'Made in China' online enterprises on global mission

Domestic Internet giants are dipping their toes in international waters for sustained long-term growth

Chinese e-commerce giant Alibaba Group Holding Ltd has been in the limelight recently with its much-anticipated initial public offering of shares in New York. But its chairman Jack Ma has also been busy making trips to countries like South Korea to expand the company's flagship e-commerce business.

Ma, who held extensive discussions with South Korean President Park Geun-hye during his trip to Seoul last month, was making his third trip to the country in the past six months, including a trip in July as part of President Xi Jinping's official delegation to the country.

Joining Ma on the trip in July were top executives from some of the biggest and most innovative Chinese Internet firms, like Robin Li, the chief executive officer of search company Baidu Inc.

Li was also part of Xi's delegation to Brazil in July. During the trip, Xi, along with his Brazilian counterpart Dilma Rousseff, witnessed the launch of the Portuguese version of the Baidu search engine. Though it was not the first time that Baidu had launched a non-Chinese language search engine, it was certainly the first time that a Chinese leader was promoting its services.

The Internet sector has never been as important in China as it is now, with domestic Internet companies and services being part of the top leaders' overseas marketing list, which includes basic goods, value-added mechanical and electrical products, and high-end, high-speed railway systems and nuclear power plants.

According to a recent study conducted by McKinsey Global Institute, the business and economics research arm of global consulting firm McKinsey & Co, the Internet sector could add 0.3 to 1 percentage points to China's GDP growth rate from 2013 to 2025.

This could fuel some 7 to 22 percent of the incremental GDP growth through 2025, translating into 4 trillion yuan ($650 billion) to 14 trillion yuan in China's annual GDP by that point.

Whether the Internet sector and other high-tech emerging industries are going to become China's new weapon to help win more global market share is still too early to tell, but it is clear that some of China's leading firms have already had the capacity to provide services outside the country and are starting to put overseas expansion into high gear.

Apart from launching a Portuguese search engine in Brazil, the Beijing-based Baidu also signed a strategic agreement with Brazil's Ministry of Science and Technology to jointly develop Internet technology in Brazil.

Baidu will offer tailor-made solutions to help with Brazil's Internet innovation and build a technology innovation center in Brazil to cultivate local talent and startup companies.

Alibaba has been even more aggressive in the overseas markets. From May to July, it had teamed up with the official postal departments in Singapore, Australia and Brazil to ease logistics procedures and facilitate cross-border e-commerce between these countries and China.

Neil Flynn, head equity analyst at Shanghai-based Chineseinvestors.com, a leading financial analysis firm of US-listed Chinese companies, said that he has seen Chinese firms focusing on domestic markets because they understand their customers, and it is often difficult for foreign firms to enter the market.

"However, understanding the Chinese consumers can be very beneficial for expanding overseas. For example, Baidu has search engines specifically for the Thai and Brazilian markets. This is because these countries are emerging economies, and consumer behavior tends to be similar to that in China. So instead of having to wait several decades to get access to half a billion people, Chinese firms can expand overseas and get immediate access," he said.

Justin Ren, professor of technology management at Boston University's School of Management, said Chinese Internet companies are expanding overseas for several reasons.

"Building a true global company is the dream of many Chinese entrepreneurs. China's Internet companies, which currently enjoy little brand-recognition overseas, all aspire to become the next Google or Amazon. Expanding globally will help elevate their status," said Ren.

Apart from the enhanced visibility, there is also the need for new markets, new suppliers, and new talents and ideas, he said. Previously, Chinese Internet firms were often seen as copycats of Western technologies.

For example, QQ was seen as an imitation of Microsoft's MSN Messenger, WeChat as an imitation of WhatsApp and Weibo an imitation of Twitter.

"But what we've seen is that these Chinese products have transformed from imitations to innovations. In particular, if we look at WeChat, its services are much more advanced than WhatsApp, and Western tech firms are looking to the Chinese market to understand the innovation and change that is happening," said Flynn, adding that the Internet sector will be a key driver for China's outbound direct investment.

Yu Yongfu, CEO of UCWeb Inc, which is China's largest mobile browser by market share, said in an earlier interview that unlike the personal computer-based Internet sector, which was pioneered by Western companies—US companies, in particular—Chinese firms can be leaders instead of followers in the mobile Internet industry.

"The mobile Internet has a lot to do with lifestyle. For example, people in the US and Europe spend a lot of time driving to work, while the majority of Asian people use public transportation. That means that Asian smartphone users on average spend more than two hours every day on the mobile Internet."

The strong reliance on the mobile Internet leads to innovation. What is more, the PC-based Internet is an industry with a unified world standard, while the mobile Internet industry varies among regions, he said.

But Ren sees many challenges for Chinese Internet companies to be successful in the global arena.

"Becoming an established global business requires strong institutional support from its home country: Its financial, legal (particularly those related to intellectual property), taxation and education systems all need to function well so companies can thrive. In this respect, China's companies have a long way to go" he said.