Europe’s World | Don’t Belittle China’s Innovation Potential

By Edward Tse | 24 Feb 2014

Four years ago, Dr. Edward Tse wrote an article, Don’t Belittle China’s Innovation Potential, which was published on Europe’s World. The date of the publication was February 24th, 2014.

Is China a breeding ground for innovation? Most people wouldn’t say so, as China is so often associated with copycats, restricted freedom of speech, poor protection of intellectual property rights (IPR), rote-learning education and an overbearing state sector. For some or all of these reasons, outsiders tend to see China as lacking the fundamentals for successful innovation.

But this view is simplistic and superficial. Let’s look at two of these so-called reasons in more detail. Lack of IPR protection is a real issue, but it hasn’t stopped innovation from taking place. Over the past decade, there have been many examples of innovation originating from China, both product and technology innovations as well as business model innovations. One can argue that change is still at a snail’s pace, but China’s IPR protection is improving and in recent years there have been cases where foreign companies successfully sued Chinese companies for IPR infringements.

The dominance of the state economy is another often-cited reason inhibiting innovation in China. Yet even the state sector can create innovations. Large scale examples include China’s space programme, its expanding high-speed rail network, the world’s highest-elevation railway (to Tibet), and the world’s fastest supercomputer. The list goes on and is lengthening. These were all developed under the auspices of the state sector. Regardless of what many people say about the Chinese copying or even stealing technology from others, for projects as complex as these, real innovations clearly do exist, and the dominance of the state economy was able to provide ample funding for these advances.

“Despite the state sector’s role so far, most of China’s innovation will not be coming from there. It will come from the companies or even individuals who compete in China’s increasingly open economy”

China’s market economy is still developing, and is now slightly over two decades old. This fundamental transformation away from the fully planned economy so deeply ingrained during the Chinese People’s Republic’s first 30 years is still just a small blip in China’s long history, and nothing that we have seen during the last 20 years is by any means perfect. But the forces shaping the future change need to be fully understood, and the direction and speed of their change recognised and appreciated.

Despite the state sector’s role so far, most of China’s innovation will not be coming from there. It will come from the companies or even individuals who compete in China’s increasingly open economy. And that includes both Chinese and foreign private companies as well as state companies. And as more mixed equity enterprises are formed in response to the needs of a competitive market, the lines separating these different kinds of companies will become more blurred than ever. China is undergoing a measured but definite process of deregulation, sector by sector. Not all sectors of the economy will ever be fully deregulated, but the trend is clear.

The size of China’s market and the potential for profits mean that when the government opens up a sector it becomes an arena for some of the world’s most intense competition. This forces companies to be innovative and to create the best products, services and business models to achieve success. There’s also a strong “why not me?” mentality among Chinese entrepreneurs, so when an opportunity arises they tend to give it a try. Some – maybe even most – may fail, but with a population of 1.4bn, even a small percentage of successes is noteworthy and these are going to encourage many others to try their luck. In short, waves of new entrepreneurs in China will be pushing for greater experimentation and more innovation.

Xiaomi, one of China’s leading smartphone players, is an excellent example of an innovative company in a highly competitive industry. Xiaomi’s leader, Lei Jun, understood the power of the Internet and built his company’s business model by “listening to customers” through social media – the concept known as “crowd-sourcing”. Its strategy is working so well that Xiaomi’s revenues grew from zero in 2010 to $5bn in 2013, with the company now reportedly valued at $10bn. The late Steve Jobs at Xiaomi’s U.S. counterpart, Apple, didn’t believe in focus groups because he felt he knew best, but Lei Jun takes the opposite approach, and is convinced that customers will be the best ones to tell him how his products should be designed and how its service model developed. With millions of fans, Lei Jun claims his business model is not to make money from the hardware, but from services.

At a more basic level of innovation, Haier, a leading Chinese white goods manufacturer, quickly gained market awareness and share by introducing a washer capable not only of cleaning clothes but also potatoes. This sprang from a customer claim and is an example of Haier’s “customer centric” management philosophy. Not every Chinese company will be like this, but the market is changing so rapidly that there are major incentives for Chinese companies to be agile, nimble and innovative.

