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Don't Believe Beijing: China Really Does Rival The U.S.
Kenneth Rapoza
Nov 30, 2018, 07:00am
Ask anyone inside the Chinese government if the country is a rival in anyway to the U.S. and they will laugh at you. But when it comes to the economy, new technologies, and soft power throughout Asia, China absolutely does compete closely with the U.S. If the U.S. is winning, it is only winning by a nose. (Photographer: Qilai Shen/Bloomberg photo credit: © 2018 Bloomberg Finance LP)© 2018 BLOOMBERG FINANCE LP
China's government scoffs at the notion that they rival the U.S. in anything. They're years behind, everyone in China tells you. They've got to be joking. Have they seen their country lately?
After a 10-day trip to China, my first virgin-eyes impression is that China is as advanced as the U.S. They are developing fast in everything tech: artificial intelligence, robotics, blockchain, high tech telecommunications systems infrastructure and internet of things. In some cases, they are even more advanced.
SenseTime is China's real-life Big Brother. Its founder, Tang Xiaoou, once recognized as a Google scholar, is on his way to becoming a billionaire.
Liu Qiangdong, better known as Richard Liu here, is already a billionaire. At the 7-Fresh grocery store in Beijing, not far from Liu's JD.com, there's this fruit stand that looks awfully similar to anything an American would find at a Trader Joe's or Wholefoods. It's organic.
It's small farm friendly. But here at 7-Fresh you can scan a barcode and find out where the apples came from, thanks to a blockchain system they're running. Meanwhile, over my head is a small assembly line of green shopping bags filled with online food orders.
It's the Jetsons. I don't think they have this at Wholefoods. I've never seen it at an Eataly in Boston or New York. They surely don't have anything like it at Stop & Shop, Kroger's and Star Market. It may all be a cheap contraption designed by those desperate to impress. Push the wrong button and the whole thing falls to pieces. I don't know. I do know that I haven't seen anything like it in the U.S.
Last year, the world's largest automated port terminal opened in Shanghai. A few months later, Quingdao opened their automated container terminal. I drove by it. I thought it was one of those ghost cities because I didn't see any workers. The reason: hundreds of them have been laid off over the years because the trucks are driverless and the container gantry cranes have no hard hats anywhere near them. It's Star Wars.
Shipping containers are transfered by unmanned vehicles at Asia's first fully automated container terminal of Qingdao Port on June 8, 2018 in Qingdao, Shandong Province of China. (Photo by VCG, Getty Images)VCG/GETTY IMAGES
The U.S. has this, too, of course. The Long Beach container terminal in southern California is fully automated. The Port of Rotterdam has the same thing. It makes sense that in terms of port logistics systems, China would be at the forefront of technology. Of the top 10 global container ports, China is home to seven of them.
But China ports shouldn't look as advanced as an American port. Isn't China supposed to be years behind?
An employee prepares a JD.com delivery drone. It might not work. But more relevant than sci-fi delivery service is JD's massive e-commerce operation. They partner with Walmart in China. Walmart could learn a thing or two from these guys. Photographer: Qilai Shen/Bloomberg© 2018 BLOOMBERG FINANCE LP
"The integration of China into the World Trade Organization, and the integration and the full embrace of new technology into China have fundamentally changed that economy," says Tim Creed, a head of investments in Europe for Schroder Adveq in London.
China produces more STEM field graduates each year than the United States, Japan, South Korea, and Taiwan combined. Forget Europe. They are nowhere near the Chinese.
Of the top three cities in the world behind startup "unicorns" -- new companies with valuations of $1 billion -- China is No. 3. Silicon Valley and New York City are numbers one and two. But that is changing fast.
This year, China recorded 181 startups with a valuation of more than $1 billion, according to the Hurun Report, besting the U.S. in the third quarter.
Ant Financial, owned by Jack Ma's Alibaba, is one-part Western Union, one part PayPal, one part Visa. Like the Visa tagline, Ant Financial is "everywhere you want to be." Especially in China. Nearly everyone pays with AliPay, the Shanghai-based mobile payments platform owned by Ant Financial. In the third quarter, Ant Financial was valued at around $140 billion.
China and the U.S. were at odds even before Trump's election. Previously, the government had a list of somewhere between 30 and 40 items for the Chinese to open up to Americans. Financial services were on the list. China offered maybe a handful of them, and the process of opening up remains too slow for Washington's taste. Trump came in and basically said we're not waiting for these guys any longer.
China is more than a cheap imitator, though nearly everyone at the WeWork in Chengdu, a city in Western China known for its panda research center, will tell you that they take U.S. and European startups and remake them for the Chinese market. WeWork is in 50 cities in China. They have 80 worldwide.
Despite a closed internet, tech entrepreneurs thrive in mainland China. Others head to Thailand and Singapore.
