Page 17 - How China Is Winning the Tech Race

building successful enterprises, observes Kyung Yoon, vice chairman of the
3
recruiting firm Heidrick & Struggles. But there’s no shortage of technical
talent on the Mainland. As many as 644,000 engineers—three times more
4
than in the United States —graduate annually from Chinese universities.
Investments in Chinese start-ups surged 28 percent to $6.8 billion in
2006—about one-third of the $22 billion that went to all Asian start-ups—
and added another $3 billion in the first half of 2007, compared with only
5
$335 million in 2002. China remains tiny next to the dominant U.S. market,
but it has been the world’s fastest-growing venture capital market for several
years in a row (see Table 1). 6
Boosted by low operating
costs, booming consumer demand
in the newly capitalistic economy, “Chinese entrepreneurs make the United
States look like it needs steroids.”
and 9.5 percent-plus economic
growth for two decades, Chinese Jim Breyer,
start-ups are scaling up and reach- managing partner, Accel Partners
ing profitability at lightning speed.
Listed Chinese Internet players
show high operating margins of 28
7
percent, almost twice as high as those of their U.S. peers. Chinacars.com, an
online version of the American AAA automotive club, launched in 2001, is
only one example. It topped $13 million in revenues and $2 million in profits

2002* 2003 2004 2005 2006 2007
(first half)

China $335 1,602 1,427 4,943 6,794 3,045

Asia $3,004 3,261 3,127 8,282 22,192 8,460

United States** $21,059 18,827 21,671 23,490 26,359 14,132

*All figures are in $ millions.
**U.S. figures include later-stage start-ups.
Source: For Asia: Asian Venture Capital Journal; for United States, Dow Jones VentureOne.
Table 1 Venture Capital Flows into China
Amount Invested in Start-ups

Introduction xiii