Flush Chinese tech giants scour globe for bargains
For many businesses, the twopronged threat of a pandemic and recession is enough of a reason to be conservative on spending.
But for China’s cash-rich tech giants, the current environment has given rise to a number of lucrative investment opportunities that could see them take a firmer grip of overseas markets.
Last week, Alibaba, the Chinese e-commerce giant worth more than US$580 billion, announced that it was readying a hiring spree of up to 5,000 engineers for its global cloud computing business.
The beefing up of the division, which has data centres spanning London, Kuala Lumpur and Frankfurt, follows a commitment from the company in April to invest US$28 billion in cloud infrastructure, in anticipation of a shift of services to the internet.
In China, that has meant accommodating for online classes while schools have been shut, for example. However, internationally, it is offering support to businesses preparing to make flexible working a long-term reality.
“The cloud investment reflects the strengths that Alibaba and other dominant digital players globally are experiencing with the shift of many activities online during the pandemic,” says Duncan Clark, founder of business advisory firm BDA China.
It’s not just Alibaba on the move. ByteDance, the Beijing-based owner of video-sharing app TikTok, is eyeing opportunities abroad, as is gaming specialist Tencent.
So how are these firms able to invest at a time of crisis?
In Alibaba’s case, a healthy war chest has offered some confidence to go ahead with investments overseas. Despite an 88-per-cent tumble in profit to US$447 million in the three months to March, the company raked in a total of
US$19.8 billion in income for the past financial year.
In an earnings call last month, Daniel Zhang, the chief executive of Alibaba, seemed unfazed by the downturn in profit as a result of strict lockdown measures, pointing instead to a continued growth in online shopping users to 850 million, up from 780 million a year earlier. “All industries, including public sectors, will choose to move their technology infrastructure to the cloud,” he said.
Meanwhile, Tencent, the gaming giant that owns popular franchises such as League of Legends and backs Fortnite developer Epic Games, has increasingly made overseas investments a priority.
In China, President Xi Jinping has led a charge against gaming amid fears that youth were being harmed. As a result, the sector’s growth in China has slowed, offering incentives to Tencent to target new markets. Last month, the firm took a US$65-million stake in Japanese game developer Marvelous, while it posted a recent job ad on LinkedIn for a director of mergers and acquisitions in Europe.
Elsewhere, ByteDance has reportedly attained a valuation of US$100 billion following recent private share transactions, while having more than US$6 billion of cash in hand.
It’s a remarkable feat for a company founded less than 10 years ago. The owner of TikTok, which now has around 800 million monthly active users, has also confirmed plans to hire tens of thousands in its bid to command a 100,000-strong workforce by the end of the year.
China’s march on the rest of the world will not be a straightforward one. According to Clark, the lack of European cloud players makes it more attractive than the U.S., where tensions with China have made “any investments there tricky.”