China wants to keep more of them at home. Enterpreneurs may be willing to sacrifice personal freedoms for a chance to make big money in China.
The Pearl River Delta, which connects Guangdong, Hong Kong, and Macau, is on par to rival Silicon Valley and New York in terms of GDP. It already rivals Tokyo. In 2015, it was named the world's biggest megacity by the World Bank. Beijing aims to bridge (literally, they are in the finishing stages of building a 34-mile bridge from Hong Kong to Macau) Hong Kong's financial might with Macau's services sector to create a massive city cluster with a forecast GDP of $4.6 trillion in 10 years.
In a jab to San Francisco, China calls it the "Greater Bay Area."
Good luck finding Visa or Mastercard in China.
You can find a Starbucks, though. They are everywhere. Chinese rival Luckin Coffee, a Beijing-based coffee chain that launched just last year and already has 1,000 stores is worth around $1 billion. China copies. And China wins. Look out, Starbucks.
A lot of the people helping China succeed in ways they haven't before are U.S. educated. Kai-fu Lee runs the Artificial Intelligence Institute at Chinese VC firm Sinovation Ventures. He used to work as a scientist for Apple, helped set up Microsoft's R&D in China and was the former president of Google China in Hong Kong. He says there are only two powers in AI: and it's the U.S. and China. China leads on the data-side. The U.S. on the research side.
But the research side is changing. Tech behemoths like Tencent, Alibaba, Sina and Baidu all have their own research and development centers.
China venture capital firms lead in terms of investments in artificial intelligence. Washington knows this, which is why much of the U.S. trade war has little to do with American manufacturing, and more to do with stopping China from moving too far ahead. It has 1.4 billion people and sits next door to another country -- India -- with another billion-plus people. And is near markets once dominated by U.S. brands and defense contractors in Southeast Asia. Washington is letting that sink in.
On Nov. 21, the Department of Commerce identified 14 categories of new technologies to target with tariffs – among them biotech, artificial intelligence and machine learning, data analytics, and robotics. They will be subject to limits on investments by foreign entities. Guess which country was top of mind?
The U.S. is using security measures as a means to go after China's tech sector. As one Chinese administrator told me, "The U.S. used to be about competition. Now they don't want it."
Ten years ago, even when the perception was that the Chinese weren't entirely playing fair, American companies didn't rock the boat. The market was too important to ignore. That has changed due to China's rapid technological leap. Some U.S. companies fear that they will never compete with Chinese brands in mainland China.
"Tech is helping China undergo the biggest consumer experiment in the world," says Janet Mui, an economist with Cazenove Capital. "It's easier to launch things like Alipay because you don't have consumer groups and privacy rights groups roadblocking you. The West may not even fully realize that China is a tech power. They have the talent to do just about anything."
The New York Times' Asia editor, Philip Pan, knows this well. His two-part series titled "The Land That Failed to Fail" says exactly this -- China is a rival to the U.S. in Asia. He says an "epochal contest is underway."
Beijing says their best companies don't compare to their U.S. counterparts, but they are wrong. At best, they are selling themselves short. At worst, they are hiding the truth: China is barely an emerging market. They are the biggest player in Asia. And if they are not the biggest player, the U.S. knows that one day they will be. So here we are today with trade tariffs and battles about the South China Sea to counter it all.
To the Chinese, the term "rival" means someone looking for a war. That's not what the Chinese want. Officially, the Chinese government is not interested in a Cold War with the U.S.
China would prefer the word "partner." China is a partner. And a rival. The best word to use is "competitor".
China is a competitor playing in the same league; not in the way the worst NFL quarterback is in the same league as Tom Brady. They are both field generals of the first and second place teams, one game in the win column behind the other.
Yet, if you listen to a Chinese diplomat, China is light years behind. It's all a ruse.
There is a sense in Beijing that the foreign trade bureaucracy of Washington still has a different world view than Trump when it comes to China. They believe they can outlast the trade dispute, as they refer to it.
They might. Many multinational corporations would be fine with a return to status quo. They will keep waiting for China to open up more. They will eventually get their wish; they will eventually take some market share away from their Chinese rivals. How long this takes to unfold is anybody's guess. Washington is not interested in waiting another five years.
Trump and Xi Jinping will meet during the G20 meeting in Buenos Aires, taking place today and Dec. 1.
Even if all went perfectly well, and Trump and Xi signed a trade war truce, two facts would not change.
First, there is bipartisan support for going after China. The only thing that can stop it is if a handful of large corporations managed to convince the President or congress to stand down.
And lastly, if a truce is reached over the next two days, it too will not change the fact that China technology rivals the U.S. They will do so far many years to come.
https://www.forbes.com/sites/kenrap...china-really-does-rival-the-u-s/#a8584742f05a
Kenneth Rapoza
Nov 30, 2018, 07:00am
- China's government scoffs at the notion that they rival the U.S. in anything.
