How China’s ‘copycat’ tech companies are now the ones to beat
Edward Tse and Marco Gervasi say the country, once derided as good only for producing fake products, is today producing leaders in innovation, becoming a model for others to follow
Shanzhai has been prevalent in China in recent decades and this has earned China the reputation of being a “copycat nation”. Western media report that China’s preferential policies and regulations to restrict market access, such as the the “Great Firewall” in the internet industry, and the lack of intellectual property protection, give Chinese companies an unfair home advantage to create copies.
Yet, the by-product of such protectionism has been the development of a unique innovation ecosystem. The innovation brought about by China – an evolutionary approach on a mass scale – is different from that in the West, and it is influencing both emerging and developed economies.
How China’s Airbnb copycats beat the Silicon Valley titan at its own game
WeChat gets Bill Gates talking too
Largely due to the success of WeChat, Tencent expanded into other innovative business models in social networking and mobile gaming. Tencent now leads in the world in terms of mobile app monetisation. The recent developments of Facebook Messenger, WhatsApp and Kik Messenger have shown a clear reference of WeChat’s strategy and functionalities.
Besides Tencent, there are also a number of areas where Chinese companies are ahead of the rest of the world, such as in the emerging industries of internet finance, new social media, artificial intelligence, virtual reality, augmented reality and intelligent transport. Justin Kan, founder of Twitch.tv, a US-based video game broadcasting platform that has been acquired by Amazon, said: “Like everybody wants to know what is happening in Silicon Valley, I think we should also be aware of innovations coming from China. You will begin to see a lot of Chinese innovations diffusing into the US.”
In the post-shanzhai era, China will see a proliferation of business models and innovations. Some companies in the rest of the world are beginning to “reference” Chinese companies, especially in the tech sector. We call this phenomenon “reverse shanzhai”.
Snapdeal, dubbed the “Alibaba of India”, is a top e-commerce company in the country. Before launching their platform, Kunal Bahl and his partner Rohit Bansal visited China in 2011 and noticed that the Indian market had more in common with the Chinese market than with the market in the US. They realised Alibaba’s platform strategy would solve India’s biggest issue: aggregating India’s millions of small brands and sellers.
The same happened in Nigeria, where e-commerce website Konga.com was originally launched as a local Amazon at the beginning of 2014, only to morph a few months later into the “Alibaba of Africa”. And this trend is not limited to e-commerce. Indian entrepreneur VIjay Shekar Sharma, an admirer of Jack Ma, modelled his company Paytm after Alibaba. The company, seen as the “Alipay of India”, has raised fresh funding from Ant Financial.
Stationless bike-sharing is the latest export of China-originated innovation. Mobike, the leading player, has gone from zero to 23 Chinese cities in 10 months, recording 200 million rides since its launch in April 2016. It is now expanding into overseas markets. Others, such as oBike and LimeBike, have already been rolled out in Singapore and Silicon Valley respectively.
China back on two wheels as bike-sharing revolution gains traction
In some cases, Chinese companies enter new overseas markets by making strategic investments in foreign companies. For example, Alibaba invested in Singapore-based e-commerce leader Lazada to build an “Alibaba of Southeast Asia”. Didi Chuxing also invested in Grab, the leading ride-hailing platform in Southeast Asia.
Furthermore, Jack Ma has been appointed a key adviser to the Malaysian and Indonesian governments for their digital economy aspirations. This is a significant achievement as it proves that China is becoming the benchmark, rather than the follower.
China: No 1 enemy of internet freedom or the global champion of online technology?
Yet, “reverse shanzhai” is not simply “copy and paste”. The recent struggles of the likes of Xiaomi and LeEco have shown that some Chinese companies still lack experience to sustain their business beyond borders. Often, one cannot simply transfer Chinese business models to another market without any adaptation. As Tokopedia’s Tanuwijaya put it: “Chinese e-commerce is a source of inspiration, but it is not a format that can be simply imposed on any market. You have to grow it from within.”
The trend of “reverse shanzhai” will be increasingly prevalent internationally, as China’s innovation and entrepreneurship continue to thrive.
The world should take notice.
Edward Tse is founder and CEO of Gao Feng Advisory Company and author of China’s Disruptors. Marco Gervasi is executive director of Red Synergy Business Consulting and the author of East Commerce