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Chinese e-commerce titan JD announced Monday that they have inked a strategic partnership with Walmart to better tap Chinese market through a combination of e-commerce and retail.

Under the deal, JD will take control of Yihaodian, an online grocery sales platform that Walmart took full ownership in July last year. JD will take over the Yihaodian brand, website and app, while Walmart will continue to operate the Yihaodian direct sales business and will become a vendor on the Yihaodian marketplace.

In exchange, Walmart will grab a 5% equity stake in JD by acquiring about 145 million shares in the online retailer, worth around $1.5 billion USD at JD’s current valuation.

In addition, the partnership covers more diversified cooperation. Walmart’s Sam’s Club China will open a flagship store on JD and offer same- and next-day delivery through JD’s nationwide warehousing and delivery network. Walmart’s China stores will be listed as a preferred retailer on JD’s O2O unit Dada, China’s crowd-sourced delivery platform.

For JD, Yihaodian’s brand and business in eastern and southern China and in key product categories such as high-quality grocery and household goods will improve its geographical and product strengths. On top of that, Walmart’s offline and overseas resources will form a strong complement to boost its O2O and globalization initiatives in competition against Alibaba.

For Walmart, the tie-up brings more opportunities for the U.S. retailor to reshape its operations in China by capitalizing on JD’s online traffic and offline delivery networks.

Yihaodian was founded in 2008 by Liu Junling and Yu Gang, two former executives of Dell. JD’s acquisition is one of a series of equity changes during the company’s troubled growth. The platform sold an 80% stake to insurance company Shenzhen Ping’an for 80 million yuan due to a lack of funding in 2010.

Walmart purchased a 17.7% stake in the company in 2011, and then gradually increased their stake to 51.3% in 2012 before fully acquiring the company last year. However, the company has seen growth slow since Walmart’s acquisition, accounting for only 1.4% of China’s online retailing market, according to China Briefing.

While Yihaodian has missed opportunities to develop into cross-sector e-commerce giants like JD, it holds an important spot in the e-commerce hypermarket vertical. Therefore, it becomes an asset of strategic importance in the e-commerce behemoth’s expansion plans, especially into the online supermarket and fresh produce sectors.

“We believe that this tie up will increase both product selection and overall user experience. We look forward to further developing Yihaodian, which has tremendous strength in important regions of eastern and southern China,” said Richard Liu, CEO of JD.com.

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Raghav Kapoor, CEO and co-founder of Smartkarma, joined us for a conversation on his company and a broader conversation on fintech in Asia. Drawing from his experience and background in finance, Raghav talked about the origins of  Smartkarma and his vision to build it towards a premium collaborative research marketplace. We also discussed the emerging fintech industry and the important observations and trends that distinguish Asia from the rest of the world.

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Analyse Asia with Bernard Leong is a weekly podcast dedicated to the pulse of technology, business & media in Asia. They interview thought leaders and leading industry players and gain their insights to how we perceive and understand the market. Analyse Asia is a content partner of TechNode.

TechNode does not endorse any commentary made in the program.

Notes:

• Raghav Kapoor, CEO and co-founder of Smartkarma
  • How did you get started in your career?
  • From your career in the equities research business until now, what are the interesting career lessons you can share?
• Smartkarma
  • What is the mission and vision for Smartkarma?
  • What is the problem that you are trying to solve as a premier collaborative research marketplace?
  • Who are Smartkarma’s customers?
  • As a multi sided marketplace, how does insight providers and partners operate within your platform?
  • Which are the institutions who has signed on as contributors?
  • What is the revenue model for the platform? Is it similar to Spotify, as the platform is known to be the spotify of Asian research?
  • You have recently raised a total of US$7.5M, who are the investors and how did you pull it off and what will you be doing with the investment?
• The Fintech Industry across Asia Pacific
  • How does someone define fintech in Asia now?
  • What are the ongoing trends in the fintech industry?
  • Everyone talked about the banks being disrupted, what is the underlying problem from your view?
  • In the research insights business, a lot of people talked about the softening economy in 2016 from the recent China equities crash to some countries entering into technical recessions, instead of asking you how bad it is going to get, I like to ask what are the interesting opportunities you see coming up?

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Despite all the brouhaha around internet celebrities and KOLs, it turns out that money is the top reason why Chinese users decide to livestream, not fame.

