Baidu has secured a permit to operate China’s first-ever fully driverless licensed robotaxis, winning an early lead in the race to launch autonomous cars in the country.

The internet group said on Monday it would be able to operate its Apollo Go cars without a safety supervisor on board in the Chinese cities of Wuhan and Chongqing.

Winning the permit has given Baidu, the operator of China’s largest search engine, an edge over its rivals, including Pony.ai, WeRide and AutoX, which are racing to develop fully autonomous driving software systems.

The permit would allow the company to carry out more testing of its vehicles, said Charlie Chai, autonomous driving analyst at Shanghai-based 86 Research.

“My best guess is that commercialisation generating significant revenue is still two to three years away,” he said. “Tech-wise, the leaders are Pony.ai and [Baidu’s] Apollo, but in terms of scale and on-ground testing, deployment Baidu is ahead.”

The service will be available in the central city of Wuhan from 9am to 5pm, and the south-western Chongqing municipality from 9.30am to 4.30pm, with five robotaxis deployed in each city, said the company. The designated areas of service will cover 13 sq km in Wuhan and 30 sq km in Chongqing.

In April, Baidu and Pony.ai won approval to move the safety driver from behind the wheel to the front passenger seat for part of their robotaxi businesses in Beijing. Beijing regulators in July allowed the two companies to collect fees for driverless rides within a 60 sq km suburban zone of the capital city.

Baidu struggled in the first quarter, with its search and video streaming platforms — traditionally the company’s cash cows — experiencing flat growth as the Chinese economy slowed. The company is banking on the driverless car business to shore up revenues in the future.

Baidu reported an Rmb885mn ($131mn) net loss for the first three months of the year, compared with the previous year’s profit of Rmb25.65bn, with research and development expenses increasing 10 per cent year on year.

But Chai said the longer timeline for the commercialisation of autonomous driving was a dilemma for shareholders.

Search and growth at IQIYI, the streaming platform in which Baidu holds a controlling stake, were weak this year, he said. “The company lacks a good narrative . . . it only attracts patient investors who are willing to wait,” said Chai.

Baidu’s chief executive Robin Li said the company’s business had been hit by the resurgence of Covid-19 in China since mid-March, but he remained confident that its artificial intelligence businesses could boost the long-term growth of the internet group.

Self-driving vehicles have become a new arena of US-China competition, according to analysts.

“China and the US are racing from the same starting line now,” said Owen Chen, an analyst with S&P Global Mobility. “It is not only technological competition between companies but also competition between countries and regional governments when it comes to policy support for the industry.”

Tencent has reported its first decline in quarterly revenues, with China’s most valuable company shaken by the country’s slowing economy and a regulatory crackdown.

The tech group missed analysts’ sales expectations after posting quarterly revenue of Rmb134bn in the three months to June 30, down 3 per cent from the same period last year and below forecasts of Rmb135.6bn.

Tencent’s net profit also fell to Rmb18.6bn (US$2.7bn), down from Rmb43bn in the second quarter of 2021, and missing analyst estimates of Rmb25bn.

The group has responded to the pressures on its business by slashing staff numbers, saying it had “optimised our workforce” in a cost-cutting drive that has reduced expenses.

“During the second quarter, we actively exited non-core businesses, tightened our marketing spending and trimmed operating expenses,” Pony Ma, Tencent’s chair, said on Wednesday.

“Looking forward, we will focus on enhancing the efficiency of our businesses and launching new revenue initiatives.”



The slowing Chinese economy has hurt the company’s quarterly advertising revenue, which dropped by 18 per cent on the year before.

Tencent has also been hit with a regulatory clampdown on gaming that began last year, with the government slowing approvals and restricting children to about three hours of play a week.

Chinese regulators paused approvals for new games in July last year as they sought to align the industry with Communist party values and make games less addictive. While it restarted gaming approvals in April, Beijing is yet to publicly sign off on any from Tencent.

“The domestic game industry is facing transitional challenges including fewer big game releases, lower user spending and measures to protect minors,” the company said.

As it contemplates obstacles closer to home, Tencent has been looking to expand abroad and has increased its investment in foreign start-ups.

On Wednesday, however, the group reported that revenue from its international gaming segment fell by 1 per cent in the quarter, blaming the desire of people to seek experiences in the real world following global lockdowns.

“The international games market is experiencing a post-pandemic digestion period as players resume offline activities,” Tencent said.

Amid a wave of tech industry redundancies in China this year, the company lost nearly 5 per cent of its staff in the quarter, trimming its employee count to 110,715 staff.

Youth unemployment soared to a record 19.9 per cent across the country in July.

Disappointing July economic figures revealed how Beijing was facing a decline in consumer demand after intermittent lockdowns to maintain its zero-Covid policy, as well as battling the fallout from debt-laden property developers and slowing global growth.

