Chinese automakers will over time become a dominant force worldwide despite the US and Europe imposing extra duties on their electric vehicles, consultants AlixPartners said on Wednesday, highlighting that China’s vehicle makers are on track to grab over 30% of the global market by 2030.

Chinese brands’ market share in Europe is unlikely to reach the previously anticipated percentage of 15% by 2030, as forecasted a year ago, instead doubling from 6% to 12%, but stronger growth is expected in other regions. Chinese brands could claim market shares 31% and 28% in Southeast Asia and Latin America respectively by the end of the decade, up from the 19% in each estimated last year, figures from the consultancy’s annual Global Automotive Outlook showed.

Many Chinese auto majors have pivoted their focus to overseas markets beyond the EU in recent months, taking advantage of fewer regulatory barriers in, for example, Southeast Asia and the Middle East. Geely subsidiary Zeekr plans to expand its footprint from 25 to more than 50 global markets by the end of this year, despite retaining “very big ambitions” for Europe, executives told investors last month. Great Wall Motor is shutting down its European headquarters in Munich, Germany, but says it still has plans to set up a factory in the region.

“Chinese automakers will definitely lose some competitive edge in EVs as they move to implement localized manufacturing and sales operations in Europe,” Stephen Dyer, a co-leader for AlixPartners’s Greater China business and head of its Asia automotive practice, told reporters on Wednesday in Shanghai. “However, they still have cost advantages over foreign competitors thanks to a shortened vehicle development time, a much lower labor cost, along with an intense corporate culture,” Dyer added, speaking in Mandarin Chinese (our translation).

An employee from a Chinese EV maker works as many as 140 hours in a month when a new car is launched, compared with only 20 hours worked by a counterpart at a global auto major, AlixPartners told clients in its latest outlook. Meanwhile, the average vehicle development time for a Chinese EV model has been cut in half to 20 months compared with legacy brands, mainly by reducing the number of physical tests and sending out software updates to fix problems.

The European Union’s additional tariffs on Chinese-made EVs are forcing Chinese majors to set up their own assembly operations on the continent. BYD on July 4 opened its first overseas passenger car factory in Thailand while planning to invest $1 billion in another one in Turkey and to establish a $30 million battery plant in Hungary. Chery in April reached a joint venture deal with Spain’s EV Motors to produce cars at a former Nissan plant in Barcelona later this year, Reuters reported. At least 12 new regional plants are being planned by Chinese car manufacturers, Dyer said.

“What we see is we’ve had a brand premium that is comparable to or even slightly more than global automakers in some overseas markets, such as Southeast Asia,” Wang Hui, a vice president of Changan Automobile, told this year’s China Auto Forum in Shanghai on Friday (our translation). The state-controlled automaker last October announced plans to build a $241.7 million plant in Rayong, Thailand, aiming to commence operations later this year with a capacity of 100,000 EVs annually. 

Wang added that Chinese firms should take a long-term mindset of “being humble and cautious” while making efforts to increase tax revenue and boost job growth for the local economies in where they operate.

READ MORE: EU anti-subsidy EV probe: What Chinese automakers have done in Europe and what’s next

The European Union announced on Wednesday it has taken a case-by-case approach to deciding how much tariffs could increase on Chinese electric vehicles. In a move that surprised many industry professionals, the preliminary duties set to hit Chinese EV imports will rise from the general 10% basis on all of them to between 27% and 48%, with SAIC and those deemed incompliant with EU standards facing the hardest hit. The tariff hikes are relatively moderate for the likes of BYD and Geely, which have either committed to growing deep roots within the EU or have already done so in the past.

Broadly speaking, the additional duties are still in line with what many analysts had expected, despite the possibility of a massive but temporary plunge in China’s EV exports to Europe. Chinese battery EVs are priced in general around 80-100% higher in Europe than in their domestic market, creating room for price adjustments, said Jefferies analysts led by Johnson Wan. There could be very limited benefit for major European players, as the high-volume EV segment would remain intensely competitive with subdued margins, said Patrick Hummel, Head of European Autos Research at UBS.

Although Bernstein analysts expect the provisional tariffs to be a serious turn-off to smaller Chinese brands, prompting them to focus on other export markets, bigger Chinese players are likely to step up their localization efforts. Paul Gong, UBS’s head of China Autos Research, also wrote in a note to clients, “Localization of production may become an increasingly appealing option over longer run compared to direct shipping from China for exporters to take shelter from trade conflicts and geopolitical tensions.”

Below, we take a look at what the key Chinese players have been doing in Europe and their respective prospects in a continent home to some of the world’s most important automakers.

BYD

China’s top EV maker is widely considered the least affected by the newly announced tariffs, with the strength to still break even on an import model thanks to its significant cost advantage versus peers. BYD’s EVs would still be priced lower than the similar models launched by European rivals, even if the company raises prices by 17.4% to fully pass on the additional tariff to customers, although the measure could effectively prevent its dominance in destination markets.

The leading Chinese player would also have a 25% cost advantage over European counterparts even after localizing the production of its popular sedan in the region, according to UBS’s previous findings. Set to be the first major Chinese automaker with a production base in Europe, BYD expects its Hungary plant to begin operation before 2026, with an annual capacity of 150,000 units. Although exports to Europe only account for a single digit percentage of its total sales, it aims to “be in a leading position” in the regional market by 2030.

SAIC

China’s biggest car manufacturer got relatively unfavorable treatment, and analysts expect the measures will significantly curb its competitiveness in Europe. The European Commission will impose tariffs of nearly 50% on EVs from the Chinese state-owned automaker, along with those deemed to be the least compliant with the nine-month anti-subsidy investigation announced last September. The company, which owns the iconic MG brand of British origin, said earlier it had “fully cooperated” with the investigation and hinted that the EU regulators misused their investigative powers in order to view sensitive business information related to its supply chain.

SAIC responded on Thursday by saying, “As SAIC MG’s sales in Europe continue to grow, we are planning to introduce China’s new energy vehicle (NEV) technologies and green factories to the continent” (our translation). The firm also called for more cooperation between China and the EU. China’s top car exporter to Europe, with shipments of nearly 243,000 units to the region last year, revealed plans last July to build a manufacturing facility plant on the continent.

Geely, Chery, and Dongfeng

Volvo parent Geely was among the three Chinese companies selected for further scrutiny and saw a relatively moderate tariff increase of 20%, another individually calculated duty rate. The impact is likely to be very marginal to China’s third biggest car exporter, thanks to its ownership of Volvo and the currently limited scale of its own brands in the region. Geely’s EV brand Zeekr said on Tuesday it is looking to establish a presence in six to eight European countries by year-end.

Chery, as well as its state-controlled peers such as Dongfeng and Chang’an, faces an extra 21% charge in a category for those cooperating with the probe but not sampled. Jaguar Land Rover’s Chinese manufacturing partner in April reached a joint venture deal with Spain’s EV Motors to produce cars at a former Nissan plant in Barcelona later this year, Reuters reported previously. Meanwhile, Dongfeng’s Voyah brand, previously planning to enter Germany, France, and Italy, has for now been selling EVs mainly in Nordic countries.

NIO, Xpeng Motors, and Leapmotor

Like their bigger peers, Chinese EV makers NIO, Xpeng Motors, and Leapmotor are also set for extra charges of 21%. NIO, which currently sells four models from more than €60,000 ($64,361) in Europe, higher than most domestic competitors, said on Wednesday its commitment to the regional market remains unwavering and it will continue to explore new opportunities within the EU despite protectionism.

The company is still looking to introduce its lower-priced vehicles, including an upcoming third brand codenamed Firefly, in Europe, but the plan is now being adjusted based on the current situation. Delivery of the first model, a well-designed boutique car, will begin in the first half of 2025 in China at a price cheaper than the BMW Mini, CEO William Li recently told investors during an earnings call.

Zhejiang-based Leapmotor, which has Stellantis as its largest shareholder, is also making pivots. Chief executive Carlos Tavares said on Thursday the European auto giant will shift the output of some Leapmotor products to Europe due to the tariff hikes, having reportedly explored the potential of building EVs jointly in Italy. A similar scenario could unfold for Xpeng Motors and its European ally Volkswagen. President Brian Gu last September revealed plans to enter Germany, Britain, and France, with Italy also being included earlier this year.

China’s SAIC Motor Corp will spend $1.4 billion building 12 fossil liquefied natural gas (LNG)-powered ships to export cars, as Chinese electric vehicles spread overseas and the European Union tightens its climate and trading policies to reduce greenhouse gas emissions.

Why it matters: The move is the latest example of how EU regulations are pushing Chinese automakers to make changes to the way they operate, and adds to the challenges they face in expanding to overseas markets with their EVs.

Details: China’s biggest automaker said on Wednesday that the SAIC Anji Sincerity has begun its maiden trade voyage from Shanghai to Europe. The ship spans 200 meters (656 feet) in length and boasts capacity for 7,600 cars, making it the world’s largest ro-ro vehicle transport vessel partly powered by sustainable fuel. 

• The container carrier is powered by both diesel and LNG, a form of natural gas that has been cooled to a liquid for easier storage and transportation, providing as much as a 30% reduction in carbon dioxide (CO2) emissions compared to similar-sized, diesel-only vessels, according to an announcement on China’s Twitter-like platform Weibo. 
• SAIC expects to spend RMB 10 billion ($1.4 billion) on building 12 LNG carriers and lease two more for the next three years. The biggest of them will be able to carry as many as 9,000 cars, Zhao Aimin, vice president of SAIC Motor International, told financial media outlet Caixin (in Chinese). 
• Volkswagen’s Chinese manufacturing partner expects its carriers to have a total combined capacity of 1.8 million cars per year by 2026. Its wholly-owned subsidiary Anji Logistics currently operates a fleet of 31 carriers on seven routes to Europe, Southeast Asia, and Latin America, and works with automakers Dongfeng and Great Wall Motor among others. 
• Zhao also mentioned SAIC’s goal to sell 1.35 million cars overseas in 2024, which would mark a growth of more than 11% from the 1.2 million units it achieved last year. That number could be further increased to 1.5 million in 2025, with at least 14 new energy vehicles, including plug-in hybrids and all-electrics, set to go on sale globally over the next two years. 

Context: SAIC is not the only Chinese carmaker to build its own fleet and set its sights on going global. Its move takes place as China recorded exports of 5.2 million cars last year, meaning a 57.4% annual growth rate, and is set to dethrone Japan to become the world’s largest car exporter. 

• BYD’s first roll-on, roll-off, chartered vehicle carrier, named BYD Explorer No. 1, set sail towards Germany and the Netherlands from its base city of Shenzhen on Monday. Carrying more than 5,000 EVs, the vessel is reportedly managed by London-based Zodiac Maritime Ltd. and is being rented to BYD. 
• The EU began mandating shipping companies, among other businesses, to buy CO2 permits for 40% of the CO2 generated by their fleets from January, a percentage that will grow to 70% and 100% over two years from 2025, Reuters reported. 
• Meanwhile, the European Commission launched an anti-subsidy investigation of China-made EVs last October.

China’s annual Singles Day online shopping festival has yet to officially kick off on Nov. 11, but its “pre-sales” events already hint that the hot sales trend will again be live e-commerce.

“Lipstick King” Li Jiaqi generated an estimated gross merchandise value (GMV) of RMB 726 million ($113.5 million, or EUR 97 million) for L’Oréal during a Taobao livestreaming event on Oct. 20, according to Ashley Dudarenok, founder of China trends watching company ChoZan.

European brands L’Oréal and Guerlain jumped on the country’s live e-commerce bandwagon early on back in 2016, hiring Chinese influencers to promote their cosmetics to Chinese viewers. Now, fueled by the pandemic, European companies are embracing livestreaming as well as promotional techniques from China as they target online European shoppers. They still have a lot to learn. 

Since its first appearance, live e-commerce has exploded in China and the market recorded triple-digit growth over the past three years. In China, the online shopping format is expected to be worth RMB 4.9 trillion in 2023, according to the China’s 2021 Live-Streaming E-Commerce Industry report released by market research firm iResearch on Oct. 27.

European brands in China’s live e-commerce scene

L’Oréal and Guerlain were followed in China a few years later by Givenchy, Unilever, Procter & Gamble, Pandora, La Mer, Nestlé, and many others. Today, few big European brands with a strong Chinese presence have not run at least one live shopping show. Italian pharmaceutical skincare brand Rilastil gets 35% of its total China sales from live e-commerce.

But success in China’s competitive livestreaming market shouldn’t be taken for granted. Dudarenok explained that it is very easy to make mistakes, such as choosing the wrong KOL, the wrong platform, or the wrong presentation style. 

The pandemic spurred European retailers into live e-commerce 

While European players in China have long been hiring Chinese KOLs, celebrities, and their own staff to host live shows on the most popular Chinese livestreaming platforms, they were slow to transfer the format to Europe, assuming it was only fit for a Chinese audience. 

A February 2021 study by Forrester and AliExpress rejected this assumption, finding 70% of 14,460 consumers surveyed in the UK, Spain, France, and Poland were interested in this new form of online shopping.

Livestreaming experiments in Europe started at the end of 2019 and increased in frequency in 2020, as the pandemic forced shops to shut down throughout the continent.

Italian apparel brand Motivi leaned into livestreaming right at the onset of the pandemic, engaging its own shop assistants to present collections and answer questions from customers in real time on its website, replicating the real shop experience.

Another example is Lancôme, which in November 2020 worked with live shopping platform Livescale to run a show with Italian influencer Chiara Ferragni. 

Monki, a fast-fashion brand of the H&M Group, also launched several live broadcasts featuring experienced sellers, again with the shows accessible directly from the brand’s website. 

Europe’s approach to live e-commerce

Still, when it comes to live e-commerce, China is about five years ahead of Europe. China’s experience may give us precious lessons to refer to. It took China a couple of years to transform live e-commerce into a popular format used regularly by both brands and consumers. Europe is now in the study and exploration phase, but we can predict some major differences in style and approach: 

Live e-commerce in China versus Europe

Will livestreaming be big in Europe?

Years 2021 and 2022 will tell whether live e-commerce in Europe has been just a temporary pandemic-driven boom or if it is here to stay. But numbers so far point in the right direction.

In 2020, Western brands saw 15 times more engagement in live e-commerce than with traditional social media, from three to five times more sales, and a 50% increase in the number of customers, according to Madison Schill, marketing and communications director at Livescale. According to Schill, the average sales conversion rate across all clients and platforms at Livescale was 9.5% in 2020. The rate this year is running about 18% in a sign that customers are reacting well.

Live shows in Europe might remain selective experiences, highly focused on content, reflecting the philosophy of the brand and the shopping habits of local customers. Sales people will likely continue to act as the main hosts, together with micro-influencers. Chinese tech players like Xinxuan, Alibaba’s AliExpress, and ByteDance’s TikTok with expertise in training and incubating livestreamers might serve as guides for European brands desiring to improve the live selling skills of their local hosts. 

If China’s growth trajectory is taken as a model, by 2024, Europe has the potential to reach around 160 million live streaming e-commerce users, of which approximately 100 million people might also make purchases while watching live streams, Leah Wang, Chief Marketing Officer of Xinxuan Group, said at the launch of the iResearch report.

In Europe, livestream shopping and e-commerce in general will probably never replace the in-store experience, but they will become part of a broader omni-channel marketing and sales strategy, in which physical shops remain at the center, sometimes serving as temporary livestreaming studios. Looking forward, we might see the expansion of live e-commerce into new verticals, maybe also into the B2B sector. 

Let’s be clear: Arm China was created by SoftBank and Arm to make more money out of China by presenting itself as a local company as much as possible. It was always SoftBank’s plan to have Arm China create intellectual property (IP)  for the Chinese market. It wasn’t in the plan for Arm to lose the power to choose who runs Arm China or for Arm China CEO Allen Wu, 53, to run investment companies competing with Arm’s own, or for the renegade CEO to set up an “Open NPU Innovation Alliance” (ONIA) that potentially competes with Arm globally.

Given the geopolitical nature of the semiconductor industry right now, whether or not Wu had taken over the joint venture, Arm China would still have attempted to market itself as a Chinese company. With Arm’s architecture facing stiff competition from the open-source RISC-V architecture, marketing in China would not have been very different.

Arm China doesn’t go so far as to say it is independent now, but it claims it  is “independently operated and Chinese controlled.” No matter what it calls itself, Arm’s company in China is nonetheless still 49% owned by Arm Ltd. One Chinese investor in Arm China, Ningbo Meishan Bonded Port Area ARM Investment Management Partnership, has sued the company in a Shenzhen court over the standoff with Wu, but cases like this may take years to be resolved.

This whole situation is a red flag for any foreign tech company considering a JV in China. There are other ways of entering the market that might be more suitable for some companies. You should explore these before going the JV route, and safeguard your company chops! 

Perhaps most important of all, the conflict in China threatens the entire Nvidia-Arm acquisition deal. What can Nvidia offer China in order to get the deal through? Can Arm China still get access to its UK parent’s IP, notably the next-generation Arm v9 architecture?

With a Chinese face

Around 27% of Arm’s revenue originated from the Chinese market in 2020. From its launch in 2017, Arm China was intended by Arm and SoftBank to appear more Chinese and to allay any fears of its large Chinese customers that supplies from a foreign company could be abruptly cut off.  

Seeing the threat of RISC-V and self-developed instruction set architectures (ISAs) combined with sanctions on ZTE taking effect only months before, Arm in 2017 was making a move to cast itself as a local option and continue the China gravy train. At the time, it seemed like a shrewd move to maintain sales growth in China. So was appointing Wu, a China-born US citizen, educated at Michigan and Berkeley, who had worked for Arm in China since 2014.

June 2020:  Boardroom showdown

Arm discovered in 2019 that Wu had been attracting investments to Alphatecture, his own fund for investing in tech startups, when he should have been bringing them to the Hopu-Arm Innovation Fund. (Not surprisingly, Hopu Investment Management Company, one of the Chinese investors in Arm China, has been siding with the mother company). In June 2020 Arm China’s board of directors, four of whom were appointed by Arm Ltd., voted seven-to-one to oust Wu. He refused to leave, kept the registration documents and all-important company chops, and is alleged to be paying his own legal expenses from Arm China’s bank account. Over a year later, he remains in charge at Arm China, despite attempts by both foreign and Chinese owners to remove him and to appoint new executives. 

As long as Wu controls the company chops, the board members can’t get rid of him because company decisions need the chops to become official. Over a year ago, SoftBank and Hopu asked Shenzhen regulators for a replacement seal. Some observers have speculated that Wu has backing from high-level Chinese officials, but that cannot be verified. Arm China’s Chinese state investors include sovereign wealth fund Chinese Investment Corp. (CIC) and Shenzhen government-owned Shum Yip Group.  

In fact, Wu is suing the three executives the board tried to reinstate. In July 2020, Wu even wrote an open letter on Arm China’s WeChat account, asking the Chinese government to help him fight Arm. A year on, they still haven’t publicly come to the rescue. Arm China owners last year offered Wu tens of millions of dollars to leave but he still occupies Arm China’s head office in Shenzhen.

The chops are still in Wu’s hands, and he isn’t budging. I’ve witnessed first-hand the entourage of bodyguards he has at events. Could the mysterious chops actually be on his person at all times?

August 2021: From Arm China to Anmou Technologies

On Aug. 26, Arm China officially launched a new brand, Core Power (Hexin Dongli), to promote self-developed IP (CPU, GPU, XPU, SPU, VPU, ISP, NPU) and services. It vowed to continue the localization of Arm’s CPU architecture and to create products suitable for the Chinese market. Much emphasis was placed on self-development, how Arm China  is “independently operated and Chinese controlled”. Wu said at the event, “Since it was established in 2018, Anmou Technologies has not only inherited Arm’s CPU business in China, but also deployed new businesses for the digital age”. Rumor has it that Arm China employees used the words “peace and love” to describe the relationship between Arm China and Arm, but I can’t confirm this. The company was described, however, as “China’s largest CPU IP supplier.”

So, it is claiming to be Chinese: Chinese controlled, Chinese run, with Chinese IP and, even now, is not just licensing Arm IP but developing its own. From a marketing standpoint, its press releases no longer say “Arm China” but “Anmou Technologies,” the legal name in China. It is clearly trying to erase any indication it has foreign connections.

Arm China may now be an Arm rival

The most startling announcement at the Aug. 26 event concerned self-developed IP, especially the neural processing unit (NPU) microprocessor. 

Another interesting bit of news was that Arm China had created an “Open NPU Innovation Alliance” (ONIA) in June, with Wu as the alliance’s chairman. The alliance’s website says the NPU’s ISA is open source and will be promoted globally, following a business model that seems similar to RISC-V Alliance’s. While intended for worldwide participation, so far all alliance members are Chinese entities. Besides Arm China, the 54 members include AllWinner, Changan Auto, Rockchips, Sword7, Sanechips (ZTE), TCL, and Tsinghua University.

This alliance has the potential to compete directly with Arm’s own NPU cores. Surely, this was never the vision of Arm executives in Cambridge or of Arm’s owners in Tokyo. Having said this, the whole endeavour feels like a difficult undertaking, different NPUs may be good at different applications. I guess this group will need to decide on what their applications are rather than trying to have a solution for everything.

A cautionary tale

As stated above, this situation seriously puts in doubt the viability of any tech JV between Chinese and foreign partners. It isn’t a good look for China if Beijing wants to attract future foreign investment in this sector. 

Arm and SoftBank wanted to find ways to make more money out of China. Yes, China is a different kind of market. In other markets it is unlikely a JV would be considered by a chipmaker or designer, but Arm executives wanted as much access as possible, so pretended to be as Chinese as they could to curry favor. The strategy backfired in a spectacular way.

JVs are often touted as the best way to deal with the Chinese market but, all too often, the foreign partner is left with a husk of a company while local management runs off to set up a competitor,  taking all the well-trained staff with them. By not even bothering to set up a new company, Wu can be credited with an innovation in the decades-old scheme. Keep the chops and it’s all yours, baby. There are many other ways to be successful in China, don’t let anyone talk you into a JV without doing some homework on other options! Even if you have the most shares of any single party and on paper have control like Arm, you may find out the hard way how little you may have. 

How will this affect the Nvidia-Arm acquisition? Arm’s ownership shifting from Japan to the US will make it be subject to US sanctions. It certainly could erode the value of the deal. In my opinion, Nvidia, the world’s biggest maker of graphics and AI chips, will have to offer the Chinese government something big in order to get the deal through. 

As of now, Arm China can license Arm’s v9 architecture if it wants to, but it has so far chosen not to. It essentially acts as a distributor of the IP to Chinese companies but does not touch the IP, which goes directly from Arm to the Chinese licensee. Indeed there are several Chinese licensees of the v9 IP, including at least one architectural licensee. It is unclear why Arm China doesn’t want to license v9 and make modifications like what it does with v8. Either way, Arm, being a British firm, faces no restrictions on licensing to Chinese companies right now. But this could change with an Nvidia acquisition. With v9 already being in China, including architectural licensees, it is hard to see what Nvidia can offer to convince China to let the acquisition go ahead.

Correction: The last two paragraphs of this article have been updated to reflect the fact that Arm Ltd is still licensing the Arm v9 IP to Chinese companies. A previous version of the article incorrectly states that Chinese companies have no access to the IP.

Chinese chipmaker Wingtech said on Monday that it had closed a deal to buy Newport Wafer Fab (NWF), the UK’s largest chip fabrication plant. The deal was closed after the UK government initially considered blocking it. 

Why it matters: The UK government’s clearance on the deal is a breakthrough for Wingtech, which quickly established its dominant position in China’s car chip industry through overseas acquisitions since 2018. But the single approval doesn’t mean Chinese chip firms looking to buy chip plants abroad will enjoy a smoother regulatory environment.

• NWF is a manufacturer of low-end chips. The plant mainly produces 180-nanometer (nm) wafers, while the industry’s bleeding edge is the 3-nm process by Taiwan’s TSMC and South Korea’s Samsung.

Details: The UK government gave Wingtech the green light to take over NWF’s parent company on Aug. 12, according to a Wingtech filing (in Chinese) to the Shanghai Stock Exchange.

• Wingtech said its acquisition of NWF had been closed as of Monday. It now fully owns the UK firm through Nexperia, Wingtech’s Dutch chip subsidiary. 
• NWF’s operation might be affected by domestic and overseas industry policies, said Wingtech’s filing, without elaborating.

Context: The NWF deal, conducted through Nexperia, was previously subject to a national security investigation by the British government following backlash from some UK lawmakers.

• Nexperia offered GBP 63 million (around $87.2) to buy NWF on July 5. The deal met with little regulatory pressure when it was first announced, but it soon met with more official scrutiny in the UK. 
• Some UK politicians have advocated taking a hard line on the deal. Tom Tugendhat, a UK parliament member and the chairman of the parliamentary Foreign Affairs Committee, told CNBC on July 5 that he would be “very surprised” if the deal was not being reviewed under the National Security and Investment Act, a November law passed to protect key UK assets from foreign takeovers.
• On July 7, UK Prime Minister Boris Johnson said he had ordered national security advisor Stephen Lovegrove to review the acquisition. Lovegrove had 30 days to complete his review.

Gotion High-Tech, a Chinese battery maker, will build a battery factory with Volkswagen in Germany, the company announced on Tuesday. Gotion is the latest Chinese battery manufacturer to expand overseas, with its eyes on European automakers embracing electric vehicles.

Why it matters: The new plant will help Volkswagen increase electric vehicle production. By 2030, the automaker wants half of its car sales to be electric to comply with stricter emission rules.

• Volkswagen pledged to phase out fossil-fuel cars in major markets by 2040 and become carbon neutral by 2050.

Details: Extending an existing partnership signed in May 2020, Gotion and Volkswagen will partner to build a battery cell factory in the German state of Salzgitter. The factory is scheduled for operation in 2025.

• Gotion will provide technical support for laying out the factory, machinery, production processes, among others, according to company statement on Tuesday. The factory will be Volkswagen’s second battery gigafactory in Europe. 
• On Tuesday, the German automaker revealed plans to open six gigafactories with a total capacity of 240 gigawatt-hours (GWh) across Europe by 2030. The plan, while ambitious, comes short when compared to its US counterparts. Tesla said last September it plans to generate 3,000 GWh of battery production capacity over the next decade.
• Gotion will also begin developing the first generation of unified cells for Volkswagen in the Chinese market. Unified cells are a new battery design that could cut costs by half, Volkswagen said in September. Gotion said it is the first battery supplier to build the new batteries for Volkswagen China.

Context: Chinese battery makers are expanding their overseas production capacity to maintain China’s leading position in alternative fuel technology. 

• CATL, a Chinese battery maker and a Tesla supplier, began building its first production site in Europe in Thuringia, Germany, in mid-2018. The company expects to start supplying BMW later this year with an initial annual capacity of 14 GWh.
• In March, Chinese EV and battery maker BYD began recruiting engineers for its first overseas battery plant in Europe, without detailing location or manufacturing capacity, Reuters reported.

BYD will begin delivering its electric crossovers in Norway during the third quarter of this year, the company announced Wednesday, the latest example of a Chinese electric vehicle (EV) maker pushing into the European auto market.

Why it matters: The move is BYD’s first major foray into Europe’s passenger EV market. Prior to the annoucement, the company’s focus in the region had primarily been on buses.

• The Chinese EV giant will have to take on big auto names including Volkswagen and Tesla, while competing with fellow Chinese EV makers including Nio and Xpeng Motors, which have a headstart in establishing a presence in the market.

Details: BYD said on Wednesday it will begin shipping the first 100 of its Tang electric sport utility vehicles to Norway at the end of this month and start deliveries during the third quarter.

• The EV maker expects to hand over a total of 1,500 Tang SUVs in the country by year-end. The seven-seater all-electric crossover is priced at NOK 599,900 ($72,200), around 50% higher than its price in China, and offers a driving range of 505 km (314 miles) on a single charge.
• BYD’s cars will be sold through Norwegian car dealership RSA, the Chinese auto giant said last year.

Context: Norway, where EVs accounted for more than 50% of car sales last year, has become a testing ground for Chinese automakers eager to tap into the fierce but fast-growing European EV market.

• Volkswagen’s partner SAIC was the first Chinese carmaker to enter Norway, and reportedly sold 3,720 EVs in the country last year (in Chinese).
• Xpeng followed suit in September. Norwegian car dealers handed over 300 of the company’s G3 electric crossovers to customers during the first three months of 2021.
• Nio last month said that it will establish its direct sales and service model in Europe by opening its first flagship showroom and start delivering vehicles to customers in Norway in the third quarter of this year.
• Europe last year became the world biggest passenger EV market for the first time, registering nearly 1.37 million electric cars versus China’s 1.27 million, according to figures from the EV Sales blog.
• Volkswagen-owned Audi was Norway’s top-selling automaker last year, delivering 9,227 EVs in the country, followed by Tesla with sales of 7,770 Model 3 sedans, reported CNN.

Xpeng Motors CEO He Xiaopeng promised Wall Street analysts May 13 that the company would roll out a new generation of autonomous driving (AV) software early next year. The company said recently that its Xpilot 3.5 system will be able to drive autonomously 90% of the time.

Why it matters: Improved AV capabilities could give the electric vehicle (EV) startup a leg up as it faces challenges. Last week, Chinese tech giants set out ambitious targets for their self-driving tech businesses in partnership with legacy automakers.

Earnings: Xpeng on Thursday reported a record RMB 2.95 billion ($450.4 million) in revenue in its first-quarter results, rising more than sixfold from a year earlier, exceeding a consensus estimate from analysts polled by FactSet, according to MarketWatch. However, Xpeng shares fell 4.8% to $23.56 on Thursday following the call.

• Gross margin expanded to 11.2% from 7.4% in the fourth quarter last year and losses attributable to shareholders was flat quarter on quarter at RMB 786.6 million.
• The young EV maker also revealed its software figures for the first time, generating around RMB 80 million ($12.4 million) in software revenue in the first quarter, and accounting for 2.5% of gross profits.
• Approximately 25% of P7 owners, Xpeng’s first sedan upgradable to advanced self-driving capability, have bought their cars with Xpilot 3.0 for an additional one-time fee ofof RMB 20,000 as of March, according to He. The company had delivered around 23,000 P7 sedans as of March.

Race to AV: He was asked about competition from Baidu and Huawei, which last month made public debuts of self-driving systems for city streets. He said the AV solutions provided by some companies are currently for limited driving scenarios or “at a very high cost.”

• In late January, Xpeng launched its Xpilot 3.0 advanced driver assistance system (ADAS), which allows vehicles to drive themselves on national highways.
• During an online conference on Apr 20, Wu Xinzhou, vice president of autonomous driving, said Xpilot 3.5 could allow autonomous driving on 90% road travel from the current 10%, as the function extends its reach from highways to city streets.
• “We are coming up with a solution that can balance all the aspects with a reasonable cost to deliver the most superior experience to our customers. This is an art,” He said.

READ MORE: Drive I/O: Key takeaways from Auto Shanghai 2021

Context: Chinese young EV makers are feeling the heat as local tech giants strive for self-driving leadership with the launch of their advanced AV solutions during this year’s Auto Shanghai last month.

• Huawei on Apr 17 announced to spend a whopping $1 billion in AV this year as the company, along with its auto partner BAIC, is pushing to deliver urban self-driving functionality first to customers from Beijing, Shanghai, Guangzhou and Shenzhen by year-end.
• Chinese search engine Baidu during the show said its ADAS solution for urban self-driving called Autonomous Navigation Pilot (ANP) will be available on vehicles launched by partners first in 20 cities by year-end and then over 100 cities by 2023.

Chinese electric vehicle maker Nio on Thursday announced that it will start delivering vehicles to buyers in Norway in September and will open a flagship store there in the third quarter, in its first overseas foray.

Why it matters: Norway is the first stage of Nio’s ambitious expansion plan for Europe, which holds significant growth opportunities for the EV upstart but may prove to be a challenge.

• Nio has only sold cars to customers in China and will need to adapt to European regulations, culture, and consumer appetites in a short timeframe.
• The Europe initiative will run at a loss over the short term as the company is at an early stage of investment, CEO William Li said during a press event in Shanghai on Thursday. “Nio didn’t set near-term sales targets for the Norway team, and instead we will pursue robust growth over the long term,” (our translation) Li added.
• Company president Qin Lihong told Caixin (in Chinese) during this year’s Auto Shanghai expo that Nio’s average selling price will probably exceed similar models from Audi and other international auto brands. 

Details: Nio plans in August to start customer test drives of its large electric crossover, the ES8, in Norway, and start taking orders and delivering cars to customers in September, Marius Hayler, general manager of Nio Norway, announced via livestream during the event on Thursday. Detailed information on pricing was not disclosed.

• Nio has plans to enter five other European countries next year, Li said, without further elaborating. The EV maker has been in talks with government officials from Germany, France, and other countries.
• Li said that he expects annual sales of at least 50,000 units in Europe over an undisclosed timeframe.
• Qin confirmed that the company will adopt the same strategy as in its home market to win over Norway’s consumers—creating a user community and premium experience with a direct retail and service network.
• The first Nio House, its clubhouse-style retail showroom, will be open for business during the third quarter on Karl Johans Gate in downtown Oslo, with four smaller Nio Spaces stores expected to open for business in Bergen, Stavanger, Trondheim, and Kristiansand next year.
• Nio will also build local power infrastructure facilities in Norway from scratch, with plans to first operate four battery swap stations in Oslo and surrounding areas by year-end. It is partnering with European charging network Plugsurfing to widen customer access to more than 20,000 chargers.
• The company expects to deliver more products looking ahead, including the ET7, a premium electric sedan scheduled for 2022, when its sales, service, and charging network expands in at least five Norwegian cities. Hayler said the local team will expand to 50 employees from 15 by year-end.

READ MORE: Chinese EV makers face uphill battle with Europe expansion

Context: Competition in Europe is stiff for Chinese EV makers. Norway is a mature EV market with a number of European brands competing for share.

• Norway became the world’s first country where EVs outsold traditional combustion cars last year, with the market share of EVs growing to 54% from 42% in 2019, Reuters reported in January citing figures from the Norwegian Road Federation.
• Boosted by heavy government tax incentives, Chinese EV makers are marching into the country. Nio peer Xpeng Motors delivered in December the first 100 of its G3 electric crossovers to customers in Norway, followed by another 200 or so vehicles shipped to the country two months later, according to a company announcement.

Chinese mixed reality glasses maker Nreal is preparing to launch its products in the US and Europe, less than a year after a California court dismissed a lawsuit brought against the company by Google’s Magic Leap.

Why it matters: Nreal is one of China’s most promising MR startups; it is backed by major Chinese tech venture capital (VC) firms and has set up partnerships with global heavyweights, including Qualcomm and Korea’s LG.

• In the US and EU, it will be competing primarily with Microsoft, Magic Leap, and perhaps Apple in the augmented and mixed reality fields, but also with Facebook and HTC in the entertainment-focused virtual reality market.

Details: In partnership with Vodafone and Deutsche Telekom, Europe’s most prominent telecom carriers, the company will launch its Nreal Light MR glasses in the EU in the spring, according to a statement sent to TechNode on Tuesday.

• The glasses will also be available in the US by April 2021, in collaboration with an undisclosed local telecommunications provider.
• Nreal is also launching an enterprise edition of its MR glasses, which users can wear over an existing pair of glasses. The enterprise edition is shaped like a halo, circling the user’s head. Both Microsoft and Magic Leap have already launched their own enterprise-oriented smart glasses.
• The startup is working with automakers, universities, and tourism organizations who want to use the enterprise MR glasses in the workplace, or to offer them to end users.
• Several new apps designed for the smart glasses were revealed at the Mobile World Conference held in Shanghai on Tuesday, including a weather app, games, and a 3D live soccer experience app.

With the initial success we’ve seen with our carrier partners, we’re scaling this strategy and excited to get Nreal Light into the hands of American consumers by April of this year.

—Nreal CEO and founder Xu Chi, in the statement

Context: In fall 2020, Nreal launched its Light MR glasses in Japan in partnership with KDDI, and in Korea with LG.

• Nreal closed a $41 million Series B in September led by TikTok competitor Kuaishou, bringing its total funding to $70 million.
• Other Nreal investors include Sequoia Capital China, video-streaming platform iQiyi—which operates its own VR venture—as well as Shunwei Capital, a VC firm founded and chaired by Xiaomi’s co-founder Lei Jun, and state-backed GP Capital and CCEIF fund.
• The company was accused of stealing technology from Magic Leap in June 2019.

READ MORE: US court rejects IP theft claims against Chinese mixed reality firm

Based on more than 10 interviews with industry insiders and regulators, TechNode tells the story of how Huawei established itself in the Greek market—and how the tables have turned for the Chinese telecom giant.

In the first part of this three-part series, we explored how Huawei entrenched itself in Greek networks. This installment expands beyond Greece to the European Union, examining how the bloc’s and consequently Greece’s policy on telecommunications security changed over the years, thanks to espionage and a global anti-Huawei campaign from the US.

A wiretapping scandal involving the 2004 Olympics, the US National Security Agency (NSA), and the mysterious death of a Vodafone employee erupted in Greece in 2005. As the mystery unraveled, the Greek government, telecommunications industry, as well as the public at large found out the hard way that Washington would not hesitate to spy on Athens’ top leadership. US security agencies had taken advantage of the 2004 Olympics to eavesdrop on the Prime Minister.

In 2018, when the US began imploring its allies to avoid Huawei, it was essentially asking Greek telecoms firms to end their relationship with a reliable partner—one that had stood by them in hard times—in favor of a government that offered them military and political support, but had spied on Greeks for months.

Greece wasn’t the only European country to be shocked by American espionage activities that decade. Starting in 2013, the bloc found out through Edward Snowden’s whistleblowing just how extensively the NSA was snooping on member-states, including heads of state. 

The diplomatic fallout with the US was quickly patched up, but Snowden’s revelations contributed to the European Union’s growing concern over cybersecurity. 

Decisions made in Brussels would affect Huawei’s prospects in Greece as much as those made in Athens. Over the next few years, the EU Commission rolled out key cybersecurity legislation. 

In interviews with TechNode, industry and regulatory insiders stressed that Greece abides by EU rules when it comes to cybersecurity. As the bloc responded to the Snowden revelations and later, Washington’s warnings about Huawei, the effects trickled down from Brussels to Athens.

As the EU prioritized cybersecurity and made new rules, Greek governments gradually implemented them.

Our man in Athens

In the wake of the financial crisis, Huawei earned trust in Athens as it “stood by” Greece during its moment of need, as described in part one of this series.

At the same time, Huawei’s European rivals and US security agencies were caught engaging in clumsy episodes of corruption and espionage. Between 2005 and 2015, a major scandal shook Athens’ trust in its long-standing alliance with the US. 

In January 2005, Vodafone found a glitch in its text-messaging service and notified Stockholm-based Ericsson, which had supplied the equipment. Two months later, Ericsson told the telecoms operator that it had found a complex piece of malware—6,500 lines of unidentified wiretapping code in the text-messaging function. 

Ericsson gave Vodafone a list of over 100 tapped phone numbers, including those belonging to then-Prime Minister Kostas Karamanlis, Minister of Justice Anastasios Papaligouras, Minister of Public Order George Voulgarakis, and Minister of the Interior Theodoros Roussopoulos. 

Two days later, a network planning manager at Vodafone by the name of Kostas Tsalikidis was found hanged in his Athens apartment. Two days after Tsalikidis’s death, Vodafone informed the Greek prime minister’s office of the wiretapping. 

The Greek government proceeded with an 11-month preliminary investigation before breaking the news to the public. 

On Feb. 2, 2006, the three ministers whose phones had been tapped called a press conference (in Greek) to inform the public of the wiretapping. By March, the government was accused of covering up the scandal in parliament. These accusations largely overshadowed the actual wiretapping in public and parliamentary discourse over the next few years. 

At that point, Greek prosecutors, telcos, and the government knew that they had stumbled onto a massive security breach, but they couldn’t find hard evidence to prove who was behind the wiretapping. The highest levels of the Greek administration understood that the US had its hands dirty, but they did not discuss this publicly.  

This “major scandal” made the industry and government uneasy in the years to come. The culprit of the “unprecedented data breach,” as 30-year telco veteran Andreas Polycarpou called it, was still out there. Instead of resolution and convictions, the incident left a trail of whispers and suspicions in its wake. 

In 2008, the Greek Parliament passed two bills, in part to respond to the Vodafone wiretapping: In February, they voted to increase the powers but also checks and balances of the country’s intelligence service, which is responsible for counter-espionage activities. In June, they changed the legal framework on violating telecoms privacy, launching a new strategy for cybersecurity. The Greek anti-corruption watchdog disapproved of the new strategy, claiming that it would put politicians with little technical expertise at the helm of a rapidly changing technological environment. 

The Vodafone case was still a mystery in September 2011, when the telco operator informed prosecutors that one of the mobile phones used for the wiretapping had made frequent calls to the US Embassy in Athens. 

The Greek public had largely forgotten the Vodafone scandal, but behind the scenes the anti-corruption prosecutor was still working to hold the culprits accountable. In 2015 then-Greek prosecutor Dimitris Foukas issued a warrant for the arrest of William Basil, a US Embassy employee who was suspected to be an undercover CIA agent key in the wiretapping. The prosecutors were also investigating Basil’s connection to a plot to assassinate the former prime minister, Kostas Karamanlis. 

Foukas was not reachable by phone. His staff told TechNode that the only way to speak to him would be to meet him in person at the Athens first instance court, which he now presides over. 

When Edward Snowden blew the whistle on NSA surveillance, the Vodafone mystery was cracked open. Unveiled documents showed that the NSA had never removed its wiretapping system installed during the 2004 Olympics in Athens. 

While giving the NSA access to Greek telephone networks was not unusual during such a high-profile event, the US intelligence agency turned it around to spy on top Greek officials. Neither the CIA’s operation in Greece, the US Embassy, nor the Greek government had any knowledge of the operation until Vodafone discovered it, the Intercept and Greek newspaper Kathimerini reported in 2015.

In 2018, the death of Kostas Tsalikidis was ruled a premeditated murder, and prosecutors pressed charges against unknown suspects. His family claimed he was murdered because he knew too much about the NSA’s abuse of Vodafone networks. Subsequent Greek governments and prosecutors refuse to officially comment on this theory.

The US was caught red-handed peeking into Vodafone’s telecoms networks to spy on Greece, its ally, without the knowledge or permission of local authorities.

Yet the Vodafone scandal didn’t make a big difference on Greece-US relations, according to Nikos Moumouris, a journalist who covered the story for newspaper Eleftherotypia at the time. It was like throwing a “pebble in the sea,” he told TechNode. “Maybe it wasn’t a pebble, maybe it was a rock. But once the story died down, it was back to business as usual [with the US].”

“Those were different times” when Greece’s capacity to investigate the breach was limited, Moumouris said.

The Snowden files 

Back in the 2000s, Greece wasn’t the only country glossing over telecommunications security. “Historically, operators simply didn’t pay a lot of attention to IT security. Other operators simply didn’t care,” said Jan-Peter Kleinhans, Project Director of Security in the Internet of Things at Berlin-based think tank Stiftung Neue Verantwortung.

The 2013 Snowden leaks were a big shock to the EU. The NSA’s privacy abuses cut deep among politicians and the public. It was a “very loud wakeup call as regards to potential threats to our fundamental rights, data protection and privacy,” an EU Commission spokesperson said.

The EU’s most powerful countries were among the biggest targets of US surveillance: France, Germany, Italy, and the Netherlands. 

Greece was the target of so-called Blarney, an NSA program designed to get access to fiber optic cables, switches, and routers, wrote journalist Glenn Greenwald, who worked closely with Snowden to publish the NSA documents, in his book No Place to Hide. 

But TechNode hasn’t found any records of the Snowden revelations being discussed extensively in the Greek parliament. 

One prominent member of the Greek parliament, Theodoros Pangkalos, said he wasn’t surprised by the revelations: The Greek intelligence service had also spied on the US embassy decades ago, he said. 

Given its history with the Stasi, East Germany’s massive secret police and intelligence agency, Germany is extremely touchy about surveillance. Relations between Washington and Berlin plunged. German Chancellor Angela Merkel, whose phone was allegedly tapped for 10 years, expelled the CIA chief from the country. 

The diplomatic fallout from the NSA revelations was quickly patched up. In February 2014, French President Francois Hollande said “mutual trust has been restored” between the two countries, less than a year after he found out the NSA had collected data for 70 million phone calls in France in a single month. 

But the EU had woken up to the importance of cybersecurity—and started tightening cybersecurity legislation for member-states. 

Baby steps

In July 2016 the EU began to take steps that would push Greece to act on cybersecurity: the “first EU-wide legislation on cybersecurity,” as the EU Commission called it, came into force. The same year, the EU Commission published the EU Directive on Security of Network and Information Systems (known as the NIS Directive), an “action plan” for the bloc’s transition to 5G networks, outlining key considerations. The document didn’t mention security of 5G networks. 

Huawei was not the controversial company that it is today, so it wasn’t a prominent part of the conversation as implementation took place. The original NIS Directive didn’t spell any trouble for Huawei: It was relaxed compared to later iterations. 

As an EU member, Greece had to follow the Commission guidelines. But Greece had consistently lagged other EU countries when it came to digital policy, including cybersecurity. 

The 2016 NIS Directive was geared more broadly toward digital service providers; the word “telecommunications” is mentioned only once in the law, in an article about security in the shipping industry. 

Greek Prime Minister Alexis Tsipras set up a dedicated cybersecurity agency (in Greek) in 2017 by presidential decree—four years after Spain, itself seen as a late mover. The Ministry of Digital Policy under Nikos Pappas published an 18-page National Cybersecurity Strategy in March 2018—five years after Italy, another member-state viewed as late to the party.

