Jun 29, 2013 · 26 minutes

What follows is an excerpt from my new ebook "Beta China: The Dawn of an Innovation Generation," which is the result of a reporting trip to China last year. The book is now on sale via Amazon and Apple for the princely sum of $1.99. 

It’s early afternoon on April 6, 2012, and the new superstar of the Chinese Internet is pacing the stage in a baggy white T-shirt. Behind him is a giant slide deck that stretches the width of a warehouse wall.

Hundreds of fans have come to Beijing’s hip 798 art district for the occasion. They’re packed into a former manufacturing plant wearing loud orange T-shirts, brandishing banners, and wielding the device that brought them here in the first place – the Xiaomi Mi1, China’s homegrown answer to the iPhone.

The 798 art zone is a fitting scene for Xiaomi’s party. It was once a military industrial complex, commissioned in 1951 by the Soviets and the China Communist Party as part of the new republic’s socialist mission. Factory workers used to make military parts and electronics here, but after the economic reforms of the 1980s that modernized China’s economy, the factories were no longer relevant or needed. The buildings were gradually abandoned. And so, in the mid-1990s, artists started to move in, laying a bright coat of paint over the drab greys of the Communist past. Today, it is a thriving cultural space, popular with the young and cool, and home to dozens of chic shops and restaurants. It is a symbol of modern Beijing – the collision point of nearly every global debate over culture, art, politics, freedom, economic bubbles, natural resource sustainability, and the power of the Internet to reshape all those things.

Meanwhile, on stage is a symbol of a new era of Chinese industry, a rare and daring entrepreneur in a country that has struggled to rekindle its centuries-old romance with innovation. A man who dares to dream big in a country accustomed to low expectations and factory reprints. He is 43 years old, his name is Lei Jun, and he is the closest thing China has to Steve Jobs.

Under that baggy white T-shirt, Lei is even dressed like Jobs, in blue jeans and a black long-sleeved shirt. Wearing a headpiece, he slowly and deliberately articulates Xiaomi’s early success, boasting that it has become one of the most recognizable handset brands in China in the space of just a few months. Every so often his voice raises into a shout and the orange-shirted army roars so that a din fills the cavernous space.

Today is Xiaomi’s second birthday. The Mi1 is a high-end device that competes with the iPhone on every metric but is modeled after the Android and costs $470 less. It has only been on the market eight months, but it has already inspired a fan club that numbers more than 2 million. Like Apple, Xiaomi designs and controls the software that runs on the phone, creating a seamless end-to-end experience that places usability on a pedestal. Two months from now, having sold 3 million units, Xiaomi will close a Series C funding round of $216 million that values the company at a staggering $4 billion. Its investors include Russian tycoon Yuri Milner, the Singapore government-backed Temasek and GIC, IDG Capital, and Qualcomm.

The startup is marking its anniversary with the release of another order of Mi1 phones, which it has been selling primarily through its Web site, and only in batches of a few hundred thousand at a time. Every couple of months, a new batch becomes available, stoking excitement among prospective customers and lending the product an air of scarcity that imbues it with the high status that is so important to many Chinese consumers.

Thirty minutes into the presentation, Lei is joined on stage by a livewire Xiaomi product manager called Xu Fei. She and Lei will together count down the sale of the next 100,000 smartphones. A massive “0” is projected on the orange slide behind them, ready to start ticking over as online orders open.

In the crowd, a sea of Xiaomi phones rises to record the moment. There is a giddiness to the scene, a sense of pride. Our phone. Our company. Our success. The party begins a collective countdown: Five! Four! Three! Two! One! For a few uneasy seconds, that giant “0” hangs there, staring everyone down. But then the ticker starts moving. The numbers begin counting upwards fast, accelerating at the speed of a bullet train.

5. 10. 18. 33. 77. 120.

Then faster. 159. 290. 352. 420.

The first 1,000 phones are gone within 30 seconds. Within a couple of minutes, the 20,000 mark is passed, a moment accompanied by fevered whoops from the crowd. The number rises to 30,000 seconds later, and soon the increments of 10,000 seem unexceptional. The crowd saves its cheers for more significant milestones.

In the background, generic instrumental rock music plays on a loop, while sales keep crashing through the thousands. It takes three minutes to plow through 50,000 phones. More flashes and lighted screens. As the final minutes tick by and the magic number approaches, the cheers from the crowd grow ever louder.