In a report released by Tencent on Monday, out of 4525 Chinese netizens surveyed, 43% of those who are willing to be livestream hosts would do so for the money. The second most popular response, at 34.6%, was livestreaming as a way to “kill time.” Survey respondents could pick more than one response in their answer, the other options being livestreaming for fun (32%), to share life experiences (22.2%), or to gain followers (17.9%).

From left to right: 1) earn money 2) kill time 3) have fun 4) share life experiences 5) gain followers 6) would not consider livestreaming

The results illustrate one of the key differences between Chinese livestreaming platforms and their Western counterparts: digital gifts. In China, audience members can tip livestreaming hosts with digital gifts that are later converted into real money through the platform. On YY, one of China’s leading livestreaming platforms, for example, digital gifts range from 0.1 RMB – applause, a lollipop, fruit candy – to 1314 RMB, a luxurious cruise ship. Users who tip – especially those who tip generously – are usually thanked and acknowledged by the host during the show.

“For me, at periods of high traffic, I can earn hundreds of thousands [of RMB] each month,” a livestreaming host on Chinese social networking app Momo told TechNode.

The host, whose stage name is Hong Xiaoqiao (洪小乔), started livestreaming when she was 21 years old, dropping out of college to do it full-time. She runs her livestreaming show every night, a mix of singing and conversation. Each episode lasts at least three hours, she says. During the day, Hong Xiaoqiao will also livestream, albeit more casually, and chat with some of her more dedicated followers.

“I prepare ahead of time,” she says. “I’ll think about today’s conversation topic and get the background music ready. Half an hour ahead of the show, I do my makeup, get my clothes ready, and set up the background music.”

Of course, not all livestreaming hosts are as successful as Hong Xiaoqiao, but for those who can attract and keep loyal followers, livestreaming as a full-time job is a real possibility.

They don’t have to be wildly famous to gain traction as a livestreaming host either. According to Tencent’s report, audience members aren’t necessarily attracted to well-established wanghong or internet celebrities. Though about a third said that they liked watching internet celebrities livestream, another third said that they didn’t care who the livestreaming host was, as long as they were “good-looking.”

Tencent’s report, which studied Chinese Android app users for the month of May, also reaffirmed the gender inbalance of mobile livestreaming platforms. About two-thirds of livestream users are men, most of them either 19 years old and younger, or 21 to 29 years old, reported Tencent’s results.

Over the past few months, major livestreaming platforms, such as YY, Panda TV, and Douyu TV, have attracted the scrutiny of government regulators, who are cracking down on lewd content. In particular, female livestreaming hosts are facing new rules, such as Douyu TV’s point system, that punish hosts for wearing salacious outfits (link in Chinese). However, curbing sexual content will pose additional challenges to China’s content moderators, as hosts are often encouraged to dance sexually or change into more sexually appealing clothing by audience members, who then reward hosts for doing so with digital gifts.

Douyu TV’s diagram lays out the boundaries of what needs to be covered during a livestreamed show.

Image credit: Douyu TV, YY.com

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Ant Financial, the financial affiliate of e-commerce giant Alibaba, is planning to acquire a 20 percent stake in Thai third-party payment company Ascend Money, according to an announcement made by China’s Ministry of Commerce last Wednesday.

The investment was proposed by Ant Financial’s Hong Kong-listed payment unit Alipay (Hong Kong) Holding Ltd. In addition, the Chinese company is also seeking an option to increase its stake by a further 10 percent within 21 months of the transaction being finalized.

Ascend Money, a newly established unit of Ascend Group, is the parent company of online payment service True Money and licensed financial services provider Ascend Nano. Ascend Group is a spin-off from True Corporation, a top-three telecom carrier in Thailand.

As the dominant payment platform in China, Alipay has long set its sights on overseas market to maintain high-speed growth beyond domestic market, where it is facing tightening competition from Tencent’s rival WeChat payment.

Last year, Ant Financial invested over $500 million USD in India’s largest online wallet provider PayTM, which now holds an online banking license in the country. The Chinese firm also helped launched online bank K Bank in Korea with local partners, but due to government restrictions the company still only holds a 2% in the joint venture.

Ant Financial sealed a $4.5 billion USD B round this April at a market valuation of over $60 billion USD.

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Apple’s meteoric success in the Chinese market has hinged on a golden rule for foreign tech firms: stick to hardware, stay away from content, and you should be fine.

That premise broke down at the end of last week, when Beijing’s Intellectual Property Office revealed a ruling against Apple in a patent case brought by little-known Chinese smartphone vendor Shenzhen Baili. The Chinese company claims the iPhone 6 and 6s infringed on a patent held for their 100C phone.

