VIPKID and the Chinese tech giants

Chinese technology companies enjoy something of an unfair and discriminatory reputation in the West. China is seen by many as a place where imitation rules over innovation. The phrase “Made in China” summons up images of DVD players, mobile phones and toys produced on the cheap with brand names which are almost, but not quite, the same as the originals. The West is where things are invented; China is where they are assembled.

However, this harmful stereotype is looking more out of date than ever. We are at the beginning of the age of Chinese technology giants becoming world players, and firms that many of us have never heard of are set to become household names in the next decade.

It was decided by the Chinese leadership that the continuation of their economic miracle meant that “Made in China” must be replaced with “Designed in China”. If the country was to continue its success, it must innovate as fiercely as it once imitated and become a global technology leader in its own right. Chinese business responded in incredible fashion.

Looking at the list of modern Chinese technology giants can be quite a strange experience. There is an equivalent to every household name we are familiar with which is sometimes bigger and richer than the Western version, but often it will be the first time you have heard their names.

For Amazon, see Alibaba. For Tinder, read Baihe. For Uber, look at Didi Chuxing. For almost any internet or telecommunications provider, meet their bigger, more impressive brother called Tencent. Instead of using PayPal, how about using Alipay?

One of the most interesting East-West crossover companies is VIPKID, a service which provides an international educational experience to Chinese children. The classes are taught by American teachers over the internet and cover a wide curriculum.

Since its launch in 2013, VIPKID has seen growth of 30% a month and has won the support of giant investors such as Northern Lights, Matrix Partners China, Innovation Works and Sequoia Capital. However the more interesting impact VIPKID is having is a cultural one. Both the American teachers and the Chinese students and their families are learning more about each other’s people and societies on top of taking part in more mundane school lessons.

And that is really the story of where the Chinese technology giants go next. Having previously been satisfied with pushing Western interlopers out of China and dominating that enormous market for themselves, these companies are now looking to move directly into Western markets. They will bring with them an unusual business culture and it will be fascinating to see how Chinese firms mix in with Western ones.

A great example is Didi Chuxing. When Uber tried to move into China, Didi got into a massive financial fist fight with it. It is estimated that both companies lost more than US$2bn as they tried to undercut each other and take control of the market – but the prize was worth it. Uber threw in the towel and admitted defeat, losing access to 450 million people in 400 cities across China who use ride-sharing services. With all of the law suits Uber is currently engaged in the last thing it needs is to see Didi Chuxing pursue it across the Pacific Ocean. Unfortunately for them, that is exactly what is happening.

For now, it is clear that the tide has turned somewhat and it is likely that it will increasingly be Western firms looking to emulate Chinese technology over the coming decades. ‘Designed in China’ has been a successful policy which has provided the basis for Chinese firms to proliferate across the world.

Image copyright: VIPKID