
China is winning the global tech race - dsr12
https://www.ft.com/content/3530f178-6e50-11e8-8863-a9bb262c5f53
======
vthallam
I know this article is more about tech companies, but China is winning
everywhere. They have started a very ambitious OBOR to connect Europe, Africa
and Asia. The Chinese investments in Europe is just mind boggling [0] and the
infrastructure projects by the Chinese Govt are spread across the whole Asia,
Africa and Europe.

Unlike the USA which offers support and aid by offering money to other
countries, the Chinese loan tons of money to build infrastructure and it is so
much that the small countries will not be able to pay and literally submit to
the Chinese. [1]

[0] - [https://www.bloomberg.com/graphics/2018-china-business-in-
eu...](https://www.bloomberg.com/graphics/2018-china-business-in-europe/) [1]
- [https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-
chin...](https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-china-
port.html)

~~~
chii
> Unlike the USA which offers support and aid by offering money to other
> countries

how is the chinese doing any different than what the USA did/might've done
with foreign aid and other strings attached loans? In the end, it's a form of
empire building.

~~~
rayiner
That's a breathtakingly ignorant assertion. The "strings attached" to U.S.
foreign aid are there to benefit the country being helped, not the U.S. They
are things like economic reforms and measures to limit corruption. There is
definitely an ideology behind it, and its paternalistic, but it's not empire
building. It's more like evangelical Christianity--the belief that we can
uplift people not only by giving aid, but by teaching them to live and govern
themselves like we do.

(Source: my dad spent his career doing USAID work; grew up surrounded by
USAID, World Bank, etc., folks.)

~~~
marklgr
No need to call others' opinions ignorant when you have another one. Here's a
good book dealing with foreign aids, among other things:

[https://www.amazon.com/Dictators-Handbook-Behavior-Almost-
Po...](https://www.amazon.com/Dictators-Handbook-Behavior-Almost-
Politics/dp/1610391845/)

~~~
rayiner
I use "ignorant" quite deliberately; the opinion of U.S. foreign aid as having
strings attached to benefit the U.S. is literally ignorant of what U.S.
foreign aid projects and funding look like.

I haven't read the book, but de Mesquita is addressing something different,
the fact that foreign aid can enable bad leaders to stay in power by giving
them a flow of benefits they can use to reward cronies and placate the
populace:
[https://www.nytimes.com/2011/06/10/opinion/10DeMesquita.html](https://www.nytimes.com/2011/06/10/opinion/10DeMesquita.html).
That may well be true, but it's a criticism of foreign aid in general; note
that de Mesquita is associate with the Hoover Institution, which believes that
government-to-government foreign aid is inherently misguided:
[https://www.hoover.org/research/better-approach-foreign-
aid](https://www.hoover.org/research/better-approach-foreign-aid).

De Mesquita does not contend that U.S. foreign aid is a form of "empire
building" intended to make recipient countries dependent on the U.S. or confer
direct economic benefits to the U.S. (Even if the U.S. is driven by the
possibility of _indirect benefit_ from having more capitalistic countries on
the world stage, along with a stable world order, that is something quite
different from seeking an "empire").

~~~
marklgr
IIRC, he claims that foreign aids directly help autocratic rulers stay in
place, by giving them means to pay off their vital support. So he says that it
clearly prevents uplifting people or teaching them democracy, since they are
the first victims of dictatorship.

~~~
rayiner
I'd go even further than that and say that foreign aid helps keep badly-run
democratic governments stay in place ( _e.g._ in Bangladesh). Being skeptical
about whether foreign aid achieves the desired effect is very different than
saying that the U.S. provides foreign aid for purposes of "empire building."

------
bottomhollow
According to the article, China is winning because it has more unicorns than
others in > 10 billion: 11 are Chinese vs 6 are American. This is just VC
pumping its own game.

Massively overvalued Chinese startups fueled by unsustainable shadow debt
taking isn't a recipe for success.

"China’s campaign against its US$10 trillion shadow banking industry has
choked off refinancing for the weaker borrowers". let that sink in......10
Trillion debt that needs to be unwound in China, mostly corporate debt.

"Chinese corporate debt to GDP ratio is already very high by international
standards – at 168 per cent in 2017 – and is expected to start rising again as
nominal GDP growth declines towards the 8 per cent from an unusually high rate
of over 11 per cent in 2017, Fitch said. Further payment problems are likely
in a market that has already seen at least 14 corporate bond defaults this
year"

[http://www.scmp.com/news/china/economy/article/2149108/curbi...](http://www.scmp.com/news/china/economy/article/2149108/curbing-
chinas-corporate-debt-could-hit-economic-growth-report)

Also, this is happening in times of economic slowdown in China, due to trade
wars, tariff from US, reshoring of manufacturing back to US, declining FDI,
etc.

