For many, China is still synonymous with the copying or stealing of ideas and the production of low-cost alternatives. “Made in China” used to mean cheap labor, cheap production, and bad quality; Chinese clones of Western innovation used to be infamous the world over. However, those living in the country or following it closely know this to be an outdated view.
With the creation of a large middle class with disposable incomes and desires, we have since moved on to “Made for China.” For a majority of MNCs, China is one of the biggest and most important markets. Local tastes and preferences are increasingly being taken into consideration, with the goal of getting a bigger share of the wallet. From F&B, to fashion, to electronics, to automobiles, “Made for China” is a reality today, as consumption in the country is still steadily on the rise.
Following the shift from being the world’s workbench to one of the world’s most important economies today, the next change is just on the horizon. As China and its companies continue to look for growth, their gaze is increasingly landing on the global markets, where some of China’s most valuable companies (like Alibaba and Tencent) have yet to prove themselves to be able to compete with incumbents.
The next big shift we are about to see will be dubbed “Designed in China.”
Why adoption rates matter
To understand how Chinese companies made the shift from copying to innovating, one needs to look no further than WeChat. Having started its existence as a crossover of QQ, WhatsApp, and similar existing products, many deemed it a copycat. Yet fast release cycles and a strong willingness to solicit, listen to, and react to market response have turned it into Tencent’s likely most valuable property. It has been adopted so widely and used so frequently that Western companies are looking to learn from and copy it.
Success stories like WeChat are possible in China because of the general willingness⏤across generations, social groups and geographies⏤to adopt new technologies quickly. With China’s incredible rise over the past decades, life has looked completely different for hundreds of millions of people, year after year. Change has been ever-present in lifestyle, affluence, infrastructure, and opportunity, amongst other related fields.
To the Chinese, continuous change and adaptation to new circumstances is the norm, a factor crucial to driving rapid adoption of new technologies.
As a rule of thumb in China: If there is benefit, or a chance for gain, or something interesting to a product, people would give it a try without hesitation⏤no matter how small it might be. They will also immediately abandon the product in the case that it does not satisfy. Within such a fast-response, live-or-die framework, Chinese products can evolve quicker and adapt to the market better. Hence innovation, both incremental and disruptive, has the right breeding ground to accelerate at unprecedented levels.
Within the frames of such an economic environment, and after copying and catching up to global standards, it is easy to see why China’s companies are at pole position for creating the next big wave of innovation. And they are already doing it. It’s just that much of their progress has remained invisible to outsiders, until now.
Designed in China
Where most would have considered their home countries to be more advanced than China ten years ago, this is no longer the case. From WeChat’s ubiquitous mobile payments, Xiaomi’s affordable yet high-quality mobile devices, to Niu’s well-designed e-scooters, China is living in the future.
And this has not even touched on China’s millions of merchants and shoppers, whose everyday lives are continuously shaped and changed by Alibaba. The enormous ways in which social technology giants are connecting people through text, voice, video, live stream, and the impeding e-mobility revolution (pushed forward by a plethora of new local entrants and government policy), will most likely make China the global frontrunner in the space.
The products that Chinese innovators are creating are no longer like the ones people used to scoff at a decade ago. No more banner-laden unusable web applications. No more clunky, ugly electronics. No one-on-one knock-offs. The new products being created in China today are rife with ingenious features, pleasant user experiences, and strong value propositions. Design is becoming an important consideration in Chinese fashion, hardware and software; all catered to global modern tastes.
Conquering the world
There are still many hurdles for Chinese companies in global markets. The lingering negative perception of Chinese companies as copycats is surely still one of those, yet there are other factors that pose greater challenges. Among them is their general understanding of other markets, or the lack thereof. Their playbooks are good for conquering a large unified market with 1.3 billion people, but seem to fail when applied to more fragmented geographies outside of China.
Companies looking to enter Southeast Asia, which is geographically and culturally the lowest-hanging fruit, are looking at a market size of about 640 million people in 11 countries. Every country is fundamentally different⏤with its own rules, systems, agendas, language, and local players⏤yet rather small as a single market when compared to China. Similar situations exist in Europe, the Middle East, Africa, and South America. To those used to dominating a large unified market, these fragmented small markets⏤as high-value as they may be⏤are difficult to conquer.
On the surface, the strongest progress has been made by Alibaba, using a mixed strategy of acquisitions, building new local properties, and pushing its underlying platforms. In Southeast Asia alone, it has acquired popular portals such as e-commerce company Lazada (and indirectly Singaporean online supermarket RedMart), while building an international version of Taobao. It is further pushing Alipay, its payments business, and Cainiao, its logistics platform, into Southeast Asian markets so that everything can run on the existing infrastructure in China.
On the other hand, WeChat continues to struggle with global adoption. While it is used mostly by the Chinese diaspora in overseas markets, attempts have been made to promote the product using star power (for example, world famous soccer players Lionel Messi and Neymar). Those have largely failed so far. International expansion efforts are now focused on offering the app as a convenient tool for Chinese tourists, rather than on acquiring foreign users.
Another cautionary tale involves the US launch of consumer electronics company LeEco, which ended rather disastrously. In trying to use the same playbook they used in China, LeEco tried to launch its smartphones via flash sales⏤widely accepted in China, but not popular in Western markets. The new entrant bore the brunt of consumer skepticism, the flash sale did not pan out, and LeEco failed to capture any significant market share with the same tried-and-true methods it learned in China.