“There’s also a strong “why not me?” mentality among Chinese entrepreneurs, so when an opportunity arises they tend to give it a try”

To successfully breed innovation, a country must be tolerant of mistakes and failures. These failures will include short-lived innovations, but they are part of the process and in fact often further examples of how innovation will be sustained in China. Tencent’s QQ, for example, was a precursor to WeChat, a fast-growing Twitter/WhatsApp type of platform very popular not only in China but internationally too. Although only two years old, WeChat already has over 600m registered subscribers and over 270m active users and the numbers are growing fast. It introduced voice capability before WhatsApp, along with a more recent payment capability that is undercutting China’s dominant incumbent, Alipay of Alibaba.

Telecom operators see WeChat and Sina’s Weibo as competitors because they eat into their own text messaging businesses and the prevalence of the Internet, in particular wireless internet, is fast cutting out traditional distribution methods. Only a few years ago, Gome and Sunning were the dominant retailers through their “bricks-and-mortar” retail stores and today, Sunning is having to quickly transform itself into an “O2O” (Offline to Online) retailer. The same goes for companies like Haier, while many retailers, especially state-owned ones, are looking at how they must revamp their business strategies to remain competitive.

As China’s economic transformation continues, more and more monopolies will be broken down. It’s unlikely that China will become completely deregulated in the near future, but it’s heading in the right direction, and the new government re-affirmed this trajectory at its recent Third Plenum when it was emphasised that market forces will play a “decisive role” in China’s economic development and non-state capital will gain access to more sectors. State-owned enterprises (SOEs) are set to remain important, but non-state companies were for the first time put on an equal footing with the SOEs. Experimental free trade zones like that of Shanghai are to be established in more cities across China, and an effort will be made to create economic conditions that are conductive to innovation by entrepreneurial companies, both foreign and state-owned.

China’s unique qualities are its complexity and size. Even a small percentage of successes can be significant in the context of global commerce. Europe and the rest of the world will need to keep a close eye on China’s innovations because as well as threats they will bring with them opportunities.


新浪财经 | 谢祖墀:打造“指数X级组织”

文 | 谢祖墀



近年来中国科技公司的发展惊人,除了阿里、腾讯之外,平安、小米等公司的市值亦实现了数千亿甚至万亿级的突破。此外,CB Insights的数据显示,2017年,中国还未上市但估值超过十亿美金的独角兽企业总数达到59家,其中的估值领先者包括滴滴出行、小米、美团等。



众所周知,阿里和腾讯成功地按阶级建立了他们各自的“超大生态系统”(mega ecosystems)。他们都是我们所称的“战略的第三条路”的信奉者。与集团式经营(“第一条路”)和以“核心竞争力”为主的聚焦战略(“第二条路”)不一样,战略的第三条路说明了企业在现有业务和未来机会之间作出的选择。当新的机会出现,但是企业尚没有足够能力的情况下,企业要不要跳过去,去捕捉新机会带来的红利。在过去二十年中,中国有着高速的发展,加上科技的逐渐普及,中国创新型企业面临着众多新的机会,而他们中的不少企业亦不断地在尝试“多级跳”。有些跳是成功的,有些跳是失败的,有些却选择不跳。企业在跳的过程中,他们自身往往缺乏足够的能力来应付新的机会。因此他们大多会选择建立相关的生态系统来尽快弥补能力上的差距。所以简单来说,战略的第三条路,亦即“连续跳跃战略”的主要组织形态就是生态系统。他们就像孪生兄弟一样,缺一不可。

第三条路的打法衍生了不同的生态系统,建立在这些生态系统之上的业务发展可以很快,每个生态系统都可成为一个“指数级组织”(exponential organization),也就是说它的业务可以按指数级的速度和强度发展。当这些战略执行者在尝试第三条路不断跳跃的过程中,他们自然地形成了由不同生态系统组成的集群,形成一个“超大生态系统”。而因网络形成的乘数效应,超大生态系统衍生出的是超级指数级组织。我们称之为“指数X级组织”(exponential X organization)。