Raucous voices urge the ticker on as it speeds round the corner into the 90,000s. Then, at the very moment it rolls over the 100,000 mark, Lei springs back on stage with both arms raised high above his head. He lets out a victory cry and punches the air.

Behind that punch is not just the exultation of another record-time sellout, but also the energy of an emerging high-tech success story written entirely in Chinese characters. The Mi1 is not merely another phone that has been “Made In China,” but a remarkable technological achievement that has been conceived, designed, and delivered in China. It is a near-perfect blend of hardware and software that captures a new strain of innovative culture that has the potential to complement and challenge the best the US has to offer.

Once regarded as a land of copycats, China is now primed for an era of Internet innovation, and Xiaomi is leading the charge. Today is a vivid illustration of the startup’s potential to reshape the consumer tech landscape in the world’s biggest Internet market.

After all, it has just sold 100,000 phones in six minutes and five seconds.

*  *  *

The words China and innovation weren’t always antonyms. Dial back the clock a few centuries, and you can get a sense of just how momentous a contribution Chinese inventions have made to modern society, right down to even the most fundamental of technologies – paper.

As far back as the fifth century BC, the Chinese had materials that approximated paper. In those times, a philosopher called Mo Tzu carried with him three cartloads of heavy books wherever he traveled. The books were made of narrow vertical strips of bamboo, which is pretty versatile stuff, but not exactly the sort of thing you can slip into your carry-on luggage. For less important documents, the Chinese resorted to writing on strips of silk. After a few hundred years, they eventually realized that there had to be less costly and less cumbersome ways of distributing their sacred texts. It took a eunuch to crack the code.

Cai Lun started his career as a court eunuch in AD 75 under the rule of Emperor Hu during the prosperous Han Dynasty, which lasted for about 400 years. It was a particularly frothy time for innovation in China, encompassing a series of world-changing scientific advances, including the use of negative numbers in mathematics, the raised-relief map, the hydraulic-powered armillary sphere for astronomy, and the nautical steering rudder. To that list Cai added modern paper that was good enough, almost, for your desktop printer.

Under Emperor He, Cai rose steadily through the ranks, and in AD 89 he nabbed a coveted role as chief of weapons manufacturing, according to Joseph Needham’s book series Science and Civilisation in China. Nearly two decades passed, however, before he would fundamentally re-imagine the papermaking process. Using bark, hemp, cloth rags, and fishing nets, Cai developed a process in which felted sheets of fiber were soaked in water and then dried into a thin, matted sheet. The technique is still used today. (I should point out that some scholars speculate that Cai merely hogged all the credit for the invention, which may actually have been the work of someone of lower rank.)

Just as Steve Jobs didn’t come up with the concept of a mobile phone with apps and a music player, Cai didn’t come up with the idea of paper. But he did make it cheaper, easier to manufacture, and more accessible. To put his achievement into perspective, consider Gutenberg’s Bible, probably the earliest European book printed using movable type. Publishers printed that particular tome on parchment made out of sheep skins. It was a fairly inefficient method. Each copy of the Bible amounted to 300 dead sheep.

By the seventh century, Cai’s papermaking technique had spread to Korea, Vietnam, and Japan. It eventually reached the West in the 12th century. Only now, in the 21st century, is it beginning to be supplanted as humankind’s primary communications medium.

Paper, however, is just one of many great inventions China has given the world. The Chinese invented both block printing and movable type. Europeans may have learned about block printing via the spread of playing cards, which were also invented by the Chinese.

The first people to print paper money? That was the Chinese, too. Around AD 1000, they invented gunpowder, which they used for fireworks. It took Europeans another 300 years to get to this technology, but when they did they used it for decidedly less friendly purposes. They used it to fire cannons. By the time the 19th century rolled around, the Europeans were using China’s invention against it to devastating effect in the Opium Wars. Those wars were motivated in part by the British addiction to tea, another Chinese invention.

There are plenty of other items on China’s highlight reel of world-changing inventions. The magnetic compass – a feature of every iPhone – was brought into the world by the Chinese around AD 1100, historians believe, and used for navigation. The Chinese were the world’s earliest practitioners of chemistry, a study fueled by the Taoist search for the elixir of life. And they were the first people to produce silk, a skill they acquired as early as 1300 BC.

