January 27, 2021
Direct and indirect public investment, innovation ecosystems and antitrust guidelines are among the ideas experts say the West would be wise to emulate.
Professor at Vassar College
They should learn from the efforts of China's leading technology companies to build technological ecosystems. Chinese tech giants such as Tencent, Alibaba and Xiaomi prioritize building innovative ecosystems rather than maximizing short-term profits. This means that they would encourage and fund startups by formal employees to build independent companies, some of which maintained linkages with the "mother" firms but do not have to. Together these leading firms have incubated the majority of China's recent tech startups. The startups and their offsprings populate innovative universe in real and virtual spaces at a rapid speed, covering many different niches, some of which ended up strengthening and extending the market shares of the mothership. However, most are not subjected to the control of the motherships.
Together these firms create a rapidly evolving and responsive innovative milieu to create new firms, new markets and new cultures of expectations. The main purpose of supporting the ecosystem is not to have more direct control. Ultimately, rising water left all boats and an emerging culture that is friendly to technological innovation will benefit the tech giants in unexpected, unpredictable, but sustained ways. Such strategies require long-term strategic thinking, rather than thinking dominated by quarterly profit and maximizing shareholder values. The strategy is also a result of China's unpredictable commercial environment, so being nimble, patient and spreading one's allies and friends are necessary for long-term success. Instead of focusing on an individual firm's profitability, Chinese tech firms often realize that it is more productive to cultivate a collective environment that is friendly to innovative firms.
Robert D. Atkinson
President of Information Technology and Innovation Foundation
Direct and indirect public investment. There are many problems with China's tech and economic policy. But at least Chinese governments at national and provincial levels are willing to put massive resources into public investment into technology: 1) funding to support robotics adoption in industry, 5G infrastructure, smart cities systems and electric vehicle charging stations; 2) funding for research in a wide array of advanced technologies, including AI, biotech and quantum computing; 3) funding to attract international high valued-added firms to invest in China; 4) funding for helping their companies invest and gain market share outside of China (e.g. Belt and Road); and 5) a very generous R&D credit.
Compared to China, U.S. investment is vastly inadequate. The U.S. put in place a network of manufacturing research institutes (e.g., Manufacturing USA). But the Chinese copied this model but funded it at an order of magnitude more. China's R&D tax credit is 2.7 times more generous than the U.S. credit. U.S. federal funding on R&D as a share of GDP is today lower than prior to Sputnik.
Investor and Newsletter Author at interconnected.blog
American and European antitrust regulators should reference and borrow from China's newly proposed "Antitrust Guidelines for the Platform Economy." The guidelines are tailored to how internet platforms actually operate, in order to determine what are anticompetitive behaviors and how you can tell. Being an old civilization but a young country, China does not have much experience or legacy when it comes to antitrust. This lack of "regulatory debt" can be helpful when drafting rules from scratch that better match our time.
Section 3, in particular, includes a detailed catalogue of ways that internet platforms can trigger antitrust considerations by selling below cost, forcing exclusive partnerships and dumping subsidiaries, among many other tactics, to gain market share and push out competitors. Many of the tactics used by Alibaba and Tencent bear similarities to what American Big Tech is doing to achieve similar goals.
Big Tech from the U.S., China and elsewhere follow each other closely and mimic each other's growth strategies to some extent. They all harbor global ambitions as well. Thus, it would be wise (and fair) for Western antitrust regulators to reference China's approach, as Chinese regulators have been learning from their Western counterparts for years, because they are all regulating the same thing.
Practice Head, Geo-technology at Eurasia Group
This is a tough question of course, with lots of differences between U.S. and Chinese technology company business models, and certainly Chinese users have different preferences in many cases, but there are also a lot of similarities depending on the sector. One thing that Chinese technology company platforms have been able to do that Western platforms have not yet copied, is providing a real Swiss Army knife approach to users via the so-called super apps fielded by Alibaba and Tencent. Instead of using and coming in and out of many apps, Chinese users can manage most of their online needs via one app and the interfaces are fairly seamless. But this requires a lot of collaboration across companies and interfaces and has been difficult for Western companies to easily duplicate.
The other thing Chinese tech companies in this space do very well is hire younger, smart graduates in tech fields and provide extensive on-the-job training on real commercial problems that companies need to solve.
Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
More from Braintrust