吉利就是一个好的案例。长期以来,许多人把吉利看成只是一家低端轿车的制造商而已。然而从1997年进入汽车行业至今,吉利正在逐步建立一个超大的生态系统,通过不断地捕捉市场中新的机会,从一家传统的民营汽车制造商逐步转型成为交通运输服务提供商。从2010年对沃尔沃汽车公司的收购进入高端乘用车市场,到2015年推出新能源网约车平台“曹操专车”进入共享出行市场,再到2016年和2017年推出领克品牌(Lynk & Co.)和Polestar品牌,为消费者提供传统汽车拥有模式以外的共享租赁模式和个性化的互联网用车体验,吉利的发展正在从以产品(“汽车”)为中心演变至以用户(“体验”)为中心。除此之外,吉利近期还通过收购美国飞行汽车创业公司Terrafugia,将业务拓展至地面交通以外的其他交通运输模式,成为其交通运输服务提供商生态系统下的一个重要部分。



这些“指数X级组织“正在不断进行跨界竞争。甚至一部分企业认为将来的商业世界将会是“无界的竞争”。据此思想推论,传统行业的界限已经不再具有特别大的意义。超大生态系统正向每个消费者的生活方式(lifestyle)进发,为消费者提供全面而个性化的产品和服务。当美团要做共享汽车、滴滴要做共享单车时,原有的界限已经变得模糊。当然,跨界的核心是客户和有关他们的数据。当一个企业已经拥有“无处不在”(ubiquity)的用户数据,同时有能力进行“单客经营”(segment of one),和针对不同“社群“(community)进行“无缝连接”(interactivity)的时候,企业就有能力不断地围绕着消费者的生活需求提供更多个性化的产品和服务。物联网的成熟和5G技术的出现将会加速这种现象的发生。




谢祖墀博士(Dr. Edward Tse)是高风管理咨询公司(Gao Feng Advisory Company)的创始人兼首席执行官。中国管理咨询业的先行者。过去的20年里,他创立并领导了两大国际管理咨询公司在大中华区的业务。外界评价他为“中国的全球领先商业战略家”和 “谢博士之于中国企业界就如大前研一之于日本企业界”。他曾为数以百计的公司(总部设在中国及其它地区)咨询过所有关键战略和管理方面的业务,涉及中国的各个方面和中国在全球的地位。他还为中国政府在战略、国有企业改革和中国企业走出国门等方面做过咨询。他已发表200多篇文章并出版了4本书,其中包括于国际获奖的《中国战略》和《创业家精神》。谢博士获得了加州大学伯克利分校工程学博士、MBA以及麻省理工学院的工程学学士、硕士。


China Daily | R&D Driving China’s Innovation Speed

By Edward Tse | China Daily Africa | Updated: 2018-02-16

The central government’s blessing of entrepreneurship has created a vibrant environment that began at the grassroots

At the beginning of China’s opening-up and reform 40 years ago, the country’s reform architect, Deng Xiaoping, put forward that “science and technology are the primary productive forces”. At the 19th National Congress of the Communist Party of China in October, General Secretary Xi Jinping proclaimed that “innovation is the primary force driving development”.

Behind both of these statements is the philosophy that research and development as well as innovation results in generating key capabilities for the country. R&D investment is generally viewed across the world as the backbone of a globally competitive and innovation-driven economy.

Late last year, the European Commission released “The 2017 EU Industrial R&D Investment Scoreboard”, which covered 2,500 companies from 43 countries that invested the largest amount in research and development last year. These companies recorded a total investment of 741.6 billion euros ($909 billion; £657 billion) in R&D, a 5.8 percent year-on-year increase.

Among the companies covered in the Scoreboard report are 376 Chinese enterprises. Their R&D investment grew by 18.8 percent year-onyear in 2016, compared with a 7.2 percent increase by 822 US companies and a 7 percent increase by 567 European Union companies.

While most of the top companies in the report are from the West, Huawei, a China-based telecom equipment and smart device manufacturer, leapfrogged to sixth place, registering 10.4 billion euros in R&D investment. Huawei’s ranking advanced by more than 200 places between 2004 and 2016. Chinese internet giants Alibaba and Tencent also entered the top 100 on the list.


Chinese companies are also well known for tech innovation in such areas as drones, electric vehicles, autonomous driving and artificial intelligence. DJI, a Shenzhen-based company, has a global market share of around 70 percent in consumer drones. NIO, a Chinese electric vehicle startup, developed the fastest electric sports car, the EP9, within 18 months and broke the world lap record at the Nurburgring Nordschleife track in Germany. In terms of AI, a Chinese company, Face++, developed advanced facial recognition technology that is widely used in the financial technology, smart retail and many other industries. This technology, now used in more than 200 countries, processes over 30 million requests each day. SenseTime, a Chinese AI company founded in 2014, focuses on innovative computer vision and deep learning technology. In July last year, the company successfully raised the largest single-round investment in AI globally, at $410 million.

