Tencent, a China-based global Internet giant, as an intersection reveals the dynamics and interactions between the two poles of growth in the global political economy—China and the Internet.
Tencent has emerged in a historical context—primarily domestic but also global. Tracing through the discourse and rhetoric changes in the numerous policies the Chinese government issued and the nation’s social-economic performance as the outcomes of these policies shows that China’s Internet has gone through four developmental stages. The Internet transformed from an infrastructure network that facilitated national economy in agrarian and industrial growth to a pillar industry itself that (re)shaped the political- economic epicenter surrounding ICT businesses. Tencent’s economic profile, particularly its expansion strategies, reveals it as highly integrated, both horizontally and vertically, and diversified. In its ownership and control, Tencent has been substantially transnationalized in terms of corporate governance and institutional connections. Tencent’s transnationalization is further demonstrated by its extensive influences in global cultural sphere via popular products such as QQ, WeChat, and gaming. The four chapters show how Tencent, as an epitome of the larger transformation in China’s Internet industry, has been integrated and transnationalized with the joint efforts of state entities and units of domestic and transitional capital.
The first contribution of this book is identifying the four historical periods of China’s Internet development. The first stage was between 1987 and 1993 when various science and technology research entities initiated research on computer networks. After China established the first full Internet operation under TCP/IP protocol in 1994, the nation’s Internet building entered a second stage. In 1994 and 1995, an enormous amount of effort and money was put into constructing the information infrastructures to facilitate the industrial growth. Some high-profile projects are the China Education and Research Network (CERNET), ChinaNet, and the Golden Projects. A third stage witnessed an intensive development in the Internet and ICT industry between 1996 and 2010. With the further opening up of the domestic market to private capital and, especially, foreign capital, many private companies in Internet value-added services emerged, among which were some well-known names: Alibaba, Baidu, JD, NetEase, Sina, Sohu, and Tencent. This stage also paralleled the Internet boom in the United States, where newly established technology companies were springing up for initial public offerings on the stock exchange markets. The fourth period responded to the 2007–8 global financial crisis and saw the Internet industry elevate to a pillar industry in China’s economic development. While this is still ongoing, a recent “Internet Plus” strategy aims at integrating the Internet into all aspects of the national political economy and building a networked Chinese society.1
History clearly shows that China’s Internet development was highly state driven. Contrary to the conventional belief that the Chinese government has been a holdback, it actually has stood on the forefront of commercializing the ICT sector. State policies were made to liberalize the domestic market where private capital assumed significant roles in the Internet industry. In addition, state entities at various levels were reorganized in ways that facilitated the efficient leadership and coordination on matters of industrialization and informatization.
The rise of Tencent is a story of the state and private capital. Tencent emerged at a time private capital and foreign investors were encouraged to build a Chinese Internet industry.
Transnational capital also was significant in Tencent’s evolvement and ownership structure. The China-based, transnational Internet company has incorporated transnational elements since its early stages. In the first two years of Tencent’s establishment, it received investment from U.S.-backed IDG Ventures China (IDG Capital), Hong Kong-based PCCW, and South Africa-based MIH. Naspers, MIH’s parent company and a South Africa-based multinational media conglomerate, is still Tencent’s primary institutional stakeholder as of December 2018 with up to 33.10 percent of shares.2 In view of this capital structure and corporate governance, Tencent is a transnational Internet company almost by creation.
Owing partly to its global stakeholders and partly to expansion strategies, Tencent’s businesses have been highly transnationalized. Tencent has successfully expanded into South and Southeast Asia, South America, Europe, and North America through service provision, research and development, joint ventures, mergers and acquisitions, and strategic partnerships. Revenues from overseas markets have grown steadily and substantially since 2010. Tencent, through horizontal and vertical integration, is a major player in the global game industry.
Tencent is only one case of China’s burgeoning Internet companies. Such industry champions as Alibaba, Baidu, JD, NetEase, Qihoo363, and Sohu to different extents have incorporated transnational elements in their business and capital structures. This suggests a need in shifting questions from “how the Internet will change China” to “how China will change the global Internet.”3
The case study of Tencent shows that China’s Internet industry is multifaced and much broader than the simple production and provision of Internet access, content, and value. Not only has the Internet industry redefined social relations and online and offline lifestyles but, more critically, it also continued reshaping forms of production, distribution, and consumption. It has done so through horizontal and vertical integration, diversification, and transnationalization. This is a third contribution of the book.
The massive Tencent empire encompassed various aspects of Internet and broadly defined media and communication services. Tencent first started with diversifying its businesses within the realm of online and mobile value-added services and gradually made investments in other companies that allowed it to horizontally and vertically integrate in various markets. Since 2010, a more comprehensive and encompassing expansion strategy has matured as Tencent extended control into the broadly defined communication and cultural industry as well as more diversified businesses.
These features displayed by Tencent are in no way unique to Chinese Internet industry. Not only can similar traits of expansion be found in previous political-economy studies of Alibaba and Google and other U.S. Internet companies, but also these processes and strategies are consistent with what has been observed in media and communication industries over decades. In a more fundamental sense, the Internet industry has the business nature of any other capitalist industry, where the processes of concentration, commodification, and commercialization have been governing. It contributes to the growing trends of consumerism, commercialism, and digital capitalism that have dominated both Western societies and China’s growing consumer society.
