Business Management

Is China starting to trump US tech industry on innovation?

While Chinese president Xi Jinping made history at Davos this month - the first leader from China to attend the World Economic Forum’s January gathering in the Swiss mountains - US President Donald Trump’s protectionism was already in full swing. Inaugurated earlier in the same week, President Trump spoke with a number of US technology leaders in December and has already had discussions with Apple CEO Tim Cook about the possibility of bringing manufacturing jobs back to the US. It’s no secret that ‘Trumpism’ means an animosity towards international trade deals and increased protection for US jobs, but what it can’t do anything about is the shift in Chinese attitudes to entrepreneurialism. China’s tech industry, for all its copying of US products (who can ever forget the HiPhone, APad or Goojje search engine?) is starting to flower on the seeds of its own endeavours.

In 2015, the Chinese State Intellectual Property Office, SIPO, became the first office to receive over one million invention patent applications in a single year, according to Technology and Patent Research International. A World Intellectual Property Organisation (WIPO) report late last year stated that Chinese innovators filed the most patent applications (1,010,406) in 2015, followed by those from the United States of America (526,296) and Japan (454,285).

Tech businesses are flourishing. Of course China has its share of large tech firms anyway, but they have generally been designed in the image of US giants – for Baidu think Google and JD think Amazon. However, you only have to look at the range of new Chinese businesses breaking into the global market to realise there has been a cultural change. The CES event in Las Vegas in January played host to a number of Chinese innovations, from DJI’s drones and LeEco’s smart super bike through to smart phones and web services from more established companies such as TenCent and Huawei.

Traditionally Chinese tech firms, with a few exceptions such as, Lenovo, Huawei and Xiaomi (branded MI) have been inward looking, developed for the domestic market but now there seems to be an increase in tech for global consumption. While western brands still find it difficult to establish themselves in the Chinese market, Chinese tech brands are seemingly branching out, establishing footholds in global markets and with this is coming a change in perception.

The Brandz Chinese Global Brand Builders report reveals that the traditionally negative perception of Chinese goods is declining. David Roth, CEO EMEA and Asia at The Store WPP which developed the report says that “the study shows that the movement of ideas and product leadership has expanded globally, with consumers increasingly looking to China as a potential source for the newest and most innovative products and brands.”

He adds that this is the opportune time for Chinese brands to expand abroad and yet more surely needs to be done domestically to iron out the fact that China also accounts for the most patent infringements. That aside it is difficult to ignore the fact that China is also working hard on strengthening its own patent system, a move which has led to record filings last year. It is also working towards a fairer tax system to encourage start-ups. China maintains a 67 per cent high taxation rate on businesses and, according to the World Bank at least, has lengthy and complex processes to set up a new business, factors which discourage competitiveness. The government is currently implementing a reform program to streamline business procedures across the country, a move which could accelerate the Chinese tech industry.

This is of course a huge concern for the US. In October last year, the President’s Council of Advisors on Science and Technology (PCAST) announced the formation of a new working group focused on strengthening the US semiconductor industry. The group apparently published a report in January this year, although the report is no longer available on the White House website. This report apparently singled out China as the key threat to the US semiconductor industry and called for restrictions on China cross-border acquisitions and investments.

It’s the sort of rhetoric that will sit well with President Trump’s protectionist plans and is backed by such powerful tech luminaries as Google’s Eric Schmidt. Schmidt’s book, The New Digital Age launched in 2013, labelled China an IT menace for its alleged hacking exploits. He argued that the real difference between the US and China is cultural, with the idea of illicit competition violating the American sense of fair play. With a new administration expected to front-up and start a trade war with China, that sense of fair play could be severely challenged.


Also read:
Facebook and China: There’s only one winner
Huawei CEO: We’ll be number one smartphone vendor in five years


« Does the CISO role need to be formalised?


What is the impact of Africa's (many) internet shutdowns? »
Marc Ambasna-Jones

Marc Ambasna-Jones is a UK-based freelance writer and media consultant and has been writing about business and technology since 1989.

  • Mail


Do you think your smartphone is making you a workaholic?