The combined value of Baidu, Alibaba and Tencent (BAT) is estimated at USD 1 trillion.

Alibaba and Tencent alone currently account for almost one-third of the MSCI China Index.

As of March 2018, the number of Chinese unicorns had risen to 164, with their combined valuation estimated at USD 628 billion. Around 50% of these companies are controlled or backed by BAT.

BAT’s ambitions, however, extend far beyond the domestic market. The three companies have invested in more than 150 companies worldwide, spanning industries from AI to biotechnology.

With access to an internet user base larger than those of the United States and Europe combined, BAT possesses a vast trove of big data.

China’s homegrown technology giants are continuously advancing artificial intelligence technologies, developing everything from autonomous vehicles and smart cities to facial recognition and AI-powered healthcare platforms.
Benefiting from a favorable environment for domestic players and strict restrictions imposed by the Chinese authorities on FAMGA companies, including the displacement of Facebook, Google and others from the market in 2009–2010, BAT has become increasingly involved in government initiatives.

In November 2017, China’s Ministry of Science and Technology announced a new wave of “open innovation platforms,” including Baidu’s autonomous driving platform, Alibaba Cloud’s smart-city system, and Tencent’s medical imaging and diagnostics system.

As BAT becomes increasingly involved in the government agenda, the companies are also expanding their influence across other countries and consumers in the Asia-Pacific region, recruiting talent from the United States, investing in startups from Canada and Israel, and establishing global partnerships in areas ranging from smart healthcare to conversational AI.
By adopting platform-based business strategies involving horizontal expansion through major M&A transactions and equity investments, BAT has gained unprecedented influence over virtually every aspect of end users’ lives.

This article examines some of the largest transactions and public-private cooperation strategies that have brought these three Chinese AI giants closer to global dominance.

Baidu

Of the three Chinese BAT giants, Baidu was the first to explore and apply deep learning technologies. A major milestone for the company was hiring Andrew Ng, who headed Baidu’s artificial intelligence laboratory in Silicon Valley.

By 2015, Baidu’s AI algorithms had surpassed humans in Chinese-language speech recognition. This happened one year before Microsoft achieved a similar result for English.

By 2017, China’s leading search engine was at the forefront of national R&D initiatives in AI, autonomous vehicles and international open-source platforms.

With approximately CNY 21.1 billion (USD 3.1 billion) in revenue in the second quarter, Baidu continued to exceed analysts’ expectations. Total revenue also increased by 31% year on year.

As Baidu plans to expand into adjacent markets, this growth is expected to continue.

After registering a number of patents, Baidu announced a new international open-source platform called Apollo, designed to transform autonomous driving.

The system had already attracted more than 95 partners, including Nvidia, Daimler and Ford. The Apollo ecosystem makes its code available to everyone. Companies can therefore use existing solutions instead of building their own from scratch, significantly accelerating development.
As of June 2018, Baidu had deployed its autonomous vehicles on public roads in China.

While conducting tests on an unused highway in Tianjin, one of China’s major industrial cities, Baidu also signed an agreement with the government of Xiong’an New Area in Hebei Province to develop an “AI city.” The city is expected to feature driverless vehicles, smart traffic management systems, facial recognition technologies and construction materials equipped with embedded sensors.

But Baidu’s ambitions extend further.

The company already leads China’s National Engineering Laboratory for Deep Learning Technology and Applications and is also developing neural-network chips and intelligent robots with government support.
Baidu is also making a major push into speech recognition as it seeks to establish a strong position in the voice assistant market.

After securing industry patents in the United States and Japan, Baidu introduced a three-in-one solution for the Japanese market called Aladdin, combining a smart speaker, smart lamp and smart projector. The product was presented at CES 2018, the Consumer Electronics Show.

Built on Baidu’s AI operating system DuerOS, Aladdin is one of several consumer products expected to compete with Amazon Alexa and Google Assistant.

Judging by patents registered by the Chinese search company in the United States, China, Europe, South Korea and Japan, a robot equipped with speech and facial recognition capabilities may also enter the market.

While Baidu focuses on autonomous driving and voice recognition, Alibaba has been assigned a leading role in the development of smart cities.

Alibaba

China’s e-commerce leader Alibaba has fundamentally transformed the country’s retail and financial sectors.

With sales from its core business growing by 62% in the first quarter of the year, Alibaba has built far more than a digital marketplace.

Ant Financial Services Group, an Alibaba affiliate, is transforming financial technology. Ant Financial controls the world’s largest money market fund, has issued loans to tens of millions of people, and processed more payments in 2017 than Mastercard.