For a long time, China was viewed as a nation that relied on low manufacturing costs for exports. And Chinese companies were labeled “copycats” by the West. Very few people believed that China had the ability to innovate. However, the country’s development over the past decade has proved otherwise.


In fact, innovation is thriving in China. MIT’s Technology Review included nine Chinese companies such as iFlytek, Tencent, Face++ and DJI in its 2017 list of the Top 50 Smartest Companies. So what caused China’s innovation and the entrepreneurship that goes with it to take off? I think it’s because of the following reasons:

1. “Why not me?”: At the end of the 1970s, during the onset of China’s era of reform and opening-up, the Chinese discovered that not only was their economy backward and undeveloped compared with the economies of the developed nations, but the gap between the Chinese economy and those economies was vast. Against this background, Chinese entrepreneurs were spurred by a new sense of purpose and the desire to strive for success and show the world that they, too, could succeed. Although it’s been 40 years since China’s opening-up began, this question of “why not me?” is still the key driver behind the Chinese entrepreneurial spirit.

2. Market opportunity provided by the State economy: For a very long time, China’s economy was dominated by State-owned enterprises. In a market defined by fast changes, intense competition and the need for innovation, SOEs are usually slow to react. Many innovative companies have taken advantage of this market gap and have benefited with extraordinary growth.

3. Transformative and intense competition: China’s process of shifting from a planned economy to a market economy is gradual and will take time. In this process, a wide range of sectors have opened up and, coupled with the allure of the massive China market, we see players from all over the world igniting intense competition. This state of hyper competition forces companies to innovate in order to stay ahead.

4. Chinese society’s pain points: In the process of transformation, pain points that had previously been hidden are now in plain sight, and they provide entrepreneurs with opportunities for innovation.

5. The rise of technology: With the wireless internet, smart devices and social media becoming a core part of the everyday life of Chinese consumers, tremendous disruption opportunities are provided for innovators and entrepreneurs alike.

6. The massive scale of the Chinese market: The size and fast-changing nature of China’s market allows companies to rapidly scale up. At the same time, it provides a platform for innovators and entrepreneurs to learn via trial and error. Leading Chinese companies are also benefiting from high valuations that provide them with the needed capital ammunition to support their growth.

7. Capital resources: Over the past 20 years of China’s development, many venture capital companies and angel investors have benefited from exceptional returns on their investments in China. Regardless of whether these investors came from abroad or were homegrown, Chinese companies have benefited greatly from the vast sums of capital these investors have provided over time.

Against this backdrop, China’s development model plays a crucial role. From the top, China’s central government actively directs the country’s economic development with great results. In this context, the central government has positioned innovation and entrepreneurship as a key national initiative, and with this blessing, a vibrant innovation and entrepreneurial environment began at the grassroots level. In addition, various local governments across China are both competing and collaborating with each other, providing additional impetus for innovation.

The author is founder and CEO of Gao Feng Advisory, a global strategy and management consulting company with roots in China. He is also author of China’s Disruptors.


Nikkei Asian Review | The Extraordinary Power of China’s Corporate ‘Mega Ecosystems’

By Edward Tse| February 9, 2018

Companies like Didi and Meituan are increasingly coming into competition

Some observers have criticized China’s market economy for lacking the “creative destruction” that is said to give Western capitalism its lasting vitality.

Such doubts are misplaced as the new year is likely to underscore. In recent weeks, Didi Chuxing, the country’s predominant ride services app, has moved to add bike-sharing options to its platform and has acquired Bluegogo, a bike operator that had run into difficulties. The move clearly positions Didi, already one of the world’s most valuable startups, to take on current bike-sharing leader Mobike. Meanwhile, Meituan-Dianping, which is best known for its food delivery service and has more than 250 million users, has moved to offer car-hailing services in competition with Didi.