The Chinese also pioneered the idea of exams for government service, and their ancient bureaucratic system of government apparently inspired the thinking of the German philosopher and mathematician Leibnitz, the French philosopher Voltaire, and the French political economists of the late 1700s known as the Physiocrats.

The list runs longer, but by now you get the point. China, as a culture and a civilization, has a long tradition of innovation. Even though the country today isn’t exactly known for its respect for intellectual property, a wider historical view shows that Chinese ideas and products have been as important to the underpinnings of modern society as those of any other country.

Still, it’s true that the country has undergone a remarkable centuries-long fallow period during which it has produced essentially nothing of note. The China we’ve known in industrial times has seldom been associated with innovation. As The New Yorker’s Evan Osnos has written, “The nation that so often reminds the world that it invented printing, paper, gunpowder, and the compass is exceedingly uncomfortable about how far back it has to reach to name its world-beating inventions.”

There are several competing theories to explain that. Scholars have variously argued that political, economic, and cultural factors have hampered scientific progress. Joseph Needham, for instance, suggested that Chinese intellectuals’ religious and philosophical beliefs have prevented their achievements from graduating into the realm of “science.” Others have pointed to the availability of a cheap and abundant workforce that negated the need for agricultural technologies. Another possible explanation is that ongoing political instability – fights between modernists and conservatives, the Republican wars, war with the Japanese, war between Communists and Nationalists, and the creativity-crushing Cultural Revolution – has had a devastating effect on the country’s ability to innovate.

The multi-disciplinarian scientist Jared Diamond argued in Guns, Germs, and Steel that China’s monopolistic government – made possible by the country’s relative lack of geographic barriers – meant individual rulers could stifle new technology at whim without threat to their thrones. At the same time, greater competition in Europe – a continent comprising many small countries divided by geographic barriers – facilitated the rapid advance of technology.

In present-day China, innovation is neutered by an education system that emphasizes conformity over creativity, a Confucian ideology predicated on hierarchy and obedience, and the low value placed on intellectual property.

Perhaps surprisingly, the biggest bears on modern China’s ability to innovate are the people who are investing most heavily in it, including Kaifu Lee, the former president of Google China who now has a Y Combinator-style incubator called Innovation Works. Lee has spoken out many times about China’s inability to produce innovators and says that it won’t produce the next Steve Jobs unless it reforms its education system and learns to tolerate failure.

In a March 2012 speech to the Yale Club of Beijing, angel investor Xu Xiaoping said it will take years for China to start truly innovating. Xu, best known as the co-founder of the New York Stock Exchange-listed New Oriental Group, singled out the university entrance exam for special derision, according to a translation provided by the Chinese tech blog TechNode. The one-off exam, which consumes students’ lives and determines their futures, destroys passion and creativity, he said, and holds China back from reaching its true potential. His company provides a way around that: it prepares Chinese students for overseas study.

The Gaokao is unlike anything most Westerners have encountered, worse by an order of magnitude than the much-feared SATs. Students take it at the end of their high-school education over a period of two days in June. In deference to just how crucial it is, entire cities go out of their way to skirt around the exam venues. Airlines change their flight paths to minimize overhead noise, cops block roads to minimize distractions, and cars are banned from using their horns, all in the name of providing the most tranquil conditions possible. But silence has never sounded so stressful.

The exam not only determines whether or not students can go on to university, but also what schools they attend and what course they can study. And there is an inherent supply-and-demand problem. For instance, in 2012 more than 9 million students sat for the exam, but only 6.85 million places at universities were available, according to Ministry of Education figures quoted in China Daily. The extreme importance of the exam, which is geared towards memorization and factual regurgitation, was rammed home this year when it was revealed that the family and teachers of a student from Shaanxi Province held back news of her grandfather’s death for two months because they didn’t want to upset her before the big day.

The Gaokao does inadvertently inspire innovation, however. For instance, some students devise the most wonderfully creative ways to cheat, deploying increasingly sophisticated devices in service of the mission. The most mundane of these are wireless earphones, but they get a lot more technical than that. My favorites are the erasers and rulers that come with built-in microphones and display screens.

Another unintended consequence of the gruelling Gaokao is that some students simply forsake it and instead trot off to the US or the UK for higher education, where they’re more likely to get a schooling that encourages them to think laterally anyway. Official data released this year showed that 1.4 million students did not take the exam in the past four years, according to Global Times. That decline coincided with a 20 percent annual increase in the number of students hoping to study abroad.

