The Eurasian Gambit

Jia Yueting
Founder and Chairman of LeEco, CEO of Le Holdings.
Jia Yueting founded Leshi Internet Information and Technology Corp Beijing in 2004 which went public in August 2010 on the GEM. It is the world's first IPO online video company.

By Olga Smirnova

Chinese companies consider Russia one of the world's most important markets.

Russian President Vladimir Putin will make an official visit to China this month. The foreign ministers of both countries have held monthly talks about it for a year. Although neither the agenda nor the exact date of the visit has been made public yet, experts say economic cooperation will be one of the main topics of discussion. Russia and China have grown closer in this regard in recent years. Government leaders meet frequently.

The 15th anniversary of the signing of the Russian-Chinese Treaty of Good-Neighborliness and Friendly Cooperation is in July, and the so-called "turn to the East" has been one of the main elements of Russian economic policy for the past two years. New possibilities for this cooperation are expected to be realized at the 20th St. Petersburg International Economic Forum (SPIEF), which opens this week, on June 16. Strong friendships between politicians lead to close economic ties. Chinese companies' interest in Russia is increasing steadily. According to data of the Chinese General Administration of Customs published June 8, the volume of trade between the two countries reached $6.1 billion in May, an increase of almost 10% compared to the same period last year.

In particular, Chinese exports were valued at $3.1 billion, and its imports from Russia were worth $2.9 billion. Late last month, Sochi hosted the latest Russian-Chinese forum of small and medium-sized businesses, at which Russian Deputy Prime Minister Arkady Dvorkovich announced plans to increase the annual trade turnover between the two countries to $200 billion by 2020 (it totaled $63.6 billion in 2015, and in the first quarter of 2015 it was $13.4 billion). A year ago in China, SPIEF organizers signed a memorandum of cooperation with the international nongovernmental nonprofit organization Boao Forum for Asia, which is held annually March 22-25. In addition to China, it is attended by Myanmar, Cambodia, Kazakhstan, Laos, Nepal, Thailand, Vietnam, Lithuania and other countries.

This year, SPIEF held a panel discussion at Boao entitled "New Approaches to the Russian Economy: Localization and Innovation," the main topic of which was the development of bilateral relations between Russia and its leading trade and economic partner — China. "China and Russia are two big countries, and they are linked by good relations. Russia is an important part of Asia, so the establishment of cooperation between the Asian Forum and the St. Petersburg Forum is of strategic importance. Together we will be able to contribute to the development of the region more actively and effectively," secretary general of the Asian Forum Zhou Wenzhong commented on the signing of the memorandum. Cooperation between the two forums, chairman of the board of the SPIEF Fund Sergei Belyakov noted, will contribute to the "development of relations between the Russian economy and the economies of China and other countries of the Asia-Pacific region."

Chinese leaders and entrepreneurs have been guests of honor at the SPIEF for several years. In 2007, Russia and China signed 18 agreements worth over $1 billion at the forum. In 2011, the guest of honor at the St. Petersburg forum was Chinese President Hu Jintao, and in 2015 it was the republic's new leader Xi Jinping. Representatives of China's largest companies are coming to SPIEF 2016. One of the highlights of the forum is expected to be the speech by LeEco CEO Jia Yueting. The Chinese billionaire, one of the world's richest businessmen in IT, with a fortune estimated at $4.5 billion, will be in Russia for the first time. Moreover, it will be his first public appearance outside of China. LeEco experts regard Russia as their third-largest international market, and the corporation has already conquered India and is actively expanding in the United States. LeEco, founded in 2004 and formerly known as LeTV, is considered China's largest Internet video platform, with a library of media content and media apps. It is called the Chinese Netflix, comparing it with the enormous American supplier of films and TV series through media streaming.

LeEco's users numbered 810 million people at the beginning of the year, according to the corporation. The company produces a variety of products, from Internet television and many apps, smart phones and smart TVs to smart bicycles and smart electric cars. The LeSee smart car was presented at the Beijing Auto Show in late April. They are all elements of a vertically integrated ecosystem where content plays the main role. Jia Yueting has called Apple obsolete and entered into an open battle with the IT giant. On August 2, LeEco plans a full-scale launch of its entire product line in the United States. Its North American headquarters are in San Jose, built on land purchased from Yahoo and occupying 24,000 square meters. It will house 800 employees and, in the future, they want to turn the office into an autonomous research laboratory. Chinese fans of the billionaire are rejoicing, praising him for the courageous step of "going beyond China."

"Here the LeEco war starts on American soil," wrote a blogger with the nickname ZhouxinZoe on popular Chinese social network Weibo. Establishing a toehold in Silicon Valley was "an extremely important point" in LeEco's global development strategy, Jia Yueting said. "We look forward to being able to share the benefits of our network platform with American consumers," he said. In an interview with U.S. television network CNBC, the Chinese IT tycoon said he was not worried about competition from the "monsters" of Silicon Valley. "We are very different from Apple," Yueting said in particular. "Apple specializes in the production of hardware and software. But LeShi focuses primarily on the Internet, then on manufacturing hardware, and then on software." Apple products are no longer considered innovative, says Yueting, who believes that the future of the mobile Internet is in "greater openness, more focused on the platform than a closed system of data transmission." Personal Apple apps were in demand at a time when processors and mobile Internet were not as fast as they are now.

"A new era of mobile Internet is dawning," Yueting said, "and it will have its own (closed) apps equally restrictive to users' freedom." Yuetin's pride and joy, the first unmanned "supercar," LeSee (Super Electric Ecosystem), will compete with the full-size electric crossover Tesla X, made by the American Tesla Motors, which began commercial shipments last October. The LeSee four-door sedan can be made to move and park with voice commands to a special mobile phone app. Its creators intend the smart car's on-board digital system to improve as new technologies emerge. In general, this is in the spirit of the popular trend in global high-tech that is usually called the "Internet of Things." "We see this car as a mobile smart device on four wheels, combined with smart television that, in essence, is no different from a cell phone or tablet," Yueting said. "We want to surpass Tesla, and take the industry to a new stage of development."

The century-old traditions in the automotive industry, according to a businessman, do not allow it to change. "Only Internet companies are capable of change," Yueting said. "Only they are able to see all the opportunities of the 21st century." This concept should favorably impact the cost of the electric vehicle. "If you compare the business model of our electric vehicle with the products of American companies, I think it would be correct to say the LeSee is Tesla plus Apple plus Uber plus Netflix and Amazon," the IT tycoon said. "We call everything combined in the LeSee the transportation platform of the future. With its help, we can create more cost-effective sources, and without increasing the price. That is, we sell the car at close to the production price. And the quality of our car is higher than that of Tesla X, and with a selling price lower than Tesla. Is it clear that it will be possible to find the LeSee on Russian roads? No official statements to this effect have been reported from the company, but we will ask Mr. Yueting about it at SPIEF.