In July 2018, the EU Commission told Greece to hurry up and adopt the NIS Directive into its national law. In November, the parliament conferred on the legislation. The debate transcript is 130 pages long, but not because the merits of the bill were hotly contested. 

Members of parliament took the November debate on the cybersecurity legislation as an opportunity to hash out unrelated grievances: farmers’ strikes, taxes on broadcast operators, austerity measures, protests, the reputation of Kostas Simitis, who served as prime minister from 1996 to 2004, and so on. Huawei was not mentioned. 

The only parties that voted against the cybersecurity law and managed to stay relatively on the matter at hand during the debate were members of the far-right Golden Dawn, which was recently ruled a criminal organization, and the Greek Communist Party. Golden Dawn brought up surveillance by US security agencies and big tech to argue that digital policy is used against nationalist and conservative groups. The communists argued that the cybersecurity legislation will trample the right to privacy to serve US and NATO interests. 

After the marathon meandering debate, the law was passed and came into force a few weeks later. 

Over the next few years, the proliferation of cyberattacks, privacy scandals, increasing digitalization, and US pressure brought telecommunications security to the center of the bloc’s digital policy. The conversation was slow to take off, but quickly ramped up in 2018 and 2019. 

“The issue of security is moving up in the EU agenda,” and so Greek governments and companies are increasingly prioritizing it, George Tsaprounis, head of corporate affairs at Greek network operator Wind Hellas, told TechNode. 

The squeeze on the EU

Because Athens faithfully follows EU rules on digital infrastructure, Washington’s anti-Huawei pressure on the EU trickled down to Greece. 

With the EU and member-states already on edge over cybersecurity, the Trump administration started its global campaign against Huawei in 2018. By December of that year, it started to bear fruit: The EU Commission’s then-Vice President for the Digital Single Market Andrus Ansip said that the bloc should be “worried” about Chinese companies like Huawei because they might install “mandatory backdoors […] It is not a good sign when companies have to open their systems to this kind of secret services,” he said. 

In 2019, the US ramped up its anti-Huawei lobbying in Europe. In a visit to Germany in May 2019, US Secretary of State Mike Pompeo threatened that European countries which use Huawei equipment could be cut off from US intelligence. 

That wasn’t enough for Pompeo, who continued to argue for more restrictions on the company. Ahead of a key meeting between EU leaders to discuss security measures for 5G, Pompeo published an anti-Huawei op-ed on Politico EU. 

Pompeo asserted that “it’s critical that European countries not give control of their critical infrastructure to Chinese tech giants like Huawei, or ZTE.”

Brussels conceded to the US argument that the country of origin of an equipment vendor can pose a security risk, but has not been willing to go all the way and ban Huawei. 

But Washington wanted more assurances. It launched a renewed campaign to rid telecom networks from Chinese technology in August 2020. Under the banner of the so-called Clean Network, the US started collecting pledges from countries to preclude “untrustworthy vendors,” like Huawei, from their networks. 

Trust no one 

Some within the EU and Greece disagreed with Pompeo’s campaign. They argued there was no evidence that Huawei was doing anything the US wasn’t already doing, using gear from Huawei competitors. 

According to many cybersecurity experts, no vendor is completely trustworthy or infallible. The only solution is to diversify and mitigate risks. The more vendors you buy from, the less you are exposed to any one, and you set up security checks and balances; one supplier might catch the others’ mistakes. 

“As German industry, you’re between two camps. You can choose which backdoor you want: A Chinese backdoor or a US backdoor,” Steffen Zimmermann, the lead expert on industrial security at German industrial lobby organization VDMA, said in March 2018. VDMA members include heavyweights like Bosch and Siemens. 

While Pompeo was making the rounds in European capitals, Greek officials kept quiet on Huawei. Greek President Prokopis Pavlopoulos visited Huawei’s Beijing office in May 2019 during a five-day official visit to China. He commended the company’s work in Greece and the two sides promised to continue their cooperation. Back in 2008, the same politician had proposed the bill to revamp the Greek intelligence service after the Vodafone wiretapping scandal.

To Greek insiders, the debate felt somewhat moot. From a technical perspective, the risk of espionage or compromised communications is not affected by the country of origin or the equipment, they told TechNode. 

“There are countries that do not rely on Huawei’s infrastructure. That doesn’t mean that they don’t have cybersecurity issues to solve,” Antonia Petrovits, a spokesperson for Huawei Greece, told TechNode.

Whichever company builds a network will have some capacity to use the infrastructure for its own purposes, the Greek telecom technical experts TechNode spoke with agreed.

Europe’s large telcos have recognized this risk for years. To avoid becoming dependent on any single supplier, and the backdoors or vulnerabilities in their equipment, many of Europe’s carriers have diversified their supply chains, procuring equipment from different vendors. 

In January 2020, the EU Commission officially included procurement diversification in the bloc’s guideline for developing 5G networks. ”Dependency of one or several networks also significantly affects national and EU-wide resilience and creates single points of failure,” the Commission said. 

Greece’s latest cybersecurity strategy, released on Dec. 3, made the same recommendation. 

Delegating the Huawei decision

In January 2020, Brussels again tried to resolve the Huawei issue—by passing the buck to member states. In its official guidance on 5G adoption, the EU Commission asked national regulators to consider elaborate technical issues—in addition to equipment suppliers’ country of origin.

The EU has limited jurisdiction over member-states and, at least on paper, didn’t want to single out China. Directives “do not target or single out individual countries or suppliers,” the EU Commission spokesperson said. 

The EU’s directive on 5G  handed the decision on Huawei back to member-states. Every company which complies with EU rules can access the market, but individual countries reserve the right to exclude companies for national security reasons, the spokesperson said.

The January 2020 EU’s 5G cybersecurity “toolbox” places a lot of responsibility on member-states’ regulators and network operators, Kleinhans said. It’s up to them to decide whether Huawei will be excluded from 5G networks. 

The 5G toolbox asks countries to consider the “risk of interference by a non-EU country” when evaluating equipment—in other words, deeming Chinese-made equipment a risk simply because it’s Chinese.

The Greek network regulator did not respond to TechNode’s multiple requests for comment. 

The Commission’s delegation of the choice on Huawei has led to a patchwork of responses reflecting the bloc’s political diversity, from Sweden’s hard ban, to Estonia’s “Huawei law,” to Ireland’s continued relationship with the Chinese company. Some telecom operators like Vodafone have taken matters into their own hands and are replacing Huawei gear with alternatives. 

It is hard to assess how much ground Huawei has lost, given the patchwork of responses and lack of public information.

Playing politics

Greek policy-makers face a diplomatic dilemma with Huawei. The company has a good track record of helping the market and offers competitive products. Security is a concern, but from a technical perspective Huawei’s gear is not more risky than its competitors, industry insiders said. 

All equipment manufacturers, regardless of their country of origin, can open a backdoor to spy on communications. “There might be access points to the equipment, but these are for service purposes. Anyone can open a backdoor that is intended for service,” Polycarpou said. 

Many operators told TechNode that they don’t see Huawei as a threat to their security—at least, not a bigger threat than the US. To them, security is a technical question that has been politicized. From a purely technical perspective, Huawei is at least on par with its Western counterparts. 

But the diplomatic balance around Huawei is delicate. Greece needs its friendships with both the US and China. 

Keep buying Huawei, and the US threatens to cut off military ties. To Athens, Washington’s support in defense issues is key to keeping Turkey, a country with four times Greece’s GDP, at bay: The two neighbours have a long history of military confrontation which flared up in August when Turkey threatened to go to war over a maritime dispute. 

But giving Huawei up could be an affront to China. The EU is well aware of the political nature of an anti-Huawei decision. Considering the threats posed by state or state-backed actors is a “non-technical” issue, it said in its October 2019 5G security assessment. 

When Sweden banned Huawei in October, the local telecommunications regulator said it was following the advice of military intelligence, which had found China to be “one of the biggest threats against Sweden.” 

An outright Huawei ban would inevitably call China out as a threat to Greece’s security when the two countries remain, at least on paper, allies. In Greece, such a statement would incur a high political cost. Despite its longstanding alliance with the US, Athens has been courting China to invest in Greece. 

In a landmark privatization deal in 2016, Chinese state-owned shipping giant Cosco acquired a 51% stake in Piraeus port, adjacent to Athens, for €280 million ($343 million), and is due to gain another 16% should it spend an additional €400 million on the port by the end of 2021.  

Five days after Turkish president Recep Tayyip Erdoğan threatened military action against Greece, the US ambassador to Athens Geoffrey Pyatt tweeted that Greece had joined the Clean Network, which is widely regarded as an anti-Huawei initiative. 

The next month, Pompeo visited Mitsotakis’ hometown on Crete island to talk about defense issues for which Greece is looking to the US for support, and vice versa; Mitsotakis’ focus was Greece’s dispute with Turkey, and Pompeo’s was Russia’s involvement in the Mediterrenean, particularly in Libya. 

The secretary of state also visited a naval base on the island that offers support to US war and logistics ships. He announced the “US Navy’s newest expeditionary sea base,” a $498 million ship, would be moved to the Greek port. 

At a joint press conference with the Greek Prime Minister during this visit, the two politicians announced enhanced cooperation on military issues—and Pompeo welcomed Greece to the Clean Network. However, Mitsotakis didn’t mention “clean” telecoms, during the press conference or anywhere else. 

Pompeo claims Clean Network members will make “efforts” to rid their networks of untrusted vendors, including Huawei. So do international media outlets. 

The Greek government has never confirmed whether it will make such efforts—or that it has joined the Clean Network. 

It’s not clear what this means. The current Greek administration has long kept a “no comment” policy on the Huawei controversy, and in 2020 its alliance with the US has deepened, so it could be that it has joined the Clean Network and is merely letting Pompeo do all the talking. 

If Greece has entered into an agreement on 5G networks with Washington, it could face retaliation from Beijing. 

It’s not clear whether the small Mediterrenean nation will embrace the Clean Network and if so, how it will interpret it. 

The next installment of this series explores what the Clean Network means in the Greek context, if anything, and Huawei’s position in the Greek market. 

Based on ten interviews with industry insiders and regulators, TechNode tells the story of how Huawei established itself in the Greek market—and how the tables have turned for the Chinese telco giant. This is the first part of a three-part series.

In 2011, the Greek government was just embarking on what would turn out to be a years-long journey of bankruptcy avoidance with a cost of harsh austerity. Social welfare cuts, increased taxes and drastic public sector reforms sent unemployment and inflation soaring—and Greeks took to the streets en masse. 

Thousands of people were being laid off. Many businesses didn’t know if they would make it to the end of the year. The Greek government was so cash-strapped that it had to be bailed out by international credit institutions.

During this chaos, a small telco operator decided to upgrade its network (in Greek) to 4G. Wind Hellas wanted to spend three years rebuilding infrastructure that previously took 18 years to complete. 

Wind Hellas had a secret weapon: a relatively unknown Chinese company called Huawei. While the country was in deep trouble, Huawei helped Wind Hellas build a brand-new network. 

By 2014, the pair had built a 4G network that they claimed was the country’s fastest.

Today, Wind Hellas is Greece’s only surviving network operator that isn’t affiliated with a European telco conglomerate, and its relationship with Huawei runs so deep that its experience of other vendors is virtually non-existent. 

“We cannot compare with other suppliers, but from what we know, [Huawei’s] performance is on par with them,” Nikos Panopoulos, chief network and supply chain manager at Wind Hellas told TechNode. 

The telco wars

To China, Huawei is a national champion, proof that the Chinese model can birth global tech leaders. To the US, it is a Trojan horse, Chinese interests and state capitalism masquerading as a run-of-the-mill tech firm. 

But to Greece’s three telco operators, including Wind Hellas, Huawei—or “Hua,” as Greek telecoms professionals call it—has been a reliable partner for 10 years. It is a trusted supplier with a proven track record. 

Huawei equipment is everywhere in Greece. Although it has not been used in Greece’s core network, Huawei equipment makes up more than half of Greece’s 4G radio access network (RAN), the grid of cell towers that speak directly to cellphones. Wind Hellas built its RAN system almost entirely with Huawei equipment. 

RAN is the infrastructure that connects the end-user with the core network. If you’re sending an email, the first thing your phone does is to connect to the network using RAN. The EU considers RAN “highly sensitive” but not “critical” to network security.

It’s not just telecoms. The warehouses of IT providers in the country are full of Huawei products, ready to be integrated into server centers around the country. The Shenzhen-based company is so deeply entrenched in the systems of a US ally that it is all but impossible to imagine the country rejecting it.

With its most important military ally on one side and a vital trading partner on the other, Greece faces a dilemma that’s become common in 2020. 

We’re going to spend the next few weeks exploring what the fight over Huawei looks like when you’re caught in the middle, using Greece as our case study. Greece’s story is unique (as we’ll see next week, it includes the suspicious death of a Vodafone employee possibly involving a US security agency), but it exemplifies the conflicts US allies face as Washington tries to drop a Silicon Curtain.

For the past two years, US diplomats around the world have implored allies not to use Huawei gear in their 5G networks. The company is “an arm of the Chinese Communist Party’s surveillance state,” said US Secretary of State Mike Pompeo in an official press release. He has called on countries to form a coalition and “push back” against China. 

Some of the US’s closest allies have decided to exclude Huawei from 5G buildouts: Australia, New Zealand, Sweden, the UK, and, reportedly, France. The rest of Europe has so far resisted  singling out Huawei for a complete ban. 

Even three countries that signed 5G security agreements early on with the US—Estonia, Poland, and Romania—are trying to find ways to increase security without singling out Huawei.

Many European countries are still undecided: Austria, Finland, Luxembourg, the Netherlands, Norway, Portugal, and Spain. Some, like Switzerland and Hungary, have committed to buy from Huawei.

Huawei’s journey to the west

In the early 2000s, Ericsson and Nokia were the world’s biggest telecoms vendors, and China was still considered a developing country by the World Trade Organization. From 2000-2005, only about one in five people in China had either a mobile phone or a landline, according to data from the International Telecommunication Union. 

Huawei was a budget alternative at best. It started to explore business in Africa in 1998 and set off on its international expansion around 2000, Antonia Petrovits, a spokesperson for Huawei Greece, told TechNode. 

Telecoms equipment manufacturer Cisco was the first US entity to take aim at Huawei in 2003, alleging that the then-upstart had infringed on five Cisco patents. But Washington had yet to come up with an aggressive and comprehensive policy centered around a national security argument, which is what we see today. 

Low key

Huawei’s Athens office doesn’t have a big sign. The company doesn’t even list the address on their website. Unless you are invited, the only way to find out where they are is by accident (as TechNode did).

It’s a far cry from Huawei’s grandiose Shenzhen headquarters. A simple four-floor building houses a women’s health clinic, and the national headquarters of Huawei and Media Markt, a nationwide electronics retailer. 

But its strategic location more than makes up for its modest appearance. It is a stone’s throw away from the headquarters of Greece’s telco providers. 

The Chinese telco giant approached Europe via the Middle East, Paul Scanlan, head of Huawei’s Carrier Group, told TechNode. They wanted to build a good brand and understand the region better before dealing with more “mature customers,” he said. 

When Huawei opened its offices in Athens in 2005, it was a China-focused company with a few branches in developing countries. The same year it inaugurated its offices in Greece, it opened an office in Kenya.

Greece appeals to Chinese companies as a “landing point” for Europe. As a member of the European Union, it follows EU rules and is an entry point into Europe’s southern and eastern blocs, Andreas Polycarpou, who worked in Athens as an executive consultant for strategy and innovation at ZTE for six years, told TechNode. 

Good products, great service

At first, Huawei undercut competition with lower prices and aggressive marketing tactics. One person with direct knowledge of the procurement process said Huawei would directly compare technical specifications and pricing with competitors’ at sales meetings.

The company’s ownership structure allowed it to keep prices low while charging into new markets, like Greece. As a privately owned company, it can afford to be patient about turning profits.

“If their prices are lower, it’s not necessarily because they’re being heavily subsidized by the Chinese government. It’s because they don’t have to answer on their margins for shareholders,” Paul Triolo, practice head of geotechnology at advisory firm Eurasia Group, told TechNode. 

Greek telcos OTE and Wind Hellas first bought Huawei equipment eight years ago, OTE’s Director of Strategic Planning Pavlos Vihos and Wind Hellas’s Head of Communications George Tsaprounis told TechNode in separate interviews. 

Over time, Huawei’s products got better and its prices increased. But their relationships with local telcos had been established, and their equipment earned a reputation as reliable.

Industry insiders in Greece said Huawei’s equipment is excellent. Some even said that it is superior to Nokia and Ericsson equivalents, Huawei’s only real competitors. 

But Huawei’s success in the Greek market goes beyond technicalities. It is largely attributable to a knack for localizing to the market and providing technical support. “Localization has always been our strategy,” Petrovits said, adding that the company “combines the best of the Chinese and international approach.”

At first, “communication was very difficult,” but Huawei developed a very good team of Greek employees and, over time, they managed to make the partnership work, Wind Hellas’s Panopoulos said.

Today, out of Huawei’s 120 employees in Greece, 70% are locals, Kostas Vasiliiou, wireless solution sales manager at Huawei Greece, told TechNode. Half of the 120 are technical staff, he said.

Huawei earned its place in Europe by delivering what was most important to the Greek market: world-class equipment at irresistible prices, and support throughout the products’ life cycle.

The Huawei secret sauce

Huawei’s commitment to localization allowed it to distinguish itself from other low-cost suppliers. As fellow Shenzhen equipment maker ZTE learned the hard way, this was key to winning over new markets like Greece. 

ZTE entered the market in 2002 with a big sale of ADSL equipment—a type of broadband—to network provider OTE, Polycarpou said.  

But ZTE never managed to form relationships with Greek telcos the way Huawei did. Huawei was able to convince Greek telcos that it would provide dedicated support. ZTE wasn’t.

“When you buy telecoms equipment, you don’t buy it for a year. You buy it for decades. You need to convince the buyer that you will be there to support them,” Polycarpou said. 

Huawei had a technical service team tailored to the market from the moment it set foot in Greece. While ZTE improved its localization efforts from 2011 to 2017 and gained some market share, Huawei quickly rolled out new products to counter ZTE’s success. 

ZTE’s technical staff currently numbers two people. They can’t compete with Huawei’s “army” of 60 technical service specialists.

 “When they [Huawei] installed the IMS systems [IP Multimedia Core Network Subsystem], they brought armies of engineers with them,” Andreas Rigas, Senior Manager of strategy and development at OTE, told TechNode. 

ZTE also did not navigate the local business landscape well, sometimes trying to sell products by talking to the wrong people, Polycarpou said. 

“When the manager changes, he doesn’t listen to the locals’ advice. He wants to go meet a minister. But in Greece, the minister has nothing to do with sales of telco equipment,” he said. 

ZTE never gained traction in Greece. Today, Huawei is cozily nestled in the country’s RAN system, while ZTE mainly sells peripheral network products, such as routers. 

Seizing the moment

When the financial crisis spiraled into strict capital controls in 2015, the stars aligned for Huawei. Domestic politics, monetary controls, and other vendors’ finances came together for Huawei to embed itself deeper in Greece’s networks. 

Since 2010, the Greek government had been agreeing to difficult austerity measures in exchange for bailouts from international creditors, chiefly the European Central Bank and International Monetary Fund. Foreign direct investment, including from US companies, dried up. 

Washington itself sat out the Greek crisis, leaving the fate of its close ally to the hands of its creditors—other than the occasional diplomatic assurance.

Frustrated by austerity and “capitulating” governments, in 2015, the Greek people elected a “radical left” government which promised to stand up to its European creditors. 

Shortly after the election, a dramatic sequence of events led to the implementation of  capital controls to avoid a run on the banks and the catastrophic collapse of the financial system. 

Transfers of money overseas were banned, unless with explicit permission from financial authorities. Cash withdrawals were limited to €60 per day. Greeks spent their summer of 2015 waiting in long ATM lines around the country. 

Huawei seized the moment. 

When capital controls were introduced, European and US companies stopped most shipments to Greece. Many would only sell if they were paid in advance. With public and private debt reaching unprecedented levels in Greece, advance payments were basically impossible.

Chinese companies like Huawei and ZTE had more cash on hand, and a willingness to bet on the Greek economy—or the country’s geopolitical position. They turned a blind eye to the capital controls by offering generous terms.

These companies let Greek buyers have equipment on credit, accepting deferred payments of up to 15 months.

Such agreements were commonplace during the crisis across industries, an unspoken secret in Greek business. In the case of telco equipment, they boosted the Chinese vendors’ position in Greece’s systems. 

The Greek government could barely pay its healthcare suppliers. But Huawei and ZTE’s support allowed Greek telcos to continue investing in their networks. 

While Greek telcos were basically unable to buy from Western suppliers, their customers enjoyed substantial improvements in service

Between 2015 and 2018, the last year for which the EU Commission has released relevant data, one-third of Greek households gained access to very high-speed digital subscriber lines (VDSL). In the same time period, coverage of Long Term Network Evolution networks (LTE) increased by 20 percentage points. LTE is the technology that supports 4G connectivity. 

In the context of the crisis, these facts are astounding. As Huawei equipment was being used to build up capacity during the capital controls era, about 22% of people in Greece were unemployed, 35% of the population was at risk of poverty and annual GDP growth averaged a meager 0.7%.

Huawei was pivotal in achieving these gains in connectivity. It is unlikely that telcos would have updated their networks so drastically in the midst of a financial crisis without an equipment vendor that was willing to make concessions in payment schedules—Huawei.

The Greek sector took note: when Western firms fled, the Chinese stayed. They “stood by the market,” an industry insider said. 

As Huawei ties with Greek telcos were growing tighter, Washington damaged its credibility when it was caught red-handed spying on Greek telecoms networks. 

By 2018, when the US began lobbying long-standing allies around the world about the security risks of Huawei products, Huawei equipment was thoroughly embedded in Greek networks. Meanwhile, European leaders in Brussels were finally waking up to the importance of telecoms security. 

But in more than a decade in the market, Huawei had already made good friends in Greece. When the Huawei debate started, Greek decision makers had years of experience—and trust—with the company.

Part II of this series will explore how the US campaign against Huawei—and its own espionage activities—have affected EU policy.

China’s preference for its own 5G equipment vendors over European suppliers has created an unfair playing field in the country’s telecommunications market, according to the EU ambassador to China in a speech given during a major telecommunications event in Guangzhou on Thursday.

Nicolas Chapuis said Chinese telecommunication operators had “massively privileged their national suppliers” and complained about a market share “free fall” for European vendors in China’s telecom infrastructure sector during a pre-recorded speech at the opening ceremony of the World 5G Convention (W5GC) held in the capital city of southern Guangdong province.

Chapuis’s speech was not included in the detailed video recording of the opening ceremony published on the W5GC website. Instead, the 130-minute video recording of the opening ceremony includes around 40 minutes of a static image with music in the background. A representative of the Beijing-based nonprofit Future Mobile Communication Forum, which co-hosted the event along with provincial government bodies, said all speeches given by high-level politicians were not “live-streamed, published in video recording, nor included in the agenda of the event.”

“The bottom line is a free fall of European market share in the telecom infrastructure sector [of China], standing today at less than 11%, while their market share in other countries stands at more than 30%,” Chapuis said according to the text of the speech sent to TechNode. “This raises major questions on fair competition.”

The EU “is urging China to ensure openness, transparency, and equal opportunities for domestic and foreign suppliers,” he said, adding that the bloc will continue to press for “meaningful market access” for both 5G infrastructure and 5G-related services in China.

China has insisted that it is not biased in choosing 5G kit suppliers. “China always sticks to equal and fair principles when purchasing 5G telecom equipment. We never preset the market shares for domestic and foreign enterprises,” Miao Wei, minister of China’s top telecom regulator, said during a keynote speech at last year’s W5GC in Beijing.

China’s three state-owned carriers in April assigned more than 80% of their 5G base station buildout contracts this year to Chinese telecom equipment makers Huawei and ZTE. A small portion of their budget went to Swedish company Ericsson, while Finland-based Nokia was not awarded any contracts.

The Finnish firm, however, said in June that it had been selected by China Unicom, one of the state-owned carriers, to supply around 10% of its 5G core network.

Chapuis’s remarks are a rare direct complaint from the EU about its access to China’s telecommunications market, aligning with the bloc’s recent stance that calls for a Europe-China relationship based on “fairness.”

“We have a robust trading relationship with China… Trade can energize our economic recovery. But we want more fairness. We want a more balanced relationship. That also means reciprocity and a level playing field,” Charles Michel, president of the European Council, said in September.

China’s Huawei, the world’s largest supplier of telecom equipment, is facing a raft of challenges in Europe. Some member nations including the UK and Sweden have decided to exclude Huawei products from their 5G networks. Several other European countries, including France and Germany, have made moves to heavily restrict its participation in their 5G buildout. Experts have said the company could be completely excluded from the continent’s 5G core networks.

READ MORE: INSIGHTS | More European countries are turning their backs on Huawei

For more than a year, the US government has continued to pressure its allies to exclude Huawei equipment. Not doing so, it said, poses the potential risk of Beijing using vulnerabilities in the company’s gear to spy on foreign 5G networks, an allegation Huawei has repeatedly denied.

Without mentioning Huawei, Chapuis said during the speech that 5G gear suppliers are subject to the same security scrutiny in Europe.

“Suppliers, be they European as well as non European, have been required to prove their compliance with a set of rules, known as the EU 5G tool box,” he said. “Chinese companies have welcomed this framework, which is based on a solid, thorough, transparent, and objective assessment of risks and applies to all players.”

About a year after China launched its first public 5G networks, it held a major telecommunications event in the southern city of Guangzhou on Nov. 26-27. The second annual World 5G Convention (W5GC) attracted top executives from the country’s three state-owned carriers (China Mobile, China Telecom, and China Unicom) and high-level officials from telecom regulators to the event. 

Representatives of several overseas carriers including Spain’s Telefonica, Singapore’s Singtel, Deutsche Telekom, and America’s AT&T also attended by video link. But W5GC was more China than world: the agenda centered on China’s deployment and applications of next-generation 5G networks, while almost all foreign speakers were allocated to a “global forum.”

Not all information from the world-level conference was new, but the message delivered by officials is important: China is counting for future economic growth on a series of cutting-edge technologies enabled by ultra-fast 5G networks, which includes electric vehicles, artificial intelligence, and big data. In the short term, 5G is seen as a remedy for the country’s virus-hit economy.

Bottom line: 

• 5G cellular service is already widely available in China—if you live in a city, you should be able to use it. But networks are far from complete, and China expects to spend hundreds of billions on base stations in the coming year.
• But 5G still isn’t essential. We haven’t seen a “killer app.” Authorities still talk about it as a future technology rather than something paying off now.
• Compared to last year’s W5GC (held in Beijing), this year focused more on the domestic market, whereas last year China tried to export its approach to 5G to the world.

Widely available:

• Liu Liehong, deputy minister of China’s Ministry of Industry and Information Technology (MIIT), said China has built more than 700,000 base stations with more than 180 million 5G subscribers as of October.
• Dong Xin, chief executive officer of China Mobile, said the world’s largest telecom carrier by subscribers had built 385,000 base stations with more than 90 million 5G end users. He said the company had provided 5G service in all Chinese prefecture-level cities.
• Wang Xiaochu, president of China Unicom, said the company is now providing standalone 5G service in more than 300 cities, meaning that its 5G network does not rely on older 4G infrastructure.

Growth forecast:

• Feng Yi, director at China Unicom’s 5G Innovation Center, said China’s 5G users could grow by 20% in the next year.
• John Hoffman, CEO of GSMA, a telecoms industry body, predicted that around 20% of global telecom users will choose 5G services by 2025, with the penetration rate reaching 50% in countries like the US, Japan, and South Korea. “China will be the world’s biggest 5G market in terms of subscribers, though its penetration rate will only be 30% by 2025.”

Message from Europe: After a year in which Huawei has lost ground in Europe, Nicolas Chapuis, European ambassador to China, argued that the bloc assesses vendors neutrally: 

“In Europe, operators and suppliers are also ready to proceed, frequencies have been allocated, but governments and security agencies want to first make sure that the impact of this new technology on industry and services is well managed and regulated. Suppliers, be they European as well as non European, have been required to prove their compliance with a set of rules, known as the EU 5G tool box. Chinese companies have welcomed this framework, which is based on a solid, thorough, transparent and objective assessment of risks and applies to all players.”

Nicolas Chapuis, European ambassador to China

READ MORE: INSIGHTS | More European countries are turning their backs on Huawei

5G spending push to continue: In June 2019, China issued 5G licenses to its three major carriers and a broadcasting company, with commercial use of the service starting last November. Though China launched the service later than countries like the US and South Korea, the country is now—according to officials speaking at this week’s event—is “taking a lead” globally in the deployment of 5G networks.

• The buildout of the country’s 5G networks is largely backed by the state. China in April kicked off a “new infrastructure” initiative, promising to spend RMB 1 trillion (around $152 billion) on seven cutting-edge technologies including 5G, artificial intelligence, and electric vehicles in 2020 alone. China Sinolink Securities, a broker, expects total investment by local governments and telecom companies into base stations to reach RMB 300 billion this year.
• The Chinese government is calling for a quick rollout of the next-generation wireless network, which prompted China Telecom and China Unicom, the smaller rivals of China Mobile, to jointly build a next-generation network. On Thursday, Wang of China Unicom said the company saved RMB 60 billion “for the state” from the partnership with China Telecom.
• Most 5G base station buildout contracts have gone to China Tower, a state-owned telecommunications tower infrastructure service provider. Tong Jilu, chairman of China Tower, said Thursday that the company had constructed more than 700,000 5G base stations for local carriers. He said 97% of those stations were built on existing 4G stations. 

5G as stimulus: Speakers tied the protocol to hopes for growth from the “digital economy.” China’s economy could have taken a much deeper hit this year without the “digital economy,” according to a former government official.

• “2020 is a year of troubles. Under this circumstance, people all looked at the digital world for economic growth,” said Li Ming, executive director of the China Institute of Digital Economy Research. “5G will be a growth engine of the digital economy,” he said.
• Xu Xianchun, director at the Tsinghua University’s China Data Center, said China’s digital economy grew 13.2% year on year in the first quarter while the country’s gross domestic product (GDP) was down 6.8% in the same period because of the Covid-19 outbreak.
• Xu, who is also the former deputy director of the National Bureau of Statistics of China, said the country’s GDP could be down more than 8% in the first quarter if the digital economy shrank as well, highlighting the importance of the sector in China’s economy.

A subdued Huawei? You can’t talk about 5G in China without talking about Huawei. But Huawei was relatively inconspicuous at this year’s W5GC. Last year, one Huawei executive appealed (in Chinese) called for the digital “Berlin Wall” to come down, and the company’s then rotating chairman vowed to build “the world’s best 5G.” This year, attendees from the company focused on products and devices.

Internal circulation: Things have changed a lot between the two W5GCs. Last year’s conference featured a session (in Chinese) that aimed at promoting China’s participation in global 5G standards; this year’s “world” conference overwhelmingly focused on developments in China. Of course, closed borders and a pandemic make international events much harder, but the changes also reflect the change in economic strategy known as “dual circulation,” which calls for the country to rely less on international markets. If China was still hoping to shape the 5G conversation around the world when it launched the conference last year, this November’s event suggests a more modest focus on the home market.

UPDATE: The quote from EU Ambassador Nicolas Chapuis has been updated based on a text provided by the EU Delegation to China. An earlier version of this article relied on a translation printed in Chinese media reports.

It’s a rainy Sunday evening in London. I pull out my phone and look for regional Chinese cuisine on food delivery apps. Disappointment quickly hits.

Browsing London food delivery platforms like Just Eat, Uber Eats, and Deliveroo, I only find typical British-Chinese sweet and sour dishes, as well as dim sum. Not exactly the regional cuisine I’m looking for. 

Frustrated by the lack of better options, I open Hungry Panda, a Chinese food and grocery delivery app only available in Chinese. Founded in 2016 by Nottingham University graduate Liu Kelu, the service targets overseas Chinese students and communities. Its social media campaigns are aimed at young homesick Chinese.

I came across Hungry Panda at Seveni, a hotpot and charcoal BBQ eatery in South London popular among Chinese students. Restaurant staff were handing takeaways to young men in blue uniforms with a panda logo and “Hungry Panda” on their bags. The company quickly piqued my interest. 

I’m not a fluent Mandarin reader, so, with the help of Google Translate, I opt for a restaurant with food from China’s southwestern Sichuan province—famous for its delicious, spicy cuisine—and another specializing in hearty meals from Northeastern China. 

The regional combination is odd: Liaoning province in China’s northeast is more than 2,500 kilometers from Sichuan. It’s also going to take over 90 minutes to deliver my meal. Ordering isn’t easy for non-Chinese speakers, as it requires basic Mandarin. Only a handful of restaurants have added English translations to parts of their menus. The platform and most of its content is in Chinese. 

But I won’t complain if I’m able to have some real barbecue skewers (chuar), a spicy numbing stir fry pot (malaxiangguo) from Sichuan, and a tasty mix of stir fried potato, aubergine and peppers (disanxian) from northern China. 

Hungry Panda is tapping into a niche by promising to bring authentic ingredients and dishes to its users, but is the app trying too hard to bring the same user experience people are used to in China to overseas markets? 

Targeting the homesick

A quick search in the app pulls users into what feels like a hidden world of Chinese food that goes beyond dim sum and fried noodles. 

Hungry Panda’s menus feature classics like spicy pickled fish soup (suanlayu), spicy cumin barbecue skewers, and grilled pancakes with egg and chives (jiucaihezi). These are dishes that are usually found in small corners of larger menus and not included on menus on apps like Deliveroo and Uber Eats—restaurateurs just don’t believe their non-Chinese customers are interested.

Hungry Panda’s interface is a near-clone of Eleme, one of China’s biggest food delivery platforms. It’s so similar that I initially thought the Alibaba-owned food delivery giant had started operating in London.

Hungry Panda was actually founded in 2016. Headquartered in London, in February the startup raised $20 million from Felix Capital, a backer of Deliveroo and 83 North, a venture capital firm and early investor in JustEat. 

In less than four years, Hungry Panda has expanded its services to more than 30 cities across six countries, all while keeping the app in Mandarin. The size of its user base is not public, but the app has been downloaded more than 100,000 times from the Google Play Store. 

In 2019, the company’s direct-to-consumer brand Dada Chinese Supermarket started delivering Asian groceries to its users within two hours of ordering, meeting a demand that was long there. Then, at the beginning of lockdown, the platform started delivering Covid care packages that included health and safety products like N95 masks, hand sanitizer, and traditional Chinese medicine. 

“Hundreds and thousands of miles away from home, it’s brave to fight against loneliness” says the voiceover in a Hungry Panda video ad. The commercial shows a man in his 20s thinking about the life he temporarily left behind to study in the UK. “Life abroad, but the stomach belongs to home” continues the voiceover.

But to Xiao Xiao, a Guangzhou native studying engineering at Durham University, Hungry Panda is far from replacing food from home: “There are only a handful of Chinese restaurants that will deliver to where I live and the food is average, but I use it during Chinese festivities or when I’m alone watching Chinese shows,” she told me.

Users can’t access the same variety of restaurants they would at home because Hungry Panda’s focus on a niche market means less demand—and therefore less supply, which is required to create enough density for on-demand deliveries to become viable. 

Too ‘Chinese’?

Hungry Panda’s interface shares many similarities with delivery platforms in China.

Just like apps in China, users receive daily red packets, or hongbao, which can be used for discounts at restaurants that sell food through the app. Food is categorized by the region it comes from in China. The touch and feel of adding dishes to the app’s cart is so similar to Eleme. Memories of ordering Yang’s Dumplings, a popular Shanghai pan-fried soup dumpling chain that only operates in China, hit me when I use Hungry Panda.

Payment is also indistinguishable. Users can use popular Chinese apps Alipay and Wechat Pay to buy their meals. Those that don’t have access to the Chinese payment platforms can also opt for credit and debit card payments. 

Ads for special offers pop up when you open the app, along with banners for new restaurants and Chinese festivities. The app now even has a carousel that lands the user on a local Covid-19 stats page in Chinese. There is little space and a lot of content is crammed into the small screen, a design principle common to websites and apps in China.

For those who are not used to Chinese apps, however, Hungry Panda might feel like visual chaos. “It’s convenient for Asian groceries, but the app is confusing. There’s a lot going on—it’s like Taobao. I’m more used to a clean Western interface,” Michelle, a Taiwanese-born Londoner, told me.

There are 400,000 people of Chinese ethnicity in the UK, and many more that are discovering an appetite for authentic regional food and groceries from China. For Michelle, an Eleme or Meituan duplicate may meet that occasional demand, but will it be enough to retain users like her in the long run? Is Hungry Panda aiming for a user experience that is almost too “Chinese,” excluding other potential users?

Challenges ahead 

Xiao Xiao is planning to go back home once she completes her degree abroad. She’s not the only one—many have moved back home after classes moved online. 

As the Covid-19 pandemic wears on, travel restrictions could mean that a much smaller number of Chinese students can continue their studies abroad this year. As a result, Hungry Panda could find itself stuck in its niche, and there may not be enough homesick students to make the business viable.

“As soon as plane ticket prices went down a little, I packed up and flew back,” Aaron, a second year student at the University of Wisconsin-Madison, told me. He now continues his studies online at his home in Harbin, a city in Heilongjiang, China’s northernmost province.

There is, however, enough of an appetite for regional Chinese food for Hungry Panda to expand its current target market. Authenticity is a big selling point to those that are looking for something different, and as we move into a new tiered system with local lockdowns in the UK, perhaps it’s time for Hungry Panda to make its platform available in English.

China’s Huawei is falling behind in the race to supply telecommunications equipment for 5G networks in Europe, its largest market outside of its home turf.

As Sweden decided in October to exclude Huawei from its next-generation mobile networks, seven out of 27 European Union member states have made moves to heavily restrict the Shenzhen company’s participation in the buildout of 5G. The list includes heavyweights like France and the UK. 

Among countries that have not made decisions on Huawei, six have signed a declaration of intent to keep their networks “clean” of Chinese technology under the US “Clean Network” initiative. Signing the Clean Network initiative does not appear to bind countries to bar Huawei gear. 

While regulators are driving the shift against Huawei, telcos are jumping the gun. In another five countries, telco operators have signed contracts to procure 5G equipment from Huawei’s competitors, Nokia and Ericsson, likely anticipating regulation.

Experts say that the Shenzhen-based company may eventually face de facto expulsion from Europe’s 5G networks as countries move to make their final decisions.

Huawei supplied around 50% of the equipment for Europe’s 4G networks, according to a 2017 report by the European Trade Union Institute, an EU-backed research center. However, the company now faces a much less welcoming environment for 5G—at least two countries have banned its gear outright, and a dozen others are considering heavy restrictions.

“Chinese vendors will play a minuscule role in parts of Europe’s mobile networks that are considered sensitive or critical,” Jan-Peter Kleinhans, director of the project Geopolitics & Technology at German think tank Stiftung Neue Verantwortung told TechNode. 

Kleinhans said that he could imagine a full exclusion of Huawei equipment from Europe’s 5G core networks “in the long run.” 

“Since the European Union put the onus on member states to objectively assess risks and adopt mitigating measures to ensure the security of 5G rollouts, most countries have increased their scrutiny of Huawei,” Jan Stryjak, associate director at market research firm Counterpoint, told TechNode. “Since no country would want to be alone in bucking the trend, solidarity seems to be the name of the game.”

European countries so far haven’t banned Huawei from all of their 5G core networks, a Huawei spokesperson told TechNode on Friday. “Huawei calls and pushes for the establishment of network security standards, and hopes all vendors to be subject to the same scrutiny.”

The company said its commitment towards the European market is “unchanged.”

The EU toolbox

The first step towards an EU-wide policy on 5G security came in January, when the EU Commission released the so-called EU 5G toolbox: A blueprint for how the 27 member states should evaluate 5G gear provider risks and trustworthiness. 

The toolbox requires member states to assess supplier risk profiles on a national or EU level and apply restrictions on those deemed high-risk. 

“The EU toolbox recommends a set of key measures that should be taken by all member states and by the Commission. These measures will apply to everybody, without targeting any actor or country in particular,” Marietta Grammenou, a European Commission spokesperson, told TechNode in an email. 

The toolbox does not mention Huawei or China by name, but instructs national regulators to consider the “risk of interference by non-EU state or state-backed actors,” echoing US rhetoric. 

Some countries have taken a middle-of-the-road approach: They have chosen to raise security requirements for all vendors in a way that amounts to a ban on Huawei without naming it.

The EU toolbox was rolled out after the US government embarked on a campaign to pressure allies into excluding Huawei equipment from their 5G networks, and marked a sharp shift from earlier guidance in EU security directives, where country of origin did not feature prominently as a concern. 

Scholars have said that Huawei is owned and controlled by the Chinese state but the company maintains that it is a private company 100% owned by its employees.

The toolbox leaves the decision to ban Huawei up to member states: “While everyone who complies with our rules can access the European market, member states have the right to decide whether to exclude companies from their markets for national security reasons,” Grammenou said.

“Since mobile networks are considered a critical infrastructure with a direct impact on national security, member states are free to develop their own strategy and thus balance between costs and security,” Kleinhans said.

As countries set their own paths, a likely result is “a highly fragmented regulatory landscape,” Kleinhans said.

Security concerns

As more regulators and telecommunication operators put limits on Huawei, it’s getting more tempting to jump on the bandwagon. Europe’s military and intelligence community, meanwhile, has been voicing objections to Huawei gear, citing national security concerns.

“With no country wanting to be the odd one out, it wouldn’t be surprising if all member states follow the same trend,” Stryjak said.

While only two countries have specifically banned Huawei from future network buildouts, lawmakers and politicians are signaling that other European countries will likely follow their example or heavily restrict the company’s involvement. 

In July, the UK banned Huawei from its 5G networks and ordered its telecommunication operators to remove existing Huawei gear from their networks by 2027, citing a US ban on the company in May that could cut the company off from the global semiconductor supply chain. 

In a similar move, a Swedish telecom regulator said in October that potential grantees of the country’s 5G spectrum must not use products from Huawei in new core networks and existing Huawei gear must be phased out before 2025.

Sweden’s Huawei decision was made based on assessments by the country’s Armed Forces and the Security Service, the Swedish Post and Telecom Authority (PTS) said. On the announcement of the Huawei ban, Klas Friberg, head of the Swedish Security Service, said “China is one of the biggest threats to Sweden.” The country, Friberg added, must not forget when constructing its 5G network that China “is conducting cyber espionage to promote its own economic development and develop its military capabilities.”

Europe’s biggest economies and political epicenters, including Germany and France, have also indicated that they are turning against Huawei.

In October 2019, Germany’s spy chief Bruno Kahl said Huawei “can’t fully be trusted” to participate in the country’s 5G network rollout. While German Chancellor Angela Merkel was in September reportedly vehemently opposed to any restrictions that would single out Huawei, she faced a contingent of politicians who sought to effectively ban Huawei from German 5G networks. Later in the month, they appeared to have won.

In July, Reuters reported that the French National Cybersecurity Authority (ANSSI) had granted licenses to some operators that use Huawei gear. But the bulk of the authorizations were for three or five years, whereas most applications for 5G kit from European rivals Ericsson or Nokia received eight-year licenses.

Notably, the ANSSI informed operators during informal conversations, not stated formally in documents, that licenses granted for Huawei equipment would not be renewed once expired, according to the report.

The Huawei issue has been a flash point in escalating tensions between China and the US. For more than a year, the US government has continued to pressure its allies to exclude Huawei equipment. Not doing so, it said, poses the potential risk of Beijing using vulnerabilities in the company’s gear to spy on foreign 5G networks, an allegation Huawei has repeatedly denied. 

A full ban on Huawei equipment would almost certainly be seen by Beijing as choosing sides, and fodder for retaliation. 

Most recently, a UK oversight body said in October that Huawei had failed to adequately solve security flaws including a “vulnerability of national significance” in gear used in the country’s telecom networks despite previous warnings. 

In April 2019, Vodafone told Bloomberg that it found “hidden backdoors” in the software that could have given Huawei unauthorized access to the carrier’s system providing internet service in Italy. The carrier said at the time that the issues had been resolved after it asked Huawei to remove them.

‘A matter of time’

Huawei has not disclosed how much revenue it earns from Europe. According to the company’s annual results, it generated RMB 206 billion (around $31.1 billion) from Europe, the Middle East, and Africa in 2019, or around 24% of its total revenue for the year.

Stryjak of Counterpoint said that there could still be a play for Huawei in the radio access network (RAN) market, the less sensitive area of 5G networks that connect end devices to core networks. However, he said, Huawei’s RAN business in the continent is still subject to the “suspicion that governments and operators now hold.”

“It seems only a matter of time before all of Europe’s core 5G networks are Huawei-free,” Stryjak said.

China was once unrivaled in electric vehicle (EV) sales. Now, Europe threatens its dominance.
 
It has been five years since China surpassed the US to become the world’s biggest EV market. Growth in China’s EV market was swift thanks to heavy government support in the form of subsidies. But this year Europe is set to dethrone China as the global EV sales leader, picking up critical momentum despite widespread disruption from the global Covid-19 pandemic.

China, a global manufacturing hub for automobiles, has historically produced entry level, low-priced cars, lagging behind the West in cutting-edge vehicle technologies. Now, facing a battle on two fronts, Chinese EV makers are attempting to shake this image as they gear up to expand abroad. There’s a lot at stake. They’ve already been beaten by overseas auto giants in their home market—or joined forces with them, casting a shadow on Beijing’s ambitions to create homegrown EV leaders.