The fight is on. Didi Senior Vice President Chen Ting has already said Meituan’s move will touch off the “war of the century.” In the background is the increasing overlap between the business networks of China’s two most valuable listed companies, Tencent Holdings and Alibaba Group Holding. After a series of mergers, both have ended up as key shareholders of Didi. Tencent also backs Meituan and Mobike while Alibaba is a major investor in Ofo, which is Mobike’s top rival as well as a partner of Didi’s.

Not long ago, many argued that state-owned enterprises were becoming increasingly dominant in China’s economy at the expense of the private sector. These observers highlighted government protections enjoyed by state companies and noted their privileged access to resources and market niches.

In reality, the fastest-growing companies in China over the last few decades have predominantly, if not entirely, been entrepreneurial companies from the private sector. According to a study by the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences, new economy sectors, ranging from e-commerce to car-hailing services, expanded twice as quickly as China’s overall GDP over the 10 years to 2016. These new economy companies are nearly always private sector companies.

The most valuable Chinese companies today are typically “mega ecosystem” players which operate networks of businesses that can support each other and supplement each other’s capabilities. A milestone was crossed last year when Alibaba and Tencent, the mega ecosystem leaders, surpassed Facebook in market capitalization.

The growth of entrepreneurial Chinese companies has been amazing. According to tech-sector funding research company CB Insights, the number of unlisted Chinese companies valued at $1 billion or more — the so-called “unicorns” — has risen to 59. The U.S., with nearly twice as many unicorns, is the only country where CB Insights counts more.

The Chinese though are closing the gap fast. Five years ago, CB counted only three Chinese unicorns, less than a quarter as many as it tallied then in the U.S. Those in China now valued at $30 billion or more include Didi, Meituan, Ant Financial Services Group and smartphone maker Xiaomi.

The notion of a business ecosystem is not new. Apple, the world’s most valuable company, was a pioneer in this regard when it launched the iPhone back in 2007 and made the App Store its platform for distributing apps. Other leading U.S. tech companies such as and Alphabet are also ecosystem players. Chinese companies, however, have turned out to be even more adept at building such organizations.

Alibaba, Tencent and Xiaomi are prime examples of mega ecosystems. Building out from their original core businesses, they have jumped into a string of new sectors as market opportunities have popped up amid economic reform and technological developments have enabled them to disrupt existing means of doing business.

Alibaba started as a small business-to-business online marketplace almost 20 years ago. Around 2003, when online shopping was emerging, Alibaba jumped in with consumer-to-consumer site Taobao and later business-to-consumer site Tmall. Next Alibaba started Alipay to support mobile online payments and then later used its platform to offer wealth management services, including the Yu’e Bao money market fund, which subsequently became the backbone of its network’s internet finance business.

Today, Alibaba’s internet finance interests are grouped under Ant Financial, which includes businesses such as electronic payment processing, banking, social credit scoring and financial cloud services. (Alibaba said on Feb. 1 that it will resume its direct shareholding in Ant, exercising rights to take a one-third stake.) Alibaba has also branched into areas including big data, smart logistics, media, auto-mobility and cloud storage. Each sector has its own system which together form Alibaba’s mega ecosystem. Though its development took a somewhat different course, Tencent has built a mega ecosystem too.

Chinese companies seem more inclined than their Western counterparts to migrate across sector boundaries and create larger ecosystems. This is perhaps because new market opportunities have been popping up more frequently in China and its consumers have embraced smartphone apps more closely. When they sense an opening, Chinese companies can quickly form ecosystems of collaborative partnerships.

In contrast, most foreign multinational corporations tend to focus on what they have been doing all along and avoid jumping across sector boundaries. This is a result of the “core competence” doctrine that has governed corporate strategy thinking in the West for about 30 years. Whle Chinese companies are more inclined to expand “horizontally” into new sectors, Western companies tend to grow “vertically” to areas upstream or downstream from their original focus.

Besides Alibaba and Tencent, companies like Ping An Insurance Group, Baidu and are building out mega ecosystems with incredible speed and intensity. Even some traditional manufacturers are moving in this direction. Zhejiang Geely Holding Group has gone from producing entry-level cars to selling premium models with the help of foreign acquisitions and has been the first Chinese carmaker to move into on-demand mobility services. It has also been experimenting with connected intelligent vehicles, shared ownership programs and flying cars, together assembling a sprawling transportation services ecosystem.

