Shai Oster, Asia Bureau Chief from The Information, joins us to conclude the state of China and SoftBank in 2018 and offer his predictions in 2019. We discussed the five major events: one, ByteDance’s success with Douyin (or Tik Tok) globally and the upcoming war with Facebook; two, the SoftBank Vision Fund and its impact to startups and venture capital globally; three, pending trade war between US and China with a short discussion on Google’s Project Dragonfly; four, the large merger and acquisitions in China and last but not least, the bearish market happening now for China technology giants. We end with Shai’s five predictions on China next year and what it will mean for the rest of the world.

Here are the interesting show notes and links to the discussion (with time-stamps included):

  • Shai Oster (@beijingscribe, LinkedIn, TheInformation Profile), Asia Bureau Chief in The Information [0:29]
    • Since our last conversation, what have you been up to? [0:50]
      • 5th Anniversary of The Information
  • State of China and Softbank in 2018 [1:48]
    • Event 1: ByteDance is printing money. [2:19]
      • Will ByteDance take over the world? How ByteDance has successfully go global against its rivals: Tencent failed to bring Wechat everywhere, Alibaba expanded via acquisitions such as Lazada and Didi only acquired 99 in Brazil. [2:36]
      • Does the lack of contest between Facebook and Tencent led to ByteDance to come from nowhere and now taking the market outside China? Thinking of Tik Tok more like an instagram product rather than a Facebook or Wechat like product. [4:21]
      • Given the rise of ByteDance with Douyin and Tik Tok and their recent mis-step on fake news in India, what does that mean for them? [9:35]
      • Can ByteDance’s capability navigate with the Chinese government regulation works for them in other countries as compared to Facebook? Is ByteDance going to be another Facebook? [12:29]
    • Event 2: SoftBank Vision Fund [15:31]
      • What has been the impact of SoftBank Vision Fund globally in 2018? [15:45]
        • New big funds like Sequoia (US$8B), Hillhouse Capital (US$10B), GGV and Qiming.
        • Betting against SoftBank, for example, in Southeast Asia, Tencent and Google are betting against Grab with GoJek.  
        • VCs and other investors are not happy with SoftBank for propping up valuations.
      • SoftBank has provoked different players within the startup and VC ecosystem globally. Do you foresee more competition against SoftBank? [19:32]
      • Will the Vision Fund still be the most dominant technology fund globally in 2019? [21:50]
    • Event 3: The pending trade war between China and US and impact to US and China tech companies, for example, Google’s Dragonfly project [24:19]
      • With the recent Huawei senior executive being held in Canada, will senior executives from the US stop dreaming to go to China? [24:30]
      • Google’s Dragonfly Project (Source: The Intercept) [29:05]
        • Does Google’s attempt to walk back into China with a censored search engine will work if the Intercept has not reported the story ? [29:10]
        • Why Google should go back into China and why its benefits their advertising business in the long term. [33:35]
        • Shai’s skepticism on whether Project Dragonfly might have ended.  [35:50]
    • Event 4: Major merger and acquisitions (M&A) in China – Alibaba Group acquires Ele.me at US$9.5B while Meituan buys Mobike at US$3.2B [36:54]
      • There is a considerable consolidation of services in Chinese market. Does that mean we are going to see more M&A next year? [37:14]
      • Shai’s prediction that the China tech giants going after both online and offline assets. [38:20]
      • US companies having 20-30% global revenues from China are now under stress, for example, Apple and Starbucks Cafe and whether Luckin Coffee in China is worth its unicorn valuation. [40:10]
    • Event 5: The bearish market for Chinese tech companies going public [43:17]
      • Based on our earlier discussion on why China tech companies have IPO in droves, is the trade war part of the reason why investors have fermented a bear market for the companies which IPO-ed recently? [43:30]
      • Does that mean that China tech companies will reduce their presence internationally? [44:51]
    • What will be Shai’s five predictions for 2019? [46:40]
      • Didi to IPO in end 2019.
      • ByteDance will continue to grow and fight Facebook in Southeast Asia, but will not IPO.  
      • Ant Financial’s path to IPO is not clear.
      • What will happen to Xiaomi with their overseas expansion?
      • First quarter of scary growth in China and followed by the wave of government stimulus in China.
  • Closing [50:00]

Podcast Information:

The show is hosted by Bernard Leong (@bernardleong & weibo) and are sponsored by Ideal Workspace (Twitter, Facebook and LinkedIn) with their new Altizen Desk (Twitter, Facebook, Medium). Sound credits for the intro music: Taro Iwashiro, “The Beginning” from Red Cliff Soundtrack and this episode is edited by Bernard Leong.