CvT: Dec. 9, 2020

Arm yourself with the Coffee. vs. Tea US-China relations newsletter as the world’s two largest economies square off for global influence
Arm yourself as the world’s two largest economies square off for global influence

Turning Tables Over Global Technology Leadership

Written by: Grace Spoerner

The US and China have been known to view topics ranging from trade to cybersecurity—and areas in between—from different lenses. Most recently, the two countries have been trading blows over the future of the internet, with conflict over intellectual property materializing into action against companies like TikTok and Huawei. As the flames of tension flare over the future of technology, a heated question must be addressed, ‘with whom does industry leadership currently reside and how could a shifting narrative influence global technology standards?’

Flattery through imitation

In its past, China had often been labeled a technology “copycat,” accused of stealing sensitive or proprietary ideas and technologies from governments and corporations, alike. There has, for the most part, been truth to these accusations. For example, the Chinese platform Weibo was inspired by Twitter, Baidu was modeled after Google, RenRen after Facebook – the examples are endless. However, though it may draw inspiration from companies in the West, China maintains a different approach to scaling internet-based companies. As opposed to their Western counterparts, whose central focus is consumer experience, Chinese companies tend to focus heavily on understanding their market, often prioritizing market segmentation and generating value for all parties to produce a high-value company.

China also has a track record of combining services from separate companies into a single application with an extended value chain. For example, Chinese technology giant Meituan bundles vouchers for services, delivery services, and consumer reviews into one singular application. By reimagining services from companies like Groupon and Yelp, Meituan has built a company worth US$5.4 billion, more than both Western counterparts combined.

Through similar veins, Chinese equivalents like Wechat and Alibaba have surpassed their Western counterparts. Alibaba, a classic example, currently maintains 58.2% of China’s gross merchandise volume (GMV), while its American equivalent, Amazon, lists 47% of the US’ GMV. Understanding China’s ability to adapt Western success stories into domestic giants by combining services, focusing on downstream value chains, and merging technology with traditional industries like finance and logistics is notable because it foreshadows China’s rise as a leader in today’s global internet industry.

Emerging from the shadows of its copycat past

As it stands today, China is home to five out of the world’s ten most valuable private companies. The tables have begun to turn as others look to China for global leadership in innovation. Trailblazing in areas like the sharing economy, digital payments, and real-time D2C logistics, China has begun setting international standards in technologies that will define the global economy for years to come. The country once known as the “copycat” has now begun churning out successful giant after successful giant fit to lead global industries.

Meanwhile, Western companies have largely struggled to keep pace. For example, China’s shared economy – largely spurred on by the release of dockless bike-sharing companies Mobike and Ofo – suddenly spread across the United States in early 2017 in the form of the companies Lime and Bird. Yet, neither Lime nor Bird have achieved the same level of success as seen by Chinese comparables. Infrastructure issues, lack of support by local governments, and a comparatively smaller market have all accounted for the disparity of success.

In another case, Apple took a page out of the WeChat and Alipay handbook by adding a digital payment option within iMessage in late 2014. However, despite Apple’s high product penetration rate, it has still struggled to develop the same market share that Alipay commands in digital payments. While nearly 81% of Chinese consumers have adopted Alipay, only approximately 9% of American users currently use Apple Pay. Similar to the sharing economy, this discrepancy can be attributed to financial infrastructure-related deficiencies, lagging regulatory support, and inhibitive consumer adoption trends.

The US & China: Divergent markets with different drivers

The Chinese technology scene has developed markedly different characteristics from its US counterpart. China boasts the largest base of internet-enabled users in the world at 800 million, with 95% of users accessing the internet through a mobile device. Additionally, the big three in Chinese technology: Baidu, Alibaba, and Tencent, are both significant founders and contributors to the continued development of technology within China. Together, these companies provided 42% of China’s venture investment in 2016, and one in five Chinese companies either originate from one of the big three or is founded by a company alumni. Due to its massive user base and capacity to churn out technology, China has become more influential in defining the world’s digital trends. 

As the race for global technology leadership becomes increasingly heated, it remains to be seen which international players will emerge as the primary drivers of the industry’s future. While the US has historically a key leader in the technology space, China has been steadily making gains. What remains to be seen is whether China’s increasingly savvy user base and technology giants will be able to shake the connotations of the country’s “copycat” past and dethrone the current leader over the future of technology.

Further Reading

US-China Relations Newsletter

CvT: Dec. 16, 2020

US-China Relations Newsletter

CvT: Dec. 2, 2020

US-China Relations Newsletter

CvT: Nov. 25, 2020

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