When I went to Seoul, South Korea, for a brief reporting trip in July 2012, I sat down for fried chicken and watery beers with Yong Joon Hyoung, a serial entrepreneur and the founder of Cyworld, a social network that pre-dated Friendster and pioneered mobile payments. As we munched on wings, Hyoung told me that Koreans have difficulty with creative thinking because their society is so deeply rooted in Confucianism and a societal order in which people are deferred to simply due to their age. Hyoung called it “senior-junior” culture. The hierarchy translates into the workplace, where “juniors” must always cushion their speech to “seniors” with platitudes and deference, while seniors just outright condescend to their younger peers. This is not a culture in which open debate with superiors is encouraged.

The conversation I had with Hyoung reflected many I would also have with people in China. Some of the most prominent startups, such as Meilishuo, Dolphin, Baixing, and Wandoujia, boasted about their “flat” business structures, in which founders sat among the rest of the team and everyone referred to each other by casual names instead of honorifics, undermining formality at every step. Their open-plan offices stood out as distinctly “un-Chinese,” relaxed and fluid spaces in which bosses aren’t shut off behind closed doors, and where there are no walls separating workers from each other.

But these companies are the exceptions. As in Korea, most of Chinese society submits its creative and critical will to the teachings of Confucianism. These teachings stress “filial piety” – which amounts to unquestioning obedience to one’s parents – and rigid hierarchy as key life values. They may be very useful in the context of family, but they often stifle innovation, and leadership, which are necessities for startups and require a healthy disrespect for authority and a willingness to disrupt the status quo and to take risks.

The consequence of this coupling of Confucian culture with an education system based on rote learning and a one-off, punitive exam is that many Chinese forgo big dreams and crazy ideas in favor of long-term employment and financial security. That is entirely understandable, given the extreme poverty of China’s very recent past, which still looms large in the collective consciousness. But because of these psychological constraints, few young people dare risk their futures by working for startups, which typically come with no associated prestige, no job security, and no guarantee of any money.

The writer Wesley Yang neatly encapsulated this cultural conundrum in a New York magazine essay about why there are so few Asian-Americans in leadership roles. “To become a leader requires taking personal initiative and thinking about how an organization can work differently,” Yang wrote. “It also requires networking, self-promotion, and self-assertion. It’s racist to think that any given Asian individual is unlikely to be creative or risk-taking. It’s simple cultural observation to say that a group whose education has historically focused on rote memorization and ‘pumping the iron of math’ is, on aggregate, unlikely to yield many people inclined to challenge authority or break with inherited ways of doing things.”

Cognizant of its innovation drought, China is actively trying to bring on the cooling rains of innovation, but it is doing so the only way it knows how – by force. One of its solutions has been to pump up its investment in research and development. In 2011, the country surpassed Japan to become the world’s second-biggest spender on R&D, behind only the US. Some commentators think China will overtake the US soon enough. A study from the Battelle Memorial Institute predicts China’s R&D spending will match America’s by about 2023.

But then, research dollars don’t always amount to success. “I think the numbers are pretty useless,” Michael Schrage, a research fellow at MIT’s Sloan School, told the Wall Street Journal. “What matters more is the kind of innovator you are. If it were really true that the people who spent the most on R&D were the most successful, we wouldn’t be subsidizing General Motors.” Apple, considered one of the most innovative companies in the world, spends less on R&D than it does on overhead costs, and isn’t even among the top ten big research spenders in the US.

In China, the correlation between R&D expenditure and actual innovation is even more tenuous. “American CEOs love to quote China’s rising investment in R&D, but they never follow with Chinese reporting that suggests 60 percent of state R&D funds are lost to corruption,” Adam Segal recently told the New Yorker’s Osnos. Segal is the author of the book Advantage: How American Innovation Can Overcome the Asian Challenge. “High-profile plagiarism and academic malfeasance cases continue to surface, and the education system struggles with fostering creativity and individual initiative,” Segal added.

On top of that, Chinese innovation faces even deeper institutional challenges. “Market incentives are still orienting Chinese entrepreneurs to adapting technologies developed in the West for the local market, not thinking long-term and investing in high-risk, high-return breakthroughs,” Segal said. “Most important, the government still fears the intellectual competition and freedom to debate the new ideas necessary for innovation.”

