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It's not exactly purely an aspect of Western companies ignoring China or localizing property for China that is the culprit here. The Chinese government also mak

It's not exactly purely an aspect of Western companies ignoring China or localizing property for China that is the culprit here. The Chinese government also makes it difficult, especially in the realm of internet services, for Western companies to play. I know plenty of American technologists who are well aware of Chinese internet properties, how could they not, when disproportionately many American technologists are of Asian descent, but many of them have made the decision that it is preferable to run your startup in the relative unfettered chaos of Silicon Valley than to navigate the maze and minefield of considerations of running an internet service in China. I'm pretty sure Google would love to have another billion Gmail users or Google search users, or to have Google Play store available (for paid apps) in China. Do you think the fact that these services are blocked are because of ignorance?

seanmcdirmid 13y ago
Gmail technically isn't blocked in China, the GFW just messes with it sometime. Otherwise your comment is spot on: American companies don't compete in China not because they don't want to, but because they can't.
- instoftech 13y ago
  Government regulation is one reason. But there are many other reasons (some are arguably more important), one of which being localization. Check out other Asian markets (South Korea, Japan, Russia) and you may notice something interesting: many western companies failed to excel there too, even though there are no strict regulations. eBay was not affected by GFW when they competed with Alibaba's Taobao marketplace a few years ago in China. eBay failed due to their own strategic mistakes.
  - seanmcdirmid 13y ago
    The biggest reason is that China is not a country ruled by fair application of law. To win in China, you have to be willing to bend the law as much as possible without getting slapped (or at least, just slapped on the wrists). American companies can't execute like that: if fuzzy application of Chinese law doesn't get them (either by getting slapped, or having to follow laws that their competitors don't have to), the American government anti-corruption laws will (it is illegal for American companies to participate in any bribery...we aren't even allowed to take Chinese or grad students professors out to lunch!). Facebook has done very well in South Korea and Japan. Russia is similar to China in the "rule of law" category.
    - anthonypham 13y ago
      You are right. There are several main reasons why US-based firms fail in China market. 1. Government regulation: China government and other centralized power governments such as Vietnam, and Russia always try to keep their eyes on Internet activities, audit informations on the Internet. These government's activities may put automated systems (algorithms) of US-based firms in difficult. It seem to violate the notion of free speech that US-based firms follow. 2. Illegal activities of these local firms: Does any US-based firm dare to share illegal documents, videos on their platform? This may be a big difference between US-based companies and Chinese's ones. Another aspect is under-table money, US companies are more more and more strictly regulated by law that prohibits them from giving under table money to local governors. There is ton of unethical ways that Chine firms can do to beat you. 3. Localization There is vast, majority people in developing countries who can't speak English;therefore, blocking them from approach US products. It turns to be a great opportunities copy-cat model for Chinese firms. 4. In some countries such as China, citizens more and more pride of their nation. Chinese are great in this aspect since they usually are member of various social guilds that respect and help each other. This tendency is in contrast to US culture that promotes individual. Thus, Chinese tend to use local products than US's one. 5. A firm in centralized governments such as China not only act as a business that seeks for profit but also act as a political tool for government. So, they receive a lot of support from government such as infrastructure, money, ... For those above reasons, I totally think that Chinese firms are in great advantage to the competition in compare to US's ones. What I put in my consideration is how these Chinese firms can succeed in global, or Western market. If they win, what I cited above maybe wrong.
      - seanmcdirmid 13y ago
        2. Actually, under US safe harbor law, providers are only liable to take down illegal content when notified of it; they do not need to be proactive about finding such content. This is quite different in China: providers must be proactive at finding illegal content...but its even worse than that...illegal content is vaguely defined (what is a state secrets? What goes against social harmony?). 3. US companies are more capable of not speaking English than Chinese companies are in not speaking Chinese. Spanish is already a big language in the US given our proximity to Mexico and South America. India and much of Africa speaks a western language (English, French, Portuguese) as a defacto unifying language... 4. Tell that to the Taiwanese, HK'ers, and Singaporeans who prefer Facebook and Twitter to Kaixing, Renren, or Weibo. Also, how many Chinese want to drive around in a QQ or Xiali vs. a Toyota or Audi? What about iPhone vs. Xioami? Chinese are much more open and pragmatic than say...the Japanese or Koreans. 5. The loans that the SOE's are getting today from the banks are really going to hurt us this year or the next. The whole solvency of the nation is at risk.
fspeech 13y ago
"The Chinese government also makes it difficult ..." The biggest internet companies like Alibaba, Tencent, Baidu are mostly foreign owned and initially funded by foreign venture capital. The real difference is that they are operated by Chinese nationals who don't have a Western headquarter to report to. McDonalds, KFC, Starbucks etc., on the other hand, succeeded probably because they didn't have to face a fast evolving market and could adapt their business models to China at their own pace.
- onewaystreet 13y ago
  Alibaba, Tencent, Baidu were all founded by Chinese and are based in China. The Chinese government welcomes foreign investment as long as ownership remains Chinese. KFC, McDonalds and Starbucks have succeeded because the majority of their managers, owners and workers are Chinese.
  - fspeech 13y ago
    Alibaba was at one time 40% owned by Yahoo and close to 40% by Softbank, with significant stakes by investors like Silver Lake and Digital Sky. Tencent was 46% owned by South African Naspers, which still owns 34%. Baidu was funded by Silicon Valley venture capital. Google actually contributed $5 million to Baidu's third round and offered to buy the whole for $1.6B (and allegedly could have cinched the deal if they had offered $2B). Google China was led by a Chinese American academic from Taiwan (though well liked by the Chinese) and staffed with managers recruited from Google's Chinese American employees, who had cushy US jobs to go back to and did not want to lose career opportunities in the US. The managers of their local competitors didn't have such luxuries.
    - cromwellian 13y ago
      Come now, Google China had onerous censorship provisions placed on it that it did not want to adhere to, and Google simply can't be a den of piracy like Baidu was.
      - 13y ago

seanmcdirmid 13y ago

Gmail technically isn't blocked in China, the GFW just messes with it sometime. Otherwise your comment is spot on: American companies don't compete in China not because they don't want to, but because they can't.

