In China a business dinner is referred to as a fanju (饭局). The first character fan (饭) means rice and is straight forward enough. But the second, ju (局), has more complex cultural connotations.
Breaking down the character logographically, you might be tempted to think that ju means ‘putting one’s foot into one’s mouth’ as it consists of two simpler characters with a ‘mouth’ (口) inside a ‘foot’ (尺).
Almost, but not quite. The second character doesn’t stand for a body part but a unit of length. So the two pictorial components of ju really infer ‘speaking within certain rules or limitations’.
Typically held in a private backroom, a fanju is seen as an important chance for businesspeople to unwind and build guanxi (relationships of trust). Business negotiations rarely take place during the meal itself but how one goes about talking during a fanju can swing the decision-making process.
A good example is toasting with alcohol: intimidating for many but often a form of due diligence for business partners, who are sizing each other up through their wine glasses.
In recent years some of the most widely publicised fanju in China have taken place on the sidelines of the annual World Internet Conference in Wuzhen. These informal gatherings have offered occasional insights for outsiders looking to understand the internet industry and its key figures better. And at the latest gathering in Wuzhen, the fanju was being talked about as a barometer for the economy in general.
What happened in Wuzhen this year?
This was the sixth edition of the World Internet Conference. It was also the fiftieth anniversary of the sending of the first message between two networked computers in Los Angeles, although that milestone date didn’t add much fanfare to the conference late last month. Indeed, nearly all of Silicon Valley’s tech giants were absent.
“This year’s World Internet Conference was sedated to the point of boring,” wrote a reporter from Technode, a portal that focuses on Chinese tech and start-ups. “While previous years featured a plethora of big names, big news and big controversies, this year’s seemed more like a typical tech conference with a slight governmental flavour.”
With the trade and tech rows between China and the US as a depressing backdrop to the event, the absence of American tech leaders was not that surprising. However, most of the big shots from the Chinese internet industry showed little interest in coming to Wuzhen this year too. Tencent’s Pony Ma, for one, was reportedly ill. After retiring as Alibaba’s boss last month, Jack Ma turned up briefly but did not give a major speech.
In previous years, photos of internet bosses clinking glasses at a grand fanju dominated news headlines. This year was no different, although rather than a large group photo the most forwarded image was of a low-key meal between NetEase’s boss Ding Lei and Baidu’s CEO Robin Li.
The gathering was held a bit earlier than usual this year too. That meant that Wuzhen, a scenic canal town, was still enjoying warmer autumnal weather. Yet as Li arrived at the restaurant, he was heard greeting Ding with a seemingly coded message: “Today is a bit cold. Let’s drink the hot ones [yellow wines are usually drunk after being warmed].”
Netizens interpreted this as Li endorsing the idea that China’s internet industry was entering a ‘winter’ period of more state control and greater capital constraints.
Changing faces at the Wuzhen fanju…
It was Ding who came up with the idea for a ‘Wuzhen fanju’ at the first gathering in 2014 and he invited eight of his friends for dinner. The photo of that went viral, given the attendance at Ding’s table of Robin Li, Sohu’s founder Charles Zhang and Levin Zhu, who had just quit as the president of leading Chinese investment bank CICC (see WiC257).
At least 13 people showed up at Ding’s dinner in 2015 with Yahoo’s founder Jerry Yang, Tencent’s Pony Ma and Hillhouse Capital CEO Zhang Lei (see WiC293) joining the banquet. A year later the number of diners grew to 17: added to list were Xiaomi’s Lei Jun, Meituan’s founder Wang Xing and Richard Yu, then head of Huawei’s mobile handset unit.
Attendance at the ‘Wuzhen fanju’, Jiemian has observed, has reflected the changing face of China’s internet economy, particularly as it expanded through smartphone-based consumption.
The line-up was at its most star studded in 2017. Ding hosted the dinner as usual, serving up organic pork from his own farms. More than 20 internet bosses turned up, albeit some of them then had to rush off to a rival fanju, hosted by Meituan’s Wang and JD.com’s Liu Qiangdong.
