Chinese start-ups voyage overseas as trade between China and Latin America multiplies

Updated 2018-04-08 13:15:20

The golden opportunity for Chinese start-ups may have arrived.

Things are looking good between China and Latin America. Trade between China and Latin America has multiplied 22 times since 2000, a stark contrast to Latin American trade with the U.S., which merely doubled in the same time period, according to Angel Melguizo, Chief Economist at OECD Development Centre.

In 2015, China promised 0 billion in trade and 0 billion in direct investment to Latin America within a decade, with infrastructure being one of the key areas of cooperation.

But Chinese involvement in Latin America is not just about infrastructure.

As competition for Chinese start-ups grows fiercer domestically, many firms are looking overseas for new opportunities. Latin America stands out in the global market as it wakes up to tech start-ups and is expected to become a battleground for global tech giants in the years to come.

China's Transsion Holdings, a mobile phone manufacturer which dominates the African market, is expanding to Latin America with the launch of its new phone in March.

This January, China's ride-sharing giant Didi Chuxing purchased 99 Taxis, Brazil's leading ride-hailing company. In February, Mobike, one of China's biggest bike sharing platforms, launched in San Diego.

Smaller start-ups have also started to enter the Latin American market. Some may have never set foot in the distant land, but have developed popular local apps from their offices in China.

Others, like Noticias Aguila, a news aggregator developed by Shenzhen Inveno Technology, managed to set up an office in Mexico and attract over 20 million users, with over 10 million Facebook followers within less than two years, becoming the biggest mobile media platform in Latin America.

The company started out as a news aggregator in China until its CEO, Tang Xin, a former Tencent employee, started to worry about the growing domestic competition.

"Competition in the news aggregator market in China is extremely intense. Apart from us, there are a lot of big players. There are vast blue oceans out there, why do we limit ourselves in this red ocean?" Tang told China Entrepreneur magazine in 2017.

In the business world, a blue ocean refers to market space untainted by competition, while red oceans refers to the competitive, "bloody" existing market.

Taking advantage of his experience in the Chinese market, Inveno launched Noticias in Mexico, Argentina, Chile and Columbia, and has now become one of the most successful examples of Chinese start-ups in Latin America.

Smiling at you

Hao Jie, an entrepreneur and partner of Magma Partners, one of the leading high-tech funds in Latin America, describes Latin America as a "virgin land" for start-ups, largely unnoticed by global capitals until just a few years back.

He expects more Chinese start-ups to join the trend in the coming two to three years. To help Chinese entrepreneurs launch in Latin America, Magma Partners recently launched the Sino-Latin American Accelerator, based in Shanghai.

In the meantime, many Latin-American start-ups are looking into China for opportunities. They include ClearingPoint, a Shanghai-based fin-tech start-up founded by a Latin American offering international payment solutions between Asia and Latin America.

The trend occurs at a time when U.S. Presidents Donald Trump has been neglecting Latin America and repeatedly insulting Mexico.

Hao says many Latin American entrepreneurs are increasingly disappointed by U.S. investors. He quotes the CEO of a Latin American company as saying, "I feel like Silicon Valley is disappearing. Investors from Silicon Valley are more interested in the proportion of racial and ethnic minorities in my company than what we actually do in business."

As a result, now when the Latin American companies see a Chinese face, they're eager for cooperation. "If you have a yellow face, you'll find the entire world smiling at you," Hao said.

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