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Aug 20 2016 at 12:15 AM
Updated Aug 20 2016 at 12:15 AM
China's tech sector leaves Australia in its wake
by Michael Smith
Mia Wang says she spends too much time on her smartphone. Like most 30-year-olds, she uses social media to chat to her friends, share photographs and organise events. However, this is China and the bulk of Wang's smartphone battery is used up on an app called WeChat which allows her to do everything Facebook, WhatsApp or Instagram can do and much more. Wang, a typical Chinese white-collar worker who is married with a three-year-old daughter, uses WeChat for work, shopping, free video calls and financial transactions.
The app is widely used in the office, where group chats take place instead of meetings. Wang also uses it to shop, especially to buy clothes and other products from businesses so small they do not even bother setting up their own website. Wang shows me a record of her smartphone battery usage. WeChat has consumed 60 per cent so far that day, while an Amazon-like retail portal called Taobao takes up the rest. "I'm spending too much time on it.
Wang's story shows how sophisticated the Chinese consumer is when it comes to social media and e-commerce, something that is not widely appreciated in the West.
The Chinese consumer is increasingly sophisticated when it comes to social media and e-commerce, something that is not widely appreciated in the West. QILAI SHEN
It's also part of the driving force behind the success of China's so-called Silicon Dragons – the giant tech companies based in the technology hub that has sprung up just across the border from Hong Kong in the country's south. They are delivering the kind of revenue growth that is rivalling even Google and Facebook.
Shenzhen is China's answer to Silicon Valley. Two decades ago one out of every four pairs of shoes in the world were manufactured in the Pearl River Delta. Today, almost three out of every four drones are made in the same region.
It is easy to despair about Australia's chances of becoming a global innovation leader after just two days in Shenzhen. We are dinosaurs by comparison. As one Australian executive working in the sector says:
The "hunger" is the driving force behind the economic boom of a country in a different phase of its development than somewhere like Australia that has enjoyed relative prosperity for generations. It is more obvious in the Pearl River Delta than many other regions, where there is a more pragmatic culture and a long history of trade and private/employee-owned companies doing well. PwC says five of the world's 14 privately-owned tech companies valued at more than $US10 billion are based in China.
We visit Huawei, the company Labor famously banned from bidding for work on the National Broadband Network (NBN), in 2012, where its futuristic showroom features products such a sensor the size of a thumbnail with a 10-year battery life, automated trains and face-recognition software being used in "Smart Cities" (something, not surprisingly, it is not selling to Australia).
Hauwei's futuristic showroom in Shenzen features products such a sensor the size of a thumb nail with a ten-year battery life, automated trains and face-recognition software. AFR
A Huawei executive James Peng says while there are government incentives such as tax breaks for technology companies, it is the region's western-style market economy that is driving the boom. "It is not about the government incentives. It is a relatively mature market mechanism, almost similar to the one implemented in the western world."
Others say it is the "pragmatic" attitude of Chinese people in the country's Cantonese-speaking south, an attitude influenced by Confucian culture but also the region's long historical links to the former British colony of Hong Kong and a track record of successful family-run private companies. Unlike the north of China where there are more state-owned enterprises, companies are also encouraged to take risks.
"You will see government efforts to encourage innovation and entrepreneurship. What a lot of business people here like is that Shenzhen is a city where there is a recognition that businesses will do well but that some will fail. Failure is okay here, whereas Chinese provincial governments can't have companies failing," an Australian government official says.
Another Australian working in China, Simon Lance, managing director of the China operations for global recruitment giant Hays, says Chinese tech firms like their counterparts in Silicon Valley, also find it challenging to recruit the right talent and have to offer pay rises of up to 25 per cent and, more importantly, a career progression plan to get new employees on board. But while labour costs are soaring China's one-party system of government also gives local tech firms an advantage over their rivals.
Mia Wang, right, consults her smart phone. WeChat consumes 60 per cent of her daily battery time, while an Amazon-like retail portal called Taoboa takes up the rest. supplied
Down the road at drone maker DJI, one executive says part of the secret is the ability of Chinese companies to move fast and adapt. Chinese tech companies used to copy what western firms were producing but then they started improving on it and now they are breaking new ground on their own. The DJI executive tells a story about how an idea for a device was discussed at a 9am meeting. By that afternoon he had a 3D printed model followed by a prototype three days later.
Innovation has also hit China's banking sector which is dominated by local banks. HSBC, one of the few foreign banks to get a slice of the action recent launched a WeChat banking app which will let its customers transfer money to each other in two seconds.
There are hurdles. Intellectual property and the lack of patent protection are issues China still needs to resolve. The growing cost of living in these new cities, which the Chinese propaganda machine promotes with videos that make them look like a set from the George Clooney film Tomorrowland, is also a contrast to other parts of China.
It seems almost impossible for Australia to compete with this part of the world. While there will be opportunities to utilise Australian talent and skills in China, the decision by Uber to pull out of China last month shows how difficult it is for foreign multi-nationals to get a slice of the action.
Michael.smith@fairfaxmedia.com.au
Michael Smith travelled to China as a guest of the Australia-China Relations Institute.
http://www.afr.com/news/world/asia/chinas-tech-sector-leaves-australia-in-its-wake-20160819-gqwbea#
Updated Aug 20 2016 at 12:15 AM
China's tech sector leaves Australia in its wake
by Michael Smith
Mia Wang says she spends too much time on her smartphone. Like most 30-year-olds, she uses social media to chat to her friends, share photographs and organise events. However, this is China and the bulk of Wang's smartphone battery is used up on an app called WeChat which allows her to do everything Facebook, WhatsApp or Instagram can do and much more. Wang, a typical Chinese white-collar worker who is married with a three-year-old daughter, uses WeChat for work, shopping, free video calls and financial transactions.