The gravity of the order is enormous, as it could potentially halt sales of the iPhone 6 and 6s in Beijing. Apple says that they have appealed to a higher court, and the phones remain on sale across China. The case was settled late last month, though the decision was only revealed at the end of last week.

It’s the latest storm cloud in an increasingly complex relationship between the U.S tech company and Chinese authorities. Beijing has recently being coaxing foreign tech firms to extend their strategic cooperation in China, singling Apple out by name on multiple occasions. Apple CEO Tim Cook has made a series of symbolic and strategic moves to charm the country’s regulators, including numerous visits to the capital.

Apple’s Path To The Chinese Consumer Is Becoming More Complex

It’s been a tumultuous six months for Apple in China. In May, a drop in sales on the mainland contributed to the company’s first revenue decline in 13 years, as China’s purse strings tightened amid market saturation. In April the U.S company received a very public blow, when their iBooks and iTunes movie services were banned under a sweeping crackdown on foreign content by the Chinese government.

Last month the U.S. smartphone vendor laid deep roots in the market with a $1 billion USD strategic investment in Chinese Uber competitor, Didi Chuxing. The investment saw Apple join a club of investors which includes several top Chinese tech companies as well as a handful of state-backed investors, including sovereign wealth fund China investment Corporation.

According to the Wall Street Journal, the company behind Apple’s latest patent dispute, Shenzhen Baili, appears to be affiliated with better-known brand Digione, which counts Baidu as their largest investor. Baidu is also Uber’s biggest strategic partner in the Chinese market.

The latest patent roadblock shows that Apple’s passage in the Chinese market continues to be perilous, despite their deepening commitment.

Chinese Firms Are Taking Advantage Of Stronger Intellectual Property Laws

Interestingly it’s not Apple’s first brush with the law this year. In May, Beijing’s Municipal High People’s Court ruled against the U.S. smartphone maker in a bizarre case of trademark infringement. A Chinese leather goods maker called Xintong Tiandi successfully defended their claim to the ‘iPhone’ name, which they had trademarked in 2010. Apple said they would continue to pursue legal action against the company, which currently sells leather wallets and phone cases imprinted with the iPhone trademark.

It’s one in a series of cases highlighting the newfound confidence of Chinese companies, who are increasingly expressing their intellectual property rights. In May Chinese smartphone vendor Huawei filed a series of high-level patent suits against Samsung, marking their first patent dispute against the South Korean electronics maker.

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Chinese after-school tutoring platform Entstudy has sealed a 120 million yuan ($18.21 million USD) C round led by Greenwoods Investment with participation of existing investors of Tencent and Yuanxi Capital.

Entstudy (Fengkuang Laoshi), whose Chinese name literally means ‘Fabulous Teachers’, helps connect parents to tutors for one-to-one after-school tutoring services aimed at primary or secondary school-age children.

The new funding will be utilized to develop its live streaming platform Dingdang Classroom (our translation), which is expected to become a major revenue source for the startup. Zhang Hao, CEO and founder of Entstudy, said to local media that the company is expected to surpass 60 million yuan in revenue this year and start to record profits next year.

At the same time, the company will be divided into three departments for community operations, teacher incubator programs and live streaming services.

The current round comes after a $24 million B plus round received last July at a market valuation of $200 million USD. In addition, Tencent’s cooperate venture capital fund invested $20 million USD in the company’s B series.

Tencent Weighs In On Online Education

China’s huge appetite for eduation has moved online in recent years. The country’s market for e-learning soared 19.4% YOY to 119.17 billion RMB in 2015, according to data from research institution Qianzhan.com.

Tencent, the Chinese internet giant with investments in virtually every sector, has set its eyes on the blooming market through both partnerships and investments. Entstudy is among a handful of education startups that Tencent holds stake in.

Since the beginning of this year, the company has invested in three edtech projects, including a $40 million USD round in Yuanfudao, a 100 million yuan B round in English learning startup ABC360, and a 320 million RMB strategic investment in the online unit of Chinese private education behemoth New Oriental Education & Technology Group which follows the establishment of a joint venture with the company in 2014.

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For end users, it’s easy to forget how much infrastructure is required to support the invisible magic that is cloud technology.

