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Chinese big tech firms cut external investments amid economic challenges

China’s internet giants from Alibaba Group Holding to Tencent Holdings slashed external investments last year amid an economic slowdown, regulatory headwinds and geopolitical tensions, according to data compiled by a Chinese consultancy.

Total investment deals made by Alibaba, Tencent and Baidu plunged by nearly 40 per cent to 102 in 2023, with Tencent – known for its expansive holdings in China’s internet sector – seeing the largest reduction in deals, data from ITJuzi showed.

The social media and video gaming titan struck 39 investment contracts with 37 companies last year, a sharp decline from the 95 and 299 deals it made in 2022 and 2021, respectively.

Web search and artificial intelligence (AI) firm Baidu participated in 24 investment deals last year, down from 52 in 2021. E-commerce giant Alibaba, which owns the South China Morning Post, took part in 39 deals, a fall from 91 in 2021, according to ITJuzi.

2021 was a watershed year for Chinese internet firms, as Beijing kicked off a campaign to rein in the “disorderly expansion of capital”. Amid a series of regulatory tightening moves, the country’s internet champions – whose market sizes were once on a par with their American counterparts – have virtually stopped expanding.

Tencent’s investments last year were mainly related to corporate services, healthcare and video games. Advanced manufacturing firms were Alibaba’s top picks, with eight related deals being struck by the Hangzhou-based company and its affiliates during the year.

Alibaba, which is grappling with anaemic consumer spending at home, made four investment deals in the e-commerce sector, three of them outside China.

AI was another investment favourite among Chinese tech giants last year, as they raced to build and promote their local rivals to OpenAI’s ChatGPT.

Tencent and Alibaba each backed seven and four AI start-ups developing large language models (LLMs), the technology which underpins chatbots like ChatGPT, which can understand complex questions and give humanlike responses.

Last year, Alibaba’s in-house research facility Damo Academy also launched a research laboratory to recruit more than a hundred postdoctoral candidates to work on cutting-edge areas, including AI and semiconductors.

TikTok owner ByteDance struck five external investment deals last year, while online shopping platform operator JD.com made just two.

ByteDance’s largest deal in 2023 was a US$1.5 billion investment into Indonesia’s biggest e-commerce firm Tokopedia, which allows the Beijing-based company to restart its local online shopping business after Indonesian regulators banned TikTok Shop.

Meanwhile, Chinese smartphone maker Xiaomi emerged as the top investor by number of investments, with 82 deals made during the year.

The company, also based in Beijing, in December launched its first electric vehicle, the SU7, designed to compete against the likes of Tesla and Porsche in China’s hotly contested car market.

In that same month, Xiaomi invested in three start-ups in the vehicle and transport industry, according to ITJuzi. South China Morning Post

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