Analysts expect growth in China’s EV market to recover in the next few years, although only marginally—high price tags and a lack of charging facilities remain key roadblocks to EV adoption. Still, as Europe collectively accelerates its transition towards low-carbon transport, it raises a number of questions. What do China and Europe’s EV markets look like? Will China’s head start in EV technology give it an edge? Can China really fulfill its goal of developing its own EV leaders?

EV sales forecast

In a big hit to Beijing’s EV ambitions, Europe overtook China as the world’s largest EV market earlier this year. Bolstered by generous cash incentives, Europe reported a massive surge in EV sales in the first half of 2020. Meanwhile, China was trapped in a downward spiral thanks to Beijing’s EV subsidy cuts last year and the economic fallout from Covid-19.

The sudden increase in European EV sales has triggered general unease among some of the biggest companies in China’s EV industry. One of the most outspoken figures is Zeng Yuqun, chairman of battery giant CATL.

Zeng said recently that China could lose its leading position if Europe continues beating China in EV investments over the next several years. Beijing’s investment into its own EV industry was about 30% of that of the EU last year, Chinese media reported (in Chinese) citing Zeng.

The EU’s lead is likely only temporary, say veteran industry observers. “Whatever short term sales advantage might take place in Europe, I don’t see that persisting. I expect China to gain the lead in terms of EV sales over the long run,” Stephen Dyer, managing director of global consultancy AlixPartners said last month during TechNode’s Emerge 2020 conference.

Although EVs only made up 3% of total car sales last year, the continent has aimed high and is forecast to increase that number to 20% by 2030 by German automotive research center, the Chemnitz Automotive Institute (CATI).

Experts see tremendous growth potential in China not only because it remains the world’s biggest auto market, but also because EV adoption is still in the early stages. Last year, only 1.2 million EVs were sold in China compared with the 25.8 million total vehicles sold—still lower than the penetration rate of EVs in Europe. The country also has a far wider offering of EV models ranging from entry level to luxury.

While experts forecast China will regain its position as the world’s largest EV market, sales could be headed for a prolonged period of slow growth until battery technology matures. One of the most obvious signs of a slowdown is that Beijing recently lowered its NEV sales goal to 20% from 25% of total car sales by 2025, as Reuters reported. 

Internal fight

After a prolonged market slump which lasted an entire year, China’s NEV sector has managed a U-shaped recovery, reporting double-digit growth since July. Now, the market is dominated by two US automakers: Tesla and General Motors (GM).

Tesla’s locally-built Model 3 and GM’s Wuling-branded mini-EV recently became China’s best-selling EVs, outperforming a slew of China’s biggest automakers. Each dominated one end of the market: the post-subsidy price of standard-range Model 3 starts at RMB 271,550 ($41,195), while a tiny Wuling EV costs only a tenth of a Tesla.

Meanwhile, young, China-founded EV makers such as Nio and Li Auto reported better-than-average deliveries, outperforming traditional auto companies, although their sales made up only a fraction of the total EVs sold.
 
That’s not what China wants. In an industry development plan released last week, Beijing promised to become a global auto powerhouse, with Chinese car brands becoming “a major competitive force worldwide” in the next 15 years (our translation).

“There’s no way that the Chinese government is going to let foreign automakers lead the EV sector for a long period of time,” said Tu Le, founder and managing director of business intelligence firm Sino Auto Insights in an interview with S&P Global.

Chinese EV makers

Despite Tesla’s lead, China’s young EV makers are becoming an important emerging power. Nio, a major challenger to Tesla in China, this month surpassed GM in market capitalization as the world’s 7th most valuable automaker. Chinese original equipment manufacturers (OEMs)—companies that make cars or car parts for other brands—are now preparing for a big electric push, while more international carmakers are jumping into the fray.

• SAIC, China’s biggest automaker, is reportedly planning to launch a new brand to compete with Tesla. Codenamed “L,” the secretive project is poised to establish a benchmark for the next generation of smart cars. Sources boasted to Chinese media that the way SAIC will use artificial intelligence technologies in these vehicles will be far ahead of its rivals. Rumors claim the project is led by the company’s top brass and an independent subsidiary will be formed to drive innovation.
• Meanwhile, Peugeot Société Anonyme’s (PSA) Chinese manufacturing partner Dongfeng, in July launched a new high-end brand called Voyah. The company said it will begin mass producing its first EV under the new brand next year. The Hong Kong-listed automaker is currently seeking to raise a RMB 21 billion ($3.2 billion) war chest in a secondary listing on the Shenzhen stock market to ramp up vehicle development and production, reported Chinese media.
• GAC is reportedly following suit, with rumors spreading that Toyota’s Chinese partner intends to spin off its EV unit for an IPO on China’s Nasdaq-style STAR market later this month.

German auto giants

Chinese automakers excel at making entry level vehicles, but competition for the lower tier market is heating up as German car manufacturers—known for leading engineering and technical innovations—begin experimenting with small, affordable EVs. Local manufacturing partners are gearing them up for entry into China’s low-cost EV segment.

• A joint facility run by BMW and Great Wall Motors broke ground in China’s eastern Jiangsu province in June. Work on the factory comes two years after the companies laid out plans to launch an EV brand called “Spotlight” in 2023. Analysts expect the sub-RMB 100,000 model to share its components and manufacturing platform with Great Wall’s Ora-branded mini-EVs.
• Mercedes-Benz early this year forged an alliance with Chinese auto giant Geely, planning to produce tiny, two-person mini-EVs in China under the Smart brand. The China-made Smart EVs are scheduled to go on sale worldwide in 2022.
• Volkswagen has promised to invest €15 billion ($17.8 billion) to fund its ambitious plan to produce 15 new EV models with Chinese partners in the next five years, as it seeks to dominate EV sales in China. The German automaker earlier this month launched its made-in-China ID.4 crossover. The vehicle is the company’s first China-made EV based on its mass-produced modular electric vehicle platform The ID.4 starts at around RMB 250,000 after subsidies, according to a Reuters report.

Despite an early lead by Tesla and its Chinese peers, experts caution that it is too early to predict whether a domestic or foreign automaker will take pole position next year, given the complexity of the landscape. Still, as the market splits between growth in the entry-level and premium EV markets, whoever wins the customer experience will have a leg up over all the other players, Dyer added.

Global dominance?

With only a few thousand vehicles sold each month, Chinese EV makers like Nio, Xpeng, and Li Auto have yet to carve out a solid position in their home markets, but they’re looking to drive sales by expanding around the world. Some companies are shifting their initial plans to launch in America, opting for Europe instead given the escalating tensions between China and the US.

• A culturally and politically diverse environment also means their domestic business models might not work in the new markets, and entering too many markets could divert management’s attention and resources, experts said.
• “Europe… is very diverse, and therefore a marketing strategy in Germany might not work in France and Italy,” said Sino Auto Insights’ Le.

Lagging in EV tech

Chinese EV makers’ recent push to extend their presence overseas echoes Beijing’s ambition to build a world-class auto industry. However, what matters even more than explosive growth is China’s tech development, and its ability to sustain quality growth. China still needs to do a lot of heavy lifting to become the undisputed leader in EVs.

Despite being home to some of the world’s biggest battery makers, China still lags far behind Western countries in manufacturing crucial EV components such as electric engines and motor controllers.

For example, more than 90% of China’s IGBT modules, a key component in the motor controller for EVs, are sourced from overseas suppliers, as few domestic parts makers have the capability to manufacture them, industry insiders recently told China Automotive News (in Chinese). IGBT devices make up 10% of the production cost of an EV, French market researcher Reportlinker said in a report.

Chinese authorities are aware of the urgency of self-reliance for core technologies from a long-term perspective, with an official at the Ministry of Finance late last year raising the alarm over its reliance on overseas EV technologies during an industry conference. So far, China’s imports of key EV components are mostly from Europe and the raw materials used in manufacturing EV batteries are sourced in Africa, and therefore industry insiders believe the risk of a cut-off is limited.

After 10 years and more than RMB 1 trillion in government incentives, China has finally become a forerunner in the global EV race, but as it grows bigger, the problems it faces in its quest to regain its position as a global leader are increasingly apparent. In its latest industry development plan, Beijing has set the goal to join the global top league in the advancement of core EV technologies by 2035. The question is: can China make another leap this time?

The telecommunications regulator in Sweden on Monday halted a spectrum auction after a court suspended “until further notice” parts of its decision that excluded Chinese telecommunications equipment maker Huawei from the country’s 5G networks, Reuters reported.

Why it matters: The court ruling granted Huawei some relief from widespread backlash in Europe. However, the Swedish Post and Telecom Authority’s (PTS) move to suspend the auction may signal future tension between Huawei and regulators.

• The Swedish authorities have said the country must consider the Chinese state’s cyber-espionage when building its 5G networks. For more than a year, the US government has campaigned against Huawei over fears that China could use Huawei to eavesdrop on communications running through telecommunication equipment it sells across the world. Huawei has repeatedly denied the allegations.

Details: PTS was set to hold spectrum auctions for the country’s 5G networks starting on Tuesday. The regulator halted the auctions on Monday after a court in Sweden ruled that carriers using Huawei equipment could participate, Reuters reported.

• In October, PTS said in a statement that potential spectrum grantees must not use products from Huawei and ZTE, another Chinese telecom equipment maker, in new central function installations. The government body also asked telecom companies to phase out existing infrastructure for central functions containing products from Huawei and ZTE before Jan. 1, 2025. Huawei appealed the decision last week.
• The Stockholm administrative court said that certain parts of the regulator’s October decision will not apply until further notice, according to Reuters. 
• Huawei has no plan for more legal action and is waiting to have “constructive dialogue” with Swedish authorities, Kenneth Fredriksen, Huawei’s executive vice president for the region told Reuters.
• PTS said it would review the possibility of starting the auctions, which would allocate frequencies in the 3.5 GHz and 2.3 GHz bands needed for 5G communication, as soon as possible.

Alibaba Group and Cartier-owner Richemont announced Thursday a combined $1.1 billion strategic investment into Farfetch, the UK-based online luxury and fashion retailer building an increasing presence in China.

Details: As part of the partnership, Alibaba and Richemont will invest $300 million each in private convertible notes issued by the New York-listed luxury fashion retailer, according to a statement from Alibaba.

• The two companies will each invest $250 million in Farfetch China, taking a combined 25% stake in a new joint venture that manages Farfetch’s China operations.
• Existing investor Artemis, the controlling shareholder of French luxury giant Kering, will buy $50 million Class A ordinary shares in Farfetch.
• After the deal, Farfetch will launch luxury shopping channels on Alibaba’s platforms including Tmall and cross-border marketplace Tmall Global to tap into the company’s massive user base of 757 million.
• In the meanwhile, the two firms will cooperate to develop omni-channel retail solutions for e-commerce websites and apps.

Go deeper: The partnership makes Farfetch one of the few companies to receive investment in and cooperation with the two rival e-commerce ecosystems headed by Alibaba and JD.com. This highlights Chinese tech firms’ eagerness to tap into the online luxury market.

• Chinese consumers have expressed a strong appetite for luxury brands over the past few years. Consultancy firm Bain expects Chinese shoppers to make up nearly half of all luxury sales by 2025, up from representing 35% global luxury spending in 2019.
• JD.com, which has been locked in a battle with Alibaba’s Tmall to win over luxury consumers, invested $397 million into Farfetch in 2017. The Chinese online retailer merged its luxury goods platform Toplife with Farfetch in 2019.
• Tencent, the Alibaba rival and JD.com investor, participated in a $250 million investment into Farfetch with investment firm Dragoneer in January.

2020 has been a tough year for China tech companies selling to overseas markets. In India, local authorities banned 177 Chinese apps in June and September following border clashes between the two countries. In the US, the Trump administration launched an effort to ban short video app Tiktok and instant-messaging app Wechat, which are among the most successful Chinese apps in international markets. 

Even in Europe, Chinese telecommunications equipment maker Huawei is facing increasing restrictions on supplying gear for next-generation 5G networks.

It forces us to wonder if the world is still open to China tech. It’s a question that’s fundamental to what we do here at TechNode—so we made it the headline question at our Emerge 2020 conference last Thursday.

Bottom line: Going overseas has always been tough, and in this political climate, it’s even tougher. But politics isn’t everything. Speakers said it’s still possible for some Chinese tech firms to succeed in the right overseas markets. Others face long-standing market barriers that predate current tensions.

Compliance and building trust: Many firms trying to enter developed markets have a more basic problem than bans, speakers said: consumers there just don’t trust them.

“The challenge for entrepreneurs going across the border is actually trying to understand what you can do and what you cannot do,” said William Bao Bean, general partner at investment firm SOSV.

Bean said a lack of regard for privacy has earned many Chinese tech companies a bad reputation in markets like Europe and the US. “You have to adapt to the local market. You have to follow the local law. And half the time, people don’t even know that they’re breaking the law when they go across the border.”

Chinese companies have been successful in exporting hardware to overseas markets, said Kiran Patel, senior director at China-Britain Business Council, during the discussion. Patel said he is “more positive” about the future of Chinese hardware than software in the British market because hardware companies usually don’t need to deal with a huge amount of personal data.

Trust is more important when exporting software that holds personal data, Patel said.

“That is the challenge that companies like Tiktok and Wechat have to meet when moving into a new market,” Patel said. “The first challenge that must be overcome is building trust.”

China, security champion? Privacy and security have always been weaknesses for China tech. But at a workshop at the conference, we heard that this truism could be changing as China moves to enforce new laws on privacy and cybersecurity. Carly Ramsey, director at risk consultancy Control Risks, told the audience that China has written one of the world’s most extensive set of requirements to protect data, and is now moving to enforce it. These don’t resolve international concerns about surveillance—but they could help clean up China’s “idiots with a database” problems.

Disrupting barriers: Embracing disruptive technology can be a path for getting around traditional tech barriers, speakers said. The most optimistic attendees about internationalism, by far, were the blockchain-watchers. 

Asked about political barriers, Matthew Graham, founder of Sino Global Capital, a venture capital firm focusing on blockchain companies, said that the US cannot stop China in the world of blockchain the way it has hobbled Huawei on semiconductors. 

“Most of blockchain is open source. It’s not really possible to throw a bottleneck in that way,” said Graham.

As the nascent technology matures, said Michael Sung, co-director of the Fanhai Fintech Research Center at Fudan University, China is emerging as a leader in standards-setting. State-affiliated projects like the Blockchain Services Network (BSN) are creating ecosystems that attract international players.

But Sung, and Harriet Cao of Bianjie, a blockchain startup, rejected a US vs. China framing for blockchain. Instead, they said, it’s a trans-boundary technology that can mitigate mistrust.

“Blockchain is a little bit of a different beast. It’s not about choosing to use Huawei equipment or not,” said Sung. “Blockchain is about multi-party coordination, having stakeholders being able to coordinate in a trusted and secure way, where trust doesn’t exist between the parties beforehand.”

They’re just not that into your EVs: China is home to some of the world’s most exciting electric vehicle (EV) makers, such as Nio, BYD, and Xpeng. But they’ve yet to get traction with Europe’s millions of prosperous, environmentally-conscious consumers. Marketing is a major reason, said Tu Le, founder and managing director of business intelligence firm Sino Auto Insights.

“Some Chinese companies have started to sell EVs into the EU. That could be a question because they haven’t really solidified positioning in their home market,” said Le. “Europe, like Southeast Asia, is very diverse, and therefore a marketing strategy in Germany might not work in France and Italy. That level of complexity for entering an international market is a lot to chew on for Chinese EV makers.”

“The complexity ramps up significantly for them. And that could be a drain on their capital,” he said, adding that Chinese EV makers should focus on individual markets as opposed to looking at Europe as one big market.

Go southeast: The right answer for many companies with global ambitions is to look for markets that are more like China than Germany or the US. We’ve long seen that most Chinese companies do best in markets that have more in common with China a few years ago—large rural populations, first-generation mobile users, or leapfrog growth.

Chinese tech companies should focus on Southeast Asia in expansion plans, said Bean of SOSV. In addition to friendlier regulations than Europe or India, he said, it’s a good market fit.

“Southeast Asia has a lot of the same challenges, problems, or opportunities that China had 10 years ago. It’s a mobile-first market. So people’s first or only experience with the internet is on a smartphone, which is very similar to China,” he said.

All we are saying is give tech a chance: Chinese companies have their share of problems. But at times they also make good-faith efforts to mitigate concerns. Huawei offered to sign “no-spy deals” with countries and set up a cybersecurity transparency center in Brussels and now is facing spreading bans from Western countries’ core 5G networks. Tiktok vowed to localize user data in the US and appointed a blue-ribbon panel of privacy experts—and was rewarded with an app ban. 

Of course, the election in the United States is going to have a big impact on China tech. If US-China relations keep getting worse, tech will be affected. Maybe we’re biased, but at TechNode we don’t think this is a great thing for anyone. 

With contributions from David Cohen.

Ant Group, Chinese e-commerce giant Alibaba’s payments affiliate, is cutting support and funding to the overseas e-wallet companies it has invested in as the company pulls back from ambitions to become a global leader in payments, Reuters reported.

Why it matters: Ant Group has made headlines over the past few months over its plans for a dual listing in Hong Kong and Shanghai. The company aims to raise $34.4 billion—potentially the largest IPO in history.

• Since 2015, the company has invested in a slew of e-wallet firms around the world as it sought to expand its overseas presence, simultaneously launching its own payments platform Alipay in several markets globally.

Details: Ant Group is now scaling back the hundreds of millions of dollars the company spent each year on its overseas fintech investments, while bringing its support employees back home, according to Reuters’ sources in nine countries.

• The move started in late 2019 as the company began to prepare for its much-anticipated initial public offering (IPO) and grappled with regulatory changes at home.
• Ant has also reportedly hit the brakes on plans to create a global QR code-based payments system that would connect all the e-wallets it has funded.
• The comany has invested in around a dozen fintech companies including India’s Paytm, Myanmar’s Wave Money, the UK’s Worldfirst, and Thailand’s Truemoney.
• The company still plans to invest abroad, reserving around 10% of the $34.4 billion it hopes to raise in its IPO for overseas investments.
• A person familiar with the matter told Reuters that Ant plans to provide initial support to the overseas e-wallet firms it invests in and then hopes to see them succeeed by themselves.

READ MORE: Ant Group to close Hong Kong order books early on strong IPO demand

US electric vehicle giant Tesla will begin exporting its China-made Model 3 sedans to a dozen of European countries this month as it faces dual pressures of plunging sales in Europe and slower-than-expected growth in China, according to persons familiar with the matter.

Why it matters: Excess inventory at Tesla’s Gigafactory Shanghai is piling up as the EV maker’s brick-and-mortar showroom expansion in China—particularly in lower-tier cities—struggles to keep up.

• The California-based automaker also aims to make up for lost ground in Europe where sales have plunged this year due to the pandemic and growing competition.

Details: Tesla will start shipping China-made Model 3 vehicles to a dozen or so European countries including Germany and France on Tuesday with deliveries scheduled for December, as the Shanghai facility’s production has sufficiently ramped up to fulfill local demand, the company said on Monday.

• In an announcement sent to Chinese media, Tesla said that the company is striving for a breakthrough in business development, including doubling production capacity, sales, and charging locations by end-year.  
• Tesla’s sales have not keep pace with accelerating production in China, people with the knowledge of the matter told TechNode on Wednesday. Existing showrooms have achieved significant operational efficiency; the company needs to expand its presence with more locations, the people added.
• The US EV giant currently runs a sales network of 105 retail locations in 33 Chinese cities, and nearly half are located in the four top-tier cities. It has only a dozen retail stores across more than 600 Chinese third- and lower-tier cities, according to information on its official website.
• To compare, Chinese EV maker Nio operates more than 150 retail locations across 91 cities, and Xpeng Motors operates around 130 stores in about 60 cities.
• Tesla’s China-made Model 3 is the top-selling EV model in China with around 80,000 units delivered in the nine months ended Sept. 30, according to figures from the China Passenger Car Association (CPCA).
• Tesla did not respond to a request for comment.

Context: The significantly lower sticker price for the China-made Model 3 is expected to help Tesla gain a competitive edge in the European market.

• The company slashed the starting price of its Shanghai-made sedan by nearly 10% to RMB 249,900 (around $37,550) earlier this month, Reuters reported, thanks to the cheaper lithium iron phosphate (LFP) batteries reportedly supplied by Chinese battery giant CATL. The model currently sells for €46,600 ($55,220) and above in France, according to an Electrek report.
• Tesla’s global sales grew 21% year on year to around 185,000 units in the first seven months of this year. However, its sales in Europe fell 23% to 38,000 units over the same period, according to figures from automotive market research firm MarkLines.
• Europe is the the only region where Tesla’s sales have plunged, owing to business interruption caused by the pandemic and growing competition from local auto giants including Renault and Volkswagen.
• Renault’s Zoe mini all-electric surpassed Tesla Model 3 to become the best-selling EV model in Europe with 36,573 units sold during the first half of this year, Bloomberg reported.

Sweden has banned Chinese telecommunications equipment makers Huawei and ZTE from participating in its 5G network rollout, the country’s top telecoms regulator said Tuesday.

Why it matters: The development shows European countries are tightening restrictions on Chinese suppliers for their 5G infrastructure, signaling the US government’s campaign to eliminate Huawei equipment from Western communications networks is gaining traction.

• Swedish company Ericsson, a key rival to Huawei, has been selected to supply parts for 5G core networks belonging to China’s three state-owned telecom companies.
• The decision may mean that Sweden could face retaliation from China. Ericsson relies on China to produce some equipment it designs and China’s Ministry of Commerce is mulling export controls that would prevent the company from sending products it makes there to other countries, the Wall Street Journal reported in July citing people familiar with the matter.

Details: Sweden’s top telecom regulator Post and Telecom Authority (PTS) is set to hold spectrum auctions on Nov. 10. The government body said in a statement Tuesday that potential license grantees must not use products from Huawei and ZTE in new central function installations.

• Existing infrastructure for central functions containing products from Huawei and ZTE must be phased out before Jan. 1, 2025, the regulator said.
• PTS said in the statement that the conditions were based on assessments made by the Swedish Armed Forces and the Swedish Security Service.
• Klas Friberg, head of the Swedish Security Service, said Tuesday that “China is one of the biggest threats to Sweden” and that the country must consider when building the 5G network what he called the Chinese state’s cyber espionage conducts.
• Huawei said in a statement to TechNode Wednesday that it is “surprised and disappointed” by the Swedish government’s decision and that “there is not any factual ground to support allegations of Huawei posing any security threat.”
• “We find the exclusion of Huawei simply based on groundless presumption unfair and unacceptable,” the company said. It also called on Sweden to “reevaluate” the decision.
• ZTE did not respond to a request for comment on Wednesday.

Huawei’s future in EU: The US government has been campaigning its allies to avoid Huawei equipment from their networks since last year. 

• So far, some US allies such as Australia and Japan have imposed de-facto bans on Huawei. Some European countries like the UK and France decided to phase out Huawei equipment over the next few years. 
• Many Western European countries, which are mostly member states of the European Union (EU), including Germany, Italy, and Spain, are on the fence.
• The EU’s stance on Huawei is relatively clear—it has released a “toolbox” and guidelines on how member states should evaluate 5G gear provider risks and trustworthiness without mentioning any specific country or company. However, its member states are taking various approaches.
• The toolbox and guidelines are not legally binding, so the results depend on how countries interpret and implement them. One example is Belgium, whose major telecom operators had chosen European vendors Ericsson and Nokia to build their 5G networks. This approach avoided enraging Beijing and largely followed Washington’s will. But the question is whether this will become the norm.
• “Huawei’s expulsion from all of Europe’s core networks seems to be a question of when, not if,” Jan Stryjak, associate director at market research firm Counterpoint, wrote in an article published in September.
• Stryjak told TechNode in a recent interview that he said as much because “more and more countries are opting to remove Huawei from their core networks in place of alternative vendors like Nokia or Ericsson.” 
• “Since no country would want to be alone in bucking the trend, solidarity seems to be the name of the game, which is bad news for Huawei,” he said.

Back in the 1990s, people thought the internet would abolish borders. “Cyberspace does not lie within your [governments’] borders,” wrote author and internet activist John Perry Barlow in 1996. 

The idea of a borderless network has held on. “One of the great things about the internet is that it does not have national borders. When a company in Tokyo sends a digital file to a company in New York, the data does not have to clear customs,” wrote the New York Times in a 2015 op-ed. 

While that may hold for Japan and the US, files going from Beijing to Brussels now often do have to pass digital customs inspections. 

China’s model of data localization, and the associated 2017 Cybersecurity Law, has been the subject of criticism and confusion. But now it seems that Beijing was on the cutting edge of a trend.

Bottom line: China is continuing to develop a system that limits where companies keep data, and what they can send abroad. Many multinational companies—and Washington—don’t like it, but they’d better get used to it: this idea is catching on around the world. 

What is data localization? Data localization regulations require that data be stored and processed on computers in a particular place, usually within a country’s borders, as opposed to letting them flow freely through data centers around the world. 

• This might not mean all data and always. Laws often specify particular types or data that must be kept domestically, and leave room for regulators to grant exceptions. 

Why localize?

• Security: Data localization schemes often cite “security” or “privacy.” But experts say that localizing data alone doesn’t mean enhanced security or privacy. Whitehat hackers contacted by TechNode said that domestic adoption of security and privacy best practices is a bigger issue. 
• Jurisdiction: Data localization does help governments regulate data, and proponents often cite the risk that companies will move data to less-regulated environments.
• Protectionism: Data is a valuable resource—so countries hope keeping it in country will give homegrown tech companies a competitive edge.

Regional styles: There are three main approaches to regulating cross-border data flows, said Nigel Cory, who studies cross-border data flows as Associate Director of Trade Policy at the Information Technology and Innovation Foundation, a think tank based in Washington DC.

• The US has little to no regulation on data flows. It also advocates against data localization in other countries.
• EU regulates cross-border flows based on privacy and security assessments.
• Chinese law treats data both as a valuable resource and a national security priority. The Chinese model asks: “What does data localization give the government from an economic perspective, but also a social and political perspective?” Cory said.  
• Legal models vary widely around the world, from bans on cross-border flows of locally harvested data (Russia) to requiring domestic storage of backups (Indonesia). 

China’s approach: The landmark 2017 cybersecurity law set the scene for data localization in China, but elements of data localization date back to 2006, Cory said.

• Under the 2017 law, “critical information infrastructure” providers, such as telecoms, utilities, energy, e-government, finance, must get permission from public security officials before transferring data overseas. 
• Information on the military, finance, energy, transportation infrastructure, and medical services, are among the law deems “critical.”
• Personal data related to over 500,000 people must also be stored within China. 

Slow roll-out: Details on how the law will be implemented on different sectors are still being hammered out in accompanying laws and regulations. 

• The key term “critical information infrastructure” is not clearly defined in the law. 
• In the absence of clear guidance, many multinationals assume their data will be included.
• Figuring out the details takes time:, in 2018, University of Hong Kong and McGill law researchers found that cross-border transfers of genomic data were subject to ten different regulations and guidelines, enacted from 1998 to 2017. Another one has been rolled out since. 

READ MORE:  Dust has yet to settle two years after China’s landmark cybersecurity law

Opening up: China is experimenting with relaxed localization rules in new free trade zones, said Xiaomeng Lu, an internet policy analyst at political risk consultancy Eurasia Group. 

• “There’s always internal debate about how to regulate new technology. When the internet first came about there was discussion about ‘how do we maintain party control of the country whilst also leveraging this for GDP growth?’,” Lu said. Now, the government is trying to strike a similar balance with data.

• The plan (in Chinese) for an FTZ in Hainan, revealed in January, talks about making outbound flows of personal data “more convenient.”
• A Shanghai FTZ plan released in April spoke of experimenting with cross-border data flows and governance—including a mention of providing access to the “international internet.”
• One of the reasons why the central government is letting such experiments run is the digital yuan, Lu said. 

Assessing the impact

Additional costs: Data localization costs international companies money. They have to build several local data centers to ensure data is backed up, Lu told TechNode. These costs are adding up as more countries adopt data localization schemes, meaning ever more local data centers.

AI headaches: Compliance becomes more complicated for global firms who use AI-empowered analytics in their products. 

• A financial firm, for example, that uses AI to detect and block suspicious transactions relies on the fact that data from different countries can be combined. A resident of Shanghai whose bank card is used in Nairobi, the system that looks over data globally will trigger some sort of alert. 
• There are ways to get around this problem, “firms may be able to find some imperfect work-arounds in terms of replicating the analytics services locally and indirectly feeding non-specific data through to their global analytics platform,” Cory said.
• But these solutions are “hugely complicated and costly.” For some firms localization workarounds are the “biggest cost in terms of how they manage their architecture,” he said. 

Competitive advantage: Chinese companies are more comfortable with data localization abroad, seeing their experience with it at home as an advantage.

• “Chinese companies take the cost and complexity of setting up an ex-China infrastructure as the cost of doing business,” sometimes even viewing it as a competitive advantage in other countries that also enact data localization, given the reluctance of some foreign firms to do the same, Cory said. 

Local champions: Data localization requirements have helped China’s domestic data center industry flourish, as large multinationals work with local firms in joint ventures to run data centers in China. 

• In the cloud space, AWS has partnered with two companies in Beijing and Ningxia. Chinese users of Apple Icloud servers will find their data stored on a Guizhou company’s servers. Microsoft Azure cloud services are hosted on Beijing-based 21Vianet’s data centers.

The opposition: In China, lobbying against data localization is a top priority for multinationals, Lu said.

• “Security and privacy often are cited as justification for data localization but, as we’ve seen time and again, hackers and cyber criminals are not limited by lines on a map,” a spokesperson for IBM told TechNode, adding that “forced data localization does nothing to make data more secure.”
• US big tech has lobbied hard against data localization. Google’s Sundar Pichai sent a letter to the Indian ministry of IT while India’s cybersecurity bill was undergoing public consultation. Facebook joined Google’s anti-data localization push in Vietnam. Mastercard and Visa convinced Indonesia to water down data localization requirements. 
• When China’s Cybersecurity Law was announced in 2016, the EU Chamber of Commerce in China cautioned that it could“hinder foreign investment and businesses operating in and with China.” 

More than data: There is no evidence that big multinationals have pulled out of China due to increased cloud costs. But data localization has other consequences that could make doing business in China less appealing. 

• When Apple moved its Chinese user data to Guizhou, it was criticized for moving the encryption keys that crack them open. 
• “Storing data locally might also mean storing or using locally mandated encryption keys, which undermines their global cybersecurity architecture. This potentially exposes communication on their platform and undermines their global products,” Cory said.
• This was not enough for the California giant to abandon one of its biggest markets, but other companies might be not be willing to expose their encryption keys and security architecture to Chinese authorities, one expert said.

Global trends

Loco for localization: China is not alone in pursuing data localization. Regulations started popping up around the world before China’s 2017 cybersecurity law, and the trend has accelerated since. 

• A 2018 study endorsed by the Center for Economic Policy Research, a European think tank, found that between 2006 and 2017, restrictions on cross-border data flows doubled around the globe.
• India first implemented data localization requirements in 2014. Regulators proposed new data localization laws in a 2019 personal data protection bill, but revised it to only pertain to “critical” personal data. Financial, biometric, genetic, and religious data can be transferred overseas for processing under the revised law. 
• Indonesia and Rwanda enacted localization laws in 2012, Nigeria in 2013, and Russia in 2015. 
• The European Union’s General Data Protection Regulation, enacted in 2016, regulates cross-border data transfers on privacy and security grounds. 
• In June, the European Court of Justice ordered restrictions on data flows to the US, saying that US privacy protections are “inadequate.”

Washington: More than Silicon Valley’s tech giants, Washington has lobbied hard against data localization around the world, with some results.

• The free trade agreement between the US, Mexico, and Canada prohibits parties from restricting cross-border data flows with each other.
• Similar requirements are part of the US’s free trade deal with Japan.
• The 2016 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement between 11 Asia-Pacific nations, also known as TPP-11, also talks of maintaining free data flows. Donald Trump pulled the US out of the agreement as soon as he came into office. 

READ MORE: INSIGHTS | China’s digital currency has a long way to go

But Tiktok! But when it comes to China, even the US is starting to talk about data localization. When Washington moved to ban two Chinese apps—Tiktok and Wechat—from US phones, it cited the risk of sensitive personal data being sent to China.American authorities appeared ready to accept a deal that would see Tiktok’s US user data kept on local servers run by Oracle. 

A future of data corridors? The rest of the world doesn’t need signaling or support from the two superpowers to set its own course when it comes to data localization. While China, India, Russia, and others, are pursuing data localization within one country’s borders, new free trade agreements are creating free data flow bubbles between trading partners. 

CPTPP signatories have moved to liberalize data flows among themselves. A January agreement between Singapore, New Zealand, and Chile enshrined free data flows between the three countries. 

As data becomes a regular part of trade talks, bubbles like these, rather than a global network, could be the future.

From Washington to Berlin, New Delhi to Shanghai, Chinese tech companies remain entangled in geopolitical conflicts this week. In the US, the Chinese-owned video-sharing app Tiktok just won an initial success in its legal challenge against the Trump administration. White House officials renewed pressure on Europe to ban Huawei from their next-generation 5G networks after German Chancellor Angela Merkel refused a full ban on the Chinese telecommunications equipment maker. A new round of export bans were imposed on China’s largest chipmaker SMIC by the US. In India, banned Chinese apps are trying to re-enter the market with revised names and logos.

Tiktok’s initial win

On Sunday, a US judge halted a looming Tiktok ban at the last minute. The ban, announced by US President Donald Trump last Friday, would have removed Tiktok from American app stores starting from midnight Sunday.

• The injunction granted by US District Judge Carl Nichols gave Tiktok a temporary reprieve amid ongoing deal negotiations to meet with Trump’s demand to sell Tiktok’s US operations. 
• However, the judge didn’t consider Tiktok’s appeal to block an executive order from Trump demanding the company to divest from its American assets, according to court documents. The order, requiring Tiktok parent Bytedance to either spin off or sell the app’s US operations within 90 days, will go effect on Nov. 12.
• Bytedance has applied to the Chinese government for a deal that would give American software maker Oracle and retail giant Walmart a combined 20% stake of Tiktok’s proposed US business. Beijing hasn’t yet made a final decision, but smoke signals from state media indicate opposition.
• In the past week, the party mouthpiece People’s Daily published three editorials commenting on the Tiktok deal. One of which (in Chinese) reads: “The ‘Tiktok deal’ is based on unfairness… If the forced deal finally goes that way, American stakeholders would earn tens of billions of dollars…then why do they need venture capital and entrepreneurship in the country when they can just mug Chinese companies?” (our translation).
• “China won’t swallow its tears when its core interests are endangered, and Chinese companies are not lambs to the US slaughter,” said another editorial (in Chinese).

US renews campaign to ban Huawei in Europe

On Tuesday, Keith Krach, the US undersecretary of state for economic affairs, said Finland’s Nokia and Sweden’s Ericsson were the only companies that European governments should choose for the 5G network rollouts. Huawei is “an arm of the CCP surveillance state and a tool for human rights abuse,” Reuters quoted him as saying.

• Krach’s remarks came as Germany and Italy are deciding whether to allow Huawei to participate in building their 5G networks. Last week, Merkel refused to compromise on her position that Germany shouldn’t single out Huawei with a targeted ban, Bloomberg  reported. Her government finalized draft regulations for the security of Germany’s 5G network, which would tighten the government’s scrutiny over equipment vendors.
• Before Germany made its 5G decisions, the UK and France had adopted a de-facto ban on Huawei, vowing to phase the company’s products out from their 5G and 4G networks in the next few years.

SMIC on Huawei’s heels

Shares of Semiconductor Manufacturing International Corp (SMIC) tumbled more than 6% this week after reports that the US had imposed restrictions on exports to the Shanghai-based chipmaker. The decision was made by the US Commerce Department on Friday upon the conclusion that SMIC’s products could be used for military purposes and therefore pose “unacceptable risk,” Reuters reported Saturday.

• The Commerce Department said in a letter to some suppliers of SMIC that they will now have to apply for individual export licenses to ship to the Chinese company.
• On Monday, the Shanghai-listed company said in a statement (in Chinese) filed with the Shanghai bourse that it had not received any official notifications about the restrictions from the US government. The company also said it had no relationship with the Chinese military and had never produced products for military end-users.
• Chinese Foreign Ministry Spokesman Wang Wenbing told reporters Monday that China opposes (in Chinese) US restrictions on SMIC and that the country would take necessary measures to safeguard the interests of Chinese enterprises.

Chinese apps launch second offensive into India

In India, several Chinese apps previously banned by New Delhi are trying to reenter the market with rebranded versions, local newspaper The Economic Times reported.

• Chinese video app Kuaishou has launched video-sharing app Snack Video, a Tiktok lookalike. Kwai, an international version of Kuaishou, as well as Tiktok were both banned in India in June.
• Hago, another Chinese social media app banned in June, has been replaced by an app called Ola Party, which allows users to log in using their Hago credentials, according to The Economic Times.
• The Indian government has banned a total of 177 Chinese apps from the country in two rounds of app bans imposed in June and September. The most high-profile apps banned including Bytedance’s Tiktok, Kuaishou’s Kwai, Tencent’s instant messaging app Wechat and the popular mobile game Player Unknown’s Battlegrounds, or PUBG.

I love lurking on Linkedin. A couple of weeks ago, something struck me. While Tiktok was facing the prospect of a US ban under an Aug. 7 executive order, many people in my European networks were delighted to announce that they were joining the short video company. Countless emojis were harmed in the making of these Linkedin posts. 

As its future in the US is under threat, Tiktok appears to be trying to fortify its operations in Europe. On Tiktok’s careers site, 272 jobs are posted in Europe (excluding Russia) at the time of writing. Dublin takes the lead with 117 jobs, London comes second with 78, and Germany third with a total of 34. Germany is hiring for offices in  Berlin, Munich, and Hamburg. Positions in Madrid, Paris, Stockholm, Warsaw, and Milan are also seeking candidates.

In Europe, Tiktok’s hiring patterns reflect its growing ambitions on the continent and a push to localize and clear the bloc’s data security hurdles. 

A data sweep on Twitter conducted by TechNode indicates that Tiktok has ramped up its hiring in Europe. Bytedance employees and job advertising services including the UK’s Job Centre Plus, a state-run employment platform, have mentioned jobs at Tiktok more frequently in recent months.

In August, 42 links to the Tiktok global careers website were posted on Twitter, compared to 12 in February. 

“It’s quite incredible how many people they’re bringing on board. Every week there’s new people,” a new hire who joined Tiktok’s European operations in August told TechNode.

Open positions on the company’s website include a wide variety of roles, from advertising and brand strategists to privacy specialists. Tiktok appears intent on localization, seeking fluent speakers in most European languages, such as Swedish, Hungarian, and Greek.

“Of course everybody is looking at what’s happening in the US,” the recent hire said, “but there’s no anxiety. On the contrary, everyone is very optimistic.”

Despite the ongoing row with Washington, Tiktok hasn’t taken down its job listings in the US. Currently, 465 positions are listed as available in the US on the app’s website. 

READ MORE: China tech faces double compliance challenge in Europe

Bet on Europe

Bytedance’s continued hiring for the popular video app shows it is optimistic about the European market, despite criticism over its privacy policy. Regulators have expressed concern over personal data flowing from the EU to China, the app’s handling of minors’ data and consent. But as long as Tiktok complies with local data regulations, the company should be safe in Europe, experts told TechNode.

Tiktok currently has over 1,600 employees based in Europe, roughly 1,300 of whom are based in the UK and Ireland, the company said in a statement Monday.

A Europe-wide ban is “unlikely,” said Jan Stryjak, Associate Research Director at Counterpoint Research. “Tiktok has not faced the same levels of scrutiny and political grandstanding in Europe as in the US,” he said, so it makes sense that it “looks to establish itself to build on its rapid growth in the region.” 

In Europe, regulators have tried to appear neutral. “I am not in the business of banning any company, I am in the business of explaining very clearly what are our rules,” EU Commission Internal Market Commissioner Thierry Bretton told Politico earlier this month.

“In the short-term, I wouldn’t expect any comparable moves on Tiktok in Europe to match US actions,” Andrew Small, associate senior policy fellow at think tank European Council on Foreign Relations, told TechNode.

By contrast, the situation around Huawei includes “fundamental questions” about the company’s role in Europe’s digital infrastructure and “longstanding issues about Chinese subsidies undermining European telecoms firms,” he said.

Tiktok does not provoke the same sensitivities. “The issues at stake with Tiktok relate to censorship and data use, neither of which is likely to lead to an outright ban, and there will be no inherent objection to Tiktok hiring and investing in Europe either,” said Small.

Beefing up data security

New data privacy and security rules in the European bloc are compelling Tiktok to reconfigure its global operations.

Bretton stressed that the “key subject” when it comes to Tiktok operating within the bloc is data, highlighting the rigor of Europe’s data security and privacy rules in comparison to China.

“The EU has not had to deal with this issue on a really major scale given that Chinese apps have not made many inroads with European consumers,” Small said. 

In August, the European Court of Justice ruled that personal data collected on EU citizens can only be transferred to third countries that have similar privacy regimes. The decision, known as Schrems II, could mean that personal data collected by Tiktok on European citizens can never be legally transferred to China. 

A few weeks after the ruling, Tiktok said its Irish and UK entities will be taking over data management for European users from its US operations. Shortly after, the company announced plans for a new data center in Dublin. According to company statements, the data center will form part of a “Privacy and Safety Hub” for Europe, the Middle East, and Africa.

Bytedance said it plans to spend €420 million ($500 million) on the Dublin data center. The investment will “create hundreds of jobs” in the city, said Roland Cloutier, Tiktok’s Global Chief Information Security Officer in a blog post.

Cloutier previously worked at Automatic Data Processing, a Nasdaq-listed HR systems provider, as well as US computer manufacturer Dell. 

The job listings on Tiktok’s website appear to line up with this announcement. Dublin is the city with the most job openings. 

But the Dublin data center doesn’t mean that Tiktok can put the data security issue to bed. 

The EU is known for having some of the world’s most stringent personal data protection rules, known as the General Data Protection Regulation (GDPR).

In June, the European Data Protection Board, an EU body in charge of the application of the GDPR, set up a task force to probe Tiktok’s data processing activities and privacy practices across the EU, China’s Caixin reported.

Privacy watchdogs in France and the Netherlands have also launched inquiries into Tiktok’s privacy policies, especially as they pertain to Tiktok’s underage users. 

Tiktok has not replied to a Sept. 15 email seeking comment. 

London calling, Berlin texting

Tiktok’s job listings show that politics have not dented its ambitions to be a true multinational. The company is charging ahead with establishing regional hubs and localization teams in key European cities, all answering to a CEO currently based in California.  

London ranks second among European cities in active jobs listings on Tiktok’s careers website. The short video app operator is reportedly considering moving its headquarters from Beijing to London, British media reported in August. 

“A new global headquarters in London could be a huge boon for the UK’s job market, which has suffered in recent months due to the Covid-19 pandemic,” Stryjak said. 

UK Prime Minister Boris Johnson will welcome the Tiktok headquarters with open arms, risking the wrath of US President Donald Trump, UK media has reported. 

The British government is reportedly split over the potential Tiktok move. Trade and tech officials and ministers are at odds over how to handle the Chinese tech company, the Telegraph reported citing UK government sources familiar with the matter.

Germany, which ranks third in the number of listed job openings, represents a big market with a big pool of tech talent, experts told TechNode. 

It’s also a strategic location that Tiktok can use to “buy some goodwill, given its outsized influence over the European debate,” Small said. 

Joining the whirlwind

Yet those who decide to join the company in these times are taking on a lot of uncertainty. The app’s US and EU operations were nearly sold to Microsoft after pressure from the US government. After weeks of speculation about a deal with Microsoft, the company has reportedly settled on a partnership with Oracle instead. 

TechNode found two people who have been approached by recruiters. Both said they ignored the recruiters’ messages as they were not interested in working for the short video app. “Tiktok is stupid,” one of them said.

But Linkedin job updates indicate that Tiktok’s attempts to poach top tech talent have been successful at times. 

Many of the new hires came from some of the West’s biggest companies, including big tech. The person who onboarded recently said the salary offer was “very competitive” but didn’t give any further details. But “it wasn’t like I couldn’t trust my eyes,” they said.  

Another new hire said that they were under a non-disclosure agreement that is valid for 100 days after onboarding. 

In a Linkedin search, TechNode identified one person who worked at Amazon for seven years in Germany and recently said they joined the Bytedance app in September. A UK-based professional with four years of experience at Google and three years of experience at Netflix said they took a position at Tiktok in July. Another person who was at Google for two years also said they joined the app in September. 

The European who is considering a position said that working for the Chinese company in the midst of an international storm seemed “insane” at first, but that they have come to appreciate the challenge.

The recent hire said that Tiktok is “an exciting place to work in at the moment, regardless of how safe this job is in the long term. 

“We all know that this industry is moving very fast. But it’s really interesting to be part of this and get this experience at this time,” they said.

As it evolves into a demand-driven model, China’s electric vehicle market could regain its ranking as the world’s largest in 2021 after likely losing the crown to Europe this year, an auto association executive said on Tuesday.

The slowdown in EV sales this year will be temporary, a result of reduced purchase subsidies as well as extended production quota mandates, Cui Dongshu, secretary general of China Passenger Car Association (CPCA) said at a briefing.