Clearly access to abundant user data is key for these kinds of companies. Even bike-sharing services like Mobike and Ofo claim that they are data-centric companies, signaling that they will also build out their ecosystems with consumer lifestyle at the core.
New technologies such as the internet of things and 5G mobile networks will enable companies to crisscross sectors faster and more capably. The operations of China’s mega ecosystems will overlap increasingly with each other, driving even more intense competition.

Perhaps more collaborations in some cases or even the merging of mega-ecosystems will take place. The “coopetition” that results would be even more dynamic. The already powerful mega ecosystem players could then get even more powerful. This will be exciting to watch.

Edward Tse is founder and CEO of Gao Feng Advisory Co., a global strategy and management consulting firm with roots in China, and the author of “China’s Disruptors.”


SCMP | Open For Business

By Edward Tse | February 7th, 2018

China-US trade and investment is thriving inpockets on the ground, despite the policy frictions

Edward Tse says while concerns about unfair Chinese trade practices and Chinese companies’ ties with the government are not totally unfounded, they ignore the real and growing business collaboration as the private sector takes the lead

Two recent failed deals involving Chinese companies seeking to invest in the US have made headlines. US telecoms company AT&T walked away from a deal with Huawei, a Chinese telecom equipment and smart device maker, under pressure from US Congress. The US government also rejected the intended acquisition of MoneyGram, a US money transfer company, by Ant Financial, an affiliate of China’s internet giant, Alibaba.

It was reported that both deals triggered US “national security” concerns. The media are now saying that, on Capitol Hill, there is a prevailing wind of “trust deficit” in US-China relations on trade and investments.

There seems to be two parts to this story. The first concerns Chinese companies investing in the US. The theory goes like this. The Chinese government is behind everything that Chinese businesses are doing and state-owned enterprises, because of their government ownership, will act on behalf of the Chinese government’s interests. By implication, their motives are not trustworthy. In addition, the Chinese government employs strong industrial policies that create an unfair playing field for companies and countries.

The second part of the story is about the perception of how US companies are treated in China. The key thesis here is that the Chinese market is closed to US (and for that matter all foreign) companies. The Chinese government favours local enterprises, especially state-owned companies, and so US companies cannot be successful in China. Many US politicians and lobbyists are asking for “reciprocity”.

There are some elements of truth in both of these arguments. However, they do not present the complete picture.

While the state sector is certainly prevalent in China, the non-state sector is actually becoming more powerful in its own right. According to Chinese government statistics, the non-state industrial sector’s revenue in 2016 was close to four times that of the state sector. About the same ratio also applies to the total profit.


Based on a study by the Institute of Population and Labour Economics at the Chinese Academy of Social Sciences, China’s “new economy” – internet-based businesses including e-commerce and car-hailing services – grew twice as quickly as China’s overall gross domestic product in the 10 years to 2016. By definition, these new-economy companies are mostly, if not entirely, private-sector companies. Entrepreneurship and business innovation are thriving in China and they come mostly from the private sector.

US President Donald Trump has called for the “re-shoring” of manufacturing to the US. Ironically, some Chinese companies were among the first to respond to the call.

Companies such as Fuyao Glass, Foxconn and Great Wall Motors – all non-state owned – announced plans to invest in the US. (Foxconn is, of course a Taiwanese company but its operations are mainly on the Chinese mainland). And Jack Ma, Alibaba’s chairman, pledged to create “one million jobs” in the US. Alibaba is the owner of the South China Morning Post.

Since its economic reform that started some four decades ago, China has gradually opened its sectors to foreign participation. Today, while there are still some that are closed or largely closed to foreign companies, a much larger number are open to competition, for example in consumer products and retail.

For US companies such as Nike, Starbucks, Apple, Ford and General Motors, China is one of their largest markets, if not the largest, in the world. And, China’s importance to these companies continues to rise. The “golden era” of foreign companies, at least for these successful ones in China, is certainly not over.

Many pundits have suggested that China’s “Great Firewall” has blocked all US tech companies from doing business in China. The likes of Facebook and Twitter are indeed blocked in China, and others like Google chose to withdraw as a stand against China’s censorship requirements. (It’s worth noting, however, that Google recently announced the establishment of a major artificial intelligence centre in Beijing.) However, there are many other tech companies that are not blocked. LinkedIn, Airbnb and Amazon’s e-commerce are all operating in China. Uber and eBay were allowed but they decided to divest largely due to extremely strong local competition (from the non-state sector).