"China's economic growth slows to multi-decade lows across industrial,
infrastructure and retail"

[http://www.abc.net.au/news/2018-06-14/china-growth-
stumbles-...](http://www.abc.net.au/news/2018-06-14/china-growth-stumbles-on-
weaker-industrial-production-and-inves/9870214)

"Two-thirds of the 21 tech IPOs in the past year are below their issue price,
with shares down an average of about 20 per cent through Friday. Leading the
wipe out are online financing platforms Qudian Inc and PPDai Group Inc, which
plummeted 55 per cent and 48 per cent respectively, while search engine Sogou
Inc has tanked 27 per cent."

[http://www.scmp.com/tech/article/2146122/struggling-
chinese-...](http://www.scmp.com/tech/article/2146122/struggling-chinese-tech-
debuts-dont-bode-well-unicorn-ipos)

~~~
chii
> unsustainable shadow debt

i keep hearing this term, but what does shadow debt mean?

~~~
rm_-rf_slash
Unregulated unofficial loans. They have played a major role in developing
China’s economy outside of the rigidly regulated financial sector. However
their total value and creditworthiness is not entirely known. The Chinese
government doesn’t want to shut down the shadow debt markets wholesale,
because of their outsize influence on the economy, but for the same reason
they don’t want shadow lending to get too out of hand either. If there is a
credit crunch or economic contraction, it will be harder to manage the
consequences of unofficial debt than official debt.

------
ilamont
TFA is blocked. Does it talk about protectionism, cronyism, poor IP
enforcement, restrictions on foreign media and communication companies, or
forced technology transfer from foreign firms as a condition of doing business
in China? These aren't the only factors behind China's rise as a tech
superpower, but without them China wouldn't be where it is today.

~~~
coldtea
So like most other countries that are now pointing their fingers?

[http://theconversation.com/trumps-protectionism-continues-
lo...](http://theconversation.com/trumps-protectionism-continues-long-history-
of-us-rejection-of-free-trade-91190)

[http://foreignpolicy.com/2012/12/06/we-were-pirates-
too/](http://foreignpolicy.com/2012/12/06/we-were-pirates-too/)

[http://www.spiegel.de/international/zeitgeist/no-
copyright-l...](http://www.spiegel.de/international/zeitgeist/no-copyright-
law-the-real-reason-for-germany-s-industrial-expansion-a-710976.html)

~~~
mistermann
Do these other countries continue to enjoy WTO Developing Nation Status, which
enables a lot of the unfair advantages China enjoys as pointed out by the
grandparent comment?

[https://www.wto.org/english/tratop_e/devel_e/dev_special_dif...](https://www.wto.org/english/tratop_e/devel_e/dev_special_differential_provisions_e.htm#legal_provisions)

Pointing out the historic cheating of now first world countries is fair if
questionably relevant, pointing out Donald Trump's raising of tariffs as
hypocrisy (I assume) is down right silly, especially in the context of this
conversation.

~~~
coldtea
> _Do these other countries continue to enjoy WTO Developing Nation Status,
> which enables a lot of the unfair advantages China enjoys as pointed out by
> the grandparent comment?_

No -- they don't need it as much, as they already climbed the lax-
IP/protectionism ladder for centuries to get high.

Now they insist nobody currently lower than them should use the ladder.

~~~
mistermann
Taking your last sentence literally, is that actually your honest assessment
of this dispute, in its entirety?

~~~
coldtea
My actually assessment of this dispute is even worse.

~~~
mistermann
"Now they insist nobody currently lower than them should use the ladder."

How might you know this though? No one has said anything out loud even
remotely comparable to this, so how might have you formed this conclusion?
What information source are you using?

I'd be quite interested to hear your actual full assessment if you have the
time.

~~~
coldtea
> _How might you know this though? No one has said anything out loud even
> remotely comparable to this, so how might have you formed this conclusion?
> What information source are you using?_

Are you kidding me? The party line from western politicians, establishment
media (NYT, Economist, and so on), and establishment (read "state sponsored")
think tanks, are exactly that: "Do as we say, not as we did".

~~~
mistermann
I have a feeling you're not aware of the human mind's capabilities as it
relates to realtime classification, association, translation of sentences into
far more detailed and colorful ideas.