CPCA said that sales for China’s new energy vehicle (NEV) industry—including all electrics and plug-in hybrids—will fall 17% annually to 1 million units this year. NEV sales in Europe for 2020 through July modestly exceeded those of China, the world’s top market since 2015, Bloomberg reported.

EV stimulus moving from China to EU

Experts say strong growth in the European market is largely driven by generous government rebates, thus the market bears little comparison to China’s, which is shifting from a state-controlled to demand-driven market with the phasing out of subsidies.

The pandemic has also dealt a significant blow to China’s market. Automakers have been hit hard, and as a result have slowed the expansion of their EV portfolios. The central government in June updated mandated production quotas to give automakers one more year to meet their NEV production targets for the three years until 2021.

Global automakers partnered with Chinese companies are “not fully prepared” to release new EV models to the country’s market, but the pace will accelerate next year, Cai said (our translation). NEV sales only account for about 2% of total car sales for overseas automakers partnered locally, which does not meet requirements set by the Chinese government, according to Cui.

Meanwhile, European countries are playing catch-up with generous subsidies to fulfill their goals to sell only zero-emission cars by the next decade. Germany in June announced a sweeping €130 billion incentive package, including doubling its subsidy of €6,000 ($6,700) for EVs costing up to €40,000. Subsidies for EVs below €45,000 in France were also increased slightly to €7,000.

“To drive an early market, the importance of incentives to overcome the affordability barrier is key,” David Wong, senior manager at the Society of Motor Manufacturers & Traders (SMMT), a UK’s automotive industry body, said on Thursday at London Tech Week.

Push for more chargers

Meanwhile, the UK is ramping up legislation supportive of recharging infrastructure, which Wong believes will “give a shot in the arm” to the country’s EV uptake.

Following an £1.5 million ($1.9 million) reward to two charging point projects, Wong said that the UK is planning to launch regulations to facilitate the “smart” charging market, including technical requirements for chargers. The government is also seeking to pass laws that require all new homes in England to be fitted with charging points.

Wong expects these moves to help convince people to switch to EVs and drive the market uptake. So far each rapid charger in the UK is shared by as many as 56 EV owners, whereas that number in China is 16, according to Wong.

China’s passenger EV sales rebounded 43% year on year to more than 100,000 units in August, representing the second consecutive monthly increase after a prolonged market slump which lasted an entire year. CPCA said Chinese EV makers have been increasingly recognized by customers especially in the premium segment, and that Beijing’s recent push to build battery swap infrastructure in major cities would be a big boost to EV uptake.

In April, a cybersecurity researcher showed that Xiaomi was collecting heaps of user data without users’ authorization. The Chinese smartphone maker responded that the data was aggregated and therefore couldn’t be used to identify users. 

China’s privacy framework

Starting in 2017, China has set up a strict privacy regime that strongly resembles Europe’s General Data Protection Regulation (GDPR). Chinese lawmakers have established reasonable privacy-related obligations for businesses that collect and handle data.

Read more: Dust has yet to settle two years after China’s landmark cybersecurity law

Several statutes in Chinese law guarantee the right to privacy: the Cybersecurity Law, the Consumer Protection Law, and the Criminal Law. Accompanying regulations and standards, including the Personal Data Security Specification (PDSS), outline detailed requirements for collecting and handling personal data. 

The PDSS is the most comprehensive explanation of China’s privacy rules. It describes a system similar to Europe’s GDPR. Both require businesses to obtain consent before collecting user data. Both guarantee the consumers’ right to correct and erase their data. 

Under the two regulations, businesses must follow the “least necessary” principle. They should collect no more data than what is absolutely necessary for their business functions, and store the data no longer than needed to achieve the stated purpose.

In China, data localization rules require businesses to ask the authorization of local Public Security Bureaus before transferring personal data abroad. 

Chinese authorities have started to enforce privacy rules. In July 2019, a special government group found that 30 apps had no privacy policy. It gave them 30 days to rectify their practices. The apps included the Bank of China app, dating app Tantan, and social media platform Renren. 

The privacy loophole

Despite ramped up implementation, there is one situation in which PDSS rules don’t apply. If consumer data is “anonymous,” it is not considered personal data, and consequently is not subject to privacy regulations. The EU makes a similar exception to its privacy rules for anonymous data.

Both regimes require “full anonymity,” which involves more than removing names. If people can be identified from a processed data set, whether alone or in combination with other databases, then the data is not considered anonymous.

This requirement is where the trouble begins. Neither framework explains how to reach full anonymization, so interpretation is up to the courts. 

In Europe, the definition of anonymization is rather narrow. In 2018, the Danish data protection agency, interpreting anonymity under GDPR, concluded that deleting names associated with taxi trips was not anonymization. 

But in China, interpreting “full anonymization” is a different story. 

Vague definition

Chinese courts are worrisomely gullible about claims of anonymization, a recent court judgment suggests. 

Alibaba’s Taobao sells marketing analytics products to Taobao merchants to help them improve their business strategy. Anhui-based Meijing Information Technology buys that data from merchants who have originally purchased it from Taobao. It then uses it to sell cheaper, competing products. 

In 2017, the e-commerce giant sued Meijing for unfair competition. In its defense, Meijing argued that the data in question was “personal data” belonging to Taobao’s users, and not to Taobao. 

The court sided with Taobao, distinguishing between personal data and “big data,” which results from aggregating large amounts of personal data. This aggregated personal data is Taobao’s property, the court ruled.

A year later, Meijing applied for retrial, claiming that Taobao’s collection of personal data did not comply with privacy laws. In 2018, a second court judgment by the Intermediate People’s Court of Hangzhou, Alibaba’s home city, upheld the previous decision. 

The Hangzhou court ruled that the user information Taobao collects is not personal data, because it “cannot be used to identify the personal identity of individuals, alone or in combination with other data.” The court recognized that Taobao collects “behavioral traces of user browsing, searching, purchases, transactions, as well as label data such as their gender, occupation, area and personal preferences.” 

In 2019, a third judgment by Zhejiang Higher People’s Court upheld this interpretation, setting precedent for future rulings on data collection.

A tall order 

It is far from certain that such data cannot lead to re-identification, the work of researchers around the world suggests. A group of researchers from University of Louvain and Imperial College London warned that anonymized datasets can often be reverse-engineered to identify individuals. A paper published in Nature in 2019 showed it is possible to correctly re-identify 99.98 percent of Americans in any available anonymized dataset by using just 15 characteristics, including age, gender, and marital status. 

Taobao’s data sets are much richer and, by extension, almost certainly not fully anonymous.

There is usually a trade-off between data granularity and its usefulness. Researchers call this the “privacy-utility trade-off”. Companies want data to be as granular as possible. But the more granular it is, the easier it is to use it to identify individuals. Real anonymization lies somewhere in the middle of this trade-off, but further away from full granularity than is often thought.

The Chinese courts’ broad interpretation of anonymity runs the risk of defeating the purpose of China’s privacy regulations by providing a loophole to companies. It allows them to collect more data than they need and handle it sloppily with only fig leaf anonymization. 

In case of massive data breaches like Equifax in 2017 or in China only five months ago, malicious actors can use stolen data to harm re-identified users.  

A Dutch privacy regulator said Friday it would investigate how short video app Tiktok handles the data of teenagers and children on the platform, Reuters is reporting.

Why it matters:The popular social media app, owned by Beijing-based Bytedance, is under increasing scrutiny in overseas markets, including the United States and the European Union, over its data protection practices.

• The EU has the world’s toughest rules on protecting people’s online privacy known as the General Data Protection Regulation (GDPR).

Details:The Dutch Data Protection Authority (DPA) announced Friday that it would examine whether Tiktok clearly states how it uses data and whether “parental consent is required for Tiktok to collect, store and use children’s personal data.”

• GDPR requires companies to obtain consent from users’ parents if they are under 16 years of age. The regulation also bans any collection of data from children under the age of 13.
• “For many users this is an important way of staying in touch with friends and spending time together, particularly during the current coronavirus crisis,” the DPA said in a statement. “The rise of Tiktok has led to growing concerns about privacy.”
• Tiktok said it was cooperating with Dutch authorities.
• “TikTok’s top priority is protecting our users’ privacy and safety, especially our younger users,” the company told Reuters.
• The DPA said the initial results of the probe are expected later this year.

Context: In March, Tiktok announced a “transparency center” in its US office to address concerns over the security and privacy of its product.

• The company also hired cybersecurity veteran Roland Cloutier as its chief information security officer. Cloutier was the chief security officer at payroll-services firm ADP, according to his Linkedin profile.
• Tiktok has seen massive growth and has become particularly popular among teens. The app, together with its Chinese version Douyin, was downloaded more than 738 million times in 2019, making it the second most-downloaded app in the world.

Chinese tech firms such as Huawei and Bytedance have developed their global presence through aggressive R&D and physical presence in the European Union (EU). Huawei, for instance, filed the highest number of patents in 2017 out of any company in the EU and booked billions in contributions to the EU economy the same year. 

Read more: Europe’s 5G challenge and why there is no easy way out

Europe’s approach to digital governance in privacy and data policy is setting a precedent for regulatory regimes around the world. Data and content regulations, most famously the General Data Privacy Regulation (GDPR), target any companies with customers in Europe. These have wide-ranging implications for foreign companies that do business in the EU. The overarching goal of the GDPR is to protect users’ privacy and return the control of personal data to users. The laws also promulgate the principle of privacy by design, in which transparency and a standard of privacy are non-negotiable pillars of service design and delivery.

For instance, companies need to obtain consent from customers on how their data will be used. Customers also need to be informed of any algorithm that makes use of their data (i.e. ad targeting), as well as business decisions resulting from the analysis of their data. Accordingly, the GDPR places a significant burden on IT and regulatory organizations in artificial intelligence to financial services sectors in the EU.

Compared to similar Chinese cybersecurity laws (in Chinese), the GDPR presents a new governance approach to data sovereignty for Chinese tech companies. GDPR seeks to regulate and safeguard personal privacy, which is a fundamental right under the EU Charter of Fundamental Rights. While China’s cybersecurity laws also cover data protection and network security of personal data, Chinese laws allow the state to access private data for national security purposes. As a result, Chinese companies have to adhere to both sets of regulations as the two different, though not completely competing, governance regimes continue to evolve. 

In addition to GDPR, EU governments have also raised concerns over cybersecurity risk of Chinese tech operations. A high profile example of this is Huawei, a leading ICT producer of 5G networks. Huawei has opened offices across the EU, hired more than 13,000 direct staff, and aggressively recruited research talents. In 2018 alone, the company has invested 2.8 billion euros (about $3 billion) in European operations, and has publicly affirmed its commitment to data sovereignty and local regulations. However, Huawei’s expansionary efforts in Europe have not translated into the adoption of its 5G network. For instance, pressure from the US and security concerns from the country’s intelligence community have resulted in stalled 5G agreement in Germany, which has originally leaned toward a comprehensive trade and commercial agreement (including 5G) with China.

Underscoring the bloc’s security concerns, the European Union has also issued a strict guideline governing “high-risk” suppliers in the opening of its 5G networks. The guideline indicates a protectionist regulatory approach with recommendations such as blocking high risk suppliers from critical parts of the network. It is clear that companies from different digital governance regimes needed to adopt a highly localized regulatory approach to participate in the EU market. 

Because of current geopolitical headwinds, Chinese firms have responded to recent regulatory roadblocks by investing in EU specific compliance and operations. TikTok, for instance, has vowed publicly that the company abides by EU regulations in Europe, and has not shared or removed contents from their platform due to oversight from regulators. The company also plans to grow its EU team up to 1,000 people to develop content policies specific to the EU market. Video content for the EU will also be managed by the local content team, thus creating a separate operation structure to counter any privacy concerns.

As Chinese tech firms continue to develop in a politically charged environment, they will continue to invest in local regulatory infrastructure to satisfy the unique EU digital governance regime. In effect, compliance know-how and infrastructure have emerged as key competitive advantages for firms operating on the continent. More established firms with the ability to invest in long term regulatory relationships in the EU and outlast medium term policy uncertainty will have an outsized advantage over rivals.

Decentralized or centralized? Bluetooth or geolocation? Control quarantines or alert people to infection risk? Store data for one month or six? There are many questions that need answers to build an app-based system to manage the Covid-19 pandemic and lift lockdowns. Much like how the implementation of health code systems wildly varies between Chinese provinces and cities, European countries are coming up with wildly different solutions. 

The differences between Europe’s path to technology for epidemic control and how China did it offer a glimpse into the future. In an era where China is increasingly exporting its innovations around the world, observing how other regions are taking to them is an ever-pressing issue for China tech. A rich debate between governments, companies and private citizens is taking place in Europe, one that China didn’t get. It is a debate that is slowing down the process, but it will determine what and how gets implemented—and how China’s techniques will be judged. 

On the continent, any hint that Europe is taking up China-style surveillance comes at a political cost. Officials are claiming to be examining the South Korean and Singaporean models. But after years of bashing China’s privacy policies and the whole world looking at China during Covid-19, it is hard to dissociate China’s model of epidemic control from what European leaders are doing. So, the continent’s public health challenge has become intensely political. What began a choice between epidemic control and individual liberty is understood by many as our way versus the China way. 

We have identified 39 different epidemic control apps mentioned in news reports in several European languages, and 7 different mobile data tracking programs across European states. With many still in development and not public, it is likely that there are tens, if not hundreds. With governments, the private sector and non-profits jumping in, it is a messy process.

The Netherlands government sent seven apps to the national data protection regulator. The regulator rejected them, saying it was not able to “properly assess” (in Dutch) them. 

Mainstream approaches range from bluetooth-based contact tracing to GPS tracking. Outliers include such novelties as sharing selfies with the police and asking users to report every time they wash their hands (in German). 

Bottom line: Europe’s efforts at digital epidemic control are—characteristically—messy, diverse, and numerous. Suspicion of privacy issues, tech, and China all make it harder to roll out. It’s too soon to say what the results of this messy process will be. Europe’s health code struggle shows how China’s digital innovations travel overseas, how they are received, and changed upon landing ashore. 

A pan-European approach? In a major twist of irony, the European Union’s data privacy regulator has called for a pan-European Covid-19 tracking app. The polyphony of apps could create catastrophic splintering. The Schengen area and the EU operate on free movement of people. If your Austrian app doesn’t work in Germany, that’s no good for the epidemic or the economy. 

Answering this call, a team of 130 engineers and researchers, backed by a German company, launched the Pan-European Privacy-Preserving Proximity Tracing initiative (PEPP-PT), a Bluetooth-based protocol that participating teams can use to build apps for their own countries. The organizers claim to have the participation of Austria, Germany, France, Italy, Malta, Spain, and Switzerland, but there have been no official statements to confirm this from any of those states. Switzerland’s top research institution is the leader of the competing decentralized protocol and Austria declared it is working with it. 

The team was organized in a hurry and, in fact, doesn’t yet exist as a legal entity. Two weeks after it was launched, it faced criticism for backing off a promise to support a decentralized protocol. An EU Parliament resolution from April 15 “demands that all storage of data be decentralised.” After the letter, several researchers from high-profile universities pulled out to back a rival Decentralized Privacy-Preserving Proximity Tracing (DP-3T). Switzerland, Estonia, and Austria’s apps are developed on the DP-3T protocol. 

The players: Unlike China, Europe doesn’t have a central authority able to designate a few official solutions. Lots of actors are putting forward their own plans. Governments, the EU, nonprofits, and the private sector have all jumped into the game. 

• National governments are scrambling to protect their populations, facing a diverse set of challenges and epidemic intensities. Many have designated national universities and research institutes to build official apps.
• The EU is not only worried about protecting its people, but also European unity and the institutions that implement it. This is the first time in the EU’s history that national borders have been closed, a monumental act of nationalism that threatens to undermine the European project. 
• The PEPP-PT initiative plans to incorporate as an NGO in Switzerland. How the DP-3T will be incorporated is undetermined.
• The NGO sector is mainly taking on the role of watchdog, warning (in French) of human rights violations caused by technological methods of epidemic control. In Austria, the Red Cross developed its own app. 
• Private sector startups, tech companies, and researchers are building their own apps or working with governments. Apple and Google are collaborating on a Bluetooth handshake app that France has endorsed. 
• Surveillance companies with questionable privacy track records like US Palantir, Israeli NSO group and Italian Cy4gate are trying to convince governments that they are the ones that can solve the conundrum. 
• But the people of Europe, with their many cultures and political beliefs, are the key to successful epidemic control. 

The people decide: It may not be governments who decide which app prevails, and they certainly cannot make any effective alone. The figure making the rounds in European media is 60%: That’s how many people need to voluntarily download the app to make it useful. As EU Commission guidelines published last week say, what needs to be accomplished is a “common approach for voluntary and privacy-compliant tracing apps.” Politicians and researchers have argued that if apps overstep in data collection, people will be distrustful of the government, and app adoption will be low.  After all, the European Union’s data protection regulation requires explicit consent prior to data collection. 

The models: There are four main models touted or already in action, and plenty more in development. Governments could choose to adopt combinations of tools to manage different aspects of epidemic control. 

• For contact tracing, a popular model uses Bluetooth handshakes to determine when people are close to each other. Such apps are only alerted to the physical proximity of people, and the virus can easily spread through objects. If someone who tested positive coughed all over the supermarket aisle five minutes before you showed up, the app wouldn’t alert you to the risk of infection. The pan-European initiatives, Germany, Apple and Google and many more are using this approach. 
• Iceland, Norway, and the Czech Republic are using GPS for contact tracing. Norway’s app will combine it with Bluetooth data. 
• In France, Germany, Austria, Belgium, Italy, and the UK, telcos have or will turn over anonymized mobile phone data to authorities to help them map and predict the outbreak.  Slovakia, Bulgaria, Croatia, and Serbia are tracking mobile phone data to enforce quarantines. 
• Greece is using a text message system to monitor when people are leaving their homes whilst the lockdown is ongoing. People text a government number information about where they are going and information about their outing. 
• The EU is also touting immunity passports, so that those who have antibodies against the virus can move around freely (and go on holidays). To do this, they need to rapidly scale up the production of testing kits.  
• Poland is asking people in quarantine to send selfies to the police at irregular intervals to confirm their location. 
• The Czech Republic’s app combines location data with credit card payments. 
• Even some lone screwballs are getting traction. A German researcher built an app that asks people to record when they wash their hands. The app then builds a risk assessment of areas. 

Privacy: As much as privacy considerations are a concern for civil society, it is not the number one priority for European governments. But in order to convince people to use the apps, there need to be certain data protection guarantees. With the pandemic ravaging through the continent, and several members going their own way, privacy is a priority only so long as its needed for an efficient response.

• European Data Protection Supervisor promised that the measures will be temporary, that they will know “a way back to normalcy.” The privacy watchdog also said that the pan-European app will be strictly limited in its data collection. 
• The General Data Protection Regulation, as it is enshrined in most European countries’ laws allows for exceptions in times of emergency. Governments have jumped at this clause, despite opposition from NGOs and opposition parties. Italy passed a law to change personal data handling standards on Feb. 3. Mobile phone data was given to governments, and the EU, with little public discussion. The German and Austrian operators gifted anonymized mobile phone data to their respective governments. 
• Governments have been rushing to pass emergency laws that would allow for greater data collection powers. In Slovakia, they did it. In Germany, the government’s proposal to allow individual smartphone tracking without judicial review was blocked by the opposition. Moldova, Latvia and Romania evoked the right to derogate human rights. The Norwegian government exempted itself from parliamentary debate. 

China anxiety: Association with China’s privacy attitudes is a liability for a proposal in much of present-day Europe. Both publics and elites are suspicious. “Belgium is not China,” a privacy activist wrote on a grass-roots news site.  In one of Germany’s top newspapers, a German-Korean philosopher said that Europe’s illusion of liberalism is headed to an end: “We have been China for a long time—only we don’t want to admit it.”

• For years European politicians and press have condemned Chinese surveillance. It is hard to go back from this attitude. As governments are trying to come up with solutions that take a page from China’s book, the media are hammering on about privacy concerns in China’s apps. 
• To steer clear of the China association, many are focusing their talk on the South Korean and Singaporean models. They are no less invasive. South Korea’s app not only tracks people’s location, but publicly posts infected people’s whereabouts. 
• The EU’s top diplomat Joseph Borell wrote a blog post warning of a “struggle for influence” in a “global battle of narratives,” in which China is “aggressively pushing” the “message that it is a responsible and reliable partner.” 
• Soon after this post, Huawei, once again in the eye of the storm, decided to stop its donations to several European countries for fear of being dragged into geopolitical bickering. 
• On EU news outlets, Jack Ma’s donations are treated as suspicious “mask diplomacy.”
•  A report published on April 1 by an anti-disinformation EU-affiliate warned that Chinese state media are promoting the idea that the “Chinese model is superior in tackling COVID-19, while highlighting global expressions of gratitude for Chinese aid delivery.” 
• But China associations are a plus, or at least neutral, for some eastern European countries. The Hungarian and Serbian governments have not released any digital means of controlling the outbreak. However, they have accepted donations of personal protective equipment from the Chinese government. 

European essence, Chinese methods? A hundred years ago, Chinese reformers associated with the Self-Strengthing Movement argued about whether they could combine “Chinese essence with Western methods” (Zhongti xiyong). It’s not easy to adapt foreign tools to domestic values—as they learned, there’s a lot of values baked into technology.

Now, Westerners have to confront the same thing in reverse. Health code is a dramatic example, but as China pioneers more and more technology, Europe will often be in the copycat role. It could be a good time to brush up on your Kang Youwei.

Huawei, the world’s largest maker of telecom equipment by revenue, released earnings for 2019, saying that it missed a target set internally by $12 billion due to a US trade ban. The company also warned of retaliation by the Chinese government.

Why it matters: After a year of “unprecedented challenges” brought by a US ban on sales of its gear to American companies, the marquee Chinese technology company reported significantly slower profit growth and revenues which missed its own goals by a wide margin.

• Despite the May ban, US suppliers continued to deal with Huawei. Eric Xu, Huawei’s chairman, said in an interview that in 2019 the company spent $18.7 billion with US companies. 
• Its annual earnings report also laid out future growth directions besides 5G: smart wearables and internet of things devices, cloud service platforms and artificial intelligence, and billion-dollar programs that support developers to add to its homegrown ecosystem, in an effort to pose a viable alternative to Android and Apple applications.

“The Chinese government will not just stand by and watch Huawei be slaughtered on the chopping board.”

—Eric Xu, Huawei rotating chairman, at a press event

Details: Huawei reported revenues of RMB 858.8 billion ($123 billion) for 2019, an increase of 19.1% year on year and maintaining consistent top line growth compared with a year ago when revenue rose 19.5% on an annual basis.

• It posted net profit of RMB 62.7 billion, slowing to 5.6% growth year on year compared with 25.1% year on year in 2018.
• Xu warned of retaliatory measures by the Chinese government during the annual report press event, saying “Why wouldn’t the Chinese government ban the use of 5G chips or 5G chip-powered base stations, smartphones and other smart devices provided by American companies, for cybersecurity reasons?”
• The carrier business grew 3.8% year on year to RMB 296.7 billion and accounted for 34.5% of the company’s total revenue, falling below 40% for the first time. Last year, it made up 40.8% of total revenue.
• Its consumer business earned RMB 467.3 billion during the year, making up more than half of total revenue (54.4%).
• Xu said that the US sanctions meant that its consumer business lost $10 billion in overseas markets. It remains the fastest growing of Huawei’s three major businesses. 
• Huawei shipped 240 million smartphone units globally, up 16.5% year on year compared with 35% year on year in 2018.

Context: The US banned its companies from doing business with Huawei in May but has since issued temporary licenses to allow Huawei to continue. It extended on March 10 this license again to May 15.

• Huawei said that its RuralStar base station solutions allow more than 40 million people living in remote areas to have mobile internet coverage. That includes a quarter of the smallest wireless carriers in the US on which many of the country’s farmers rely.   
• Huawei’s executives said that Covid-19 has affected its plans to build 5G infrastructure in Europe and China, though domestic construction may ramp up since the outbreak seems to be under control in China. 
• Much of Huawei’s manufacturing is based in southern China which means its supply chains are less affected by the Covid-19 lockdown in Hubei, central China.

Xiaomi said Tuesday it has resumed production capacity by 80% to 90%. However, they also warned that demand for smartphones in overseas markets would be hit by the spread of Covid-19 in March and April.

Why it matters: The Beijing-based smartphone maker has a strong presence in overseas markets such as India and Europe. It is likely to see a drop in sales in the first half of the year as the pandemic spreads around the world.

• The company is selling the idea that smartphones are necessary goods and demand will bounce back after the pandemic is over.
• “Smartphone is becoming a basic necessity and the demand for it should resume soon in India and Europe. We are optimistic about the growth in overseas markets,” Wang Xiang, president of Xiaomi, told reporters and analysts in an earnings call Tuesday.

Read more: Xiaomi wants to be exempted from an e-commerce ban in India

Details: Xiaomi’s production was severely impacted in February when the coronavirus outbreak intensified in China, but its production capacity has been resumed to 80% to 90% of the normal state, according to Wang.

• He said sales of smartphones in the domestic market have also bounced back to 80% to 90%.
• Wang expects that the demand for smartphones in India and Europe will see a drop in March and April, but expects a recovery to begin by May.
• The company said Tuesday its revenue for the fourth quarter rose 27.1% year on year to RMB 56.5 billion (around $8 billion), slightly higher than analysts’ average estimation of RMB 54.9 billion.
• The company booked a net income of RMB 2.3 billion in the period, a year-on-year increase of 26.5%.
• Revenues at Xiaomi’s smartphone business rose 22.8% year on year to RMB 30.8 billion in the quarter.
• The company said it sold 32.6 million smartphones in the quarter, a 30.5% rise compared with the same period of 2018. Its smartphone shipments for last year were 124.6 million units in total.

Context: Market research firm IDC estimated that smartphone sales in China may fall as much as 40% in the first quarter compared with the same period last year.

• Xiaomi’s share price has dropped more than 22% since the beginning of March.
• To avoid sales loss in India, Xiaomi’s biggest overseas market, the company has asked New Delhi to list smartphones as an essential commodity so that they can be sold on e-commerce platforms during the nationwide lockdown in India.

Chinese passenger drone maker Ehang has more than quadrupled its revenues and significantly narrowed its losses in the fourth quarter, the company said Wednesday, but it expects some short-term effects from Covid-19 in 2020.

Why it matters: In Ehang’s first quarterly financial results since listing on Nasdaq in December, the urban air mobility company recorded a surging top line as well as solid progress toward commercialization of its passenger drones.

• The Guangzhou-based startup expects revenues to double in 2020.
• The Covid-19 pandemic will bring some “short-term turbulence” to Ehang and the urban air mobility industry, CEO and co-founder Huazhi Hu said in a statement.

Details: “Absence and late return of front-line workers, delayed fulfillment across our supply chain, and the short-term disruption on some of our customers’ industries such as tourism” as a result of the Covid-19 outbreak might dampen Ehang’s results in 2020, the company said. But it is looking to explore new opportunities such as emergency response and search and rescue.

• Ehang’s Q4 revenue rocketed 421% year on year to RMB 54.7 million ($7.9 million) from RMB 10.4 million.
• Despite these gains, Ehang’s net losses per share were RMB 0.22 ($0.03) or RMB 15.5 million ($2.2 million) in the quarter ended December, 43% lower than the RMB 27.1 million in Q4 2018.
• In 2019, Ehang sold 61 of its Ehang 216 passenger drone, 26 of which were sold in the fourth quarter and 18 in the third quarter, the startup said. In 2018 it sold no drones.

Context: The drone maker’s initial public offering raised $46 million, less than half of its initial goal of $100 million.

• Ehang drones have received flight permission from the US Federal Aviation Authority as well as Norway’s regulator. The drone maker has conducted test flights, including some for passenger drones, in 15 cities in China and Europe. It has signed agreements to cooperate on urban air mobility with Guangzhou in southern China and Linz, the third-largest city in Austria.
• The startup outlined its vision for the future of urban air mobility a month after it went public. Ehang wants to create bus-like infrastructure for drones, compared to the taxi visions of other companies.

As working from home catches on globally, gaming giant Tencent on Tuesday launched its video conferencing tool internationally, taking China’s battle for enterprise collaboration and productivity tools to markets overseas.

Why it matters: China’s tech heavyweights have been pushing into B2B services since late last year, looking for sources of growth outside their traditional industries. The Covid-19 pandemic has accelerated the shift, dramatically increasing in the size the pool of potential users.

• The market for video conferencing in China grew 36.2% year on year in 2018 to RMB 3.1 billion ($437 million), according to data from CCW Research, a market research firm.
• In September, popular video conferencing tool Zoom was blocked in China, leaving a void for local players to fill.
• Globally, Tencent and Alibaba have to compete with major tech players like Microsoft, Google, and Zoom for a share of the enterprise collaboration pie.

Details: Voov is an international version of Tencent Meeting, launched in December 2019 by Tencent Cloud. It offers cloud-based encrypted video conferencing and instant messaging capabilities during meetings, the company said in a statement emailed to TechNode.

• The company touts the service’s “ultra-smooth” HD video conferencing and stability, which leverages “Tencent Cloud’s cutting-edge technology.”
• The paid version of Voov allows up to 300 participants to dial in to a meeting, but this feature will be free during the Covid-19 pandemic.
• “By offering customers Voov Meeting’s paid features for free, we hope to provide suitable solutions to assist enterprises in reducing their operating costs during this time,” said Norman Tam, General Manager at Tencent’s International Business Group.
• Users can join Voov meetings using a WeChat mini program without having to download the app on their phones or laptops. They can connect using their WeChat accounts or just a phone number, a Tencent spokesperson told TechNode.
• The app offers artificial intelligence-enabled image distortion, such as beautification and background blurring. This will help users “eliminate embarrassing scenarios such as working without makeup or exposing messy home environments,” it said.

Context: Alibaba’s productivity tool Dingtalk also offers video conferencing functionality, but does not offer interoperability with Tencent’s WeChat, the most popular social network app in China.

• Zoom’s app is ranked first in the US Apple app store, and its share price rocketed nearly 50% in the last month. Microsoft offers video conferencing in its Microsoft Teams collaboration suite, while Google has developed Google Hangouts.
• In China, Tencent competes with other local players like Zoom’s Chinese partner Huawan, and Shenzhen-listed BizConf Telecom.
• In February, Alibaba enterprise collaboration app Dingtalk offered online learning to students whose education moved online due to the epidemic. Alibaba is also trying to make Dingtalk a collaboration tool for front-line medical staff battling Covid-19.
• Despite its wide usage, Dingtalk has been heavily criticized by users who flooded app stores with one-star reviews in early March.
• Countries around the world are announcing lockdown measures to halt the spread of Covid-19 —and work is moving online as a result. Out of approximately 380,000 confirmed coronavirus infections worldwide, about 80,000 are in China.

Alibaba has launched a free international collaboration platform based on its enterprise productivity app Dingtalk for medical professionals to share information and advice on prevention and treatment of the Covid-19 outbreak, Alibaba Cloud said on Wednesday.

Why it matters: Information sharing between medical professionals is key to tackling the pandemic, as new hotbeds of infections rise.

• Alibaba’s move is in line with China’s policy to lend a helping hand in the coronavirus pandemic that is sweeping through the globe.

Details: Alibaba’s “Medical Expert Communication Platform” is built on the Hangzhou-based giant’s Dingtalk work collaboration app. It seeks to connect “medical heroes” from around the world to share experience and know-how in the fight against Covid-19, according to a company statement.

• Users can message instantly and make use of video calls across borders, as well as use Dingtalk’s real-time text translation for 11 languages.
• As soon as doctors from around the world join the platform, they can talk to top Chinese experts, the company said.
• Alibaba also compiled a handbook on Covid-19 treatment and prevention, outlining best practices learned from China’s experience. The handbook includes guidelines on hospital practice, staff management, diagnosis, nursing care, rehabilitation of critically ill patients, and more.
• The handbook is available in English and Chinese and will soon be available in Italian, Spanish, Japanese, and Korean.
• Jack Ma, the founder of Alibaba, tweeted from his recently created Twitter account, “I need your help to share this handbook quickly to hospitals, doctors, nurses and anyone who needs to know around the world.”
• Alibaba’s Cloud division offers computing power tailored for treatment, vaccine development, and epidemic prediction for Covid-19, for a fee.

Context: The Covid-19 epidemic started in China, but is now crippling the healthcare systems in countries including Italy, Iran, and Spain. As of Tuesday, there were more coronavirus cases outside of China than in. Yesterday, China reported only 13 new confirmed cases of the virus,

• As the pandemic seems to be under control inside China, Beijing has turned its focus to helping other countries, as well as mitigating the risk of imported infections.
• The Alibaba founder pledged to donate millions of protective face masks and Covid-19 testing kits around the world.
• Dingtalk saw a surge in daily active users and downloads in February, as Chinese authorities imposed mandatory work-from-home arrangements and millions of students had to download the app to follow online classes.
• However, Chinese users did not take well to the work and study from home experiment, flooding app stores with negative reviews.

Alibaba founder Jack Ma posted on his freshly minted Twitter account on Monday that he is donating through his charity foundation testing kits and masks to countries afflicted by Covid-19 including the US, all of Africa, Italy, and Spain.

Why it matters: Ma’s move follows other tech billionaires in offering help to countries affected by Covid-19, but has also given him the most positive publicity he has seen in a while.

• Ma developed a cult-like devotion in Alibaba employees and aspiring entrepreneurs around the world, but has fallen out of the spotlight since stepping down from Alibaba’s helm in September.

Details: A donation of 500,000 Covid-19 testing kits and 1 million protective face masks to the US was already underway, according to Ma’s first tweet on Monday which has drawn nearly 430,000 likes as of Tuesday morning. The Jack Ma Foundation said it plans to deploy similar aid to Japan, Korea, Italy, and Spain.

• The Jack Ma Foundation will be sending 1.1 million testing kits, 6 million masks and 60,000 medical use protective suits and face shields to the capital of Ethiopia. The government in the capital city of Addis Ababa has agreed to distribute them among the 54 African countries, Ma said.
• An undisclosed amount of medical supplies donated by the Foundation arrived in Belgium yesterday. Part of the supplies will be sent to Italy, which counts the most Covid-19 confirmed cases outside China.
• “Unity is strength,” was the message attached to the supplies, written in French, German and Chinese.
• Cainiao Network, Alibaba’s logistics arm, will be operating five flights to Europe per week to deliver aid to the EU, according to the foundation.

Context: Jack Ma donated RMB 100 million (approximately $14.3 million) to two Chinese companies working on Covid-19 vaccines and RMB 1 billion for medical supplies to central Hubei province, where the virus was first reported.

• The Alibaba founder faced online criticism in May 2019 after expressing support for the “9-9-6” work schedule and then encouraging employees to perform daily sexual activity on top of that.
• There are more than 3,800 confirmed cases in the US, but this number may increase drastically once testing for the virus is widely available. Testing kits are in short supply and have been criticized for accuracy flaws.
• Europe has emerged as the new epicenter of the Covid-19 outbreak. As of March 17, confirmed cases in Italy number more than 24,000 and Spain more than 9,000 while France and Germany each exceed 6,000.
• Africa has remained largely unaffected by the virus, but the continent is bracing for an outbreak as 30 out of 54 countries now have cases.
• Microsoft founder Bill Gates has pledged to donate $100 million for the global fight against the current novel coronavirus, including $50 million to scientists researching Covid-19 treatments and vaccines.

Ant Financial, the fintech arm of Chinese online marketplace Alibaba, bought a small stake in Swedish payments app Klarna, the startup said on Wednesday. 

Why it matters: Ant Financial has embarked on a series of moves to tap European consumers, as the Chinese online payments market is effectively saturated by the WeChat Pay and Alipay duopoly. 

• Tencent is also looking to expand into Europe, which is becoming a new arena for competition between China’s biggest apps. 

“Alipay, and the wider Alibaba Group, have truly set the global pace on retail innovation and the app economy. We are delighted in this confidence shown in Klarna in defining the future of payments and shopping.”

— Sebastian Siemiątkowski, Klarna CEO

Details: The investment accounts for less than 1% of Klarna’s equity and was comprised of existing and new shares, Reuters reported citing a source familiar with the matter. 

• Klarna offers a “buy now, pay later” credit service, enabling shoppers to purchase goods and pay in 14 to 30 days. 
• Klarna’s service is already available on Aliexpress, Alibaba’s overseas e-commerce platform. 

Context: Ant Financial announced a partnership in November with French startup Worldline to bring Alipay into Europe to provide payment services to Asian tourists. At least another six European mobile wallet platforms, together accounting for 5 million users, are partnering with Alipay to offer payment services on the continent. 

• One of Ant Financial’s biggest moves into European fintech was the $700 million acquisition of UK-based payments group WorldFirst, in February 2019.
• Tencent, whose WeChat Pay is Alipay’s biggest competitor in Chinese digital payments, has also been making moves into Europe. 
• In 2018, Tencent led the Series B of German online bank N26, which raised $160 million. In January 2020, it led another Series B, this time for French digital payments app Lydia, which raised $45 million. 
• Founded in 2005, Klarna is valued at $5.5 billion. According to the Financial Times, Klarna’s investors include global payments provider Visa, New York investment firm BlackRock, and venture capital group Sequoia Capital. 
• The Swedish company says it is powering 200,000 retailers around the world, including H&M, Asos, Expedia Group, Ikea, Farfetch, Adidas, Spotify, Samsung, and Nike. 
• It also counts 80 million customers globally, and “has more than 200,000 more monthly app downloads than the nearest US competitor.”
• In 2019, Klarna’s revenue increased by one-third on an annual basis to $740 million. But a push into the US market and heavy credit losses led to a net loss, according to the Financial Times.

Huawei is testing a new search app similar to Google for its smartphone ecosystem in a bold new step to further challenge the US search giant on its home turf.

Why it matters: The Chinese telecom and smartphone giant has been working on replacing all Google apps and services for its in-house Huawei Mobile Service (HMS) framework on Android phones.

• The world’s second-largest smartphone vendor is banned from using Google products on handsets which have launched after May because of a US trade blacklist.
• The Shenzhen-based company debuted in Europe last month a phone with HMS pre-installed. Instead of using Google Play, the buyers will have to use the company’s App Gallery to download apps.

Details: Huawei is recruiting users in the UAE to test its new Huawei Search app, according to a forum post published on Feb. 26 on the company’s website.

• “We are excited to announce the upcoming launch of the Huawei Search app and invite our UAE users to participate in our user beta test,” the company said in the post.
• The app allows users to search the internet for webpages, videos, news articles, and images, according to XDA Developers, which first reported the beta test.
• The search service is operated by Aspiegel Limited, a subsidiary based in Ireland, according to the app’s user agreement. Aspiegel’s website describes it as a mobile service provider for Huawei device users in Europe, Canada, Australia, and New Zealand.
• However, it is unclear whether the company developed the search engine from scratch or it used a third-party search service. According to the XDA story, the search app’s Privacy Statement says users have the “right to request delisting of a search result,” which may imply that it is not a third-party search engine.
• Huawei declined to comment when contacted by TechNode on Tuesday. 

Context: Citing security reasons, Google last month warned users against loading its apps through unofficial channels to new Huawei devices made available to the public after the trade blacklist.

• Last month, the company released a new version of HMS, adding capabilities such as Quick Response (QR) code extraction, near-field communication (NFC), and identity authentication.
• HMS provides mobile applications corresponding to Google offerings. They include Huawei App Gallery, a mobile wallet, a video-streaming platform, and a music app.

Huawei launched an upgrade to its foldable smartphone on Monday, putting on offer for overseas users its proprietary ecosystem to replace the Google app and services it has been banned from.

Why it matters: In launching its self-developed app ecosystem to users outside of its home turf, the Chinese tech giant is ratcheting up its competition with Google in the Android service market. It has stepped up efforts to lure users and developers to switch to its alternative to the Google Mobile Services (GMS) framework, which it lost access to in May.

• The world’s second-largest smartphone maker has repeatedly said that it will not abandon the Android mobile operating system, which runs on most of its smartphones. But without Google, it has to develop alternative offerings for its phones.
• The company’s in-house replacement, known as Huawei Mobile Services (HMS), provides mobile applications corresponding to Google offerings such as the Play store, YouTube, and Google Maps.

Details: Huawei launched the Mate XS in an event live-streamed from Barcelona. The new model is an upgrade of the Mate X phone that it showcased last year which features a flexible screen that can fold into a 6.6-inch smartphone and unfold into an 8-inch tablet.

• The Mate XS improves upon its successor with a more durable screen and hinge mechanism, Richard Yu, CEO of Huawei’s consumer business group, said on Monday.
• The EUR 2,499 (around $2,714) device runs the HMS core which provides apps through Huawei’s App Gallery, said Yu.
• The new model will come with a feature akin to WeChat’s mini program. The feature, known as Quick App, will allow users to load apps in second without downloading them from the app stores, according to Yu.
• The company also announced a $1 billion subsidy scheme to boost its global developer program. “We welcome every developer worldwide to join HMS,” said Yu.

Context: Google has banned Huawei from using GMS on new phones as a result of a US trade ban imposed in May.

• Citing security reasons, Google on Saturday warned users against loading its apps through unofficial channels to new Huawei devices made available to the public after the trade blacklist.
• Huawei has teamed up with Xiaomi, Oppo, and Vivo to form an alternative to Google’s Play store to distribute Android apps to users outside China.
• Last month, Huawei released a new version of HMS, adding capabilities such as Quick Response (QR) code extraction, near-field communication (NFC), and identity authentication.

What with all the panic over the past month, you could be forgiven for forgetting there’s a tech war on. But for Chinese telecommunications giant Huawei, there’s no forgetting ongoing threats from the US.

The phase one trade deal signed in January between the US and Chinese governments created the illusion of a turning point in the ongoing dispute. However, Huawei’s predicament and the uncertainties arising from it are far from over.

Bottom line: The phase-one trade deal offered little relief for Huawei. The deal, which included provisions on intellectual property theft and halted some tariff hike in the past years, didn’t mention the Huawei situation at all. 

The Shenzhen-based company still has to confront the technology and supply chain blockage from the US. It is now facing more legal charges brought by the Trump administration. The last few weeks have made Huawei’s situation clearer as US and European views of the company split further. Threats from the US are intensifying, while in Europe bans are being ruled out. The company is signaling that it will fight Google on its own OS turf, preparing alternatives to Google services for the Android platform

Endless lawsuits: Huawei’s US challenges are intensifying as its fight with the US government and competitors moves into the courts.

• A US judge rejected Tuesday a lawsuit filed by Huawei challenging a law that banned federal purchases of the company. It filed the lawsuit in March 2019, seeking to overturn a provision in the National Defense Authorization Act (NDAA), which bans US government agencies from doing business with Huawei or ZTE.
• The US Department of Justice filed on Feb. 13 an indictment that accused Huawei of conspiring to steal trade secrets and conducting business and technology projects in sanctioned countries like North Korea and Iran. While not many charges brought by the indictment are new, the legal action came at a critical time when the extradition hearings of Huawei CFO Meng Wangzhou began in Canada. 
• Huawei filed earlier this month two lawsuits against US telecoms operator Verizon, accusing it of infringing 12 patents held by Huawei.

HMS push: Huawei’s phone sales outside China are threatened by its loss of access to Google apps and services on Android phones. It is actively pushing in-house replacements for Google offerings, bringing it in direct competition with the search engine giant. 

• It is reported that Huawei plans to launch a new smartphone that will run on the company’s in-house Huawei Mobile Services (HMS) framework in Europe later this month. HMS is an alternative to the Google Mobile Services, which provides mobile applications corresponding to Google offerings such as Gmail, the Play Store (Google’s app store), and Google Music.
• HMS is an Android skin deployed on Huawei phones sold in the Chinese market. It replaces most Google apps and services from vanilla Android with offerings such as Huawei App Gallery, a mobile wallet, Huawei Video, and a music app.
• Reuters reported that four Chinese smartphone makers, including Huawei, Xiaomi, Oppo, and Vivo are teaming up to form an alternative to Google’s Play store to distribute Android apps to users outside China. 
• Last month, Huawei released a new version of HMS, adding capabilities such as Quick Response (QR) code extraction, near-field communication (NFC), and identity authentication. 
• In the same week, the company invested around $26 million into a subsidy scheme for British and Irish developers to make apps on HMS.

Fighting Google on its own turf: It has been widely reported that Huawei is going to use an in-house mobile operating system called HarmonyOS to replace Android. But recent efforts like HMS demonstrate that Huawei is sticking to Android. But with the absence of Google, it has to develop alternatives to all of the Google offerings on its phones.

Since the standard Google Play app store is not part of the open-source Android package, Huawei will have to build a new ecosystem around its own app store. To make it viable the company must solve a chicken and egg problem: it needs enough apps to bring in consumers and enough consumers to bring in app developers.

Huawei has already seen a declining trend in smartphone sales in Europe, its biggest overseas market. The company’s smartphone shipments in the continent dropped by 16% and 7% in the third and fourth quarter last year, according to market research firm Canalys.

A full switch to HMS may risk losing some users in overseas markets, but it could also turn into a profitable business for Huawei and help it take a large portion of Google’s share in the Android service market.

Google parent Alphabet is estimated to have earned around $29 billion from the Play store last year, accounting for nearly 18% of its total revenue. The earnings come from GMS pre-installed on billions of Android smartphones worldwide. 

For Huawei, the number is smaller but still significant. It is the second-largest smartphone vendor in the world and has sold 230 million smartphones last year. Huawei has said it had no plans to return to using Google’s mobile services even if the US government decides to lift the trade ban.