*  *  *

That is why Lei Jun is so important. The unassuming CEO on stage at Xiaomi’s second birthday party is like the Yao Ming of Chinese entrepreneurship, a man seemingly born to start companies. To him, intellectual competition and freedom to debate are breakfast.

With a helmet of black hair, a broad smile, and dimpled cheeks, Lei looks almost as baby-faced as he did when he first became CEO of a software company Kingsoft back in 1998, when he was only 28. At that point, he had been working for Kingsoft since 1992, when he graduated with a computer science degree from Wuhan University, an unremarkable school of more than 50,000 students.

Since that time, Lei has taken Kingsoft public, gone on to start an e-commerce site, Joyo.com, which he sold to Amazon for $75 million, and become one of the country’s leading angel investors, with stakes in online clothing retailer Vancl, shoe retailer Letao, mobile browser maker UCWeb, and communications portal YY, all of which have valuations in the hundreds of millions of dollars. He started Xiaomi in April 2010 with Google’s former Android engineering lead for China, Lin Bin, whom he met while chairman of the board at UCWeb.

Lei is unusual among China’s Internet leaders for having no American education and speaking no English. But what’s even rarer is that, on top of software, he is innovating on product, a big hole not only for China, but also in other emerging markets such as Brazil, Russia, and India. Xiaomi speaks to a promise that consumer goods won’t always be Western creations, and that’s a real threat to the West, whether you are Apple or Dolce Gabbana. If he pulls it off it’ll be a radical shift for the developing world. Hence the screaming fans.

Lei’s peers describe him as a thoughtful and calm businessman who listens well and articulates his points clearly. On stage, he comes across not as jingoistic or particularly polished in his Steve Jobs-like presentation, but boyishly excited. He hasn’t quite mastered the art of public speaking – at times, he lets his speech wander and his intonation sag – but he projects an aura of self-assuredness.

He also exhibits an irritable side, proving he hasn’t quite honed public relations to perfection, either. When a reporter from the Economic Observer asked Lei how much profit Xiaomi made on each Mi1, Lei raised his voice and said, “Do you think that’s a polite question?” When the reporter went on to ask what differentiates the Mi1 from cheaper local competitors, Lei slammed his phone on the table. “You are making an insult by comparing a first-class international brand to domestic products,” he fumed.

That incident is one of the few times Lei has been the subject of bad press in China. And it’s unlikely to harm him in the long run – it’s not like the odd tantrum did anything to harm Jobs’ reputation as a visionary. His most ardent supporters might suggest that such displays of intemperateness are only to be expected from a man with a clear entrepreneurial vision who is passionate about his product.

“Lei Jun is a special entrepreneur, and his combined skill set is difficult to emulate,” says Robin Chan, another prominent angel investor in China. Chan, who splits his time between Beijing and Silicon Valley, founded social gaming company XPD Media, acquired by Zynga in 2010. Chan is an investor in Twitter, Foursquare, and Square. He also has a stake in Xiaomi. He thinks Lei is central to Xiaomi’s early success. “It takes a serial entrepreneur that understands the mobile Internet, e-commerce, and social media, as well as ready access to the capital markets, to grow as fast as they have.”

How fast is that? Well, Xiaomi got that $4 billion valuation for a reason. In just over a year, the company sold 3 million devices and became one of the most recognized handset brands in China, all on the strength of the Mi1. It spent very little on traditional advertising, instead choosing to market the product through social media. By the end of 2012, it had sold more than 7 million phones, and Lei estimated a net profit of about $200 million. Its sales target for 2013 is 15 million devices.

Investors are in love with its model, too. Xiaomi takes Amazon’s approach to making money, selling the phones cheaply in order to make money from software and accessories, and Dell’s approach to distribution, using its Web site as its main retail outlet.

But the most potent comparison is to Apple. Just like its now-rival in Cupertino, Xiaomi has built an entire ecosystem around its product, with a customizable user interface, an app marketplace, and a brand that resonates with a broad range of consumers.

Lei has even positioned Xiaomi as revolutionary, a word that resonates more strongly in China than in most countries. This can be seen in the company’s very name, which literally translates to mean “millet,” but is also supposed to invoke the so-called “millet and rifle” revolution style that helped the Communists defeat the Japanese army and the nationalist Kuomintang. One of the slides on stage at the birthday party shows an army of Xiaomi cartoon rabbits surging forward behind a large red flag held proudly aloft. It is a direct allusion to well-known Communist propaganda.

