Each Saturday, Farhad Manjoo and Mike Isaac, technology reporters at The New York Times, review the week’s news, offering analysis and maybe a joke or two about the most important developments in the industry.
Mike: Hello, Farhad! Yesterday was my birthday. Now I’m 31, which in millennial parlance means I’ve been dead for years.
What did you get me? I didn’t see any big packages in my mailbox yet.
Farhad: I’m 37. Let me let you in on a secret: No one gives you presents after 30.
So, quite a week for tech and tech-related issues! In auto tech, Volkswagen admitted to gaming the system in emissions testing for some of its vehicles, deceiving regulators and the general public for years. The outlook does not look good for VW.
Meanwhile, the death of print has been greatly exaggerated, I guess, while e-books aren’t exactly flying off the digital shelves like we thought they were? Kickstarter also became a public benefit corporation, which is pretty hippie dippie, but noble.
But let’s talk about China. Apparently I’m an idiot for not lining up Mandarin lessons, since in 10 years or less, we’ll be part of a global economy dominated by China. Who knew? Besides, you know, economists.
In any case, the technologists seem to know. Everyone from Tim Cook to Travis Kalanick to Satya Nadella was up in Seattle this week, talking with Xi Jinping, China’s president, on his state visit to the United States. Apparently, we’ve all agreed not to hack each other, sort of, and we all want to do more business together, but under some conditions.
Farhad, tell me what to think. Do you speak Mandarin, or are you as ill-equipped for the new economy as I am?
Farhad: I don’t speak Mandarin, but Mark Zuckerberg does, and it doesn’t seem like he’s any better prepared to deal with China than I am.
So let’s use Mr. Xi’s visit as an opportunity to talk about the way American tech companies have approached China. China holds the promise of becoming an unspeakably huge market — a place where Facebook and Google could connect billions, and where Apple and Amazon could sell to a burgeoning middle class. But China is also perilous to American tech companies: a place where their technology could be copied or stolen, or where smarter, more culturally astute upstarts could come in with unusual business models and eat their lunch.Continue reading the main story
Only Apple has done really well there, and even then, only after completely overhauling its China strategy a couple of years ago. To address China, Tim Cook focused on creating more retail stores in the country (in the past, Apple relied heavily on third-party sellers) and on making deals with Chinese mobile providers. Apple has also begun designing phones with Chinese consumers in mind — it’s pretty clear, for instance, that making larger phones, and not to mention gold phones, was aimed mainly at the Chinese market. These moves have paid off; China now accounts for about a fifth of Apple’s revenue, up from about 15 percent two years ago, and sales there are growing fast.
But the other tech giants face a tougher time. Google and Facebook are shut out of the market as a result of Chinese censorship, and local search engines and social networking companies are well-entrenched in China. The same goes for e-commerce: Amazon has tried to make inroads there, but Alibaba rules the Chinese e-commerce market more handily than Amazon rules the American one.
It feels like the Chinese Internet industry and the American Internet industry are effectively cut off from each other. There’s no overlap — but at some point, they may collide. Right?
Mike: I honestly do not envy Facebook, Google or Twitter in this situation.
As you said, on the one hand China is so lucrative and must be amazing to look at from the perspective of an outside business hungry to enter a huge market. Imagine some chunk of 1.3 billion more people using your services. That’s just under Facebook’s current worldwide footprint.Photo
But China wants to exert its muscle over its people and the types of speech that are permitted on its Internet. That means no anti-state speech, nothing that could involve collusion against the government. And that’s the polar opposite of what companies like Facebook, Google or Twitter really stand for.
Others, like LinkedIn, may have found a compromise, but it seems like mostly spin. Under LinkedIn’s Chinese site rules, politically sensitive speech is susceptible to censorship. Some would consider that move by LinkedIn to be an American company compromising a user’s ability to speak freely on its network in order to pursue a lucrative business end.
Companies like Uber and Lyft have a much easier time, I think, because catching a ride has little to do with speaking one’s mind. Though local regulators aren’t exactly friendly to American companies coming in and potentially dominating the ride-hailing market, but that’s another issue.
That said, China’s stock market is a hot mess right now, and the country may be reaching the end of an era of enormous economic growth. Opening up to more business dealings with American countries — and tech companies in particular — is probably something China is more amenable to now than ever before.
So to answer your question: I have no idea what’s going on or what will actually happen. Also, this newsletter was not very funny. China is serious business.
Farhad: Maybe it’s time to call in Donald Trump? He’d go there and say, “Hey China, use Facebook and Google, or else!” That’d work, right?
Mike: I will use this occasion to invoke the words of The Donald: “You’re fired.”
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