5G updates: The UK finally made its “Huawei decision” in late January, allowing the Chinese company to play a limited role in Britain’s 5G networks. It appears that the EU is following a similar approach, opting for risk management frameworks rather than bans.

The UK’s limitations include:

• Huawei will be banned from supplying kit to “sensitive parts” of the network, known as the core. That part of the network is where voice and other data is routed across various sub-networks and computer servers to ensure it gets to its desired destination.
• Its gear will only be allowed to be used in the “non-core” parts of the network, or the periphery. The periphery includes the base station and antennas used to provide a link between individual mobile devices and the core. 
• It will only be allowed to account for 35% of the kit in the periphery.
• Huawei gear will be excluded from areas near military bases and nuclear sites.

The decision from Downing Street has irritated the US government with President Trump’s White House chief of staff Mick Mulvaney warning there could be “a direct and dramatic impact” on the sharing of intelligence between the US and UK.

Following the UK’s decision, the European Commission published a “toolbox” of risk mitigation measures to guide EU members’ 5G rollouts. The kit doesn’t name Huawei or China, but it agrees that a supplier’s relationship with foreign states could affect its risk profile.

Tough tests ahead: With Europe rejecting US calls to ban Huawei, it’s clear that the company had dodged a bullet on market access. US export bans remain the most pressing threat, although it remains to be seen whether the bans will be upgraded to the point that the company cannot source essential components. Equally uncertain is whether a critical mass of consumers and app developers outside China will be willing to move to a new Android ecosystem that lacks Google’s popular apps and services.

Huawei will launch in Europe next week its first smartphone that will run on the company’s in-house service framework instead of Google’s, as the Chinese handset giant moves to offset a US trade ban’s impact on its overseas smartphone sales.

Why it matters: The move marks Huawei’s efforts as the world’s second-largest smartphone maker to challenge Google’s dominance in the Android ecosystem in markets outside of China.

• Experts believe that a lack of Google apps and services will slash the appeal of its new phones in the western markets such as Europe, the company’s biggest overseas smartphone market. 
• The company has seen its smartphone shipments drop by 16% in the third quarter and 7% in the fourth quarter, according to market research firm Canalys.

Details: The Shenzhen-based company has chosen not to substitute the open-source Android mobile operating system that its handsets all run on. Instead, it developed alternatives to popular Google apps and services that it lost access to as a result of a US trade blacklisting that took place in May.

• Huawei will launch its Honor V30 smartphone series which uses Huawei Mobile Services (HMS) next week in European markets, Chinese media Beijing News reported on Monday, citing the Honor department within the company.
• An alternative to the Google Mobile Services framework, HMS provides mobile applications corresponding to Google offerings. They include Huawei App Gallery, a mobile wallet, Huawei Video, and a music app.
• The V30 is also the first Honor smartphone that is compatible with the next-generation 5G network. Honor is a Huawei budget sub-brand.
• The company will hold a product event in Europe though the Mobile World Congress (MWC) was canceled, according to the report.
• A Huawei spokesperson declined to comment.
• The company said in a statement last week that it would hold “online and regional events to show Huawei’s latest products and solutions” in Barcelona after the MWC cancellation announcement.

Context: Huawei has accelerated its pace to promote HMS and lure more developers to its app platform.

• It was reported earlier this month that the company had teamed up with Xiaomi and Oppo to form an alternative to Google’s Play store.
• The company released last month a new version of HMS, adding capabilities such as Quick Response (QR) code extraction, near-field communication (NFC), and identity authentication.

China’s biggest smartphone makers are delaying new product launches that had been scheduled around the Mobile World Congress (MWC) after the event organizer announced it was calling off the world’s largest mobile phone trade show this year.

Why it matters: The annual event held in Barcelona is one of the most important stages for Chinese smartphone makers to unveil new products to an international audience. The exhibition’s cancellation and forced delays for product launches could hurt revenues from overseas markets, compounding expected losses in domestic sales brought by the Covid-19 outbreak.

• Panic about the Covid-19 epidemic has led to a 70% drop of smartphone shipments for offline channels in China during the Spring Festival holiday, a major shopping season in the country, Fang Jing, chief analyst at Cinda Securities, told TechNode in an interview last week.
• He predicted that the overall smartphone shipment figures in China would drop by 15% to 20% year on year in the first quarter.

Details: GSMA, the MWC organizer, announced Wednesday that the event this year was cancelled due fears about the virus outbreak in China which has spread to countries in Europe and North America.

• Chinese smartphone makers, including Huawei, Xiaomi, and Oppo, had plans to launch new products in Barcelona around the event which was scheduled to run from Feb. 24 to 27.
• Vivo, the world’s fifth-largest smartphone vendor, said in a statement sent to TechNode on Thursday that the company had decided to reschedule the product launch of its Find X2 smartphone from Jan. 22 to March.
• The Dongguan-based company told TechNode on Tuesday that it planned to attend the MWC and that it had sent some staff to Barcelona ahead of time for self-quarantine purposes.
• Huawei said last week that it would attend the tech conference as planned. The world’s second-largest smartphone maker usually makes major product releases for overseas markets during the MWC. A Huawei spokesman declined to disclose to TechNode whether the company had plans to do so this year.
• Xiaomi planned to hold a press conference on Feb. 23 in Barcelona to release its new flagship smartphone, the Mi 10. The handset will be launched in China via livestream on Thursday afternoon. A Xiaomi spokesman did not say whether the Barcelona launch will be canceled or delayed.

Context: Multiple telecommunication firms including Ericsson, Nokia, Intel, LG, Sony, and Amazon, as well as hardware companies had pulled out from the MWC prior to GSMA’s announcement.

• The GSMA also holds an MWC designed for Chinese companies and audiences in Shanghai every year. This year’s MWC Shanghai will be held from June 30 to July 2, according to its website. It is unknown whether this event will also be affected.

The small city of Trikala, Greece offers some quintessential provincial scenes: bustling farmers’ markets with vibrant colors and old men with bushy mustaches chatting on park benches.

Delve deeper and you’ll discover public wifi, smart parking facilities, and coming soon, driverless buses. Trikala has become Greece’s first smart city thanks to the roll-out of multiple digital initiatives. With technology delivered straight from China, the city is set to commission (in Greek) the world’s first operational pilot for autonomous buses in real traffic conditions downtown.

Chinese state-owned vehicle manufacturer Weichai will provide the driverless buses which will operate for at least two years. This is the first time that China-made driverless vehicles will hit the roads in Europe.

The buses will automatically avoid obstacles and pedestrians and offer an on-demand service. They will provide customized options for passengers that deviate slightly from original routes to better serve their needs. 5G networks will support operations with lower latency and quicker connection speeds to the control center.

“There was great interest from European manufacturers. Weichai participated through a local subsidiary called Amani Swiss,” Odysseas Raptis, chief executive at e-Trikala, the company responsible for procurement, told TechNode. The most important factor was the technology and know-how of candidates, he said.

The project received funding from the Greek government and the European Union. The two governmental authorities handed out rounds of funding last summer and announced a procurement tender.

A team of five to seven engineers and experts from Weichai will accompany the driverless buses to the city for about nine months. During the first phase, the team will work with local engineers to map out a route. This phase is expected to last two to three months, Raptis said.

The driverless buses will then operate for six months while the Weichai team trains local staff. After that point, passenger operations will start and the program will run for an additional two years.

A team from Greece’s Institute of Communications and Computer Science from the National Technical University Department will also support the experiment, Raptis said.

“Globally, our program is synonymous with pioneering innovation,” said Yannis Kotoulas, president of e-Trikala told TechNode. “We will be able to see how passengers and people living with the experiment react to the buses,” he said, describing the partnership with Weichai as a “huge pleasure.”

Weichai Group is a Chinese state-owned corporation that specializes in the design and manufacture of diesel engines and vehicles. It has clients in 110 countries around the world, according to its website.

“We believe not only in this particular move, but in close collaboration with them [Weichai] to take steps that the global automotive market needs,” Raptis said, referring to the bypassing of obstacles and on-demand service.

Shanghai-based DeepBlue AI was also involved in the design and manufacturing of the vehicles, people familiar with the matter told TechNode.

If it wasn’t for a DeepBlue event in Athens last June, this deal may never have gone through. Trikala Mayor Dimitris Papastergiou told TechNode that it was after this promotional event that he informed DeepBlue of the tender.

Small city, big ambitions

Primarily agricultural with little industry in the heart of Greece’s biggest valley, Trikala had fallen on hard times competing with international product prices and volumes.

Over time, it became, at best, a stop over for tourists on the way to Meteora, a UNESCO world heritage site featuring monasteries built on towering rocks reaching 550meters in height. While tourists from Russia, the Balkans, and beyond continued to flock to the important religious landmark, Trikala’s economy was dwindling.

Technology offered the city not only an opportunity to better the lives of residents but also to nurture tourism and create jobs. Tours to Meteora now stop at Trikala to see the city’s smart infrastructure and try out the free public electric vehicles.

“We need to create our own opportunities and not wait for the state,” the mayor said. He said the municipality had submitted over 1,000 applications to international institutions for technology funds.

Trikala has gained a reputation on the European stage as the country’s first smart city. The Ministry of Economics and Finance named the city Greece’s first digital city in 2004. By 2009, it was listed in the world’s top 21 smart cities worldwide by the Intelligent Community Forum, a global network of smart communities.

The local municipality has integrated several intelligent features into the city’s infrastructure, including sensors on car parking spots, smart waste management and a pilot 5G network, one of three in the country. Chinese technology has been key to at least one of these, the engineers working on the project told TechNode.

The smart waste system was designed by local engineers and manufactured in China. The system monitors key pumps in the city’s waste pipes and alerts the control room if the pumps are under stress or in need of maintenance.

Without the option to manufacture cheap and quality hardware in China, implementing the system would have been far more difficult, the engineers said.

In 2015 and 2016, Trikala ran another driverless bus pilot funded by the European Union. Among the seven cities that participated in the project, Trikala was the only one to launch the project downtown. It served well as a tourist attraction, e-Trikala President Kotoulas said.

Results from the EU study showed that passengers at Trikala were unique in using the driverless bus regularly, as opposed to just out of curiosity. This data concurs with what local authorities told TechNode. The city’s residents are used to high tech applications and are proud to be part of a community that innovates.

The municipality anticipates further collaboration with Weichai in automated and sustainable mobility in the near future.

Global adoption of Chinese mobile payment services is on the rise as merchants look to attract Chinese tourist spending, according to a new survey released Tuesday by market research firm Nielsen along with Alibaba’s fintech arm Ant Financial.

Why it matters: Chinese mobile payment giants including Alipay and WeChat Pay have been eager to cash in on the spending power of Chinese tourists traveling abroad.

• As its expansion in the US hits road bumps amid escalated trade tensions, Ant Financial has set its eyes on Europe and other markets like Southeast Asia.
• Ant Financial says it has more than 1.2 billion users worldwide.

Details: Overseas merchant adoption of Chinese mobile payment services rose significantly in 2019, driving a pickup in spending volume for Chinese outbound tourists, according to the report.

• The study surveyed a total of 4,837 Chinese tourists and 547 overseas merchants.
• Adoption of Chinese mobile payment solutions by overseas merchants accelerated during the year, especially in Europe. For example, 61% of the merchants surveyed in the UK said they adopted Chinese mobile payment solutions beginning in 2019.
• Overseas merchants surveyed said they were motivated to provide more Chinese-friendly payment services as 89% of Chinese tourists said they are more willing to spend when provided with familiar payment methods.
• Correspondingly, Chinese tourists’ use of cash has dropped. For example, the amount of foreign currency exchanged by Chinese tourists prior to leaving for Europe fell 16% in 2019.
• Chinese tourists from lower-tier cities are an increasing segment of travelers abroad, and their level of spending overseas compared with tier-one dwellers is narrowing, the report said.
• Singapore, South Korea, Japan, Australia, France, Thailand, New Zealand, Canada, the UK, and the US were the top 10 most popular countries for Chinese tourists using mobile payments in 2019. The ranking was determined by the percentage of Chinese tourists that used mobile payments in a specific country during their most recent trip.

Context: Ant Financial’s payment app Alipay invests in and forms partnerships with local companies in order to gain a foothold in overseas markets.

• In June, Ant Financial inked partnerships with five European e-wallet providers, which allows it to tap into merchants in 10 countries in the region including Finland, Norway, Spain, Portugal, and Austria.

Norwegian telecommunications company Telenor clarified on Sunday that Huawei will participate in building the country’s 5G network as a “non-core” equipment provider, Reuters reported, after saying it would phase out the use of the company’s equipment from its current networks over the next five years.

Why it matters: The announcement marks Huawei’s second contract with a major European carrier in the past week despite warnings from the US government to exclude Huawei. However, neither deal is for Huawei to supply gear for core, or controlling, networks, a sign that European carriers are still treading cautiously following US allegations that Huawei gear poses cybersecurity risks.

• Huawei has signed more than 60 commercial 5G contracts around the world with 32 coming from Europe, Chinese finance media outlet Yicai reported on Thursday.
• It is unclear how many of the contracts are to supply core networks.
• Recent deals from Western European carriers, which also include Germany’s Telefónica Deutschland, only allow Huawei to supply for less-sensitive radio access networks (RAN), the radios and antenna that connect mobile devices to wireless networks.
• RAN accounts for the bulk of the cost of a new network but it is not the core, according to Reuters.

Details: Telenor will work with Huawei both to maintain the current 4G network and upgrade to 5G coverage in “selected areas of Norway,” according to the report, citing Hanne Knudsen, Telenor vice president for communications.

• “Huawei has delivered hardware for RAN, but not for the core network. When they will build 5G in selected areas for the modernization, this is also for RAN, not core,” said Knudsen.
• Telenor’s Finnish subsidiary DNA also uses Huawei as one of its 5G RAN suppliers, she said.
• Huawei did not respond to TechNode requests for comment on Monday.

Huawei nabs German 5G network contract, regulator approval pending

Context: State-controlled Telenor is Norway’s biggest telecommunications provider, and operates in other Nordic and Asian countries, serving around 183 million customers.

• The company said on Friday that it selected Swedish company Ericsson as the key technology provider for its 5G network in Norway.
• Telefónica Deutschland, the operator of Germany’s second-largest wireless network, said on Wednesday that it had selected Huawei and Finland’s Nokia as its RAN suppliers.

Chinese telecommunications equipment maker Huawei has won a bid from one of Germany’s biggest telecommunications companies to help build the country’s 5G network.

Why it matters: The deal with Telefónica Deutschland, the German branch of a Spanish telecommunications giant, is a sign that German wireless operators are willing to source 5G equipment from Huawei despite warnings from the US government and experts that the company’s products pose cybersecurity risks.

• However, a deal with a carrier doesn’t guarantee Huawei’s access to the German market. The country requires all suppliers to 5G network operators to submit a document self-declaring their trustworthiness and procure additional certification.
• The deal “will be subject to the successful safety certification of the technology and the companies according to the legal provisions in Germany,” (our translation) said Telefónica Deutschland in a statement (in German) on Wednesday.

Details: Telefónica Deutschland, operator of Germany’s second-largest wireless network, chose Huawei along with Finland’s Nokia as suppliers of its less-sensitive radio access network. The carrier said it would invest up to 18% of its revenue next year to accelerate the deployment of its 5G mobile infrastructure.

• Huawei and Nokia would be “equally responsible” for supplying gear for the project, according to the statement.
• The company hasn’t yet selected a supplier to upgrade the more sensitive core network which houses control functions and won’t do so until next year, according to Bloomberg, citing Telefónica Deutschland CEO Markus Haas.
• The company “is taking into account the ongoing political process of establishing these security guidelines without delaying the start of the 5G expansion,” said the statement.
• In addition to the self-declaration, 5G equipment vendors are also required to obtain a certification from the Federal Office for Information Security (BSI), Germany’s cybersecurity authority, to supply to carriers.

German foreign minister warns over Huawei’s state ties

Context: German Foreign Minister Heiko Maas questioned last month whether the country should allow Huawei access to its 5G network rollout, citing Huawei’s ties with the Chinese government.

• Top German government officials, including its defense minister and intelligence chief, have stated that Huawei cannot be trusted and that its equipment should be excluded from the country’s 5G network.
• A European Union report published in October warned that “hostile third countries” may force 5G suppliers to facilitate cyberattacks serving their own national interests.

Chinese fintech giant Alipay is partnering with London-listed payments and foreign exchange firm for cross-border remittance services and blockchain applications, the duo announced on Wednesday.

Why it matters: The move, which is expected to expand the reach of remittance services for both companies, is not the first Ant Financial has made in the UK this year.

• Ant Financial acquired London-based payments firm Worldfirst after its acquisition of US money transfer company MoneyGram last year fell through over US national security concerns.
• The partnership provides a boost to Ant Financial’s existing blockchain capability.

“We are excited to partner with Finablr for global remittances, as we continue to explore new ways to apply our technology in order to benefit more people around the world… For example, using blockchain technology developed by Alipay, we have helped launch a blockchain remittance service between our e-wallet partners AlipayHK and GCash, providing round-the-clock, real-time transfers between Hong Kong and the Philippines.”

—Clara Shi, head of Alipay’s global remittances business

Details: The latest partnership aims to extend the scope of collaboration to Ant Financial’s remittance network partners in China and other countries, Finablr said.

• The first stage of the partnership, which includes the integration of the Finablr platform with Ant Financial’s remittance system, has been completed.
• The two companies will also explore other areas of collaboration, including digital gifting as well as driving efficiencies through Ant Financial’s Ant Blockchain Information System.
• Finablr said it is “one of the first global cross-border remittance partners” for Alipay.

Context: Both Ant Financial and Finablr have adopted blockchain technology for real-time cross-border money transfers.

• Ant Financial will benefit from Finablr’s blockchain-based money transfer capabilities. Finablr’s remittance payment system is powered by RippleNet developed by US-based payment service Ripple, the firm behind top cryptocurrency XRP.
• Blockchain-based money transfers are faster and more secure.
• In October last year, Travelex and Swych, two brands under Finablr, launched a cross-border shopping solution for Alipay’s largest rival WeChat Pay.
• Alipay is said to serve more than 1.2 billion people globally. The payment firm has been expanding its cross-border services for Chinese travelers abroad as well as overseas customers shopping on Chinese sites. It now supports 27 currencies.

Whenever I go on stage to introduce myself, I always say: tech blogger is the best title I’ve had, ever. As a blogger, I always want to write; as a frequent traveler who gets to see innovation all over the world, I always want to share. But unfortunately, as founder of a company, I have to spend more time on management work. So a big thanks to TechNode’s English media team, who pushed me and also helped me set up this column. And I do hope I can force myself to write more, as a tech blogger, like the old days.

I spent last week at the TechCrunch Shenzhen 2019 conference. As you may know, TechNode has organized the event as TechCrunch’s China partner since it began in 2013, and we’ve seen tech trends come and go. As you can see from the image below, there were so many true innovators who were almost unknown when on our stage but what they work on now is huge in China and the global tech space.

This year’s TechCrunch is no different, and we managed to keep the standard of high-profile VCs, founders, and influencers.

But to me what stood out this year were the ones that came from overseas.  Just two or three years ago, every time we organized a TechCrunch event, we’d think about which companies from Silicon Valley we could invite to China. But now it’s different—there are loads of good startups in Silicon Valley, but the focus in the global tech space from China is more and more diverse.

Southeast Asia

What we saw the most of this year was Southeast Asia. Quite a few VCs, or even companies, were from SEA. They are looking at the Chinese ecosystem, and they wanted to discuss, meet each other, and meet the Chinese VCs. SEA also accounted for two whole side stages, and on the main stage we also had sessions talking about the region.

Today, you can feel the gap between China and the United States getting further, speaking from a non-political perspective. Frankly speaking, three to five years ago, every time we talked to a Chinese startup, they’d always start their pitch: “I’m kind of like Facebook” or “I’m kind of like Uber.” They’d always use some Silicon Valley benchmark. That meant that their model has been proven by Silicon Valley, so it’s more likely they receive money from VCs.

But now the situation has changed—if you look at all the stages at TechCrunch, and all the Chinese unicorns on stage, they don’t really have benchmarks from Silicon Valley.

However, if you go to Southeast Asia now, there it’s the time for copying from China. I met quite a few SEA-based startups, and when they come to pitch you, they would say something like, what we do is like Eleme, like Bytedance, etc. Even when you talk to SEA-based VCs, they say they want to work with Chinese VCs to co-invest in SEA startups. This is a lot like China VCs a few years ago—then, if you could raise USD money, it was a kind of endorsement.

China tech’s history with Silicon Valley is repeating itself with SEA and China. What’s next? Just to give you an example, in the e-commerce sector, when Alibaba’s Taobao was recognized as a popular e-commerce platform, there were loads of agencies to help traditional businesses set up e-shops on the platform. The next wave is probably going to be more and more merchants, who want to sell stuff not only to Chinese people, but to Southeast Asia. So I’m quite interested in ecommerce agencies like the Lazada alumni-founded one, named Intrepid.

Of course, China eventually outgrew the “as seen in America” approach. In another three to five years, who knows who could be going to Bangkok or Kuala Lumpur to learn from SEA models and bid for VC money?

Japan

For Japan, it’s a different story. We know the mobile internet business China is ahead of Japan, and the language barrier in Japan is truly painful. However, it does not mean Japan has stopped innovation or that there is nothing we can learn from Japan.

This year, we invited a few people from Japanese big corporates, government, and VCs to talk about the innovation situation in Japan, and how the Japanese ecosystem can work with the Chinese ecosystem.

In recent years, when we talked about tech innovation, we talk about the US, we talk about Israel. And we talk about SEA for the market. It is true that Japan does not have that many startups, or you can say at least not many startups from Japan want to do global business. But I’ve started to notice an interesting trend: we see more and more Japanese corporates that have money—and huge resources as well—but they can’t find that many good startups inside Japan. So instead of looking for local startups they can work with, corporates are coming to China, looking for startups that they can work with and then bring the technology back to Japan.

These corporates believe Chinese startups are more aggressive, working even harder than Japanese startups. Coming to China, Japanese corporates want to invest, work with, or buy services.

Europe

With the EU and China, we see something similar to Japan, but a little different.

Like, there’s quite a good few good family businesses, or corporate businesses, which have huge of industrial resources are looking at China. Examples are, BMW brought its corporate innovation program “Startup Garage” to China; Airbus is looking closer than ever into the smart transportation sector in China.

Communication between China and EU is missing. In China we know the AI company DeepMind, but most of us consider it as an American company. It’s actually headquartered in London. Offstage, I met investors from France and other EU countries. Everyone is thinking now is a good time to do something in China. They all agree on this: in tech space, it’s time to educate China, and educate the EU market about each other.

There are still, or at least we still expect lots of, interactivity and partnership between China and Silicon Valley. And technology wise and research wise, there is still lots China needs to do to catch up with Silicon Valley. But the whole tech world is a lot like the mobile phone market: iPhone is still important, but we have many more options besides Apple. Silicon Valley is not the only place to go for technology innovation.

Embattled Chinese telecommunications equipment maker Huawei released a position paper on cybersecurity last week, arguing that security assessments of 5G network suppliers should focus on the products, not the country of origin.

Why it matters: While few of the points expressed in the document are new, the release of the position paper comes as the UK and Germany near deadlines on deciding whether Huawei should be allowed into their 5G network infrastructure.

• The paper also countered a viewpoint brought by a European Union report released last month in which it said “hostile third countries” may force 5G suppliers to facilitate cyberattacks serving their own national interests.

Details: System failure and human error constitute the greatest risk, and political suspicions have done nothing to solve the issues of cybersecurity, Huawei said in the paper dated November 2019.

• The company suggests that potential risks inherent in any given product should be evaluated based on factors that have a material effect on security, such as its security architecture and features, rather than focusing on “unrelated factors,” such as country of origin.
• The company also calls all stakeholders to evaluate cybersecurity risks in a “more rational, objective, and evidence-based way,” arguing that all 5G equipment suppliers and components should be assessed using the same standard.
• The company reaffirmed that it is a private company wholly owned by its employees and “no government or any third party holds shares in our company, intervenes in our operations.”
• There is no Chinese law authorizing state intelligence agencies require that a telecom equipment maker aid them in collecting intelligence information, implanting backdoors, or damaging customer networks, said the company, citing independent, unnamed legal professors and law firm.

“Today, cybersecurity is increasingly intertwined with political suspicions and trade barriers and falling trust between nations… Frequently, cybersecurity is used simply as an excuse to erect trade barriers, and this has further obscured the real issues.”

—Huawei

Context: The UK and Germany are on the verge of making their decisions on whether to allow Huawei to participate in their 5G network rollouts. Governments in both countries have indicated that the cybersecurity issue is a major concern.

• The UK government will make the decision following general elections on Dec. 12, according to a report by the Guardian citing the country’s culture secretary.
• Germany authorities drafted a set of security guidelines last month, asking 5G supplier candidates to submit a document self-declaring their trustworthiness. Meanwhile top German government officials, including its defense minister and intelligence chief, have stated that Huawei cannot be trusted and that its equipment should be excluded from the country’s 5G network.

EU report warns of 5G threat from ‘hostile’ states

The world’s biggest commercial drone manufacturer DJI revealed on Wednesday that it is developing technology to track and identify drones via smartphone app in a bid to reduce airspace disruption and improve data transparency in the industry.

Why it matters: Unauthorized drones have caused flight delays and and cancellations, costing the airspace industry millions of dollars. American and European authorities are increasingly pushing drone makers for a system to better monitor the technology.

Details: Users of the app will allow be able to identify all drones flying within a certain radius, just as license plates are used for cars, DJI said in a press release (in Chinese).

• It is unclear when the app will be made available to the public, as DJI is refining the tool and waiting for mandatory drone identification regulations to kick in next year.
• Users can view the position, speed, altitude, and direction of drones on the app, which the company plans to make available for public use.
• Drones will transmit wireless broadband signals that the app can read from up to a kilometer away without a cellular network, so it can be used in remote areas, the company said.

“It’s possible to provide this information in a direct drone-to-phone broadcast, without requiring an expensive mobile data connection, an additional transponder on the drone, or other complex tech.”

—DJI spokeswoman to TechNode

Context: The European Aviation Safety Agency will roll out mandatory remote drone tracking and identification regulations in 2020, and the US Federal Aviation Administration is in the process of drafting relevant legislation along with a cohort of industry stakeholders.

• The app is compliant with a standard developed by ASTM International, a global technical standards organization, with the consensus of 35 industry players.
• London Heathrow, Europe’s busiest airport, has been grounded twice this year due to unauthorized drones been sighted near its airspace. In January, the military was called in to help airport officials and police to investigate a drone sighting. In September, London police threatened protesters with life sentences in order to deter plans to shut down the airport for 24 hours by flying drones at regular intervals in its no-fly zone.
• Gatwick airport in London reportedly grounded an excess of 1,000 flights carrying 140,000 passengers during last year’s Christmas holiday season due to unauthorized drones flying near its no-fly zones, the Guardian reported.

Despite the sophisticated nature of Europe’s telecom networks, security has only recently become the centerpiece of the conversation, Paul Scanlan, chief technology officer of Huawei’s Carrier Group, told TechNode at the Fortune Tech Forum in Guangzhou. When asked about Huawei’s past cybersecurity mistakes, he said the company’s focus on innovation and speed contributed significantly.

In the past, Huawei was focused on “innovation and getting products out fast,” and was unaware of how it should strive to uphold certain security-related architectural features in their code, Scanlan said in response to a report by the UK’s Huawei Oversight Board (HCSEC) that found “underlying defects” in its software development.

 “If a customer wants to add a feature, we can’t re-engineer the whole product,” because that would be too slow, he said. Instead, Huawei would put a module on top of the existing code, he continued.

Over time, these development practices led to some “architectural peculiarities,” which the HCSEC found undesirable, especially given that hackers were getting more sophisticated, he said. “Now we [Huawei] understand that these sorts of things are important,” he added.

Last March, the HCSEC reviewed Huawei product software and found “extensive non-adherence to basic secure coding practices, including Huawei’s own internal standards. “These included suppressing alerts from static analysis tools and using an outdated third-party operating system.

HCSEC is a UK subsidiary of Huawei that works under the watchful eyes of British authorities.

No backdoors

The important thing is that “it found no backdoors,” Scanlan said, echoing Huawei’s statement when the report first came out. Huawei has invested $2 billion to “develop better testing, processes and KPIs focused on developing trustworthy software,” he said.

This so-called “transformational program” was announced by Huawei in November 2018. Three months later, the HCSEC report said that it remained “a proposed initial budget for as yet unspecified activities,” giving the watchdog no confidence in Huawei’s ability to follow it through.

Scanlan also said that the company is the only equipment vendor that faces so much scrutiny and that it has a history of handing their code over for review in the UK, and to a lesser extent, Germany. According to him, it is the only company to be under so much scrutiny.

But in a network, “you’re only as insecure as your weakest link. If you have multiple vendors and you are only scrutinizing Huawei, that doesn’t make sense,” he said.

“The real issue is that this is the first time security is being talked about on a global, government level,” Scanlan said. During the rollout of 3G and 4G, similar discussions on the security of networks were lacking, he said.

“We’re having these discussions globally now, and everyone is part of them, vendors, operators, governments. Excluding the US, we are having a lot of these discussions,” he said.

European regulators have been working together with industry players to come up with a common security framework that all member-states can agree on. All equipment vendors are consulted in these discussions, Scanlan said.

Note: This article has been updated to reflect better Paul Scanlan’s words following an inquiry from Huawei.

German Foreign Minister Heiko Maas on Monday questioned whether the country should allow Huawei access to its fifth-generation wireless network rollout because the company is compelled to hand information over to the Chinese government, Reuters reported.

Why it matters: The remarks came just weeks after German authorities drafted security guidelines calling for would-be suppliers to 5G network operators to pledge that they won’t reveal data to their home governments under legal pressure, a strong sign that Berlin may exclude Huawei from its 5G network build.

• The guidelines require 5G equipment suppliers to submit a document self-declaring their trustworthiness.
• The German government documents echo an earlier report by the European Union which warned “hostile third countries” may force 5G suppliers to facilitate cyberattacks serving their own national interests.

Germany wants Huawei to self-declare its trustworthiness to join 5G push

Details: Maas told reporters in Berlin that Huawei was a company dependent on the Chinese state due to its national security laws. A 2017 law requires organizations and citizens to “support, assist and cooperate with the state intelligence work.”

• Germany, therefore, wants to subject 5G gear suppliers to a test of trustworthiness and examine if they are forced by law in their home countries to pass on data that actually should be protected, said Maas.

Context: The US has been urging European nations to exclude Huawei from their 5G network rollouts, saying its equipment could be used by the Chinese government to spy on their communications. Huawei has repeatedly denied the allegations.

• Countries such as the US, Australia, and Japan have banned Huawei equipment from their 5G networks, but no EU member states have complied with White House pressure so far.
• Huawei said last month that it had signed more than 60 commercial 5G equipment contracts worldwide.

Huawei has been defending its “trustworthiness” amid comments from Germany’s spy chief, though the country’s government has already drafted new security guidelines allowing the Chinese equipment maker to supply equipment for Germany’s future 5G network.

Bruno Kahl, head of the German Federal Intelligence Agency, claimed that Huawei can’t be fully trusted. In response, Huawei Germany issued a statement repeating that it is independent of China’s Communist Party and has a good track record working with network operators worldwide.

In an ironic twist, German authorities drafted new security guidelines issued on October 15, calling for would-be suppliers to 5G network operators to submit a document self-declaring their trustworthiness, a similar sentiment to Huawei’s statement.

Equipment vendors, such as Huawei and ZTE, would produce the document confirming that they are not obliged to reveal personal data, equipment design, or any other critical information to third parties.

“Certain telecommunications providers and network operators with increased risk potential may only use certain critical system components if they have been purchased from trusted sources,” Michael Reifenberg, a representative for German regulatory office, the Federal Network Agency (FNA), told TechNode by email.

Reifenberg referred to the trustworthiness document as a “no-spy declaration” for dealings between equipment suppliers, such as Huawei, and network operators, such as Deutsche Telekom. Operators would then submit the declaration to the FNA. The document binds the supplier or manufacturer with the network operator in case of data breaches, meaning that they will bear joint liability in case of a leak.

“It is the weakest link in this entire document,” said Jan-Peter Kleinhans, Project Director of Security and the Internet of Things at Stiftung Neue Verantwortung, a think-tank in Berlin. The certification will be based on technical standards, but the vendors’ declaration of trustworthiness “is not double-checked by [cybersecurity agency] BSI , it is not evaluated. It is not enforced, there are no sanctions,” he said.

“Details of the implementation are not yet specified,” Reifenberg said. When a declaration is breached, the Agency “may give orders, take other measures to secure compliance and may set penalty payments” on an ad hoc basis, he said.

The draft guidelines also provide for the certification of 5G network equipment, which will be issued by Germany’s cybersecurity authority, known as the Federal Office for Information Security.

Regulators have yet to decide whether the certification, based on an upcoming technical guideline, will be a mandatory process for suppliers.

Germany is one of many countries worldwide facing pressure from the US to exclude Chinese firms from the development of 5G networks. Washington claims that Chinese vendors’ have a close relationship with the government, which may force them to turn over critical information.

Back in May, US Secretary of State Mike Pompeo issued a veiled threat during an official visit to Berlin, saying there is “a risk we will have to change our behavior in light of the fact that we can’t permit data on private citizens or data on national security to go across networks that we don’t have confidence (in).”

‘Hostile third countries’

Days before Germany released the guidelines, the EU Commission released a risk assessment on 5G, warning “hostile third countries” against colluding with 5G equipment vendors to conduct cyberattacks on member states. But the German agencies which drafted the security catalog are not trained to account for political risk, “in the eyes of the BSI, the origin of the vendor doesn’t matter,” said Kleinhans.

EU report warns of 5G threat from ‘hostile’ states

“In a way, you are asking the wrong question to the wrong person,” he said. “You have two completely technocratic agencies that are very much focused on technical aspects, drafting a technical document, which suddenly the world and some Germans included, expect that will have geopolitical impact.”

This is in line with Angela Merkel’s overall approach to the security of 5G, which has “pushed the debate into the technical realm,” Kleinhans said. Analysts say that Merkel’s government is trying to protect Germany’s industrial prowess, which relies heavily on access to the Chinese market.

The guidelines have caused controversy within the German Parliament, not only because of the content. The draft needn’t be voted on by parliamentarians before it is enacted, since it is not a new law but an updated version of technical guidelines created by the responsible agencies.

“A question of such strategic meaning should not be being decided at the administrative level,” said Norbert Röttgen, a member of Merkel’s party, the Christian Democrats.

The draft will be open for public comment until 13 November 2019.

China will no longer force foreign firms to transfer technologies in order to access the market, Wang Shouwen, a vice commerce minister said at a press conference in Beijing on Tuesday.

Why it matters: Forced tech transfer and the unequal playing field conditions on China’s mainland have been issues at the heart of the US-China trade war.

• Wang signaled new directives that will add to the Foreign Investment Law effective in 2020, barring the use of “administrative tools” which force foreign companies to hand over trade secrets.
• Beijing will refine policies so that foreign and domestic companies have equal market access to new energy vehicle production, Wang said.

Details: The new measures are aimed to bring about a transparent and predictable investment environment in order to stabilize foreign investment flows, according to Wang.

• A spokesman for China’s Foreign Ministry, Geng Shuang, said at a separate event that lead negotiators from China and the US have had conversations over the phone recently and will do again so in the future.

“Administrative organs may not implicitly or explicitly force the transfer of technology by foreign investors or foreign-invested enterprises.”

—Wei Ye, Commerce Ministry official 

Context: Wang’s pledge did not address the joint venture mechanism which forces foreign enterprises to partner with a Chinese company in order to operate in China, frequently creating conditions for unintended tech transfer.

• In July 2019, major California-based chipmaker AMD denied claims of wrongdoing for passing chip designs to its Chinese partners.
• China has long been accused of requiring foreign tech firms to give up intellectual property in exchange for access to the world’s second-largest economy. A 2019 survey by the European Union Chamber of Commerce showed that 20% of European firms doing business in China had been subject to forced tech transfer, up from 10% in 2017.

Briefing: European firms say forced tech transfers rising in China

• Earlier this month, US President Trump revoked a $250 billion hike in tariffs that would have gone into effect on Oct. 15 after striking a tentative agreement on increased protections for intellectual property rights, agricultural goods, enhanced access to China’s financial markets, and currency policy.
• China and the US are now working on the text for the so-called “Phase one” trade deal announced by the US president on Oct. 11.
• Washington’s tariffs have caused foreign firms to withdraw or halt investment and production in China amid an economic downturn.
• After Apple announced it was considering shifting 15% to 30% of its production out of China, Foxconn, a major supplier, unveiled a plan to move production to South and Southeast Asia to minimize tariff impact.

UK Prime Minister Boris Johnson is preparing to allow Huawei equipment in certain parts of the country’s next-generation networks despite the risk of backlash from the US, the Sunday Times reported.

Why it’s important: The move would be a major blow to Washington’s campaign to bar Huawei from 5G networks worldwide on security concerns, and could cause a rift in the close relationship between the US and UK.

• The UK is part of the Five Eyes Alliance, an intelligence-sharing network that also includes the US, Canada, Australia, and New Zealand, and could be the first of the five to decide to work with Huawei. The UK’s inclusion of Huawei in 5G could send a strong signal to other countries.

Details: According to the Sunday Times report citing anonymous senior sources, the UK government is nearing a decision to allow Huawei supply gear for “non-contentious” part of the network.

• The individuals cited in the article say there are no good alternatives to Huawei technology, and that London risks being left behind if they don’t say yes. “The West has screwed up by allowing Huawei to develop a near monopoly in this area,” said an anonymous source quoted in the report.
• No formal decision has been announced, and the cabinet is expected to meet within the next five weeks to finalize the ruling.

Context: In April, Theresa May made a similar decision, which sparked a cabinet crisis and was eventually revoked. Whether Johnson’s meetings included his cabinet was not made clear in the report. It remains to be seen how Johnson’s decision fares with the British Parliament, which last year protested intensely against May’s decision.

• Washington has lobbied aggressively around the world to exclude Huawei from the development of 5G networks.
• Huawei said in June that it had secured 50 contracts worldwide. It has also moved into smart vehicles in an effort to mitigate falling sales due to the US ban.
• Last week, a list of draft security guidelines by the German authorities showed that Berlin is likely to allow Huawei in its networks.
• Monaco was the first country in Europe to achieve full 5G coverage. It used Huawei gear.
• Australia has banned Huawei from supplying 5G equipment. New Zealand has revoked an earlier ban and is still on the fence on the issue.

Chinese telecommunications giant Huawei said on Wednesday that the company has no plans to sell its foldable smartphone in overseas markets and that the device will launch in China on November 15.

Why it matters: The world’s second-largest smartphone vendor, hamstrung by a US export ban that blocks access to the most popular features of Google’s Android mobile operating system, is approaching overseas markets with caution as it ramps up marketing efforts in its home territory.

• Google said in August that it could not sell the license that is required to pre-install popular Google apps and services such as YouTube and the Play Store to Huawei for new devices.
• Huawei smartphone sales in Europe, the company’s biggest market outside China, tumbled 16% year on year in the second quarter, though it retained its position as the second-largest smartphone vendor in Europe with 8.5 million units shipped in the quarter ended June 30.
• In the same period, domestic shipments of Huawei smartphones soared 38% year on year, which analysts said stemmed from patriotic fervor among Chinese shoppers in response to US restrictions on the company.

Huawei to launch new 5G-capable handset in Europe without Google

Details: Kevin Ho, vice president of Huawei’s consumer business unit, told reporters at the launch of the Mate X foldable phone on Wednesday that there is no timetable for the device to go on sale in overseas markets because its demand has exceeded supply in China.

• The current production capacity of the RMB 16,999 (around $2,405) device is roughly 100,000 units per month, according to Ho.
• The company also announced that its smartphone shipments in 2019 to date had exceeded 200 million units, reaching the sales benchmark two months earlier than last year.
• The increase is attributable to strong domestic sales figures, while sales in overseas markets slipped, according to Ho.

“Our strategy is based on carriers’ 5G roll-out in different regions… A global launch plan [for the Mate X] is under review.”

⁠—Huawei spokesman to TechNode on Thursday

Context: This is not the first time that Huawei has deferred its overseas markets from launch plans for new handsets.

• The company delayed sales of its newly launched Mate 30 5G smartphone series in Europe in September because the handsets have no access to Google apps and services under the US trade ban. However, it said last month that it is planning to launch the Mate 30 series in Southeast Asia in October.
• NTT Docomo, Japan’s largest mobile carrier, said last month it would not offer phones from Huawei for its 5G network based on concerns about restricted access to Google services, according to Nikkei Asian Review.

Update: an earlier version of this story referred to Kevin Ho as He Gang, as he is also known.

A new EU report published on Wednesday warned that “hostile third countries” may force 5G suppliers to facilitate cyberattacks serving their own national interests, but refrained from singling out China and its telecommunications equipment giant Huawei.

Why it matters: The EU report, which aims to help ensure a high level of cybersecurity across 5G networks of its member states, said a “strong link” between the supplier and government of a given third country could leave the specific hardware supplier subject to interference.

• Such interference may stem from the fact that the third country has “no legislative or democratic checks and balances in place,” said the report.
• Though the report didn’t name China or Huawei, it echoes a US government argument against Huawei that Beijing could use a Chinese law from 2017 to force Huawei to hand over network data to the government.

Details: The advisory report is a result of a national cybersecurity risk assessment by all EU member states, aiming to help them identify the main threats and threat actors when rolling out their 5G networks.

• Threats posed by states or state-backed actors are perceived to be the most serious as well as the most likely actors, as they “can have the motivation, intent and most importantly the capability to conduct persistent and sophisticated attacks on the security of 5G networks.”
• It also recommends member states to look into the ownership structure of their 5G suppliers, which is another point of contention in the US government’s allegations against Huawei.
• Huawei said in a statement on Thursday that it welcomed the EU 5G network security risk assessment and the company was ready to work with its European partners to deliver safe networks.
• “We are pleased to note that the EU delivered on its commitment to take an evidence-based approach, thoroughly analyzing risks rather than targeting specific countries or actors,” Huawei said.
• The Shenzhen-based company reiterated that it is a “100% private company wholly owned by its employees.”

Context: The US has been urging European nations to exclude Huawei from their 5G network rollouts, saying its equipment could be used by the Chinese government to spy on their communications.

• Some of the United States’ closest allies, such as Australia and Japan, have banned Huawei equipment from their 5G networks, but none of the EU member states have complied with President Trump’s call.
• As of late July, Huawei has secured 50 5G commercial contracts globally, of which 28 were signed in Europe, said Chen Lifang, president of the company’s public affairs and communications department, in July.

What began as a 24-hour hackathon involving 21 international teams and more than 200 participants from 26 countries has narrowed to five groups competing to most efficiently leverage artificial intelligence to remotely grow a crop of tomatoes in the Dutch town of Bleiswijk, agricultural media outlet Fruitnet reported.

Why it matters: Feeding its 1.37 billion citizens is one of China’s biggest priorities and it continues to promote the development of agricultural technology to address the vulnerability.

• Effectively automating greenhouses using AI has the potential to increase horticultural productivity while simultaneously reducing resource use and management complexity.
• At scale, autonomous greenhouses can produce significantly higher net profits than those managed by humans.

Details: The second Autonomous Greenhouse Challenge, which began in September and is organized by Wageningen University & Research together with Tencent, first tasked participants with creating algorithms that could best manage a variety of variables including temperature, light, and CO2 under simulated conditions.

• Competitors then pitched a solution for autonomous greenhouse control based on their hackathon results.
• The five finalists are Netherlands-based AiCU, The Automators, and Automatoes; Korea-based IUA.CAAS; and China-based Digilog, which is composed of employees and researchers from an international group of five companies and three universities.
• From December to June, the teams will remotely operate a real greenhouse using the algorithms they developed during the hackathon.

Context: Last year’s Autonomous Greenhouse Challenge saw finalists compete to grow cucumbers using AI, with the winner chosen based on net profit from the sale of their crop, the use of AI, and sustainability.

• Digilog, whose name is a portmanteau of the words “digital” and “analog,” looks to simultaneously advance agricultural technology and “create harmony between technology and human beings.”
• According to its page on Wageningen University & Research’s website, the team also hopes to host the Australian Grains Industry Conference (AGIC) or the Argo-AI Challenge in Seoul.
• With China poised to drive the growth of Asia’s agritech industry through 2025, AI has provided useful solutions in other projects looking to save farmers time and resources through automation. For example, drone maker XAG and Bayer teamed up on an AI-powered unmanned aerial system designed to streamline the crop-spraying process for farmers planting on rough terrain.

Huawei launched a new 5G-compatible smartphone lineup in Munich, Germany on Thursday without Google apps or access to its services as the Chiese tech giant contends with a US trade blacklist barring it from purchasing American-made technology.

Why it matters: Experts believe that a lack of Google apps and services will slash the appeal of the Mate 30 series in the western markets such as Europe, Huawei’s biggest overseas smartphone market.

• The company said it has no timetable for the availability of the new flagship series in Europe.
• The company will start taking pre-orders for the devices in China next week and they will be available in Southeast Asia sometime next month.

Details: The Mate 30 series will operate on an open-source version of Google’s Android operating system, but they won’t come with popular Google apps such as Gmail, YouTube, or the Google Play Store.

