Chinese social media app rednote Full of cute and heartwarming moments after about 500,000 American users fled to it last week to protest the US government’s looming ban on… Tychok.
They call themselves “Tychok refugees“These users paid the ‘cat tax’ to join RedNote by posting CAT photos and videos. They answered a lot of questions from their new Chinese friends: Is it true that in rural America, every family has a big farm, a huge house, at least three children And several big dogs? That Americans have to work two jobs to support themselves? That Americans are terrible at geography and that many people think Africa is a country that most Americans have two days off every week?
The Americans also asked questions for their new friends. “I heard that every Chinese person has a giant panda,” wrote one American Rednote user. “Can you tell me how I can get it?” “Trust me, it’s true,” came an answer from someone in eastern Jiangsu province, the person who was put in his post, posting a photo of a panda doing laundry.
I spent hours scrolling those so-called tax photos and laughed at the cute and serious responses. This is what the Internet is supposed to do: connect people. Most importantly, RedNote showed how competitive the random Chinese social media app is from a pure product standpoint.
With access to the online population of one billion And an army of hard-working, resourceful engineers, China’s internet platforms are world-class in their design, functionality, and user experience—as evidenced by Tiktok and now by Rednote, or Xiaohongshu in Chinese.
But why don’t more people outside China use Chinese apps?
For a while, it seemed like Chinese internet giants were poised to take over the world. Remember the excitement when Alibaba It listed its initial public offering in New York in 2014, when Didi He took over Uber in China in 2016, when Facebook was imitating WeChat, and when Silicon Valley partner Andreessen Horowitz Humans The power of WeChat? At one point, five of the world’s 10 largest Internet companies measured by market capitalization were Chinese. Now Tencent, the WeChat creator and game company, is the only one remaining in those ranks.
The largest Chinese Internet companies still make products that can compete with any in the world. Their employees work harder than their Silicon Valley counterparts. (Many work a “996” schedule – 9am to 9pm six days a week.) In the face of the US semiconductor embargo, they have been able to make remarkable advances in artificial intelligence. But the world seems to have forgotten about China’s cyber leaders, except to see them as part of a technological and geopolitical threat.
The industry has not lived up to its promises. Why? What happened?
In 2017, I wrote a column for another publication called “The Title,” “Behind the Great Firewall, the Chinese Internet is booming“I told English-speaking readers to think beyond China’s desire to censor and copy Western companies because China was censoring on such a scale and at a speed that was mind-boggling.
That year, Tencent’s revenue rose 56 percent, while revenue at Alibaba, the e-commerce giant, rose 60 percent. Didi He grew up Nearly $10 billion in funding, mostly from international investors.
All of these feel like a lifetime. It is difficult for Chinese Internet companies to thrive now.
The country is mired in the worst economic downturn since the Mao era. Few people believe 5 percent Growth rate announced by the government for 2024. Consumer confidence is low – both Uniqlo and Starbuckstwo consumer brands that have thrived in China for years, are losing customers to cheaper brands.
When a country’s economy suffers, it is difficult for one of the pillar industries to do well. Technology company profits reflected this.
As China population Continuing a steady decline — it’s down for a third year in a row — Big Tech platforms are running out of new users. WeChat has about 1.4 billion accounts, larger than the Chinese population. Even a second-tier social media app like RedNote, which is popular among young, urban, and affluent female users, has amassed more than 300 million users. For such companies, international expansion is the natural next step.
BansansThe parent company of Tiktok, is the envy of the industry due to its success External companieswhich was growing at a much faster rate than its domestic operations.
But the US effort to ban Tiktok highlights how difficult it is for Chinese internet companies to expand overseas. As the Chinese Communist Party tightens its grip on the country’s private sector, it is increasingly difficult for the world to entrust its citizens’ data to Chinese companies, which ultimately… answer To Beijing.
There are good reasons why the outside world, including the US government, does not trust these companies. In a country where the government owns too much of everything and power is indiscriminate and often ruthless, the private sector has been on its toes. Internet companies are heavily censored and must self-police to survive. All the big companies, without exception, have removed their apps from app stores or been fined or disciplined by regulators in recent years.
It is well known that China’s leader, Xi Jinping, is no fan of the digital sector, unless it is used to further his national renewal agenda.
“The real economy is the foundation of the nation’s economy and the source of its wealth,” he said He said In 2018. “Economic development should not deviate from the real economy towards over-reliance on the virtual economy.”
In this speech and on last On occasions, Mr. Xi made clear that he placed a higher priority on advanced manufacturing than the Internet and liked state-owned enterprises more than the private sector.
That set the tone for campaign on Alibabaand Ant groupand Didi And Tencent Video game Work in 2020 and 2021. Harsh “zero covid” restrictions in 2022 have sent the country’s economy spiraling into financial losses for the first time in years.
Also around this time, the Chinese government Wolf Warrior Diplomacy and alliance Russia has forced many countries to rethink their views on China as an important part of the global economy. Some now see it as a threat to democratic systems and world peace. Perceptions of China have deteriorated in many Western countries, and fewer people are interested in visiting China than a decade ago.
Chinese Internet companies and investors are increasingly hold between their despotic government at home and suspicion, even hostility abroad.
Most Western investors now view China’s technology industry as not worth investing in due to geopolitical tension and unpredictable politics in the country.
US university endowments and pension funds have stopped giving venture capital firms money to invest in Chinese startups. The generation of Chinese investors who helped create some of the most successful technology companies has played golf, marathoned and hiked.
Investors in global stock markets are not as interested in Chinese internet companies.
The investor, who was not allowed to speak publicly, recently told me that in 2017, when she joined a hedge fund managing more than $100 billion, about 40 percent of the fund’s emerging market holdings were Chinese technology stocks. Now they are less than 3 percent.
The ecosystem that cultivates a vibrant tech sector is broken. Fewer investments mean fewer startups, far fewer initial public offerings abroad and far lower stock valuations than their American counterparts. RedNote, the social media app created by American Tiktok users, was founded in 2013 and has never gone public.
The investor said that these companies are still competitive. But in the eyes of the world, she added, she was no longer relevant.
