AN INSIGHT INTO CHINESE TECH.
Prelude
Its September 12th 2018 and I have just landed in China , apart from the breath taking scenery, new language and culture , I noticed something quite unusual especially with my social media applications . I couldn’t access either Facebook, WhatsApp, or Instagram despite an efficient WIFI connection. Prior to my entry to China, I quite knew the Chinese tech industry from an African or rather Ugandan perspective. I arrived at a time, when Huawei was on the rise both in the mobile phone in the equipment sector ( locally and internationally), Transsion holdings( Tecno, Infinix, Itel) had set a foothold on the African market and StarTimes digital was a major player in the digital television industry. Fast forward to when in the country(China), and the vast new that reality kicks in is that China is a global tech player at par with the United States or western Europe with its own rules and regulations.
To understand the Chinese tech industry, the city of Shenzhen is the perfect starting point. What was once a shipping village in 1980, has risen to become China’s version of silicon valley. Shenzhen is home to China’s biggest startups such as Baidu, Tencent, Alibaba , Huawei and DJI. All these companies have a set a foothold in the international market in their respective sectors. What started as a government project of a free economic zone in the 1980s in the re-opening era of China’s economy, ended up in a tech heaven that’s attracting foreign talent from all over the world. In summary , the Shenzhen tech miracle is the story of China’s tech industry of a favorable government policy of attracting foreign investment and then supporting the rise of local startups all backed up by an extensive domestic market and good infrastructure.
However recently, the Chinese government has started a crackdown on the tech industry in China , a move that seen to echo the anti-monopoly crackdown in the US. Firms like TenCent and Alibaba have been heavily fined with thegovernment also introducing new policies that directly affect the big tech in China. The introduction of the digital yuan ( theChinese government’s e wallet system) into the market which is a direct competitor to WeChat pay (TenCent) and Alipay (Alibaba) and the denial of ANT group of launching the worlds largest IPO is an example of how new policies are affecting big tech in China.
Regardless , an insight into Chinas tech miracle is incomplete without highlighting the success stories, its characteristics and the current state of affairs.
THE CHINESE TECH SUCCESS STORIES
Baidu, Alibaba , TenCent , Huawei, Xiaomi , Bytedance(Tiktok), Lenovo and the BMK group ( oppo, Vivo,Oneplus, Realme/Redmi ) are one of the most known successful Chinese tech brands. These tech brands have gone on to create tech products that have dominated not only the local Chinese market but also the international market. These companies have been assisted by the Chinese government policy of supporting local firms either through subsidies or favorablegovernment policy that tries to limit the power of foreign firms in the country. Majority of the pioneers of these firms might have benefited of the govt policy in the 1980s and 1990s that required the foreign firms to hire Chinese in the technical sectors of the firms apart from the foreign experts, thus leading to a generation of technically equipped personnel.
To highlight a few tech firms , we start with Huawei. It’s the worlds largest mobile equipment company and in a brief period in 2021, the worlds largest smartphone company. The company has been at the forefront of the 5G technological revolution globally and its P phone series once of the best selling phones prior to the Trump administration trade bans . Trump administration restrictions limited the company’s access to vital international components and software thus seriously affecting its market share that has now dropped to less than 4% globally. The fact Huawei owns over 1000 patents shows that they have a role to play in the innovation of the global tech sector. Then to TenCent , the world largest gaming company and one of the largest companies with a vast number of acquisitions. WeChatone of its platforms ,with a global active user base of over 1 billion, is as an impressive product. WeChat an app that is primarily designed for communication, has morphed into a super app or an operating system with an app. The app is able make payments, book flights and accommodation, post and view videos just like YouTube, view news and alerts, view and scan health codes and work effortlessly with our TenCentapplications such as TenCent meeting and QQmusic all with in the vast TenCent tech ecosystem. The other remarkable tech firms such as Xiaomi, the Bmk group have grown in market share with them introducing new and improved versions of technology every year. Transsion holdings (tecno, itel and infinix) is a Chinese firm that primarily decided to focus on the developing markets and has since set a foothold there. Transsionis leading the smartphone market in sub-Saharan Africa only second to Samsung mobile . Bytedance -owned Tiktok has become the fastest growing app per downloads on major app stores and is very popular among the millennial population. Therefore in conclusion, the global tech industry is somewhat largely influenced by Chinese tech firms and innovation.
THE GREAT CHINESE FIREWALL.
Its 2006, and there is great fun fare at the entry of google into the worlds largest consumer market. But ironically, four years later in 2010, the company was all but banned in the country. Apart from google, other western firms such as meta (Facebook, WhatsApp, Instagram) , twitter, YouTube, uber are inaccessible in the country. The big question is why the Chinese government chose this approach in the first place.
First and foremost, its national security. The Chinese government believes that the international tech firms are a threat to national security since they collect lots consumer dataof its citizens and store it in far away foreign servers. This is a true notion especially with the recent privacy concerns of major tech companies such as google and Facebook. The Chinese government wants all Chinese consumer data held within China, and with most firms finding it hard to abide by that, it explains why some were expelled or denied entry into the Chinese market. The firms that make it in the Chinese market such as Microsoft and Apple have to make concessions to the Chinese government such as the fact that Apple doesn’t allow banned apps from appearing in its app store. Secondly its nationalism and the need to protect local industry. Beijing ascertains that the competition that will arise between foreign tech and the upcoming tech firms will eventually lead to the collapse of the local firms . This policy also plays in the governments push to promote a nationalistic/patriotic sentiment in the country, by fronting the various local tech firms as a source of national pride. Henceforth all this add up to the Chinese tech firewall.
CONCLUSION
Since the turn of the century , China has played a big role in the tech industry through its innovation and the global outreach of its tech firms. The Chinese firewall , a defining characteristic of the Chinese tech industry, is a model that if properly used and a few changes added to it, is a perfect model developing nations should implement as it protects the upcoming local tech firms thus encouraging innovation and protects national consumer data. In a world, where the shift to the 4th industrial revolution ( artificial intelligence and internet of things) is becoming mainstream, many nations such as the developing nations should prioritize the tech sector, just like the Chinese communist party did.
Written by
Rugaba John Paul
Research fellow at Development Watch Centre.