China market bodes mixed for local IT firms

SINGAPORE -- The huge market of China can be both a blessing and a curse for local information technology firms, said Kai-Fu Lee, founder of Innovation Works and former president of Google China.

Speaking at the FutureChina Global Forum in Singapore, Lee said most of the companies his venture capital firm funds are mainly exploring the domestic market.

Lee, who had also worked with companies like Microsoft and Apple, was responding to a question about whether there are an increasing number of Chinese entrepreneurs going to the overseas markets first and avoiding the domestic market in fear of being copied.

He said that it is the stereotype of China being a market of copycat is unfair, though this does happen in some areas. The reasons for some companies going directly to the overseas market is more complicated.

For some of the mobile game companies, for example, one of the reasons might be that the mobile payment is more mature in the overseas market, he said.

Lee said he was worried about the reverse problem of the huge Chinese market being both a blessing and a curse for the local IT firms. It's a blessing in that it is a huge market that is usually difficult for foreign firms, and it is a curse in the sense that, because the Chinese market is so large that it is difficult for a firm to lift itself up and go get the overseas market once it has succeeded in optimizing for the Chinese market.

"So I am quite optimistic that the companies we fund and other venture capital fund will find success in the local Chinese market. I am less optimistic that there will be great IT brands outside China in five years' time," Lee said at the forum.

Lee delivered a speech on Monday evening on how the IT technologies have changed the lives and the way people work. The innovation in the IT sector is also drastically different from that for a traditional product like a car in that you can't try different versions of the cars out before it hits the market but you can try and optimize the IT applications.

He said the IT sector is typically more resilient than others in the economic downturn as it is easier to adjust its investment plans. Economic downturns don't prevent people from upgrading from dull phones to smart phones or from using phones just for making phone calls to using them for accessing information and reaching out to friends over the Internet.