Russ Shaw, founder of Tech London Advocates, explores the attitudes towards international tech investment and explains why we should embrace, not fear, it.
The recent announcement from the Chinese State Council that the country is clamping down on foreign investment is, unfortunately, part of a common theme for 2016. Economic nationalism was a driving force behind the recent US election, and freedom of movement has been a central issue in the Brexit referendum. This is detrimental to the tech sector at large, particularly in London.
The news comes after a string of high-profile Chinese acquisitions of Western tech start-ups and scale-ups, most recently the acquisition of Skyscanner by Ctrip, China’s biggest travel company. This deal is an excellent strategic decision by both parties; Skyscanner has made vast strides overnight towards its goal of cracking into the Asian market, while Ctrip has acquired the industry leader in a niche sector that provides a powerful English-language base.
Negative reactions
Reaction in both markets to the news has been negative, with UK commentators worried we are selling the family silver, while the announcement from the Chinese government also suggests such deals should be restricted.
These reactions indicate the belief that trade is a zero sum game, an opinion we see reflected in much of the current political rhetoric. In a world with distinctive differences between emerging and established markets, trade represents an opportunity to increase global wealth and share ideas and technology.
Skyscanner’s sale to Ctrip is representative of changing investment practices within the Chinese tech sector. Alibaba, Ant Financial, Baidu, Ctrip, and Tencent have all made acquisitions outside of China since 2014 – with $191bn worth of total Chinese overseas investment in the first nine months of this year alone.
As Chinese companies invest in American and European tech economies, Western firms are beginning to exploit the booming Chinese consumer market. American travel-tech giant Airbnb is currently in talks to buy China’s second-largest home booking service, Xiaozhu, marking a significant investment in the Chinese travel industry. These deals match the expanding pool of Chinese capital to a skilled and experienced community of Western tech entrepreneurs.
In January, the Chinese backed venture capital fund Cocoon Networks announced it would invest up to £500m in UK and European tech start-ups. This fund will accelerate the growth of UK tech firms, provoke an exchange of technology and offer an avenue for access into the Chinese market. Although it is Chinese purchases that make the headlines, investment and cooperation flows both ways.
Closing the gap
Rather than see deals as an exodus of talent or capital, they are part of a global ecosystem of investment that facilitates growth and innovation. The UK does not yet have the deep pockets of California’s investment community, and investments like these, or the announcement of the recent $100bn SoftBank Vision Tech Fund based in London, allow us to close the gap and compete with Silicon Valley. The growth of investment between Chinese and Western economies marks the beginning of a new era in Chinese-UK tech cooperation.
Whilst the British tech industry continues to develop into a global player, we should celebrate that Chinese companies look to the UK for world-leading tech startups and scaleups.
As new cultures, ideas and working practices are exchanged between East and West it’s time to recognise a simple truth. Collaboration and cooperation is good news for the UK – not just for China.