Alibaba symbolizes China’s new tech giants

BEIJING (AP) – Alibaba Group’s US stock offering is a wakeup call about an emerging wave of technology giants in China’s state-dominated economy.

Until now, Chinese companies that made a splash in global stock markets were state-owned banks and oil companies. But they are big by decree, not because they sell products customers want.

By contrast, private sector tech champions such as Lenovo Group in personal computers and search engine Baidu Inc. survived bruising competition to rise to the top of their industries.

Lenovo overtook Hewlett Packard Co. to become the No. 1 global PC maker last year. Baidu ranked No. 31 on Forbes magazine’s latest list of the most innovative companies. Huawei Technology Ltd. unseated Sweden’s Ericsson in 2012 as the biggest maker of network gear.

Each success is unique, but they share common roots in an environment in which the ruling Communist Party has spent heavily since the 1990s to train engineers and expand Internet access. Communist leaders have pursued a hybrid strategy of encouraging inflows of technology and investment while limiting foreign ownership and censoring online material.

“We’ve seen a pretty careful balancing of encouraging competition and investment and also control,” said Duncan Clark, chairman of BDA China, a research firm in Beijing, and an adviser to Stanford University’s China 2.0 Program in entrepreneurship.

China’s tech giants expanded while attracting little notice abroad in part because many focus on a fast-growing home market in the world’s second-largest economy. They have little incentive to take on the risk and distraction of expanding overseas.

Tencent Holdings Ltd., with a stock market valuation of $150 billion, is known abroad for its WeChat instant messaging service, which has attracted millions of foreign users. But most of its $3.1 billion in 2013 profit came from its role as China’s leading provider of online and smartphone-based games.

Alibaba, founded in 1999 to link foreign retailers with Chinese producers of goods from costume jewelry to industrial hoses, also has stepped up its focus on its home market. Since the start of 2013, the company has spent more than $2 billion to create or acquire Web-based video, finance and other consumer businesses. Chinese buyers accounted for a big portion of last year’s $248 billion in sales on its e-commerce platforms.

The company’s shares are expected to start trading Friday in New York after an initial public offering that is set to be the biggest ever, possibly raising $25 billion. But many Chinese tech companies show no interest in expanding to foreign stock exchanges.

Tencent is traded in Hong Kong but has announced no plans for listings outside Greater China. Huawei, founded in 1988 by a former military engineer and owned by its employees, has begun reporting financial results like a publicly traded company in an attempt to ease security concerns in Western markets, but has no plans to join any stock market at home or abroad.