Does China Threaten America’s Dominance of Technology Unicorns?

China has consistently remained in the headlines recently as the back and forth between Donald Trump and Chinese President Xi Jinping continues. Discussions about imports, tariffs and the ongoing trade war have attracted the majority of the attention, but there’s another story developing just below the surface often overlooked — is China going to control the future of technology?

Over recent years, Chinese tech firms and conglomerates have been hard at work not only producing more content (websites, apps and services) but expanding and acquiring additional companies of their own. One of the most prominent examples can be seen with the explosive growth of the Chinese-developed TikTok, a widely popular short-form video app.

Growth and Acquisitions
Currently, TikTok is in the midst of a legal battle after news broke of a potential ban on the app being upheld in India. But beyond concerns of protection of its users is another surprising fact that’s the main reason authorities are even paying attention to the app in the first place. In the first quarter of 2019 alone, TikTok added as many as 188 million new users of which 88.6 million were Indian. The Chinese app has erupted in popularity both in India and globally, warranting additional scrutiny from regulators.

But TikTok’s success story isn’t just one of growth within the app, it’s included acquiring promising companies as well. The owner of TikTok, ByteDance, successfully bought a similar Chinese giant, Shanghai-developed, to merge with the app for a reported $800 million. The acquisition brought with it 100 million users and was one of the first Chinese apps to successfully penetrate the American market.

Now, other Chinese conglomerates are looking to replicate that success by acquiring
more companies to aid in their expansion beyond just social media. More recently, the
highest valued fintech company on the market, Ant Financial, has begun making acquisitions of its own. The Alibaba affiliate has agreed to purchase another fintech company, WorldFirst, though details about the sale have not been disclosed. This recent purchase marks the efforts of China’s most successful company expanding into newer markets yet again.

It will be interesting to see how the UK-based payment company and currency exchange fits into the plans of the Chinese powerhouse. Ant Financial already has a fintech play of their own, Alipay, though is looking to expand operations without drawing too much scrutiny.

Favorable Conditions and Lots of Capital
Besides success with consumers, Chinese companies enjoy very favorable market conditions compared to many of their western counterparts with a lot of room for growth. One area in particular this growth can be seen is in venture capital spending and investments. Nine years ago, the United States was far ahead of the globe in venture capital spending with $30.8 billion compared to China’s $5.6 billion. However, by 2018 China has nearly caught up to the US boasting an impressive $105 billion in VC investments compared to $111 billion for the US, a drastic shift over the past eight years.

Venture capital expenditures in the region reflect shifts not just in the economic power of China, but in the technological development as well. With the rise in VC spending has come an impressive amount of unicorns, privately held startups valued at over $1 billion, in the country as well. Though not yet on par with the US, China is second when it comes to startup unicorns with the vast majority of startups focusing in the tech space.

Looking Forward
With a high-growth mindset and what seems like nearly limitless capital for investment, China could well be on its way to challenge much of the current tech world. Unlike the China of the past, known for imitating successful tech companies in the US, the tables are beginning to turn. More investment for startups can often translate to more creative and innovative ideas as we’ve seen in recent history. Mobike, a Chinese bike-sharing app launched in 2015 saw success in Shanghai and Beijing witnessed an eerily similar concept take the US by storm three years later with the rise of scooter-sharing apps like Bird and Lime. Is China going to be a new leader in tech, not a follower? It will be interesting to watch things play out.

21 thoughts on “Does China Threaten America’s Dominance of Technology Unicorns?”

  1. Just because it’s valued at over 1B doesn’t mean it’s profitable, or will ever be. I can think of a few companies like that already, and a some of them are already listed…

  2. Useful analysis. What do the current “brain flow” and “investment flow” look like, and when might they actually reverse direction, or have a significant change in volume?

  3. I think you missed my main point.
    The establishment of successful startups elsewhere in the world DOES do some harm to the inhabitants of the other locations, because capital and talent flows towards the biggest startup hubs.

    If I’m in location A, and location A has 80% of the worlds hot startup scene, the location A doesn’t get 80% of venture capital and people looking to do new startups. Instead location A gets 95%, because everyone wants to be in the top spot.

    But if we have a location B that has a bunch of startups and the distribution is now 60% location A, 30% location B 10% C,D,E etc. then the amount of resources that position A grabs drops from 95% to a more reasonable 70% or so. The huge winner-takes-all advantage is lost.

