‘Web Dragons’ Help TEDA Build China’s ‘Internet Plus’ Vision

January 6, 2016 | By Business Wire News

TIANJIN, China

Chinese President Xi Jinping rubbed shoulders with some of Silicon Valley’s biggest names on his recent US visit – Satya Nadella of Microsoft, Apple’s Tim Cook, Amazon’s Jeff Bezos and Facebook’s Mark Zuckerburg.

But he also brought with him some of their Chinese rivals – Ma Huateng of Tencent, Liu Qiangdong of JD.com, Cheng Wei of Didi-Kuaidi, an Uber competitor, and Alibaba’s Jack Ma.

And while China has not yet developed a rival to Silicon Valley, many of the biggest Chinese tech firms have invested in the Tianjin Economic-Technological Development Area (TEDA).

Ranked the country’s top development zone every year since 1997, TEDA is now home to more than 300 internet firms, which together have registered capital of $320 million, and they are seeing revenues soar as China’s population continues to do more and more of its business online.

Many of these firms have chosen TEDA for their ‘Internet Plus’ expansion – defined by Chinese Premier Li Keqiang as integrating cutting edge web technology with modern manufacturing.

That’s partly because TEDA is increasingly seen as effectively a Beijing location under central government plans to integrate the Beijing-Tianjin-Hebei region.

The park is 45 minutes away from Beijing by high-speed train and boasts more space and lower rents than the crowded capital – attractive to startups and established firms alike.

“This dual city concept is now very popular. To quote a proverb, our aim is for TEDA to be ‘an ocean place that draws the dragons out from Beijing’,” says Wang Sheng, Chairman of TEDA Administrative Commission.

But Internet Plus is also about revolutionizing the relationships between consumers, suppliers and manufacturers.

It’s a trend that is seeing consumer-focused firms and industrial companies alike branch out into offering financial services at all stages of the supply chain – with big implications for doing business in the world’s biggest manufacturing country.

Earlier in 2015, consumer electronics giant GOME launched an Internet finance business in TEDA. GOME started off as a bricks-and-mortar retailer with more than 1,700 stores and 10,000 vendors across the country, and says its profits have risen 40% since going online.

Now TEDA-located GOME Finance wants to build financial services on to its online presence. It aims to provide online supply chain lending, wealth management services, peer-to-peer lending and consumer credit.

China’s web-only heavyweights are doing the same thing. Asia’s biggest Internet company Tencent is a TEDA tenant. Its WeChat mobile messaging service has more than 600 million users and is enabling a boom in mobile commerce through WeChat Wallet. Tencent has also set up WeBank, an online bank service, and its first financial product was a micro-loans service, based on the company’s big data solutions.

Tencent has a US$400 million stake in China’s leading classified services platform, 58.com, another TEDA tenant. Since 2005, 58.com has offered classified information on everything from housing, jobs and used goods to cars, pets and other services. It now offers a peer-to-peer lending platform to finance local merchants who post listings on the site.

Top Chinese online retailer, NASDAQ-listed JD.com, has also set up shop in TEDA through its financial arm, JD Finance, which is venturing into consumer credit.

In June, JD Finance and US-based ZestFinance launched a joint venture called JD-ZestFinance Gaia to support the development of consumer credit in China. The combined initiative will incorporate ZestFinance’s credit decision technology and JD’s deep consumer data – JD.com has a database of more than 100 million users – to generate credit risk evaluations.

Right at the other end of the supply chain, TEDA-located industrial firms are also changing the way they relate to each other.

Ganglian is a Shanghai-headquartered steel commodity exchange platform with its northern China base in TEDA that has launched a new financial holdings company.

TEDA is also home to the Tianjin Energy & Chemical Trading Center, created in April 2015. It provides clients with internet-based financing services as well as offline commodity trading and logistics services ranging from refined oil and fuel oil, to other petrochemicals. The center offers credit-based or collateral-based lending online to both buyers and sellers.

TEDA was the natural choice, says Li Yongwu, president of China’s Oil and Chemical Industry Confederation, citing Tianjin’s traditional role as a hub for the petrochemical industry as a whole and TEDA’s Nangang Park, a dedicated zone for the petrochemical industry.

“Internet Plus could cause business and manufacturing relationships to become as fluid as our own personal transactional relationships,” says Andrew Mar, an intellectual property lawyer with China-focused firm Fish & Tsang.

“Raw good suppliers, factories, and shipment facilities could become as interchangeable to manufacturing companies as grocery stores and taxi services,” he says. “Internet Plus technology could drastically reduce the transaction costs for creating and maintaining the business relationships required for providing goods and services.”

For Mar, this gives China the opportunity to be at the forefront of creating and adopting Internet Plus enterprise infrastructure as well as developing intellectual property enforcement techniques to protect businesses that grant limited-time licenses to factories producing their goods.

Even agriculture, that most traditional of activities, is being targeted through Internet Plus.

JD Finance is entering the non-profit arena – JD’s crowd-funding platform is to raise money to establish microfinance pioneer Grameen’s China operations, with the aim of providing micro-loans for entrepreneurs in China’s rural areas, which are underserved by the country’s banking system.

Meanwhile agricultural conglomerate New Hope Group has launched its New Hope Commercial Factoring Company in TEDA. The firm purchases invoices and receivables and provides upfront payments, eliminating costly delays in payment collection.

It envisages working with farmers and agricultural and animal-husbandry supply chains. China Agricultural Bank loaned the startup $150 million to get the initiative off the ground.

Internet Plus is also changing manufacturing itself. TEDA launched its first ‘Industrial Park of Intelligent Unmanned System’ in December 2015, home to about 50 intelligent equipment producers that were already TEDA tenants and 20 new tenants specializing in unmanned technology.

Such companies can provide support to both upstream companies in the form of R&D and robotics and unmanned equipment and downstream companies, which focus more on applications and total solutions.

“This is a very wise approach in the early stage of incubating the whole business community, because of its spillover effect along the sector chain,” says Ma Jie, TEDA Science and Technology Development Group’s general manager.

Outside observers agree.

“Tianjin, historically a competitive manufacturing base, enjoys unique competitiveness for developing intelligent manufacturing. This would be a path that other places will find hard to duplicate,” says Li Ting, director of informatization promotion at China’s Machinery Industry Information Centre.

“Also, such transformation towards intelligent manufacturing will help the region further modernize the whole manufacturing process. That’s everything from advances in technology, updating production lines, optimizing company organizational structure, process re-engineering and service capabilities.”

Such initiatives are helping China progress towards a more sustainable future, Wang Sheng says.

“People will not only benefit from enhanced business products and processes, but also from a wider scope of ‘social goods,’ such as smart energy, inclusive finance, efficient logistics, convenient transportation, and green technologies, all of which will make our world and society more sustainable,” he says.