Attendance there was pretty much made up of Tencent’s ecosystem. Up to Rmb5 trillion ($708 billion) worth of businesses were said to be sitting around the table. In a leaked photo of the roundtable gathering, Pony Ma sat in the place of honour (in the middle, directly facing the door) flanked by Wang and Liu (Tencent is a shareholder of both Meituan and JD.com). There were also a few frenemy attendees such as Bytedance’s boss Zhang Yiming and prominent venture capitalist Neil Shen, whose Sequoia China fund is a major investor in Bytedance.
The year 2017 marked the stellar rise of both the 020 (online-to-offline) and the ‘sharing economy’ business models. As such Bytedance’s Toutiao, Meituan and Didi Chuxing were all emerging as a trio that looked set to take on the BAT incumbents of Baidu, Alibaba and Tencent (see WiC394). Didi was riding high, having just overcome a challenge from Uber and victoriously taking control of the American unicorn’s China unit.
What does the Wuzhen fanju tell us about China’s internet bosses?
Friendship and business alliances aside, the dinner has also revealed aspects of the tech bosses’ personalities.
The fiercest drinker seems to be Richard Liu of JD.com, tech analysts on various social media platforms have agreed. The Hunan native is said to prefer employees who can knock it back as well. Perhaps a “drinking culture” has helped to instill a little boldness in the company’s managers. Sometimes it might prove costly as well: Liu was forced to skip the conference last year following a sex scandal in Minneapolis – after a dinner featuring 32 bottles of red wine (see WiC427).
Tencent’s Pony Ma can also drink, it seems, but nobody seems to know his true capacity for alcohol. Insiders speculate that he is even better in making others drink more. He also likes to play it casual. At the fanju in 2017 he was the only one in a T-shirt, while the other 15 big shots were all in collared shirts or suits.
“I am never the one who can drink the most. Neither am I the one who drinks least,” NetEase’s Ding once said of himself. That may encapsulate his formula for commercial success as well. NetEase isn’t really regarded as being in the same rank as the BAT trio. Yet in terms of market value, Ding’s firm has rarely fallen outside the top five of the Chinese internet firms.
The always smiling Ding also seems a popular chap among the other tech bosses, explaining why his guest list at Wuzhen kept growing (at least, until this year’s dramatic scaling back).
In the 1990s Ding was one of the pioneers of the Chinese internet, having founded NetEase alongside portal rivals Sina and Sohu (see WiC356). Since then NetEase has been able to expand into other profitable sectors such as online games and music, while Sina launched its popular Twitter-like weibo service. By comparison Sohu has dwindled in terms of value and influence (it was worth only 1% of NetEase this week). All the same, Sohu’s founder Charles Zhang has remained a respected figure in the sector. That’s why he always finds a seat at earlier Wuzhen fanju, although Jiemian says that the 54 year-old mostly talks about keeping fit.
“He looks aloof from the competition and he would even fall sleep during the official conference,” the news portal remarked.
Where was Jack Ma?
China’s most celebrated internet tycoon is a regular at the conference. But the talkative Alibaba boss has also been a high-profile absentee from the evening fanju.
Indeed, when the dinner gathering overshadowed the official agenda at the conference in 2017, Ma’s absence became another major news topic.
“It is true that no one has invited me,” he told Southern Metropolis Daily at the time. “Of course, I might not have the time if they did.”
“It’s not easy for so many people to come together. I think the fanju is a good thing,” Ma added. “But more important is what has been discussed over dinner, such as the sharing of some valuable insights for the industry.”
According to Sina Tech, Ma grew up in Tongxiang, a city near Wuzhen. And thanks to its proximity to Hangzhou, where Alibaba is based, Ma has often seemed to be the semi-official host of the Wuzhen event.