    Note that for people living everywhere else this is probably better. A more even distribution of resources flowing to the different locations means more successful tech development for the world as a whole.

    But you can still see why location A gets annoyed.

  4. Nothing particularly wrong with your points, but I would still assert that the vague threat implied by the title of the post is no threat. The problem is not a question of wanting more unicorns, it’s the implication that some harm is being done every time a unicorn is birthed elsewhere. Does it mean 1 less unicorn will be created in China or Poland for every unicorn created in the US, as if there is some finite pool of possible unicorns?-No.

    Non-unicorns also employs people, if you weren’t working for a unicorn you would be counted among the vast majority that don’t.

    Dominance of Technology Unicorns, in and of itself, does not mean much more than a beauty pageant would.

  5. China is ready for another weak US president like bama. Just a few more years of the US laying down and playing dead, that’s all President for Life Xi asks.

  6. With that size and educated population they would seriously have to try not to to fail.

    India says “Hold my cholai and watch this”

  7. Regardless of any nightmares neighing about “the end”, unicorns employ people.
    I work at one for example.

    And they tend to cluster. The next unicorn (and associated jobs, and spending which pays for other jobs) is much more likely to be established in the Number 1 startup hub, than the number 2. Number 3 is even worse off.

    You do want more startups in your country compared to other countries, because that leads to even more startups.

    And successful startups are one of the biggest sources of economic and tech growth in the world.

  8. They mention TikTok right in the article. I’ve got a Huawei phone in my pocket. And WeChat is installed on it.

  9. I think I’ve been reading stories about the coming Chinese wave of innovative companies for at least a decade or two. Yet I still am not aware of a single tech company or product that has come out of China and is widely used worldwide. Usually the examples are Chinese knockoffs of google, facebook, uber, etc. that are used only in China.

  10. ..They are all faded replicas of American tech giants. With a Chinese bigger market they do have a chance to sprout. Only people with a dominant lizard brain will skew it to a match of threats and dominance.

  11. Can you provide a link for those figures?

    Do any of our complaints allege IP theft?

    The real reason we’re upset is that we stopped investing in research and China didn’t. Now we blame them.

  12. “Does China Threaten America’s Dominance of Technology Unicorns”

    Irrationality at its finest. What does it mean to the average American if China or some other country has 1 or 100 more “Tech Unicorns” than the US? I would venture it would mean absolutely nothing. To the irrational and the inept, it would probably mean they’re no longer great and the end was neigh.

  13. china dosent usually have unicorns due to truely free and open capital markets. IP protetection in china favors consumers not companies.

  14. I ask a variation on this question to people:

    “Can you name one innovation that originated in China in the last decade that has mass adoption in the USA?”

    Usually to be answered by silence. Of course the right answer would be “The AI powered police state”.

  15. “The US filed 23 complaints against China with 19 wins and 4 pending decisions as of March 2019.”

    Should have been “The US filed 23 complaints with the WTO against China with 19 wins and 4 pending decisions as of March 2019.

  16. “is China going to control the future of technology?” China will undoubtedly be a powerhouse in technology. With that size and educated population they would seriously have to try not to to fail. Since China doesn’t respect anyone else’s IP though, expect a sizable chunk of her new developments to be stolen in turn and produced in other countries for pennies on the yuan compared they can produce them in China. What goes around comes around.

    Guys, it is not the Chinese people that the US worries about. It is the policies of the Chinese government that are turning us against China’s rise. We have no problems with competition, even competition that places us in second place or worse. We’re OK with that outside of understanding we need to up our game. The US filed 23 complaints against China with 19 wins and 4 pending decisions as of March 2019. No country will allow that to go on too long before retaliation is in order. Trump is just the shot across their bow, more to come.

  17. Can anyone name a Chinese “unicorn” that even a small fraction of people in the US use?

  18. Its even worse for USA. There is another big problem. America becoming like modern Putins Russia

    Russians can blubber about new “advanced super stealth fighters”, tanks with “no world analogues” bla bla bla, but they destroyed their industrial base, and finishing destroying native White Russian population. So most they can do it is to produce couple of half baked prototypes and make scary claims.

    It is same thing happening in the USA. If for example somebody will invent some marvelous “inventive” gadget. In 2 weeks it would cheaply and efficiently mass produced in China. And now China take lead in Development of new tech as well. Who could predict that?

    But free market and diversity are the strengths which will put U$A from any problem.

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