Why foreign startups shy away from China

What is the common thread tying together Skype, Spotify, Waze, Mobileye, Wix, Zoopla? They are all companies hatched in Israel and Europe. They have all grown much of their business in the US and then made a major exit there, either through an acquisition or IPO. For two decades the US has provided high-growth startups with what they need: access to deep-pocketed venture capitalists, proximity to top-notch universities, a culture of risk-taking and sheer market size.

This changed, however, in July 2017, when China’s State Council issued the New Generation AI Development Plan, a three-step roadmap to becoming a world leader in AI by 2030. In November 2017, China’s Ministry of Science and Technology appointed four of its biggest technology companies—Baidu, Alibaba Group, Tencent Holdings, and voice recognition company iFlyTek—to lead the development of AI innovation.

Earlier, in May 2015, Chinese Premier Li Keqiang and his cabinet issued the “Made in China 2025” plan that stipulated the increase of Chinese domestic content of core materials, which means more components produced locally in China in products that are made or designed in China.

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