SoftBank sold a large part of its stake in Alibaba to “instantly show” investors its finances were solid after logging a record quarterly loss of $23bn, the technology conglomerate’s chief financial officer has said.

In an interview with the Financial Times, Yoshimitsu Goto acknowledged that after years of playing down the possibility of any sudden, large-scale exit from its stake in the Chinese ecommerce giant, SoftBank’s announcement of the sale last week was abrupt.

Goto dismissed market concerns that SoftBank’s continued heavy losses could strain its relationship with lenders, but admitted that the Alibaba share sale was intended to reassure investors in what is one of Japan’s most highly leveraged companies.

“In times like this, it is critical as an investment group to instantly show that our financial strength is rock solid,” Goto said.

The Alibaba stake sale, which was accompanied by what some investors said was inadequate explanation from SoftBank, prompted some to question whether it was actually a move to address a looming financial emergency.

Only two days after reporting its worst quarterly performance, SoftBank revealed that it would post a gain of ¥4.6tn ($33.6bn) by selling shares in Alibaba, significantly reducing the investment on which founder Masayoshi Son built his name as one of the world’s greatest technology investors.

Goto said the move was designed to mirror the previous sale of some of SoftBank’s most prized holdings which began when the Covid-19 pandemic led to a crash in its share price in March 2020; that included stakes in its domestic mobile unit and US carrier T-Mobile.

“Just like two years and a half ago, we wanted to show the world that we can do something like this because we are financially resilient. That was our objective,” he said.

Although the sale served the need to shore up the company’s balance sheet, the decision to sharply reduce the Alibaba stake comes with the political risk of being seen to abandon a Chinese investment at a sensitive time. China is in the throes of a regulatory crackdown on tech companies and diplomatic relations between Beijing and Tokyo are strained.

In 2020, SoftBank’s $41bn asset sale funded the largest share buyback in Japanese history and paid down its enormous debt load, helping to improve investor confidence. The latest move to sell Alibaba’s stake has boosted the group’s share price by 10 per cent, but also left some analysts perplexed.

“SoftBank is reducing exposure to its largest asset when [Alibaba’s] shares are down 71 per cent from their peak. It is a far different message than the super-positive one we have become used to hearing over the years,” said Kirk Boodry, analyst at Redex Research.

The sale of the Alibaba stake is being carried out through prepaid forward contracts, a type of derivative to which SoftBank has increasingly turned to raise immediate cash. Until recently, the company had stressed to investors that the contracts did not amount to a sale since it retained the option to buy back the shares later.

But its decision to settle the deals early by relinquishing the option of retaining the shares means SoftBank’s stake in Alibaba will reduce from 23.7 per cent at the end of June to 14.6 per cent when the settlement is completed in September.

Among concerns expressed by several investors and analysts following two consecutive quarters of large losses was that SoftBank risked a breach of one of its financial covenants with its lenders. The covenant states the company must not report two consecutive years of losses. SoftBank suffered a ¥1.7tn net loss in the year to March 2022.

“Our decision has nothing to do with the financial covenant. There are countless ways for us to address the covenant issue,” Goto said.

He added that the main reason for the early settlement of Alibaba contracts was to remove any concern the group would need additional cash in future to buy back the shares. “We wanted to send a clear message regarding our balance sheet,” Goto said.

Short bets on Hong Kong stocks have hit a historic high. The trade has been a profitable one so far, with the city’s benchmark Hang Seng index down nearly a quarter in the past year. That has made short selling Hong Kong stocks look a surer bet than it really is.

Short-selling trades as a proportion of the total turnover on the Hong Kong’s stock market this week climbed to a record 23 per cent this week, according to Bloomberg data.



Much of the bearishness is justified. Regulatory risks remain high for the Chinese tech groups that dominate the city’s benchmark index. Their prices have also been dragged down by the fear that their American depositary receipts will be compulsorily delisted.

Big investors have been reducing their exposure. Warren Buffett’s Berkshire Hathaway has just trimmed its stake in Hong Kong-listed Chinese electric carmaker BYD. The move triggered a disproportionate drop in the shares.



Still, the large volumes of shorts are surprising. Hong Kong restricts the activity. Naked shorting — selling shares that traders do not own or have not borrowed — is banned. This means short sellers have to pay up to borrow the stock. Returns on successful short sales are correspondingly lower than in markets such as the US. An uptick requirement means short sales must be made at a higher price than the previous trade.

Hong Kong’s short sellers are now vulnerable to short squeezes. Trading volumes in Hong Kong have fallen in recent months, increasing the potential for sharp, hair trigger price movements. The main targets of the short bets have been big Chinese blue-chips. These popular names, which include giants such as Tencent and Alibaba, have large, loyal, long-term retail investor bases. That makes covering short positions pricey.



