Tech plus cash offers new model for Chinese firms

By Shen Meng Source:Global Times Published: 2017/4/27 23:33:41

Illustration: Peter C. Espina/GT

For a long time, Chinese enterprises have given the impression of lacking core technology while having plenty of investment strength, backed by their previously accumulated wealth. But a number of acquisition deals in Asia by Ant Financial, an arm of Chinese e-commerce giant Alibaba Group, show that Chinese companies can offer not only funds but also technology input. It is becoming a new model for Chinese enterprises in going global.

Whether in developed countries or developing countries, the emerging Internet finance sector is at almost the same starting line. Those who are the first to develop and promote their own service models and technical system standards will undoubtedly hold the initiative in the Internet finance sector. And those who hold the initiative are likely to dominate the emerging finance world for the future. By providing services to the world's largest Internet market, Ant Financial has proven that its experience and achievements in the Internet finance sector offer the best solutions in the world at the current stage. As the most dynamic economy among the world's developing countries, China could lead the new economic and technological trends on the global stage.

As one of the largest Internet finance companies in China and even the world, Ant Financial has accumulated a huge amount of technology in terms of mobile payment, inclusive finance, credit evaluation and other aspects, forming its own unique integrated Internet finance services. For some countries and regions with underdeveloped Internet finance, Ant Financial already has advantages in certain technical areas. Therefore, it has become possible for Ant Financial to make overseas acquisitions by injecting both capital and technology.

Applying the "capital plus technology" model for overseas expansion could strengthen capital links to expand Ant Financial's service network because both the Internet and finance services are boundless. In the meantime, the model could also encourage investment target companies to use Ant Financial's technical standards or models so as to expand its influence in the Internet finance sector. In this way, Ant Financial could bring its Internet finance practices, which are already successful in China, to other countries and regions at the lowest cost. Once more and more Internet finance companies adopt the Ant Financial standards, there will be more potential for the company explore.

Finance is at the core of each country or region's industries and economy, and is often controlled by a small elite group. The combination of finance and the Internet has greatly released the potential of financial inclusion, which not only gathers everyone's strength through the Internet but also allows everyone to find their financial services. At the same time, finance is an industry with a high threshold for technology and service, but the Internet could be used to lower the financial service threshold so as to efficiently lower the cost of financial services and make them more widely available.

Besides Ant Financial, there are many other Chinese companies that have grasped all or part of the leading technologies in their industries, and these technologies also have the possibility of maximizing their value and expanding into new potential markets. For instance, Chinese enterprises have formed standards and advantages in such areas as rail transportation, including high-speed railways and underground rail, as well as in construction and operation of nuclear power plants, global positioning and navigation, big data and artificial intelligence.

Acquisition by simply splashing money around can trigger local market resistance. It is often described as "plunder" because the local community does not benefit. The "capital plus technology" model, on the other hand, can offer access to the target market and can also win local support, which is essential for Chinese enterprises that aim to lead economic transformation and upgrading, explore new business growth and expand into new development space under the One Belt and One Road initiative.

The author is director of Chanson&Co, a boutique investment bank in Beijing.

Posted in: INSIDER'S EYE

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