instoftech 13y ago
Government regulation is one reason. But there are many other reasons (some are arguably more important), one of which being localization. Check out other Asian markets (South Korea, Japan, Russia) and you may notice something interesting: many western companies failed to excel there too, even though there are no strict regulations. eBay was not affected by GFW when they competed with Alibaba's Taobao marketplace a few years ago in China. eBay failed due to their own strategic mistakes.
- seanmcdirmid 13y ago
  The biggest reason is that China is not a country ruled by fair application of law. To win in China, you have to be willing to bend the law as much as possible without getting slapped (or at least, just slapped on the wrists). American companies can't execute like that: if fuzzy application of Chinese law doesn't get them (either by getting slapped, or having to follow laws that their competitors don't have to), the American government anti-corruption laws will (it is illegal for American companies to participate in any bribery...we aren't even allowed to take Chinese or grad students professors out to lunch!). Facebook has done very well in South Korea and Japan. Russia is similar to China in the "rule of law" category.
  - anthonypham 13y ago
    You are right. There are several main reasons why US-based firms fail in China market. 1. Government regulation: China government and other centralized power governments such as Vietnam, and Russia always try to keep their eyes on Internet activities, audit informations on the Internet. These government's activities may put automated systems (algorithms) of US-based firms in difficult. It seem to violate the notion of free speech that US-based firms follow. 2. Illegal activities of these local firms: Does any US-based firm dare to share illegal documents, videos on their platform? This may be a big difference between US-based companies and Chinese's ones. Another aspect is under-table money, US companies are more more and more strictly regulated by law that prohibits them from giving under table money to local governors. There is ton of unethical ways that Chine firms can do to beat you. 3. Localization There is vast, majority people in developing countries who can't speak English;therefore, blocking them from approach US products. It turns to be a great opportunities copy-cat model for Chinese firms. 4. In some countries such as China, citizens more and more pride of their nation. Chinese are great in this aspect since they usually are member of various social guilds that respect and help each other. This tendency is in contrast to US culture that promotes individual. Thus, Chinese tend to use local products than US's one. 5. A firm in centralized governments such as China not only act as a business that seeks for profit but also act as a political tool for government. So, they receive a lot of support from government such as infrastructure, money, ... For those above reasons, I totally think that Chinese firms are in great advantage to the competition in compare to US's ones. What I put in my consideration is how these Chinese firms can succeed in global, or Western market. If they win, what I cited above maybe wrong.
    - seanmcdirmid 13y ago
      2. Actually, under US safe harbor law, providers are only liable to take down illegal content when notified of it; they do not need to be proactive about finding such content. This is quite different in China: providers must be proactive at finding illegal content...but its even worse than that...illegal content is vaguely defined (what is a state secrets? What goes against social harmony?). 3. US companies are more capable of not speaking English than Chinese companies are in not speaking Chinese. Spanish is already a big language in the US given our proximity to Mexico and South America. India and much of Africa speaks a western language (English, French, Portuguese) as a defacto unifying language... 4. Tell that to the Taiwanese, HK'ers, and Singaporeans who prefer Facebook and Twitter to Kaixing, Renren, or Weibo. Also, how many Chinese want to drive around in a QQ or Xiali vs. a Toyota or Audi? What about iPhone vs. Xioami? Chinese are much more open and pragmatic than say...the Japanese or Koreans. 5. The loans that the SOE's are getting today from the banks are really going to hurt us this year or the next. The whole solvency of the nation is at risk.

fspeech 13y ago

"The Chinese government also makes it difficult ..." The biggest internet companies like Alibaba, Tencent, Baidu are mostly foreign owned and initially funded by foreign venture capital. The real difference is that they are operated by Chinese nationals who don't have a Western headquarter to report to. McDonalds, KFC, Starbucks etc., on the other hand, succeeded probably because they didn't have to face a fast evolving market and could adapt their business models to China at their own pace.

onewaystreet 13y ago
Alibaba, Tencent, Baidu were all founded by Chinese and are based in China. The Chinese government welcomes foreign investment as long as ownership remains Chinese. KFC, McDonalds and Starbucks have succeeded because the majority of their managers, owners and workers are Chinese.
- fspeech 13y ago
  Alibaba was at one time 40% owned by Yahoo and close to 40% by Softbank, with significant stakes by investors like Silver Lake and Digital Sky. Tencent was 46% owned by South African Naspers, which still owns 34%. Baidu was funded by Silicon Valley venture capital. Google actually contributed $5 million to Baidu's third round and offered to buy the whole for $1.6B (and allegedly could have cinched the deal if they had offered $2B). Google China was led by a Chinese American academic from Taiwan (though well liked by the Chinese) and staffed with managers recruited from Google's Chinese American employees, who had cushy US jobs to go back to and did not want to lose career opportunities in the US. The managers of their local competitors didn't have such luxuries.
  - cromwellian 13y ago
    Come now, Google China had onerous censorship provisions placed on it that it did not want to adhere to, and Google simply can't be a den of piracy like Baidu was.
    - 13y ago