Merger and Separation Between Chinese State News Agency and Private IT Companies

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[Asia Economy Senior Reporter Cho Young-shin] China Unicom and Tencent are establishing a joint venture (JV) to enter the content delivery network (CDN) and edge computing sectors, according to Chinese media such as Jiemian News and Economic Observer on the 3rd. China Unicom is one of the three major telecom operators in China, alongside China Mobile and China Telecom. Tencent is a giant in the Chinese IT industry.

[Image source=Reuters Yonhap News]

The State Administration for Market Regulation of China approved the JV jointly invested by Unicom Innovation Venture Capital, a subsidiary of China Unicom, and Shenzhen Tencent Industry Venture Capital, a subsidiary of Tencent.

Chinese media reported that the JV shares will be held 48% by Unicom and 42% by Tencent, respectively. The JV will enter the content delivery network (CDN) and edge computing sectors, fostering new growth areas, according to the Chinese media.

Ma Zhihua, a Chinese IT expert, said, "CDN is a business broadly categorized under cloud computing," and added, "Edge computing technology will make existing CDNs smarter and more efficient." He further noted, "Although CDN and edge computing technologies have entered a mature stage, there is no dominant company in the market yet."

Edge computing refers to technology that processes data near the user’s device or on the device itself, rather than relying on a central cloud server. Compared to traditional central cloud servers, it can reduce data transmission volume and is known as a necessary technology for future autonomous vehicles, smart factories, virtual reality (VR), and the Internet of Things (IoT).

The Economic Observer attributed significance to this JV approval as an extension of the mixed-ownership system. It explained that the JV approval is meaningful not as a financial health improvement through private capital injection into state-owned enterprises, but as a joint investment by state-owned and private enterprises to promote new businesses. The Chinese authorities introduced the mixed-ownership system in 2016 to attract private capital into state-owned enterprises.

Professor Wang Feng of Renmin University evaluated, "China Unicom has comparative advantages in digital network fields such as base stations, while Tencent has strengths in content operation, websites, and applications user portfolios," adding, "The JV can become a pioneer in the digital economy."

Global Times reported that JD.com, a Chinese online and mobile retail company, also formed a strategic alliance with China Mobile, a Chinese telecom operator. JD Digital Technology Holdings, a fintech subsidiary of JD.com, and China Mobile’s Shanghai subsidiary will cooperate in digital fields such as cloud computing, big data, and smart cities, according to Global Times.

This content was produced with the assistance of AI translation services.