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Why China Isn’t “The Next Silicon Valley”

38 points by vaksel 17y ago

paulgb 17y ago
It's refreshing to see an article of this quality from TechCrunch.
- deleted 17y ago
  [deleted]
TweedHeads 17y ago
...yet
carbon8 17y ago
"And while China gets a rap for ripping off U.S. Web start-ups now, I think we’re going to start seeing U.S. start-ups copying a lot of elements of Chinese entrepreneurs’ business plans...[lists some business models]" Interesting slight of hand there.
- megaduck 17y ago
  Yeah. The rap is pretty well deserved, regardless of what happens in the future. I have a friend who's at a venture-backed startup here in Beijing (not software). At a local startup meet-and-greet, he started talking to the founder of a local web startup. The business model? "We copy FriendFeed."
  - cmars232 17y ago
    I see nothing wrong with that. It's a winning strategy until these services are mature and commoditized in China. At that point, you'll perhaps see market pressures drive innovation. If FriendFeed doesn't want to support the Chinese language, or doesn't support it well enough, there's a great opportunity. Maybe they'll get bought out by FriendFeed at some point!
ckinnan 17y ago
China has a "second-mover" advantage in that they can copy the most successful models and technologies in the West (including Taiwan and Japan) and leapfrog ahead. But China's development isn't that sudden-- they've embraced more-or-less capitalism for a good 20 years. It was already insane when I was living there a decade ago. It is an enormous and potentially great country of ambitious, hard working people who respect business and learning. The challenge is ensuring we make room for them in the global community, and that their political systems evolve with their economic progress.
- bitdiddle 17y ago
  Well actually the growth rate has been phenomenal when one considers the starting point. I first visited Xiamen in 1982 when it was designated a special economic zone and the changes since have been phenomenal. The rate at which workers moved from farming to industry dwarfs the comparable rate here in the US. Your adjectives of ambitious and hard working are spot on. Having 1.2 billion people has always been both China's greatest strength and it's greatest weakness. They have been poor for so long that their thirst is now unquenchable. China's growth is going to force serious changes in the US if we are to remain a competitive world player. Consider how many chinese schools teach english and how many american schools chinese. However I would argue that in software, americans have an inventiveness, I call it yankee ingenuity (mickey mouse) that is unique and is part of our culture. This is something that takes years to develop. So perhaps there's an edge we can keep but the key will be to engage and play. The chinese love doing business with americans because we are a good people. They have different notions of IP but we need to recognize that much of those are historical artifacts of western law, or as kids sharing music would say: "unsustainable business models" "Ici repose un géant endormi, laissez le dormir, car quand il s'éveillera, il étonnera le monde" -- Napolean
megaduck 17y ago
She's naive. There's no way that I'd consider doing a software startup in China, and I live here. There's just no good way to make money at it. First, it's damnably hard to get people to pay you for anything software based. With the rampant piracy, nobody has ever needed to pay a dime for anything. Convincing people to BUY software is virtually impossible. Even if you could convince people to pay, the payment systems are byzantine at best. Forget credit cards, you'd better be prepared to go collect cash from people at home or work. Advertising-based models MIGHT work, but the competition's going to be tough. You'll be competing with corporations like Google, Microsoft, YouKu, and others that have billions to burn while they build marketshare. However you might succeed. Games like WOW can also make money. Regardless, if you start making any money, it will probably be taken from you. The government already has its fingers in your pie, because you must get licensed from the government to run a website. That means dealing with government officials who will demand kickbacks, or might just up and seize your business. The same goes for any partners that you have, who will inevitably try to squeeze you out and take over any profit-making venture. The odds of you having your business simply taken from you are very very high. Naturally, you have absolutely no legal protection for anything. Zero. If anything, the courts are your enemy, because they side with whoever has the most influence and that's not you. Your employees embezzle from you? Your competitor (or a partner) steals all of your equipment? Government officials demand "protection" money? Too bad! Better luck next time. You can also forget about patent, trademark or copyright protection, but that goes without saying. I'm not even going to cover things like hiring engineers or building hardware here, which have their own special headaches. It's not impossible to make money here, but 99% of the time the risk/reward ratio isn't worth it. Personally, I'm basing my company in California and targeting the American market. We might eventually come to Hong Kong or Taiwan, but I've written off the mainland as a lost cause.
- liuliu 17y ago
  What you said is exactly what Sarah's argument is. For the constraints and the whole chaos situation in China, it is definitely not gonna be Silicon Valley anyway. However, it is more likely to come up with new business models (like the virtual goods and virtual currencies) because of all the constraints you talk about.
joel_feather 17y ago
China is not the next silicon valley because silicon valley is an artificial self indulgent child that sees itself as the cleverest kid on the block. China is the guy living on the farm and working harder, doing more and just being cleverer than the other one. When they meet at the global championship, silicon valley will realise that it has long been fat, lazy and worst of all...slow.
- DanielBMarkham 17y ago
  when they meet at the global championship It's 2009. The global championship is already on. Time to start getting the newspaper delivered to the farm.
  - joel_feather 17y ago
    It's not on yet. China is a closed eco-system, it has not really entered the playing field on the same level as the other countries. You need to have been there to understand - china is very inwardly focused. When it decides to focus outwards, that's when the championship will start. Things like building influence in Africa, setting up medical programs, developing hinterlands of their country - china is doing all this silently. America is out there and roaring and thumping its chest, but china is silently expanding. The global championship is on for the Americans - they are strutting about and flexing their muscles and lifting all the weight they can lift. But there are other players that have not come in yet. They are waiting and training.
    - bitdiddle 17y ago
      "china is doing all this silently" no, actually we just haven't been listening.
known 17y ago
"A country is not made of land; a country is made of its people." -- Unknown

