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I remember The Economist doing a piece on this fairly recently[0] that talked exclusively about how China's tech VCs and established corporations (referring to

I remember The Economist doing a piece on this fairly recently[0] that talked exclusively about how China's tech VCs and established corporations (referring to the likes of Alibaba/Tencent) are challenging (and to a certain extent dethroning) Silicon Valley "monopoly" when it comes to investing in innovation/R&D in super critical areas like A.I., for example. One huge advantage Chinese corporations and startups have is China's super lax (non-existent, in fact) privacy and data protection laws -- enabling their companies to harvest ENORMOUS amounts of data to hone their A.I. algorithms on -- making them super attractive for investors. Add to this China's culture of scientific inquiry, rampant IP theft from American and European corporations and startups alike, a stable administration that has made technological advancement it's razer sharp focus -- you have the perfect recipe for VCs' fund to start flowing on to the next big thing with relatively fewer barriers. [0] https://www.economist.com/news/business/21737075-silicon-valley-may-not-hold-its-global-superiority-much-longer-how-does-chinese-tech https://www.economist.com/news/business/21737075-silicon-val...

rdlecler1 9y ago
Don’t forget lower wages. Capital can go a lot further in China than in Silicon Valley. Frankly, I also see Chinese VCs being more open minded about what’s investible. Silicon Valley feels a bit like the British Emplire at its sunset.
- adventured 9y ago
  > Silicon Valley feels a bit like the British Emplire at its sunset. That general premise has been widely forecast at least three or four different prominent times across the last 40 years in Silicon Valley. There was a time in the 1980s that it was supposedly dying. In the early 1990s it was supposedly dead. In 2001 it was supposedly dead. The sun isn't setting this time either. There is no competition for Silicon Valley anywhere on earth on the horizon. China does not directly compete with Silicon Valley. The notion that they do, is entirely a myth. China's tech companies are trapped inside of China (that's why Baidu never actually proceeded to challenge Google globally, which used to be widely expected). US tech companies get the rest of the world to play in. Talent that is drawn to Silicon Valley, isn't going to China instead (plenty of it that is local to China may be staying home in China rather than moving to the US). China is dramatically less welcoming to foreigners than the US is. The US hands out a million green cards per year. It's almost impossible to become a citizen in China as a foreigner. Not to mention that little problem of China having few human rights, near total state censorship and an aggressive dictatorship that has been rapidly revoking the few rights they acquired. It's so bad, they're banning joke apps in China now, because apparently, according to the Communist Party, jokes are contrary to Socialism. [1] [1] https://advox.globalvoices.org/2018/04/11/no-laughing-matter-china-shuts-down-popular-joke-sharing-app/ https://advox.globalvoices.org/2018/04/11/no-laughing-matter...
karthikb 9y ago
Don't forget - a US immigration system that makes it incredibly difficult, expensive, and time consuming for individuals from China (and India, which is following the same VC trends as China, just time shifted) to come and settle in the US. Increasingly, money that would have flowed to US VCs can just stay "at home" and invest in talent that is increasingly staying.
- pkaye 9y ago
  What about the EB-5 visa?
  - z2 9y ago
    Assuming from the point of view of a founder, would they want to loan $500k to $1M to a US government-sanctioned project likely to return -100% to 3% over at least 5 years? If I had that money to spare AND was keen on founding a company, I'd more likely literally burn half the money for heating, and use the remaining half for a startup in my own country first. For a VC looking to immigrate, maybe... Edit: Or do you mean getting US VCs into said US government-sanctioned projects, so that the US can take EB-5 money and use it on VC funding? That's quite brilliant.
  - karthikb 9y ago
    Not going to work for most founders. The point is that VC money chases where founders and their talent are, which is why the SF Bay Area has had such as stronghold for such a long time. As the US makes it more difficult for founders and talent to come to the US, VCs will focus on areas where those founders actually are. And if your option is - stay in your home country and take local money, or try to move to the US, maybe having to figure out all sorts of loopholes to speedup the process and still spend years doing so...which do you pick? Combine this with major new technologies on the horizon (especially around autonomy, AI - potentially, and others) which give opportunities for new players, and an incredible amount of recently created wealth looking for new growth opportunities in China and India and you have the recipe for a massive shift in balance.
    - 9y ago
seanmcdirmid 9y ago
Laws in China are not as relevant as enforcement. Enforcement is completely contextual, if they don’t like what you are doing they’ll get you on something, so as a foreign company you have to tread much more carefully when operating in China than a Chinese company. The legal framework in China simply isn’t very developed, that doesn’t mean you can get away with whatever you want, quite the contrary, it means you never know when the government will come down on you for violating some unwritten rule.
- abhiminator 9y ago
  > quite the contrary, it means you never know when the government will come down on you for violating some unwritten rule. Isn't bribing your way out of "violations" common in China?
  - seanmcdirmid 9y ago
    Not really. You at least have to build up your guanxi before the violations occur (or brought up as a problem), once it happens, it’s too late. At anyrate, the FCPA has to be followed by American citizens as well as companies (other western companies have similar acts), so it isn’t really an option. My point is, unless you are Chinese working for a Chinese company, don’t try to be edgy in China, follow both written and unwritten rules. Foreigners are great chickens to kill to scare the monkeys, as the Chinese idiom goes.
    - lazerpants 9y ago
