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I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc. China is succeeding because it really wants to.

With manufacturing in US hollowed out in last couple of decades and China being the new global manufacturing powerhouse, it is not surprising that China is seeking smart (software/cloud/AI/robotics powered) solutions to industrialization, warehousing, transportation, supply chain, payments and other areas. Why hasn't US achieved the level of digital payment smoothness that China has been able to?

While the points you made about lax laws and blatant data privacy invasion are an contributing factors, I think you would have seen China making great strides in the above mentioned areas even if laws were enforced strictly. It's important to recognize China's technological prowess. They have similarly taken a lead in bioengineering.

> Why hasn't US achieved the level of digital payment smoothness that China has been able to?

Because it already achieved that "level of digital payment smoothness" with credit cards?

> I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc. China is succeeding because it really wants to.

> It's important to recognize China's technological prowess. They have similarly taken a lead in bioengineering.

I attribute it to having an authoritarian government that's not afraid to direct the economy. The US, on the other hand, has more-or-less adopted an ideology that specifically rejects that kind of government economic direction.

> Because it already achieved that "level of digital payment smoothness" with credit cards?

Whether the two are equivalent depends on the transaction costs of the two models.

According to the Economist: "Visa and MasterCard extract over 0.10 cents of net income for every dollar of payments. Ant takes a smaller cut, of less than 0.03 cents." https://www.economist.com/news/business/21726713-ant-financi...

Perhaps more importantly I've seen estimates that Chinese banks lose $20 billion yearly in credit card fees due to the mobile payments.

> Whether the two are equivalent depends on the transaction costs of the two models.

I don't think we're not talking about exact, feature-for-feature, cost-for-cost equivalence.

Both these systems have the same or similar "level of digital payment smoothness" from the customer perspective. At least with credit cards, those fees are on the merchant side not part of the customer experience equation.

If one tries to pay when merchants don't eat the fees, e.g., paying real estate tax online where the county tax collector charges a 2+% convenience fee for credit cards, one definitely would see the difference. In other cases where merchants eat the fees, they are just passed on to the buyers, though many cards do rebate their holders part of the fees as "rewards".

The way credit cards work in the U.S. is incredibly behind how they work in every other developed nation.

I studied abroad in New Zealand in 2004. Even back then, everything was chip-and-pin, with computerized machines at every merchant to take orders. I never had to hand my NZ bank card to a merchant, just insert it into an EFTPOS reader and enter my PIN. My American credit card needed a swipe, signature, and handover to the cashier, because unlike in the U.S, they actually checked signatures in NZ.

Meanwhile, in the U.S, we just moved to chip cards 2 years ago, and just yesterday I had a POS reader reject it for "chip malfunction - swipe instead". The major merchants just stopped collecting signatures last month, though cashiers have been ignoring the signature for decades now.

I blame the innovator's dilemma and first-mover disadvantage, like sanxiyn's comment mentions. The U.S. has a "good enough" system that everyone's adopted; it's not worth it to force everyone to adapt to a system that's a little better. Same goes for many other broken systems in the U.S. - electricity, measurement, public education, public transportation, health insurance, etc.

I haven't handed my card to a merchant in the states since I got back a year and a half ago. UnionPay card use was always annoying in China because in addition to your PIN, you would need to sign as well, it was like the worst of all worlds. I'm not really into QR either (tap via RF is the right solution), but it works better than what they had before.

>I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc

What, and not be racist? Where's the fun in that?

It's clear that Chinese scientists and engineers are inferior (except when they happen to immigrate and work in the US, then they're suddenly OK) /s

> Why hasn't US achieved the level of digital payment smoothness that China has been able to?

This isn't unusual. Because of legacy issues, latecomers often enjoy superior infrastructure. For example, US is still on 110V despite all the disadvantages.

> For example, US is still on 110V despite all the disadvantages.

Could go into that? IIRC, 110V is less efficient but it's also less dangerous, so maybe it's more of a trade-off.

But your point stands. I've read that the reason Estonia's government infrastructure is so much more advanced than the US's is because they had visionary leaders and started from scratch in the 90s. The US has the weight of decades of good-enough paper processes weighing it down.

Ya, I miss the satisfying "pop" I get when plugging in to outlets in China without a ground pin.

"I think we need to be careful about attributing all of the China's success and splurge of VC funding to IP theft, hostile domestic market for foreign players, etc."

All of it? Clearly not. But it would be pretty disingenuous to claim that it's not related.

"With manufacturing in US hollowed out in last couple of decades"

The US is still the #2 manufacturer in the world.

"Why hasn't US achieved the level of digital payment smoothness that China has been able to?"

We've had credit cards for quite a long time.

>The US is still the #2 manufacturer in the world.

