All That Is In Peril Is Not Lost…

Well maybe, but you might not want to be too complacent. China is the world leader in many areas today (manufacturing, exports, solar panels, etc.) and catching up fast in others, like technology. Chinese startups have come to Silicon Valley for years to see how things are done. Now they are wondering if there is anything to learn here. 

As one Chinese said in The Wall Street Journal recently, “China is like a startup. The U.S. is like a big corporation. China runs very fast, tweaking along the way. The U.S. runs at a steady pace…”

According to a February article in The Economist, America’s attitude towards Chinese technology has progressed from first, the country is irrelevant to second, Chinese firms are just copycats to, more recently, China is a separate insulated market and won’t translate beyond its borders to finally, wow China is very close to closing the gap.

The general consensus according to The Economist is that Chinese technology is still only about 45% our equal but this number is increasing rapidly. In 2012, China was assumed to be only 15% our equal. Within 10 or 15 years China may be neck and neck with us. 

Apple (American) and Geely (Chinese) are good examples of what is happening. Early on the iPhone could command a high price due to its innovative technology. The phone still commands a premium price. But the Chinese competition is getting tougher, their technology better and their price lower. The chart below shows Apple’s diminished market share in a number of growing Asian economies. In China, Apple has only an 8% market share although profits are still strong. It won’t be long before we see Huawei, Xiaomi, and other Chinese phones here. In cars the Chinese are far behind us in combustion engine technology. So what are they doing? Doubling down on electric cars where they may very well be the winners and buying foreign technology, like Geely’s acquisition of Volvo and their recent big investment in Mercedes.

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Anyone who has been to China will vouch for the work ethic there. Americans are not lazy. We are notorious for taking very little vacation, but the Chinese have not yet heard of work-life balance. Long hours and the quest for market dominance seem to be everything in China. Chinese companies, aided by Chinese government policy, will continue to be the big force to worry about.

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