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China is winning the global tech race (ft.com)
72 points by dsr12 on June 18, 2018 | hide | past | favorite | 94 comments



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... [1] - https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-chin...


Kind of a United Fruit model of economic investing which resulted in the pejorative banana republic and resulting cries of American Imperialism, and subsequent loss in economic growth as AmCos pulled out due to instability.

Wonder if they can avoid a similar fate. Maybe people are wiser on both sides, one can hope.


My impression is that much of this "instability" was largely the result of American military/intelligence intervention that came in response to the local government seizure and nationalization of these industries.


Superficially maybe. My impression is most of the instability was countries with govts with too weak an effort to transition from an agricultural society to a goods and services centered one, this resulted in an ill advised call for land redistribution and other unrest rather than making education necessary for all kids. Even now many illegal manual labor immigrants to the US lack basic education.


> 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.


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.)


>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.

That sort of comparison is going to only get you into trouble. Foreign aid is very often tied to foreign policy, especially security policies like maintaining bases, to keep "friendly" regimes in power, to "tied" aid, etc.

Certainly, not everything is Machiavellian about it, and ofcource people recognize the huge benefits and impact it has had in uplifting poor people, lets also not forget that there is a whole lotta grey in there.


Breathtakingly ignorant? Wow. I have seen foreign aid in the third world and a lot of it is pretty self serving from the first world (including the US). Examples: US aid to fund a cure for malaria except they were only interested in solutions that would work as short term protection for the US military, not long term protection for the people actually suffering from chronic malaria. The WHO (in this case pushed by individual Americans) pushing locals to switch a national park over to mining interests resulting in multinationals coming in, screwing the environment and taking all the profits. I think your dad might have been viewing the world through ideological glasses.


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...


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. 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.

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").


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.


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."


Exactly. The US just hopes the money will be used for the welfare of the country and hoping for some soft power when it's required. On the other hand, the Chinese are just loaning the money and making other countries explicitly owe them.


The difference is that know the rest of the world is aware of it it whereas in the past, they were not as aware.

I know that may not be the answer you want to hear but " image " is huge in China.


So China is winning by giving out loans that will never be paid back?


Yes, because they take assets in lieu of payment. You don't get from 3rd world country to challenging the world super power in 20 years by being dumb.

On a related tangent, if you don't mind - I'm trying to test my "tone detector" - it indicated sarcasm in your comment, as if the comment to which you were replying was not just wrong but dumb - how accurate was I?


This is exactly what happened with the Hambantota Port. Sri Lanka asked for billions in loans from China to build a second port in Hambantota, Sri Lanka. After it was built, the naval port didn’t get any shipping/cargo traffic so Sri Lanka couldn’t pay back the Billions. China offered to refinance the loan, how? Sri Lanka turned over control of the port to the Chinese Government under a lease of 100 years and Sri Lanka gets to pay a lower amount on the loan.

Now US Intelligence are seeing an uptick in Chinese Navy Warships patrolling the Indian Ocean and fears about Hambantota turning into a Chinese Military Port.

This is being called the String of Pearls Theory: https://en.wikipedia.org/wiki/String_of_Pearls_(Indian_Ocean...

The model has already happened in Djibouti, where a Chinese Military Port is currently operational. US Generals have voiced their concern: https://www.reuters.com/article/us-usa-china-djibouti/signif...


Exactly.

It's odd how some people can clearly see (and acknowledge) these things, while others seem literally unable to see them, almost as if they have some sort of a psychological filter hiding portions of the full spectrum of reality. I wonder if I suffer from the same thing, but different portions of the spectrum. I find it an interesting and useful way in which to observe the world and disagreements between people.


It's kinda funny how Americans still thinks US is doing shit to help anyone else besides themselves and their business interests. China is now doing the same thing the west/ImF/world Bank have always done. But in the case of China they don't run around toppling government and the countries do get general infrastructure while the west usually just built the bare minimum to get the resources out. Yes its imperialism but I'd take the Chinese version over the horrors of the western Empire any day of the week and twice on Sunday.


> It's kinda funny how Americans still thinks US is doing shit to help anyone else besides themselves and their business interests.

It depends on what you mean by that statement I suppose. It sounds like you are of the opinion that literally every single foreign aid initiative the United States of America undertakes is, at it's core, entirely (not partially, as I would suspect the case to be, but entirely) for the purposes of advancing the interests of American businesses.

Is that a more or less proper characterization of what you've said, or have I misunderstood?

And if it is proper, how might you have come to know this? I mean, for the sake of argument let's assume it's true - if this what they were really up to, I'd think most of the corresponding proof would be known only to a fairly select group of trustworthy insiders. How would you have found out these details?

