LA JOLLA – Chinese President Xi Jinping stopped in Seattle on the first leg of a state visit to the United States to meet with America’s technology giants and underscore China’s cooperation with U.S. companies as well as its emphasis on Internet security.

Mr. Xi attended a China-U.S. business roundtable on Sept. 23 with 15 executives from 15 companies from each country. Among the U.S. executives at the meeting were Berkshire Hathaway’s Warren Buffett, Amazon’s Jeff Bezos, and Apple’s Tim Cook.  Joining them were executives of Chinese tech giants Baidu, Alibaba and Tencent. The 15 Chinese companies represented at the roundtable have a total worth of US$1.2 trillion of market value, about one-eighth of China’s GDP in 2014. Another focus of Mr. Xi’s Seattle visit was the 8th U.S.-China Internet Industry Forum co-hosted by Microsoft and the Internet Society of China.

These cyber events, which attracted global attention, come as China’s Internet and high-technology industry are burgeoning. China now has 700 million Internet users and its high-tech industry is growing more rapidly than any other sector. The IT industry and technology generally are stimulating consumption as a crucial driving force for continued economic growth in China. Mr. Xi’s agenda in Seattle reflects this reality. As a result, some Chinese and U.S. technology companies have established cooperative partnerships, for example: Baidu will replace Bing as Microsoft’s search engine in China, and Tencent and Legendary Pictures will work together on upcoming motion pictures.

 

China’s corporate giants at Seattle business roundtable

World’s largest search engine in Chinese Mandarin
$71.4 billion market cap
Ranked #11 among innovative companies by Forbes
President Zhang Yaqin, former Microsoft corporate VP

Online and mobile commerce company
$145 billion market cap
IPO on the NYSE in September 2014
Executive chairman Jack Ma Yun, ranked #7 richest person in Tech by Forbes

 

Online social network, e-commerce and games
$181.1 billion market cap
Founded in 1998
Chairman and CEO Ma Huateng, ranked #11 richest person in Tech by Forbes

 

Computer hardware
$16 billion market cap
Acquired IBM’s personal computer business in 2005
CEO Yang Yuanqing

 

Ranked world’s largest bank for three consecutive years (2013 – 2015)
$278.3 billion market cap
Founded in 1984
Chairman & Executive Director Jiang Jianqing

 

Ranked world’s 4th largest public company by Forbes
$199.1 billion market cap
Founded in 1912
Chairman Tian Guoli

 

List compiled by Diying Wu, Institute of the Americas

China boasts about its Baidu, Alibaba and Tencent (BAT), and sees U.S.’s Google, Apple, Facebook and Amazon (GAFA) as its counterpart, though Google and Facebook are currently banned from China. After its noisy exit in 2010 against the backdrop of Chinese censorship, Google is actively preparing to re-enter China with a limited Google Play Store for Android devices as the majority of the software innovations in China are carried out on the Android platform.
Facebook is also working to regain its share of the China market, and its CEO Mark Zuckerberg has made personal efforts towards this end. Zuckerberg’s wife, Priscilla Chan, is of Chinese descent and he learned Mandarin to better communicate with her family. Now Zuckerberg is taking great advantage of this skill to push for Facebook’s reentrance into China. On Sept. 23, after having a brief conversation with Chinese President Xi in Mandarin at the Internet Industry Forum in Seattle, Zuckerberg posted on his own Facebook page that “this was the first time I’ve ever spoken with a world leader entirely in a foreign language. I consider that a meaningful personal milestone”. In fact, as early as October 2014, Zuckerberg visited Beijing’s Tsinghua University and delivered a speech in Mandarin, which greatly impressed the audience and the Chinese media.

U.S.-China Business Roundtable with 15 U.S. CEOs and 15 Chinese CEOs as part of Pres. Xi’s visit to Washington state. Photo via Paulson Institute

The GAFA success story in China is Apple. Its iPhone sales in China increased over 75% in 2014, and more than 25 percent of its latest quarter’s revenue came from China. An iPhone 6s sells at 5,288 RMB (US$830) in China, higher than the retail price in the U.S. It is considered a luxury purchase for most Chinese consumers. Yet Apple products still managed to take over market share and create trending crazes in China. In 2012, a 17-year old teenager from Anhui province sold his kidney to buy an iPhone and iPad2.

Qualcomm, based in San Diego, California, is another U.S. technology company with recent operations challenges in China. In February, Qualcomm was fined $975 million dollars according to Chinese anti-trust regulations. This is the highest fine of its kind in China’s history. China’s National Development and Reform Commission (NDRC) launched its anti-trust investigation against Qualcomm in late 2013 and the investigation lasted more than a year. The company accepted the penalty in exchange for access to the Chinese market. “We end up better-positioned as a company in China as a result,” Qualcomm CEO Steve Mollenkopf said in an interview to Bloomberg. Qualcomm’s recent episode has much to do with Chinese government’s “indigenous innovation” policy, introduced as national strategy in 2005 aiming to encourage technology innovation by domestic companies.

Interactive Timeline of China-U.S. Tech

 Timeline created by Diying Wu, Institute of the Americas

On September 23, Boeing signed a deal with Mr. Xi to sell China 300 airplanes for US$38 billion and to establish a 737 jet-completion and delivery center in China. The Chinese companies involved in the deal are China Aviation Supplies Holding Company, ICBC Financial Leasing Co., Ltd., and China Development Bank Leasing. Boeing estimates that in the next 20 years, China will be its biggest market for commercial aircraft. The company projects that China will need 6,330 new airplanes with a total worth of US$950 billion. As the Chinese middle class grows, more tourists will travel by air. According to China National Tourism Administration, in 2014 there were more than 109 million Chinese tourists travelling abroad. China’s largest low-cost airline Chunqiu said its revenue on international lines increased by 63.13% in 2014.

Interactive Timeline of Boeing and China

Timeline created by Diying Wu, Institute of the Americas

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