Chinese tech entrepreneurs go on global offensive

Tech entrepreneur Rosie Zhang is betting that the reopening of China’s borders to the world will jump-start growth for her start-up.

“Now we can go out and sell,” she said, after three years spent during the pandemic pitching customers and teaching them how to use her company’s retail automation technology over video calls from Shanghai.

Zhang is one of a growing number of Chinese tech founders, who, even at a time of rising geopolitical tensions, are turning their sights outward. Tepid economic growth and fierce competition are one reason they are looking outside of China. Beijing’s tech crackdown and “common prosperity” drive targeting the country’s business magnates have also sapped their confidence in their home market.

“Chinese entrepreneurs face intense competition at home and an uncertain business environment, so it makes sense many are looking at opportunities abroad,” said Huan Li, an investor at start-up accelerator Plug and Play.

The growing success of China’s leading tech and industrial groups in global markets is also providing encouragement. Ecommerce platforms Shein and Temu are inundating the US with $7 dresses and $3 backpacks sourced from mainland factories. TikTok is hogging more and more of the screen time of 1bn global users, while sales by electric vehicle makers such as BYD are pushing China towards the top of global auto export tables.

Zhang’s company Cloudpick offers a computer vision system that can turn any small convenience store into an Amazon Go-like experience for shoppers. With 60 per cent of the group’s 500 customer locations in China, Zhang is leading a renewed push to automate checkouts outside the country.

“China is highly competitive — software and hardware companies have to constantly cut costs, reduce profit margins and increase efficiency to remain viable, but the trial by fire naturally provides an advantage when entering overseas markets,” Zhang said. “If you can survive here you can make it anywhere.”

Founders in innovation hubs such as Beijing and Shenzhen say foreign customers are more willing to pay for tech that speeds up their business processes or automates functions. They are also less likely to haggle over prices.

The difficulty of selling software in China was partly behind Allen Liu’s decision to target foreign customers with his company’s foray into Software as a Service (SaaS). The WaterWheel Network online platform enables data centres and others to farm out computing power to AI companies training large language models.

“Global customers are more willing to pay for services. It’s easier,” he said. “Our old business in China is not growing very fast but it’s stable, giving us the opportunity to expand into emerging overseas markets.”

With battle-hardened Chinese entrepreneurs increasingly setting their sights abroad in emerging fields such as AI, the kind of pressure TikTok’s rise put on Facebook may soon be felt across the tech spectrum.

Zhang said Cloudpick could price their its below its main competitors from the US and Israel. Qian Huang, founder of Passive Edge, said his start-up had a similar edge, with pricing at about half that of British and German competitors. The group, which sells thermal batteries for heating, is targeting sales in Europe where electricity prices have skyrocketed, he said.

Wu Houfeng, general manager of Shantou-based Zhengchao Electric, said low prices and localised supply chains would help its electric vehicle chargers gain a foothold in south-east Asia and Oceania, the group’s first target markets.

“Our domestic business allows us to pay the fees for our overseas expansion,” he said.

One handicap they have to overcome is their Chinese origins at a time of increasing geopolitical tensions. Plug and Play investor Li said China’s frictions with the west did complicate foreign expansion for larger groups but that it should be less of a problem for start-ups, particularly as they were not on Beijing’s radar. “Some people worry all Chinese companies are controlled by the government when that’s not the case,” he said.

The larger Chinese groups, such as TikTok and fast fashion house Shein, have taken the lead in attempting to obscure their roots, pioneering the “Singapore-washing” approach of moving some of their company functions to the city state.

TikTok now calls itself a global company with headquarters in Los Angeles and Singapore. The group’s list of nine other global office locations on its website omits mention of any in China, where teams of engineers, product designers and operations people run much of the hit app.

Chinese ecommerce group Pinduoduo recently deleted mentions of China from its new app Temu hawking cheap goods to Americans. Temu’s website in April erased “Pinduoduo” and “China” from its origin story and now claims: “Temu was founded in Boston, Massachusetts in 2022.” 

TikTok said it had thousands of employees in Singapore including its chief executive. Pinduoduo did not respond to a request for comment.

Danny Tao, head of Dongguan-based ePropulsion, said originating in China had advantages and disadvantages. Being situated in the heart of China’s electric vehicle supply chain had helped his company turn into one of the world’s leading makers of electric motors for boats.

However, being Chinese also made selling overseas more challenging, he admitted. “We are trying to build a global brand that doesn’t remind people of China,” he said.

“We won’t deny our Chinese roots. If someone asks me where our products are designed and made, I’ll say China, but there is no need to emphasise our Chinese identity.”