![]() In contrast, search engine Baidu has had a more difficult time penetrating foreign markets. Notably, Alibaba has made inroads throughout the Asia-Pacific and European e-commerce markets, while ByteDance’s TikTok and Tencent’s WeChat have garnered massive international userbases. But in many segments, they are growing quickly and have demonstrated significant innovations. Overall, Chinese firms still make up only a small share of international digital markets. This report assesses the progress of Chinse firms in international digital markets. jobs, exports, and gross domestic product (GDP). companies in other markets-on the basis of Chinese government “innovation mercantilism”-it would reduce U.S. If China succeeds in taking market share away from U.S. The real battleground is in other nations. There is likely little American Internet firms can do to gain significant market access there, even if China let them in. The unfair takeover of the Chinese market by Chinese Internet firms is a done deal. Īs in virtually all technology sectors, the Chinese game plan is the same: first copy foreign technology (often through forced joint ventures, intellectual property theft, or reverse engineering) then limit access to the Chinese market of foreign firms while supporting domestic firms with a panoply of support, including grants, tax breaks, favorable lending deals, discriminator government procurement, and other tools and finally, support “going out” to gain global market share outside of China. Īs noted, China’s digital economy is dominated by domestic firms, due in large part to the Chinese government banning such international competitors as Facebook and Twitter in 2009, and Dropbox and Google in 2010. This is even more impressive given that China’s Internet penetration rate remains low at only 60 percent and 99 percent of its Internet users have mobile Internet (with 70 percent using mobile payments). While this type of protectionism was unfair and even illegal under the World Trade Organization (WTO), there’s no doubt this “China First” strategy was wildly successful, and led directly to China’s now highly diverse and dynamic mobile and Internet services industries.Īs in virtually all technology sectors, the Chinese game plan is the same: first copy foreign technology, then limit access to the Chinese market of foreign firms while showering domestic firms with a panoply of support.Īs a result, China’s digital economy is massive, with an estimated $1.5 trillion of online retail transactions in 2019, or 25 percent of the nation’s total retail transactions-more than twice both the volume and proportion of e-commerce in the United States. ![]() firms, creating time for its own firms-especially Baidu, Alibaba, and Tencent (often called BAT)-to build similar services, or at least initially copies of U.S. Instead, it significantly limited the role of or banned U.S. dot-coms-especially Google, Facebook, and Amazon-just set up shop and dominate the Chinese market the way they were doing in so many other nations. ![]() It decided it would not let the giant U.S. Indeed, as the Information Technology and Information Foundation (ITIF) noted:Ĭhina made arguably the most important digital strategy decision in the history of the IT industry. digital industry firms hold significant market share in virtually every nation in the world, except one: China. firms were able to capitalize on early leads to be the most competitive in the global market.Īnd because of that initial lead, coupled with continued investment of tens of billions of dollars a year in research and development (R&D), U.S. And because digital industries, especially information (including search engines and social networking) and e-commerce, are characterized by scale and network effects, U.S. For a variety of reasons, including strong software capabilities, deep entrepreneurial ecosystems such as in Silicon Valley, and a large national market, U.S. The digital economy is the key driver of growth and innovation.
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