The Hang Seng index, which now trades at just 0.8 times book value, looks dirt-cheap compared with regional peers. The lower the valuation of Hong Kong stocks fall, the higher the risk of a short squeeze in coming weeks.

Tencent has reined in its once aggressive pursuit of Chinese internet companies, sending a chill through an industry already reeling from a regulatory onslaught.

The Shenzhen-based internet giant and owner of the popular messaging app WeChat has outlined a strategy internally to divest about Rmb100bn ($14.5bn) of its $88bn listed equity portfolio, according to two people familiar with the matter.

The soft target is part of a broader shift by Tencent to reduce costs as economic growth slows amid a property crisis and zero-Covid restrictions in China. The pivot represents a tidal change for start-ups in the internet and consumer sectors raised on cheap capital from deep-pocketed investors.

“Tencent has been a powerful investment force. Their vast capital meant they took risks that others couldn’t,” said Li Chengdong, head of internet think-tank Haitun in Beijing. “Tencent gave life to the entire venture capital community.”

The company has a larger war chest and longer investment horizon than most venture capitalists and is one of the critical providers of follow-on investment rounds. As a result, changes in its strategy will have a knock-on effect throughout the industry.

Funding for Chinese start-ups has declined. Beijing-based data provider ITjuzi found that start-up fundraising fell by 38 per cent in the first half of the year, with the number of deals down 19 per cent compared with last year.

Lulu Yilun Chen, author of Influence Empire: The Story of Tencent & China’s Tech Ambition, said: “Tencent channelled so much money into start-ups, creating a vibrant ecosystem where entrepreneurs experimented with business models and battled it out for market share.”

“That era has gone after the regulatory crackdown and as Tencent’s focus has shifted with the wider economic slowdown,” Chen added.

Tencent’s move to scale back its spending and divest large chunks of its portfolio is representative of a broader shift in the industry, said Li. “This is an inflection point for consumer and internet companies.”

Tencent’s investments in listed companies, excluding subsidiaries, totalled Rmb602bn at the end of June, falling from Rmb726bn in the same period in 2020, following a rout in Chinese tech stocks.

“We can’t keep providing unlimited support. We’re selecting companies that can sustain themselves,” said one Tencent employee with knowledge of the company’s investment strategy.

The person added that Tencent had been asked by investors to divest its underperforming assets and the shift was testing the boundaries of the investment team. “We’re having to think in a way that we’ve never thought before,” the employee said.

Tencent’s outsized role as a backer of China’s internet companies has attracted the scrutiny of regulators, seeking to break up the monopolistic grip of the country’s top tech titans.

The company is the largest investor in food delivery giant Meituan, ecommerce titan Pinduoduo, online brokerage Futu and video-sharing app Kuaishou.



One Shenzhen official working for the local branch of the anti-monopoly agency said Tencent used the combined power of its universal messaging app WeChat and its deep pockets to support its portfolio companies.

“Consumers are paying the price for the way Tencent created a protective ecosystem for its portfolio companies,” the official said, pointing to how WeChat blocked users from sharing links to the competitors of services in which it had invested. The official said regulators had instructed Tencent to divest stakes in large tech companies.

Tencent said: “We [have not] received any external pressure regarding our investment portfolio . . . We will continue to make decisions independently and in the best interest of our shareholders over the long term.”

One official at the Guangdong office of the anti-monopoly agency, involved in probes into Tencent’s sprawling tech empire, said: “Tencent has a monopoly grip over gaming, instant messaging and entertainment. The company has been very humble when dealing with the regulators. Still, we are looking for actual moves like a Rmb100bn donation [to the poverty alleviation fund] or selling stakes in listed companies.” 

Tencent plans to pare back stakes in companies, including ecommerce player JD.com and Meituan, said one investment team member. Two people with knowledge of the matter said Meituan was not at the top of the investment team’s sell list.

“In the following months, Tencent will keep executing sales of listed shares, including but not exclusively Meituan,” said one person with knowledge of the matter. Their views were echoed by two members of the Tencent investment team.

Reuters previously reported that Tencent plans to sell all or much of its $24bn stake in Meituan. Tencent said during an earnings call in August that the report was “not accurate”.

Tencent added: “We don’t have any target amounts for divestments. We have always invested with the goal of generating strong returns for our company and shareholders, not according to any arbitrary timeline or target.”

Investments in China’s tech sector have not stopped altogether. In August, Tencent’s corporate venture arm invested in agriculture, robotics, semiconductor and vaccine technology companies — all sectors singled out by Beijing as critical for the country’s drive to become self-reliant in science and technology.

The Shenzhen official said that Tencent’s success in investing in China’s booming tech growth meant the company needed to contribute by financing companies in sectors that the government backed.

“Tencent should shoulder some responsibility,” they said, adding that the company “may profit less with this change of investment strategy”.