Why China’s tech giants are going rural

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Just a week ago, Alibaba pumped US$717 million into Huitongda Network, an ecommerce platform serving 15,000+ rural towns in China. It’s also started investing in AI for rural pig farmers.

And they’re not the only ones moving from tier 1 cities like Beijing: Tencent-backed WeDoctor is making healthcare more accessible for folks in tier 3 and 4 cities, while Alibaba rival JD.com has also entered the space with their delivery drones.

As more and more players enter the space, what are the major implications?

Editor’s note: Answers have been edited for clarity.

Jianggan Li, founder at Momentum Works

These companies are all aiming for growth—though there are nuanced differences:

• For companies like Alibaba, Tencent, and other listed companies, this delivers their growth stories to investors in the public market.
• Smaller companies and startups are targeting rural markets because the competition in big cities is too fierce and user acquisition costs too high.
• There are also companies who build business models just for small cities, often because the founders understand the life and mentality of small town people.

In the short term, this is a blue ocean. So far, a few companies such as Pinduoduo and Qutoutiao have managed to penetrate this market. With more attention from big guys as well as VCs, the competition will surely heat up. Maybe soon it will become a red ocean like any other industry in China.

What sort of innovations can we expect out of this trend?

The interesting thing about Kuaishou (or Kuai), a short-form video app, was that most tech or VC practitioners had not heard of it when it reached 200 million downloads. It shows a huge disconnect between the elites in tier 1 cities and the public in other parts of the country.

Let’s discuss