Putting the dragon in its place

Silicon Dragon: How China is Winning  the Tech Race by Rebecca Fannin; McGraw-Hill; US$24.95

Context is key for foreign reporters in China as they try to translate the story for an audience abroad – but it’s devilishly difficult to provide.

Journalists will always focus on the exceptions but readers who are unfamiliar with the situation don’t have the ability to contextualize these exceptions. This creates a disconnect between what’s really happening and what the reader is told is happening.

Rebecca Fannin appears to face this problem in her book Silicon Dragon: How China is Winning the Tech Race.

The blurb on the book’s dust jacket asks if readers realize that China has the world’s largest number of mobile phone users, three times as many engineering students as the US and the fastest-growing venture capital market in the world. We’re painted a picture of a booming tech scene flush with venture money and run by an energetic entrepreneurial class waiting to create the next Yahoo or Google. These facts are all true – but they’re not very useful without context.

Retail trumps tech

Silicon Dragon doesn’t point out, for example, that venture money is increasingly flowing toward non-tech sectors like retailing. Venture capitalists are trying to tap into the rising affluence of the middle-class, and retail chains and home shopping networks may be better at doing this than tech plays.

Figures from Dow Jones VentureOne, the research firm, show that while technology has accounted for the majority of venture investment over the past few years, the retail segment has been catching up. (In the third quarter of 2007 venture investments in retail and consumer firms outweighed funding for IT firms.)

The book could also have benefited by being more critical. For example, the last featured company, a lighting firm called Lattice Power, is apparently close to introducing a technology regarded as the “holy grail of LEDs” and profiting from an IPO in the billions. But Fannin merely says it uses a closely guarded technology and barely challenges the claims its executives make.

Still, the author’s ability to get interviews with top Chinese tech executives and venture capitalists can’t be faulted. As international editor of trade publication Asia Venture Capital Journal, she gets good access to the likes of Jack Ma, Robin Li, Lee Kai-Fu and others. Her chapter on Baidu, with a unique account of the company’s founding by Li’s partner Eric Xu, is particularly interesting.

VC insight

The book does best when it lets readers in on how and what venture capitalists in China are thinking about China’s entrepreneurs and the business environment. The tightly-knit venture community gets a bit of exposure here, although Fannin could have fleshed out the personalities and relationships between individual VCs more thoroughly.

It’s also worth noting that the people she talks to are all heavily invested in the Chinese tech economy and so can be depended on to say argue that their industry is ascendant.

Companies in the book are either labeled “innovators” or “copycats.” But the innovators aren’t given as much space as the copycats – and the fact that the copycats outweigh the innovators may even undermine Fannin’s own thesis: that China is winning the tech race.

Silicon Dragon is a decent outline of China’s tech scene today and is most useful in introducing the VCs that give the market momentum. Readers would do well to supplement it by taking in David Sheff’s China Dawn, published in 2003, which chronicles the early days of China’s tech industry through the eyes of luminaries Bo Feng and Edward Tian. It’s an ambitious work of narrative non-fiction, and it provides useful context and background to what’s going on in the China tech scene today.

WONG JOON IAN

Excerpt: Venture trail

One of the first independent Chinese venture firms not connected to a corporate or a local authority was Capital Today Group. It was founded by the former Baring Private Equity Asia managing director Kathy Xu, who raised a US$280 million fund in 2006. Xu and other locals honed in where they felt most comfortable: with the native entrepreneurs, who often were seen as too foreign by the Americans. “The American VCs don’t speak Mandarin and don’t understand the culture,” scoffed Xu.