• Huawei will offer its own Android skin called EMUI10 on the new devices.
• The phones will ship with a Play Store alternative called the AppGallery, which the company confirmed on Thursday will allow downloads of more than 45,000 apps, including Facebook, Instagram, and WhatsApp.
• The new devices use Huawei’s Kirin 990 processor, the company’s first smartphone chipset to include a built-in 5G modem.
• The lineup includes the Mate 30 and Mate 30 Pro, both of which are available in 4G and 5G models.
• The two devices will start at EUR 799 (around $883.2) and EUR 1,099 (around $1,214.9), respectively.

Context: Huawei is the world’s second-largest smartphone vendor following South Korea’s Samsung and the biggest smartphone seller in China.

• The lack of Google apps will have little effect on sales in the Chinese market because most of Google’s services are blocked in the country.
• Huawei smartphone sales in Europe tumbled 16% year on year in the second quarter.
• NTT Docomo, Japan’s largest mobile carrier, said this week it would not offer phones from Huawei for its 5G network, based on concerns about restricted access to Google services, according to Nikkei Asian Review.
• Google has cut Huawei off from future updates and services for the Android operating system after the US put Huawei on a trade blacklist in May.
• Smartphone makers need to purchase a license from Google to pre-install popular Google apps and services.
• Google said last month that it could not sell the license to Huawei because a temporary reprieve from the US government does not apply to new products such as the Mate 30.

A Huawei executive has confirmed that its next flagship smartphone, the Mate 30, will deliver without Google services or apps pre-installed, and that alternatives were in active development.

Why it matters: The absence of Google services and apps will have little effect on the new handset’s performance in Huawei’s home market as they are blocked in China, but experts have said that it may significantly lower its appeal in overseas markets.

• Smartphone makers need to purchase a license from Google to pre-install popular Google apps such as the Google Play Store and Google Maps.
• Google said last month that it could not sell the license to Huawei because a temporary reprieve from the US government does not apply to new products such as the Mate 30.
• “No consumers in Europe would want a phone without Google services,” Tiago Alves, vice president of Asia Pacific at Aptoide, a Portugal-based Android app store, told TechNode in a June interview.

Details: Wang Chenglu, Huawei’s president of consumer software, confirmed at the International Radio Show (IFA) consumer electronics expo in Berlin last week that the new Mate 30 handset would launch without Google’s apps or access to its services, and the company is developing alternatives so that user experience faces as little disruption as possible, according to Ausdroid, an Australia-based tech news outlet.

• The devices will run the Android 10 operating system with Huawei’s EMUI 10, the latest version of its mobile user interface, layered on top.
• Huawei is set to unveil the Mate 30 line on September 18 in Munich, Germany, but it is unclear when the devices will go on sale.

Context: Huawei released its in-house mobile operating system, HarmonyOS, last month, which is considered to be an Android alternative.

• Huawei’s upcoming P40 flagship handset may run the HarmonyOS, said Richard Yu, CEO of Huawei’s consumer business group.
• Huawei smartphone sales in Europe tumbled 16% year on year in the second quarter, though it retained its position as the second-largest smartphone vendor in Europe with 8.5 million units shipped during the quarter ended June 30.

SAP, one of the world’s largest enterprise software companies, could outperform its US rivals during the trade war because it is free to trade with China, the company’s CEO Bill McDermott said in an interview at a TechCrunch event on September 6.

The trade war has created a binary hurdle for American rivals including Microsoft and Cisco: not only has the US banned trade with Chinese businesses, China’s state-owned firms will not let them bid on their procurement tenders.

“The fact that Germany has excellent relations at the public and the private-sector level in China, it’s no question it’s a help to us.”

—Bill McDermott, SAP CEO

Why it’s important: The Trump administration is betting on a strategy of non-cooperation to stifle China’s competitive tech companies on the global stage. McDermott’s comments indicate that the trade war is helping it gain an edge over US rivals simply because it has unfettered access to the Chinese market.

Details: SAP, with a market capitalization of $145 billion, makes financial and management software for enterprises, competing with Microsoft, Cisco, and Oracle among others. SAP’s German roots has allowed the company to target China’s gigantic state-owned enterprises as clients.

• But the company is toeing a thin line. Last year, it spent $10 billion to acquire two American software companies, Qualtrics and Callidus software. McDermott said that if more than 25% of the company’s software is based on US innovation, they could also be subjected to US export restrictions.
• McDermott said they have not significantly changed their software development process in anticipation of a no-deal between the world’s largest economies.
• SAP does not disclose its revenue from China.
• The German company has implemented a cost-cutting strategy to offset the costs of its spending spree. It implemented layoffs and has promised to boost margins by 500 basis points over the next five years.

Context: Washington has taken bold moves in the trade war, trying to force Beijing to end practices that the Trump administration sees as unfairly promoting China’s homegrown businesses and stifling foreign competition.

• American companies seem to disagree with this strategy, claiming that lack of access to one of the world’s biggest markets is hurting profits.
• US chipmakers reportedly lobbied hard for the US government to end a ban on trading with Huawei.

Huawei could delay sales of its upcoming Mate 30 flagship smartphone overseas due to its lack of Google services amid the US trade ban, the South China Morning Post reported citing people familiar with the matter as saying.

Why it matters: Prospects for Huawei’s smartphone business remain uncertain under the cloud of US sanctions on the world’s second-largest handset seller.

• Google confirmed it won’t allow Huawei to install its apps and services on the new handsets as the temporary US government reprieve doesn’t apply to new products.
• Europe is Huawei’s most important smartphone market outside of China, but its smartphone sales from the region slid 16% in the second quarter compared with the same period a year earlier, according to research firm Canalys.

INSIGHTS: Supply chain body blow: Huawei’s reliance on US tech, charted

Details: The 5G-enabled handset will continue to run on the Android operating system, but it won’t have access to Google services along with apps such as Google Play and Google Maps, said the report. The planned delay is not final and any further action by the US government may affect Huawei’s decision on the release.

• Huawei will sharpen its focus on selling the new Mate 30 to consumers in its home market, where Google services and apps are not widely used, according to the report.
• “The open Android operating system and the ecosystem around it are still our first choice,” Huawei said in a statement sent to the South China Morning Post. “Please stay tuned for our new products.”

Huawei is pushing forward with the launch of a new flagship smartphone in Europe even though Google apps and services may not be on offer, Reuters reported on Thursday, citing company executives.

Why it matters: The new 5G-capable Mate 30 is Huawei’s first flagship handset launch since the US government placed it on a trade blacklist in May. The new smartphone will not feature HarmonyOS, Huawei’s self-developed mobile operating system,  signaling that the world’s second-largest smartphone maker is not yet ready to break with Google.

• Huawei can access the open-source version of Android without violating the US sanctions, but it barred from purchasing a license from Google to install popular apps such as YouTube and Google Maps on its phones.
• It launched HarmonyOS earlier this month saying that while it is possible to install HarmonyOS on phones, the company has no plans to do so at present.
• “No consumers in Europe would want a phone without Google services,” Tiago Alves, vice president of Asia Pacific at Aptoide, a Portugal-based Android app store, told TechNode in a June interview.

Details: Huawei is set to unveil the Mate 30 line for phones on September 18 in Munich, Germany, according Reuters citing a source familiar with the matter, though it is unclear when the devices will go on sale.

• Google, for the first time, confirmed that it cannot sell the license required to install its apps and services to Huawei due to the US ban.
• A temporary reprieve from the US government last week does not apply to new products such as the Mate 30, according to the Google spokesperson.
• Google declined to reveal whether it had applied for a license to resume supplies to Huawei, though it said before that it wants to continue businesses with the Chinese company.

“Our new phones will still be based on Android…We want to maintain one standard, one ecosystem, one technology.”

—Vincent Pang, senior vice president and board director at Huawei

Context: Huawei smartphone sales in Europe tumbled 16% year on year in the second quarter, though it retained its position as the second-largest smartphone vendor in Europe with 8.5 million units shipped during the period ended June 30.

• Huawei’s CEO of consumer business Richard Yu said in January that the company would overtake Samsung and become the world’s largest smartphone vendor by 2020.
• In June, Huawei announced that it had given up on fulfilling this ambition because of the US sanctions following a Bloomberg report saying that the company was preparing for a 40% to 60% decline in international smartphone shipments.

US sanctions on Huawei are beginning to impact the Chinese firm’s business in key markets as handset sales in Europe tumbled 16% year on year in the second quarter, according to a report from market research firm Canalys released on Monday.

Why it matters: While sales at home surged on patriotic support for the Shenzhen-based firm, demand among European consumers waned after products were cut off from future updates for Google’s Android operating system amid US sanctions.

• Huawei’s domestic shipments soared 38% year on year in the second quarter, which analysts said stemmed from patriotic fervor among Chinese shoppers in response to US restrictions on the company.
• Google has cut Huawei’s access to future updates and services for the Android operating system after the US put Huawei on a trade blacklist in May.
• China blocks most Google services within the country, so Huawei uses a modified version of Android for the domestic market that lacks most popular Google apps such as YouTube and Gmail.
• “No consumers in Europe would want a phone without Google services,” Tiago Alves, vice president of Asia Pacific at Aptoide, a Portugal-based Android app store, told TechNode in an interview.

Details: Despite the drop, Huawei retained its position as the second-largest smartphone vendor in Europe with 8.5 million units shipped in the quarter, trailing South Korea’s Samsung with 18.3 million units.

• Xiaomi’s European shipments grew by nearly half in the period to hit 4.3 million.

“Samsung has been quick to capitalize on Huawei’s US Entity List problems, working behind the scenes to position itself as a stable alternative in conversations with important retailers and operators,”

— Ben Stanton, Canalys senior analyst

Context: Huawei unveiled an Android alternative called HarmonyOS last week, and claims that switching handsets to the new operating system would take only a few days if necessary.

• US sanctions on Huawei show no sign of easing up as the trade conflict with China continues.
• Huawei chairman Liang Hua said last month that the company faces major difficulties ahead and its consumer business will be most affected in the second half.

Huawei’s Hongmeng may not replace Android on smartphones after all

Chinese electric vehicle makers are in a strong position to take advantage as the mass adoption of new energy buses takes off worldwide, especially in Europe where half of all new models sold by 2030 will be electric, according to a research note from analysts at UBS.

Why it matters: Rapid growth in the European electric bus market provides a great chance for Chinese makers as they have already gained years of product development and commercial operation experience.

• Buses are still largely produced by hand, unlike sedans and trucks, and therefore Chinese companies can remain cost-competitive compared with European rivals, UBS said.
• Chinese firms also boast mature comprehensive industry chains integrating batteries, motors, and controls.

“For years, Chinese automakers have lagged behind in the development of traditional vehicles. However, we believe they have great advantages in the new era of electric vehicles,” (our translation)

UBS China Auto Analyst Shen Wei

Details: Europe posted electric bus sales of about 1,000 units last year, roughly 5% of total sales. UBS estimates the number will increase four-fold next year to make up one-fifth of the total.

• Annual new energy bus sales in Europe could hit 12,000 by 2030, according to UBS.

Context: Beijing adopted a plan to subsidize its EV industry in 2009 and started the nationwide deployment of electric buses in 2015 with the aim of turning the country into a global leader in new energy vehicles.

• The number of new energy buses used for public transit in China reached 350,000 units as of last year, making up around half of the country’s total in urban areas. UBS expects that percentage to rise to over 80% by 2020.
• Chinese EV giant BYD is by far the largest electric bus supplier to Europe, selling over 700 battery-electric buses. It has secured a 20% market share in the region since it entered in 2010.
• Yutong followed BYD into the market and the Zhengzhou-based firm delivered around 100 electric buses to the continent as of the end of last year.

Autonomous driving startup AutoX and Swedish electric vehicle maker NEVS are working together to deploy robotaxis in Europe by the end of 2020, according to a joint statement.

Why it matters: Chinese self-driving companies are taking an international approach to develop their technologies. In June, AutoX and rival Pony.ai were given the green light to run robotaxi services in California.

• Deploying robotaxis gives autonomous driving companies a wealth of data with which they can better train self-driving cars.
• People drive differently in various parts of the world. Early robotaxi testing allows companies to localize their technology more quickly than their peers.

“AutoX enables companies like NEVS to become autonomous by creating an AI driver which is tailored to the specific geolocation it is in; adopting local driving styles, while also navigating in urban and dynamic conditions.”

— Xiao Jianxiong, CEO of AutoX

Details: NEVS is currently developing the robotaxi vehicle in Trollhättan, Sweden, and is taking design cues from a concept vehicle it teased at CES Asia in 2017.

• The two companies will begin testing the robotaxis in late 2019, with plans to deploy vehicles a year later.
• The aim of the partnership is to deploy autonomous taxis around the globe, according to the statement.
• The companies hope to use robotaxis to reduce the number of vehicles on the road, thereby cutting down on pollution and tackling congestion, they said.

Context: Following the partnership, AutoX will be testing its technology on three continents. In June, the company received permission to test its vehicles in the southern Chinese city of Guangzhou.

• Prior to receiving a license to run robotaxi services in California, AutoX had been testing its autonomous driving technology in the state.
• NEVS has more of a Chinese presence than meets the eye. The company last year finalized plans for an electric vehicle plant in Tianjin, a city in northern China.
• In January, property giant Evergrande acquired a $930 million majority stake in NEVS through its subsidiary Evergrande Health.

Chinese smartphone maker Xiaomi has set up a research and development unit in Finland focusing on camera technologies, according to Finnish media.

Why it matters: The Beijing-based handset maker joins Huawei in setting up a research arm in Tampere, Finland, where there is an abundance of experts thanks to the presence of one-time industry leader Nokia.

• Set up three years ago, Huawei’s Tampere operation focuses on camera, audio, and imaging technologies.
• Huawei has four models in the global top 10 rankings of mobile phone cameras from independent benchmark Dxomark, while Xiaomi has one.
• Nokia once led the market prior to Apple’s entry in 2007.

“At first, Xiaomi Finland Oy will focus on product development for camera technologies in Tampere.”

— Jomio Nikkanen, Director of Xiaomi Finland, to SuomiMobile

Details:

• Xiaomi is investing 2 million euro into the unit, according to registration documents cited by SuomiMobile.
• All of the company’s 2 million shares are registered with Xiaomi Technology Netherlands BV.
• The arm’s business scope includes software, IT systems, telecommunications equipment, and related services, SuomiMobile reported.
• Nokia and Xiaomi previously inked a collaboration agreement two years ago for cross-licensing on essential cellular patents.

The principality of Monaco is the first country in Europe to cover its entire area with a 5G network featuring Huawei equipment, giving the Shenzhen-based telecom giant an opportunity to showcase its equipment in real time.

Why it matters: Monaco is the first on the continent to fully welcome Huawei 5G technology as part of its core infrastructure.

• The debut gives Huawei an opportunity to showcase its products to more European governments and authorities.

“It allows us to make a shop window in a number of areas, notably linking 5G development to this intelligent state.”

— Huawei Vice President Guo Ping

Details: Monaco Telecom, owned by a French billionaire, signed the agreement with Huawei in September.

• Monaco’s telecom operator says it has taken all necessary measures to ensure the security of the network.

Context: As the US-China trade war plows on with Huawei’s 5G bids at the eye of the cyclone, Europe has been struggling to pick a side. The US maintains that Huawei poses a national security risk. But European leaders are not entirely convinced and countries are making their own assessments. The UK will use Huawei equipment on non-core parts of its 5G network, while Germany is on the fence.

• A report by the GSMA, the industry group representing telecom companies, found that excluding Huawei and ZTE from European 5G networks could cost operators up to an additional $62 billion.
• The Principality is the second smallest country in the world, with one of the highest per capita incomes.
• Monaco is not part of the European Union, but maintains close relations, uses the euro, and has effectively abolished border controls with the EU.

EU opens road to 5G connected cars in boost to BMW, Qualcomm – Reuters

What happened: European Union member states on Thursday rejected a European Commission push to adopt wifi technology for connected vehicles systems. The wifi-based standard was backed by automakers Volkswagen, Renault, and Toyota. Companies including Daimler, Ford, and Huawei support 5G standard, saying that the technology enables a wider range of in-vehicle and traffic management applications. The commission proposed legislation backing wifi in March, which was voted down last week by 21 countries including Germany, France, and Italy.

Why it’s important: The results are a triumph for tech giants including Qualcomm, Ericsson, and Huawei, who are among the eight founding members of the 5G Automotive Association (5GAA), a global association across ICT and automotive industries for the development of intelligent cars. Global auto and tech industries have been split over whether wifi or 5G works better and is safer for the next generation of connected vehicles. Backers of the wifi-based standard say that unlike 5G, wifi is available now and can be deployed immediately to improve road safety. EU states are scheduled to meet on July 8 to formally reject the wifi proposal.

TikTok Investigated Over Children’s Data Privacy – Pandaily

What happened: Regulators in the UK are investigating how short video app TikTok handles the personal data collected from young users and whether it prioritizes children’s safety on the platform, Pandaily reported. The investigation started in February, following the $5.7 million dollar fine that the US Federal Trade Commission (FTC) imposed on the app for collecting personal information from users under 13. According to the report, while TikTok’s main user base is comprised of 16- to 24-year-olds, evidence indicates that many of them are under 13 and shouldn’t be allowed on the app, according to its rules.

Why it’s important: Since the FTC fine, TikTok has revised its user agreement, limiting those under 13 to an ecosystem where they can only watch age-specific videos and removing almost all other in-app functionalities. The restrictions, however, can be easily circumvented by entering fake birth dates. The ongoing investigation in the UK suggests that the Bytedance app might need to further tighten its controls.

New ams/MEGVII Partnership for Plug-and-play solutions Enabling 3D Face Recognition in Any Smart Device – Businesswire

What happened: Chinese AI surveillance company Megvii will join forces with Austrian sensor manufacturer Ams AG to make what it claims will be the first off-the-shelf facial recognition solutions that don’t rely on smartphones. The standalone plug-and-play 3D suite, featuring Ams AG’s laser technology with Megvii’s facial algorithms, will focus on smart home, retail, security applications.

Why it’s important: Once referred to as “China’s rising AI star,” Megvii, which reached a $4 billion valuation in May, has recently entered choppier waters. The firm’s role in China’s state-level surveillance has attracted criticism from abroad since a March report stated Megvii was seeking an $800 million IPO listing. Many speculate that China’s surveillance players could soon face a US administration ban similar to that of Huawei. As a result, anonymous insider sources claim it is rethinking its listing altogether. Despite the turmoil, Megvii appears committed to partnerships and product development, this time with a European partner.

A version of this article first appeared in our members-only newsletter on June 22, 2019. Become a member and read it first.

The current debate about whether Chinese mobile network equipment vendors pose a threat to European security is messy, and heavily driven by a US perspective and agenda. Compared to the United States, however, the situation here in the European Union is much more complicated.

Some facts to keep in mind: Huawei has been in Europe for almost 20 years, employs more than 12,000 people, and has research collaborations with roughly 150 universities. Since 2016, Huawei has consistently been one of top three patent applicants at the European Patent Office. Almost every EU member state has at least one mobile network operator deploying Huawei (and/or ZTE) equipment—especially in Radio Access Network (RAN). As an example, roughly 50% of Germany’s 75,000 base stations come from Chinese vendors.

But many policymakers in Brussels and in member states think that Huawei became the world market leader for mobile network equipment through industrial espionage and price dumping. In fact, the company’s R&D budget is significantly and consistently higher than that of direct competitors Ericsson and Nokia. Huawei leads in 5G by almost every metric—the number of 5G Standard Essential Patents (SEP) filed, the number of employees sent to 3GPP standards meetings, the number of contributions to the 5G standards.

The case of Huawei and 5G is part of a broader development in information and communications technology (ICT). We are moving away from a unipolar world with the US as the technology leader, to a bipolar world in which China plays an increasingly dominant role in ICT development. Europe is accustomed to technological dependency on the US—but how do we feel about increasing dependency on China?

Why it matters where technology comes from

The digitalization of our society and industry is built on highly complex, constantly changing, interconnected, and interdependent ICT systems that are ultimately untrustworthy. They are untrustworthy because, as I argued in a paper earlier this year, IT security certification, code reviews, and audits do not scale and are not up to the task of identifying malicious code among millions of lines of code running on billions of transistors.

Committed state actors with limitless budgets and time will always find a way to infiltrate and compromise foreign ICT systems. Thus, one has to rely on manufacturers to keep their systems secure through software updates—and not to abuse their privileged access. The extent to which one trusts the manufacturer depends on the legal and regulatory environment out of which it operates.

The Snowden revelations show why rule of law matters for trust: The documents showed that the National Security Agency (NSA) intercepted parcels containing network equipment. The NSA would open the parcel, install custom malware on specific network equipment, repackage it, and send the parcel on its way to the customer. All of that happened unbeknownst to the manufacturer.

Even though Cisco holds more than 50% of the global network switch market, there was never a debate in Europe about ripping out US network equipment. Why? Partly, because Europe was confident in US rule of law and the country’s legal system. Rightly so. Of course, US intelligence agencies and law enforcement have extensive and overbearing powers. But its companies fight in court against government attempts to break into devices or access to sensitive customer data. How realistic is it that Huawei would fight in front of a Chinese court against handing over customer data to the Chinese police?

That is why the Prague Proposals, a memorandum by 30 member states from NATO and the European Union on 5G security, state that “security and risk assessments of vendors and network technologies should take into account rule of law, […].” That said, just because China lacks the rule of law does not mean that Chinese vendors should be banned from participating in 5G rollout.

What are we worried about?

The debate about Huawei and 5G often conflates two very different issues—the challenge of building and maintaining trustworthy and resilient communication networks, and the question of technological dependency. The current focus in the US is dependency on Chinese technology, as the US Department of Defense wrote in a key report. But we need to distinguish between the two issues, as they call for very different policy responses. If we replaced all Chinese equipment in our mobile networks, it would not magically make us secure—but it would make us less dependent on China.

Two security scenarios are most often discussed: industrial espionage and network sabotage.

Industrial espionage of Chinese origin is a massive problem for European and other businesses, and we need better and stronger tools to fight it. But so far mobile networks have not played a role in espionage campaigns. State-sponsored hackers often infiltrate computer networks through spear-phishing mails, clever social engineering, and exploits for desktop operating systems or internet network equipment. A well-written, infected e-mail sent to a CEO or IT administrator is still (and will continue to be) a highly efficient attack vector.

Of course, mobile network-based attacks might become more common with 5G. That is exactly why governments are right to be worried about the security of our future digital infrastructures. There is a lot they can do to improve the trustworthiness and resilience of our mobile networks. That said, these measures will never eliminate risk, only reduce it. This fact of life has not stopped us from connecting other critical infrastructure—from nuclear power plants to hospitals to energy grids—to the internet.

In a nutshell, building and maintaining trustworthy digital infrastructures is a shared responsibility between vendors, operators, and national regulatory authorities—and should be addressed on four different levels: standards, implementation, configuration, and processes. 3GPP needs to develop standards that utilize strong end-to-end encryption to shield traffic from network equipment. Vendors are responsible for the secure implementation of those standards in their equipment, and there should be mandatory baseline requirements. Secure configuration of the deployed equipment is then the responsibility of the operator. That is not an easy task and will require a lot of coordination between all actors.

Network sabotage, which disrupts the flow of information and renders network resources unavailable, is a different beast entirely. Attackers can prepare a kill-chain well in advance and only use it once it is necessary—the famous “kill-switch.” Both because of the complexity of today’s mobile network equipment, and because of regular and continuous manufacturer software updates, security audits and certification processes are of limited help here. They certainly reduce the risk but do not eliminate it.

Risk mitigation against network sabotage has to address the mobile operator’s processes and network planning. The European Commission’s 5G Recommendations talk about “cybersecurity through diversity of suppliers,” and Germany’s (preliminary) 5G security requirements proposed similar requirements. Diversity of network equipment and thorough network planning have a significant impact on the resilience of those mobile networks.

The UK National Cyber Security Center already sits down with operators during the network planning phase. Redundancy and shared network infrastructure is another way to improve resilience against network sabotage. National roaming would definitely improve resilience.

The UK has arguably the most experience with assessing the trustworthiness of Chinese mobile network equipment. If their ongoing Telecoms Supply Chain Review comes to the conclusion that Chinese vendors should be excluded from certain core network functions, such as lawful interception for law enforcement agencies, Europe would do well to follow suit.

These steps would do a lot to improve the trustworthiness and resilience of our networks, and we aren’t doing them yet. But banning companies does very little to fix the countless flaws present in today’s ICT systems.

It would also put us on a costly and unproductive road toward paranoia: If we ban Huawei and ZTE from the 5G rollout, do we need to ban Chinese 5G modules in autonomous cars? What about the AI coprocessors from China in your smartphone? What about solar technology from Huawei in your energy grid?

It’s about dependency, stupid

The more challenging discussion and the real driver of the current 5G debate is the fact that Europe and many other Western nations have become increasingly dependent on Chinese technology. China is no longer just the “factory of the world,” but instead an economic competitor and at the same time a “systemic rival.”

For ICT, and especially semiconductors, the country still lags behind and is highly dependent on foreign designs, IP, and chips. This is why US export control measures against Huawei are so effective in disrupting their supply chain. But for how long? The collateral damage is massive, and China has already announced its own “entity list” to halt business with foreign companies. The semiconductor industry is susceptible to these types of geoeconomic strategies, because of the (for now) global nature of the semiconductor supply chain.

But where is this leading us? Chinese companies are doubling down on self-reliance to ensure business continuity. Disrupting ICT supply chains through export control measures hurts innovation and might very well lead to decoupling. In this scenario, technology will be developed with two different sets of standards—the US and its allies on the one side and China and its allies on the other. This would pose a huge challenge to companies that need to maintain different supply chains for different markets. Most importantly, it would not result in more trustworthy or resilient ICT systems and digital infrastructure.

Europe is correct not to follow the US call to entirely ban Chinese equipment. The problem is much more complicated than that. Indeed, we are becoming more and more dependent on ICT systems from a country that we perceive as a systemic rival. That’s not good. But banning Chinese companies would do a disservice to our own industry: 5G is first and foremost an infrastructure that companies need to adopt in order to develop innovative services and applications for their own industries.

An indiscriminate ban against Chinese 5G vendors would significantly delay the 5G rollout in Europe and give Chinese industries an even greater head start in developing services, applications, and new business models to fully utilize future 5G infrastructure. This could very well mean that in a few years, our industry will have to rely on those more innovative and efficient 5G applications and services to make the most use of our infrastructure – making us even more dependent.

Thus, instead of banning, the answer should be to strengthen our own industry in key technologies and critical sectors. That also means we need to do the hard work of properly assessing risks in a highly connected society and industry.

Europe does a great job of articulating responsibilities and defining requirements. But in a highly software-defined world where “code is law,” maybe there is no way around getting our hands dirty, spending the money, and creating our own systems again?

Chinese smartphone giant Xiaomi has fired an employee who used a 3D artist’s work without permission in the company’s promotional campaign, according to a statement by the company on Wednesday.

The Verge reported on Tuesday that Xiaomi used three pieces of art from British 3D artist Peter Tarka in advertisements to promote its devices in Spain.

Tarka told The Verge that he created one of the pieces in May 2018 as part of his Installations collection. Xiaomi’s designer just erased some of the elements from the piece and replaced them with the company’s products, according to the report.

Tarka said he was “100% sure” Xiaomi had used his work and no one from Xiaomi ever reached out about licensing or commissioning his art.

Xiaomi said in the statement that it had dismissed the employee who is responsible with “immediate effect,” and it had reached out to Tarka to apologize.

The content has been removed from Xiaomi Spain’s website.

Xiaomi announced its global expansion plan in 2014 after its China sales slowed due to market saturation and competition from Chinese companies such as Oppo, Vivo, and Huawei. But intellectual property disputes are proving to be an ongoing hurdle in its global expansion plan.

In December 2014, India’s Delhi High Court issued a temporary order and blocked Xiaomi from importing, advertising, and selling smartphones that infringed on eight patents held by Ericsson.

In December 2015, the company was sued by American company Blue Spike LLC, which claimed that Xioami had infringed on its patents with devices such as its Mi 5 and Mi 5 Plus smartphones. The company had been planning to enter the US market prior to the lawsuit but delayed the move until late 2018, according to media reports.

Before it went public on the Hong Kong Exchange in June 2018, a report by research firm Counterpoint said Xiaomi’s business model could be easily replicated by bigger players such as Huawei or Samsung because of its lack of investment in its own intellectual property or research and development.

Xiaomi said in the Wednesday statement that it would further strengthen its internal approval processes to prevent the situation from happening again.

China’s largest telecommunications network operator announced Sunday it had awarded its first round of 5G network equipment contracts worth around $2 billion to four suppliers from different countries, including European company Ericsson and Nokia.

Chinese telecom equipment giant Huawei was awarded the bulk of the tender. It will provide 588 units of Mobility Management Entity (MME) and System Architecture Evolution (SAE) telecom equipment, the core network product of the next generation of wireless network, accounting for 51% of the total tender.

Swedish company Ericsson and Finnish company Nokia are the second- and third-largest 5G equipment providers for China Mobile. Ericsson will provide 384 units of MME/SAE equipment, and Nokia will offer 116 units, followed by Chinese company ZTE with 43 units.

China Mobile, also the world’s largest telecom operator by mobile subscribers, is starting to build its 5G network after acquiring on June 6 a 5G commercial use license from the Chinese Ministry of Industry and Information Technology.

Ericsson and Nokia are expected to gain less 5G market share than they held during the 4G roll out because China’s three major state-owned telecom companies—China Mobile, China Unicom, and China Telecom—may have to support Huawei following a global backlash led by the US government.

An analyst quoted by China Daily, a state-run English-language newspaper, said the significant share of Ericsson and Nokia in China Mobile’s 5G equipment tender highlights that China delivers its promises of sticking to international cooperation.

A commentary (in Chinese) published Monday by Beijing Youth Daily, the official newspaper of the Communist Youth League committee in Beijing, said the tender had proven the Chinese government and Chinese telecom operators weren’t defensive about Ericsson and Nokia just because they were foreign companies. “Instead, the Chinese market has given them opportunities to participate in the country’s 5G network rollout fairly,” the commentary said.

Huawei said in a statement that the company’s 5G equipment had reached the standard of commercial use, and the company would “spare no effort” to back Chinese telecom operators in their 5G rollouts.

Alipay has tripled its merchants in Europe amid ‘booming’ Chinese tourism market – CNBC

What happened: Alipay is making inroads in overseas markets despite being locked in a trade war with the US. The mobile payment giant has tripled the number of merchants in Europe accepting its service to “tens of thousands” in the past year, according to Roland Palmer, head of Europe at Alipay. Palmer dismissed concerns that trade war is weakening the growth of its overseas business, saying that the company is tapping into opportunities brought by Chinese tourists in Europe.

Why it’s important: Ant Financial, Alipay’s operator, has been expanding its business outside of China over the past few years. As its expansion in the US is hitting bumps amid trade tensions, the Chinese fintech giant has been focusing on markets in Europe as well as other parts of Asia. Last year, the US rejected Ant Financial’s acquisition of money transfer company MoneyGram over national security concerns. However, after its acquisition plan fell through in the US, Ant Financial successfully acquired UK-based payments company earlier this year.

Nokia says it has moved ahead of Huawei in 5G orders – Reuters

What happened: Finnish telecommunications company Nokia said it has secured 42 commercial orders for the next-generation of wireless networks, surpassing its Chinese rival Huawei. Customers are increasingly looking to Nokia to equip their 5G core networks, either to have dual sourcing for the most sensitive parts of their networks or to replace existing providers, said Nokia director Federico Guillen. Huawei has secured 40 5G contracts around the world by the end of March, according to the company while Swedish 5G competitor Ericsson has publicly announced 19 contracts, of which eight are live.

Why it’s important: Nokia and Ericsson are expected to benefit from a wounded Huawei, which faces trouble on a global scale. The United States and Australia have banned Huawei equipment from their 5G network rollouts, while New Zealand and the UK have limited Huawei’s participation in major 5G networks. That leaves the two European companies a huge market gap to fill. However, they may expect less 5G market share in China than what they had during the country’s 4G rollout. In an initial bid for 5G equipment by China’s largest carrier China Mobile, Ericsson was only allocated 5% of the tender and Nokia gained none; the bulk of the bid went to Huawei and its domestic rival ZTE.

Chinese internet giant Tencent puts $40m bet on True Layer – The Times

What happened: Chinese internet giant Tencent is leading a $40 million funding round for TrueLayer, a London-based startup that has built a developer platform which allows third parties such as fintech and retail companies to access bank APIs and consumer data. Other potential backers include Singapore’s sovereign wealth fund Temasek.

Why it’s important: Tencent’s expanding investment portfolio is said to be double the size of Chinese rival Alibaba and larger than US tech giants Google and Facebook. The company said in February that it has no plans to scale back its investments this year. Tencent’s investment spree is driven largely by its growing businesses including fintech and social media as well as its plans for global expansion. The investment from Tencent is not only a significant financial boost for True Layer, but it could potentially help with accessing other markets in Asia and Latin America, where the internet company has an increasing fintech presence.

This could be the first Chinese-brand electric car sold in Europe – Quartz

What happened: Aiways, a four-year-old Shanghai-based EV company, recently told Quartz it plans to start selling its U5 flagship SUV in Germany, France, Switzerland, Norway, and the Netherlands in early 2020. The move would make it the first Chinese EV company to offer its vehicles in Europe. According to Quartz, Aiways plans to sell the U5 directly to customers, and is exploring a partnership with German startup Vehiculum for lease options. The U5 will begin production for China’s domestic market in September.

Why it’s important: Aiways won’t be the only company looking to enter the European market in 2020, Geely’s Lynk & Co is aiming to launch its car subscription service in Europe sometime next year. And as 2018’s fastest-growing car brand with more than 120,000 vehicles sold, Geely seems to have a considerable advantage over Aiways, which only recently secured a license to start manufacturing its flagship U5. Regardless, EV sales have grown in China despite a slowdown in overall auto sales, and as the trade war rages on, the European market could be a solid alternative to the U.S.  

German food discounter Aldi to open first store in China – Deutsche Welle

What happened: German supermarket chain Aldi is set to open its first flagship store in downtown Shanghai this week and a second offline store is expected to follow. The German discounter is reportedly aiming for a more affluent customer base in China by selling sought-after products from Europe. Aldi initially plans to open at least 10 stores in China, with 50 to 100 additional outlets to follow in the coming years, according to business publication Manager Magazin.

Why it’s important: Following the footsteps of supermarket chains like American Costco and Sam’s Club, Australia’s Woolworths, and South Korea’s E-mart, Aldi launched its flagship store on Alibaba’s Tmall marketplace in 2017 looking to attract shoppers from China’s affluent middle class. After building brand awareness through online operations in the country, establishing a brick-and-mortar presence is a logical next step as the retail brand expands beyond its core market in Europe. However, an offline store will put it in direct competition with its former partners in the country, like e-commerce giants of Alibaba and NetEase Kaola, which are also looking to expand offline.

Huawei: ARM memo tells staff to stop working with China’s tech giant – BBC

What happened: UK-based chip design firm ARM has severed ties with Huawei. According to an internal memo, the decision is in response to last week’s sanctions on China by the US, as ARM utilizes American technology in its chip designs. An analyst described impact of the move, if long-term, as an “insurmountable” blow to the telecom giant’s business.

Why it’s important: Losing access to ARM’s designs may not be immediately destructive for Huawei, but if the two companies do not renew ties, Huawei will be unable to update its devices with new chips and may have to begin building its own from scratch, a process that could take years. Additionally, the Android operating system is designed for ARM-based processors, so in combination with Google’s revocation of Huawei’s Android license, the company will have an even more difficult time providing a user interface for its devices.

China’s tech transfer problem is growing, EU business group says – Reuters

What happened: European businesses in China have reportedly been facing greater pressure to transfer technology to local companies. The European Union Chamber of Commerce in China said on Monday that 20% of the 585 participants reported forced technology transfer to maintain market access in an annual survey, an increase from 10% seen two years ago. In certain “cutting edge” industries the incidence of reported transfers was as high as 30% in chemicals and petroleum, for example, and 28% in medical devices, said European Chamber Vice President Charlotte Roule.

Why it’s important: The report echoes the US investigation into China’s alleged forced technology transfer under Section 301 of the Trade Act of 1974 which started two years ago. The Communist Party’s mouthpiece People’s Daily said in a commentary published Saturday that the Washington’s accusations on the issue were “purely fabricated” without any evidence. China has long been accused of adopting unfair legal practices requiring foreign enterprises to hand over technology to gain access to the world’s second-largest economy. China’s central government tried to reassure foreign investors by passing the Foreign Investment law in mid-March during the country’s Two Session meetings. The new law, which will take effect on Jan. 1, 2020, prohibits use of administrative measures to force technology transfer.

WeChat Pay’s European Flagship Smart Airport to open at Amsterdam Airport Schiphol accelerating spread of WeChat ecosystem overseas – CISION

What happened: Chinese internet giant Tencent and Amsterdam Airport Schiphol have jointly launched the first flagship WeChat Pay Smart Airport in Europe. Chinese tourists will soon be able to use WeChat to pay for goods in shops at Schiphol Airport, as well as to place orders and make purchases via the airport’s mini program. Coupons for preferred currency exchange rate and discounts will also be offered to WeChat Pay users at the airport.

Why it’s important: The move comes as Tencent’s messaging app expands its mobile wallet and cross-border payment business in Europe. Tencent stated in its 2019 first-quarter results that fintech and cloud computing helped offset weak revenue from its gaming business. WeChat’s payment wallet has been a key growth driver for Tencent’s fintech business. Chinese payment giants have been eager to cultivate an overseas presence as their home market becomes increasingly saturated. Ant Financial’s Alipay, WeChat Pay’s main rival, also made further inroads into Europe earlier this year as its expansion efforts face more challenges in the US amid escalating political tensions.

Huawei says 5G network security is a technical issue and not a country one, responding to Prague proposals – South China Morning Post

What happened: Security officials and experts from more than 30 western countries gathered in Prague last week and issued on Friday a set of proposals for 5G network deployment guidelines. The non-binding Prague Proposals warned governments about equipment supplied by vendors that might be vulnerable to state influence. The proposals did not contain the names of any specific 5G equipment suppliers. Huawei responded to the proposals by saying that cybersecurity was a technical rather than an ideological issue.

Why it’s important: Neither Chinese delegates nor Huawei representatives were invited to the meeting in Prague, although participants stated that no country or company was being singled out. Besides the US, participants included member countries from the European Union and NATO, and US allies such as Japan and South Korea. Europe has become a key battleground in the dispute over the US-led Huawei ban as countries prepare to auction 5G licenses this year. By end-March, Huawei had secured 40 5G contracts around the world, and over half of them come from Europe, according to the company.

Vodafone Found Hidden Backdoors in Huawei Equipment – Bloomberg

What happened: Vodafone Group Plc, Europe’s biggest phone company, said it found hidden backdoors going back years in the software of internet routers supplied by Huawei for the carrier’s Italian business. Vodafone asked Huawei to remove those backdoors in 2011, and the supplier later replied that the issues were fixed. However, further testing showed that the security vulnerabilities remained. Vodafone also said backdoors were identified in other network parts supplied by Huawei. The carrier said the problems have now been resolved. There was no evidence of any data being compromised, said Vodafone.

Why it’s important: Vodafone’s reports of backdoors found in Huawei equipment support allegations made by the US that Huawei’s equipment is vulnerable to exploitation, particularly by the Chinese government. But Vodafone also said that it was not uncommon for vulnerabilities in equipment from suppliers to be identified by operators and other third parties in the telecom industry. The London-based carrier stated in March that a complete ban on using Huawei equipment would be seriously damaging to the UK’s 5G future.

May to ban Huawei from providing ‘core’ parts of UK 5G network – The Guardian

What happened: Britain will allow Chinese telecommunications giant Huawei limited access to the country’s next generation of mobile networks, known as 5G. Prime Minister Theresa May ordered the ban after a meeting with ministers on the National Security Council (NSC). Huawei will be allowed to supply some “noncore” parts of the 5G mobile infrastructure like antennas. However, some May’s cabinet ministers, including the foreign secretary, the home secretary, and the defense secretary, raised concerns, arguing instead for a total ban on the supplier.

Why it’s important: While Huawei can say that it has avoided a complete ban from supplying 5G equipment to the UK, providing only “noncore” equipment is not exactly an endorsement of its repeated claims that it is free of interference from the Chinese government. Also, Huawei is already a “noncore” supplier for Britain’s existing mobile network. The partial acceptance implies that the British government still buys US allegations that Huawei’s equipment could be used by Beijing for spying or sabotage.

A report studying global artificial intelligence (AI) trends points to progress for AI research in China in the last year, as well as persistent roadblocks.

The study, published by academic journal and research firm Elsevier, analyzed over 600,000 scholarly publications from 1998 to 2017 and found that Chinese publications are increasing in volume and show enhanced performance in some markers of quality.

Between 1998 and 2002, Chinese researchers wrote only 9% of academic publications, compared to 24% in the 2013 to 2017 time period. Europe lost 5 percentage points and the US 8 percentage points in the same time period but combined, accounted for more than half of the AI research worldwide.

Chinese research has mostly grown in the area of computer vision. In 2011, this topic overtook neural networks as the most popular among Chinese academics. That year, Chinese researchers wrote 3,000 papers on computer vision. Six year later, they wrote approximately 6,500, more than double than on the second most-popular topic, neural networks.

Europe follows a similar trend on computer vision research, but the consistent growth of this field is matched by that of planning and decision-making. In absolute numbers, the latter category maintains a lead in European research over computer vision, with approximately 750 more papers being published in 2017.

Another source of growth for Chinese research are conference papers. China’s AI-related academic publications increased by 13.8% between 2008 and 2018, compared with a 7.7% increase in Europe and 5.3% in the US.

The US may be lacking in volume of papers, but it is winning in research impact. Elsevier used the field-weighted citation impact (FWCI) to measure how often a paper is cited in other publications, adjusted for the average of the field.

Papers published from American institutions are cited 1.5 times more than the mean of the related field, a figure that has held and even increased since 1998. By contrast, European institutions started at the mean in 1998, and have progressed to about 1.25 in 2017.

China’s growth in this respect is “tremendous,” the study finds. China’s FWCI in AI research has galloped from half the world average in 1998 to reaching the mean in 2017.

This trend held true in the years from 2013 to 2017, when the top Chinese universities in terms of impact are, in order, the Chinese Academy of Sciences, Tsinghua University, Harbin Institute of Technology, Shanghai Jiao Tong University, and Zhejiang University.

Professor Chuan Tang of the Chinese Academy of Sciences (CAS) was interviewed for the paper. He finds three main obstacles in China’s contribution to global AI research. First, it is lacking the chip technology to support AI technology.

Second, “China lacks long-term efforts in AI basic research,” and scholars tend to follow Western trends, he told Elsevier. Third, it lacks experts of high quality, as only 38.7% of researchers working in China with more than 10 years of experience, he said.

Globally and in all academic disciplines, papers have higher impact, as measured by the FWCI, when they are published in partnership with industry professionals. Only 3.4% of AI-related papers worldwide involve academic-corporate collaboration, but they achieve, on average, a 2.53 FWCI score.

The US is leading in cross-sector collaboration; it is responsible for 8.9% of papers involving industrial partners worldwide. This share of American papers has an astounding academic impact, with an FCWI score of 3.41.

Europe and China have yet to work with corporate partners in AI research to this extent, with shares of 3.6% and 2.3% of global academic-corporate papers published, respectively, involving academic-corporate collaboration.

Chinese studies that involved corporate partners achieved an FWCI score of 2.64, slightly ahead of their European counterparts at 2.46.

China is also lagging behind in international collaboration. It holds the highest percentage of researchers who never leave the region, while the US has the largest number of researchers who migrate out of or into the country. Researchers who tend to stay within their region have the lowest impact and productivity on the field, compared with their migratory counterparts.

Slightly more researchers migrated to China for around two years between 1998 and 2017 to work on AI academia. China gained 0.1% more researchers in this period, close to the US’s net inflow of 0.3%.

However, researchers who stayed in the US in these two decades have the highest impact on the field, which “might indicate a reason for international inflow into the country,” the paper concludes.

Finally, the paper includes a case study of graduates from the Chinese Institute of Automation and the Chinese Academy of Sciences. The research indicates that graduates from AI-related fields are far more likely to end their education with a dispatch, meaning they are employed in jobs that the university or research institute helped them find.

Dutch chip maker denies China played role in IP theft – Engadget

What happened: Dutch chip maker ASML is rejecting reports by newspaper Financieele Dagblad that employees passed privileged information to a Chinese firm with apparent links to the Ministry of Science and Technology. While ASML did indeed suffer the loss of intellectual property with significant commercial value, the company has denied that the theft was connected to the Chinese government. Meanwhile, ASML CEO Peter Wennik seemed confident that his company’s business with China would continue as usual, commenting, “We resent any suggestion that this event should have any implication for ASML conducting business in China.”

Why it’s important: ASML manufactures photolithography machines for the semiconductor industry, which utilizes them in the production of computer chips. Its business in China accounts for about one sixth of its total sales, and doubled to approximately $2 billion in 2018.  It was also one of the companies that hailed a recent investment agreement between China and Europe that insures European companies will not be required to hand over their technologies in exchange for access to Chinese markets. But that hasn’t stopped the news of ASML’s IP loss from reigniting calls for the Dutch government to bar Huawei from being part of the Netherland’s 5G network, despite the tech giant having no connection to the theft.

Bike-sharing start-up Mobike close to management buyout in Europe – The Telegraph

What happened: Citing an email sent from Mobike to investors, The Telegraph reported that the company’s European arm is in the final stages of a management buyout from Meituan-Dianping, the bike-rental startup’s Chinese owner. Regional General Manager of Mobike Europe Paul Zhu and other senior executives are leading the initiative, sources said. While it has not yet been confirmed, the sale is expected to be worth $100 million. Mobike Europe is also reportedly planning on branching out into e-bike and scooter rentals in the region. Meituan is expected to keep a stake in the company after the sale.

