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Jack Ma’s Double-Whammy Marks End of China Tech’s Golden Age

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Jack Ma’s Double-Whammy Marks End of China Tech’s Golden Age
The full implications of Beijing’s rapid-fire moves against Jack Ma’s Internet empire in recent days won’t be apparent for weeks, but one lesson is already clear: The glory days for China’s technology giants are over.

The country’s government imprinted its authority indelibly on the country’s technology industry in the span of a few days. In landmark announcements, it slapped a record $2.8 billion (roughly Rs. 21,000 crores) fine on Alibaba Group for abusing its market dominance, then ordered an overhaul of Ant Group. On Tuesday, regulators summoned 34 of the country’s largest companies from Tencent to TikTok owner ByteDance, warning them “the red line of laws cannot be touched.”

The unspoken message to Ma and his cohorts was the decade of unfettered expansion that created challengers to Facebook and Google was at an end. Gone are the days when giants like Alibaba, Ant or Tencent could steamroll incumbents in adjacent businesses with their superior financial might and data hoards.

“Between the rules for Ant and the $2.8 billion (roughly Rs. 21,000 crores) fine for Alibaba, the golden days are over for China’s big tech firms,” said Mark Tanner, founder of Shanghai-based China Skinny. “Even those who haven’t been targeted to the same extreme will be toning down their expansion strategies and adapting many elements of their business to the new bridled environment.”

Tech companies are likely to move far more cautiously on acquisitions, over-compensate on getting signoffs from Beijing, and levy lower fees on the domestic Internet traffic they dominate. Ant in particular will have to find ways to un-tether China’s largest payments service from its fast-growth consumer lending business and shrink its signature Yu’ebao money market fund — once the world’s largest.

Even companies that have been less scrutinized so far – like Tencent or Meituan and Pinduoduo – are likely to see growth opportunities curtailed.

The watershed moment was years in the making. In the early part of the last decade, visionary entrepreneurs like Ma and Tencent co-founder Pony Ma (no relation) created multi-billion dollar empires by up-ending businesses from retail to communications, elevating the lives of hundreds of millions and serving as role models for an increasingly affluent younger generation. But the enormous opportunities coupled with years of hyper-growth also fostered a winner-takes-all land-grab mentality that unnerved the Communist Party.

Regulators grew concerned as the likes of Alibaba and Tencent aggressively safeguarded and extended their moats, using data to squeeze out rivals or forcing merchants and content publishers into exclusive arrangements. Their growing influence over every aspect of Chinese life became more apparent as they became the conduits through which many of the country’s 1.3 billion bought and paid for things – handing over vast amounts of data on spending behavior. Chief among them were Alibaba and Tencent, who became the industry’s kingmakers by investing billions of dollars into hundreds of startups.

All that came to a head in 2020 when Ma – on the verge of ushering in Ant’s record $35 billion (roughly Rs. 2,62,470 crores) IPO – publicly denigrated out-of-touch regulators and the “old men” of the powerful banking industry.

The unprecedented series of regulatory actions since encapsulates how Beijing is now intent on reining in its Internet and fintech giants, a broad campaign that’s wiped roughly $200 billion (roughly Rs. 14,99,840 crores) off Alibaba’s valuation since October. The e-commerce giant’s speedy capitulation after a four-month probe underscores its vulnerability to further regulatory action.

Chinese titans from Tencent to Meituan are next up in the cross-hairs because they’re the dominant players in their respective fields. Regulators may focus on delivery giant Meituan’s historical practice of forced exclusivity – particularly as it expands into burgeoning areas like community e-commerce – while investigating Tencent’s dominant gaming service and whether its messaging platform WeChat excludes competitors, Credit Suisse analysts Kenneth Fong and Ashley Xu wrote Tuesday.

“The days of reckless expansion and wild growth are gone forever, and from now on the development of these firms is likely going to be put under strict government control. That’s going to be the case in the foreseeable future,” said Shen Meng, a director at Beijing-based boutique investment bank Chanson & Co. “Companies will have to face the reality that they need to streamline their non-core businesses and reduce their influence across industries. The cases of Alibaba and Ant will prompt peers to take the initiative to restructure, using them as the reference.”

The revamp of Ant – a sprawling financial titan once worth as much as $320 billion (roughly Rs. 23,99,710 crores) – is a case in point. In its ruling, the People’s Bank of China said it wanted to “prevent the disorderly expansion of capital” and ensure that all of Ant’s financial business will be regulated under a single holding company.

What Bloomberg Intelligence Says
Ant Group’s prospects could wane further after China halts improper linking of Alipay payments with Ant’s other products. New curbs on Yu’ebao also hurts its wealth business. Alipay’s 711 million active users are its potential fintech-product buyers. Ant’s valuation could now be near banks we cover (average 5x forward earnings) compared with over 30x at its IPO attempt.

