Chinese Companies Seize Investment Chance amid Turkey's Financial Winter
Alibaba's USD 721 million injections in Turkey's major e-commerce startup has fueled the industry with confidence. As Turkish lira recovers after a year-long free-fall, China's presence gains visibility in Turkey's emerging business scenes.
With its 82 million population and a median age of 32, Europe's youngest and growing country, Turkey, has attracted sets of investment amid structural risks and long-term opportunities. The country is bestowed with natural resources and locates itself as a bridge between Asia and Europe.
In 2018, one M&A deal was accounted for the biggest deal of all-times in Turkey: Alibaba's purchase of one major e-commerce startups of Turkey, Trendyol. Chinese giant paid USD 728 million for 82% stakes of the Turkish company. With this transaction, the total value of startups sold in 2018 surpassed USD1.4 billion.
"Today, more than 1,000 Chinese companies are doing business in Turkey, including ICBC, Bank of China, China Merchants Group, China Investment Corp, shipping group COSCO and telecommunication giants Huawei and ZTE," states Arda Ermut, president of the Presidency of the Republic of Turkey Investment Office. What's more, the country has gained more visibility and became appealing for the investors as Lira depreciates.
Alibaba went after e-commerce
Two trends foster e-commerce business in Turkey, fast-paced growing mobile penetration rates and expanding young middle-class with the increased urbanization ratios. The e-commerce market has reached over USD 10 billion in Turkey with a 42% growth in 2018 compared to the previous year, according to Tübisad, a Turkish chamber for industrial development.
Within this environment, Trendyol sold 82% of its shares to Alibaba, making one of the most significant transactions in Europe in 2018. The purchase gave a massive exit for the Turkish fashion-sales firm's early backers: Tiger Global, Kleiner Perkins, and Earlybird Venture Capital.
It has also fueled the entire ecosystem with confidence, upgraded the scale, and grabbed global attention. The firm is one of the largest e-commerce company in Turkey & MENA, serving more than 16 million customers a year.
Huawei Waltz in Communications Infrastructure
Huawei's brand is polished in Turkey's today and future. By signing strategic cooperation agreements with the government in Smart Cities, and 5G deployment with the leading mobile carrier Turkcell; the company consolidates its position in Turkey's strategic fields. "The company is using one of the former Turkish political kingpins as its chief lobbyist in Turkey," said a person familiar with the matter.
The Chinese heavyweight is accelerating its presence for the end-customer products as well, Huawei smartphone's penetration rate has jumped from around 1% to more than 8%. "Huawei is cooperating with the PR agency that has used to work for Apple," said the person. Indeed, Huawei's GR and PR engagements gave its fruits in Turkey.
Xiaomi is the other Chinese company expanding in the Turkish market. The company is selling over 160 products, such as smartphones, accessories, computers and home devices to Turkish costumes in two Mi Stores in Istanbul. (Check out this in-depth coverage for Xiaomi's global expansions)
Some other Chinese ICT groups are interested in major Turkish telecommunication infrastructure companies as well, Bloomberg speculates.
Alipay tries to disrupt fintech
Turkish banks have set their domination in financial technologies scene in the country, they are technically equipped, flexible, financially strong and have their compliance team to deal with the regulators. Many tried to disrupt banking in Turkey, but few succeeded.
In 2018, Turkey saw nearly 400,000 Chinese tourists arrive in the country, an increase of 59% compared to 2017. The opportunity has long been seen by the many, but Alipay is the first Chinese firm who steps into the market. The Chinese payment behemoth partnered with the payment platform ininal in Turkey in May 2019: making it possible for Chinese tourists to pay in Turkey via Alipay app.
Ant Financial, the parent company of Alipay, is one of the major corporate shareholders of the several fintech companies around the globe, it concentrates its investment activities around the developing regions.
Bytedance's TikTok discovers the hidden artistic-potential in Turkish people
Turkey is the third-largest market for TikTok, after India and the USA. The app penetrated into 28 million users, nearly 35% of the population: and it is truely-prolific.
Turkey presents particularly unique opportunities for social media platforms with an average of 2 hours and 46 munites social media usage per person. The country is the 5th biggest user of Twitter and Instagram, and it seems they embrace TikTok as well.
"Bytedance has long been hiring 'Turkish Speakers' for their team in Beijing, and they established Turkish office in 2019," said the person familiar with the matter. "Most of them are content-checkers, who controls and comply the content to stay in the safe side of the regulations," the person added.
Although fluctuated, the Turkish economy is one of the major economies in Europe, and its significance is increasing as it stays young. Amid this dynamic environment, Chinese investors and companies are seizing the opportunity and expanding their footprint. Several other areas, including, among others, Tourism, Healthcare and Auto are considered to lead the next wave of investments between Turkey and China.
Economics aside, the Turkish government guarantees a peaceful and fruitful existence for the foreign companies, declaring "an opportunity to co-invest with the government to benefit from the next successful exit," as well.
This incentive is particularly meaningful for the Chinese companies, considering the current politico-economic conjuncture that has been shaped by the rising global economic tensions one hand, and by the Belt and Road Initiative on the other's, in which Turkey stands in the Middle Corridor of the Project.