China Is No Silicon Valley
February 26, 2013 Leave a comment
February 25, 2013, 4:49 p.m. ET
China Is No Silicon Valley
Duncan Clark is the chairman of BDA China, an investment-advisory firm specializing in China’s technology, Internet and e-commerce sectors.
ON WHETHER CHINA CAN BECOME THE NEXT SILICON VALLEY:Innovation is born, not made. It isn’t something that you can fast-forward. When you do try to fast-forward it, you get copying.
This is China’s challenge. There’s a clear desire to move up the value chain from the “Made in China, Designed in California,” to flipping that around.
One thing we do see in China today is capital. It’s abundant. The problem is, there are so many so-called venture-capital and private-equity firms today that there really isn’t much discipline in this process. Everybody’s focused on the IPO, and the IPO route at the moment is very backlogged. Both domestically and internationally, listing China stocks right now is a bit of a challenge. So the model is there for the capital but not in terms of the ecosystem that we see in Silicon Valley.
You have large companies in China today like Tencent [Holdings Ltd.], Taobao, which is the consumer e-commerce play of Alibaba [Group], and Baidu [Inc.]. These companies are very dominant in their respective fields.
What we don’t see these companies doing is buying other companies. So an important distinction between China and Silicon Valley is the M&A route generally isn’t there—partly because for the entrepreneur in China, it’s all about the IPO.
This has created companies that shouldn’t have tried to go public or shouldn’t have actually gone public when they did.
ON WHETHER CHINA’S BIG INTERNET COMPANIES CAN SUCCESSFULLY GO GLOBAL : China is such a big and competitive market that there’s little incentive to do so. The government wants Chinese companies to go global. But it would take a lot to have a material impact on their revenues.
We don’t see Chinese [service] companies going head-on into the U.S. or Europe, frankly, because why should they? There are other opportunities.
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