Tencent takes on the world (asia.cnet.com)

21 August 2012 12 h 46 min Comments Off

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Internet giant Tencent, creator of the popular QQ instant messenger service, has announced plans to expand its video games into foreign markets. According to the BBC, Tencent President Martin Lau told investors recently that the Internet company plans to “devote more resources” to expanding outside of China.

For China watchers who have been predicting’s China’s shift from the world’s source for cheap manufacturing to a world leader in tech innovation, Tencent’s stated ambition could be the beginning of a groundswell of outward expansion for many Chinese companies.

Tencent’s strategy for growing abroad appears to be to invest in pre-existing online game manufacturers with an established history of success. It has recently purchased 49 percent of Singapore’s Level Up, giving the company access to markets in Brazil and the Philippines. The Chinese firm has also invested heavily in the North American market, purchasing Riot Games and acquiring minority shares in Epic Games.

Tencent is able to get to this point thanks to a strong gamer community within China. With over 457 million Internet users, the potential size of the online gaming industry is huge. According to Niko Partners, “the buzzword in Chinese online games today is Web games”. That makes it easy to see why gaming makes up half of Tencent’s revenues.

The truly exciting thing about Tencent is that it is a clear example of China making a transition to the next growth phase of its economy. A couple of months ago I tried to research multinational technology firms coming out of China and was a little disappointed. There are a lot of huge companies in China, but many have grown large on the back of the local economy.

Lenovo has been a sort of pioneer for Chinese tech firms expanding abroad. Tencent seems to be following the Lenovo model of global expansion through partnerships and acquisitions. The combined success of companies like Lenovo and Tencent demonstrates to me that China is no longer simply the workhorse of the world’s economy. It is now beginning to produce companies capable of stepping forward and competing on the global stage by becoming the source of innovation in technology.

Smartphone manufacturer, Xiaomi, is an example of a young Chinese firm that makes a product that compares well to what’s sold by Samsung and Apple in all the major markets of the world. The future of tech out of China looks promising.

Source: asia.cnet.com (21/08/2012)

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