      Meh, I often saw people ignore FCPA or find ways around it when I worked in China. Really, having your 51% JV partner be someone well connected with the Party was pretty much a guarantee of success. Granted, this was a decade or so ago.
Chaebixi 9y ago
> China's tech VCs and established corporations (referring to the likes of Alibaba/Tencent) are challenging (and to a certain extent dethroning) Silicon Valley "monopoly" when it comes to investing in innovation/R&D in super critical areas like A.I., for example. Isn't this also official Chinese government policy? Those Chinese tech VCs may be literally funded by the state and/or operating under its direction.
- aaavl2821 9y ago
  Apparently there is almost $800B (7% of China's gdp) in Chinese government money in "venture guidance funds", basically government LPs. Originally the govt wanted to do direct venture investments but that proved challenging and strewn with conflicts The article mentions that the govt funding may not be as large as it seems and that the government LPs don't have that much control over investment strategy, but the intent is there https://www.chinamoneynetwork.com/2017/10/31/chinas-798b-government-funds-redraw-investment-landscape-largest-funds-must-know https://www.chinamoneynetwork.com/2017/10/31/chinas-798b-gov...
NicoJuicy 9y ago
Except outside of china
abhinavkulkarni 9y ago
I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc. China is succeeding because it really wants to. With manufacturing in US hollowed out in last couple of decades and China being the new global manufacturing powerhouse, it is not surprising that China is seeking smart (software/cloud/AI/robotics powered) solutions to industrialization, warehousing, transportation, supply chain, payments and other areas. Why hasn't US achieved the level of digital payment smoothness that China has been able to? While the points you made about lax laws and blatant data privacy invasion are an contributing factors, I think you would have seen China making great strides in the above mentioned areas even if laws were enforced strictly. It's important to recognize China's technological prowess. They have similarly taken a lead in bioengineering.
- Chaebixi 9y ago
  > Why hasn't US achieved the level of digital payment smoothness that China has been able to? Because it already achieved that "level of digital payment smoothness" with credit cards? > I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc. China is succeeding because it really wants to. > It's important to recognize China's technological prowess. They have similarly taken a lead in bioengineering. I attribute it to having an authoritarian government that's not afraid to direct the economy. The US, on the other hand, has more-or-less adopted an ideology that specifically rejects that kind of government economic direction.
  - fspeech 9y ago
    > Because it already achieved that "level of digital payment smoothness" with credit cards? Whether the two are equivalent depends on the transaction costs of the two models. According to the Economist: "Visa and MasterCard extract over 0.10 cents of net income for every dollar of payments. Ant takes a smaller cut, of less than 0.03 cents." https://www.economist.com/news/business/21726713-ant-financial-500m-customers-home-plans-expand-chinas-digital-payments-giant-keeps https://www.economist.com/news/business/21726713-ant-financi... Perhaps more importantly I've seen estimates that Chinese banks lose $20 billion yearly in credit card fees due to the mobile payments.
citilife 9y ago
> One huge advantage Chinese corporations and startups have is China's super lax (non-existent, in fact) privacy and data protection laws I think it's more that the Chinese government will essentially gift you a monopoly if you are deemed strategic (which almost everything is at this point).
kekebeici 9y ago
China just passed pretty strict rules on data, particularly on state secrets and personal information. Would be curious to hear why this counts as nonexistent?
- yorwba 9y ago
  Do you have a link to a source handy?
  - kekebeici 9y ago
    http://www.chinabusinessreview.com/understanding-chinas-state-secrets-laws/ http://www.chinabusinessreview.com/understanding-chinas-stat... https://www.lexology.com/library/detail.aspx?g=2d04aa03-d8dc-45e6-94be-73fa0228a6d4 https://www.lexology.com/library/detail.aspx?g=2d04aa03-d8dc...
- kenbaylor 9y ago
  This may be the one you are looking for: Cybersecurity law: https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2017/02/overview-of-cybersecurity-law.pdf https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2017/02/o...
pascalxus 9y ago
This may sound naive, but how does IP Theft even work? I've worked as a software engineer for over 12 years at over half a dozen companies, with codebases numbering in the millions of lines of code and I have yet to see any software or code I could imagine anyone would want to steal. And if you really needed some code, I'm sure it's available somewhere as open source. And wouldn't the open source code be much more preferable? rather than ripping out some piece of "stolen" code that was never meant to serve other purposes.
- yorwba 9y ago
  IP that's worth stealing is not limited to one specific implementation, it's about using someone else's idea. (So "theft" is a misnomer, it's really about imitation.) For example, if you buy a competitor's product to take it apart, replicate its components and assemble lots of knock-offs, you have some validation that the product is going to work, without having to do any costly planning and design yourself. All of that works without literally breaking into the competitor's factory to steal their equipment or their code. For a lot of really valuable IP you won't find an open source implementation, or if you do, you won't be able to legally use it, at least as long as software patents are a thing.
  - sumanthvepa 9y ago
    It is utterly ridiculous that to take an =idea= is considered theft. In that case, pretty much every American corporation can be accused of theft. Google: Stolen from alta vista, Microsoft: Stolen from CP/M, Apple: Stolen from Xerox, The american space program: stolen from the Nazis! If that's the basis for accusing China of stealing IP, it's a pretty weak argument.
- rayiner 9y ago
  E.g. what is now a major Chinese player in the US market used to clone Juniper/Cisco routers down to the English silk screened assembly instructions on the circuit boards.
- remir 9y ago
  Intellectual property is not just code. It can be patents, a product, a specific design.