Let's test this theory: post the most compelling _actual_ evidence you have
that backs up the claim:

"Now they insist _nobody_ currently lower than them should use the ladder."

~~~
mistermann
Is a downvote considered compelling evidence now?

Something to as yourself in private: why do you believe what you believe, with
such conviction, if you are not able to defend it intellectually?

------
melling
Interesting article by Michael Moritz of Sequoia Capital.

China is taking the lead.

“All lists of private companies contain degrees of subjectivity and error, but
the Wikipedia ranking of unicorn start-ups by value offers a peek into the
future. For westerners, it should be disconcerting. Of the top 50 entries, 26
are Chinese and 16 are American. There are none from Europe. The Chinese also
dominate the proportion of the most valuable of these companies. Of the top 20
with an estimated market value of over $10bn, 11 are Chinese, six are American
and two are Indian. ​​“

~~~
l5870uoo9y
Europe needs to build its own tech ecosystem instead of being a resource hub
and market for US companies. There were some sense in the French driving
Peugeot, the Germans VW and the Americans Ford, instead of all driving a
generic car from a distant silicon valley company far away from local market
and value chain.

~~~
opportune
I don’t really understand how Europe has struggled so much. Is it due to a
lack of investors? Brain drain or some comparative lack of talent (I doubt
it)? Regulations (also doubt it)? Cultural differences? Difficult domestic
market?

~~~
rarec
Probably a combination of all three. The US and China have the benefit of a
comparatively gargantuan native population that all speak the same language
and enjoy similar tasting kool-aid that you can immediately market to. A
business in SF can reach people NYC, Florida, etc. Combine that with somewhat
lax customer rights laws (however you may view it), and you have recipes for
some explosive growth.

I've also heard that European investors are notoriously conservative in their
strategies and don't take the risks that the US does. Japan is also faltering
in this department for that reason. Without the pools of money to draw from,
if you cannot gamble then you cannot win, essentially.

~~~
berthe
> Probably a combination of all three. The US and China have the benefit of a
> comparatively gargantuan native population that all speak the same language

As odd as it sounds, my understanding is that China's Han population _doesn
't_ all speak the same language, but they (for the most part) _read /write_
the same language. They call the variations in spoken language "dialects," but
many of them are mutually unintelligible. I think the situation is the similar
to a hypothetical one where the Romance countries (e.g. France, Spain, Italy,
etc.) speak their respective modern languages, but continue to write
exclusively in Latin.

Just a small unimportant quibble that doesn't negate your larger point.

~~~
tomp
Still, the difference is size. In China, 20 million people speaking the same
language is a city. In Europe, it's a country.

------
kraig911
The bigger China grows the more important IP and patents will become thus
making it like all the rest. India will be the next giant to be exploited.

------
rb808
Meanwhile ZTE goes bust if it can't buy American chips. I dont see any Chinese
tech that is unique.

~~~
ajiang
Do you mean Qualcomm chips and smartphone tech that practically every runs
every smartphone in the world? I can see how that would impact ZTE's
smartphone business...

[https://en.wikipedia.org/wiki/Qualcomm#History](https://en.wikipedia.org/wiki/Qualcomm#History)

~~~
dagw
Completely OT, but I just realized that Qualcomm the chip company and Qualcomm
the email software company are one and the same. Don't know why I never made
that connection before.

------
announcerman
I wonder if the reason for this is mainly due to how much leeway you have as
long as you use your technology for the benefit of the ruling party. Isn't it
much easier to work on things like harvesting personal information if you
don't have GDPR breathing down your neck? Hell the government might even help
your tech startup with basically unlimited cash as long as you help them with
your tech.

~~~
JumpCrisscross
> _as long as you use your technology for the benefit of the ruling party_

The dark side of this leeway are demands for patronage from middle-level
bureaucrats.

------
whazor
I believe China is too unbalanced in their IP protection in order to 'win the
tech race'. They either have a monopoly that controls the market via Chinese
gov, or there are no rules at all and everyone will backstab you. I believe
that these conditions are unfavorable for true technological innovation.

------
heinrichhartman
Paywalled. I can't read this.

~~~
pella
maybe:

try via twitter link (
[https://twitter.com/FT/status/1008323779360157696](https://twitter.com/FT/status/1008323779360157696)
) - and open in a new incognito window.

------
jsadamsnyc
They are winning more than the global tech race.. :(

------
ajiang
I think most people voting / commenting are not actually able to read the
article due to paywall. Adding the text so discussion is more substantial. @HN
not sure if this goes against any rules, my feelings won't be hurt if the
below is removed.

 _Cast your eyes down the list of the world’s most valuable private technology
companies and you might be put in mind of the 2008 Beijing Olympics. That’s
when China ran away with most of the gold medals — even though the west
focused on the accomplishments of the US swimmer Michael Phelps. The same
trend is evident in the list of technology “unicorns” worth $1bn or more.
Uber, Airbnb and SpaceX may be hogging the limelight, but the undisputed gold
medal leaders are the Chinese.

All lists of private companies contain degrees of subjectivity and error, but
the Wikipedia ranking of unicorn start-ups by value offers a peek into the
future. For westerners, it should be disconcerting. Of the top 50 entries, 26
are Chinese and 16 are American. There are none from Europe. The Chinese also
dominate the proportion of the most valuable of these companies. Of the top 20
with an estimated market value of over $10bn, 11 are Chinese, six are American
and two are Indian. ​​

Topping the list with an estimated value of $150bn is Ant Financial, the
financial services spin off from Alibaba. Its value rests on the opportunities
investors believe lie ahead in China and, increasingly, in south-east Asia.

