Dreams of Beautiful Babies

Baidu and China Unicom may be headed for an arranged marriage.
At Closing, May 25th
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Mixed-Ownership Reform.

Add that to your lexicon of Chinese government policies, alongside One Belt, One Road, and Going Out.

The term has been around for a few years but just popped back to the fore.

China Unicom Hong Kong Ltd. 1 and Baidu Inc. said Wednesday night they'll join forces in areas including mobile internet, artificial intelligence and big data.

Both companies are struggling, and each needs a shoulder to cry on. Unicom's operating profit has fallen off a cliff, with prospects of a merger being about the only thing juicing the stock. Baidu, the nation's biggest search operator, has been in pain for a year and is the favored punching bag of anyone who has a grievance with the internet, or who advertises there.

Weak Signal

Unicom's stock tends only to get excited when there's talk of mergers or government-led reform

Source: Bloomberg

Whether the government booked the table and lit the candles or the parties met through "mutual friends" (read: online), Baidu and Unicom are now dating. As they stare into each other's eyes and talk about the future, it's possible they're whingeing about that meddling matchmaking auntie, the National Development and Reform Commission, while agreeing they're happy to have a nice meal.

Glory Days

Unicom's operating profits are not what they use to..

Source: Bloomberg

Both sides must surely now be thinking about marriage. Unicom would like Baidu's handsome, if aging, search engine. It will have fallen in love listening to plans for big data and artificial intelligence. Baidu can't help but be comforted by Unicom's stability, placid demeanor and rich parents.

But what if all this is a distraction, especially for Baidu, which desperately needs to get out of search and into something with a future? Its hopes for driverless cars and deep learning could be delayed while time and energy are spent doing newlywed things like picking out curtains.

Unicom, having realized its catch isn't quite as exciting as it seemed, may be left daydreaming of a better prospect. That cheeky Tencent looked like a lot of fun, and has so many friends. And just think what could have happened with an astute merchant like Alibaba, not to mention all those financiers who flirted back in the day.

Yet if there's one thing spouses know the day after a wedding, it's that they're stuck with one another for a while. In Chinese culture, one good option is to make babies.

And what beautiful babies they'd be. Unicom's blue blood with Baidu's brashness. Unicom telling the young progeny to wear a helmet while Baidu urges the kid to ride faster. Big data with direct mobile connections; artificial intelligence rolled out onto millions of phones and in thousands of retail outlets. Bliss!

Back at the table, though, the candle has burned lower, the waiter comes by to pour more water and both sides get to wondering: Who's going to pick up the check?

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. Technically, it's Unicom's parent that's involved in the plan.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net

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