Why it’s important: Talk of a sale for Mobike Europe has been circulating since December, as the company faced an investigation for a possible violation of European data protection regulations. In addition, since its acquisition by lifestyle services hub Meituan-Dianping in May, Mobike has reduced its international presence in accordance with its parent company’s core market. In March it announced it would withdraw from some of its Asia-Pacific markets, including India, Thailand, Malaysia, Singapore, and Australia. The company faces the same loss-making conundrum as fellow bike-rental companies, which analysts at Tonghai Securities predict will last through 2021.

Biotech Shanghai Miracogen taps Synaffix’s antibody-drug conjugate tech in a deal worth up to $125M – Engadget

What happened: In a deal worth up to $125 million plus royalties, Shanghai Miracogen has partnered with Netherlands-based Synaffix to advance development of its cancer treatment regime, known as an antibody-drug conjugate (ADC). The two companies had previously joined up for the treatment’s research phase, and now Synaffix will be licensing two platforms to help advance the ADC toward clinical trials. According to Synaffix CEO Peter van de Sande, “There is a clear trend in China towards developing innovative products and as such, ADCs have emerged as a strong area of growth within the field of oncology.”

Why it’s important: ADCs are an emerging class of cancer treatment that combine an antibody with a potent anti-cancer drug, and unlike traditional treatments like chemotherapy, are meant to destroy cancer cells without harming healthy ones. This particular class of treatments has been slow to reach the market, though, partly due to certain safety and efficiency issues that have hindered effectiveness. But with cancer rates in China increasing rapidly, the treatment market is projected to reach $30 billion by 2024, and biotech companies like Shanghai Miracogen are looking to take a slice.

Correction: This article was updated Apr. 12 to clarify that the potential value of the deal is $125 million plus royalties, not up to $150 million as previously written.

Cameras linked to Chinese government stir alarm in UK parliament – The Intercept

What happened: Security firm Hikvision has provided its cameras to parliament, as well as police, hospitals, and schools around the United Kingdom, raising concerns from politicians. The company is selling its equipment through a network of corporate partners, according to The Intercept. Hikvision says its cameras can be used with facial recognition software and linked to a database of identity data, allowing them to distinguish between known and unknown individuals.

Why it’s important: Hikvision has been accused of profiting from China’s mass surveillance system, which UK politicians say makes procurement problematic. The cameras also pose national security risks when placed in parliament, they said. Like Hikvision, Huawei has been subject to scrutiny as nations around the world consider whether to let the Chinese telecommunications provider take part in 5G deployment. Hikvision is 40% state-owned, and a member of the UK parliament’s second chamber, the House of Lords, likened using the company’s equipment to having a spy in their offices. Nonetheless, the UK is an attractive market for companies like Hikvision. Similar to China, the country is highly surveilled, with one camera for every 11 people.

A version of this story was originally posted by the author to her account on LinkedIn.

Ten years ago, I left China for an academic scholarship in the US sponsored by the Chinese Ministry of Education and Commerce, beginning a journey during which I’ve worked in and adapted to America, Germany and and the UK. Getting used to new cultures in the US and Europe has been a challenge. But as European companies turn to China, they’re struggling to adapt to local culture in ways I recognize.

Starting as a green hand with Western culture, way out of my comfort zone, I’ve learnt step by step to navigate cross-cultural challenges, to stand on my own feet and to become a full-fledged professional in Europe.

My parents still live in China but have made every effort for their daughter to live in a world where everyone has an opportunity. Being here today is the result of their unconditional love and unspeakable sacrifices. My road so far has crossed many chasms, I always jumped without looking back, with avid curiosity, mental discipline and a strong will to win.

What I learned about myself

Looking back over my past years of living and working outside China, I came to realize my view of my home country has changed completely over time.

Born and raised in mainland China within a family closely associated with the former Nationalist regime from its Whampoa Military Academy, the elite incubator for commanders during the civil war. During my first few years living overseas, I was not exactly comfortable with my nationality.

In an era of adverse media coverage and limited public understanding of Chinese affairs, I felt I was a complete outsider among my Western peers: the weird one with a non-cool accent, the one with a strange and hard-to-pronounce Chinese name. I was consumed by figuring out how to fit in and to behave like a native—let alone daring to think about how to stand out.

Following my heart, I became busy immersing myself in the local culture. Along this journey I have received tremendous support from like-minded friends and mentors. I am proud, as a native Chinese, to be able to speak fluent French, German and English.

While honing my intercultural skills, I have been asked many times about China-related issues. How do ordinary people think of the government’s censorship? What’s your view of democracy? As an only child, are you a victim of the one-child policy? It is always a pleasure to bring out my point of view, and to try to understand and explain situations that seem confusing across cultures.

Being multilingual gives me the unique privilege to educate myself across different media and cultural outlets in Europe and China. This encourages me to stay open-minded, empowers me to see things from different angles, and enables me to understand conflicts and complexities within the European Union.

Ultimately, I discovered that I could offer a fresher, multicultural and cosmopolitan point of view on Europe and its conceptions on China, not to reset the narrative or control the storyline, but to better promote mutual understanding and intercultural dialogue.

I chose to stay in Europe and together with two Chinese founders from Amsterdam launched HoiTalent Germany, a job portal for international talent and platform for tailor-made international career coaching.

What China and Europe still need to learn about each other

Every day, I speak with investors and entrepreneurs across the EU and China. I often ask them about their competitors overseas. I notice that European founders usually have comprehensive knowledge about their US competitors: top VCs, the latest numbers on their deal flows and fundraising activities.

Europe watches Silicon Valley and Israel closely, sending numerous industrial leaders, experts and students to the West Coast every year. However, without a defined “Valley,” people I meet have a hard time assessing the full Chinese ecosystem beyond Alibaba and Tencent, or celebrate another digital tycoon beyond Jack Ma and Pony Ma—even though China has transformed from a manufacturing-reliant economy to one lead by tech and innovation and become home to around a hundred unicorns as many as the US.

On the other hand, as a Chinese woman living in Europe’s most dynamic innovation hubs, Berlin, London and Paris, every time I go back to China, I am humbled by people’s extensive knowledge of entrepreneurs, companies and investors across the Pacific in Silicon Valley.

But I also hope they could better appraise the European start-up landscape, its numerous promising ventures and its courageous battle back to relevance. Europe is seen as the globe’s consumer-tech underachiever due to its fragmented market associated with languages barriers and local legal regulations, but the continent has never lacked entrepreneurship and innovation.

Its ecosystem has great talent, ambition and the global vision to produce tech companies comparable to their US and Chinese counterparts. What has been missing is capital and the scalable market required to catalyze innovative start-ups into global success stories.

There is a knowledge and information gap between the European and Chinese tech worlds: European startups remain poorly covered in Chinese media outlets, and Chinese innovation and openness remain underestimated by their European counterparts.

I stay in touch with China because I am in a unique position in Europe to introduce an innovative and tech-driven China to a curious European audience—and at the same time, I am on a mission to unveil the flourishing European startup scene to an open-minded China.

European mobile network operator Orange announced on Wednesday that it had made Europe’s first voice and data call over a full 5G mobile network in cooperation with Chinese telecoms equipment maker ZTE.

Previous 5G calls in the region were made using Non-Standalone (NSA) architecture, which uses existing 4G network infrastructure to support 5G networks. The test, which took place in Valencia, Spain, used full Standalone (SA) mode, meaning the 5G network is built independently without architecture from current systems and therefore allows for 5G enhancements, according to the company statement. It was the first 5G SA call in Europe.

Spanish press reported the company’s plans to work with ZTE, Huawei and Nokia in its 5G trials across the country in early January. The operator stated that it would trial 5G technology in Valencia in partnership with ZTE, in Seville with Huawei, and in Vigo with Nokia.

“The test lays the foundation of 5G network’s commercial use, it also marks that Orange’s cooperation with ZTE has entered a more substantial phase, compared with its cooperations with Huawei and Nokia,” Xiang Ligang, director of the Information Consumption Alliance of China, told TechNode.

“But the test is still far from the commercial use of 5G,” Xiang said, adding that the process could last as long as a year.

Orange network director Mónica Sala said in the statement that it was a key to learn about this new and disruptive technology while taking advantage of continuous 4G growth to offer to customers “the best 5G network at the right time.” She added, “ZTE’s know-how has been shown in this milestone and we are very proud of the results.”

Orange is a French multinational telecoms operator. It is the fourth-largest mobile network operator in Europe after Vodafone, Telefónica and VEON.

ZTE chairman Li Zixue said last month in a shareholder meeting that the company owned more 3,000 5G patents, and had cooperated with 30 telecoms operators regarding 5G networks.

美的收购的机器人巨头库卡，去年利润暴跌八成将开始裁员 – Jiemian

What happened: Two years after being acquired by Chinese consumer electronics giant Midea, German robot manufacturer Kuka reported poor results for 2018. Its sales revenues decreased 6.8% to €3.2 billion (around $3.6 billion) compared to the prior year, while after-tax profits plummeted 81.2% year-on-year to €16.6 million. The company is has a cost reduction plan in the works with the goal of saving €300 million by 2021, including laying off 350 full-time employees in Augsburg, Germany within the year.

Why it’s important: A major industrial robots manufacturer and global automation solutions provider, Augsburg-based Kuka was 95% acquired by Midea in 2017. At the time, the home appliances maker sought to sell Kuka robotics in the Chinese market, while implementing them in its own production bases amid the state-led industrial policy “Made in China 2025.” However, uptake for Kuka equipment in Chinese factories including Midea’s was disappointing because of cost and slow delivery times. Kuka’s troubles also highlight China’s slowing economy over the past year despite the market’s long-term attractiveness, German media cited Kuka employees as saying.

Huawei Equipment Has Major Security Flaws, U.K. Says – The Wall Street Journal

What happened: A report released by a UK watchdog said that Huawei poses a major risk to the country’s telecom networks because it failed to address security flaws in its products and demonstrate a commitment to fixing them. The report is an annual update from the Huawei Cyber Security Evaluation Center (HCSEC), a laboratory that the company set up in 2010 to examine its products used in British networks. The report said “further significant technical issues have been identified in Huawei’s engineering processes,” which could lead to new risks in the UK’s telecom networks.

Why it’s important: British officials attributed the defects to Huawei’s “poor software engineering,” and stated that they were not a result of Chinese state interference. While it stopped short of recommending a ban on Huawei from supplying equipment for UK 5G networks, the report rebuked Huawei for its failure to address previously identified security concerns. This is blow to the telecom giant, which had seen some respite from US pressure following its worldwide media campaign to repair its image. Huawei struck back at the US with a lawsuit filed in early March seeking to overturn a ban against its equipment.

What happened: In his testimony to Congress on Wednesday, the US Secretary of State said that he is “hopeful” EU countries would follow US advice and shun Huawei from their 5G networks. He added that progress has been made convincing them and that the US will not partner with or share intelligence with countries which use Huawei equipment.

Why it’s important: The statements come two days after a deal-packed meeting in Paris between China, France, Germany, and the EU Commission which paved the way for strengthened EU-China relations. The US has been trying to exclude Huawei from building next-generation internet infrastructure around the world. Europe is a key battleground due to its market size and 5G readiness. Germany launched its 5G spectrum auction on Mar. 19, refusing Washington’s request to ban Huawei. The Chinese telecoms giant is fighting back with a global public relations campaign and a lawsuit filed Mar. 7 against the US government for banning its agencies from using Huawei equipment.

ZTE steps up 5G investments as it seeks comeback after near-death experience – South China Morning Post

What happened: Shenzhen-based telecommunications equipment maker ZTE is expected to build three cybersecurity evaluation centers in China, Belgium, and Italy this year, similar to the one that Huawei operates under the supervision of the UK government. ZTE aims to reassure government agencies and telecoms network operators about the integrity and security of its 5G equipment. The company already secured six commercial 5G contracts in addition to its vast supply deals with China Mobile, China Unicom, and China Telecom, the three major telecoms network operators in China. The company will soon release a white paper about its 5G cybersecurity efforts.

Why it’s important: ZTE has kept a low profile since last March when the company was brought to the brink of collapse after Washington DC banned American companies from selling components to the Chinese company for violating US sanctions against Iran. As the fourth largest telecoms equipment supplier worldwide, ZTE is unlikely to abstain from the 5G race. On top of the six commercial 5G contracts mentioned above, the company has also been cooperating with about 30 telecoms network operators around the world on 5G research and development as of the end of February.

Pentagon eyeing 5G solutions with Huawei rivals Ericsson and Nokia: official – Reuters

What happened: The US Department of Defense is talking to Huawei rivals Ericsson and Nokia about its 5G development plans, according to Ellen Lord, the Pentagon’s chief weapons buyer. The US is also laying the groundwork to develop its own technology to support 5G-enabled communications, Lord said. She added that the military-to-military discussions about future 5G networks were going well for the United States, with many European allies “leaning forward” to engage in a dialog on its development.

Why it’s important: Following its August ban of Huawei equipment purchases citing security risks, the US government has also warned European Union members about using Huawei technology, which it said could undermine transatlantic military and intelligence co-operation. The European Commission will ignore US calls to ban Huawei equipment and leave it to individual countries to decide on national security grounds while recommending that members share more data to tackle cybersecurity risks related to 5G networks, according to Reuters.

Naspers Brings SoftBank-Style Mega-Tech to Europe – Bloomberg Opinion

What happened: On Monday, South African media organization Naspers announced it will list its roughly $133 billion stake in Tencent in Europe. The group will combine its shares in various tech businesses—which also include Indian startup Swiggy and Russian internet giant Mail.ru—to establish a new company in Amsterdam. Existing shareholders will reportedly have access to around 25% of the new Dutch company, with the rest held by Naspers. The new entry could be valued at more than $100 billion, becoming the largest listed internet company in Europe.

Why it’s important: Naspers has outgrown Johannesburg’s stock market, thanks to its sizable stake in Tencent, acquired in 2001. Its Tencent investment is also the largest source of growth by far for the company, while stakes in other companies have yet to turn a profit. In addition, like its peer SoftBank, Naspers’ share in a Chinese internet giant has outpaced its own valuation. That could set limits on its potential to spur startup growth. While the new company could continue to sell off part of its Tencent stake, as it did last March, to reinvest in promising new businesses, it may be difficult to improve on its best and biggest bet so far.

This article by Sophy Yang originally appeared on China Money Network, the best data intelligence platform tracking China’s tech and venture capital markets (access requires subscription).

Chinese fintech conglomerate CreditEase announced on Wednesday that its investment unit, CreditEase FinTech Investment Fund (CEFIF), participated in a $125 million Series B financing round of Berlin-based insurance technology firm Wefox Group.

The investment also saw the participation of European Ventures Fund, a newly-launched investment vehicle of Abu Dhabi’s sovereign wealth fund Mubadala.

Founded in 2014, Wefox serves as a digital platform that helps customers, brokers, and insurance companies manage their insurance and financial products and services more efficiently. The company said in the statement that it has grown the revenue to about $40 million, while serving more than 1,500 brokers and over 400,000 customers.

“Wefox Group is a proven insurtech innovator with visionary management leadership and strong technology and AI (artificial intelligence) capabilities to provide consumers with more seamless and personalized insurance policy experience,” said Dennis Cong, managing director of CEFIF.

Proceeds of this round will be used for the company’s expansion into the European broker market and creating an all-in-one insurance platform, in which all interactions are personalized.

CEFIF was launched in February 2016 by CreditEase as a venture fund investing in fintech companies globally. With an equivalent of $1 billion in the total committed capital, CEFIF has poured money into more than 40 companies in areas ranging from wealth management, alternative lending, insurtech, payments, and enterprise services. Its portfolio companies include Chinese online securities brokerage firm Tiger Brokers, used-car trading platform operator Dasouche, and cloud-based business network Tradeshift.

The fund joined a $100 million funding round in New Jersey state-chartered commercial banking firm Cross River Bank in December 2018, after it led a $62 million Series C round in San Francisco-based online lending startup Upgrade in August 2018.

UK payments processing company Barclaycard announced a new partnership with Alipay on Thursday that will allow retailers to accept the Chinese payment app in stores across the country. The move will allow more merchants in the UK to tap into the growing number of Chinese tourists and their spending power.

Under the agreement, Barclaycard merchants will start accepting in-store Alipay payments without replacing their existing point-of-sale (POS) system. Alipay users will be able to search for retail outlets near their location to find out information such as opening hours, directions, and discount offerings.

Barclaycard first launched a pilot with Alipay transactions in 2017, testing the POS payment solution in eight retail stores across the country. The payment services provider processes nearly half of credit and debit card transactions in the UK and has over 110,000 merchants in its network. Earlier this month, it inked a similar deal with UnionPay International, a unit of China UnionPay, which has a virtual monopoly on in-country card payment processing.

“Our new agreement with Alipay gives retailers a vital tool to help them seize the revenue opportunity posed by the growth of Chinese visitors to the UK,” Rob Cameron, CEO and global head of payment acceptance at Barclaycard, said in an announcement.

The UK is forecasting around 483,000 visits from Chinese tourists in 2019, a 43% increase compared with 2017, according to VisitBritain, the national tourist agency. Chinese tourists are expected to spend more than £1 billion this year, making China one of the biggest inbound tourism markets for the UK. The Chinese tourist boom is also reflected in the number of Alipay users in the UK, which, according to Alipay, doubled in 2018.

Additionally, official figures show that there are around 488,000 Chinese residents and students in the UK, which means China is becoming an increasingly important customer segment for retailers in the UK.

Chinese payment giants Alipay and WeChat Pay have been planning their international expansion in recent years, hoping to capture a share of the tourism market’s lucrative growth.

Data: China has the most blockchain patents, despite banning cryptocurrency – The Next Web

What happened: The Next Web analyzed data made available by the UN’s World Intellectual Property Organization (WIPO) and found that, to date, the majority of patents related to blockchain technologies were approved in China, followed closely by the US. However, Chinese entities were not among the top four institutions holding patents; Alibaba ranked fifth. Americans dominate the top 15 companies whose applications were granted. The total number of approved patents skyrocketed in 2017, when 917 blockchain-related patents were granted. In 2018, during the bitcoin crash, the number of patents continued to increase. It is unclear how many of the patents are related to virtual currency or other blockchain applications.

Why it’s important: Blockchain is increasingly relevant, especially for banks. Global spending on blockchain technologies is expected to reach $12.4 billion by 2022, most of which will be used for finance, particularly cross-border ($453 million) and trade ($285 million) payments, according to US market intelligence firm International Data Corporation. As with patents, the US will spend the most ($1.1 billion), followed by Western Europe ($674 million) and China ($319 million). Patents are important for protecting intellectual property in this burgeoning sector, especially for ambitious companies participating in a global economy. China banned cryptocurrency exhanges and initial coin offerings (ICOs) in 2017. However, following a 2014 Supreme Court decision, it is US law that poses the strictest scrutiny to patent requests which apply an abstract idea via computing, such as the distributed ledger.

What happened: Huawei opened a new lab in Brussels on Tuesday where government, industry, and standards institutions will collaborate on cybersecurity research. Internet and wireless client companies will be able to test the Chinese tech giant’s network equipment on the lab grounds. To facilitate this bid at transparency, Huawei will make available its source code, Huawei global cybersecurity and privacy officer John Suffolk told AP News. The lab has been interpreted as an attempt to convince European governments that the company’s 5G equipment is safe to use due to its proximity to the EU Commission, which has criticized Huawei in the past. The Commission was cautious in its response, emphasizing “reciprocity in terms of market openness” and that the EU is “rules-based.”

Why it’s important: The US has been trying to undermine Huawei’s bid to build 5G infrastructure around the world, claiming that the firm’s ties to the Chinese government pose a security threat to the nations that take up its offer. Huawei continues to eye other markets despite the Trump administration’s staunch campaign and a ban on US federal agencies using Huawei products, for which the Chinese company is allegedly planning to sue the White House. The EU is a key battleground; it is Huawei’s biggest market outside China, and has prioritized 5G development as part of its Digital Single Market initiative.

Ciaran Martin’s CyberSec speech in Brussels– UK Cyber Security Centre

What happened: Ciaran Martin, Director General of Cyber security for Britain’s Government Communications Headquarters, defended Huawei’s bid to develop 5G networks. In a speech in Brussels on Wednesday, he confirmed an anonymous report published in the Financial Times earlier this week, saying that UK authorities have been mitigating potential threats to networks from Huawei for 15 years and that their regime is “arguably the toughest” in the world. He added that this is a question of setting a national standard, and not indicative of hostile activity from China.

Why it’s important: The US is trying to push Huawei out of the race for 5G, claiming that its links to Beijing pose national security risks. Some governments are convinced, others remain doubtful. New Zealand is carrying out an independent assessment, whereas German authorities released a preliminary ruling in favor of Huawei on Tuesday. The UK and New Zealand rulings could sway other countries because they are privy to sensitive US intelligence as members of the Five Eyes intelligence alliance. The Chinese tech giant is a key element in the US-China trade talks, and it is unclear how its 5G stake will affect the negotiations. Earlier this week Huawei’s founder, Ren Zhengfei, said the firm would not carry out espionage, even if it meant defying Chinese law.

UK says Huawei is manageable risk to 5G – Financial Times

What happened: The Financial Times reported that UK National Cyber Security Agency has concluded that security risks posed by Huawei in 5G networks can be mitigated. Quoting two anonymous sources close to the investigation, the report runs contrary to US claims that Huawei should be barred from future 5G networks because its close ties to Beijing jeopardize national security.

Why it’s important: As a member of the Five Eyes Intelligence Network, an intelligence-sharing alliance that also includes the US, Canada, New Zealand, and Australia, the UK has unique access to sensitive US intelligence. Earlier on Monday, New Zealand announced it will conduct an independent assessment. If the UK endorses Huawei publicly, it could sway governments across the European continent in favor of the Chinese telecoms giant. Most recently, the US approached Canada and Eastern European states, arguing that 5G is a greater liability to national security since it will embed a range of objects to the internet, notably cars. China claims that the US is trying to hinder Huawei’s development, which last year overtook Apple in terms of smartphone sales. Despite Washington’s efforts, Huawei has secured 25 commercial contracts to supply 5G technology. It is running tests with a further 50 companies worldwide.

Huawei founder Ren Zhengfei denies firm poses spying risk–BBC

What happened: In his first interview with foreign media in over three years, Huawei founder and CEO Ren Zhengfei said that his company has never been asked to spy for his country. There is no Chinese law that requires enterprises to “install mandatory backdoors” to gather intelligence, he said. In any case, the ex-army engineer said, Huawei wouldn’t comply with such requests. His statements in part address the recent arrest of a Huawei executive in Poland on spying charges; the employee has since been fired. Ren also spoke on the arrest and detainment of his daughter and CFO Meng Wanzhou. Meng, who Ren says he “misses very much,” awaits extradition to the US on allegations that she took part in Huawei’s violation of Iran sanctions.

Why it’s important: The telecommunications company’s expansive plans to support 5G networks have been curtailed somewhat by multiple bans. Australia and New Zealand have forbidden Huawei equipment from being used for 5G, while the US has leveled a governmentwide restriction on all Huawei devices. Ren remained calm in the face of these setbacks, praising Trump–who is considering a broader ban–as a “great president,” and saying the company will shift towards “countries that welcome Huawei.”  In firmly upholding Huawei’s innocence, he also maintains the company’s stance of distancing itself from the ex-employee arrested in Poland.

Chinese Mining Giant Bitmain Is Closing Another Overseas Office – Coindesk

What happened: Chinese bitcoin mining company Bitmain confirmed that it’s shutting down its Amsterdam office, just a month after it announced it would shutter its Israel branch. After American media reported that mining operations had halted at a new site in Rockdale, Texas last week, Bitmain also said that a portion of employees there had been laid off. The company is undergoing personnel cuts across the board, including in its China offices. Co-CEOs Wu Jihan and Micree Zhan may also step down from their roles, according to a SCMP source.

Why it’s important: Bitmain grew rapidly last year, and cutbacks may be partly the result of a too-hasty expansion: The Rockdale site alone originally planned to employ 400 people. Its scale down is also tied to cryptocurrency’s falling fortunes in 2018, which the company cited as the reason for the Israel office shutdown. Last September, following the lead of fellow Chinese mining competitors, Bitmain filed for a Hong Kong IPO. No further progress has been announced since then, however. Either way, the mining company faces an inauspicious start to 2019 amid a chilly crypto climate.

Poland could limit use of Huawei products after worker arrested – Reuters

What happened: After a Huawei employee and a former Polish security official were arrested on spying charges in Poland last week, Huawei may face new restrictions in the European country. A senior government official said on Sunday that Poland might consider banning public bodies from using the company’s products. It could also put further limits on enterprises considered to be security threats. On Saturday, Huawei said it had fired the arrested employee, and that his “alleged actions have no relation to the company.”

Why it’s important: Although the specific allegations against the former Huawei employee have yet to emerge, the case certainly doesn’t help the company’s current international public relations crisis. Based on claims that Huawei used a front company to violate Iran sanctions, the US had CFO Meng Wanzhou arrested in Canada and is contemplating banning companies from using Huawei products. The telecommunication company’s goal of deploying 5G networks worldwide has also taken a blow after Australia, New Zealand, and other countries have forbidden the use of its network gear due to security concerns. If the trend continues, the Chinese company may be forced to curtail much of its plans to expand overseas and focus on friendlier markets instead.

Chinese bike rental companies Mobike and ofo expanded to more than 30 countries last year. While attending the SeedStars Summit 2018 in Lausane, Switzerland, we asked people from 5 different countries what they think about Chinese bike rental startups’ expansion into their home countries.

Recent data from Cheetah shows that China’s active users of bike rental service increased six fold in 2017. In China, ofo ranked number 1, Mobike came second, dominating 90% of the Chinese market, and Hello Bike is in third place. Didi also just launched their rental bikes in Chengdu and Shenzhen.

Cheetah Mobile is optimistic about bike rental companies’ global expansion, predicting that the number of bike rental users in the world will increase to 306 million in 2019 and there will be 5 to 10 times more room for expansion in the overseas market in the next 2 years.

In Europe, many cities tried to roll out docked bike sharing, as “dockless bike-share companies” launched in Europe in 2017.

Last August, ofo said it planned to operate 6,000 shared bikes in Bangkok by the end of September. However, when we interviewed one investor from Thailand whether he had tried ofo in Bangkok, he said he has never seen ofo bikes in Bangkok.

“Bangkok doesn’t have bike lanes, so it’s not so safe for bicycles to pass. We mostly commute to work with cars, or maybe train,” he said.

Netherlands

Mobike officially announced its launch in Rotterdam, the country’s second-largest city, last November, after a successful trial period in the Netherlands. They couldn’t enter Amsterdam, the capital since the city decided in August to temporarily clear up all sharing bikes, as the bikes occupied the city’s scarce public space.

In January this year, Mobike and nine other dockless bike-share companies agreed to work together on API integration, excluding Ofo and oBike.

David Loriggiola

Everybody owns a bike in Amsterdam, even more than one. People would rather rent a car. So, the idea of renting bikes could work for tourists. I rented a car twice recently, and I think a car sharing model has a better market fit. I haven’t seen Mobikes in Amersterdam.

Germany

Mobike kicked off its operations in Berlin, Germany in November 2017, meeting its goal of expanding to 200 cities globally by the end of 2017. After other bike rental companies also launched in German cities, transport authorities in Munich and Frankfurt have limited the maximum number of bikes to be left at particular public locations, while Cologne has introduced designated parking zones for bikes.

Mobike’s arch rival Ofo is hiring people in Germany right now.

Julian Daum, editor at Business Punk

There’s a grey [Deezer] and a yellow [oBike] bike startup with bike stands, where you can put them. There’s a debate around these bike rental startups. Everybody’s hating them. Because they are standing around, thrown everywhere, but nobody’s picking them up. Berlin is a bike stealing hotspot. You cannot let it stand there for two minutes, so it makes sense to use bike rental startups. But I prefer racing bikes, especially from the 70s. Rental bikes are not very fast. Besides, everyone I know owns a bike. I don’t see any people driving around on rental bikes. But if there’s space in the local market, why not? Someone might be needing a bike or a car.

[Bike robbers] have specialized gear to break the locks, so some people use two locks with different lock systems since not many robbers carry gear to break two kinds. One of the reasons for robbing bikes is because there is a big second-hand bike market. They deconstruct the bike, put the parts together differently and resell. A lot of them go to Poland. In Germany, we use car-sharing companies. There are two moped–little electric scooter sharing companies–Emmy and Coup.

France

Paris has three bike rental players including, Singapore’s oBike, with about 1,800 grey-orange bikes, and two major Chinese firms: Ofo, with about 1,000 yellow bikes, and Mobike, with several thousand orange bikes.

Stefan Himmelstoss, head of scouting at tire company Continental

I have seen Mobike and ofo in Paris. The problem with it was the vandalism and it doesn’t make a good picture in the city. Expanding to Copenhagen and Netherlands would make more sense in general. Bike sharing models in Europe were adopted because of its traction gained in Asia.

BMW is running electric scooter business in Paris and Berlin has electronic scooters for inner city transport. So people there don’t need to own the transport.

Co-pace is the startup program of Continental. Our main purpose of launching co-pace is to help mature enough companies and to advance with them. In products, maybe we want the companies to generate more stream of revenues in various ways. Investment is only one part. Working together and understanding each other is much more important. Continental’s co-pace is looking for startups in mobility that is reducing the communication problem. We are looking for startups who are available in data analytics, has knowhow upfront and how that will work. For example, we can take away the cars and replace them with shuttles. This needs a mixture of intelligently and efficiently working transportation.

Italy

Italy was the second European city that Mobike expanded to, following the UK. The a fleet of orange bikes were launched in both Florence and Milan last July, followed by ofo’s yellow bikes. Mobike charges €0.30 cents for the first 30 minutes, then €0.50 for each additional 30-minute period. Ofo charges are lower — starting at €0.20 cents for the first half hour, €0.30 for the next and €5 for a full day pass.

Italy is also seeing bike theft and vandalism. The police in the Quarto Oggiaro district in Milan used Ofo bikes’ geolocation to find 20 bikes locked within a private residence.

Loris Lanzellotti, co-founder and CEO of BoostHeroes

BoostHeroes is a venture capital company with a portfolio of 55 companies with a sector-agnostic view. I invested in Hong Kong-based bike rental startup GoBee bike. GoBee bike was started by a French CEO in February 2017. GoBee bike expanded to Rome, Florence, Turin in Italy and Paris, Lille in France, since the founder of GoBee had major contacts in those cities. However, they encountered vandalism and theft, and the service didn’t work out. The rate of the bikes stolen or thrown away was higher than expected in their business plan. In February, they shut down the operation in Paris.

In some cities, they tested the model earlier than Mobike and ofo. GoBee bike didn’t launch in Milan as there were more ofo bikes.

Mobike and ofo are doing pretty well in Europe. Many are complaining about their service. I’m not sure if they’ve reached break-even point or not. Education of customers is necessary. You don’t want to be the first company to launch, because the bikes will be subject to vandalism and theft, and you don’t want to be the first one to make mistakes in the market.

Note: On April 13th, SCMP reported that ofo plans to take over the operations of Hong Kong-based GoBee Bike. 

Singapore

Singapore is one of the first countries that ofo and Mobike have expanded to, in early 2017. We previously reported that ofo and Mobike aren’t doing so well in Singapore due to its local player oBike.

Stanley Chia, co-founder and COO of Cialfo

I use Mobike in Singapore, and I like it. In Singapore, you can link your credit card to Mobike and pay. It’s helpful. But it’s more useful in China, because of the number and easy access to bikes. But in Singapore, there are much fewer bikes.

These bikes, however, make streets messy. In China, it’s acceptable to some extent. They are hiring people to tidy up the streets. In Singapore, the rules are much stricter. Users are expected to park the bikes in the parking zone. So it’s quite inconvenient because you can only pick up a bike from where it’s parked properly. From both perspectives, it’s less accessible, and not easy because there aren’t many bikes. On the other hand, it cost too much to keep it organized since we don’t have many parking places. So it’s hard to make it more organized in Singapore.

In Singapore, we normally use MRT and bus. Lazy people like me use a taxi. I reached certain income range to own a car, but it’s too expensive. So using taxi costs less for me. I use taxi-hailing apps like Grab taxi.

I think the idea of ofo and Mobike is not that innovative, there were such ideas before. Mobike and ofo could bring it to volume for the masses, and make wide use of it. Acceptance of such innovation in the community is impressive. So it’s more about the community who are open to change and innovation. When it comes to innovation, in a big city like Singapore there is an obvious difficulty of implementing it.

When it comes to tech and entrepreneurship, China has been brimming with ideas during the last decade. Now it’s time to bring these ideas out into the world and according to China Connect founder and organizer Laure de Carayon, Paris is the right place.

China Connect Paris is a two-day conference starting on March 7th, 2018 which aims to help European firms understand the China market by gathering influential internet players and marketers from Greater China and Asia-Pacific. The theme of this year’s event is China, The New World’s Inspiration—a nod to the idea that the worldwide digital order has begun to shift towards Asia.

“There is a huge and deep need for education,” de Carayon told TechNode. European firms have been the Chinese and Asian-Pacific region for quite a while but the market has been accelerating and growing with local businesses becoming more influential. According to her, companies will have to grant more decision-making power to local offices. However, the market is too strategic to let go of control without a thorough understanding.

“It’s about keeping the balance in both the fundamentals of the market which is maturing and keeping track of the ongoing innovation in parallel,” said de Carayon. “How do you embrace this change and all the opportunities that come with it? It’s a headache: you have to be fast, you have to be agile while being very strategic. It’s a global trend and it’s getting stronger and so obvious in China.”

Among the guests at China Connect’s eighth annual conference are e-commerce platform Secoo, China’s selfie king Meitu, bike rental giant ofo, influencer platform Robin8, travel site Ctrip, Maserati, Coca-Cola, and more. Content, commerce, social, data are the topics that are the main pillars of the event with special attention to e-commerce and social.

“If you consider Europe, there is a big stake in Chinese tourists and WeChat is the key to them. But beyond that there is a need to understand of social networks as a whole and social influencers,” said de Carayon, adding that the social market is evolving quite fast. But aside from the big platforms, there is an opportunity for less known ones which are more niche but can be very effective.

“In the West, everybody follows the same platforms, we’re like sheep. In China, it’s much more diverse and with diversity comes complexity.”

China Connect also launched its first China-based conference in Shanghai last year in July that brought together representatives from TechNode, Suning, Musical.ly, Weibo, Withinlink, and others. According to de Carayon, the two events are among the rare time that connect the Chinese and European marketing and tech community. The European Union and China are two of the biggest traders in the world. Today, China is the EU’s second-biggest trading partner behind the US while the EU is China’s biggest trading partner.

In Paris, China Connect has set high goals: to challenge even the experts in China. However, this does not mean that newcomers cannot join the learning curve. This year’s event will offer workshops organized by Secoo and Meitu, while the panels will cover technologies such as blockchain, virtual reality, and artificial intelligence.

As an important part of the global entertainment business, gaming is looking pretty good and the uprising trend of this sector is showing signs of slowing down for the near future as people living the digitalized world are seeking for more entertainment. Global venture capital firm Atomico released a report to shed some light on the latest changes in the sector.

2016 has witnessed some remarkable tipping points of the gaming industry, according to the report. Firstly, the field has become a global industry with games revenue exceeding USD$ 100 billion. To put the number into perspective, this means that the gaming industry is now worth three times as much as movies worldwide.

The surge in revenue is in line with the increasing player base, which broke 2 billion for the first time last year.  Mobile has become the most lucrative segment after years of continuous growth.

Atomico’s bullish views towards mobile gaming are shared by many research agencies. Newzoo made a bold prediction that the mobile segment will account for 42 percent of worldwide sales this year and to over half of the total games market by 2020.

China, the home to world’s top gaming developers like Tencent, is taking a fair share of this boom. The report shows that 11 out of 24 gaming companies worth more than US$ billion have come from China. Europe took the runner-up position with 6 companies

While investors have more confidence in publicly listed companies, the enthusiasm is also felt by private gaming firms. Of the total private investments, Europe is taking an increasing share of global games funding rounds, with Chinese acquirers playing a big role.

The top twenty largest games M&A transactions of the last five years have created US$ 46 billion in exit value, of which European targets accounted for 70% of the value. Looking at the origin of the buyers, 55% of deal value came from strategic Chinese acquirers, illustrative of growing interest from China.

This interest is only set to increase in 2017 and beyond, as the growing appetite for fresh content from Chinese gamers leads to investors seeking to exploit this through selective investment in European studios, the report noted.

The analysts attribute this surge to two reasons. For one, although the surge in listed entities has allowed VC communities to see increasing markups, they are often only on paper. Games companies are more than twice as likely to achieve liquidity as $B+ companies from other tech categories.

Additionally, Europe’s unique culture, as well as technical and commercial factors, have helped the region to become a world leader in mobile game development.  Many of these are subtle points, such as the region’s rich, centuries-old history of storytelling and creativity, or, its deeply connected communities of passionate individuals that came together through the region’s mod and demo scenes, creating fertile ground for mobile game development.

Most importantly, European studios were developing for mobile before it even became the “mobile” that we think of today, learning their craft building games on Java and optimizing for Nokia or Motorola feature phones, a world away from the mobile devices and games we recognize today.

On the other hand, the prosperity of European game development finds its root in rising demands from the world, of which China is an important market gaming studios can’t ignore. It’s now not only the world’s largest market of gamers – with over 600 million – but also it’s most valuable by spend, eclipsing the US and even the whole of Europe combined.

“There are unique opportunities. Almost 90% of the 24 billion dollar games companies founded in the last 15 years have achieved liquidity, proportionally more than any other sector – so games studios, especially in Europe, are a good bet. As the Chinese market continues to thirst for content, and continues to expand in size, we expect to see an uplift in Chinese interest,” Mattias Ljungman, Partner at Atomico said.

As China’s domestic market continues to develop, many of the country’s internet giants are beginning to look elsewhere for future growth prospects. As growth slows and the market becomes saturated, companies including Tencent, Alibaba, and many others are eyeing not just Southeast Asia, but also Israel, the US, and the EU.

To learn more, we talked with Hagai Tal, CEO of Tel Aviv-based mobile advertising company Taptica. He has invested, led and developed companies for growth, continued investment, and IPO/disposal, including Kontera, Amadesa, Payoneer, BlueSnap (formerly Plimus), and Spark Networks (NYSE: LOV). He is a Fellow of the third class of the Middle East Leadership Initiative of The Aspen Institute and a member of the Aspen Global Leadership Network.

How active are you in China?

We have an office in Beijing with around 10 people already. We are serving clients like Cheetah Mobile, Tencent and other big guys, like Alibaba. We help them first of all to find a channel for us to form a relationship with customers outside of China. So our biggest asset value will be helping those companies to figure out what to do when it comes to companies in the West. Sometimes we get involved in the content as well.

But the majority of our help is to help them to figure out which market is the right market for them. The Chinese market is an interest for us because we see the mobile proliferation in China. We see companies in China that have a lot of potential to grow.

In recent years, most of them are trying to grow outside of China, either through just distributing their content or buying companies outside of China. So we’re seeing a lot of activity coming from the Chinese market. And I have to say that in the recent years, also there’s some sort of matureness in the Chinese market, where in the past it was more a jungle, you know, everyone was trying to do different things. Now it’s becoming much more organized and there are more standards.

And there’s much more interaction between China and Western countries, so also the way of doing business and communication between both sides are becoming better and better. Payment terms are better, legal stuff is becoming easier to run.

What do you think is driving this shift?

Most of the companies we are dealing with are public. So I think the public market already gave them a high valuation and they’re all trying to find ways to continue to increase the growth or the keep the growth they have. They all understand that it’s probably outside of China that will be the best way for them to do it.

They all seem to hire people who have the language, buy companies who can give them the bridge to get those countries invested in money in order to try to market their products and fit their product to different market. When we go to the contracts, we see a lot of people knocking on the door and asking questions about how to get to users outside of China.

How is the Chinese focus on revenue growth affecting the global markets?

There are different ways of different stock markets around the world. You know, there’s NASDAQ everyone is looking at. We are a public company on London stock exchange. There’s also Chinese companies going public in China. Currently, there’s sort of an arbitrage between the valuation the company gets in different markets and different markets have different ways to measure a company. In London, if you have the EBITDA, then you can get the valuation whereas in China if you have the net profit, you can get the valuation. So there’s a big focus on the net profit.

Now, at the same time, the net profit of many companies, especially those in the gaming sector, in China is very high. It’s much higher than other places. So there is an arbitrage between the different markets. It means that on the mobile client, China is very high to companies in my space, that if we get approached by companies from China, we need to adapt or we need to see the same way that the Chinese are looking into the companies. And they do look at the net profit and because of that, we need to think about how to present the company in the net profit as well.

The Chinese, because of what we mentioned before, they need to keep the growth that they have. They need to buy companies. They need, if a Western company wants to be bought by the Chinese, they need to understand how the Chinese are looking into it. They can’t just compare with the EBITDA where they do it in London Stock Exchange, they have to look at the net profit.

It’s not so bad because the Chinese are looking at cash. Really how much money you’re generating, where the rest of the players are looking at the stories around it and the future potential.

How do you think this will affect companies that are attracting Chinese-led investment?

They’re not just looking for companies to buy, they’re also looking for management or people who can manage for them.

They’re not necessarily coming into the company and saying, “We know how to do it better than you, you’ve got to do whatever we tell you.” They see it a different way, they say, “We don’t understand all this. We want you to continue running the business.”

They want the management to stick around, they build the contracts around the composition of the management if they stick around. They have no interest in getting involved in the daily running of the business.

What about innovation? Will Chinese ownership affect the innovation of these companies?

I don’t think that statement is relevant anymore to the future. I think the Chinese are becoming innovators. You know, I saw these new bike-rental companies. I think this is great. This is innovation. I think the Chinese maybe have been copying in the past few years, but I think in the recent year or two, the Chinese have become more innovative.

You know, for us, we can’t be innovative only for the people who live in Israel because the market is too small. But for the Chinese, they don’t need to go so far. They need to look at their local history they have. And then if you look at the mobile devices in China, it’s innovative already. You know, I’ve gone to the conferences, I do think there’s been design in China already happening.

The culture gap between China and the west is getting smaller and smaller and we’ll see much more innovative people. I see Chinese starting to grow mostly in the US. They come back now to China. They can be a good group of people that can lead innovation in China.

What about problems in communication? Do you see that as a possible stumbling block?

In ten years’ time, we’re all going to be on the same standard. Whoever is not operating on the same standard will be left behind. Because Chinese companies need to compete globally, and not just with other Chinese companies, they will have to change how they communicate.

For expat founders entering the China market, and for Chinese travelers visiting overseas countries, the language difference is the first and essential problem they run into. Aiming to help people have a conversation regardless of their language difference, Travis the Translator recognizes and translates speech in 80 of the most common languages within two seconds and is now launching in China.

Google Translation can be of help, but it eats up your battery if you’re up for a longer period translation work. Targeting China market, Dutch startup is now selling Travis devices through their WeChat public account and will start receiving retail orders starting from the end of May. Their crowdfunding campaign just got funded 746% of their modest $80,000 goal on Indiegogo, summing up to US$ 596,848 with 1 day to go.

The market is huge. There are 7.5 billion people in the world using 7,097 languages, and the 83% speaks only one language. Priced at US$ 139, the translator is a handheld, pocket-sized device and comes with a matching Android app. We couldn’t try out the translation, but Travis sure was light and compact in size.

The Rotterdam-based company is using IBM and Google’s existing AI principle on translation. They use Google Translate for some language and translates other languages using apps from Microsoft, Systran, IBM and 2 apps that the company refused to disclose. The company does not have an in-house AI scientist.

“The more we use, the better it gets. IBM and Google’s existing AI needs more data to get better. We use our app as an umbrella and link with their open source software,” Lennart Van der Ziel, co-founder & CEO Travis the translator told TechNode at an event in Shanghai.

OLE (Open Learning Education) and Travis partnered to donate 200 devices to refugee centers in Turkey so that they can encourage them to learn a new language. The team is also working closely with the Rotterdam city government. With its 12 hour battery, they are looking to have 100 devices in the tourist center, so that tourists can take the translator and use it for one day.

Lennart Van der Ziel, co-founder and CEO of Travis the Translator studied law in Rotterdam and decided to leave his position to pursue his dream.

“Lawyer is about fixing the problem of the businesses. When I thought about it, I wanted to work ahead something and have lawyers to help me. I don’t want to solve someone else’s business matters,” Lennart says.

The 29-year-old Dutch founder started a Venture Cafe in Rotterdam, where a huge community of investors and entrepreneurs gathered and also where Lennard teamed up with other co-founders.

To enter the China market, the company is furthering its presence in first-tier cities like Beijing and Shenzhen.

Finland is home to notable game companies like Rovio, Remedy, and Supercell. After these companies received global attention beginning in 2009, new game companies have mushroomed in Finland adding their own share of excitement. With a population of 5.4 million people, Finnish startups target global market from day one.

China is a go-to market for Finland VR companies, thanks to its widespread VR arcades and huge population. As a case in point, Finnish game developer Reforged Studios scooped $2.5 million USD from Chinese technology company NetEase in October 2015.

TechNode interviewed four Finnish VR startup CEOs at a Slush Shanghai event held Monday in Shanghai to find out more about the VR scene in Finland.