Many California-based technology investment bankers — eager to haul in trophy
initial public offerings — are now romancing more companies in China than at
home. Smartphone maker Xiaomi has already filed to float in Hong Kong, which
must be disquieting for the US exchanges. Ride-hailing app Didi Chuxing and
Meituan are among the bankers’ other targets.

The growth rates of leading public technology companies underline the same
trends. For the year ending March 2018, the top five US companies grew at a 26
per cent median clip, while the top five Chinese entities jumped 33 per cent.

The US companies are generally larger, but Chinese companies are narrowing the
gap. As 2016 dawned, the top five Chinese companies were worth one-quarter of
their US counterparts. By the end of March 2018 this had risen to one-third.
Right now, Facebook, the fifth most valuable US tech group, is just ahead of
Alibaba, with Tencent not far behind. No wonder that Chinese youngsters
looking for role models evoke the names of Jack Ma, Pony Ma, Lei Jun (founders
of Alibaba, Tencent and Xiaomi) more than they do Amazon’s Jeff Bezos,
Facebook’s Mark Zuckerberg, or the late Steve Jobs of Apple.

Chinese internet companies also stand out because they are purchasing stakes
in many of the more interesting, younger private technology companies. It is
somewhat akin to real estate companies snapping up the best beach-front
property.

Most Chinese activity is outside the US, with Tencent and Alibaba building
vast constellations of satellites. Tencent has more than 600 investments,
while Alibaba has around 400 — totals that almost make Japan’s SoftBank look
like a penny-pinching slowpoke.

Critics of this approach may gripe that it is undisciplined, but the admirers
argue that these investments are somewhat akin to Chinese premier Xi Jinping’s
ambitious and far-reaching Belt and Road Initiative. The only US company that
comes close is Google, which since the start of 2017 has made more than 100
investments, although they are heavily concentrated in the US. It has also
purchased more than 80 companies outright since 2014.

Another transpacific difference involves the use of cash. Between 2015 and
2017, the five biggest US tech groups (especially Apple and Microsoft) spent
$228bn on stock buybacks and dividends, Bloomberg data shows. During the same
period, the top five Chinese tech companies spent just $10.7bn and ploughed
the rest of their excess cash into investments that broaden their footprint
and influence.

It’s hard to escape the view that the Chinese groups are — like all of us —
creatures of their heritage. They are using their investments as one way to
help fulfil the ancient Chinese definition of the Middle Kingdom — as the
centre around which all else revolves.

The writer is a partner of Sequoia Capital. The views expressed are his own
and he may own shares in companies mentioned_

------
corporateslaver
This is propaganda. China is mostly an uneducated factory nation who will be
crushed by automation. Articles like this are great for clicks on a website.

Edit: which Chinese tech companies are actually dominant? All of them are
copies of American tech companies propped up by their government. Where is the
market penetration into the USA? Where is the competition? There is none.

~~~
ajiang
Author is Sequoia's Michael Moritz who has a decent amount of credibility
here. I think his last few articles on China have been more around warning US
tech companies not to get complacent, rather than trying to convince people
that China is a tech holy land.

As for the part about being an uneducated factory nation, the latest PISA
findings from 2015 would have China scoring higher than the US on math (10th
vs. 25th) and science (6th vs. 40th), but slightly lower than the US on
reading (27th vs. 24th).

~~~
chii
> Sequoia's Michael Moritz who has a decent amount of credibility

but you have to also think whether he's biased in wanting to push the view
that the next big tech hub is in China, because he's invested in the region.
Making the hype machine so that when time comes to exit, there's plenty of
doofus who will believe the hype and buy into the market.

it's very hard to know what to believe, and even more effort to do research.
Most people won't be doing it, so it's an effective method to generate hype.

~~~
thablackbull
> but you have to also think whether he's biased in wanting to push the view
> that the next big tech hub is in China, because he's invested in the region.

He puts his money where his mouth is. I made another comment here that it was
refreshing as it didn't predict the collapse of China which has been peddled
for the past few decades by so-called experts - they could peddle any view
they want with no financial repercussion.

Secondly, even if Moritz was biased and published this article for his own
gains, it's not as if we (foreigners) have easy access to invest in the
region.

> it's very hard to know what to believe, and even more effort to do research.
> Most people won't be doing it, so it's an effective method to generate hype.

I heartily agree with you here, but you have to admit for every article like
this, there are 10x more about the imminent demise of China, so I don't buy
the argument that this article's hype will override 'collapse' articles which
generate much more clicks.

