First Principles | China’s long game, and the lessons it holds

Much like Silicon Valley, China's tech prowess wasn't built overnight. That China's big tech can compete with the West today is a testament to that. However, Xi's recent crackdown has indications of which technologies he will chase and why, and which he will discard.

The Communist Party of China (CCP) will meet on October 16 to decide if the current Chinese premier Xi Jinping will stay on as leader of the party. The world’s technology watchers believe — not quite farcically — that because Xi will continue to wield power, China’s technological dominance challenging the West will begin to recede. While this sounds like a fair assessment, it is off the mark. Much of it has to do with Xi’s optics — that of an authoritarian leader who dictates what must be done.

Much of it has to do with Xi’s optics — that of an authoritarian leader who dictates what must be done. (AP)

Now, that's the thing about technology and entrepreneurship. It happens at the grassroots. Authority cannot compel people to innovate or even stay the course. Earlier this month, the New York Times reported that China’s billionaires are stepping down from their roles or are leaving China.

This is why professor G Venkat Raman sounds counterintuitive when he says, “China’s dominance in technology will not just continue, but improve exponentially.” Prof Venkat is affiliated to IIM Indore, studied in Beijing, speaks fluent Mandarin, and visits China often. He has a first-hand feel of how the country thinks and works. His argument is at complete variance with what tech writers’ punditry would suggest.

Consider Silicon Valley in the United States (US). It was neither willed nor created overnight. Circumstances conspired over decades to make the place what it is now. Back in 1908, the US Navy set up a research and technology base there. It was no coincidence that Stanford University came up there and had fine teachers who encouraged students to create companies in the late 1940s and early 50s.

Then, William Shockley, widely credited with the invention of the transistor in 1956, set up the Shockley Semiconductor Laboratory. But his authoritarian behaviour compelled eight of his brightest engineers to quit and create Fairchild Semiconductor. While Shockley’s company shut down, over the next 20 years, Fairchild alone would spawn 65 other enterprises. This includes Intel. It was inevitable that capital finds its way to fund such people.

Closer home, the IT revolution in Bengaluru did not happen overnight. While companies such as Infosys and Wipro started to raise their profiles in the 80s, the ground for it was seeded as early as in 1911 when the Diwan of Mysore did all he could to attract entrepreneurs. Post-Independent India saw it as a salubrious place where a research culture had taken root.

In much the same way, China’s rise too, explains Prof Venkat, happened ground up. After the death of Chairman Mao Zedong in 1976 and the economic bloodbath that followed, the communist ideology that Xi’s party owes allegiance to, was toned down. The next government under Deng Xiaoping discarded its role of a regulator and donned the hat of a facilitator instead.

Blueprints were created at the highest levels to imagine what it would take to dominate industries as diverse as toys, leather and electronics. Power was decentralised and leaders of provinces were given autonomy. The government set up incubators at universities, introduced vocational education alongside traditional courses for those who wanted it, and created a new national discourse that celebrated wealth in a stark departure from the past. It would take some years before China emerged as the manufacturing capital of the world. Entities such as Baidu, Alibaba, Tencent and Xiaomi now exist to take on the might of Facebook, Amazon, Apple, Netflix, and Google from the West.

But as recently as last year, Xi cracked down on entrepreneurs such as Jack Ma, the founder of Alibaba and one of China’s poster boys. “The rich can be a challenge to the establishment in the future,” Prof Venkat explains. When looked at from that perspective, a crackdown was tactical. The shrewd Xi had figured entrepreneurship has percolated across China, and that he must retain his dominance even as he crafts a new narrative.

It is now about which technologies to discard and which ones to chase. This means shifting polluting industries out of China to other parts of the world such as Africa while China stays focused on building the next generation of semiconductors, facial recognition technologies, Internet of Things (IoT), clean tech and renewable energy. That is what Xi wants China to be known for, and him to be remembered by.

Policymakers in India will do well to keep in mind that it pays off to play the long game.