- China produces more STEM field graduates each year than the United States, Japan, South Korea, and Taiwan combined.
Ask anyone inside the Chinese government if the country is a rival in anyway to the U.S. and they will laugh at you. But when it comes to the economy, new technologies, and soft power throughout Asia, China absolutely does compete closely with the U.S. If the U.S. is winning, it is only winning by a nose. (Photographer: Qilai Shen/Bloomberg photo credit: © 2018 Bloomberg Finance LP)© 2018 BLOOMBERG FINANCE LP
China's government scoffs at the notion that they rival the U.S. in anything. They're years behind, everyone in China tells you. They've got to be joking. Have they seen their country lately?
After a 10-day trip to China, my first virgin-eyes impression is that China is as advanced as the U.S. They are developing fast in everything tech: artificial intelligence, robotics, blockchain, high tech telecommunications systems infrastructure and internet of things. In some cases, they are even more advanced.
SenseTime is China's real-life Big Brother. Its founder, Tang Xiaoou, once recognized as a Google scholar, is on his way to becoming a billionaire.
Liu Qiangdong, better known as Richard Liu here, is already a billionaire. At the 7-Fresh grocery store in Beijing, not far from Liu's JD.com, there's this fruit stand that looks awfully similar to anything an American would find at a Trader Joe's or Wholefoods. It's organic.
It's small farm friendly. But here at 7-Fresh you can scan a barcode and find out where the apples came from, thanks to a blockchain system they're running. Meanwhile, over my head is a small assembly line of green shopping bags filled with online food orders.
It's the Jetsons. I don't think they have this at Wholefoods. I've never seen it at an Eataly in Boston or New York. They surely don't have anything like it at Stop & Shop, Kroger's and Star Market. It may all be a cheap contraption designed by those desperate to impress. Push the wrong button and the whole thing falls to pieces. I don't know. I do know that I haven't seen anything like it in the U.S.
Last year, the world's largest automated port terminal opened in Shanghai. A few months later, Quingdao opened their automated container terminal. I drove by it. I thought it was one of those ghost cities because I didn't see any workers. The reason: hundreds of them have been laid off over the years because the trucks are driverless and the container gantry cranes have no hard hats anywhere near them. It's Star Wars.
Shipping containers are transfered by unmanned vehicles at Asia's first fully automated container terminal of Qingdao Port on June 8, 2018 in Qingdao, Shandong Province of China. (Photo by VCG, Getty Images)VCG/GETTY IMAGES
The U.S. has this, too, of course. The Long Beach container terminal in southern California is fully automated. The Port of Rotterdam has the same thing. It makes sense that in terms of port logistics systems, China would be at the forefront of technology. Of the top 10 global container ports, China is home to seven of them.
But China ports shouldn't look as advanced as an American port. Isn't China supposed to be years behind?
An employee prepares a JD.com delivery drone. It might not work. But more relevant than sci-fi delivery service is JD's massive e-commerce operation. They partner with Walmart in China. Walmart could learn a thing or two from these guys. Photographer: Qilai Shen/Bloomberg© 2018 BLOOMBERG FINANCE LP
"The integration of China into the World Trade Organization, and the integration and the full embrace of new technology into China have fundamentally changed that economy," says Tim Creed, a head of investments in Europe for Schroder Adveq in London.
China produces more STEM field graduates each year than the United States, Japan, South Korea, and Taiwan combined. Forget Europe. They are nowhere near the Chinese.
Of the top three cities in the world behind startup "unicorns" -- new companies with valuations of $1 billion -- China is No. 3. Silicon Valley and New York City are numbers one and two. But that is changing fast.
This year, China recorded 181 startups with a valuation of more than $1 billion, according to the Hurun Report, besting the U.S. in the third quarter.
Ant Financial, owned by Jack Ma's Alibaba, is one-part Western Union, one part PayPal, one part Visa. Like the Visa tagline, Ant Financial is "everywhere you want to be." Especially in China. Nearly everyone pays with AliPay, the Shanghai-based mobile payments platform owned by Ant Financial. In the third quarter, Ant Financial was valued at around $140 billion.
China and the U.S. were at odds even before Trump's election. Previously, the government had a list of somewhere between 30 and 40 items for the Chinese to open up to Americans. Financial services were on the list. China offered maybe a handful of them, and the process of opening up remains too slow for Washington's taste. Trump came in and basically said we're not waiting for these guys any longer.
China is more than a cheap imitator, though nearly everyone at the WeWork in Chengdu, a city in Western China known for its panda research center, will tell you that they take U.S. and European startups and remake them for the Chinese market. WeWork is in 50 cities in China. They have 80 worldwide.
Despite a closed internet, tech entrepreneurs thrive in mainland China. Others head to Thailand and Singapore.