rdlecler1 9y ago

Don’t forget lower wages. Capital can go a lot further in China than in Silicon Valley. Frankly, I also see Chinese VCs being more open minded about what’s investible. Silicon Valley feels a bit like the British Emplire at its sunset.

adventured 9y ago
> Silicon Valley feels a bit like the British Emplire at its sunset. That general premise has been widely forecast at least three or four different prominent times across the last 40 years in Silicon Valley. There was a time in the 1980s that it was supposedly dying. In the early 1990s it was supposedly dead. In 2001 it was supposedly dead. The sun isn't setting this time either. There is no competition for Silicon Valley anywhere on earth on the horizon. China does not directly compete with Silicon Valley. The notion that they do, is entirely a myth. China's tech companies are trapped inside of China (that's why Baidu never actually proceeded to challenge Google globally, which used to be widely expected). US tech companies get the rest of the world to play in. Talent that is drawn to Silicon Valley, isn't going to China instead (plenty of it that is local to China may be staying home in China rather than moving to the US). China is dramatically less welcoming to foreigners than the US is. The US hands out a million green cards per year. It's almost impossible to become a citizen in China as a foreigner. Not to mention that little problem of China having few human rights, near total state censorship and an aggressive dictatorship that has been rapidly revoking the few rights they acquired. It's so bad, they're banning joke apps in China now, because apparently, according to the Communist Party, jokes are contrary to Socialism. [1] [1] https://advox.globalvoices.org/2018/04/11/no-laughing-matter-china-shuts-down-popular-joke-sharing-app/ https://advox.globalvoices.org/2018/04/11/no-laughing-matter...