It is a clear #3 by population, so I don't know how significant that statement is.

It's very significant, because the parent claimed US manufacturing had been hollowed out. That hasn't actually occurred.

The Fed's measurement of real manufacturing output is 70% higher than it was 30 years ago (the population is merely 1/3 larger).

Further, manufacturing is booming in the US. [1] In China it has been barely expanding for years, and that's despite China supporting their manufacturing base with vast state subsidies that have generated extreme over-production in things like steel.

The US has a perpetual cheap energy advantage over most of the rest of the world that is helping to spur that manufacturing boom. Natural gas prices are typically half that of the rest of the developed world or lower, as are electricity prices (US electricity costs are something like 35% that of Germany). Then throw on top the substantial corporate income tax cuts that will bolster manufacturing income margins.

The US outlook for manufacturing is brighter than it is for all other major economies. [2]

[1] https://www.marketwatch.com/story/ism-manufacturing-gauge-hi...

[2] http://fortune.com/2016/03/31/united-states-manufacturing-ch...

but in the crucial area of consumer electronics, ie cell phones and computers, the us seems to be far behind asian manufacturing (china & taiwan). Perhaps because of cost, I doubt much is made in the us. A quick search reminded me that the us is still a manufacturing powerhouse, depending on metric probably number 2, but I couldn't find much about specifics on where things are manufactured. It's a complicated world with intel designing cpus, at least to a large part in the us, but making them to some extent in other places.

Don't forget - a US immigration system that makes it incredibly difficult, expensive, and time consuming for individuals from China (and India, which is following the same VC trends as China, just time shifted) to come and settle in the US. Increasingly, money that would have flowed to US VCs can just stay "at home" and invest in talent that is increasingly staying.

What about the EB-5 visa?

Assuming from the point of view of a founder, would they want to loan $500k to $1M to a US government-sanctioned project likely to return -100% to 3% over at least 5 years? If I had that money to spare AND was keen on founding a company, I'd more likely literally burn half the money for heating, and use the remaining half for a startup in my own country first.

For a VC looking to immigrate, maybe...

Edit: Or do you mean getting US VCs into said US government-sanctioned projects, so that the US can take EB-5 money and use it on VC funding? That's quite brilliant.

Not going to work for most founders. The point is that VC money chases where founders and their talent are, which is why the SF Bay Area has had such as stronghold for such a long time. As the US makes it more difficult for founders and talent to come to the US, VCs will focus on areas where those founders actually are. And if your option is - stay in your home country and take local money, or try to move to the US, maybe having to figure out all sorts of loopholes to speedup the process and still spend years doing so...which do you pick?

Combine this with major new technologies on the horizon (especially around autonomy, AI - potentially, and others) which give opportunities for new players, and an incredible amount of recently created wealth looking for new growth opportunities in China and India and you have the recipe for a massive shift in balance.

I misread the parent post and was thinking of VCs. Anyway my view is that it is good for the wealth and opportunities to spread around a bit. It will benefit us all that more people around the world are solving problems in science, technology and medicine.

Now try getting a visa as a founder in China or India.

Laws in China are not as relevant as enforcement. Enforcement is completely contextual, if they don’t like what you are doing they’ll get you on something, so as a foreign company you have to tread much more carefully when operating in China than a Chinese company.

The legal framework in China simply isn’t very developed, that doesn’t mean you can get away with whatever you want, quite the contrary, it means you never know when the government will come down on you for violating some unwritten rule.

> quite the contrary, it means you never know when the government will come down on you for violating some unwritten rule.

Isn't bribing your way out of "violations" common in China?

Not really. You at least have to build up your guanxi before the violations occur (or brought up as a problem), once it happens, it’s too late. At anyrate, the FCPA has to be followed by American citizens as well as companies (other western companies have similar acts), so it isn’t really an option.

My point is, unless you are Chinese working for a Chinese company, don’t try to be edgy in China, follow both written and unwritten rules. Foreigners are great chickens to kill to scare the monkeys, as the Chinese idiom goes.

Meh, I often saw people ignore FCPA or find ways around it when I worked in China. Really, having your 51% JV partner be someone well connected with the Party was pretty much a guarantee of success. Granted, this was a decade or so ago.

> China's tech VCs and established corporations (referring to the likes of Alibaba/Tencent) are challenging (and to a certain extent dethroning) Silicon Valley "monopoly" when it comes to investing in innovation/R&D in super critical areas like A.I., for example.

Isn't this also official Chinese government policy?

Those Chinese tech VCs may be literally funded by the state and/or operating under its direction.

Apparently there is almost $800B (7% of China's gdp) in Chinese government money in "venture guidance funds", basically government LPs. Originally the govt wanted to do direct venture investments but that proved challenging and strewn with conflicts

The article mentions that the govt funding may not be as large as it seems and that the government LPs don't have that much control over investment strategy, but the intent is there

https://www.chinamoneynetwork.com/2017/10/31/chinas-798b-gov...