This story doesn't seem to add up, but maybe I'm missing something?

> China is now doing the same thing the west/ImF/world Bank have always done.

The exact same thing, or something similar?



I think Chinese leadership have a different set of incentives than Americans do. American businesses are about minimizing production costs in order to sell as much as possible in the US market. While the Chinese government seems to prefer expanding the market for their domestic good by raising the stands of living in developing countries.

Similar to how the US handled Japan and South Korea instead of Latin America and the middle east.


On a related tangent, if you don't mind - I'm trying to test my "tone detector" - it indicated sarcasm in your comment, as if the comment to which you were replying was not just wrong but dumb - how accurate was I?

It's not the comment that's dumb, it's the strategy. The Soviet Union used to dump tons of money into client states, and all that Russia has to show for it now is a naval base in Syria. China has hundreds of millions of peasants who are living in abject poverty. Doesn't it have better uses for that money?


> It's not the comment that's dumb, it's the strategy.

Really? Based on what, the failure of the Soviet Union? If you were to look a little closer, you may discover the Chinese aren't executing an identical strategy. The world is extremely complex, using blunt comparisons like the above won't yield very accurate results. At the very least, you would probably benefit from having a more open mind.


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...

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-...

"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-...


There has been this little discussed massive debt overhang in China. But for comparison, I wish I could find something that compares the US debt overhang. What's the total corporate debt of the US, it must be massive. I guess "Shadow banking" debt is just a part of the debt China has, because cities and regions have large loans too.

This article says for the US, $8.7 trillion, 45% of GDP https://www.cnbc.com/2017/11/20/the-debt-time-bomb-that-keep.... Compare to 168% in China above.


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

It may not be the cleanest or most efficient recipe for success, but whether it is or is not "a" recipe for success remains to be seen. There is more than one way to skin a cat as they say.

As for their massive debt, again that could be a problem, maybe even completely derail China and throw them back into chaos, but there's little reason to think that it must be a problem. As long as sufficient confidence can be maintained in the system and everyone keeps showing up to work each day, and trade continues flowing, how the results are divvied up at the end of the day in the short run is secondary to the longer term functionality of the overall system.


> unsustainable shadow debt

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


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.


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.



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...

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.


>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.


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


My actually assessment of this dispute is even worse.


"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.


>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".


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."


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?


Not op, but pretty much, yes. GDP per capita is still way lower for China compared to US.

China is perfectly justified in playing a system built by the winners for the winners. Much luck to them in making the hypocrisy of the system more clearly obvious.

The US is complaining about IP theft, where:

1) they are (were? mainly?) the ones with IP assets

2) the rules have been established by the US (mainly)

3) whenever the US sees fit, it breaks its own rules (thanks Trump, finally this is obvious to everybody!)

And all the while without even mentioning:

A) the war dividends, all around the world. Whoever thinks the US is losing money with NATO is just delluded.

B) the massive rent extracting effects that the dollar has throughout the world economy.

Tell Trumpy something: if he wants "fair" trade, let's also get a fair currency for all involved.

The truth is that the deficit happens because the US consumer indulges in extra hyperconsumerism thanks to an overvalued dollar.

The arrangment suits nealy everybody. Now comes Trump and wants a new deal.

Let's get one: the US consumes less with a weaker dollar, and the deficit disappears.

You know what the US won't get: a world where the US controls the currency, the military and the economy. Maybe you haven't noticed, but the US is only 5% of world population.

It wouldn't be fair.


You must not have paid attention in history class. When the colonies, primarily the US, started doing better than the old European countries ... what happened ? And yes, immigrants in the US beat quite a few traditional industries at their own game, under rules set by people trying to sabotage them. Well done, right ? So what happened ...

Peace, love and prosperity ? Or something else ?


>When the colonies, primarily the US, started doing better than the old European countries ... what happened?

Nothing much. There were 2 world wars that finished the old European countries, and the US took over the warmongering world leader game, and the colonialism (as neo-colonialism this time).

>And yes, immigrants in the US beat quite a few traditional industries at their own game, under rules set by people trying to sabotage them.

Not sure what you mean. Immigrants that succeeded in the US still played by US rules and laws. In fact most any immigrant that succeeded was totally Americanized - ending up like those "trying to sabotage them". Did you see any huge story where immigrants changed the underlying culture, ethics, etc?


What I mean is early US history. When the colonies' industries started growing and outperforming the home industries, the governments of Europe started systematically sabotaging the American (then not-quite-yet-American of course) businesses, eventually using the police and even army to use direct violence against them.

