Why Tencent and Alibaba are eyeing a HK push

August 24, 2017 16:21
Alibaba hopes to be more involved in Hong Kong’s technological and financial development, Jack Ma said on Wednesday. Photo: Reuters

After establishing their dominance at home, mainland Chinese technology and internet firms have been viewing the international markets as their next big frontier.

As they seek new business and a global profile, the companies realize that their task is not easy, given that many Western nations still harbor suspicions about Chinese firms and their motives.

In this situation, the technology giants are coming to the conclusion that they should devote their energies to the Hong Kong market first and showcase their prowess there.

Once you prove your mettle in what is often ranked the world's freest economy, expanding elsewhere could become a little easier.

Well, this seems to be the logic behind the efforts of China's top two technology firms, Tencent and Alibaba, to gain an enhanced profile in Hong Kong.

Tencent, the leading provider of internet value-added services in China, and Alibaba, the nation's top e-commerce firm, made fresh noises in the past few days about their interest in the Hong Kong market.

The internet giants want more piece of the action in Hong Kong, even though the market is very small compared to that back home, as the city represents a good platform to showcase success to the rest of the world.

Meanwhile, a Hong Kong push will also be in line with the Chinese government's goal of greater economic leverage over the special administrative region and soft-selling the "Rising China" story.

Supporting the strategy, Hong Kong is also keen on welcoming the mainland technology firms, given the city's aim to become an innovation hub and foster a new growth engine for the economy.

This was evident from comments made by Hong Kong Chief Executive Carrie Lam during a visit to Alibaba Group headquarters in the mainland this week.

On Wednesday, Lam had a stopover at Alibaba's offices in Hangzhou where she met key company officials, including Executive Chairman Jack Ma.

According to a press release put out by the Hong Kong government after the meeting, Lam told the Alibaba executives that her administration attaches great importance to innovation and technology, and that it will strive to develop Hong Kong into a smart city.

Ma expressed support for the initiative and said his group is keen to participate and assist Hong Kong in its development.

Lam's trip to the Alibaba headquarters received wide coverage in mainland media, raising hopes that a new chapter is in the offing in relation to China-Hong Kong cooperation in the tech sector.

During the meeting with Lam, Ma noted that Alibaba had in the past missed out opportunities to develop its presence in Hong Kong. The group will now seek to boost ties with the city, he said.

"It's a pity that we lost the opportunity to be listed in Hong Kong, but we cannot lose future opportunities there," media reports quoted him as saying.

Alibaba opted for a listing in the US in 2014 after it failed to secure green light to launch an initial public offering in Hong Kong due to the company's shareholding structure.

One of the most interesting points that Ma made during Lam's visit is that Alibaba wants to play a big role in helping Hong Kong develop into a "more fashionable", cashless society.

Alibaba's growing data cloud services and e-payment systems can help Hong Kong in its financial and technological development, he said.

Alibaba aims to capitalize on its huge customer base, with the company claiming that one in three people in Hong Kong use its Tmall or Taobao online platforms.

The group also operates two data centers in Hong Kong as of now, helping it become one of the largest public cloud service providers in the city.

Among other initiatives, Alibaba's payment service Alipay, which launched its Hong Kong service early this year, has recorded more than 100,000 users.

Building on these strengths, the Chinese e-commerce titan wants to expand its presence and gain stronger profile in the city.

In a similar fashion, Chinese internet giant Tencent has also outlined ambitious plans to gain more exposure in the Hong Kong market.

The firm's chairman, Ma Huateng, has been quoted as saying that Tencent has been in discussions with the Hong Kong Monetary Authority on issues related to WeChat Pay mobile payment service.

The Chinese group eyes big progress next year that will allow Hong Kong people to bind their banking accounts on WeChat Pay to enjoy the advantage of mobile payment service.

Hong Kong was an early adopter of cashless payments as it deployed the Octopus cards system twenty years ago, allowing users to pay for public transport and small-value retail purchases through prepaid cards.

But the service failed to keep up with the latest technologies, leading to a situation where there is no integration yet between the cards and users' bank accounts.

This gives the two Chinese internet giants opportunities to tap the market potential in Hong Kong.

Alibaba and Tencent plan to expand their services here after settling some issues with local banks.

From the firms' perspective, Hong Kong will be a place to showcase their latest technologies and solutions to the global market.

An endorsement in Hong Kong can help the Chinese groups expand into other developed markets, convincing consumers and governments that the firms can be trusted with personal information and data. 

As for the Hong Kong government, it can use technology expertise from the mainland entities to enhance the city’s information technology planning and future roadmap.

Also, increased penetration of Chinese advanced services in Hong Kong can help promote a more positive impression of the mainland among Hong Kong people, serving a key political objective.

We can only wait and watch as to how far the "soft approach" will succeed.

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EJ Insight writer