The app is widely used in the office, where group chats take place instead of meetings. Wang also uses it to shop, especially to buy clothes and other products from businesses so small they do not even bother setting up their own website. Wang shows me a record of her smartphone battery usage. WeChat has consumed 60 per cent so far that day, while an Amazon-like retail portal called Taobao takes up the rest. "I'm spending too much time on it.
"I have to check it frequently,"
Wang, one of the more than 700 million people in China actively using WeChat. Her daughter is only three and does not use WeChat – but possibly not for long. Children as young as four in China are using WeChat via a microphone installed in a fluffy toy called a Mon-Mon, although Wang says that is not commonplace yet.
Wang, one of the more than 700 million people in China actively using WeChat. Her daughter is only three and does not use WeChat – but possibly not for long. Children as young as four in China are using WeChat via a microphone installed in a fluffy toy called a Mon-Mon, although Wang says that is not commonplace yet.
Wang's story shows how sophisticated the Chinese consumer is when it comes to social media and e-commerce, something that is not widely appreciated in the West.
The Chinese consumer is increasingly sophisticated when it comes to social media and e-commerce, something that is not widely appreciated in the West. QILAI SHEN
It's also part of the driving force behind the success of China's so-called Silicon Dragons – the giant tech companies based in the technology hub that has sprung up just across the border from Hong Kong in the country's south. They are delivering the kind of revenue growth that is rivalling even Google and Facebook.
Shenzhen is China's answer to Silicon Valley. Two decades ago one out of every four pairs of shoes in the world were manufactured in the Pearl River Delta. Today, almost three out of every four drones are made in the same region.
It is easy to despair about Australia's chances of becoming a global innovation leader after just two days in Shenzhen. We are dinosaurs by comparison. As one Australian executive working in the sector says:
"There is a real hunger here that Australia does not have. The Chinese look at Australians and think you are fat and lazy by comparison."
The "hunger" is the driving force behind the economic boom of a country in a different phase of its development than somewhere like Australia that has enjoyed relative prosperity for generations. It is more obvious in the Pearl River Delta than many other regions, where there is a more pragmatic culture and a long history of trade and private/employee-owned companies doing well. PwC says five of the world's 14 privately-owned tech companies valued at more than $US10 billion are based in China.
We visit Huawei, the company Labor famously banned from bidding for work on the National Broadband Network (NBN), in 2012, where its futuristic showroom features products such a sensor the size of a thumbnail with a 10-year battery life, automated trains and face-recognition software being used in "Smart Cities" (something, not surprisingly, it is not selling to Australia).
Hauwei's futuristic showroom in Shenzen features products such a sensor the size of a thumb nail with a ten-year battery life, automated trains and face-recognition software. AFR
A Huawei executive James Peng says while there are government incentives such as tax breaks for technology companies, it is the region's western-style market economy that is driving the boom. "It is not about the government incentives. It is a relatively mature market mechanism, almost similar to the one implemented in the western world."
Others say it is the "pragmatic" attitude of Chinese people in the country's Cantonese-speaking south, an attitude influenced by Confucian culture but also the region's long historical links to the former British colony of Hong Kong and a track record of successful family-run private companies. Unlike the north of China where there are more state-owned enterprises, companies are also encouraged to take risks.
"You will see government efforts to encourage innovation and entrepreneurship. What a lot of business people here like is that Shenzhen is a city where there is a recognition that businesses will do well but that some will fail. Failure is okay here, whereas Chinese provincial governments can't have companies failing," an Australian government official says.
Another Australian working in China, Simon Lance, managing director of the China operations for global recruitment giant Hays, says Chinese tech firms like their counterparts in Silicon Valley, also find it challenging to recruit the right talent and have to offer pay rises of up to 25 per cent and, more importantly, a career progression plan to get new employees on board. But while labour costs are soaring China's one-party system of government also gives local tech firms an advantage over their rivals.
Mia Wang, right, consults her smart phone. WeChat consumes 60 per cent of her daily battery time, while an Amazon-like retail portal called Taoboa takes up the rest. supplied
"The thing that really strikes me about China is that it makes long-term plans … 10-year plans … you can set up an industrial park working on virtual reality or artificial intelligence almost overnight. Australians touring here are surprised at how high-tech the facilities are becoming,"
says Lance, who is originally from Perth but moved to China almost 15 years ago.
says Lance, who is originally from Perth but moved to China almost 15 years ago.
Down the road at drone maker DJI, one executive says part of the secret is the ability of Chinese companies to move fast and adapt. Chinese tech companies used to copy what western firms were producing but then they started improving on it and now they are breaking new ground on their own. The DJI executive tells a story about how an idea for a device was discussed at a 9am meeting. By that afternoon he had a 3D printed model followed by a prototype three days later.
Innovation has also hit China's banking sector which is dominated by local banks. HSBC, one of the few foreign banks to get a slice of the action recent launched a WeChat banking app which will let its customers transfer money to each other in two seconds.
There are hurdles. Intellectual property and the lack of patent protection are issues China still needs to resolve. The growing cost of living in these new cities, which the Chinese propaganda machine promotes with videos that make them look like a set from the George Clooney film Tomorrowland, is also a contrast to other parts of China.
It seems almost impossible for Australia to compete with this part of the world. While there will be opportunities to utilise Australian talent and skills in China, the decision by Uber to pull out of China last month shows how difficult it is for foreign multi-nationals to get a slice of the action.
Michael.smith@fairfaxmedia.com.au
Michael Smith travelled to China as a guest of the Australia-China Relations Institute.
http://www.afr.com/news/world/asia/chinas-tech-sector-leaves-australia-in-its-wake-20160819-gqwbea#
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