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Beijing is in the process of reshaping the tech sector. Bold regulatory interventions have ended the era of “barbaric growth” that gave rise to China’s world-leading tech giants, and poured cold water on consumer internet development. We cover the new rules of the platform economy, consumer and market protection legislation, and how China’s tech titans are adjusting to the new reality.
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We keep an eye on China’s changing internet demographics. Rural digitization policies, lower-tier urban tech market development, and the never-ending push to expand internet coverage and quality is driving market opportunities under-appreciated beyond China’s borders.
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On Monday, the Civil Aviation Administration of China (CAAC) published a draft of its first policy to regulate drones.
ICYDK: The CAAC is the central planner for China’s aviation system, controlling civilian airspace and airports.
The CAAC’s drone “roadmap” sets out key goals across five-year increments.
Before 2025: Make “vertical” take-off and landing sites, and low-altitude airspace for drones widely available.
Before 2030: Allow drones to use unified navigation, powered by China’s Beidou navigation satellite system.
Before 2035: Integrate drones into national airspace.
So why drone on about drones?
Fun fact: Avid Tech Daily readers may remember that the Ministry of Transport approved JD’s push into drone-based delivery last October.
Our take: Airline traffic has plunged under zero-COVID, so now’s the perfect time for the CAAC to start planning for drones and the future of China’s skies.
On Friday, the Central Propaganda Department gave a big-deal press conference celebrating China’s last decade of internet regulation.
Joining them on stage: Representatives of China’s cybersecurity watchdog, the CAC.
The CAC folk dropped a few choice nuggets of info during the conference.
First, they said that one of their missions is to support the healthy development of internet platforms, committing to:
It’s official: That’s the CAC’s strongest signal yet that it will increasingly cut big tech platforms some slack.
Second, officials hinted that although Didi has already been issued a massive RMB 8 billion fine for breaching data security rules, the company’s troubles aren’t over quite yet.
What that means: Didi’s apps may not fully return to app stores for over a month – perhaps longer.
Our take: The peace between tech companies and regulators is tenuous, and we’re skeptical the CAC will keep up the pretense of partnership over the long term.
On Wednesday, Tencent posted its Q2 earnings – and the numbers didn’t look good.
At the earnings call, Tencent said macro headwinds are weighing on its business – but it’s optimistic about the regulatory environment.
Tencent founder Pony Ma said the regulatory tide is turning:
Ma pointed out two recent developments as evidence of Beijing’s supportive stance:
In addition: Tencent is expecting to receive game approvals soon, after having not received any approvals for 15 months.
Our take: Tencent thinks that the regulatory crackdown is abating.
That’s because: Preferential policies will be handed to national strategic areas rather than the typical consumer internet sectors…
On Thursday, China Mobile released its earnings report for H1 2022.
What caught our eye: In the first half of 2022, China Mobile’s cloud revenue clocked in at RMB 23.4 billion, up a whopping 103.6% y/y.
Why the massive growth? The company said the boom was primarily driven by SOEs’ rising demand for digitizing their business operations via cloud services.
But here’s the other thing: Regular readers know that SOEs are also under political pressure to move away from big tech cloud providers like AliCloud and towards state-owned cloud.
Sounds like that combination of factors has been very lucrative for China Mobile.
Our take: We’ve heard a lot of talk about how the push towards state-owned cloud will impact private cloud players, but this is the first time we’ve seen numbers that confirm the push is having a concrete impact on the market.
On Tuesday, the Sichuan branch of NDRC released the implementation plan for the Chengdu-Chongqing node of the National Unified Computing Power Network (NUCPN).
Background: NUCPN is China’s strategy to create an interconnected network of green data centers.
More background: Sichuan will host one of the network’s eight major data transfer hubs — the Chengdu-Chongqing node.
The deets: Sichuan hopes to have a cluster of data centers built near the node by 2025.
But what really stood out to us: Sichuan is getting even more aggressive about requiring data centers to keep their energy consumption numbers down than the national NUCPN plan requires.
Our take: Although PUE is the de facto standard for measuring energy efficiency in data centers, it’s been criticized as being an unreliable metric.
The problem: If servers are made more efficient — for example, through server virtualization — but infrastructure energy use remains the same, PUE goes up.
In other words: Data centers angling for subsidy money may choose not to make IT equipment more efficient in order to keep their PUE number down, using more energy than they actually need.
Time will tell if this project does indeed result in reduced emissions, or bad decision-making in pursuit of state-directed targets.