China’s rise as a global tech leader

Bangkok Post - - OPINION - Su­tapa Amorn­vi­vat, PhD, is CEO of SCB ABA­CUS, an AI-pow­ered data an­a­lyt­ics sub­sidiary of Siam Com­mer­cial Bank, where she pre­vi­ously headed the Eco­nomic In­tel­li­gence Cen­tre and the Risk An­a­lyt­ics Di­vi­sion. She re­ceived a BA from Har­vard and a PhD from MIT.

All eyes are on China as it emerges as a new global leader in tech­nol­ogy. Star­tups are sprout­ing up in Shang­hai and Shen­zhen with most suc­cess­ful ones go­ing pub­lic at stag­ger­ing IPO prices. In my re­cent visit to China, my at­tempts to con­nect to the out­side world proved to be a chal­lenge. I found this ironic amid the coun­try’s ex­u­ber­ant tech scene.

China’s ef­forts to fil­ter on­line traf­fic with the Great Fire­wall means no one can en­ter apps like Line and Face­book. Even ac­cess to Google and YouTube is not al­lowed. The days of us­ing vir­tual pri­vate net­works (VPN) to by­pass the fire­wall are also num­bered as au­thor­i­ties have be­gun to close them down.

The Chi­nese govern­ment has pre­vented these global firms from op­er­at­ing in the coun­try. In­stead, it has al­lowed Chi­nese ver­sions of all the plat­forms men­tioned above to flour­ish. In China, cit­i­zens use WeChat in place of Face­book for so­cial me­dia. They nav­i­gate with Baidu for searches with­out Google. Peo­ple use Youku to watch videos over YouTube. And all have proven very pop­u­lar and suc­cess­ful in China.

From the out­side, these de­ci­sions by the govern­ment seem like a back­ward step. Crit­ics say they sti­fle the chance for tech­nol­ogy ad­vance­ment and global con­nect­ed­ness. But this is not the whole story. Chi­nese tech com­pa­nies have al­ready moved be­yond re­ly­ing on the govern­ment’s pro­tec­tive bar­rier. Their abil­ity to in­no­vate is what brings me and many other for­eign busi­ness peo­ple here to see tech­nol­ogy at the fron­tier and Chi­nese home-grown in­no­va­tion.

How did China, once ridiculed as the land of knock-offs, be­come a global in­no­va­tion hub?

First, the govern­ment and pri­vate firms are se­ri­ous about re­search and de­vel­op­ment (R&D). By 2016, China has be­come one of the top five coun­tries for spend­ing on R&D. This is on par with France and the Nether­lands, as China spent 2.1% of GDP in re­search. In the same year, Thai­land’s 0.6% in­vest­ment pales in com­par­i­son.

Many Chi­nese tech com­pa­nies such as Alibaba and Ten­cent now top the list of firms with largest mar­ket cap­i­tal­i­sa­tion in the world. These firms have not only grown to be­come renowned for cut­ting-edge in­no­va­tions. They have be­come well-known for en­ter­ing new fields, from robotics and Ar­ti­fi­cial In­tel­li­gence (AI) to even clean en­ergy.

Of­ten, these com­pa­nies started out by cloning ideas from for­eign firms. Yet, what sets these firms apart is they do not thrive by only repli­cat­ing or re­ly­ing on the govern­ment. They have moved be­yond their old im­age of coun­ter­feits to the next level of in­no­va­tion through hard work.

Take Ten­cent’s WeChat, which has al­most 900 mil­lion users world­wide. Start­ing out as a so­cial me­dia and chat app, the plat­form tries to con­nect the on­line and off­line worlds. Over time, it con­tin­ues to add new func­tion­al­i­ties. Users can talk with friends, or­der food, call a taxi and book a doc­tor’s ap­point­ment with­out leav­ing the app. What Ten­cent has cre­ated has helped fuel a cash­less so­ci­ety in China that is catch­ing on faster than any­where else glob­ally.

An­other Chi­nese tech com­pany, Meitu­anDian­ping, a deals provider akin to Groupon, was re­cently val­ued at US$30 bil­lion. This makes it 10 times more valu­able than Groupon, which came up with the con­cept. This year, the firm opened an off­line store where con­sumers can shop and find fresh seafood us­ing its app. It was an in­stant hit.

An­other fac­tor fuelling the rise of in­no­va­tive China may partly lie in the suc­cess of Jack Ma from Alibaba and other Chi­nese self-made tech bil­lion­aires who have be­come icons to en­trepreneurs. China’s steady eco­nomic growth that comes with busi­ness op­por­tu­ni­ties and a vast con­sumer mar­ket also helps fund these en­trepreneurs’ hope and dreams.

But that does not mean Thai­land has to copy China to shut for­eign firms and use a sin­gle in­ter­net gate­way to over­see on­line con­tent. Do­ing so would be dis­as­trous for con­sumers and hurt busi­nesses more than en­cour­ag­ing in­no­va­tion. In­stead of tak­ing ex­treme mea­sures, the best an­swer to in­no­va­tion is for pol­i­cy­mak­ers to fo­cus on re­search.

Thai con­sumers, like Chi­nese con­sumers still face the same prob­lems that need to be met through unique prod­ucts or ser­vices. This means there are still busi­ness op­por­tu­ni­ties to en­hance the con­sumer ex­pe­ri­ence. The Thai govern­ment should fo­cus on pro­vid­ing a healthy en­vi­ron­ment to firms for years to come.

Thai firms need to also avoid the copy­ing of in­tel­lec­tual prop­erty that has long plagued China’s rep­u­ta­tion. Coun­ter­feits are still preva­lent and can af­fect busi­nesses large and small. Vi­able prod­ucts pitched on crowd­fund­ing sites in the US of­ten ap­pear in China a few weeks later. Even when fake prod­ucts are cheaper, it comes at the cost of steal­ing from those who have worked hard to cre­ate them.

With this in mind, Thai au­thor­i­ties must pro­tect in­tel­lec­tual prop­erty through strict en­force­ment. This means go­ing be­yond raid­ing pi­rated DVD stalls once in a while. For an in­no­va­tive cul­ture to set­tle, firms need to learn how to take le­gal pre­cau­tions too. Busi­nesses will need to de­velop prod­ucts that are both unique and hard to repli­cate.

China’s tech­nol­ogy is catch­ing on and will sur­pass the ca­pa­bil­ity of the West. It is im­por­tant Thai­land learns to adapt from its gi­ant neigh­bour.

Walk­ing the right path to­wards en­trepreneur­ship needs to hap­pen with R&D, not just repli­ca­tion of tech­nol­ogy. The com­bined ef­fort of all stake­hold­ers from pol­i­cy­mak­ers to laws and en­force­ment to banks can pro­vide a great tail­wind for Thai in­no­va­tors to have a chance to com­pete in this fierce global mar­ket.

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