Ma’s company will likely have to apply and register to get into any new areas of finance in future – a potential ordeal given the infamously creaky wheels of Beijing bureaucracy. It faces restrictions in every key business – from payments and wealth management to credit lending.

The company’s most lucrative credit lending arm will be capped based on registered capital. It must fold its Huabei and Jiebei loan units – which had CNY 1.7 trillion (9roughly Rs. 19,50,880 crores) of outstanding loans between them as of June – into a new national company that will likely raise more capital to support its operations. Ant must reduce its Yu’ebao money market wing, which encompasses a self-operated Tianhong Yu’ebao fund that held $183 billion (roughly Rs. 13,71,890 crores) of assets as of the end of 2020, making it one of the largest pools of wealth in the world.

Alibaba appears to have got off lightly in comparison. While the $2.8 billion (roughly Rs. 21,000 crores) was triple the previous record set by Qualcomm’s 2015 penalty, it amounts to under 5 percent of the company’s annual revenue. Far more insidious however is the threat of future action and the dampening effect it will have on Alibaba.

The fine came with a plethora of “rectifications” that Alibaba will have to put in place – such as curtailing the practice of forcing merchants to choose between Alibaba or a competing platform. Executives also volunteered to open up Alibaba’s marketplaces more, lower costs for merchants while spending “billions of yuan” to help its clients handle e-commerce.

Ant will likewise have to tame its market share grab in payments. Changes to that business, which is fending off Tencent’s WeChat Pay, were among the top priorities regulators outlined. Ant pledged to return the business “to its origin” by focusing on micro-payments and convenience for users.

The most amorphous yet dire threat lies in the simple principle implicit in regulators’ pronouncements over the past few days: that Beijing will brook no monopolies that threaten its hold on power.

The central bank warned in draft rules released previously that any non-bank payment company with half of the market for online transactions – or two entities with a combined two-thirds share – could be subject to antitrust probes. If a monopoly is confirmed, the State Council or cabinet has powers to levy a plethora of penalties, including breaking up the entity.

That’s an entrepreneur’s ultimate nightmare.

“Everyone is on the regulators’ radar, and it really depends on each one’s reaction next,” Chanson & Co.’s Shen said. “It’s better to take the initiative to self-rectify, rather than having to go through restructuring ordered by the regulators, which may not have your best interests in mind.”

(Updates with a graphic of this week’s stock gyrations in fifth paragraph)
– With assistance from Coco Liu.

© 2021 Bloomberg LP


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Microsoft Partners With Inworld to Bring AI Game Development Tools to Xbox

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Microsoft Partners With Inworld to Bring AI Game Development Tools to Xbox


Microsoft is teaming up with Inworld AI to create game development tools for Xbox, enabling developers to create characters, generate entire scripts and quests, and more. The multi-year deal brings an AI design copilot and an AI character runtime engine to the forefront, both of them being totally optional to use and to varying degrees. Of course, the use of AI in art has been criticised by many for simply lacking originality, in addition to running the risk of fewer jobs for artists — a growing fear among many considering the alarming number of layoffs seen at game studios this year in an attempt to cut costs.

“At Xbox, we believe that with better tools, creators can make even more extraordinary games,” Haiyan Zhang, GM, Xbox Gaming AI, said in a blog post. “This partnership will bring together: Inworld’s expertise in working with generative AI models for character development, Microsoft’s cutting-edge cloud-based AI solutions including Azure OpenAI Service, Microsoft Research’s technical insights into the future of play, and Team Xbox’s strengths in revolutionizing accessible and responsible creator tools for all developers.”

The aforementioned AI design copilot is a toolset that will help game designers turn prompts into scripts and dialogue trees. In contrast, the character runtime will enable dynamically generated plot beats and quests. We’ve already seen heavy AI integration in games by way of procedural generation — a more recent example being the 1000+ planets in Starfield. Not to mention, enemy AI has been around for way longer.

Inworld made headlines in August when it launched a modded story mode for Grand Theft Auto V, Sentient Streets, in which players had to investigate the rise of a bizarre AI-worshipping cult — a segment loaded with characters that spoke in AI-generated dialogue, on the fly. The mod was later taken down by publisher Take-Two, leaving a permanent strike on the creator Bloc’s YouTube channel. As per The Verge, Inworld’s AI technology can also be used for narration in top-down RPGs to warn players about any events awaiting off-screen and respond to questions like we’ve seen in the past year with AI chatbots like ChatGPT and Bing Chat. Microsoft has also been heavily banking on artificial intelligence, having made a $10 billion (about Rs. 83,254 crore) investment in OpenAI. The company has also integrated AI tools into its popular suite of services and also added an AI copilot to Windows.