Cooperate and prosper
Using the failures of the past as important lessons, Chinese companies are getting smarter about their international strategies. This is a fact underlined by examples like Indiegogo, through which many Chinese companies carry out crowdfunding activities in Western markets to gauge demand and gather quick feedback on their ideas and offerings. Just as Western companies had to fail and iterate to finally see success in the Chinese market, Chinese companies are now going through the same struggle. Products cannot be simply exported, they need to be designed for their respective target markets.
In closing, it is fair to say that we are just at the cusp of what will be the next big wave of growth for China and its companies. After having been a manufacturing hub, followed by its evolution into a consumer society, Chinese companies are now out-innovating their Western counterparts and are pushing into other markets quickly. Large opportunities are available to those who can be a good partner and seize the reins at the seat of this seismic shift. 
Chinese Innovation Waves; Chinese tech startups aren’t just imitating anymore — and investors are starting to pay attention
The first wave of China-based internet startups adapted Western business models, sprinkled them with some extra touches, and leveraged the world’s largest base of online consumers to build huge businesses. Baidu, Tencent and Alibaba have become huge companies, dominating China’s market for internet search, social networking and e-commerce.
The most recent wave of fast-growing Chinese tech companies has taken an entirely different path. Rather than copy Western business models, Chinese entrepreneurs are experimenting with new business models, creating companies that have no analog in the West.
Room for experimentation
Chinese authorities are showing surprising tolerance for business model innovation, often allowing young companies to grow unencumbered by regulatory pushback for much longer periods of time than in other countries.
Consider, for instance, China’s booming bike sharing industry: over the course of just a few years, Chinese bike sharing companies like Mobike and ofo have deployed millions of bikes in cities across China, creating a new industry worth billions in a flash.
Bike sharing is not a new idea. New York’s Citi Bike system was installed in 2013 – and there are similar programs in many U.S. and European cities. In China, however, the idea has taken a new direction: Chinese bike sharers use apps on GPS-capable phones to find the nearest GPS-enabled bikes wherever they might be parked around the city, not just at designated kiosks. They then pedal to their destinations and log out, leaving the bikes more or less anywhere and making them available again to other riders.
The model is wildly successful. Ofo, which has more than 6 million bikes in 100 cities across China, recently raised $700 million in a round led by Alibaba. Mobike, which is only 15 months old, has a fleet of more than 5 million shared bikes, adding more than 100,000 a day to the system. Mobike customers are taking 25 million daily rides – and the total keeps growing.
In mid-June, Mobike announced a $600 million venture round, boosting total funding to date to over $900 million. Part of that will fuel international expansion – on June 30, Mobike started operating in Manchester, the company’s first move outside China.
Filling the entertainment vacuum
It also helps entrepreneurs that Chinese consumers are eager to experiment with new tech products and services. That’s especially true in entertainment. Offline, China is dominated by state-run entertainment options – and in rural areas, there isn’t even much of that. The result is an insatiable hunger for new forms of digital entertainment.
There’s no better example of this than live streaming video, which in China has emerged in ways that have no match in Europe or the U.S. On live streaming platforms like Yizhibo and Huajiao Live, celebrities and pseudo-celebrities are offering online streams of themselves speaking, singing, or even eating in return for voluntary payments from users using virtual currency. China now has more than 150 live streaming platforms, which together have more than 50 million paying customers. Revenues from the live streaming sector hit $3 billion last year according to iResearch – and the trend is just getting started.
China’s e-commerce players – including Alibaba’s Taobao and JD.com – are integrating live streaming functions into their core platforms. Users can watch live broadcasts of sellers doing product reviews and interact with celebrity endorsers.
On June 18, JD.com featured more than 30 celebrities in a 12-hour live shopping spree. In one prime time slot, 10 million users on JD.com watched and interacted with singers and actors endorsing hot and spicy crayfish, a popular snack in China. JD.com said it sold 450,000 crayfish (about 15,000 boxes) in five minutes.
Chinese consumers are also paying for online education courses and lectures. Just a year old, Zhihu Live has 70 million registered users and 20 million daily active users who pay for one-on- one live streaming with experts on everything from how to become a securities trader to UI and product design. On iGet, also known as De Dao, users pay $30 a year to take classes on business, career development, parenthood, art history, music and other subjects.
China’s rapid pace of innovation, relentless spirit of experimentation and the country’ thirst for novelty and new experiences has turned the country into the biggest competitor for Silicon Valley in the marketplace of ideas. There’s an intense spirit of competition – China’s startups have developed a “9-9- 6” work schedule, with staff working 12 hours a day, six days a week.
Chinese consumers are enthusiastic early adopters, even if some emerging technologies aren’t quite ready for prime time. Goldman Sachs estimates that mainland China accounts for a third of virtual reality headset sales globally this year. According to EY, China is the leading country for consumer adoption of fintech products and services. China remains the largest smartphone market in the world – and it has by far the largest population of Internet users.
In China’s fast evolving startup and investing ecosystem, trends, hits, and flops emerge on a weekly basis. Savvy investors and entrepreneurs globally should pay attention, because China’s entrepreneurs are spawning new ideas that will serve China’s 1.4 billion people – and the rest of the world as well.