China's tech giants among world's elite

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BEIJING Powered by Chinese smartphone users splurging billions on mobile games and online shopping, China's tech giants Tencent and Alibaba are racing up the elite league of the world's most valuable companies.

Hong Kong-listed Tencent, famous for its games and WeChat messaging service, became the first Asian firm to break into the US$500 billion (S$673 million) league last week - briefly overtaking Facebook as the world's fifth biggest company in terms of market value.

Alibaba is just a few billion shy of joining its Chinese competitor at the top table of public listings - and is already there when its private affiliates are taken into account.

While the top five - Apple, Google's parent company Alphabet, Microsoft, Amazon and Facebook - thrive across the world, the two Chinese firms have made their fortunes by cornering China's own vast market of 750 million internet users.

Tencent and Alibaba do have a major advantage over American rivals because China severely restricts access to its Internet, with Facebook and Google kept outside the "Great Firewall".

But they have also deftly tapped into smartphone technology to woo China's large, adaptable population.

"Chinese consumers' acceptance of new technology is faster than nearly anywhere," said Mr Zhao Chen, a managing partner at the China office of tech accelerator Plug and Play.

"Even my grandpa, who is 88 years old, uses WeChat and WeChat payment."

Tencent boasts nearly 1 billion monthly active users of WeChat, known as a "super app" for its combination of instant messaging, social media, mobile payment options, games and publishing. Half of WeChat users spend more than 90 minutes a day on the app.

In smartphone games alone, the company's revenues surged by 84 per cent in the third quarter, driven by the success of the "Honour of Kings" title.

Alibaba, meanwhile, has dominated the e-commerce market, with consumers flocking to its shopping platforms to buy everything from laundry detergent to Boeing 747s.

Today, there are more than 1 billion smartphones running in China, according to iResearch. Both Tencent and Alibaba earn most of their revenue from their mobile apps.

Although Alibaba and Tencent have grown in a protected corner of the Internet, they have developed unique ways to rake in cash. While Amazon takes a cut from the sale of goods like traditional retail, Alibaba takes a different approach.

The company earns most of its money from charging merchants to advertise on its Tmall and Taobao platforms.

"If you don't buy ads, you won't have any business," said Liu Song, owner of the Sweet Lisa Flagship Store, which sells women's dresses, rompers, and skirts on Alibaba's Tmall store.

The world beyond China also offers opportunity, though neither Tencent nor Alibaba can yet challenge their American rivals on the global stage.

Should US tech giants fret?

"Not really," investor Mr Zhao said.

"But they should be alert that Chinese companies are coming up with new business models that really work." - AFP