China Roundup: Beijing is tearing down the digital 'walled gardens'
Hello, and welcome back to TechCrunch's China Roundup, a round-up of the recent events that have shaped the Chinese technology landscape and what it means for people in the rest of the world.
This week, China is getting serious about demolishing the walled gardens that its internet giants have formed for decades. Two large rounds of funding have been announced, from the newly founded autonomous Fahrunicorn Deeproute.ai and the fast-growing, cross-border financial services provider XTransfer.
Tear down the walls
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The Chinese internet is notoriously isolated, with a handful of "super apps" each occupying comfortable, protective territory trying to lock users in and keep rivals away. On Tencent's WeChat Messenger, for example, links to Alibaba's Taobao marketplace and ByteDance's Douyin short video service cannot be displayed or even redirected. This is unlike WhatsApp, Telegram, or Signal, which offer friendly URL previews in chats.
Ecommerce platforms ward off competition in different ways. Taobao is using Alibaba's subsidiary Alipay as its default payment option, omitting its arch-rival WeChat Pay. Tencent-backed JD.com, a rival to Alibaba, is encouraging its users to pay through its own payment system, or WeChat Pay.
But changes are underway. "Ensuring normal access to legal URLs is a prerequisite for the development of the Internet," a senior official from China's Ministry of Industry and Information Technology said at a press conference this week. He added that unjustified blocking of web links "undermines the user experience, undermines user rights and disrupts market regulations".
It makes sense to filter third-party links when it comes to keeping out pornography, misinformation, and violent content. Content distributors in China also adhere strictly to the censorship rules, which silences politically sensitive discussions. Those principles will persist, and the new order of the MIIT is to crack anti-competitive practices and dwindle the power of the bloated internet giants.
The call to end digital walled gardens is part of the MIIT's campaign launched in July to restore "order" to the Chinese Internet. While crackdowns on internet companies are routine, the spate of new guidelines announced in recent months - from new data security rules to tightened gaming restrictions - shows Beijing's determination to curb the influence of all kinds of Chinese internet companies.
The deadline for online platforms to unblock URLs is September 17th, the MIIT previously said. Almost all of the major Internet companies have quickly made declarations that they will consistently implement the requirements of the MIIT and contribute to the healthy development of the Chinese Internet.
Internet users will benefit from the dismantling of the walled gardens. You can seamlessly browse third-party content on WeChat without switching between apps. You can share product links from Taobao directly in Messenger instead of your friends copying and pasting a bunch of cryptic codes that Taobao automatically generates for WeChat sharing.
Autonomous driving startup Deeproute.ai announced this week that it has completed a $ 300 million Series B round from investors including Alibaba, Jeneration Capital and Chinese automaker Geely. The evaluation of this round was not disclosed.
We saw a lot of advertisements from Pony.ai, WeRide, Momenta and AutoX, but not that much from Deeproute.ai. This is partly because the company is relatively young and was only founded in 2019 by Zhou Guang after he was "fired" by his co-founders at the once promising Roadstar.ai amid company disputes.
Roadstar.ai investors reportedly viewed Zhou's layoff as detrimental to the startup, which had raised at least $ 140 million by the time, and subsequently attempted to liquidate the company. It appears that Zhou, the former chief scientist at Roadstar, still enjoys the trust of some investors to support his reborn autonomous driving.
Like Pony.ai and WeRide, Deeproute tries to operate its own robotaxi fleets. While the business model gives the company control over a variety of driving data, it is research and money intensive. Hence, all of the major Chinese Robotax startups are looking for faster commercial deployments like self-driving buses and trucks to ease their financial stress.
Cross-border trade boom
The other major funding news this week comes from Shanghai-based XTransfer, which is helping small and medium-sized Chinese exporters collect payments from overseas. The Series C round, led by D1 Partners, raised $ 138 million and catapulted Xtransfer's valuation to over $ 1 billion. Proceeds will be used for product development, recruitment and global expansion.
Founded by former Ant Group executives, XTransfer seeks to solve a problem that small and medium-sized exporters face: opening and maintaining bank accounts in different countries can be difficult and costly. As such, XTransfer acts as a payment gateway between its SME customer, the payee and their respective banks.
As of July, XTransfer had more than 150,000 customers, most of them in mainland China. The company with over 1,000 employees is also expanding to Southeast Asia.
While business-to-business exports are booming in China, more and more products are also being sold direct to consumers around the world by Chinese brands. Some of the most successful examples, like Shein and Anker, use a different group of payment processors for their direct sales to consumers, which are typically larger in volume but lower average ticket value.
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