In reality, the cloud is made up of industrial-scale warehouses packed with backup generators, air conditioners, and data centers, where servers and other storage equipment are kept. In China, these data centers occupy a total of about 2.35 million square meters*, an area that is expected to expand to 3.27 million by 2019, according to DatacenterDynamics (DCD) Intelligence. On top of that, each data center requires electricity – a lot of it.

“In operational costs, electricity is the most expensive,” says Pan Dong from Guofu Data (国富光启), a Shanghai-based PaaS and IaaS company. “Why are China’s telecom companies willing to go to Inner Mongolia and Guiyang? Because the electricity is cheaper.”

At DatacenterDynamics’ annual conference in Shanghai on Wednesday, experts from different tech companies, including Huawei, Telstra, and Intel, shared insights on the data center industry. Though U.S tech companies, such as Facebook and Google, have a head start when it comes to building and maintaining data centers, China’s tech giants are certainly catching up, especially when it comes to energy efficiency.

“Chinese colocation [providers] are good at energy efficiency,” says Dedric Lam, the CEO of DCD Group Asia Pacific. “In general, [they’re] better at energy efficiency than the average global colocation provider.”

Colocations are shared facilities for data centers that are managed by a service provider. In China, about 70% of colocations belong to telecommunications companies like China Telecom and China Unicom. Because China started building data centers after the U.S, their equipment is newer, says Mr. Lam. That’s partly why data centers in China are more energy efficient and have more optimal PUE (power usage efficiency) numbers than the global average.

“China is a maturing market – the age of our data centers is, in general, younger. They don’t have the problem of legacy infrastructure as much,” he says.

Chinese tech companies, such as Tencent and ZTE, are also investing heavily in green solutions, optimizing their PUE to levels close to or superior than those of Facebook. In 2011, Facebook launched its “Open Compute” server, a customized piece of hardware that the company claims is 38% more efficient to build and 24% less expensive to run than other servers on the market.

In May, both ZTE and Tencent partnered together to create what they claim is the world’s most energy-efficient data center, Tencent West Lab. The data center is made up of smaller data centers known as “T-blocks”, short for “Tencent blocks.”

“T-block changes the traditional data center into something standardized and modular, then we can stack those blocks in fields,” says Sean Zeng, a data center architect at Tencent. “It takes less time for construction and is very convenient for us to expand or scale it.”

Tencent and ZTE’s “T-block” data center

Because T-blocks are smaller than traditional data centers, they can be pre-fabricated and transported to the data center site, saving time and operational costs. According to Mr. Zeng, T-blocks are very sensitive to location, as they are designed to leverage their surrounding environment to cut costs.

“Location is very important for T-blocks,” he says. “In central and western China, for example, there are some advantages in terms of climate.” In Inner Mongolia, for example, T-blocks need to be customized for the province’s freezing winters, and can take advantage of the region’s abundant sunshine and moderate humidity.

In addition to T-blocks, ZTE and Tencent’s Tencent West Lab makes use of solar power and indirect evaporative-free cooling technology, which is five times as energy efficient as traditional air-conditioning systems, according to ZTE. Other companies, such as IBM and Delta, are also investing in their own micro modular data centers as part of a global trend to cut costs and improve energy efficiency.

For China, improving the energy efficiency of its data centers will be imperative. At the moment, only about half of China’s massive population is online. As that other half gains access to the internet – or as existing users’ needs grow more demanding – China’s data centers will need to grow and expand sustainably.

According to China’s Ministry of Industry and Information Technology (MIIT), as of 2015, China had over 400,000 data centers. Though China’s colocation centers are relatively energy efficient, overall, China’s data centers are less green than the global average. The Chinese government has already started setting benchmarks for energy efficiency, and is working with tech companies to lower their energy consumption. In 2015, for example, MIIT and the National Energy Administration (NEA) released a plan to launch one hundred green data center pilot projects by 2017, with energy consumption rates at least 8% lower than the national average by 2017 (link in Chinese).

*This estimate refers to the ‘white space’ in data centers, a term that describes the amount of usable area in a data center.

Image credit: Shutterstock, Tencent Data Center

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It’s no secret that Chinese smartphone vendor Xiaomi has bigger plans than just making smart hardware, and an important part of its ambition is online finance, a business that has become an absolute must for almost all Chinese internet giants.

As a further move towards the goal, Xiaomi invested 885 million RMB ($115 million USD) in a newly established online bank through its wholly owned financial subsidiary Yinmi Technology.

