With the global rise of Chinese tech majors, these firms now maintain a focus beyond top-tier Chinese cities on China’s lower-tier cities and as well as the eastern US as they strive to grow and deepen their global footprint.
According to a Harvard Business Review report, the Western states of the U.S. are the only other region with a population that possesses the accumulation of ”massive value, wealth, and power through the winner-take-all economics that govern many digital business models” to sustain their growth, a factor that may see Chinese corporate expansion into the US impacted by the ongoing Sino-US trade war.
Cases of this include Alibaba Group Holdings, which has launched Alipay in New York City to cater to the growing number of Chinese tourists, as well as recently listed smartphone maker Xiaomi, which is looking to enter the U.S. market by the end of this year.
Alibaba Group’s expansion into the US was via its finance affiliate Ant Financial (Alipay), which in end-2016 saw Alipay enter the U.S. market with the aim of bridging the cultural differences between the U.S merchants and Chinese tourists. To date, 170,000 North America retail locations have signed up with Alipay, according to an account by Fung Global Retail Tech’s Deborah Weinswig.
Additionally, Alipay is looking to expand its U.S. footprint by onboarding more boutique hotels and individual luxury brands to come on board, with the end-goal being to promote cashless payments in the U.S., though brand associations are likely to raise concerns about data security and render attracting users in the U.S. a challenging proposition.
Meanwhile, Tencent Holdings, which has been attempting to grow WeChat into an international player since summer 2013, recently secured a partnership with Silicon Valley-based mobile payment startup CITCON in 2017. The deal will enable WeChat users to access cashless payment experiences in the U.S., including RMB settlement and mobile payments in U.S. brick-and-mortar stores, with the long-term aim of onboarding U.S. retailers that service Chinese tourists.
According to details of an interview with CNBC, Tencent has announced of its plan to further expand WeChat Pay’s reach in the U.S. and emphasises merchant onboarding, unlike Alipay. Yin Jie, director of cross-border operation at WeChat Pay, disclosed that the U.S is Tencent’s priority market for the time being.
However, both tech majors are likely to face significant challenges in expanding their footprints in the U.S. given the ongoing US-China trade war. In April 2018, media reports indicated that some Chinese firms were suspending U.S. expansion plans and opting to see how the current trade dispute would pan out.
Just about a month later, two Chinese multinational telecommunications equipment and system company – ZTE & Huawei – were ordered by the U.S Department of Defence to stop the sales of their phones on U.S. military bases, due to a perceived security risk to information security.
While Yin Jie has highlighted the differences with WeChat Pay, the escalating trade disputes can easily make US merchants become more wary of coming on board these Chinese mobile payment platforms. Despite Chinese exports to the U.S. impacted by high tariffs, China’s tech majors remain relentless in their pursuit of growth, with Xiaomi looking to enter the fray despite the problems that plague other hardware makers like ZTE & Huawei.
