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Reuters/Paul Carsten
A JD courier and his tricycle.

There can only be two contenders in China’s internet war

Adam Pasick
By Adam Pasick

Senior Editor

Google, Facebook, Amazon, and Apple are vying for dominance of the developed world’s internet industry, but it’s becoming clear that in China there are only two contenders: Alibaba and Tencent.

Tencent, China’s biggest internet company, carried out a complicated—if not unexpected—maneuver today with the purchase of a 15% stake in online retailer As part of the deal, Tencent will essentially outsource its e-commerce operations to JD, which will take control of Tencent’s QQ Wanggou and Paipai e-commerce units, gain a minority stake in Tencent’s Yixun unit, and collect $215 million in cash.

Tencent’s deal means that Alibaba, China’s e-commerce market leader, now faces a beefed-up competitor to its dominant Taobao and Tmall marketplaces. Tencent-owned companies will also have the advantage of seamless integration with WeChat, a popular messaging app, which already offers everything from taxi-booking to banking services. Here’s how the Chinese market is divvied up:

Both factions in China’s internet war are looking for more funding to bolster their positions; both Alibaba and JD are planning initial public offerings in the next year. After JD’s IPO, Tencent has the right to acquire an additional 5% stake.

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