Chinese digital platform companies’ expansion in the Belt and Road countries

Abstract

The emergence of digital platforms is shifting the digital economy toward a platform economy, and Chinese platform-based businesses like Alibaba, Tencent, and JD are increasingly expanding in the Global South. Alongside this, the Chinese government has been promoting digital economy collaboration with emerging markets through high-level engagement under the banner of the Belt and Road Initiative (BRI) and its digital economy component the Digital Silk Road (DSR). Despite significant market interest and policy attention, grounded empirical analysis of Chinese digital platforms’ expansion within Belt and Road Initiative countries is scarce. This study employs a mixed-methods approach, drawing on both quantitative data of Chinese platform companies’ overseas foreign direct investment and qualitative data obtained from fieldwork interviews in Southeast Asia and from secondary sources to conduct a case study of Chinese platforms in Indonesia. It finds that Chinese digital platforms largely undertook their overseas expansion based on commercial interests, and Beijing’s high-level policy framework BRI has had a limited direct impact on the expansion of the privately-owned Chinese platforms and their local business operations within host countries. The vagueness of BRI/DSR has also given platform companies investing in Indonesia room to choose how they engage with Chinese BRI/DSR rhetoric depending on the local context. Furthermore, local contextual factors, including Indonesian policy, policy implementation, and labor market, have shaped the platforms’ business expansion. Firms have been pushed to adapt to local policy priorities and socioeconomic context, seek local partners and invest in local capacity building. The findings suggest a more complicated state-firm relationship in Chinese digital platforms’ expansion than that which is often perceived, and the importance of host country contexts in shaping Chinese digital platforms’ local business strategies.

Keywords:

• Belt and Road Initiative
• Chinese overseas investment
• digital economy
• digital platforms
• Digital Silk Road
• Southeast Asia

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 More broadly, given that the existing research on digital platforms focuses on business models in the Global North, there is a need for studies on the expansion of platforms in developing country settings (Nicholson, Nielsen, and Saebø 2021).

2 The Chinese state exerts considerable influence over Chinese firms’ overseas telecommunications infrastructure projects by taking ownership stakes and its term for financing (Hsueh 2011). Also, state-owned enterprises are major players in the telecommunications sector, e. g., all major telecommunications network operators are state-owned. In the same vein, telecommunications equipment providers like ZTE are state-financed, and Chinese state-backed policy-directed banks such as the Export-Import Bank of China and China Development Bank, and funds like the China-Africa Development Fund, have financed major telecommunications infrastructure projects, mandating the use of Chinese suppliers and equipment (Agbebi, Gong, and Zheng 2021). Furthermore, private companies like Huawei piggyback on diplomatic missions and state financing for overseas deals, building strategic alliances with state-owned telecom firms and party officials (Hawes 2021). In contrast, digital platform companies like Alibaba, Tencent, and ByteDance are private firms that have amassed significant revenue and capital from the Chinese market, domestic and international stock exchanges, and global investors for their overseas expansion (Jia and Liang 2021; Jia and Winseck 2018; Shen 2017, 2021), and they are embedded in different state-business relationships and power dynamics in their overseas expansion.

3 Available at http://www.aei.org/china-global-investment-tracker/.

4 Available at https://www.cfr.org/blog/countries-chinas-belt-and-road-initiative-whos-and-whos-out

5 In selecting key informants in developing country settings, efforts were made to seek out interviewees within divergent organizations and holding divergent perspectives (Kumar 1989). This included first identifying the relevant groups from which the interviewees can be drawn, as already noted in the text; then selecting a few informants from each group based on the consideration that informants possess an intimate knowledge of the Chinese platforms’ expansion and local business practices or relevant work experiences, and reaching out to possible informants through networks and colleagues, and attending conferences like the Indonesia Development Forum, industry and startup community events, and academic seminars on relevant topics (purposeful sampling). The author also asked interviewees to suggest names of other persons who in their opinion are knowledgeable experts (snowball sampling).

6 As Foster and Azmeh (2020) pointed out, in latecomer economies including China and Indonesia, industrial policy objectives are important drivers of national digital strategies. Both countries also share similar policy preferences in maintaining the domestic policy autonomy for imposing data localization requirements. Yet, the Indonesian legislation mandating data localization was first implemented in 2012, prior to the significant inflow of Chinese capital. So in this sense, Chinese capital’s influence on Indonesian national digital policy in this area was fairly limited. In fact, Indonesia’s roll-back of its data localization requirement in 2019 was mainly because of pressure from the US government’s digital trade agenda and US tech firms (Basu 2020; Diela 2019).

7 It is possible that such intense competition for talent using compensation packages may experience some cooling, as the mass tech layoffs at tech firms in both the US and China starting in 2022 also affected the tech sector in Indonesia (Timmerman 2022).

8 It should be noted that companies like JD did not disclose the ratio of local to foreign employees at senior management level, so the extent of workforce localization at the senior level is unknown. The post-pandemic bear market and the mass tech layoffs also affected JD’s operations in Indonesia. As part of overseas business restructuring, JD shut down its JD.id e-commerce platform that was having difficulty sustaining revenues in 2023 and chose to focus on expanding the logistics business in Indonesia. So, it is possible that the local to foreign ratio now has changed.

Additional information

Funding

This research project was partly funded by the Strategic Public Policy Research Funding Scheme from the Central Policy Unit of the Hong Kong Special Administrative Region Government, China (Project Number: S2016.A7.003).