The battle for the Internet in the third world

The Economist notes that US internet giants are squaring up to their Chinese counterparts, not so much in the USA and China as in the third world.  It calls the struggle “The most titanic commercial battle in the world“.

Facing off are the towering giants of American and Chinese tech, led by the FAANGs (Facebook, Amazon, Apple, Netflix and Google’s parent, Alphabet) on one side and the BATs (Baidu, Alibaba and Tencent) on the other. These are some of the planet’s biggest firms, with a combined stockmarket capitalisation of more than $4trn. At play are some of its most promising markets. Why, then, has the battle largely escaped attention?

One reason is where it is taking place. The titans have avoided each other in their home markets, and rising trade tensions make it ever less likely that a clash will happen there (see article). Except for Amazon and Apple, the FAANGs are already all but banned in China. America, meanwhile, is putting up barriers to Chinese firms … So the cream of America and China are taking each other on directly only in third countries, such as Brazil, India and Indonesia.

Another reason for the battle’s low profile is that it is not being fought in the open. The American firms have, broadly, transplanted their services to other markets; Amazon has pledged over $5bn to replicate its offerings in India, for example. But the Chinese giants are taking a different tack, buying stakes in local firms and weaving them together into complex tapestries of services. The ecosystem of Tencent and Alibaba, with over 1,000 stakes in foreign firms, includes dozens in emerging markets. Along with Ant, they have backed 43% of all Asian unicorns, startups worth more than $1bn. Chinese tech firms pumped $5bn into Indian startups in 2017, a fivefold increase on the year before. America’s tech giants are wearing uniform abroad; China’s melt into the background.

. . .

America and China are vying for digital supremacy. The fight between their tech champions in other markets will inevitably have political overtones … its outcome could put third countries in one camp or the other, increasing the risk that the world eventually splits into two techno-blocs.

There’s more at the link.

It’s fascinating watching this develop from a distance.  I’m most familiar with Africa, of course, being from that continent.  Chinese companies have already established what’s almost a stranglehold over vital mineral deposits and mines, and are offering low-cost loans to develop the infrastructure needed to develop them.  When the host country can no longer afford payments on those loans, Chinese companies – or the Chinese government – take over the infrastructure concerned, further entrenching their position and shutting out competition from Western firms (see, for example, the port of Hambantota in Sri Lanka).  It’s a full-blown commercial war, all right . . . and at present, from my perspective, China appears to be winning.

Peter

3 comments

  1. I would submit that the vast USA (and European) expenditures in Africa have not greatly benefited the people there. While I dislike the repressive possibilities of the current Chinese system, it may be able to better serve the needs of ordinary Africans (of all skin colors).

    Thus far, outside encouragement and funding of political and economic reform have been regrettable failures. If corruption is the norm in Africa, perhaps it can at least be managed in a way that benefits both people and government, instead of just the latter.

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