Venture capitalism (VC), a business model native to the Western world, has recently gained traction in the Asian market and will only continue to flourish in the future. Thanks to the rise of VC, innovative ideas native to Asia are being discovered and supported, which may inspire the construction of new Silicon Valleys across the continent.

Consumers have frequently criticized goods and services produced in China as lacking in originality and quality. Since so many global companies outsource their production in China, the Chinese businessman’s mindset has been molded into copying whatever is trendy to make cheap knockoffs and quick money. Since the PRC government has blocked access to social media sites like Facebook and Twitter, or video streaming sites like Youtube, the Chinese have come up with copycat sites. Since the Chinese Internet market was quite undeveloped at the turn of the 21^st century, the knockoff version of Facebook and Twitter – Renren and Weibo – quickly dominated the market and became almost as popular as their originals by the number of registered users.

Renren is now listed on New York Stock Exchange (NYSE) with a market capitalization of $1.22 billion. DCM, the renowned VC firm that invested in Renren during its early stages of development, currently manages funds of about $3 billion and has over 143 companies in its portfolio. Out of the 143 companies, 41 companies were founded and are currently operating in China, 16 in Japan, 80 in the US, and 6 from elsewhere in the world. Although US companies still occupy more than half of DCM’s portfolio, Chinese companies are quickly catching up.

Chinese companies have also received more global media attention than ever before. Jack Ma’s Alibaba Group, a tech company that has successfully evolved itself into an e-commerce conglomerate, has just changed its IPO filings recently revealing that the company would be listing its shares under the symbol “BABA” with the NYSE. This news has started a frenzy among the business people across the world. Newspapers like the Wall Street Journal, Financial Times, Forbes and even the Irish Times have written about Alibaba within this past week. Steve Schaefer, a Forbes correspondent, even went as far as saying Alibaba’s offering can maybe surpass Facebook’s 2012 debut as the largest tech IPO on the record, and challenge Visa’s hold on the title of the biggest US listing.

One of the most famous subsidiaries of Alibaba Group is Taobao Marketplace, the dominant online shopping website in China and beyond. Although Amazon’s service is global, its popularity and market share in China pales in comparison to Taobao’s. A sizable portion of the population, especially younger generations, purchases everything they need exclusively online. And even if they were to go shopping in a physical store, that would be only for the purpose of comparing prices. People would still go back online to purchase from Taobao, because goods are often cheaper there. Before Taobao was created, Softbank Corporations of Japan invested $20 million in Alibaba Group without getting any of its shares. Softbank made a bigger offer to Jack Ma, in return of getting 30% of Alibaba’s shares. However, Jack Ma was too smart to give his company shares away at the time. The investment turned out to be very profitable for Softbank, since it became to own 34.3% of Alibaba, and has gained 45% over the last year.

Modern China has been known for its cheap labor, but never before has it been known for organic economic innovation and growth. More young people are becoming entrepreneurs and many successful companies have been born from this unique kind of creativity, the kind that attracts capital and endless opportunities. VC will further encourage entrepreneurship among youngsters, and this is a hopeful sign of diversifying China’s economy to support sustainable development in the future.

Update: The featured image was changed on July 29th

The views expressed by these authors do not necessarily reflect those of the Glimpse from the Globe staff, editors, or governors.

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While Alibaba has declined to comment on why it moved its IPO from Hong Kong to New York City, its decision is largely based on a disagreement between company executives and the Hong Kong Securities and Futures Commission. Unlike Hong Kong’s stock exchanges, the NYSE and the NASDAQ do not maintain a one-share per one-vote standard, allowing Alibaba’s key partners to maintain control over its board of directors.

Holding its IPO in the United States could also facilitate future acquisitions of American companies. Its recent investments in the Silicon Valley start-ups Tango and AutoNavi indicate that Alibaba is seeking market expansion at the international level. More than just a middleman between sellers and buyers, Alibaba allows its customers to pay bills, buy insurance, and even take out loans. Its wide range of services and competitive pricing structure are enticing to both consumers and venders. Moreover, Alibaba’s capital is substantial. In the past fiscal year, its estimated sales exceed $420 billion, which dwarfs the combined revenue of Amazon and eBay. Further, it boasts 300 million customers across China – a number that will surely grow in accordance with increased Internet penetration.

Yet, Alibaba’s main obstacle to success may be the Chinese Communist Party. Consider yuebao, Alibaba’s financial investment service that provides a 5% return on risk-free investments. Yuebao offers a fantastic yield in China where millions of laymen deposit their hard-earned yuan into bank accounts only to see its real value depreciate from an inflationary tax. As Yuebao continues to threaten Chinese banks’ monopoly on savings, its days may be numbered before the Communist Party intervenes. Only time will tell if Alibaba can fend for itself in the vast ocean of e-commerce. Continued expansion within China and throughout the developed and developing world may prove impossible. One thing is for certain: Alibaba’s biggest threat to global development no longer lies in America, but in Beijing’s Politburo.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

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