Typically, Alibaba has also been allotted the best space in the exhibition zone and China’s political leaders tended to visit Ma’s company first before going to the other booths (Tencent’s Pony Ma once needed to wait 40 minutes for the leaders to arrive at his exhibition stand, Sina Tech gossips).
“It’s quite obvious that some internet bosses and private capital firms are trying to turn their Wuzhen fanju into an IP [intellectual property event]… Alibaba as a semi-host [of the conference] might feel its thunder is being stolen,” Sina Tech concluded during ‘peak fanju’ in 2017.
Jack Ma refuses to be trumped, however. “If Alibaba was to organise a fanju today, it wouldn’t be lesser than any in the world,” he told reporters on the sidelines of the 2017 conference. He followed that up by holding a private dinner in Davos a few weeks later, mingling with the likes of Bill Gates, Jordan’s King Abdullah II and IMF chief Christine Lagarde.
Following Ma’s disapproving comments in 2017, NetEase’s Ding met Ma for a drink at the event a year later. However, that only happened after Ma bumped into Ding while the NetEase boss was chilling out at a riverside bar with Sohu’s Charles Zhang and Huawei executive Alex Zhang. This ‘unarranged’ gathering also took place in front of an excited herd of journalists (who, it turns out, display an uncanny ability to spot photo opportunities at Ding’s gatherings, including the smaller dinner with Robin Li this month).
Has the buzz gone from Wuzhen?
When Chinese President Xi Jinping inaugurated the 2014 World Internet Conference, the gathering was described as a “coming out party” for the Cyberspace Administration of China (CAC). Lu Wei, director of the newly created internet regulator, announced that the government wanted Wuzhen to become the industry’s answer to the World Economic Forum held annually at Davos (see WiC262).
Unfortunately the internet tsar was detained by graft busters in December 2017, just days before that year’s conference was due to kick off. Paradoxically as the CAC took a backseat after Lu’s detention, the conference reached its greatest popularity in 2017. Aside from the bustling banqueting that year, Apple CEO Tim Cook and Google boss Sundar Pichi both took to the podium at the official meeting.
However, things began to go downhill for some of the tech bosses after that year’s gathering – especially those in the O2O sector. It started with bike-sharing firm Wukong’s bankruptcy (see WiC372) and subsequently attention turned to the huge amounts of hot money pouring into the sharing economy (see WiC396). Commentators looked more critically at many of the new business models, asking whether they would ever turn a profit.
Throwing the Sino-US trade and tech war into the mix, the era of easy financing for the internet sector also seems to have passed. Robin Li and Ding Lei (ever-present attendees at Wuzhen) were alert to the metaphorical chill this year – hence Li’s quip about ordering hot wine.
Along the same lines, netizens have been predicting even harder times ahead. “The freezing winter is coming but most people are unprepared as yet” was the verdict of a widely forwarded article published on Gelonghui, an investment news portal. It was then taken down as part of a campaign by state censors to purge any gloomy analysis of the economic downturn (or talk of the ‘consumption’ downgrade; see WiC425) on social media.
There are other policy imperatives shaping the internet sector too, spawned in part by the ongoing tech war with Washington. Instead of a slew of new apps for ordering coffee online or sharing phone chargers, the Chinese government wants to encourage the development of ‘core technologies’, aka those that enhance national security – the foremost being semiconductor chips.
This might explain why Alibaba’s big announcement at Wuzhen this year was hardware-related – predicting it would be the first Chinese firm to open-source its microcontroller unit (MCU) design platform, which it says will also speed its development of a homegrown AI (artificial intelligence) chip.
Of course, technical discussions about why MCUs are so important are boring stuff for less tech-savvy commentators – and even more so for netizens keener to assess the line-up at this year’s fanju.
But they also reflect a new era in which the private sector’s tech bosses are increasingly being conscripted into a ‘national service’ campaign to wean China off its dependence on US components like semiconductors.
Indeed, perhaps there are a few more fanju being convened for that very purpose – albeit by officialdom rather than Ding – bringing together the great and good in Chinese tech…
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.