Though he denies it, it looks as though Lei has modeled himself on Steve Jobs, right down to the austere jeans-and-black-T-shirt look. A reporter once spotted a copy of Walter Isaacson’s Jobs biography on Lei’s desk. In the past, Lei has bristled at the comparison. He told Forbes that Jobs is an inspiration but denied copying his mode of dress. “I was annoyed in the beginning, very annoyed,” he told the magazine, “but I don’t mind anymore.” One of Lei’s nicknames is Lei-bu-si, a pun on Jobs’ Chinese name, Qiao-bu-si, according to magazine. But Lei says he doesn’t think Jobs could have succeeded had he lived in China. “Jobs was a scrupulous perfectionist, while Chinese culture emphasizes the middle path.” In China, you need to make compromises.

Like Jobs, he is also prepared to fight for his product. In June 2012 Zhou Hongyi, the controversial and polarizing CEO of security software company Qihoo, took to Sina Weibo (a Chinese microblogging service) to stir up trouble. “Just because he is wearing a black T-shirt and blue jeans, that does not make him a second Steve Jobs,” Zhou said, according to a translation provided by China Daily. “The malfunctioning Xiaomi smartphone is nothing compared with the iPhone.”

No surprise – Qihoo was about to announce its own smartphone that would compete with Xiaomi’s devices. Lei, however, was bothered enough to respond through the media. “A lie told a thousand times becomes the truth,” he told the Southern Metropolis newspaper while defending the veracity of the Mi1.

In Lei Jun, China has found an entrepreneur who not only possesses the experience, skills, and vision to drive innovation, but who can also put a face to a new era of the Internet. He’s not Steve Jobs, because China’s tech world in 2013 requires someone different. He is a bona fide homegrown tech revolutionary who believes in the strength of his ideas and the power of possibility. His opponents may dismiss all that as just good marketing, but his supporters think he could be the man to wake China from its centuries-long innovation slumber.

*  *  *

When it comes down to it, China knows it is behind the pace set by the world’s innovation leaders. In 2011, the Chinese Academy of Science and Technology for Development ranked China 21st among the world’s 40 most innovative countries, according to China Daily. “Although China has a scale advantage in innovation resource and knowledge creation, it still has a big gap in innovation efficiency, intensity and quality compared to developed countries,” the academy’s executive vice president said.

The report noted that China expects to become “an innovative country” by 2020, at which time the country’s blueprint for science and technology predicts R&D investment will amount to 2.5 percent of GDP. The same blueprint estimates that by the same time “scientific progress” will contribute 60 percent of the nation’s economic development. One should treat these bold claims with a healthy degree of skepticism, however. Such blueprints are sometimes better at serving the government’s political ends than they are meshing with reality.

And yet, despite all the challenges, the restrictions, the corruption, the conflicts, the instability, and the disadvantages, innovation does happen in China. Particularly with regard to the tech industry, it is happening in ways that are not being properly acknowledged by much of the Western world. That may be partly because the West doesn’t pay much attention to what’s happening China. The products within China aren’t typically designed for the outside world, so the outside world often doesn’t realize that innovative things are happening. One world, two Internets. Even though it is a culture primed to copy, it is also the wellspring from which key Internet developments are beginning to emerge.

As I will outline in the following chapters, from micropayments to microblogging, burgeoning online communities to entertainment portals, mobile browsing to mobile messaging, some of the best Internet ideas to come out of China are quietly being copied by the US already. Many more should be.

And let’s not forget: The US has had a free enterprise culture for more than 150 years. China has had it since 1978. There is strong reason to believe we are only at the beginning of China’s rise. As Shaun Rein argued in his book The End of Cheap China, rising costs and the end of easy money are forcing Chinese companies to think more strategically. No longer can they rely on simply filling in gaps in the economic infrastructure that don’t exist in the developed world. As the standards of living and worker compensation rise, the Chinese will come to demand more from their homegrown brands, or they will simply turn to foreign competitors.

Homegrown Chinese companies – from Xiaomi to Sina to YY – are already starting to change the dynamics of the global Internet industry, showing that Silicon Valley’s status as the victim of Chinese copycats could ultimately be short lived. Instead, expect to see some reverse colonization – the infiltration of Chinese ideas into the air space of the Western world’s Internet sectors.

"Beta China: The Dawn of an Innovation Generation" is on sale now via Amazon and Apple for $1.99.