Page 19 - How China Is Winning the Tech Race

“It adds up to a tipping point for U.S. dominance of technology,” says Richard
Lim, a Beijing-based managing director with GSR Ventures (see Table 3).
Adding to the momentum, tech firms increasingly are going public in
Shanghai and Hong Kong. The markets are sizzling. The number of stock
market investors in China reached nearly 100 million by mid-2007 as cab
drivers, housewives, and retirees raced to get rich. This is remarkable con-
sidering that China reopened local exchanges only in 1991 after the com-
munist victory of 1949 had shut them down.
Today’s China is switched on. The Middle Kingdom has the world’s larg-
est number of mobile phone users (500 million), the second-largest number of
Internet users (162 million), and 2 of the top 10 Web sites globally. China
9
accounts for 24 percent of world production of semiconductors—silicon chips
that make electronic devices work—and is projected to have one-third of the
10
global market by 2010. Chinese chipmakers such as the NYSE-listed Semi-
conductor Manufacturing International Corp. in Shanghai’s Pudong
industrial area already make 7 percent of the world’s chips.
Chinese goods once stood for cheap knockoffs found in Wal-Mart and,
more recently, for tainted imports, but with the Internet revolution, a tipping
point took hold. Young Chinese “returnees,” so-called sea turtles, began
churning out close imitations of successful U.S. dot-coms and tweaking them
with local characteristics that no American multinational, eBay, Google, and
Yahoo! included, could get exactly right. Among the Chinese transplants,
which were funded largely by American venture investors, were copies of

TOTAL CAPITALIZATION OF TOTAL CAPITALIZATION OF
NASDAQ COMPANIES NASDAQ-LISTED CHINESE COMPANIES

2005 $3,846.7 billion 1 2005 $14.5 billion 3

2006 $4,132.6 billion 2006 $23.6 billion

2007 2 $4,503.9 billion 2007 4 $39.9 billion

1 Combined U.S. market cap. 2 As of June 30, 2007. 3 Combined global market cap. 4 As of July 27, 2007.
Source: Nasdaq.
Table 3 Chinese IPOs Going Strong

Introduction xv