains below $30 per ton (Scandinavian countries and Switzerland charge the most) and so does the percentage of total emissions these taxes cover. On average, OECD nations’ carbon taxes cover only 24% of total emissions.
  • Many studies have tried to estimate the actual long-term social costs of a ton of CO2 (e.g. the damage done to agriculture and other sectors, human health, direct damage of extreme weather events, etc.). While outcomes vary greatly, a recent meta-analysis concluded that the average social cost amounts to ~$112 per ton of CO2.
  • Carbon offset programs (e.g. planting trees to compensate for emissions) have lost popularity over the years. The total volume of offsets has dropped from 135 million metric tons of CO2 equivalent (MtCO2) in 2008 to 63 MtCO2 in 2016. The costs of offsetting vary per method and region (from <$1 in India to $12 per ton in developed economies), but the average price is $3 per ton. Most of these offset options (e.g. reforestation) do not qualify within the European ETS.


To stop global temperatures from rising, at some point in the future, net greenhouse gas (ghg) emissions will need to come to a full stop. This can be achieved through targeted (governmental) action that singles out sectors and activities where gains are relatively easy and cheap (e.g. in the power sector). The problem with such solutions, however, is that they do not necessarily address the right sectors and simply go for the ones that are easiest to tax or in which norms can be applied with the greatest ease (e.g. transportation fuels or vehicles). Moreover, economy-wide gains need to be made and sectoral exemptions (e.g. in aviation or long-distance shipping) can easily lead to those sectors postponing any meaningful efforts.

Carbon trading schemes offer a promising alternative in theory, as they would be able to cover a far greater share of economic activities and do so more efficiently. That is, the rationale of cap-and-trade systems is that resources are allocated according to the logic of the market; those sectors which can reduce emissions relatively easily and cheaply will do so and sell credits to others for whom this is more difficult and expensive. Furthermore, they incentivize private capital to invest in R&D for carbon-reducing technologies. As such, in the short-term, carbon trading would be much more effective and efficient than taxes, norms or subsidies. Also, in the longer term, it could even provide a financial incentive for efforts to remove carbon dioxide from the atmosphere. That is, for some activities (e.g. specific industrial processes) no practical zero-emissions alternative may be developed and these emissions would have to be compensated by a form of negative emissions.

the rationale of cap-and-trade systems is that resources are allocated according to the logic of the market

Cap-and-trade works on a national level, but even more so on an international level, as the costs of carbon savings still vary greatly throughout the global economy. This is also why, under certain conditions, European business can acquire credits from certified projects in the developing world (where carbon savings still require minimal investments).

Unfortunately, the practice of emissions trading has proved more difficult than the theory and carbon prices have been too low to have any impact. This was due to an excess of carbon credits across the EU (in part due the economic crisis), too cheap means of gaining credits from international projects and so-called “carbon leakage”. The latter refers to businesses offshoring their most carbon-intensive production methods, outside of the EU, in order to escape cap-and-trade systems. Even more so, these companies were able to earn €25 billion from selling excess allowances they had been given for free.

Today, improvements to the system have driven up the price of carbon and it has become a relevant incentive for European companies (although it still falls well short of covering the actual cost of climate change). Looking ahead, various models forecast carbon prices to rise further, from €30 to a maximum of €50 per ton. These higher prices are to result from a further tightening of the total emissions allowances (43% down in 2030 from 2005 levels) and additional mechanisms such as the market stability reserve. The latter will take unused allowances off the market (e.g. in case of economic slowdown) to stimulate relative emissions savings regardless of the overall performance of the European economy.

Higher carbon prices in Europe will, finally, push industries to innovate and clean up their processes. Also, the emergence of similar systems across developed economies could mean that European companies will remain competitive as their international competitors face the same challenges (and costs). Moreover, significantly higher carbon prices would stimulate more businesses to reduce emissions beyond their own “needs” (as defined by a gradual pathway towards 2030, for instance) and make money off credits they can sell to others. For some companies, this could very well become a business model in its own right. In fact, albeit in a different regulatory framework, Tesla has earned more than €1.7 million from selling credits to other car manufacturers who were not able (or willing) to put zero-emission vehicles on European roads.


  • Countries such as China and India may introduce carbon credits to improve the carbon-efficiency of their industries, but rapid economic growth will nevertheless lead to an absolute increase of carbon emissions. Whereas the EU will be able to lower the total amount of credits each year, developing countries will actually have to offer more credits each year (but less each year relative to economic growth). China nevertheless claims that its total emissions will peak in 2030 and drop thereafter.
  • Methods to capture CO2 from the atmosphere have received a lot of attention over the last months. Quite a few startups have emerged in this field and all claim to make rapid progress. As it stands, the lowest estimates of the costs of these “direct-air capture” technologies still project a hefty €90 per ton of CO2 and unless further cost reductions are realized, these technologies will not “work” with a carbon price of €30-50. Common forms of carbon offsetting (e.g. reforestation or supplying efficient cooking stoves to developing economies) are much cheaper than European carbon credits, but in most cases, these do not qualify for the ETS. Also, as the long-term potential of these solutions is limited, other forms of carbon storage may be needed nonetheless.
  • Capturing (and storing) carbon directly at the source (CCS) is often portrayed as a solution for (new or existing) coal-fired power plants. However, CCS could make these plants three times as expensive and it would most probably be more rational to replace them by renewable energy sources. In sectors in which clean alternatives are not available, such as the cement industry, CCS could become competitive if carbon prices continue to rise (e.g. the lower estimate of CCS in cement production is €42/ton CO2).

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%.

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.”’

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.