Even more so, the Internet industry has been in alliances with many other powerful corporate players, such as the banks and financial institutions, as well as those public institutions that have been increasingly privatized, including education, research, and health care, among others.
A fourth contribution is a theoretical reconceptualization of the role of the state in the political economy of Internet studies. The development of Tencent needs to be understood in light of general economic and political contexts in and outside China, which entails regulations and deregulations on Internet industry, China’s market transformations and global reintegration, and the expansion of transnational digital capitalism.
Tencent’s successful commodification strategies with QQ and WeChat show that the central state has been actively making room for Internet capital to develop aggressively; the state did so by balancing, and to some extent limiting, the power of the telecommunication giants that used to be national champions. Such a protective and encouraging attitude to domestic Internet companies is also consistent with what Dan Schiller has observed in Chinese government’s approach to U.S.-based global Internet giants: “Although China’s party-controlled state welcomed unprecedented quantities of foreign direct investment into many industries, it was also impressively successful in setting terms of entry into the national market for the strategic communications and information sector.”4 While Google, Facebook, Apple, and Amazon have taken over most of the market in the rest of world, their Chinese counterparts—Alibaba, Baidu, and Tencent—still dominate the Chinese territory. These are indebted to the more constituting and encouraging than restraining role of the Chinese state.
Two emergent dynamics need to be further clarified: the Internet industry in the Global South countries—particularly, the emerging economies, such as Brazil, Russia, India, China, and South Africa (BRICS)—and the relations between the ICT industry and global financial sector.
The Chinese Internet industry—with Tencent being just one case—has been in active interactions with the digital industries from the emerging economies. While much ink has been spilled over the rising “locomotives of the South”—the BRICS countries—as vectors of change in the global economy, the unique pattern of interactions in their digital industries remains understudied.5 The political economy of the Internet industry in BRICS is significant not only to the understanding of the global ICT network but also to the changing geopolitics of information, which have been traditionally dominated by the United States and its allies in the Western world.
How much room does global capitalism hold for the rising Internet capital from BRICS? To what extent are the BRICS countries competing or collaborating with the existing leading players from the United States and Western Europe? In what ways does BRICS stand as an analytical unit that contributes to an updated understanding of global political economy? More than 15 years after the term “BRIC” was initially coined, a decade after the first BRIC summit was held, and five years after the BRICS development bank was proposed, these questions still sit unanswered. More important, the questions whether and to what extent BRICS would function as another unit of geopolitical power are acquiring new urgency in a drastically changing international political environment where North America, Europe, and the Middle East are witnessing uncertainties in their own ways.
Two critical tasks arise from these questions: to analyze the interconnections in portfolio investors, business sectors, suppliers, customers, managerial personnel, and human resources of the BRICS Internet companies, and, to map out the network among them. Building on the academic discussion of digital capitalism and global Internet governance, such a project would add knowledge about the geopolitics of information from the perspective of the Global South countries.
Also revealed in this book is an interweaving relationship between the global ICT industry and financial sector, as contemporary neoliberal ramifications. While initial growth of the Internet companies was heavily dependent on the participation of financial capital, a latest development saw a great number of technology companies become venture-capital investors themselves and participate in ICT investments.
In light of the critical role of venture capital in global ICT, the history, development, and regulations of it have yet been sufficiently investigated. This includes a set of questions: Since when and in what ways has venture capital come into being? How have the forms of venture capitalist investments in ICT industry evolved and varied in the United States and globally? Who are the primary stakeholders in venture capital, and how might these people’s social economic capital inform their investments? What is the role of state in the development of venture capital investments and transnational digital industry? What, if any, are the regulatory considerations regarding the use of venture capital in ICT sectors, and to what extent have these concerns been articulated? What power has venture capital exercised over Internet system development?
These questions speak to three interrelated, understudied aspects in the processes of transnational capitalist expansion in technology industry: the development of independent venture capital firms, such as Sequoia Capital, in the context of the rise of Silicon Valley; the evolvement of venture- capital arms in traditional major investment banks, such as Goldman Sachs’s venture capital and growth equity team; and the growth of venture-capital organizations within the Internet industry itself, such as IDG Ventures. To trace the histories of these three types of entities and to analyze the political-economic contexts that have enabled and conditioned their development would demonstrate how the participation of venture capital investments has further consolidated and accelerated the private actors’ dominance over the provision system of global communication and information.
Foregrounding the ICT sector as an important and ever-burgeoning vehicle for global capitalist expansion orchestrated by the neoliberal states and private capital, the intertwined relations between global financial and ICT sectors not only stand as a vector of contemporary social changes but also shed light on the trajectory of the global financial and digital capitalism. Christian Fuchs notes about the relation between information economy and crisis that
To make sense of where the current ICT system leads and what crisis and/or opportunities lie ahead is perhaps an ongoing intellectual puzzle, the solution to which can only be rooted in looking back and understanding the history.