To some extend, however, the new bank isn’t a “Xiaomi Bank” in the real sense, because the gadget maker only takes a 29.5 percent stake as the second largest shareholder of the joint venture, which has a total registered capital of 3 billion RMB.

This can be reflected in the name of the bank, which is entitled as “Sichuan Hope Bank” (四川希望银行) after New Hope Group, the largest shareholder, which holds a 30 percent stake in the company. Chengdu Hongqi Chain, a chain retailer, holds a 15 percent stake, while remaining investors take a 25.5 percent.

It’s important to point out that a 30 percent stake is government-prescribed upper limit for a single shareholder in a private bank. Tencent and Ant Financial hold 30 percent in WeBank and MyBank respectively as the biggest shareholder of their respective online banking units.

New Hope Group is a business conglomerate with an extensive financial background in banking, securities and insurance. We may also expect the new bank to have an offline presence thanks to Hongqi Chain’s vast physical store network, which is a major asset when competing against other online banks. Of course, Xiaomi will grant the bank access to its huge (and young) user base.

Online financing has been in Xiaomi’s sights for some time.The company has been in financial businesses from payment (MiPay) to lending and financial management services (MiFinance). Apart from in-house services, Xiaomi has also made a series of finance-related strategic investments. Companies they have invested in include P2P lending site JimuBox, brokerage startup Tiger Brokers and investment management platform Cgtz.com.

Xiaomi’s online banking initiative puts it up against other internet heavyweights. Alibaba and Tencent have expanded considerably into the online banking space since they received their respective banking licenses two years earlier. Xiaomi still doesn’t have the required license, though they have cleared the path to further accreditation by obtaining a payment license as part of their acquisition of third-party payment company Jieru Ruitong.

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Serkan Toto from Kantan Games joined us for a conversation on three recent events that impacted the mobile gaming market in Japan and the rest of world. We analyzed the progress of Nintendo’s new mobile games following the changes in Apple’s app store, the upcoming LINE IPO, and why SoftBank is divesting their gaming portfolio: Gungho and Supercell.

Download MP3 here (21.4 MB) or Subscribe via RSS

Analyse Asia with Bernard Leong is a weekly podcast dedicated to the pulse of technology, business & media in Asia. They interview thought leaders and leading industry players and gain their insights to how we perceive and understand the market. Analyse Asia is a content partner of TechNode.

TechNode does not endorse any commentary made in the program.

Notes:

• Serkan Toto, CEO of Kantan Games JP
• State of mobile gaming in Japan [1:19]
  • How is the mobile gaming scene moving in Japan since we last spoke? [1:23]
  • Any updates on Nintendo’s continued foray into mobile gaming? [2:00]
  • Nintendo’s new mobile games: Fire Enblem (strategy) and Animal Crossing (farming simulation game) available in iOS and Android [2:30]
  • Niantic Labs (funded under Alphabet), Pokemon and Nintendo’s joint venture: Pokemon Game. What happened with their field test? [3:30]
  • Any new business models or concepts coming out of Japan’s mobile gaming industry with the introduction of AR and VR? [5:23]
  • Apple’s new app store changes and how it’s impacted the mobile gaming space worldwide. [6:40]
• LINE IPO [8:50]
  • Why did LINE attempt a dual listing in U.S and Japan? [9:13]
  • They currently have 215M monthly active users, with ARPU $5.10 vs Twitter ($7.27) & Facebook ($11.27). How are they going to demonstrate growth by revenue or new products? What is their growth story going to be? [10:00]
  • Interesting numbers: Kakao Talk has 50% monthly active users (MAUs) less than LINE, Wechat has 4x more MAUs (800 MAUs) than LINE.
  • Will LINE end up like Mixi being overwhelmed by Facebook? [11:18]
  • What’s LINE’s impact in the mobile gaming market? [13:05]
  • LINE’s focus on O2O services. [14:00]
  • Is this going to be the biggest tech IPO of the year? [15:16]
  • Should we be bullish or bearish about the IPO? [15:35]
• SoftBank’s divestments [16:22]
  • Recently, SoftBank has been divesting their assets in the gaming industry: Gungho, known for Puzzle and Dragons; Supercell known for ‘Clash of Clans’ (to Tencent); their stake in Alibaba: US$8.9B (acquired by various major players, Alibaba, Temasek and GIC Singapore). What’s going on? Are they just trying to reduce their debt or raise money for something else, for example, Sprint in the U.S? [16:55]
• What excites Serkan in the mobile gaming market? Reference with Square Enix [21:00]

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