23 Apr

It's clear that the Chinese concept of the "Silicon Dragons" have gone mainstream, returning from another business trip to China, I want to summarize my impressions from the last days & years in the following article.

The western world can no longer ignore the expanding power, influence and impact of China's Silicon Valley. China's tech and venture scene has evolved really quickly. It's no longer considered a joke to say that "China is winning the tech race" - There are just too many examples of how China is leading advances in a new era of technology.

I don't want to talk too much about e-mobility, new growing automotive players, artificial intelligence companies ... it's clearly no longer a case of "copying ideas from the Western world".

Today, it's about ideas and disruption traveling from China to the West and being copied. That's a new way of transformation! Personally - in the last years I was travelling to the Silicon Valley about 3 to 5-times a year ... Astonishing? No, but times have changed and Shenzhen, Shanghai... or even Beijing have taken place for these journeys. The world's biggest tech companies are no longer mainly from America. In addition to Amazon, Apple and Alphabet, there's Baidu, WeChat, Alibaba, Tencent and Xiaomi. Right behind them are China's next-in-line leaders: news aggregator Toutiao, group e-commerce dealer Meituan, and ride-sharing leader Didi Chuxing.

If you mention Jack Ma's name today in a conversation not only with business people - even with friends and family, they actually know who you mean - The "former Silicon Valley stars" - Mark Zuckerberg or Elon Musk are no longer the "Digital Kings" on the stages of this world.

I met Jack Ma several times in the last years - on diverse summits - He had a tremendous growth with Alibaba - much more Jeff Bezos had with Amazon in the past 15 years - with a simple strategy thinking in 10 up to 20 years development steps. Could you imagine any western leader talking about his Digital platform business will look like in 10 years? May be Dr. Dieter Zetsche from Daimler does but many of them haven't even recognized that a Digital Platform and Digital Collaboration / Partnering means long-term success.

The Name recognition is easier when you're one of Asia's top billionaires and running one of the worlds most valuable companies. Not content to dominate China tech in their homeland, Chinese power businesses are going global, moving into Hollywood, real estate in New York and LA, and innovative startups in Silicon Valley or even in Manufacturing Industries like robotics in Germany (Kuka, Augsburg). They're beating American and European businesses to newly emerging opportunities in Southeast Asia too, an important next frontier.

Chinese entrepreneurs - like Jack Ma - are known for moving with lightning speed and at non-stop work hours to start up new businesses. A new term has been coined to describe their work life, "996", meaning 9 to 9, 6 days per week. Silicon Valley or other Startup hubs worldwide can look decidedly sleepy, by comparison.

China is getting ahead in many fields that are revolutionizing tech, from artificial intelligence to Fintech to virtual reality to the sharing economy and retail e-commerce. What's more, these categories see U.S. and Chinese businesses competing head-to-head: Baidu with Google, Alibaba with Amazon, Facebook with Wechat, BYD with Tesla and Huawei with Apple.

There's plenty of money in the Middle Kingdom to finance these China's next upstarts. China venture capital market now matches the U.S. investment in startups, to about $60 billion US Dollar. Moreover, China's startups have gotten into the unicorn elite, and now claim nearly one-quarter of the world's unicorn-financed emerging companies.

As China progresses, a new generation of angel investors has sprung up from the initial successes of founders from the prior boom a decade ago. These angel investors are not only financing the next leaders but inspiring them to do more. They are the necessary heroes.

Yes, there are government curbs on content and some investment spirals in China. But China's tech economy operates in its own sphere, often isolated from broader economic and political issues.

It's clear as we have now entered into 2018 that China's Silicon Valley will challenge the West more than ever -- and this is just the beginning.

With strong backing from government, China is rapidly becoming the world’s leading innovation nation.

In the current era of volatile economic and political climates many analysts talk about the industries of the future. Along with the rise of China’s large Internet technology companies such as Baidu, Alibaba and Tencent, the search for innovation in China has broadened. In June 2016, speaking at the Summer Davos Forum in the northern port of Tianjin, Premier Li Keqiang said, “We will deeply promote mass entrepreneurship and innovation, combine elites and grassroots online and offline, as well as enterprises and research institutes to form a new power for innovation.” The grassroots power of ‘would-be’ entrepreneurs promises to revitalise China’s ‘innovation-oriented nation’ blueprint, first unveiled by Hu Jintao in 2006 at the National Conference on Science and Technology.

Heeding this call, makerspaces have popped up in most cities. Makerspaces are associated with the global hacker movement, which advocates open innovation, peer production and open source software, hardly the kinds of prescriptions one normally associates with authoritarian societies. In China the maker is now officially described as "chuangke", a ‘creative professional’.

In January 2015, Li Keqiang visited Chaihuo, a makerspace in Shenzhen, describing it as a model for Internet+, China’s newly unveiled digital innovation strategy that aims to modernise the nation’s manufacturing economy. According to China’s National Work Conference on Science and Technology in 2018, China now has more than 2800 makerspaces.

Many projects claim to be representative of a new wave of Chinese innovation that taps into grassroots talent. One of these is Inno Way, located in Beijing’s hi-tech district Zhongguancun near Tsinghua Science Park. Inno Way replaced Haidian Book Town, which died a natural death because more people were reading online. Launched in June 2014, the project is described as a new landmark of start-up culture, bringing aspiring grassroots ‘makers’ into conversations with policymakers, venture capitalists and angel investors.

Replicating Beijing, Shanghai offers up a similar version in Yangpu District, part of the Knowledge Innovation Community project, a development kick-started a decade ago by a Hong Kong real estate development company. Called Innospace, it provides mentoring and financial assistance for start-ups in a range of sectors.

Aside from the large first-tier cities of Beijing, Shanghai, Chongqing, Shenzhen and Guangzhou, there are also significant developments elsewhere. A major project, aptly called Dream Town, is taking shape in Hangzhou just a few kilometres from the Alibaba Group’s headquarters in Yuhang District. The district, noted mostly for its farmlands a decade ago, now advertises itself as a digital economy district.

The developments we see in China reflect regional articulations of digital innovation, particularly a new–found fascination with makerspaces and co-working spaces.

Wulf Schlachter - CEO DXBe Management - April 2018

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