Craig Addison

Opinion | China is in the kind of technology bubble that helps local firms. Will it last?

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China internet officials on 27 January 2015 defended its efforts to block virtual private networks (VPN), which are used to get around the country's strict internet controls. VPNs encrypt and reroute internet traffic past the national firewall to access more than 2,700 blocked websites including Gmail, Facebook and Youtube, websites of several human rights organizations, as well as some media including the New York Times and financial news agency Bloomberg. Photo: EPA

Craig Addison

Published: 4:15pm, 4 Jun 2017Updated: 7:59am, 5 Jun 2017

China’s technology sector is in a bubble – but not the kind that erases huge fortunes when it bursts. This bubble, imposed by the Chinese authorities in Beijing in the form of the censored, closed internet also known as the Great Firewall, has stymied efforts by the world’s second-largest economy to create truly innovative breakthroughs.

Various commentators of late have written about how China has “won” against Silicon Valley or has caught up with it.

They cite the rapid growth of BAT – Baidu Inc, Alibaba Group Holdings and Tencent Inc - and their innovations in e-commerce, mobile payments, social network and instant messaging as evidence of China’s innovation prowess. Alibaba owns the South China Morning Post.

What they often don’t mention is that BAT were born, survived and thrived in a protected market, which is the other aspect of the bubble. It keeps competitors out, as well as restricting the free flow of information.

Shielded from competition from the American tech innovators they originally copied, and with a home market of 1.35 billion people, BAT and newer Chinese web startups have been able to grow rapidly on the mainland and come up with innovations that have evolved out of the closed Chinese internet environment.

Recent examples include live streaming companies, and so-called knowledge payment services that offer online comedy, investing tips, beauty advice for a fee.