Alibaba forms Norinco alliance

Alibaba Group Holding Ltd stepped up its moves in the location services sector on Wednesday by joining hands with the biggest military equipment maker in China.

The alliance between the e-commerce giant and China North Industries Group Corp, or Norinco, is set to drive the expansion of the home-grown Beidou Satellite Navigation System which is starting to threaten the worldwide dominance of the United States-owned Global Positioning System.

Alibaba and Norinco have set up a 2 billion yuan ($313 million) joint venture in Shanghai to provide high-accuracy location and data analysis services to customers, according to Norinco. Alibaba and Norinco will each hold a 50 percent stake in the company.

"Location-based services are a critical part of the Internet infrastructure. We will provide better services to enterprises and developers by taking advantage of our strengths in cloud computing and big data sectors," Alibaba said in a statement.

Norinco, a major supplier of tanks, anti-aircraft missiles and high-explosive bombs to the People's Liberation Army, is a major developer of Beidou's ground-based augmentation system.

The system provides differential corrections and integrity monitoring to the positioning information generated by satellites. It is claimed to provide significantly higher accuracy than GPS and is available indoors and in other areas where satellite signals cannot reach.

Chinese delivery companies, such as SF Express (Group) Co Ltd, are already using satellites to track packages. A more accurate indoor navigation service will lift efficiency for the companies.

Miao Qianjun, secretary-general of the Global Navigation Satellite System and Location-based Services Association of China, said the biggest business opportunity is in satellite-based positioning because the ground-based augmentation technology has low rates of return.

Beidou's universal coverage may also help Alibaba tap into markets outside China. The New York-listed company has been trying to locate the next online shopping goldmine as the purchasing power of Chinese shoppers seems to be tapering.

"The focus of Beidou will be on regions within the framework of China's Belt and Road Initiative in the coming years," Miao said.

The areas include Southeast Asia, Central Asia, the Middle East and some East European economies.

Before allying with Norinco, Alibaba spent $1.5 billion to acquire Chinese satellite navigation provider AutoNavi Holdings Ltd in 2014. The move helped Alibaba compete with Baidu Inc in the mapping and navigation market.

The Alibaba investment will also help Beidou attract more overseas customers. Beidou was designed both for military and civilian use and it started to provide commercial services since 2012.

China requires all the navigation devices sold in the country to be compatible with Beidou, pitting the Chinese system as a strong contender against the GPS.

Miao said as China puts more satellites into obit, the young system is on track to generate 400 billion yuan in annual turnover by 2020.

A visitor inquires about the driving navigation devices powered by the Beidou Satellite Navigation System at an expo in Urumqi, Xinjiang Uygur autonomous region. The home-grown system is a challenger to the United States-owned Global Positioning System.