karthikb 9y ago

Don't forget - a US immigration system that makes it incredibly difficult, expensive, and time consuming for individuals from China (and India, which is following the same VC trends as China, just time shifted) to come and settle in the US. Increasingly, money that would have flowed to US VCs can just stay "at home" and invest in talent that is increasingly staying.

pkaye 9y ago
What about the EB-5 visa?
- z2 9y ago
  Assuming from the point of view of a founder, would they want to loan $500k to $1M to a US government-sanctioned project likely to return -100% to 3% over at least 5 years? If I had that money to spare AND was keen on founding a company, I'd more likely literally burn half the money for heating, and use the remaining half for a startup in my own country first. For a VC looking to immigrate, maybe... Edit: Or do you mean getting US VCs into said US government-sanctioned projects, so that the US can take EB-5 money and use it on VC funding? That's quite brilliant.
- karthikb 9y ago
  Not going to work for most founders. The point is that VC money chases where founders and their talent are, which is why the SF Bay Area has had such as stronghold for such a long time. As the US makes it more difficult for founders and talent to come to the US, VCs will focus on areas where those founders actually are. And if your option is - stay in your home country and take local money, or try to move to the US, maybe having to figure out all sorts of loopholes to speedup the process and still spend years doing so...which do you pick? Combine this with major new technologies on the horizon (especially around autonomy, AI - potentially, and others) which give opportunities for new players, and an incredible amount of recently created wealth looking for new growth opportunities in China and India and you have the recipe for a massive shift in balance.
  - 9y ago

seanmcdirmid 9y ago

Laws in China are not as relevant as enforcement. Enforcement is completely contextual, if they don’t like what you are doing they’ll get you on something, so as a foreign company you have to tread much more carefully when operating in China than a Chinese company. The legal framework in China simply isn’t very developed, that doesn’t mean you can get away with whatever you want, quite the contrary, it means you never know when the government will come down on you for violating some unwritten rule.

abhiminator 9y ago
> quite the contrary, it means you never know when the government will come down on you for violating some unwritten rule. Isn't bribing your way out of "violations" common in China?
- seanmcdirmid 9y ago
  Not really. You at least have to build up your guanxi before the violations occur (or brought up as a problem), once it happens, it’s too late. At anyrate, the FCPA has to be followed by American citizens as well as companies (other western companies have similar acts), so it isn’t really an option. My point is, unless you are Chinese working for a Chinese company, don’t try to be edgy in China, follow both written and unwritten rules. Foreigners are great chickens to kill to scare the monkeys, as the Chinese idiom goes.
  - lazerpants 9y ago
    Meh, I often saw people ignore FCPA or find ways around it when I worked in China. Really, having your 51% JV partner be someone well connected with the Party was pretty much a guarantee of success. Granted, this was a decade or so ago.

Chaebixi 9y ago

> China's tech VCs and established corporations (referring to the likes of Alibaba/Tencent) are challenging (and to a certain extent dethroning) Silicon Valley "monopoly" when it comes to investing in innovation/R&D in super critical areas like A.I., for example. Isn't this also official Chinese government policy? Those Chinese tech VCs may be literally funded by the state and/or operating under its direction.

aaavl2821 9y ago
Apparently there is almost $800B (7% of China's gdp) in Chinese government money in "venture guidance funds", basically government LPs. Originally the govt wanted to do direct venture investments but that proved challenging and strewn with conflicts The article mentions that the govt funding may not be as large as it seems and that the government LPs don't have that much control over investment strategy, but the intent is there https://www.chinamoneynetwork.com/2017/10/31/chinas-798b-government-funds-redraw-investment-landscape-largest-funds-must-know https://www.chinamoneynetwork.com/2017/10/31/chinas-798b-gov...

