Chinese tech companies are just starting to globalize, VC says

Ben Harburg, Managing Partner of MSA Capital, chats with CNBC’s Evelyn Cheng at the annual East Tech West Retreat in the Nansha District of Guangzhou, China on December 1, 2021. Harburg discussed the ambitions of Chinese technology companies to globalize.

CNBC

GUANGZHOU, China – Chinese tech companies plan to expand overseas much earlier in their lifecycle, a venture capitalist told CNBC – signaling a change in attitude among companies in the world’s second-largest economy.

The change was prompted in part by China’s tighter regulatory control over technology as well as competitive pressure in some industries, according to Ben Harburg, managing partner of venture capital firm MSA Capital.

“It also forces Chinese companies much earlier in their lifecycle to consider going global,” Harburg said at CNBC’s annual East Tech West conference in Nansha, southern China.

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Harburg said that a few years ago his venture capital firm was working with more mature cross-border social media or e-commerce companies. But today, start-ups in industries ranging from artificial intelligence to healthcare are going global or “thinking about developing their globalization strategy,” he said.

These Chinese companies might find that their business models are working in emerging markets, in particular, Harburg said.

“Our view was that Chinese business models are global best practices, especially for emerging markets, because the way Chinese consumers have evolved with technology is much more reminiscent of how the next wave of consumers in India, in Pakistan, Egypt and Nigeria, and Brazil, will engage in the technology, ”he said.

There are only a handful of examples of Chinese tech companies that have been successful overseas in the past. But more recently, there has been an increase in the number of China-based tech companies expanding their international businesses.

Beijing-based Xiaomi is now the world’s third-largest smartphone player in terms of market share, thanks to big gains in India. Chinese tech giant ByteDance’s short video app, TikTok, has one billion monthly users worldwide.

Chinese fashion brand Shein has also won over young Western consumers.

Meanwhile, giants like Alibaba and Tencent continue to expand their businesses overseas.

“I think there’s maybe the perception that it’s, you know, it’s kind of the pinnacle of China’s expansion into these markets,” Harburg said.

“But our view is that this is only the tip of the spear, and that there is a long tail of Chinese companies dealing with financial services, education, health care and other social applications in emerging markets and even more mature markets. “

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