Incumbents really don't react well to upstarts even just performing decently.


That's what's so interesting about modern times, both the leaders of incumbent countries as well as the citizens seem not only not worried about threats from rising countries, but in many cases determined to defend and assist them in their endeavor to dethrone the current incumbents.

I wonder if history has ever seen anything like this before, at least on such a widespread scale.


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. ​​“


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.


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?


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.


> 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.


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


Fractured market for sure, but also cultural differences (mentality).

What's standard bread&butter hustling in US is considered cringe-worthy BS in Europe.

While the music plays, there's no way business conservatism and sticking to "fundamentals" can compete with SV unicorns.


It's hard to understand. On paper, it has all the ingredients. Highly educated rich market. The EU created a 500 million common market which should allow European companies to scale. SAP, Spotify, Philips, ASOS, Skyscanner and even Nokia/Skype before take overs were/are tech success stories. But looking at the largest companies by revenue in Europe you see they are dominated by 20th century largely traditional industries (oil, engineering, food). Ref: https://en.wikipedia.org/wiki/List_of_largest_European_compa...


A few factors:

1. There is no common language so hiring is typically restricted to one country.

2. Taxes are very high, particularly social security taxes that must be paid by the employer. Firms are very reluctant to create jobs.

3. A lot of bureaucracies are old and inefficient.

4. For the same reasons, products are difficult to scale. You can go from a local product in San Francisco to a national product in the USA relatively easily. But in the EU you are dealing with multiple languages, cultures, country bureaucracies in order to make the same jump.

The best thing for the EU would be to get everyone speaking English at least as a second language. Then, to require all official forms, Government engagement etc. to be in the national language and English.

Imagine you go from working in Warsaw to Berlin. A distance of only 570km, but you need to be able to speak Polish to deal with Polish bureaucracy, English to work at the multinational firm, and German to deal with German bureaucracy.


The US goverment / military dumps obscene amounts of money into the development of technology. This provides a solid foundation on which to build a thriving consumer technology sector. It's totally viable to develop and bring to market devices that cost millions of dollars per unit as long as it possesses some modest degree of military application.


To me an important part seems to be the fact that the US has an extremely competitive tech sector – personified in Silicon Valley – that has been cultivated over decades, basically since the US rose to prominence after second world war.

Through innovative symbiosis between universities, business', talent, steady US defence spending, plentiful of financing and business friendly regulations it has become the preeminent tech sector only rivalled by the Chinese which was born out of protectionism. With the invention of the internet and the unprecedented level of free trade, a few companies from Silicon Valley has successfully monopolised large part of not only the US market but also the European market. And not only that, this was done in record speed, Facebook was only founded in 2004. Traditional manufacturing sectors are much more dependent on the local market than tech companies.

After the second world war Europe was destroyed and effort when in to rebuilding countries and relations. Furthermore the mindset that gave birth to Silicon Valley to combine raw capitalism with university campus' wouldn't have had a chance. Rigid universities, socialist political discourse and unions would have prevented it. Perhaps the mindset is changing, question is to what degree protectionism will be used to gain a footing in the vital tech sector.


Per capita this doesn't seem as terrible. Is that the wrong way to look at this?

China has ~1.38 billion people USA- ~326 million


Yeah but I guess what is remarkable is the trajectory from 1990 to 2018


It's been a very predictable trajectory. I recall reading in the mid 90s, as a high school student an op-ed that anticipated China's GDP to exceed America's sometime in the early 2020s. They're right on course to do that.


Okay, but the debt to GDP ratio is much higher in china. See my previous article, China 168% of gdp, us 45% of gdp.


>Sequoia Capital.

Rephrasing: Chinese sock market is more plump, and more crazy than American. If you are in a business peddling BS stocks, there is no better market. I'm extremely sorry for use of vulgarities there, but I know of no other words in English language to characterise that.

On other hand... China's tech scene beats the silicon valley even without any stock market backing. And it is its beauty. China is probably the last place in the world where BS "high finance" has not yet gobbled up the tech scene.

Things are still done by real men of merit, real industrialists, real Chinese Carnegies. I personally knew of people who secured cash on the table for their businesses from them with just gentleman's agreement without them bowing down to any of "high finance" gatekeepers.

To Sonny

>I'm actually really surprised there isn't some great, commonly available mobile OS from China commonly available here ...

Well... a big part of South Asia know no other mobile OS other than what I call "Chindroid." Something that comes with custom skin on top of Android 2.0 era forks of Cyanogen. There is a whole culture grown around that.