NicoJuicy 9y ago

Except outside of china

abhinavkulkarni 9y ago

I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc. China is succeeding because it really wants to. With manufacturing in US hollowed out in last couple of decades and China being the new global manufacturing powerhouse, it is not surprising that China is seeking smart (software/cloud/AI/robotics powered) solutions to industrialization, warehousing, transportation, supply chain, payments and other areas. Why hasn't US achieved the level of digital payment smoothness that China has been able to? While the points you made about lax laws and blatant data privacy invasion are an contributing factors, I think you would have seen China making great strides in the above mentioned areas even if laws were enforced strictly. It's important to recognize China's technological prowess. They have similarly taken a lead in bioengineering.

Chaebixi 9y ago
> Why hasn't US achieved the level of digital payment smoothness that China has been able to? Because it already achieved that "level of digital payment smoothness" with credit cards? > I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc. China is succeeding because it really wants to. > It's important to recognize China's technological prowess. They have similarly taken a lead in bioengineering. I attribute it to having an authoritarian government that's not afraid to direct the economy. The US, on the other hand, has more-or-less adopted an ideology that specifically rejects that kind of government economic direction.
- fspeech 9y ago
  > Because it already achieved that "level of digital payment smoothness" with credit cards? Whether the two are equivalent depends on the transaction costs of the two models. According to the Economist: "Visa and MasterCard extract over 0.10 cents of net income for every dollar of payments. Ant takes a smaller cut, of less than 0.03 cents." https://www.economist.com/news/business/21726713-ant-financial-500m-customers-home-plans-expand-chinas-digital-payments-giant-keeps https://www.economist.com/news/business/21726713-ant-financi... Perhaps more importantly I've seen estimates that Chinese banks lose $20 billion yearly in credit card fees due to the mobile payments.

citilife 9y ago

> One huge advantage Chinese corporations and startups have is China's super lax (non-existent, in fact) privacy and data protection laws I think it's more that the Chinese government will essentially gift you a monopoly if you are deemed strategic (which almost everything is at this point).

kekebeici 9y ago

China just passed pretty strict rules on data, particularly on state secrets and personal information. Would be curious to hear why this counts as nonexistent?

yorwba 9y ago
Do you have a link to a source handy?
- kekebeici 9y ago
  http://www.chinabusinessreview.com/understanding-chinas-state-secrets-laws/ http://www.chinabusinessreview.com/understanding-chinas-stat... https://www.lexology.com/library/detail.aspx?g=2d04aa03-d8dc-45e6-94be-73fa0228a6d4 https://www.lexology.com/library/detail.aspx?g=2d04aa03-d8dc...
kenbaylor 9y ago
This may be the one you are looking for: Cybersecurity law: https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2017/02/overview-of-cybersecurity-law.pdf https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2017/02/o...

pascalxus 9y ago

This may sound naive, but how does IP Theft even work? I've worked as a software engineer for over 12 years at over half a dozen companies, with codebases numbering in the millions of lines of code and I have yet to see any software or code I could imagine anyone would want to steal. And if you really needed some code, I'm sure it's available somewhere as open source. And wouldn't the open source code be much more preferable? rather than ripping out some piece of "stolen" code that was never meant to serve other purposes.

yorwba 9y ago
IP that's worth stealing is not limited to one specific implementation, it's about using someone else's idea. (So "theft" is a misnomer, it's really about imitation.) For example, if you buy a competitor's product to take it apart, replicate its components and assemble lots of knock-offs, you have some validation that the product is going to work, without having to do any costly planning and design yourself. All of that works without literally breaking into the competitor's factory to steal their equipment or their code. For a lot of really valuable IP you won't find an open source implementation, or if you do, you won't be able to legally use it, at least as long as software patents are a thing.
- sumanthvepa 9y ago
  It is utterly ridiculous that to take an =idea= is considered theft. In that case, pretty much every American corporation can be accused of theft. Google: Stolen from alta vista, Microsoft: Stolen from CP/M, Apple: Stolen from Xerox, The american space program: stolen from the Nazis! If that's the basis for accusing China of stealing IP, it's a pretty weak argument.
rayiner 9y ago
E.g. what is now a major Chinese player in the US market used to clone Juniper/Cisco routers down to the English silk screened assembly instructions on the circuit boards.
remir 9y ago
Intellectual property is not just code. It can be patents, a product, a specific design.