Capitalism in a Communist Country

We hear stories all the time of how products of Western companies are copied brazenly by the Chinese. Of how copyright, patent laws and intellectual property are violated with impunity by Chinese companies.

 

As I was reading Chinese venture capitalist and ex-Googler, ex-Microsoft, Kai-Fu Lee’s book on AI, I realized this is how Chinese companies operate against everybody – including each other. It’s not something restricted only to their dealings with the West.

 

Here are two examples of how brutal, vicious and underhanded the fights between Chinese companies are. Before the smartphone, TenCent had a popular messenger/chat application for the desktop called QQ. Another company, Qihoo, came up with a popular antivirus software. Unrelated areas, right? Until TenCent decided to enter the antivirus market. Sneakily, TenCent changed the installation program – if a user tired to install QQ, it would also install TenCent’s antivirus software. Given how popular QQ was, this effectively became a backdoor to install their antivirus software on most user’s machines.

 

Qihoo hit back – their antivirus software started flagging QQ as a security risk to the user, regardless of what the truth was. One day, on his way to work, Qihoo’s CEO learnt that there were 30 cops at the office. Convinced they were “sent” by TenCent, Qihoo’s CEO fled to Hong Kong. From where he continued the battle. TenCent then escalated things – they announced that QQ wouldn’t work on any system that had their rival’s antivirus software. This was like WhatsApp saying it wouldn’t work on a phone that had the Chrome browser. Eventually, the Chinese government intervened and told both companies to dial it down.

 

The other example is of Kaixin001, a social networking cum gaming site. Unfortunately, the obvious URL, kaixin.com, wasn’t available – it was owned by someone else. So they launched with the URL as kaixin001.com. A fatal blunder in the brutal world of Chinese startups, as it turned out. The biggest Chinese social media company, Renren, first went and bought the kaixin.com URL. They then created an exact copy of kaixin001 and brazenly called it “The Real Kaixin Net”. Where do you think most new users enrolled? kaixin.com sounds like the real site (even though it was owned by the copier) whereas kaixin001.com (the actual site) sounds like a phishing site:

“The move kneecapped Kaixin001’s user growth, killed its momentum, and neutralized a major threat to Renren’s dominance.”

Kaixin001 sued; but by the time the courts ruled in their favour and awarded a fine, it was too little, too late. Renren had lost the (court) battle, but won the war for users and market dominance.

 

It’s a dog-eat-dog world out there in China. Bare knuckled capitalism in a communist country. Go figure.

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