This may sound naive, but how does IP Theft even work?

I've worked as a software engineer for over 12 years at over half a dozen companies, with codebases numbering in the millions of lines of code and I have yet to see any software or code I could imagine anyone would want to steal. And if you really needed some code, I'm sure it's available somewhere as open source. And wouldn't the open source code be much more preferable? rather than ripping out some piece of "stolen" code that was never meant to serve other purposes.

IP that's worth stealing is not limited to one specific implementation, it's about using someone else's idea. (So "theft" is a misnomer, it's really about imitation.)

For example, if you buy a competitor's product to take it apart, replicate its components and assemble lots of knock-offs, you have some validation that the product is going to work, without having to do any costly planning and design yourself. All of that works without literally breaking into the competitor's factory to steal their equipment or their code.

For a lot of really valuable IP you won't find an open source implementation, or if you do, you won't be able to legally use it, at least as long as software patents are a thing.

It is utterly ridiculous that to take an =idea= is considered theft. In that case, pretty much every American corporation can be accused of theft. Google: Stolen from alta vista, Microsoft: Stolen from CP/M, Apple: Stolen from Xerox, The american space program: stolen from the Nazis! If that's the basis for accusing China of stealing IP, it's a pretty weak argument.

E.g. what is now a major Chinese player in the US market used to clone Juniper/Cisco routers down to the English silk screened assembly instructions on the circuit boards.

Intellectual property is not just code. It can be patents, a product, a specific design.

If you can simply copy the entire hardware design, pcb layout, firmware etc. of an hydraulic press, milling machine, washing machine, surveillance camera, USB serial adapter, etc. you can get a sellable product out the door fast and a lot cheaper than starting from scratch and doing it all yourself.

In biotech, it can take the form of patents not being honored. Also lab workers learning trade secrets, then the local government revoking business licenses for the US company essentially giving control of the business to a Chinese entity. Have even heard of the govt literally taking equity in successful startups from Chinese private venture funds in some cases

All of this is just anecdotal second hand evidence but wanted to answer the question :)

Here is an interesting example:

https://www.bloomberg.com/news/articles/2018-01-24/chinese-f...

A Chinese wind turbine manufacturer paid a programmer working at American Superconductor to send them the source code used to run the turbines. The company shortly afterwards cancelled their contract w/ AMSC.

Also worth noting that China's government policies can create a domestic vacuum for products previously validated outside of China. Google's product and business model can be replicated for the 1.3+ billion Chinese citizens that don't have access.

Don’t forget lower wages. Capital can go a lot further in China than in Silicon Valley. Frankly, I also see Chinese VCs being more open minded about what’s investible. Silicon Valley feels a bit like the British Emplire at its sunset.

> Silicon Valley feels a bit like the British Emplire at its sunset.

That general premise has been widely forecast at least three or four different prominent times across the last 40 years in Silicon Valley. There was a time in the 1980s that it was supposedly dying. In the early 1990s it was supposedly dead. In 2001 it was supposedly dead.

The sun isn't setting this time either. There is no competition for Silicon Valley anywhere on earth on the horizon.

China does not directly compete with Silicon Valley. The notion that they do, is entirely a myth. China's tech companies are trapped inside of China (that's why Baidu never actually proceeded to challenge Google globally, which used to be widely expected). US tech companies get the rest of the world to play in.

Talent that is drawn to Silicon Valley, isn't going to China instead (plenty of it that is local to China may be staying home in China rather than moving to the US). China is dramatically less welcoming to foreigners than the US is. The US hands out a million green cards per year. It's almost impossible to become a citizen in China as a foreigner.

Not to mention that little problem of China having few human rights, near total state censorship and an aggressive dictatorship that has been rapidly revoking the few rights they acquired. It's so bad, they're banning joke apps in China now, because apparently, according to the Communist Party, jokes are contrary to Socialism. [1]

[1] https://advox.globalvoices.org/2018/04/11/no-laughing-matter...

> One huge advantage Chinese corporations and startups have is China's super lax (non-existent, in fact) privacy and data protection laws

I think it's more that the Chinese government will essentially gift you a monopoly if you are deemed strategic (which almost everything is at this point).

China just passed pretty strict rules on data, particularly on state secrets and personal information. Would be curious to hear why this counts as nonexistent?

Do you have a link to a source handy?

http://www.chinabusinessreview.com/understanding-chinas-stat...

https://www.lexology.com/library/detail.aspx?g=2d04aa03-d8dc...

This may be the one you are looking for: Cybersecurity law: https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2017/02/o...

Except outside of china