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The 5 Biggest Chinese Software Companies (CHL, TCEHY)

Most of the world’s largest software companies still operate out of the United States as of 2018, but even American tech giants are paying attention to the software revolution underway in China.

The number of Chinese software companies more than doubled between 2009 and 2014, and as of 2018, China has nine of the world’s top 20 tech giants, according to venture capital firm Kleiner Perkins Caufield & Byers’ annual report on internet trends.

Just as critically, China produces legions of new software engineers each year — more than 100,000 annually by some estimates. Modern Chinese software firms are big and getting bigger, and it is possible the Red Economy will soon replace Germany and Japan as the United States’ preeminent international technological competitor.

The growth is not without controversy: American tech companies remain highly critical of Chinese piracy tactics. Microsoft (MSFT) has enlisted several U.S. attorneys general to block Chinese software companies from doing business in America unless they pay for Microsoft licenses.

The point is that Chinese tech companies, one way or another, are growing rapidly. There were 35,774 active Chinese software companies as of year-end 2017, and more than a dozen companies had reached valuations of greater than $1 billion.

With that in mind, here are five of the largest and most influential Chinese software companies.

1. China Mobile

Like many major Chinese companies, China Mobile Ltd. (CHL) is state-owned. The company is primarily a mobile service provider, not a software designer, but it does boast a large software team among its nearly 240,000 employees. Based out of Beijing, China Mobile reaches more than 800 million subscribers and, by that measure, it is the world’s largest phone company. Most of China Mobile’s customer base is Chinese, although it reaches into Pakistan and Hong Kong. It has a $195.62 billion market cap.

2. Tencent

Shenzen-based Tencent Holdings Ltd. (TCEHY) is a Chinese social networking giant. Its WeChat messaging app claimed more than one billion monthly users in 2018, its social networking website QZone reported 629 million users and its instant messaging service had a whopping 820 million monthly users. To put that in perspective, that is more than twice the population of the United States.

Tencent’s valuation is $534 billion. The company has many U.S.-based software investments, and reports suggest Tencent wants WeChat to be an American brand, too.

3. Alibaba

As the world’s largest e-commerce retailer, moving more than double the product volume of Amazon (AMZN) and eBay (EBAY) combined, there is a case to be made for Alibaba Group Holding Ltd. (BABA) as the most important Chinese software company.

All of Alibaba’s software offerings are produced through a wholly owned subsidiary, Alibaba Software. The firm offers its own payment and banking service, Alipay. Alibaba has also invested in a number of U.S. startups, including video messaging application Snapchat and the car service Lyft.

4. Baidu

Baidu, Inc. (BIDU) was founded in 2000 by Robin Li (Li Yanhong), who spent much of the 1990s working as a software developer for the Wall Street Journal, among others. Baidu consistently ranks as the top online search engine in China, and evidence suggests it is solidifying its market share. The company offers dozens of free software products, most of which target PC users in Asian markets.

5. Xiaomi

Sometimes referred to as the Apple of China, Xiaomi (XIACF) is a handset and smartphone manufacturer with a short sales history and oodles of potential. In late 2014, Xiaomi was valued above $45 billion, making it the most valuable private technology firm in the world. Billing itself as an internet company, It went public on the Hong Kong exchange in mid-2018, and had a bit of a rough start – shares fell 6% on its opening day. But it subsequently recovered, and now has a market cap of $56.4 billion.