EXCEPT for some parts of the world where Apple is still the brand of choice, the performance of gadget brands in China may influence its appeal and reputation globally. This interesting theory was first put forward in a McKinsey Global Institute report issued in 2015 called the “China Effect on Global Innovation.” Seven years later, the report and succeeding studies proved the prediction’s accuracy.
“Chinese companies are performing well in some types of innovation, by filling consumer needs with better products and services and wielding the power of China’s manufacturing ecosystem to make innovations in production processes…has yet to take the lead in more challenging forms of innovation, such as scientific discovery and engineering,” the study indicated.
It also observed how Chinese technology companies are using a distinctly Chinese way to nimbly accelerate experimentation and learning on a large scale. This was a polite way of saying copying and reverse engineering because since it started growing its industries the country was an innovation sponge instead of a technology creator. This has however changed very quickly since the 2015 McKinsey report.
Today brands that lead in China are usually seen as innovation leaders. From simply adopting and absorbing global technologies and knowledge, companies now collaborate with European, Japanese, Korean, and American tech companies for hardware, software, and intellectual inputs but Chinese engineers, are spurned by government incentives in both local and national levels.
Take Huawei as an example. The company invests around $20 billion annually in research and development. It has nearly 30 R&D centers globally. Fifty percent of its 80,000-strong workforce in China alone are working at developing groundbreaking technologies–from screen resolution, and the color of handsets to AI-powered applications.
Many will argue that the rapid digitalization of China came from a realization that the best way to put a handle on its citizenry is to keep a watch on them online. This may be partly true as social media combined with CCTV, satellite, and AI can profile individuals which can be made useful say in credit checking and profiling. The same technology can put tabs on dissenters and troublemakers.
The country however has become technologically advanced to a degree that many don’t appreciate. Being one of the largest investors in digital technologies, it has also taught itself to become guinea pigs for developing technologies by becoming early adopters which have in turn make it home to a third of the world’s unicorn companies. This means the government from a national and local level actively encouraged digital innovation, pushing entrepreneurship and allowing start-ups, collaborations, and multinational companies room to experiment and grow. Government, on different levels, becomes an investor, participates as a developer, and supports it as consumers of technologies developed from these endeavors. Completing this cycle helped push the country’s digital economy forward.
Baidu is another example. The local search engine came about from the mistrust of China to the West. WeChat was born the same way too. With Facebook banned, WeChat had to become global; giving it impact on the and worldwide digital landscape.
“China has the scale to drive rapid commercialization of digital business models, and has the advantage of a very large home market of consumers who are young and eager to embrace digital in all its forms. Three aggressive, giant internet companies with global reach–Baidu, Alibaba, and Tencent, or BAT as they are collectively known–are creating a multifaceted and multi-industry digital ecosystem that touches every aspect of consumers’ lives,” McKenzie said in a 2017 report.
Alibaba, like Amazon, started as an e-commerce platform that delivered B2B and B2C services. But it had the belief that it could expand rapidly and deliver almost anything, probably based on its own founder billionaire Jack Ma’s belief that “almost ‘everybody can be successful if you really try hard.” In a country where compliance rather than individualism is held dear, working collaboratively is the way to success. In the tech field this seems to be the case as Alibaba through its development into the second pillar in China’s digital economy now with services that prop the Chinese tech backbone, including its largest enterprise so far, Alibaba Cloud. Alibaba is another global brand now.
That report “China’s digital economy: A Leading Global Force” forecast with great precision what is happening to digital globalization in relation to the growth of China’s own digital landscape. It has successfully absorbed technologies already created in other parts of the work through many mergers and acquisitions (M&A).
The third pillar of China’s digital economy is Tencent–which could very well be, in terms of consumers and scope, the world’s leading Internet and technology. Tencent was founded in Shenzhen, China the original technology sponge of the country, which was once known for producing knock-offs of electronic goods, then shed off that image by creating legitimate and original technologies, as well as become headquarters for most China’s tech brands known worldwide.
“China could set the world’s digital frontier in the coming decades,” the 2017 report predicted accurately.
Brands successful in China have gained interest all over the world, some to the extent of being banned for still-to-be proven technological espionage capabilities.
After the pandemic, which China seemed to have maneuvered cleverly through, the country continues to lead in most digital frontiers. The crisis seemed to have strengthened their handhold on technological innovation and in many aspects of the digital space.