>Then why does nobody outside of China use Chinese tech? This is a paradox that flies in the face of all the 'great news' coming from China.

I'm totally disagreeing with you on that. China's tech is ee-ve-ry-whe-re... except for America...

What half of Africa uses? A $20 dollars white label BuBuGao phone.

What half of South Asia depends on water filtration? Cheap Chinese membrane filters.

Who makes 70% of industrial chemicals, 30% of generic medicines, and 50% of precursor chemicals?

Whose heavy equipment is used everywhere outside of developer world...

Who has a complete dominance in manufacturing machinery?

Whose white goods totally dominate every non-OECD country?

This list will span for a kilometre.

Behind all of these things stand businesses that are head above all those "unicorns" where it comes to being considered "substantial"

Nobody will blink an eye if one of those 10000 facebook.com unicorn clones will disappear tomorrow, but if something will happen the biggest maker of fertilizers in China tomorrow, the whole world will turn silent for at least a few minutes.


Then why does nobody outside of China use Chinese tech? This is a paradox that flies in the face of all the 'great news' coming from China.

In HK, nobody uses Baidu, they use Google.

The article is misleading because the size of these 'new industries' like 'car sharing' is going to be a function of the size of the economy, so really, it's like measuring the size of the banking sector ... it will be a % of the economy and that's that. Since banking is protected, it will be domestically owned. In China, so many sectors (all of them?) are strongly protected in so many ways so the outcomes are all rather predictable. Ride sharing, search etc..

For AliBaba though, and situations wherein they have done things differently given the state of their economy, they can claim a separate path and it'd be rather difficult to predict outcomes.

But those things notwithstanding ... we're still not using any chips, OS, software, services or tech out of China just yet.

I'm actually really surprised there isn't some great, commonly available mobile OS from China commonly available here ...


Ehhh, Rigol is a popular oscilloscope brand with non-professionals. Rigol is Chinese.

https://www.rigolna.com/products/digital-oscilloscopes/1000z...

edit: and I should add, I think they redefined the market somewhat.


Touché. Kind of. I don't doubt there are things here and there, but if what an HN knowledgeable can come up with is 'Oscilloscopes' ... well then you might have made my point for me.

I am perplexed by the lack of Chinese tech that we use and I think there must be some reasoning behind that.

Our markets are 'mostly open'.


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.


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


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


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.


ebikes, scooters, and hoverboards were all out of china.


Can't speak for "hoverboards", but ebikes and scooter where definitely not "out of China", sure they no doubt win in volume and price, but they where hardly trailblazing or innovative in the space.


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.


> 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.


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.


Paywalled. I can't read this.


maybe:

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


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


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


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.


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).


> 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.


> 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.


>This is propaganda. China is mostly an uneducated factory nation who will be crushed by automation

LOL.

First, that's the same argument they were making back in the day for Japan (the "uneducated factory nation", the "copy cats", the "cheap knockoffs" etc). Funny how that turned out.

Second, labor costs are not the relevant factor, so automation wont matter much to bring factory jobs back. It's all about the supply chain:

http://www.businessinsider.com/you-simply-must-read-this-art...

https://www.economist.com/free-exchange/2012/01/23/apple-and...

Not to mention that Chinese factories can and will also invest in automation.

Third, "uneducated factory nation"? Where does one get that information from, the John Birch Society Bulletin?

https://www.theguardian.com/science/2018/feb/18/china-great-...

http://bruegel.org/2017/08/china-is-the-worlds-new-science-a...

Oh, and as sibling says: "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)."

It's easy to make fun of previously underdeveloped nations that started from an uneducated and less advance point 30 and 60 years ago, but the problem is that they can catch up (like Japan and South Korea, an insignificant economic wasteland after WWII, did). Especially if their rivals are on the decline themselves. Rome didn't last forever.


Look at Japan, their economy has been stagnant since the 80s, propped up by government market manipulation. They are almost completely irrelevant. Which innovative companies does China have that aren’t complete rip offs of American ones? Where is the penetration by those companies into the USA?


>Look at Japan, their economy has been stagnant since the 80s, propped up by government market manipulation. They are almost completely irrelevant.

They're still "the third-largest in the world by nominal GDP and the fourth-largest by purchasing power parity (PPP). and is the world's second largest developed economy".

I'd take that level of irrelevance any day.

Besides that, Japan's situation doesn't tell us much.

>Which innovative companies does China have that aren’t complete rip offs of American ones?

DJI would be a good example. They're the Apple of drones, and are doing great in the gimbal business as well. No American company comes even close.