Alibaba operates China’s hugely popular online retail platforms Tmall (B2C) and Taobao (C2C) and is also expanding abroad through AliExpress. Yet one of its most valuable assets is the enormous volume of real-time data generated through the Alipay mobile payment system.

While mobile payments account for less than 1% of in-store transactions in the United States, they have already become an integral part of everyday life in China.

People buy fruit at street markets by scanning QR codes. Donations to charities or directly to people in need can be made through Alipay or WeChat Wallet. At one KFC restaurant in Hangzhou, customers can even use a new Alipay feature to pay with their face.

Facial recognition is already available for user registration in Alipay. At the time, the service had more than 500 million users worldwide.

Alibaba, however, is interested in much more than e-commerce and mobile payments. Having signed cooperation agreements with the governments of Macao and Hangzhou, the company is at the forefront of smart-city development.

Its cloud-based ET City Brain system uses AI algorithms to manage traffic, healthcare and urban planning. The system receives data from cameras, sensors, social media and government sources.

To advance urban planning technologies, Alibaba signed a cooperation agreement with Nvidia, which developed a deep-learning-based video platform for smart cities.

Alibaba also invested in Chinese company SenseTime, described at the time as the world’s most valuable AI startup, specializing in computer vision.
During the same year, Alibaba invested in Nexar, a computer-vision-based road analysis system, and signed an agreement with the Malaysian government to develop the country’s first City Brain initiative.

By analyzing road conditions, City Brain can optimize traffic flows and dispatch emergency services to accident locations.

Alibaba’s influence extends far beyond Asia. The company operates in more than 200 countries and is launching a USD 15 million initiative to study artificial intelligence, quantum computing and other emerging high-tech markets.

Alibaba also plans to attract leading specialists and establish AI research centers under its DAMO Academy initiative in Tel Aviv and six other cities.

Tencent

When it comes to Chinese technology giants with no direct Western equivalent, Tencent stands apart.

After surpassing Facebook in market capitalization in November 2017, Tencent became the first Chinese company to exceed a valuation of USD 500 billion.

Its messaging platform WeChat, used by more than 1 billion people, can be described as a multifunctional “Swiss Army knife.”

WeChat is an ecosystem of unprecedented scale, combining functions associated with many major global companies and services, including Facebook, iMessage, PayPal, UberEats, Instagram, Expedia, Skype, WebMD, eVite and GroupMe.

Without leaving the app, companies can organize large-scale events, users can order services to their homes, and wealthy individuals can make large payments.

After launching its basic functionality, WeChat surpassed 100 million active users within one year. By its second anniversary, the number had exceeded 300 million. The platform steadily expanded its functionality long before WhatsApp began considering similar features.

In the previous year, it was announced that 38,000 healthcare organizations had official WeChat accounts. Patients at 60% of these organizations could register for appointments online, while more than 2,000 organizations accepted payments through WeChat Wallet.

Tencent has also strengthened customer loyalty by becoming a leader in the mobile gaming market. The company owns the rights to the hugely popular League of Legends, played by more than 100 million people each month.
By rapidly addressing users’ everyday needs, WeChat has become virtually indispensable in daily life and achieved a level of customer loyalty that Western brands can only aspire to.

Under the guidance of the Chinese government, Tencent has also been making significant progress in applying artificial intelligence to healthcare.
The company is strengthening its AI expertise by recruiting leading researchers and establishing a research center in Seattle. Seeking to become an international player in genomics and personalized medicine while developing AI-powered healthcare in China, Tencent is actively investing in and cooperating with startups around the world.

In April of that year, Tencent began cooperating with British startup Babylon Health, whose virtual assistant enables Chinese users to report symptoms and receive immediate medical feedback.

Tencent also participated in a USD 154 million investment round for Chinese AI unicorn iCarbonX. Seeking to develop a complete digital representation of a person’s biological self, iCarbonX acquired several US startups specializing in personalized medicine.

In addition to its own Tencent Miying Healthcare AI platform, designed to assist healthcare institutions with cancer diagnostics, Tencent has been rapidly entering the drug-development market. During the year, it participated in two multimillion-dollar deals with US startups developing drugs using AI technologies.

Conclusion
China’s technology giants are driving transformative changes across a wide range of industries, from smart urban infrastructure to personalized medicine.

But they are not only transforming industries within China. They are also bringing enormous amounts of capital and cutting-edge technologies to startups and markets around the world. The pie is not getting smaller — it is getting bigger.

And China itself, with BAT at the helm, shows no signs of slowing down.