China wants to keep more of them at home. Enterpreneurs may be willing to sacrifice personal freedoms for a chance to make big money in China.
The Pearl River Delta, which connects Guangdong, Hong Kong, and Macau, is on par to rival Silicon Valley and New York in terms of GDP. It already rivals Tokyo. In 2015, it was named the world's biggest megacity by the World Bank. Beijing aims to bridge (literally, they are in the finishing stages of building a 34-mile bridge from Hong Kong to Macau) Hong Kong's financial might with Macau's services sector to create a massive city cluster with a forecast GDP of $4.6 trillion in 10 years.
In a jab to San Francisco, China calls it the "Greater Bay Area."
Good luck finding Visa or Mastercard in China.
You can find a Starbucks, though. They are everywhere. Chinese rival Luckin Coffee, a Beijing-based coffee chain that launched just last year and already has 1,000 stores is worth around $1 billion. China copies. And China wins. Look out, Starbucks.
A lot of the people helping China succeed in ways they haven't before are U.S. educated. Kai-fu Lee runs the Artificial Intelligence Institute at Chinese VC firm Sinovation Ventures. He used to work as a scientist for Apple, helped set up Microsoft's R&D in China and was the former president of Google China in Hong Kong. He says there are only two powers in AI: and it's the U.S. and China. China leads on the data-side. The U.S. on the research side.
But the research side is changing. Tech behemoths like Tencent, Alibaba, Sina and Baidu all have their own research and development centers.
China venture capital firms lead in terms of investments in artificial intelligence. Washington knows this, which is why much of the U.S. trade war has little to do with American manufacturing, and more to do with stopping China from moving too far ahead. It has 1.4 billion people and sits next door to another country -- India -- with another billion-plus people. And is near markets once dominated by U.S. brands and defense contractors in Southeast Asia. Washington is letting that sink in.
On Nov. 21, the Department of Commerce identified 14 categories of new technologies to target with tariffs – among them biotech, artificial intelligence and machine learning, data analytics, and robotics. They will be subject to limits on investments by foreign entities. Guess which country was top of mind?
The U.S. is using security measures as a means to go after China's tech sector. As one Chinese administrator told me, "The U.S. used to be about competition. Now they don't want it."
Ten years ago, even when the perception was that the Chinese weren't entirely playing fair, American companies didn't rock the boat. The market was too important to ignore. That has changed due to China's rapid technological leap. Some U.S. companies fear that they will never compete with Chinese brands in mainland China.
"Tech is helping China undergo the biggest consumer experiment in the world," says Janet Mui, an economist with Cazenove Capital. "It's easier to launch things like Alipay because you don't have consumer groups and privacy rights groups roadblocking you. The West may not even fully realize that China is a tech power. They have the talent to do just about anything."
The New York Times' Asia editor, Philip Pan, knows this well. His two-part series titled "The Land That Failed to Fail" says exactly this -- China is a rival to the U.S. in Asia. He says an "epochal contest is underway."
Beijing says their best companies don't compare to their U.S. counterparts, but they are wrong. At best, they are selling themselves short. At worst, they are hiding the truth: China is barely an emerging market. They are the biggest player in Asia. And if they are not the biggest player, the U.S. knows that one day they will be. So here we are today with trade tariffs and battles about the South China Sea to counter it all.
To the Chinese, the term "rival" means someone looking for a war. That's not what the Chinese want. Officially, the Chinese government is not interested in a Cold War with the U.S.
China would prefer the word "partner." China is a partner. And a rival. The best word to use is "competitor".
China is a competitor playing in the same league; not in the way the worst NFL quarterback is in the same league as Tom Brady. They are both field generals of the first and second place teams, one game in the win column behind the other.
Yet, if you listen to a Chinese diplomat, China is light years behind. It's all a ruse.
There is a sense in Beijing that the foreign trade bureaucracy of Washington still has a different world view than Trump when it comes to China. They believe they can outlast the trade dispute, as they refer to it.
They might. Many multinational corporations would be fine with a return to status quo. They will keep waiting for China to open up more. They will eventually get their wish; they will eventually take some market share away from their Chinese rivals. How long this takes to unfold is anybody's guess. Washington is not interested in waiting another five years.
Trump and Xi Jinping will meet during the G20 meeting in Buenos Aires, taking place today and Dec. 1.
Even if all went perfectly well, and Trump and Xi signed a trade war truce, two facts would not change.
First, there is bipartisan support for going after China. The only thing that can stop it is if a handful of large corporations managed to convince the President or congress to stand down.
And lastly, if a truce is reached over the next two days, it too will not change the fact that China technology rivals the U.S. They will do so far many years to come.
https://www.forbes.com/sites/kenrap...china-really-does-rival-the-u-s/#a8584742f05a
