by Bailey Marsheck
GPS 21st Century China Center Event
Feb 2, 2018
Washington, D.C.’s preeminent role in American diplomacy often obscures the importance of another power nexus of the Sino-American relationship: Silicon Valley. Yet the technology ecosystems in China and Silicon Valley are strongly connected and interdependent, with funding, ideas and top talent continuously circulating between the two. In his talk titled “Silicon Valley’s China Paradox” at the UCSD School of Global Policy and Strategy, former Huffington Post reporter and Paulson Institute fellow Matt Sheehan outlined the key linkages between the two dominant tech hubs. He also emphasized the relationship’s great paradox: While money and employees navigate the oceanic divide with relative ease, the major tech companies fail in their attempts to cross over between markets. Working in China as a reporter for HuffPost before returning to his native Bay Area, Sheehan’s experience in the two tech hubs lends him an insider’s perspective on the complicated dynamics at play. He shared some of his analysis and personal experiences with the GPS audience.
A popular view taken by scholars of US-China “great power relations” is that American geopolitical dominance is shrinking as China’s rapid development brings the two states closer to parity. Sheehan’s talk demonstrated how the Silicon Valley-Beijing tech relationship closely mirrors Washington-Beijing political ties in this regard. In the 1990’s when the internet was being popularized in the US, China was still an economic and technological backwater. Yet it didn’t remain one for long. While America’s PPP GDP was 5 times greater than China’s GDP in 1991, today China’s PPP GDP has overtaken America’s.
Silicon Valley companies and entrepreneurs played a large role in the origins of the Chinese tech scene. China’s first internet connection was established in 1994 through a partnership between the Institute of High Energy Physics at China’s Academy of Sciences and the Stanford Linear Accelerator Center. Endowed with better education and superior technology, opportunistic expats arrived in China during the dot-com boom to monetize their expertise. As America’s tech obsession caught on in China, the rise of homegrown Chinese tech companies ushered in a more competitive era in the US-China tech relationship. Unable to compete with American technology from Yahoo and Google, new early-2000’s players like Alibaba and Baidu nevertheless dominated market share by copying technology and better adapting services to target Chinese consumers. While Chinese tech today has outgrown its infancy to reach near-parity with Silicon Valley in terms of talent, money and creativity, the narrative of copycat China has endured.
Sheehan identified artificial intelligence and emerging internet markets as the arenas of US-China tech competition moving forward. While Silicon Valley retains the most innovative and top-class researchers, it must contend with China’s sizeable government subsidies of tech research and the sheer volume of Chinese researchers. Simultaneously, investments and employees cross between markets seeking the greatest returns. But companies like Facebook and Google remain conspicuously blocked or absent in China while China’s Baidu, Alibaba and Tencent (BAT) have failed in their attempts to attract the American consumer.
I believe the importance of the Silicon Valley-China tech relationship is greatly underestimated in the International Affairs community. This belief is informed by my childhood in the Bay Area and a few months last year spent working in Washington, D.C. Growing up, I experienced a Silicon Valley bubble where Oval Office decisions were overshadowed by the happenings in offices of tech CEOs. Washington lent little weight to the business affairs of Silicon Valley in return. While countless analysts build their careers on the back of US-China diplomatic relations, few study China’s tech connection with Silicon Valley outside of the business world or niches within the national security community. An full understanding of Sino-American relations is incomplete without an increased focus on the Silicon Valley-China tech relationship.