As Google return is mooted, Russian company also settles in after earlier failed foray

Chinese search engine companies may be about to feel the heat of rivalry from their overseas counterparts again. Not only is speculation rife about Google stepping back into China, but Yandex, Russia's biggest search engine, has set up shop in Shanghai.

Yandex, based in Moscow, has the largest market share of the search engine businesses in Russia and in other Russian-speaking countries.

Established in 1997, it has expanded its business into the offline market. Ninety percent of its revenue comes from Web advertising, and the rest from business-to-consumer and business-to-business websites, payment transactions, e-mail, transport information, navigation, cinema bookings and many other businesses.

Yandex has been looking for opportunities in China and opened an office in Shanghai, its first in Asia, in September. An attempt by the company to enter the country two years ago ended in failure, which it attributes to a lack of interest from Chinese merchants.

David Tsai, general manager of Yandex in China, says the company aims to promote its business-to-business operations and online payments system in China rather than its search engine.

The China e-Business Research Center in Hangzhou says China's online trade was worth 7.63 trillion yuan ($1.2 trillion; 1.1 trillion euros) in the first half of this year, 30.4 percent more than in the corresponding period last year. Online cross-border trade was worth 2 trillion yuan over the same period, 43 percent higher than in the corresponding period last year.

Data Insight, a Russian research agency specializing in e-commerce, says Russia's online trade was worth more than 645 billion roubles ($10.33 billion; 9.44 billion euros) last year, 40 percent higher than in 2013.

"Chinese businesspeople from many sectors have shown great interest in the Russian online market over the past few years," Tsai says, stressing that the interest is mutual.

Sino-Russian online trade was worth $2 billion last year, accounting for half the total trade between the two countries, as more and more Chinese businesses realize the importance of the Internet to bilateral trade and of online advertising, he says.

Yevgeni Mozhaev, a Russian expert on e-commerce, says the increase of Russian cross-border trade was greatly boosted by deals with China, its proportion of orders rising from 45 percent in 2013 to 72 percent last year.

As for Russians, they are showing growing interest in entering the Chinese market, Mozhaev says.

"The devaluation of the rouble has prompted Russian companies to explore overseas markets. But Chinese consumers are used to paying low prices, and that makes it hard for big Russian companies to muscle in."

Vladimir Isayev, a spokesman for Yandex, says it aims to attract more Chinese merchants to promote their products.

Raymond Wang, a principal at Roland Berger Strategy Consultants, says China's e-commerce market has become hugely attractive to global companies, including those who run search engines.

Even if certain search engines functions are restricted in China, the e-commerce market is fairly open, Wang says, although one concern is the ability of quick response and adjustment for localization of international giants to the Chinese market.

"Taking that into account, anyone wanting to gain access to the Chinese e-commerce market really needs to set up an office in the country. The market is changing so rapidly that international companies without an office can't be flexible enough and listen more closely to their customers, not to mention industries where technological support is critical."

There has been speculation that Google, after leaving China five years ago amid disputes with the authorities over censorship, is planning to bring back some of its business to China.

In recent days, Eric Schmidt, the executive chairman of Alphabet Inc, Google's parent company, told a technology summit in Beijing: "Google is in constant dialogue with Beijing as it seeks to better serve the country."

In June, Forbes magazine said that "as early as this fall" the company hopes to get Chinese government approval to distribute a special China version of its Google Play mobile app store for Android smartphones in the country.

The Information, a US-based news website, said: "The moves will re-establish Google as an Internet services provider in the Chinese mainland that stores user data locally and complies with government censorship requirements."

Forbes quoted Sundar Pichai, Google CEO, as saying that there are huge opportunities in China, where "we are playing as an enabling platform today and hopefully we have a chance to offer other services in the future".

At the moment, Google China's main revenue comes from its advertising business, including products such as AdSense, Wang says. Its search engine is restricted in China.

renqi@chinadaily.com.cn

(China Daily European Weekly 11/13/2015 page23)