Chinese tech innovation looks set to gain momentum

This year’s CES highlighted China’s ‘new found’ innovation – what does it mean for global tech?

A firm belief in cultural superiority has long been a staple component of the global tech scene and this is no more obvious than in the general thinking about the east vs. west approach to work. Here, the standard rhetoric is that in Asia whilst individuals often work harder – pushing themselves with a gruelling 24/7 work ethic – they don’t necessarily work smarter. This in turn raises the west above mere mathematical aptitude to deliver the kind of entrepreneurial creativity necessary for US and European companies to dominate the global marketplace.

However, things are changing, especially in China. Over the last few years this vast behemoth of a country has been making a concerted push to alter the way it makes technology and gradually shake its image as a second rate copycat merchant to emerge as an innovation leader. This ‘new found’ innovation was in evidence all over this year’s CES where a huge range of bright, progressive Shenzhen companies exhibited.

Chinese innovation is not a new thing,” Andrew Laxton, Executive Vice President and Managing Director of Europe and Asia for communications agency Racepoint Global tells IDG Connect. Over the past 10 to 15 years, China has been focused on moving towards a tech and R&D backed economy, he explains. It is also working towards being a world leader in semiconductor and microchip development and manufacture by 2030.

“China may set ambitious goals, but it also sets achievable deadlines and is willing to take the time to reach its final objective,” he adds.

The other Chinese story that has been making headlines at the start of this year is the launch of the first Chinese ballpoint. Quartz suggested this “feat shows how the Chinese government remains insecure about the country’s continued reliance on foreign technology, and the lengths it’s willing to go to overcome it.”

Yet China’s global focus has been evident for some time now. Alibaba’s IPO and stock market flotation, could highlight a trend for Chinese companies to expand beyond its own domestic market. While US giant Walmart’s decision to invest in China’s second-largest online retailer, JD, rather than pursue its own multi-channel strategy inside the country could also prove significant.

Laxton of Racepoint points out that companies like JD, Alibaba, AliPay, Baidu and Tencent are all world leaders in their respective fields and are leading industries with their innovations. While the country is also beginning to take a lead in the sphere of supercomputers. In June last year The Sunway TaihuLight took the top spot as the world’s most powerful supercomputer.

“In just 16 years China has gone from having no supercomputers ranked in the top 500, to having 167, which is more than any other country,” says Laxton.

China is also making a concerted push into fintech. According to a 2016 report by KPMG, China already has five of the planet’s top 10 fintech firms. While it recently launched a new Asia Fintech FOF fund to provide fintech startups with an extra US$1.45 billion – a mere few months after the Zhongguancun Fund of Fund offered US$4.3 billion to the sector.

All this ambition is certainly being noted in the US. Political website The Hill expressed concerns at the end of last year that the US is losing the innovation war to China due to lack of patent reform. While on the other side of the world the South China Morning Post boasted about the record number of Chinese patents but worried that such rapid change could result in quantity over quality.

“Innovation in China is going from strength to strength,” suggests Jérôme Buvat, Global Head of Research at Capgemini Consulting. “The very nature of China’s economy will result in quick, short-term gains and it is at the forefront of some of the most innovative global technology trends. These include taking a lead in developing drones, smartphones and autonomous vehicles.

“In terms of long-term impact on the global technology scene, you need look no further than the acquisitions Chinese companies have been making worldwide. From our experience, Chinese companies are great at spotting trends and investing in – even acquiring companies that are producing new or disruptive business and consumer products.

“As a result, we predict that more global companies will look to partner with Chinese organisations in order to benefit from this, in addition to being able to access the local market, saving companies revenue and resource,” he says.

David Midgley, Head of Operations at payment gateway and merchant services provider Total Processing adds Chinese innovation will continue “for a while at least”.

He explains “they have been opening up to the rest of the world more and more in recent years as they have begun to develop a more capitalist-like economy. This in itself helps to breed innovation, as innovations that catch on and can be sold globally will mean revenue for both the developer and their employer.”

However, he warns, in terms of impact “much will depend upon some of Trump’s actions once he takes office. Trump has criticised Apple previously for having their products made in China and has suggested placing a 35% tariff on Apple products. If he was to go through with this, or something similar, it could lead to a trade war with China, that would not just impact global tech, but possibly commerce generally.”

Only time will tell how a new political landscape will impact the global tech market but Laxton of Racepoint is adamant that “China’s growth and focus on innovation should not be seen as a flash in the pan. With its investment in education, particularly STEM subjects, China has created the world’s largest pool of talent for these subjects. In addition, it has created a system and mind-set that will keep it as a leader in these areas for decades to come.

“For technology companies, we can expect to see an increased focus on global markets from Chinese businesses. Having grown and dominated the home market, global expansion is the next logical step. My message to all technology businesses is that you can no longer ignore China. Not only is it pushing the boundaries of what is possible, it is also a huge market that is open to investment, new ideas and the best products and services,” he says.