Talk about one-upmanship. Elon Musk’s 10 million-sq-ft Gigafactory aims to produce enough lithium ion batteries for 500,000 Tesla Model 3 cars by next year. That’s a huge target but Musk may be outstripped by a handful of Chinese manufacturers who are looking to produce three-and-a-half times more batteries than the Gigafactory.
We all know now that the Chinese never do anything by halves. Take a look at when they decided to construct the world’s largest floating solar power unit and were clear it would be bigger than anything else in the world. So the floating power plant in Huainan in China’s Anhui province can generate 40MW or enough to power a small town. Till the Huainan plant came up, the biggest of its kind was a 6MW plant in the UK. The advantage of a floating power station, in case you’re wondering, is that the water can cool the solar panels.
Similarly, China's giant hi-tech firms such as Alibaba, Tencent, and Baidu may have begun as copycats that grew within the confines of a giant protected market. But they’ve moved way beyond the me-too territory and are determined to grab first spot in mega-style. What’s the best way to do that? Move to Silicon Valley and pay top dollar for the best cutting-edge companies.
Ignoring Deng’s philosophy
That’s why it’s hard to believe the Chinese giant next door that’s determined to be the Numero Uno Global Economic Superpower should waste its time squabbling over pasture land on what was once the Tibet-Bhutan border. Deng Xiao Ping always advised that China should conceal its iron fist inside a velvet glove till it was ready to take its place as the first among nations. Xi Jinping either thinks he has got to the top spot or he’s junking Deng’s sound advice.
Military adventures can always be chancy and the Chinese must know this as well as anyone else. In fact, a mountain skirmish would be more than a distraction for the Chinese. It could be a Himalayan Blunder when China’s been conquering new territory in the hi-tech world. Last year, the Rhodium Group estimated Chinese companies spent $46 billion buying US companies. The top four companies alone — that’s the BAT trio, Baidu, Alibaba and Tencent along with JD — spent slightly over $5 billion. While figures are down this year due to Beijing’s currency curbs, there’s still Chinese money going abroad.
Over the years, some funds have gone into property (like Anbang Insurance which bought New York's Waldorf Astoria) but most of the money has been spent strategically on new tech firms such as Lyft, the San Francisco-based car-hailing service. Tencent, which owns the WeChat messaging service, has focused on buying gaming companies so it has access to the very latest technology. Tencent has a $4-billion cash pile and has already bought into scores of US startups. It’s even taken a long-odds punt on an asteroid-mining venture called Planetary Resources. If that sounds reckless, consider that Larry Page of Alphabet (Google) is another investor.
Hot on the heels
The Chinese are going global for various reasons. Most crucially, they’re determined not to be left behind when a new wave of technological breakthroughs take place. So they want to have their fingers on the pulse in places like Silicon Valley. Also, they’re aware they’re battling global-scale corporations. Currently, just 7 per cent of Alibaba’s revenues come from outside China. But its goal is to push that up to a whopping 50 per cent. Already, its investments include almost $2 billion in Lazada, an online retailer that’s spread across Southeast Asia. Of course, it’s also investing heavily in firms like Paytm.
Still, as they think on an ever-bigger scale, the Chinese giants are facing a dilemma. How do they translate success in their home market in familiar conditions and a language they understand into a global model? Each one began as a copycat but later made unique additions. Baidu is the Chinese search engine, a Google equivalent if you like, and Tencent’s WeChat is a messaging service with add-ons like stickers and music. Alibaba is, in some ways, a competitor to Amazon but is only a platform on which selling and buying take place.
Even at home, though, the Chinese are pushing forward the frontiers of technology. Take a look at the ambitious EHang 184, a drone that promises to airlift one person and a briefcase. The company has staged test flights although it has some way to go before it gets its final clearance. And on terra firma, look at Future Mobility Corp, which is backed by Tencent and which wants to sell premium electric cars by 2020. Meanwhile, the Chinese government has now turned into a global trendsetter on the environmental front and is pushing for a switch to electric cars in under five years. In a different direction, head to Wuxi in Jiangsu province in East China. This is a hi-tech city of a different sort which focuses on producing ultrasonic instruments and medical film. Once again, many of the city’s products are trailblazers.
The bonanza promise
Does India lose out if it quarrels with the Chinese? In 2014, Xi Jinping promised a spending bonanza of $20 billion in this country, mainly for infrastructure, within five years. Three years later, precious little of that has materialised from state-sector companies. The investment that has come is from Chinese private-sector companies determined to get into India on the ground floor as the country’s readying to move quickly to higher floors. One prominent example is mobile phones. Chinese firms now control a sizeable chunk of the Indian mobile phone market. What’s more, these Chinese companies have been building their own plants at high speed and will soon be doing a large chunk of their manufacturing here.
Firms like Baidu have said they believe India is where China was in 2003-2004 and that’s poised to zoom upwards. So they want to be here to catch the rising tide. That’s why a border skirmish is a pointless exercise that could only harm trade and industry.
(The article first appeared in The Hindu BusinessLine.)