There are others of course, and more will emerge. Already they make phones on par with the best of the Android world.

Besides, which innovative companies did Japan have before the 70s that weren't complete rip offs of American ones? And which innovative companies did the US have (before the mid-19th century) that weren't complete rip offs of European ones? And yet here we are now...


Over Half of the Japanese stock market is owned by the government bank. The whole economy is a shell propped up by quantitative easing financial policies.

Great drones. We have google, they have cheap manufacture produced drones.

I keep hearing “China is coming”, “they will have more”, ....

It never comes to fruition. That have a massive population supported by manufacturing wages that will all lose jobs when automation takes over.


> It never comes to fruition.

In a number of gaming sectors, it's already done. Steam is majority Chinese players, mobile gaming revenue has been from China. Steel (until the tariffs) has been dominated by cheap Chinese offerings, killing off a bunch of suppliers in the last 15 years. I dunno what you're talking about, but reality doesn't care what you think anyway.


>Over Half of the Japanese stock market is owned by the government bank. The whole economy is a shell propped up by quantitative easing financial policies.

Well, different countries use different strategies. Half of the US economy is based upon the country's military might, and (through it) imposing favorable deals, bullying, controlling oil and trade routes, IP laws and so on (plus "quantitative easing financial policies" and trillion dollar bailouts, subsidies and handouts to Detroit and co). I'll take Japan's "quantitative easing financial policies" any day...

>Great drones. We have google, they have cheap manufacture produced drones.

Well, they also have their own Google: Baidu.

Heck even Google's page-rank style concept was pioneered by a Chinese (the founder of Baidu) before Google was a thing:

"A small search engine called "RankDex" from IDD Information Services designed by Robin Li was, since 1996, already exploring a similar strategy for site-scoring and page ranking.[18] The technology in RankDex was patented by 1999[19] and used later when Li founded Baidu in China.[20][21] Larry Page referenced Li's work in some of his U.S. patents for PageRank." (Wikipedia)

>That have a massive population supported by manufacturing wages that will all lose jobs when automation takes over.

They have a massive internal market, 4 times the US in population, strong growth, have been the world's largest economy back before (for many centuries), have a much older and more resilient culture, have the tech and the factories, and they will own the future, as the tired Europe and US give up the spirit.

Rome didn't last forever either...

>I keep hearing “China is coming”, “they will have more”, ....

Well, I don't know for how long you "keep hearing that", but if you hear it for e.g. the last 2-3 decades, then it's also accompanied by massive Chinese growth those last 2-3 decades.

So it's not like you merely hear it without anything coming out of it. On the contrary, it's one of the most well supported statements.

If you mean why they haven't already taken over the lead, well, it took US nearly a century, plus two whole world wars that torn and beat Europe up, to get to be the world player that it has been the last 70-80 years.

The world economy is not like the tech market, to expect something to go from start to domination in a few years...


> Half of the US economy is based upon the country's military might, and (through it) imposing favorable deals, bullying, controlling oil and trade routes, IP laws and so on (plus "quantitative easing financial policies" and trillion dollar bailouts, subsidies and handouts to Detroit and co). I'll take Japan's "quantitative easing financial policies" any day...

Bluntly, this is BS. A bit of the US economy, yes. Half? Not even close. But you seem to have an ax you want to grind with respect to the US, and reality would not serve you as well as hyperbole.


>Bluntly, this is BS. A bit of the US economy, yes. Half? Not even close.

I'm not talking directly -- like the arms industry and the oil industry and so on. I'm talking about the cascading effect that pumps up and propels the rest.


And I still say it's BS. Or, to be more charitable, excessive hyperbole.


Well, not if you live out in the rest of the world and have suffered the consequences for near a century...


How does where you live change what fraction of the US economy is based on the country's military might?

I suppose, though, that your claim might be true of the fraction of the US economy that happens where you are...


> China is mostly an uneducated factory nation who will be crushed by automation.

I'm not sure we've travelled to the same China. The country is capable, talented and very driven. If you ignore the surveillance state it has a lot of same characteristics that once made America exceptional.

Even if this wasn't written by someone with the Sequoia Capital brand behind him Ive seen enough anecdotally to believe it.


> Articles like this are great for clicks on a website.

That may be true, but I do find it refreshing over the thousands of articles claiming that China would collapse over the past few decades (and yet, somehow these experts failed to predict the AFC, GFC, dot-com bubble,...). Surely you consider those click-bait as well.


Not true. Look at places like shenzhen which is like the silicon valley of china. Theyre inventing new technologies just like here in the usa. It isnt the same in terms of amount but theyre on their way for sure.




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