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Hello, this is Kenji reporting from Hong Kong. As reporters, we’ve been focused on covering corporate earnings, but lately, we’ve also been paying close attention to developments in distressed mainland Chinese real estate companies, many of which are listed in Hong Kong.
China’s property crisis has been ongoing for about two years, but it was reignited last week when Country Garden Holdings, one of the country’s largest developers, missed coupon payments on two offshore bonds. The impact of weakness in the property sector on the broader Chinese economy cannot be underestimated.
The concerns about the economy and consumer sentiment set the backdrop for the latest quarterly results of tech conglomerates. Tencent Holdings reported an 11% year-on-year increase in revenue for April-June, falling short of expectations despite strong online advertising demand. Alibaba Group Holding, on the other hand, saw a 14% rise in revenue for the quarter but highlighted slow growth and weak demand in its key cloud segment.
Recent economic statistics further highlighted the sluggishness of the Chinese economy, with retail sales growing only 3.1% in June and 2.5% in July, while industrial output growth also slowed down.
The tech industry has yet to prove convincingly that it can replace the property sector’s role in the Chinese growth story.
Generating competition, China’s biggest tech companies are betting on generative artificial intelligence (AI) to unlock new growth opportunities. Tencent Holdings plans to roll out its own foundation model for generative AI this year, aiming to incorporate it into various businesses such as public services, tourism, and finance. Alibaba Group Holding, on the other hand, is developing large language models on which other tech companies can build their own AI-based tools.
Foxconn, the iPhone assembler, announced its plan to invest “several billions of dollars” in India to accelerate its expansion in the country. The move reflects the push by customers like Apple to reduce their reliance on China. However, India still has a long way to go to match China’s manufacturing capabilities.
China’s state-owned telecom carriers, China Mobile, China Telecom, and China Unicom, are shifting their focus to cloud services to catch up with private internet companies like Alibaba and Tencent. They have reported double-digit year-on-year growth in cloud service revenue in the first half of the year and have ambitious targets for the full year.
Vietnam, with its population of 100 million, has always been an attractive market for internet companies. However, the government’s strict restrictions on online freedoms may soon become even harsher. Authorities are considering a new regulation that would require internet service providers to disconnect users who share “illegal” content. This would further tighten the country’s web control regime, which already blocks around 1,000 websites.
In conclusion, the technology landscape in Asia is constantly evolving, with developments in China, India, and Vietnam shaping the industry. Stay updated with our newsletter to get all the latest news and insights from the region. Sign up today!
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