The Digital War. Winston Ma
to alert citizens seen in open areas without face masks. In particular, it accelerates Chinese companies' shift to the cloud as enterprises try out cloud initiatives to facilitate remote working and remote interactions. For companies managing their internet infrastructures, making adjustments to computing needs on the fly is expensive and complicated. Cloud computing makes it easier.
On the other hand, many pandemic-driven new business practices will remain part of daily life. For example, live-streaming is now an important shopping channel, with or without the “home stay” order, and the digital platforms are developing enhanced services for livestream hosts with new digital technologies, such as 5G and AR- (Augmented Reality-) powered features. With a strong sense of urgency, all companies are rushing to learn how new 5G iABCD digital technologies can be integrated into their businesses to unlock value from nontraditional angles. The digital transformation of China is accelerating.
BaaS Startup Innovation Ecosystem
With government endorsement in the background, a dynamic ecosystem of entrepreneurs and startups is organically being built up and rapidly expanding (see Figure 1.9). The network of established internet firms and their seasoned entrepreneurs, endless eager talents, abundant angel investors and venture capital, and a sophisticated manufacturing system are collectively making China one of the most interesting centers of innovations in the world.
The core of this ecosystem is a network of “graduated Chinese entrepreneurs” from established tech firms at home and abroad. Around their passion for new startups, there seems to be an endless supply of venture capital, young talent, and government support. This development resembles the multiplying effect seen in the Silicon Valley ecosystem in the last few decades, where generations of innovators, from Intel, Netscape, Google, and PayPal, have created waves of startups. Whereas the previous generation of China internet companies was mostly copycat versions of Western sites, the new generation startups are creating a remarkable wave of innovation that challenges the long-held perception of “Made in China” copycatting.
Figure 1.9 China's innovation ecosystem
Among 5G iABCD (see Figure 1.5), the blockchain is the latest addition to the startup scene. Thanks to fresh endorsement from China's central government, the blockchain industry is experiencing a boom. According to the China Internet Report 2020 by SCMP (South China Morning Post) Research, about 80% of the top tech companies recognized by the SCMP have either run a blockchain project or invested in blockchain technology. Scores of blockchain startups are popping up daily, even the coronavirus hasn't been able to keep them down.
For example, because food scandals—ranging from rice grown in cadmium-tainted soil to infant formula tainted with melamine—is widespread in China, blockchain is used to support supply chain transparency and auditability to reassure consumers wary of food safety. In June 2019, Walmart China entered into a partnership with consulting firm PricewaterhouseCoopers (PwC) and blockchain firm VeChain to create the Walmart China Blockchain Traceability Platform.
VeChain is a Shanghai-based blockchain provider specializing in governance and business ecosystems. They have created a tokenized public chain called VeChainThor. The companies work together to provide real-time traceability throughout the supply chain, which has traditionally been challenging due to fragmented data sharing systems that are often paper-based and can be error-prone. Built on the VeChainThor blockchain, the traceability platform enables shoppers to track consumer goods back to their source, inspection, and shipping.
Amid the coronavirus pandemic, startups like Hyperchain launched a blockchain-based platform to improve donation efficiency. In February 2020, the blockchain startup teamed with China Xiong'an Group Digital City Corporation (as the name suggests, it is the company that operates the blockchain city of Xiong'an) to create a donation tracking platform called Shanzong, which means “trace of good deeds” in English. At a time when some traditional charities like the Red Cross have come under fire for poor distribution of resources to people in need, Shanzong tracks what kind of donations are given, from money and masks to medical materials, how they have been matched to areas of need, and when they have been delivered, according to a Hyperchain statement.
In fact, China is shown as dominating in the 2019 Global Blockchain Invention Patent Ranking report from IPRDaily, a Chinese intellectual property news site. It would appear that China is predominantly driving the world in the utilization and development of blockchain technology. According to the report, China accounted for the top three spots, seven of the top 10 and 19 out of 30, and the Chinese companies have represented about 70% of the world's global blockchain patent applications (see Figure 1.10). Alibaba and its financial arm, the Ant Group, have by a wide margin filed the most patents identified with blockchain on the planet.
Figure 1.10 Global blockchain patent application 2019 ranking
With an initial public offering (IPO) announced in August 2020 and targeting a valuation of more than $200bn, the Ant Group is the world's highest valued financial technology (or fintech) company—and most valuable private tech startup globally. Its Alipay is China's largest mobile-payment network, spanning 900 million users, and it also operates one of the country's largest investment products platforms, lends to individuals and small businesses, and operates a credit-scoring system based on customer data analytics. (See the detailed case study in Chapter 5. The company was known as Ant Financial until June 2020, when its official Chinese name was changed to “Ant Technology.” A spokesperson said the company wants to be referred to in English as “Ant Group Co.”, better reflecting its role as “an innovative global technology provider” to businesses.)
Of course, most blockchain protocols are open source. Therefore, the ranking of blockchain patent applications is not directly equivalent to blockchain technology innovation power. Nevertheless, the increase in the number of blockchain patents demonstrates a developing interest by China and business organizations like Alibaba, which has been on the top since 2017. Furthermore, Alibaba, Tencent (ranked No. 2), and other firms also provide blockchain platform infrastructures for the market (BaaS – blockchain as a service). Their BaaS services provide an important link between blockchain architecture and the enterprise-level blockchain projects.
These BaaS services enable blockchain entrepreneurs to focus on building new applications, leading to a wave of young blockchain companies in China. For example, Tencent is collaborating with Waterdrop, a crowdfunded health insurance firm, to develop a medical and insurance solution leveraging blockchain technology. Tencent plans to integrate the solution into its WeChat messenger, which will help more than one billion Chinese users to access their medical bills conveniently and securely. The solution will also benefit medical institutions and insurance firms by facilitating an efficient billing system to prevent claims from fraudulent invoices.
In the coming years, the pace of innovation will continue accelerating. For one thing, established tech firms, as well as up-and-coming companies, serve as useful infrastructure for next generation tech startups. For another, the synergies of 5G iABCD are gradually taking shape. The different technologies can feed into each other and create an ecosystem of automation—IoT devices collect data on millions of criteria, which is then collated in the cloud and managed by Blockchain, analyzed by Big Data, and used to train and improve AI