38 points by vaksel 17y ago

paulgb 17y ago

It's refreshing to see an article of this quality from TechCrunch.

deleted 17y ago
[deleted]

TweedHeads 17y ago

...yet

carbon8 17y ago

"And while China gets a rap for ripping off U.S. Web start-ups now, I think we’re going to start seeing U.S. start-ups copying a lot of elements of Chinese entrepreneurs’ business plans...[lists some business models]" Interesting slight of hand there.

megaduck 17y ago
Yeah. The rap is pretty well deserved, regardless of what happens in the future. I have a friend who's at a venture-backed startup here in Beijing (not software). At a local startup meet-and-greet, he started talking to the founder of a local web startup. The business model? "We copy FriendFeed."
- cmars232 17y ago
  I see nothing wrong with that. It's a winning strategy until these services are mature and commoditized in China. At that point, you'll perhaps see market pressures drive innovation. If FriendFeed doesn't want to support the Chinese language, or doesn't support it well enough, there's a great opportunity. Maybe they'll get bought out by FriendFeed at some point!

ckinnan 17y ago

China has a "second-mover" advantage in that they can copy the most successful models and technologies in the West (including Taiwan and Japan) and leapfrog ahead. But China's development isn't that sudden-- they've embraced more-or-less capitalism for a good 20 years. It was already insane when I was living there a decade ago. It is an enormous and potentially great country of ambitious, hard working people who respect business and learning. The challenge is ensuring we make room for them in the global community, and that their political systems evolve with their economic progress.

bitdiddle 17y ago
Well actually the growth rate has been phenomenal when one considers the starting point. I first visited Xiamen in 1982 when it was designated a special economic zone and the changes since have been phenomenal. The rate at which workers moved from farming to industry dwarfs the comparable rate here in the US. Your adjectives of ambitious and hard working are spot on. Having 1.2 billion people has always been both China's greatest strength and it's greatest weakness. They have been poor for so long that their thirst is now unquenchable. China's growth is going to force serious changes in the US if we are to remain a competitive world player. Consider how many chinese schools teach english and how many american schools chinese. However I would argue that in software, americans have an inventiveness, I call it yankee ingenuity (mickey mouse) that is unique and is part of our culture. This is something that takes years to develop. So perhaps there's an edge we can keep but the key will be to engage and play. The chinese love doing business with americans because we are a good people. They have different notions of IP but we need to recognize that much of those are historical artifacts of western law, or as kids sharing music would say: "unsustainable business models" "Ici repose un géant endormi, laissez le dormir, car quand il s'éveillera, il étonnera le monde" -- Napolean

megaduck 17y ago

She's naive. There's no way that I'd consider doing a software startup in China, and I live here. There's just no good way to make money at it. First, it's damnably hard to get people to pay you for anything software based. With the rampant piracy, nobody has ever needed to pay a dime for anything. Convincing people to BUY software is virtually impossible. Even if you could convince people to pay, the payment systems are byzantine at best. Forget credit cards, you'd better be prepared to go collect cash from people at home or work. Advertising-based models MIGHT work, but the competition's going to be tough. You'll be competing with corporations like Google, Microsoft, YouKu, and others that have billions to burn while they build marketshare. However you might succeed. Games like WOW can also make money. Regardless, if you start making any money, it will probably be taken from you. The government already has its fingers in your pie, because you must get licensed from the government to run a website. That means dealing with government officials who will demand kickbacks, or might just up and seize your business. The same goes for any partners that you have, who will inevitably try to squeeze you out and take over any profit-making venture. The odds of you having your business simply taken from you are very very high. Naturally, you have absolutely no legal protection for anything. Zero. If anything, the courts are your enemy, because they side with whoever has the most influence and that's not you. Your employees embezzle from you? Your competitor (or a partner) steals all of your equipment? Government officials demand "protection" money? Too bad! Better luck next time. You can also forget about patent, trademark or copyright protection, but that goes without saying. I'm not even going to cover things like hiring engineers or building hardware here, which have their own special headaches. It's not impossible to make money here, but 99% of the time the risk/reward ratio isn't worth it. Personally, I'm basing my company in California and targeting the American market. We might eventually come to Hong Kong or Taiwan, but I've written off the mainland as a lost cause.

liuliu 17y ago
What you said is exactly what Sarah's argument is. For the constraints and the whole chaos situation in China, it is definitely not gonna be Silicon Valley anyway. However, it is more likely to come up with new business models (like the virtual goods and virtual currencies) because of all the constraints you talk about.

joel_feather 17y ago

China is not the next silicon valley because silicon valley is an artificial self indulgent child that sees itself as the cleverest kid on the block. China is the guy living on the farm and working harder, doing more and just being cleverer than the other one. When they meet at the global championship, silicon valley will realise that it has long been fat, lazy and worst of all...slow.

DanielBMarkham 17y ago
when they meet at the global championship It's 2009. The global championship is already on. Time to start getting the newspaper delivered to the farm.
- joel_feather 17y ago
  It's not on yet. China is a closed eco-system, it has not really entered the playing field on the same level as the other countries. You need to have been there to understand - china is very inwardly focused. When it decides to focus outwards, that's when the championship will start. Things like building influence in Africa, setting up medical programs, developing hinterlands of their country - china is doing all this silently. America is out there and roaring and thumping its chest, but china is silently expanding. The global championship is on for the Americans - they are strutting about and flexing their muscles and lifting all the weight they can lift. But there are other players that have not come in yet. They are waiting and training.
  - bitdiddle 17y ago
    "china is doing all this silently" no, actually we just haven't been listening.

known 17y ago

"A country is not made of land; a country is made of its people." -- Unknown