At the 19th national congress of China’s Communist Party last October, President Xi Jinping made the pledge that China will continue to open up its economy to foreign companies. In November, the government announced plans to ease limits on foreign ownership in a range of financial services. Further liberalisation is expected over time.

Similar to how US companies are investing in China to try to capture the Chinese market, more Chinese companies are also investing in the US. Triangle, the third-largest Chinese tyre manufacturer, is investing in a US$580 million plant in North Carolina. To many Chinese companies, the US is an attractive market and the conditions for manufacturing are becoming more favourable.

As Chinese innovation and entrepreneurship continue to thrive, there will certainly be more opportunities for start-ups involving both Chinese and US entrepreneurs, and venture capitalists. Technology, especially AI, will increasingly be embraced for innovation.

Both the US and China are now leading the world in the development and application of AI, and this trend is likely to continue to accelerate. The interactions between China and the US at the start-up and investors’ levels are actually taking place intensively as there is so much to share and many opportunities to jointly pursue. Much of this is reflected in cross-border investment.

It would be naive to expect smooth sailing for the US-China trade and investment relationship this year. However, I don’t believe all will be bad, either. There will be areas of tension and differences in points of view and policies, but there will also be areas of collaboration and alignment.

“Coopetition” is perhaps the best word to describe the nature of this relationship. It won’t be a zero-sum game, especially not in today’s world of increasing connectivity.

Edward Tse is founder and CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in Greater China. He is the author of China’s Disruptors.


观察者网 | 谢祖墀:揭秘中国通往人工智能领域全球领袖之路









中国政府的有利政策刺激了国内一众不同的技术厂商的技术创新。如百度、阿里巴巴和腾讯等领先的互联网巨头,以及像碳云智能(iCarbonX)、商汤科技(Sense Time)等初创企业,还有估值超过十亿美元的独角兽公司如滴滴出行、小米科技等都已在业务中运用人工智能技术或已投资于此。

例如,百度将公司战略从“移动互联网第一”调整为“人工智能第一”。百度战略的具体内容包括能与音响、电视、冰箱等智能设备相连接的对话式人工智能系统DureOS、无人驾驶汽车研发开源平台“阿波罗项目”,以及可以提供60多种人工智能技术服务的“百度大脑”等。百度的竞争对手腾讯也建立了自己的人工智能技术实验室,该实验室研发的产品在今年早些时候打败了日本围棋高手一力辽(Ryo Ichiriki),从而一举成名。

除此之外,中国医疗行业的初创企业碳云智能(iCarbonX)则建立起了一整套数字化的“生态体系”,利用人工智能技术收集用户的生理和心理健康数据,为用户提供个性化的健康分析报告,并且针对用户的健康状况给出预测分析。而初创于2014年的人工智能企业商汤科技(Sense Time)则聚焦于计算机图像识别创新和深度学习技术。今年7月,商汤科技称已获得4.1亿美元的全球人工智能行业最大单笔投资。






SCMP | What’s in Store for China & US in 2018

By Edward Tse
January 11th, 2018

China is perennially a top of mind issue in American politics. Former President Barack Obama’s “Asia pivot” strategy had China as its centerpiece. President Donald Trump’s election campaign also centered around China, but in a very different light. He reasoned a key reason why America “wasn’t great again” was because of China’s increasing competitiveness which manifests itself mostly in its trade surplus against the US. As he vowed to make “America great again”, he sees China as a “strategic competitor” to the US.

In 2017, China made huge strides in stepping up its leadership position in global politics as the US, under President Trump, receded. At the World Economic Forum at Davos, Switzerland in January, Chinese President Xi Jinping underscored the criticality of globalization against the backdrop of Trump’s US-centric rhetoric. While the US withdrew from the Trans-Pacific Partnership, China stepped up its “Belt and Road” initiative with the formation of the Asian Infrastructure Investment Bank (AIIB) whose member countries now number 84 (as of Jan. 2018). While China (together with the European Union) pledges its commitment to reduce global carbon emissions according to the Paris agreement, the US decided to walk away.

