China’s Big Challenge

The Chinese New Year will be celebrated on February 16th, and the country continues to take firm steps in its goal, proclaimed by its government, to become the world technological leader before 2050

I have to admit that my relationship with China is about love and hate. One of those feelings that produces a strange, complicated and hard to break balance. For those of us who work in technology, it is easy to learn to love the Asian giant even though ghosts such as child exploitation, wage inequality, or theft of intellectual property overflow our heads.

It is easy to be overwhelmed if we measure China by the numbers: 1.3 billion people, 8 million university graduates a year (twice as many as the US), 14,000 new companies registered in a day, more than 180 million Smartphones manufactured per month, etc. With these magnitudes, one would think that all we can do is just wait for China to gradually displace the rest of the technological superpowers. However, there are some important challenges that the country has to overcome and that can jeopardize the ambitious plans of its government.

The Technological Challenge: Going From “Made in China” To “Designed in China”

During the two years I worked with the Chinese phone manufacturer Huawei, one of the things that caught my attention was the inability of many of my Asian colleagues to solve problems creatively. When they knew what they had to do, they were like an army moving towards a common goal. However, if any unforeseen event happened, I often saw how they were blocked, and chaos began to reign among the project teams. Within the course of time, I understood that hard and simple as it may seem, Chinese education does not teach how to think or design, it teaches how to execute or copy.

This has two consequences. Firstly, intellectual property, which is the most valuable asset within the technological process, is always kept in China. The back cover of any iPhone says, “Designed in California, assembled in China”. This minimizes the market value of Chinese technology companies. For example, in the previous case, Apple’s revenues are only twice as large as the company that assembles their phones (Foxconn), but the market value of the American company is almost ten times greater than the Chinese one.

Secondly, the lack of capacity to generate intellectual property by Chinese engineers has historically led companies to illegally take over foreign patents and designs. This has led to a multitude of scandals about industrial espionage and the violation of intellectual property rights. In 2013, a devastating statistic showed that 70% of counterfeit products in the world came from China.

The Chinese government is putting measures to solve these problems, such as encouraging the presentation of patents or more harshly pursuing cases of intellectual property infringements. As a result, some experts have begun to identify a phenomenon of change called “China’s Innovation Miracle”, a movement led by technology companies such as Xiaomi, WeChat or Alibaba, capable of generating unique and quality products. Even so, there are still a few years left for this culture of innovation to be transmitted to all sectors and, most importantly, to the traditional Chinese educational system.

The Political Challenge: Demolish China’s “Cyber-wall”

The phrase “you do not realize what you have until you lose it” takes on great relevance the first time you land in China. Thousands of foreigners turn on their mobile phones after landing and search for the address of their hotel in Google Maps to find out the best way to get there. However, Google Maps does not show any results. Nervously they try to contact their country of origin through WhatsApp so that someone remotely looks at it, but the message delivered check never arrives. They try to use alternative channels like Facebook messenger to communicate, but they get the same frustrating result. It is then when they begin to tremble and realize that this feeling of forced disconnection from the world will accompany them during the rest of their stay.

This limitation on access to foreign information and services has been one of the biggest investment projects of the Chinese Government. Analogous to the physical “Great Wall” that was built in the 5th Century to protect China from foreign invasions, the great “cyber-wall” was erected in 1997 to preserve the sovereignty of the Chinese population. As its leader, Deng Xiaoping said: “if you open the window for fresh air, flies might come in as well “.

Unfortunately, the protection of digital sovereignty has been carried out in many cases through the intervention of the Government on products developed by Chinese companies, forcing them to include backdoors to obtain and analyze information processed on them. In other words, espionage and full-fledged control.

These “backdoors” remain when the products cross China’s borders and have been the reason for multiple international scandals. For example, the Smartphone BLU R1 HD, which accessed information on calls, messages, and applications accessed on the phone, and send it deliberately to China.

The controversy has reached such a point that products from leading companies such as Huawei or ZTE have been banned in the US. China should be able to demonstrate to the international community its capability of developing “backdoors-less” products so that confidence can be reestablished. This is the only way the country will be able to enter markets where it does not currently have access.

This is China, a country full of challenges and opportunities, capable of being equally hated and loved. We do not know if China will become a world leader in 2050, but what we do know for sure is that it will continue to be present in almost every tech talk.


Article written by David Purón, Founder and Chief Executive Officer at Barbara IoT.