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First, a quick housekeeping note: China Report will be off for a few weeks. I’ll be away from work for the rest of the month, so the newsletter will take a brief pause. It will return on May 9 with more news and analysis of China’s tech world. So stay tuned! In the meantime, I hope you’ll reach out and tell me what you’ve enjoyed about the newsletter so far—and what you’d like to read more about in the future.
I’m currently traveling in Turkey, and even though I’m just a few days from starting a vacation and could be spending my time outside petting the street cats of Istanbul, I’m a journalist. I can’t not pay attention to the tech news around me. And 2023 is actually a big year for Turkey, but not only because it’s the republic’s 100-year-anniversary, with a high-stakes election coming up. On the technology side of things, this is the year when the country starts shipping its first domestic electric vehicle, a symbol of future economic growth.
In 2018, five of Turkey’s most influential companies formed Togg, the country’s first electric-vehicle maker. After a few rounds of delay, the EVs made by Togg are finally expected to hit the market this year, and they already seem pretty popular: just last week, the company completed a lottery drawing that selected 20,000 people to become the first batch of owners out of nearly 180,000 applicants. (The very first car was delivered on Monday to the Turkish president, Recep Tayyip Erdoğan, who has made Togg an important political project of his own.)
After working on my explainer about how China built its world-leading EV industry, I can see a lot of similarities between the path China took and the path Turkey is now on. Both countries are automotive manufacturing powerhouses but aren’t satisfied with staying at the lower end of the auto supply chain. EVs offer the chance to enter a new and fast-growing market, one that is poised to disrupt the traditional automotive industry and become an essential part of the global energy transition. The difference is that China is already a few laps into the EV race, while Turkey has just entered it.
But there are more material connections between the two countries. Starting an EV business from scratch is hard; making batteries—the most important part of an EV—is even harder. That’s why Turkey isn’t going it alone and is instead partnering with Farasis, one of the top Chinese battery companies, just behind the industry leaders like CATL, BYD, and CALB. In 2019, Togg and Farasis formed a joint venture named SIRO, each taking a 50% stake, to build a battery plant in Gebze, Turkey, that will produce lithium-ion batteries to power Togg’s electric cars.
Farasis is not the only Chinese tech company making its way into Turkey. In January, a Turkish newspaper reported that Alibaba is planning on investing more than $1 billion to build a data center and a logistics center in Turkey. Alibaba owns Turkey’s biggest e-commerce company, Trendyol, and its overseas shopping app AliExpress is often the most downloaded free app in Turkey’s Google Play store. Shein, another important Chinese player in the fast-fashion industry, has also started manufacturing in Turkey after producing exclusively in China for a decade, the Wall Street Journal reported in December.
It’s not surprising that these companies are choosing Turkey, considering that Turkey has always had a close economic relationship with China. It plays a strong role in Beijing’s Belt and Road Initiative, and that role has only strengthened since the start of the Russia-Ukraine war, which made railway logistics through Russia less dependable.
But Turkey is also important because, sitting at the intersection of Europe and Asia, it can be an entry point for Chinese tech companies aiming to go into the European market.
The EV industry is a good example of that. Chinese battery companies have met with resistance trying to make inroads in the US. For example, when Chinese battery giant CATL entered into a deal with Ford in February to make EV batteries in Michigan, Senator Marco Rubio immediately asked the Committee on Foreign Investment in the United States to review the deal and also sought to ban EV companies from receiving tax credits if they used Chinese technologies.
Europe seems to be a more hospitable market, but it hasn’t been smooth sailing there either. In 2019, Mercedes-Benz took a 3% strategic stake in Farasis to work together on supplying EV batteries. They planned to build a battery plant in Germany, but that has been severely delayed and even reportedly canceled. Turkey seems to be Farasis’s backup plan.
When we talk about the globalization efforts of Chinese tech companies, the spotlight is usually cast on the United States and how companies like TikTok and Shein are succeeding or floundering in the US market. But it’s good to remember that these Chinese companies are also expanding into other corners of the world—and that some countries, like Turkey, are even actively courting their presence.
As the US-China relationship remains heated, Chinese tech companies will be even more inclined to give up on entering the US and to turn to other markets. It will be interesting to see how that dynamic shapes tech industries and local communities around the world.
Where else in the world have you seen Chinese tech companies making significant inroads? Let me know what you’ve observed at email@example.com.
Catch up with China
1. The Chinese government launched a national security review of US chip manufacturer Micron Technology on Friday, likely to retaliate against the escalating restrictions that the US government has placed on Chinese chip-making companies. (Financial Times $)
2. A new indictment against Sam Bankman-Fried claims that the FTX founder successfully bribed at least one Chinese government official with a $40 million payment in 2021. (NBC News)
3. A US ban on TikTok would affect not only American users but also TikTok influencers around the world who rely on advertising deals and traffic coming from the US. (Rest of World)
4. Pinduoduo, a popular Chinese e-commerce app, used malware to exploit vulnerabilities in Android operating systems and obtain user data to boost sales. (CNN)
6. To restrict Beijing’s influence in Europe, US officials secretly (and successfully) campaigned to block a port renovation deal between Croatia and China. (Wall Street Journal $)
7. Yang Bing-Yi, cofounder of the Taiwanese soup dumpling chain Din Tai Fung, which now boasts more than 170 locations around the world, has died at the age of 96. (NPR)
8. TikTok and Amazon tried to bring the Chinese livestream shopping business to the United States, but US consumers are just not interested. (Wired $)
Lost in translation
After spending millions of dollars on two Super Bowl ads, Temu, the new e-commerce app owned by Chinese company PDD Holdings, is struggling to deal with surging sales. According to Chinese business publication Jiemian, Temu has been having problems with its warehouses and logistics in the past two weeks after a sharp increase in orders. It even had to pause user acquisition activities to give other departments some time to catch up.
Temu is trying to replicate the success of Pinduoduo, its sister app in China. Like Pinduoduo, Temu sells products at extremely discounted prices. To enable those discounts, Temu has instituted many strict pricing policies that have infuriated its suppliers. Any product that hasn’t sold 30 pieces in 30 days on the platform is labeled “unsellable” and must either have its price lowered or be removed from the website.
In January, when most suppliers took a break during China’s Lunar New Year holiday, Temu instituted a new rule that allowed the platform to arbitrarily lower listing prices without the suppliers’ agreement. Feeling exploited by the platform, many Chinese suppliers decided to end their business with Temu.
One more thing
You really can get anything online. Last week, the Chinese private satellite company Commsat put three types of commercial satellites up for sale on Taobao, a popular Chinese e-commerce shop. The prices ranged from $290,000 to over $4 million (launch costs included). The mid-range option, also the most gimmicky one, is a satellite that holds a selfie of you while it orbits the Earth (lower middle image). The other two only have more traditional functionalities, like remote sensing and communication. The company has already had two buyers.