Creating a VR platform for the Web

“Finland is one of the most active VR centric countries,” Kaarlo Kananen, founder and CEO of Vizor told TechNode. “Many Finnish companies focus exclusively in VR. We have a great talent coming from various successful game companies and also the heritage of Nokia.”

Mr. Kananen himself hails from the game industry, developing content creation tools. “I started the business because I believe VR will be the medium for the future. We want to bring easy VR creation workflows for the masses.”

Founded in 2015, Vizor is a web-based platform for creating, and sharing VR and 360 images. Mr. Kananen says a few thousand projects are published on Vizor VR platform every month. One of its flagship products is ThreeSixty, a 360 image uploading service. After taking a 360 degrees photo, the user can drop it on the ThreeSixty website to get a URL of the photo that can be embedded into any website.

Mr. Kananen believes large scale adoption for VR will happen on the web. The advantage of a web-based VR platform is the accessibility. Users don’t have to download any apps, but can access VR directly via web browser.

“There is opportunity in web pace. You can embed VR into web-based businesses like real estate, travel, journalism,” he says. “Many media companies are looking at this space, including New York Times. They have done VR trials already using custom apps but we intend to enable companies like them to bring VR onto the web.”

VR game companies struggle for monetization

“Virtual Reality in Finland is growing very fast,” Lasse Liljedahl, CEO and co-founder of Iceflake Studios says. “The companies are implementing VR to traditional sectors in addition to gaming.”

Iceflake Studios makes VR console games, mobile games and PC games. They can be played with or without a VR headset, so that they do not exclude players who don’t own a headset. Ice Lakes, one of the most successful paid games published by the company, has 50,000 users both on iOS and Steam. Mr. Liljedahl says the company earns 250K USD in revenues a year.

“Finland has Android phones, Windows phones, and iPhones, and today the Android market is the most popular. Oculus was the dominating VR headset in Finland, but now HTC Vive is growing more rapidly,” he says.

The 33-year-old CEO started developing games as a hobby in late 1990. Founding the company in 2007, the company has made 16 games so far, claiming 25 million users worldwide, mostly via Apple and Windows phones.

“In 2007 there were 100 game companies, there are now like 3400 people in the industry. However, it’s hard to make a VR gaming company profitable,” he says. “We are one of the few game companies in Finland that can pay salary for all employees.”

B2B is the market

Teatime Research is working with medical imaging and provides 3D medical analysis for doctors. After with CT scanning images, MRI data and all types of 3D data, doctors can look at patient’s bone parts in VR. The team is building a new technology that will enable live segmentation and separation of body into layers of muscles, tissues, and bones.

“Smart VR companies target 2B customers. If it’s not a high-end VR content, it’s hard to make profit worldwide. Now with a half a million high-end headsets sold, that’s not too many B2C users in the market. 2B is a choice for VR companies. B2C market wont’t be lucrative until 1 or 2 years,” Aleksis Karme, co-founder and CSO of Teatime Research Ltd says.

The Teatime Research team consists of architects, UX experts, and scientists. The 36-year-old Mr. Karme is a data analytics scientist who has been in 3D modeling for 22 years and paleontology in China for 11 years.

The company also provides an apartment sales tool for construction projects in Finland and internationally. The users can plan the project, monitor phases during construction and marketing and after purchase, they can increase added sales. Their customers are mostly based in Finland, US, Europe and China.

“There are home buyers who have already signed the contract to purchase the apartment based on a VR experience. It’s a good business.”

VR developers need to flock together

Organizers who worked to gather together the VR developers is FIVR (Finnish Virtual Reality Association). Startups in FIVR collaborate and help each other, give feedback to support and promote VR and AR technology development and implementation in Finland. Lollihop, one of the teams in FIVR, is started by a 24-year-old university student who is studying video game development.

“VR companies in FIVR get access to free office space and equipment, and receive help applying for grants supported by the government. The students get basic support funds from the government,” Carl-Anthon Kranck, 3D game artist at Lollihop told TechNode. “Lollihop game is still in development stages, but is getting positive feedback from the users. I’m still in university and now here in China to study the market.”

“Most VR companies in Finland are relatively early stage and are still introducing VR to customers, and businesses to raise awareness,” he says. “Also, there aren’t many VR hardware startups in Finland. The market will get bigger with the second generation of headsets when more headsets are available in Finland.”

Image Credit: TechNode

Chinese tech giant Tencent may soon add the company behind mobile gaming sensation Clash of Clans to their already massive portfolio.

The Wall Street Journal reported on Thursday that Tencent is in talks to purchase a majority stake in Supercell from SoftBank Group Corp, according to people familiar with the matter. The deal that would value the Finnish gaming company at $9 billion USD.

When SoftBank purchased a 51% stake in Supercell in 2013, the company was worth $1.53 billion USD. The sale would free up some significant capital for Softbank, which also recently divested around $10 billion worth of Alibaba shares which the Japanese firm acquired as an early investor in the e-commerce company.

Tencent is also in discussion with other investors, such as Hillhouse Capital Group, who may join the deal as co-investors, according to the same sources.

“We don’t comment on market rumors or speculation,” a spokesperson from Supercell told TechNode. SoftBank and Tencent did not respond to requests for comment.

Supercell’s Clash of Clans has enjoyed extraordinary success in the Chinese mobile gaming market, which is primarily dominated by local players. Other notable companies in China’s mobile gaming industries include Chinese internet company NetEase, as well as mobile game publisher iDreamSky, which sold $15 million USD worth of shares to Tencent in the process of their initial public offering last April.

The multi-billion dollar deal with SoftBank will be Tencent’s largest to date. Just last December, Tencent purchased a majority stake in U.S gaming company Riot Games, the maker of hit eSports game League of Legends. In 2013, the Chinese tech company purchased almost half the stock of gaming firm Epic Games, totaling $330 million USD.

Gaming is a core part of Tencent’s business, accounting for over half of the company’s overall revenue in Q1 of 2016. According to market research firm DataEye, mobile games made up 36.6% of China’s digital gaming industry in 2015, a number that is expected to increase as tech companies shift their attention from PC games to mobile.

Image credit: clashofclans.com

Update (6/17/2016 14:28): This post was updated to include a comment from Supercell. 

Chinese home appliance manufacturer Midea Group is betting big on high tech manufacturing.

On Wednesday, Midea made a whopping $5 billion USD bid for a more than 30% stake in German robotics company Kuka AG. Kuka specializes in industrial automation, where robots autonomously complete industrial tasks, such as welding, assembling components, and load-bearing.

Acquiring a more than 30% stake in Kuka means Midea will have to make an offer for all of Kuka’s outstanding shares. Midea’s bid is an all-cash proposal at €115.00 per share (about $130 USD) for all issued shares of Kuka. If the Chinese company’s bid is accepted, Kuka will remain independent and listed in Germany, according to Midea’s press release.

Though a potential acquisition of Kuka’s technology by a Chinese company worries regulators, Kuka investors celebrated Midea’s bid, sending shares upwards by around 25%.

Midea’s bid for Kuka comes in the context of rising labor costs and the company’s desire to move towards high tech manufacturing. According to a 2015 report by McKinsey, China’s working age population is expected to shrink by 16% by 2050, as the country is seeing increasing wage competition from its southern neighbors, such as Vietnam and Indonesia.

Investing in smart manufacturing will be long-term play for Midea, which currently has more than 100,000 employees worldwide. In addition, the company wants to develop smart home devices as part of an initiative called “Smart²”, launched in 2015.

“The investment fits perfectly into Midea’s”Smart²” strategy, which aims to upgrade our manufacturing competencies and develop smart home devices,” stated Paul Fang, the CEO and Chairman of Midea, the company’s press release.

Part of Midea’s Smart² strategy is about developing smart home devices using robotics technology. According to Midea, the company aims to increase its overall sales to over 25 billion euros (about 28 billion USD) over the next few years. The company hopes to make smart devices and service robotics a significant part of those sales.

Image credit: KUKA Aktiengesellschaft

Norwegian software company Opera launched an iOS app called ‘Opera VPN’ on Monday, a free and unlimited VPN (virtual private network) service that comes with other web browsing perks, such as ad-blocking and preventing ad-tracking cookies from sharing your data with advertisers and marketers.

However Chinese netizens will be disappointed to discover that the Norwegian-based company management have not made the service available in China.

“We are in good sync with our consortium partners,” says Peko Wan, Opera’s Head of PR and Communication, Asia, when asked about the possible conflicts between Opera VPN and Opera’s Chinese backers.

In February of this year, a consortium of Chinese companies, including Qihoo 360 and Kunlun Tech, entered a $1.2 billion USD bid to acquire Opera. Chinese internet company Qihoo 360 has a controversial record when it comes to user privacy, as it was accused of stealing confidential information from users in 2013, which the company denied. Thankfully, it looks like the Norwegian company is still independent when it comes to product development, especially since foreign VPNs are not supported by the Chinese government.

“They are supportive with the primary goal being providing good user experience to our users.”

“With the new Opera VPN app, we help people to break down the barriers of the web and enjoy the internet like it should be,”said Chris Houston, President of Surfeasy, Opera’s VPN division, in the company’s press release.

Opera VPN will remain unavailable in the Chinese market for the foreseeable future. Despite the regular crackdowns on VPNs by the Chinese government, a large number of VPN services both foreign and local, such as Astrill and VPNinja, cater to customers in China. Virtual private networks are a way to connect securely over the internet, which makes them handy for anyone who wants their web traffic encrypted, like privacy advocates and corporations.

VPNs can also mask a user’s location, since their IP address is replaced once they connect to a virtual private network. That means VPNs can be used to get around all kinds of content filters, from workplace bans on social media to the ‘Great Firewall’, China’s internet censorship apparatus.

So far, users of Opera’s new VPN app can choose to connect with servers in five different countries: the U.S., Canada, Germany, Singapore, and the Netherlands. The app has already been localized into a number of different languages, including English, Japanese, Arabic, and Spanish.

Qihoo 360 declined to comment on Opera’s new VPN feature.

Image credit: Opera

Correction (5/11/2016 21:26): This post was updated to correct the fact that Opera’s acquisition is still awaiting approval from shareholders and the U.S and Chinese government. 

To Ning Zhang, the co-founder of Limejump, operating a “virtual power plant” is a lot like managing a hedge fund.

“It’s all about hedging, risk management, and power asset optimization,” he says.

Limejump is a “technology-driven utility” based in London that delivers a demand-response solution that it calls a virtual power plant. Demand-response is a type of energy management that changes energy distribution on the demand side – where electricity is consumed, not generated – in response to changes in the price of electricity or when the reliability of the grid system is threatened.

For example, if millions of residents suddenly turn on their T.V. to watch the Oscars, the amount of energy demand will spike. That’s known as a “peak load”, something power producers use to estimate how much electricity they have to generate. Instead of powering up energy generation, demand-response solutions redistribute energy in the grid system to make sure that demand is met without having to pump up supply. This prevents unnecessary electricity generation and potential blackouts in the grid.

“We noticed there’s a lot of flexibility in the market,” says Zhang, referring to the energy market. “For example, if you’re a big corporation, you always have a spare load you [can] control. If you’re a hospital, you always have a backup generator [that] you can turn on. Flexibility in financial terms can be a real options.”

To “alleviate network imbalance and take advantage of market prices,” Limejump’s virtual power plant aggregates flexible demand from an interconnected network of businesses and generators. For example, Limejump worked with Planet Ice & Silver Blades Ice Rinks, a chain of ice rinks in the U.K, to power down its compressors for short periods of time during moments of peak electricity usage in the National Grid. Planet Ice & Silver Blades Ice Rinks halved its energy costs without having to increase temperature of its ice, according to Limejump.

“Three years ago, the biggest challenge for either trading or risk management for hedging [is that] energy cannot be stored,” says Zhang. “[You had to] match supply and demand within a half hour. The price becomes a lot more difficult to manage.”

That’s why data and data analytics are vital to demand-response solutions like Limejump’s. Without an accurate and real-time pricing model for electricity, Limejump’s “virtual power plant” cannot optimize prices for its clients or energy savings in the grid.

Not surprisingly, Limejump has invested a lot of research and development (R&D) into this area. According to Zhang, the first phase of Limejump’s R&D focused on capturing real-time data through IoT (internet-of-things) hardware. The second phase is more about fintech (financial tech). In the future, the company wants to create different kinds of demand-response products and enable its clients to do real-time trading based on their energy portfolio.

Amazon.com Inc. is making an aggressive expansion into global logistics, pitting their cross-border e-commerce business against Alibaba Group Holding Ltd. in a bid to drive down shipping costs from the world’s biggest manufacturing nations, reports show.

The U.S. company’s roadmap includes building cargo and customs management services from China and India to core markets including Japan, Europe and the United States, according to internal Amazon documents reviewed by Bloomberg dating back to 2013.

 It’s a bold plan which pits them directly against Alibaba, who have been spending aggressively to expand their homegrown logistics brand as well as their global logistics network. The cross-border e-commerce market is expected to become a $1 trillion USD industry by 2020.

The project, dubbed ‘Dragon Boat’, would also pose new competition to Amazon’s local shipping counterparts, FedEx and UPS. “Sellers will no longer book with DHL, UPS or Fedex but will book directly with Amazon,” said the 2013 report secured by Bloomberg. “The ease and transparency of this disintermediation will be revolutionary and sellers will flock to FBA given the competitive pricing.”

Amazon’s shipping costs have been rising sharply in the past year, causing concern from investors. Their latest earnings report shows a 37 percent jump in shipping costs year over year. 

In a regulatory report cited by Reuters, Amazon registered a Chinese freight forwarding subsidiary, Beijing Century Joyo Courier Service, with China’s transport authorities in 2015, along with a complimentary application to the U.S. Federal Maritime Commission from their China subsidiary in November. Amazon also filed with the Shanghai Shipping Exchange to serve as a shipping broker for a dozen trade routes, including China to Europe and China to the U.S.

Alex is a twenty-three year old woman from China who studies fashion marketing in London. She also does daigou on the side.

“I started [doing daigou] for friends and I only charged for shipping,” she says. “Then more and more people added me on WeChat and Weibo. If it’s a total stranger, why not make some money?”

Daigou is what is known as a gray market, or an unauthorized sales channel. In particular, it refers to Chinese shoppers who travel overseas to purchase goods so they can resell them illegally when they return to China. In some cases, like Alex’s, daigou agents ship their goods internationally and don’t return to China to make the sale.

The daigou market is a lucrative one, estimated to be worth 34 – 50 billion RMB in 2015, according to a report by Bain & Company. It’s one of many channels that Chinese consumers can access for Western luxury items, such as women’s wear, jewelry, and cosmetics, or other desirables like vitamins and food products. The daigou phenomenon has drawn both awe and criticism from countries like Hong Kong, Australia, and Japan, which are often targets of daigou agents, due to the sheer volume of purchases made by Chinese shoppers. In some cases, daigou agents have been known to temporarily empty a country’s supply of a certain product, like baby formula in Australia during Singles Day, a major online shopping holiday in China.

“It is an ecosystem created by Chinese people that is not defined by physical land,” says Jacqueline Lam, a co-founder of Mihaibao (觅海宝), a cross-border e-commerce platform targeting Chinese consumers. “It’s a market between Chinese people all over the world. It’s fascinating.”

Mihaibao wants to disrupt the existing daigou market by scaling and legalizing it. The platform connects Chinese consumers directly with high-end Western brands, such as Gucci and Giorgio Armani, while offering the lowest price globally for the product at the local currency automatically.

“Daigou cannot do that,” says Ms. Lam. “You cannot send a daigou traveling around the world, buying different products at the optimal price. So what we’re doing is we’re making money from efficiency in the system.”

In addition to price optimization, Mihaibao strips foreign VAT (value-added tax) off its prices, which allows the platform to add Chinese import taxes – legalizing the process – and still make a profit. Without paying Chinese taxes, Mihaibao cannot build a long-term, sustainable business and receive government support, says Ms. Lam.

Mihaibao also prides itself on its cultural understanding of Chinese consumers. Through its partnerships with Western companies, the startup hopes to help foreign brands cater to the tastes of Chinese consumers.

“They’re very smart shoppers,” says Ms. Lam. “They want much more information than Western shoppers and they care about different information.”

She cites a Giorgio Armani coat as an example. “They will care that it was made in Italy or France, but not made in Portugal,” she says. “Chinese customers now care where their original product is from. If something is Western but made in China, they might feel cheated.”

Also, because of issues of trust and authenticity of goods in China, product images need to be more detailed, says Ms. Lam. They have to show every angle of the product and convince Chinese consumers that it’s the product they want, she says.

There are many players in the daigou space, like other cross-border e-commerce sites and overseas websites including Tmall, JD, Shopbop, Net-A-Porter, and Kaola.com (网易考拉海购). However most make a compromise between authenticity and price. For example, consumers who shop on lower-end platforms like Alibaba’s Taobao run the risk of purchasing counterfeit goods.

There are offline channels for Western goods as well, such as domestic department stores and outlet malls, but an increasing number of Chinese consumers are opting for online options. According to a report released by Bain & Company, cross-border and overseas websites accounted for about 12% of all Chinese luxury goods spending. The daigou market, on the other hand, is declining because of crackdowns on daigou by Chinese customs officials, as well as other factors like global pricing by brands and governmental support of cross-border e-commerce in China.

As a startup that wants to legalize China’s gray market, it would seem natural for daigou agents like Alex to resent Mihaibao. But the company is employing daigou agents and leveraging their existing client bases in return for a commission on sales.

“[My] customers get parcels from the merchants, not from me personally, which is really good for building trust,” says Alex. In addition, by giving Mihaibao control over the supply side of daigou, she doesn’t have to spend time browsing through different stores and shipping packages.

In the future, Mihaibao plans on expanding to other verticals outside of fashion. Currently, the platform offers traditional luxury fashion brands, as well as more unique products from other high-end designers which appeal to younger generations of Chinese shoppers and Chinese people who have returned from working or studying abroad. In December 2015, the company received a round of $1.6M of seed funding from a list of high-profile investors including John Wu Jiong, Alibaba’s first CTO and Yahoo’s first Chief Architect.

Image credit: Mihaibao

Correction (1/27/2016) 17:30: This post has been updated to correct a factual error. Mihaibao received its round of seed funding in December 2015, not January 2016.

2015 was a tumultuous year for China’s multi-billion dollar luxury goods market. A plunging stock market, crackdowns on overseas luxury goods, and more high-profile arrests under Xi Jinping’s anti-corruption campaign are just a few factors that shook up China’s luxury market in 2015.

According to a new report by Bain & Company, some new trends in the Chinese and global luxury market have emerged. Here are five key takeaways:

1. China’s Luxury Market is Declining

Overall, purchases of luxury goods in mainland China decreased by about 2% to 113 billion RMB last year. In particular, men’s wear, watches, suitcases, and handbags have taken a drastic dive. For example, in 2014, luxury brand men’s wear decreased by 10% from 2013; by the end of 2015, the decrease is expected to be 12% from 2014.

The decline can be attributed to a number of different factors, including President Xi Jinping’s continued anti-corruption campaigns, which discourage lavish gift-giving (also known as bribes). Last April, former security chief Zhou Yongkang joined the growing number of Chinese government officials who have been arrested on charges of corruption.

In addition, last year’s stock market crash contributed to a slowdown in the luxury market, as well as increasing crackdowns on the daigou market by Chinese custom officials. Daigou refers to Chinese shoppers who purchase luxury items overseas and resell them illegally when they return to China. Between 2014 and 2015, the daigou market size for luxury goods decreased from about 55 – 75 billion RMB to about 34 to 50 billion RMB.

2. … But a Few Verticals Continue to See Steady Growth

Luxury brands in women’s wear, jewelry, cosmetics, perfume, and personal care items continued to see growth in 2015.

Since 2012, these verticals have seen steady growth. For example, luxury brand women’s wear has stayed at around a 10% CAGR (compound annual growth rate), and cosmetics, perfume, and personal care items have ranged around a 5 to 10% CAGR.

Top brands in these verticals include: Armani, Burberry, and Channel in women’s wear; Bvlgari, Cartier, and Chow Tai Fook in jewelry; and Chanel, Dior, and Estee Lauder in cosmetics.

3. Chinese Shoppers Aren’t Traveling to Hong Kong to Buy Luxury Goods

Instead, they’re opting for Japan, South Korea, and Europe. Japan was a particularly popular destination, as sales in luxury items is estimated to have increased by 251% since 2014. South Korea was second with an increase of 33%, followed by Europe with an increase of 31%.

In contrast, sales in Hong Kong and Macau decreased by about 25%.

The sharp increase in luxury items purchased by Chinese shoppers in Japan is attributed to a more open visa policy, which also explains the increasing number of Chinese tourists who visit Japan.

4. Cross Border E-Commerce is Taking Off

According to Bain’s report, cross-border and overseas websites are taking about 12% of all Chinese luxury goods spending.

Instead of buying luxury goods at department stores, shopping malls, or arranging a deal with a daigou merchant, Chinese shoppers are making purchases through websites like JD, Tmall, Net-A-Porter.com, ShopBop (acquired by Amazon in 2006), and Harrods.

Startups have also started catering to Chinese consumers through cross border e-commerce platforms, such as Kaola.com (网易考拉海购) and Mihaibao (觅海宝). To appeal to more price-sensitive Chinese consumers, startups like SECOO (寺库) and Share2 (只二) are selling secondhand luxury goods.

The Chinese government has also been helping to move luxury brand purchases online. For example, in January 2015, limits on cross-country online payments increased from $10,000 USD to $50,000 USD. The expansion of free trade zones in China also offers tax benefits to companies that conduct cross-border e-commerce.

5. Global Pricing by Luxury Brands to Boost Domestic Growth in 2016

Luxury brands like Chanel and Cartier have begun to price their items globally, shrinking profit margins for daigou merchants and reducing the price gap between Europe and Asia. Last March, Chanel was the first luxury brand to slash the prices of its handbags in China, before being joined by Cartier and Gucci, who also cut prices across their products.

In part a response to depreciating currencies such as the euro and RMB, global pricing by luxury brands will contribute to further downsizing of the daigou market and an increase in local consumption and domestic growth in 2016.

Correction (1/26/2016) 15:00: This post has been updated to correct a factual error. Mainland China’s luxury market declined to about 113 billion RMB, not by 113 billion RMB.

Chinese parents are notorious for enrolling their children in a multitude of co-curricular classes, and now the rise in innovation-driven tech investment has yielded yet another option: 创客课程 or ‘maker’ classes.

“We are committed to the principles of experiential learning and project-based learning,” states Join-In (卓因青少年创意工场), one of many ‘maker’ education companies in China. They have an extensive repertoire of workshops for children aged 3 to 18, from soldering a wristwatch to building a robotic car that can be controlled remotely through Bluetooth.

In maker education or ‘learning through making’, learning is supposed to happen as part of the student’s experience as they tackle hands-on projects on their own or with peers. Ideally, teachers take on the role of facilitators and guides. Their job is to lead students towards certain learning goals and revelations without giving away the answer.

China’s Burgeoning Maker Movement

The term ‘maker’ is a hot buzzword in China. Though it’s often used to describe hardware projects, ‘making’ can refer to any creative endeavor: painting, cooking, knitting, 3D printing, robotics, hydroponics.

China’s maker movement follows in the footsteps of similar movements in Europe and the U.S, where makerspaces, or communal spaces where makers can share tools, knowledge, and projects, started emerging in the early 2000’s.

In 2010, China’s first makerspace, Xinchejian (新车间), was founded in Shanghai by David Li, Min Lin Hsieh, and Ricky Ng-Adam. Since then, makerspaces have sprung up all over China, not only in first tier cities like Shanghai and Beijing, but Nanjing, Suzhou and Chengdu, among others.

In the December 2010 a TV show called 我爱发明 or “I Love to Invent” (our translation) launched. Each episode features inventions by different Chinese people, as well as real-time demos and analysis by the show’s host. In 2014, China’s Ministry of Education sponsored the first China – U.S Youth Maker Competition, with Intel, Tsinghua University, and the Chinese Service Center for Scholarly Exchange as organizers. Last January, Chinese Premier Li Keqiang made a high profile visit to Chaihuo Makerspace (柴火创客空间) in Shenzhen, and was named Chaihuo’s first new member of 2015.

“Makers have revealed the incredible entrepreneurship and creativity of the people,” commented Mr. Li. “This kind of vitality and creativity will be an inexhaustible engine for China’s future economic growth.”

The government’s avid support of China’s maker movement is not surprising. While many Chinese companies and institutions focus on the educational merits of maker culture, the Chinese government has primarily viewed it as a stimulus for entrepreneurship.

Homegrown innovation will become an imperative in the coming decades as China’s working-age population is expected to reduce by 16% by 2050, according to a report released last October by McKinsey. In the eyes of the Chinese government, China’s maker movement could drive – at least partially – the country’s radical shift from manufacturing to startups and innovation.

Disputes Around Maker Education

“Making for the sake of making, which is what most [maker education startups] are doing, shouldn’t mean more than playing with a special or different kind of toy,” says Rock Zou, the founder of Bigger Lab (必果科技), an educational startup aimed at high schoolers in China.

He’s referring to the plethora of maker classes that revolve around kits. For example, Shanghai-based robotics and open source hardware provider DFRobot sells over forty different kits of varying difficulty levels. For beginners, there’s the “4-Soldering Light Chaser Robot Kit” which only requires simple circuitry and soldering to assemble a robot that responds to ambient light. In more advanced kits students have leeway over their end product. Kits involving Arduino microcontrollers, for example, are more open-ended and enable students to build their own interactive hardware.

DFRobot sends its kits to schools all over China and trains teachers on how to run maker classes. According to Luna Zhang, a community manager at DFRobot, these training sessions are also meant to instill the “maker spirit” in teachers.

Mr. Zou concedes that kits offer some kind of educational value, but believes that they don’t challenge students enough intellectually. “You’re not pushing any boundaries,” he says. “It makes a difference whether you ask the question of why we make things, or what should we make.”

Bigger Lab’s classes focus on design thinking, user research, and rapid prototyping.

Last July, during their first round of workshops, Bigger Lab students stayed at a youth hostel in Shanghai and interviewed their tenants. The goal was to create a prototype that was designed to address one or more pain points of staying at the hostel. Over the course of the month, students learned various design thinking principles, as well as technical skills such as 3D printing and lasercutting, to help them with come up with a final product. At the end of the month, the students presented their projects at Xinchejian.

One group of students created a prototype of a machine that scanned tenant handprints and printed them onto postcards. “Our group decided to work on how to keep the memory of the hotel,” wrote one of the students in his blog. Another group created an interactive game that worked like human Tetris, but with anime characters in different poses instead. Inspired by their interviews at the hostel, the group wanted to help tenants get to know one another.

“They really [didn’t] like talking to humans, especially strangers,” Mr. Zou says. “But the problem is, if you don’t do it, you risk making useless stuff and wasting resources and time.”

Results, Results, Results

It can be difficult to persuade Chinese parents to buy into the principles of ‘learning through making’. After all, learning through making necessitates a kind of courage and resilience towards failure.

“I was more idealistic in the beginning,” laughs Ms. Han. “We wanted students to know that it’s okay to fail. In life, you’ll have to face failure eventually. But parents can’t accept that.”

Like Mr. Zou, Ms. Han disagrees with curricula designed around kits. In her previous job, Ms. Han marketed robot kits for Senfu Robotics Education Institute. That experience pushed her to create Join-In in 2015. “The end product doesn’t always represent the educational value,” she says. “What if you took away [the kit]? Would students still know how to build?”

However, Join-In has had to compromise to appease parents. Every class, which usually consists of four workshops, ends with tangible product. It’s the result of a kit that Join-In puts together, plus some customizations from the student for a margin for creativity.

“Chinese parents are really focused on results,” says Ms. Han. “At the end of workshops, parents will ask their children: ‘Were you able to finish? Did you put it all together?’”

Join-In has also started organizing robotics competitions to convince parents of their program’s value. These competitions appeal to parents because students can bring up their award during their xiao sheng chu (小升初) interviews, which are part of the national xiao sheng chu exam deciding what middle school students can attend. Multitudes of education companies have rushed to cater to this need to stand out.

For Bigger Lab, parental pressure is less potent as its target audience is Chinese high schoolers, specifically those with ambitions to study abroad. “In the college application process, [local] awards rarely mean anything,” explains Mr. Zou.

In 2016, both Join-In and Bigger Lab plan to expand their businesses and apply for investment funding. Specifically, Join-In will start by connecting schools in 2nd tier cities and build brick-and-mortar outreach centers to find more students. In addition to recruiting more teachers, Bigger Lab will build their own space that will be used as a classroom and workspace for students.

Image credit: Bigger Lab

Update (1/16/16) 13:05: We updated this post to add Join-In’s Chinese company name, 卓因青少年创意工场.

Twenty-eight of the world’s wealthiest investors are pooling their money to solve climate change.

Bill Gates and Mark Zuckerberg launched the Breakthrough Energy Coalition on Monday, timed to coincide with the U.N Climate Control Conference in Paris. The initiative is dedicated to investing in early-stage companies that will move the world towards zero-carbon energy.

The coalition includes four Chinese partners, Alibaba Chairman Jack Ma, SOHO CEO Zhang Xin, SOHO Chairman Pan Shiyi and founding Managing Parter of Sequoia Capital, Neil Shen.

“The risk-reward balance for early-stage investing in potentially transformative energy systems is unlikely to meet the market tests of traditional angel or VC investors,” states the Breakthrough Energy Coalition on their website.

To overcome this barrier, the Breakthrough Energy Coalition will provide seed, angel, and Series A funding across five different sectors: electricity generation and storage, transportation, industrial use, agriculture, and energy system efficiency.

According to their website, the organization is looking for “outliers.” This includes companies that are developing innovative and new technologies or are enabling existing technologies to be dramatically more efficient, cheaper, and scalable.

Like Bill Gates, who announced at $1 billion USD investment in clean energy technology this past summer, Jack Ma has already made commitments towards environmental solutions.

In an interview with President Barack Obama during this year’s Asia Pacific Economic Cooperation (APEC) summit, Jack Ma said that he had been investing 0.3 of his company’s revenue in programs to encourage young people to solve environmental issues for the past six years.

Jack Ma is also the Chairman of the Board for the The Nature Conservancy’s China Program, which is dedicated to conserving and protecting different habitats in China.

So far, no amount of investment have been disclosed by the Breakthrough Energy Coalition. In addition, the process of how companies and organizations can start pitching to the coalition remains unknown.

Image Credit: Shutterstock

If you ask Alan Feld what Chinese investors should know before investing in Israeli startups, his answer is simple: a trusted, local partner.

“Investing is very much a local business,” he explains.

Feld is the cofounder and managing partner of Vintage Investment Partners, Israel’s only active fund of funds. They manage about $1 billion dollars in funds and discretionary accounts across Israel, the U.S, and Europe. These include secondary funds, or holdings in other private equity and venture capital investments, co-investments in late-stage companies, and a fund of funds.

But Vintage Investment Partners isn’t just about leveraging money. One of the company’s most valuable assets is its massive database. Their proprietary database includes more than 4,000 venture and private equity-backed companies in Israel, the U.S, and Europe, as well as more than 3,000 investors.

“We see about twenty companies a week,” says Feld. He and his team will drive around Israel, where companies are two hours away at most, and meet different entrepreneurs, companies, and investors. Feld also conducts similar meetings in Berlin, London, Stockholm, and other cities outside of Israel.

In doing so, Vintage Investment Partners not only does due diligence on its underlying companies, but also grows its enormous, cross-continental network. The investment firm can then use its database to connect investors, companies, and entrepreneurs to the right contacts for sourcing talent, business partnerships, and more. Offered as a free service, this strengthens and helps the firm expand its network even further.

For Chinese investors interested in Israeli startups, Vintage Investment Partners’ database could prove crucial. Israel is home to thousands of startups – the most startups per capita in the world – which can be challenging to navigate for any investor or firm without local or detailed knowledge about Israel’s startup ecosystem.

Not that that’s stopped Chinese investors. Famous Chinese investor Li Ka Shing and his Horizon Venture fund have invested in 29 Israeli startups and were early investors in Waze, a crowd-sourced navigation app that Google acquired for $1.15 billion in 2013. Alibaba, Baidu, Fosun, Renren, Tencent have also poured investments into Israel’s startup ecosystem, which boasted about $15 billion USD worth in exits last year and eighteen IPOs.

At the same time, Israeli startups are looking to scale into larger markets like China’s. MoovIt, an app that provides different services to public transportation commuters, such as trip planning, service alerts, and more, plans on launching in Hong Kong, Guangzhou, Shanghai, and Beijing. Last year, the social investing platform eToro secured an equity round from Ping An Ventures, a Chinese venture capital firm.

“I want Chinese investors to have a good experience in Israel,” says Feld. “And Israel could be a bit of a bridge. It could be a conduit between China and the U.S, and China and Europe.”

According to Feld, some trends to look out for in Israel’s technology world include cybersecurity, cloud technology, and computer vision startups, such as JustVisual and Cortica.

Image credit: Shutterstock

Typing English on a smartwatch is a challenge. Choosing from 20,000 Chinese characters is a relative nightmare. That’s why Hong Kong-based iBeezi came up with their ‘6-key’ keyboard.

The company’s name means ‘one stroke one character’ (一笔一字) in Chinese, and they’ve come up with software that lets users type Chinese characters, Roman letters and even emoji on smart watch. 

“It’s currently the only solution for writing Chinese on a smart watch,” says Alexis Van Gestel, CEO of iBeezi.

The current method of typing Chinese on smartphones adapts the Sogou input method developed by Sohu.com, which cannot be transferred to smart watches.

“[The Sogou input method] is predictive, but it can only function properly on large screen devices. Also, when a user writes pinyin, every character appears in a random order for selection,” he continues.

“iBeezi is like a path based on pinyin and advances into characters. The same characters will always be located in the same corner so that users can master it quickly and build memory muscle easily.” 

The algorithm for the keyboard was developed by professor Pierre-Henry de Byuyn who lived for eight years in Greater China. “I have come to understand that the Chinese language is one of the most meaningful and richest languages in the world,” Mr.Byuyn says. “I wanted to bring back the full power of Chinese characters in the world of communication and improve the speed of writing them.”

There is a reason why the team chose six keys for its keyboard. John O’Keefe, May-Britt Moser and Edvard Moser were awarded the Nobel Prize for Medicine in 2014 for their work on ‘the inner GPS of the brain and how the brain learns things (cognitive-neuroscience)’. According to them, a hexagon shape enhances the human capability to learn new knowledge and language faster. 

Founded in May 2013, the team of 10 is based in Belgium and Hong Kong. The company has so far raised a seed funding of $300,000 USD from investors in Belgium and Hong Kong to further their Chinese expansion. The iBeezi smart watch app is currently available on Android, but not iOS, as Apple does not allow third party keyboards on the Apple Watch. 

The team is now taking a B2B approach, working with smartphone companies to introduce the keyboard. “We aim to become the reference keyboard for smartwatches and to further develop written communication for wearables by partnering with the leading social media, e-commerce and chat platforms in China and overseas countries,” says Mr. Van Gestel.

In the near future, iBeezi plans to integrate other complex languages, as well as a ‘stroke’ mode for their keyboards.

Several companies in the Chinese market have been looking to enter the Chinese typing space. In late October, Sogou filed eight patent lawsuits claiming that the Baidu- backed input method was suspected of violating multiple key patents by Sogou, raising a claim of 80 million RMB.

Image Credit: iBeezi

DJI, the Shenzhen-based Chinese drone company, has announced it will take a minority stake in high-end camera technology brand Hasselblad. 

“We are honored to be partnering with DJI, the clear technology and market leader in its segment,” said Perry Oosting, Hasselblad’s CEO. Neither company has released the financial details of the deal.

“Hasselblad and DJI share a passion to provide creative people with cutting-edge, inventive technology to help them take visual storytelling to the next level,” said Frank Wang, DJI’s Founder and CEO. “With this partnership, we combine our strengths to further push the borders of what’s possible in imaging technology.”

DJI  has been expanding rapidly into a series of drone and photography related projects. Recently the company revealed it had been working with Canonical on a powerful computer called the Manifold, especially designed for the DJI Onboard SDK. The computer equips drones with powerful data, image and mapping abilities. 

Earlier this week the company unveiled a concept video detailing ideas for their upcoming drones including obstacle avoidance, free-flight object tracking and multi-angle shooting. While the ‘Phantom X’ is still a concept, it appears the company is seeking out the right partners to make the promised technology happen. 

Hasselblad’s camera technology is high end, playing into DJI’s brand ambitions. “DJI and Hasselblad are equally enthusiastic about creativity and excellence, and we are looking forward to sharing technical expertise and paving the way for future innovations,” said the Swedish-based company’s CEO.

According to the joint release, the companies will continue to develop delineated brands. Hasselblad’s 75-year-long history includes supplying cameras for the Apollo missions and moon landing, however more recently they have focussed on more traditional cameras.

Linkfluence, a European leader in Social Media Intelligence has acquired ActSocial, a social media intelligence company based in Shanghai and Singapore. The terms of the deal were not disclosed.

Through the acquisition, Linkfluence will be looking to expand its international reach in social media intelligence. Currently the company has more than 160 employees in the U.K., Germany, France, Spain, Singapore and Shanghai, China. 

Singapore and China-based Actsocial (previously Wildfire) provides insight into social networks across Asia, and identifies key trends, social media crises and core topics of interest online. The company was founded in Singapore in 2009, but focuses largely on the Chinese market. Its word of mouth programs have boosted brands’ marketing and sales performance, from packaged foods to tourism, with big name clients including Starbucks, Carrefour, Nestle and Hyatt. 

The social media marketing company raised $2 million USD from Singapore’s private equity firm Hera Capital in 2013. It was previously backed by Ideas Ventures and several angel investors in China and the Asia Pacific region.

“ActSocial and Linkfluence mix groundbreaking technology with human expertise to generate a strong competitive advantage for clients. These common traits will accelerate team integration and make it possible to launch our new offerings within weeks,” said ActSocial CEO Marc Rivoira.

Founded in 2006 in France, Linkfluence is a social media intelligence company offering organizations a unique approach to monitor, analyze and activate social media. It is working with more than 100 of the fortune 500 brands to roll out International social listening solutions in 2016, including Coca Cola, McDonald’s, Orange, and Groupama. 

Linkfluence CEO Hervé Simonin said Linklfuence strengthens its position in Europe. The Linkfluence Group is set to reach an estimated annual turnover of EUR15 million ($1.7 million USD) in 2015 and plans to reach a 100% growth every years in years to come, according to the company.

Image Credit: TechNode

The European Commission announced a strategic agreement on Monday to cooperate with China on the development of 5G networks.

The deal comes as China is ramping up its 5G and pre-5G efforts to roll out consumer-ready networks by 2020. The high-speed 5G connection is also a vital element in China’s booming Internet of Thing market, as well as a key component in their Smart Cities initiatives.

The European Commission has recently signed similar agreements with Asian market leaders in 5G technology, Japan and South Korea. Both countries, along with China, have made commitments to roll out networks within the next five years.

The deal could mean that the European Commission will have access to the research conducted by China and vice versa. The two countries may also be able to access funding from partnered research associations. China and Europe will work together on standardizing of 5G rollout, including the promotion of a unified spectrum. 

“By 2020 there will be more than 30 times as much mobile internet traffic as there was in 2010.” said the European Commission in a statement. “5G won’t just be faster, it will also be the backbone of our digital future.”

The agreement was signed during a trade and economic dialogue held in Beijing this week. It follows several EU partnerships from Chinese telecommunications companies. In July Huawei announced their involvement with the European 5G Public Private Partnership (PPP), one of the associations that could be sharing funds with Chinese researchers under the new agreement. 

East Asian countries have made strong commitments to 5G development. South Korea, the regional leader in 5G research, has committed to rolling out networks by the 2018 Winter Olympics, While Japan made a similar commitment for the 2020 Summer Olympics. Chinese providers Huawei and ZTE have both committed to a 2020 deadline, already testing their services. 

Currently, a lack of funding and allocated spectrum as well as security concerns are the biggest barriers to 5G development globally. The latest partnership could help China and the EU promote a global standard spectrum while pooling funding and research data.

The theme of LeWeb conference, that just ended and whose acquisition by Reed Midem has just been announced, was “the Internet of Things”.
It’s not a huge surprise that Loïc and Géraldine Le Meur chose this theme. With the development of collaborative funding platforms such as Kickstarter, we have seen the appearance of some fantastic projects in this sector.

What we don’t perhaps appreciate from the start is that this theme encompasses a wide range of concepts!  For instance, in The Internet of Things, you will find platforms (Sen.se, SmartThings, Ninja Blocks), gaming and leisure (Sphero, Ubooly and Team Blacksheep), Quantified Self (Withings, Fitbit and Inside Tracker) and home improvement as well (Nest, Lifx, Lockitron, Koubachi and Natatmo).

Through the presentations made by speakers such as Brian Solis of Altimeter Group and Dalton Caldwell of App.net plus the fifteen demonstrations that took place during the conference, it became obvious that all these technologies have two major things in common:

Things create data
According to a study carried out by Cisco, in 2008 the number of things connected to the internet exceeded the number of human beings on Earth and they predict that 50 billion things will be connected between now and 2020!
Every day these connected things (computers, Smartphones, sensors, televisions, etc) generate 2.5 quintillion bytes!  Imagine how much this generate 10 years from now with five times more things and each thing sending more data!  The growth is simply exponential.
In his speech, Dalton Caldwell explained that one of the challenges in the future will be to make use of all this data.  In other words: it’s really easy to create data with The Internet of Things, but what are we going to do with it then?
Caldwell thinks that The Internet of Things will benefit from the incredible progress there has been on the social web, in particular the ability to insulate the signal from the noise.

Smartphones are at the heart of The Internet of Things
What is quite astonishing about the connected things that we have seen is that most of them have the Smartphone as the principal user interface.
Thus our whole lives will become “drivable” from our Smartphones.  When I get up in the morning, I turn on the light with Lifx, I adjust the thermostat with Nest, I can watch my weight with Withings or monitor my physical activity with the Fitbit sensor fitted to my belt.
The Smartphone is becoming the universal remote control for the things around us, even if each thing currently has a specific application.

So will The Internet of Things be the third wave of the web?
The presentations I attended during this conference have convinced me of one thing:  The Internet of Things is not the future, we’re already living it and this is just the beginning.
However, we might ask ourselves whether this connected world, as it’s currently presented to us, will happen soon.  For example:  I leave the office, my car tells my house to run me a bath and turn on my favorite radio station…
The future of The Internet of Things is not about what can be technologically achieved and what cannot, it’s about how it will seamlessly integrate itself into the way we do things to become unobtrusive and change our behaviors.
If entrepreneurs manage to take up this challenge, I think that The Internet of Things will be the third wave of the web.

One of the high points of the LeWeb conference held in Paris from December 4th to 6th was without doubt the Startup competition.
Such an event offers a unique opportunity for young entrepreneurs to make themselves known. At previous conferences you could have discovered Super Marmite, Waze, Babelverse, Heycrowd and Blippar as well.
This year, out of the 17 startups selected from the 400 candidates, most had more or less close links with the conference theme “The Internet of Things”.
In other words, you might secretly hope to discover the next Nest or Lockitron.
So for the whole of Tuesday, the startup pitches followed one after the other in the second plenary room and an enthusiastic public was presented with projects that, until now, had been in “stealth mode”.
The startups selected at the end of the first day were: Recommend, Be-bound and qunb.
Recommend offers a mobile application that makes it possible to recommend all sorts of things to your friends.
Be-bound offers an original, if slightly old-fashioned seeming, method of connecting to the internet in the absence of a broadband Wi-Fi network.
Qunb is a “YouTube” or rather a “Slideshare” for data.
On Thursday, the 3 finalists presented their projects in the main plenary room in front of a jury composed of successful French entrepreneurs (Jacques-Antoine Granjon, Marc Simoncini, Pierre Kosciusko-Morizet and Jean-David Blanc).

Before announcing qunb as the winner of this year’s competition, Jacques-Antoine Granjon created a bit of a stir when he remarked that the judges were hoping for a better selection of startup finalists. Having sat through the entire first round of presentations, I am totally agree with him, and in my opinion, here are the startups that should have been in the final:
– qunb: I think that they got their place in the final because there is great business potential. Next time I would advise their team to do less story-telling and more demonstrations.
– Biletu: Is a mobile application that makes it possible to make peer-to-peer payments. At first I thought it was unimaginative and, above all, I thought there were already plenty of startups doing the same thing. But the application is designed in such an intelligent and user-friendly way.
– wiMAN: A Wi-Fi access terminal for public spaces, such as cafés, restaurants, shops, etc, that adds a social layer to the service. All you have to do to access the Wi-Fi network is to log into Facebook. The business can also ask the user to “Like” its Facebook page or post a little message on their wall to thank the business for the connection.

Sometimes the best ideas are also the simplest, that’s why, without doubt, I would have chosen wiMAN as winner of the 2012 competition.

Did you see the pitches? Which was your favourite?

For over 8 years, french entrepreneur Loïc Le Meur and his wife Géraldine are running LeWeb, one of the best technology conference in the world.

Year after year, the venue is became pretty huge with +3K attendees, very famous speakers (Eric Schmidt, Sean Parker, Jack Dorsey,…), 2 plenaries and 1 startup competition.

In a video, Le Meur announced that LeWeb’12 theme is “The Internet of things”, one of the most promising technological advance to come.

One of the highlight is the startup competition that will showcase 12 promising startups. We will cover it and try to catch up original interviews for Technode readers.

If you are interested, the conference will be fully livestreamed (link to come) and all the videos will be featured on LeWeb Youtube Channel.