Despite being a Microsoft-affiliated AI toolset, it would be interesting to see whether titles using them will be allowed to thrive on other platforms. In July, Valve claimed that it would be cracking down on games that included AI-generated assets if the developer didn’t own the copyright to the piece of art. For the uninitiated, when you insert a prompt to create something in AI, the software simply repurposes existing assets found online and mushes them together — basically stealing from other artists and writers without appropriate commercial licenses. Infringing them would lead to the game not being distributed on Steam, forcing the developers to seek proper licenses for the asset by reaching out to the AI companies involved. It’s unclear how Microsoft’s partnership will play out — as long as AI content is being used as a catalyst to innovate and create something new, it should be fine.


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BSNL Offers Free 4G SIM Upgrade: Here’s How to Get It

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BSNL Offers Free 4G SIM Upgrade: Here’s How to Get It


BSNL (Bharat Sanchar Nigam Limited) is a state-owned telecommunication company in India. Earlier this year in May, the government said that the firm started rolling out 4G services in the country. By December, the networks were said to be upgraded to 5G. However, at the India Mobile Congress, BSNL chairman P K Purwar said that the company will launch 4G services in December and then roll it across the country by June 2024. The chairman added that the 5G upgrades will take place after June next year.

In a post on X shared by BSNL’s Andhra Pradesh (@bsnl_ap_circle) unit, the company confirmed that BSNL users can upgrade their older 2G or 3G SIMs to a 4G SIM for free. Not only will the upgrade be free, but a promotional image shared with the post suggests that users who opt for the upgrade will also receive 4GB of free data that will be valid for three months. It is speculated that BSNL is aiming to boost its upcoming 4G services with this offer. The announcement was first spotted by Telecom Talk.

To access the free data offer and the free upgrade, BSNL users are requested to get in touch with executives at BSNL’s Customer Service Centre, franchisee or retailer stores, or contact one of their Direct Selling Agents (DSA). The promo image also adds in a finer print that the offer is available with certain terms and conditions, but hasn’t detailed any, so far.

Reliance’s Jio recently launched the 4G-supported Bharat B1 feature phone in India. The handset is priced at Rs. 1,299 in India. Alongside 4G connectivity, the phone comes with JioCinema and JioSaavn applications pre-installed.

The Jio Bharat B1 is equipped with the JioPay application, which is said to allow users to make UPI payments. Aiming to increase accessibility, the phone supports 23 languages overall, including multiple regional languages.


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Realme GT 5 Pro Teased to Feature 3,000 Nits Display; More Details Revealed

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Realme GT 5 Pro Teased to Feature 3,000 Nits Display; More Details Revealed


Realme GT 5 Pro’s launch date is not far away. The Chinese smartphone brand on Tuesday (November 7) confirmed the arrival of the new GT series smartphone in its home country. The Realme GT 5 Pro is teased to come with a display with over 3000 nits of peak brightness. It is also confirmed to pack a larger heat dissipation area for thermal management. The handset will ship with Qualcomm’s new Snapdragon 8 Gen 3 SoC. The Realme GT 5 Pro is expected to come as a successor to the Realme GT 5 that debuted in China in August.

Realme, via Weibo, announced the arrival of the Realme GT 5 Pro in China. The display of the handset is confirmed to offer 3000 nits peak brightness. It has also been teased to offer heat dissipation with a surface area of around 10,000mm2. It is confirmed to ship with Qualcomm’s new Snapdragon 8 Gen 3 SoC. The post doesn’t specify the exact launch date of the smartphone, however, given the release of the teasers, the launch could be just around the corner.

The Realme GT 5 Pro has been in the news a lot lately. It is expected to feature a 6.78-inch (1,264×2,780 pixels) AMOLED display and is tipped to come in 8GB, 12GB, and 16GB RAM options along with 128GB, 256GB, 512GB, and 1TB inbuilt storage options.

For optics, the Realme GT 5 Pro is said to have a triple rear camera unit comprising two 50-megapixel sensors and an 8-megapixel shooter at the rear. The camera setup might include a Sony LYTIA LYT808 sensor, an OmniVision OV08D10 secondary sensor, and a Sony IMX890 telephoto sensor. For selfies, there could be a 32-megapixel sensor at the front. It is said to carry a 5,400mAh battery with support for 100W wired charging and 50W wireless charging.

The Realme GT 5 Pro is expected to come with upgrades over Realme GT 5. The latter was launched in China in August with a price tag of CNY 2,999 for the base model with 12GB of RAM and 256GB of storage.


The Motorola Edge 40 recently made its debut in the country as the successor to the Edge 30 that was launched last year. Should you buy this phone instead of the Nothing Phone 1 or the Realme Pro+? We discuss this and more on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.
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