As Trump called for “re-shoring” of manufacturing to the US, paradoxically some Chinese companies were amongst the first to respond to the call. Companies, such as Fuyao Glass, Foxconn, and Great Wall, announced major plans of investing in manufacturing in the US. (Foxconn is of course a Taiwanese company but its operations are overwhelmingly in Chinese Mainland). And, Jack Ma, chairman of China’s leading Internet company Alibaba, announced it will create “one million jobs” in the US.

So what will happen to the US – China relationship in 2018?

It seems likely the “co-opetition” nature of the relationship between the largest and second largest economies in the world will continue.

Donald Trump’s “America First policy”, or at least its rhetoric, would most likely continue and to that end, China will likely continue to be a target of a “strategic competitor” to the US. In global geopolitics, China will likely continue to step up its position as a global leader as China continues to seek its “Renaissance” while the US would continue to fortify its “Me First” position.

In business, as China’s economy continues to grow at around six to seven percent, China will continue to present numerous opportunities for US companies (and those from other countries). At China’s 19th Party National Congress back in October 2017, Xi Jinping made the pledge that China would continue to open its economy to foreign companies. Sure enough in November, the Chinese government announced plans to ease limits on foreign ownership in a range of financial services sectors. We expect the further opening for foreign participation in China’s growing economy will take place in 2018, allowing more degrees of freedom for US companies operating in China.

As China’s middle-class will continue to grow in size and the level of its purchasing power heighten, Chinese consumers will become even more important customers for US products and services both domestically and outside of China. For US companies, such as Apple, Starbucks, Nike, General Motors, Ford and Honeywell, China has become one of their largest, if not the largest, markets in the world. And, China’s importance to these companies will inevitably continue to increase. While competition is super intensive and technology is driving major, discontinuous change in the China market, more US companies will realize the incredible upside potential of the China market and will seek ways to capture its rightful potential. Even Google, who decided to withdraw from the China market several years ago, have recently announced the establishment of a major Artificial Intelligence (AI) Center in Beijing.

China has also become the world’s largest country of outbound travelers. In 2017, the number of Chinese outbound tourists is estimated at around 130 million. Chinese consumers will likely become even more globally active in 2018. The US will continue to be one of the most favored destinations for the Chinese. The Chinese consumers tend to spend a lot as they travel and that would bode well for the US travel and tourism industry.

In 2018, more Chinese companies are expected to invest in the US and to exploit the potential of the US market. For instance, in December 2017, reports claim that Huawei, China’s leading telecom equipment and smartphone maker, would partner with AT&T to sell its Mate 10 smartphones in the US. If true, this would be a breakthrough development, as for a long time, Huawei was not able to penetrate into the US market. Triangle, the third-largest Chinese tire manufacturer, is going to invest into a $580 million plant in North Carolina in 2018. Keer Group, a textile producer in China, plans to invest $218 million over next five years to expand the capacity of its facility in South Carolina. To many Chinese companies, the US is an attractive (and in some cases necessary) market and the conditions for manufacturing are becoming more favorable.

As China’s innovation and entrepreneurship continue to thrive, there will certainly be more opportunities for start-ups of both Chinese and US entrepreneurs, as well as for venture capitalists. Technology, especially AI will increasingly be embraced for enabling innovations by entrepreneurs. Both the US and China are now leading the world in the development and application of AI, and this trend will likely continue to accelerate. The interactions between China and the US at the start-up and investors’ levels are actually taking place intensively as there is so much to share and many opportunities to jointly pursue. Much of this has already manifested in cross-border investments between the two sides. We expect this would happen even more in 2018.

Inevitably, the US government will continue to send rhetoric on trade friction between the US and China, and will announce more policies to address the trade imbalance. Additionally, the US government will likely continue to view China as a strategic competitor, and national security will continue to be a key consideration by both governments when it comes to investments by organizations from the other side. However, common interest would prevail both at the government level and at the business level. In 2018, we expect the US- China relationship would continue to move along. There will be areas of tension and difference in points of view and policies, but there will also be areas of collaboration and alignment. Co-opetition is perhaps the best word to describe the nature of US – China relationship in 2018. After all, it won’t be – and shouldn’t be – a zero-sum game especially not in today’s world of increasing connectivity.

Original published by South China Morning Post on January 11th, 2018. All rights reserved.

Edward Tse is founder and CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in Greater China, and author of China’s Disruptors.