[Analytics] The India advantage: why China’s tech workforce can’t gain traction in Silicon Valley

Chinese companies and executives are facing resistance in the US as distrust of Beijing’s objectives grows. In contrast, India’s familiarity with English and history as a rule-of-law democracy leave it ‘much more tied into Silicon Valley’. Mark Magnier specially for the South China Morning Post.

While Indian tech workers have flourished in the US, their Chinese counterparts have struggled to gain the same acceptance. Growing distrust between Beijing and Washington, fuelled by the trade war, has heightened suspicion of Chinese in the industry, but the problems they face go deeper, and have been evident for some time.

In September 2015, Chinese President Xi Jinping landed in Seattle, Washington, to meet with corporate titans at Amazon, Apple, Boeing and Microsoft. There he encouraged them to set up research and development centres in China and partner on information technology and other sectors prioritised by “Made in China 2025”, a strategic tech blueprint aimed at upgrading Chinese industry. Four local Republican members of Congress balked at meeting him, according to news reports.

That same week, Indian Prime Minister Narendra Modi arrived in California’s Silicon Valley for meetings with Facebook, Google, Apple, Tesla and Uber executives. Modi, an avid Facebook and Twitter user, bounded among companies and packed an 18,000-seat stadium for a speech that touted India’s open policies toward US firms.

While Americans and Indians mixed seamlessly in Silicon Valley at a reception for Modi – effusing about the need for closer ties – the Xi reception was rather formal, said Anja Manuel, a co-founder of consultancy RiceHadleyGates and author of This Brave New World: India, China and the United States, who attended dinners for both leaders.

“India is much more tied into Silicon Valley than China and the atmosphere is just more comfortable with India,” she said. “US business leaders were starting to become wary of China, worried that there was not a fair playing field, and behind the scenes several CEOs didn’t want to be in pictures with Xi Jinping. They said all the right things, but the message was clear,” said Manuel, a former diplomat, investment banker and current senior fellow at the Harvard Initiative on Technology and Public Purpose.
“It’s a perfect example of the difference in cultures between the two,” she said.

As Chinese face more locked doors in the world’s largest tech centre, they have been doing some soul-searching on why they lag, despite Chinese outnumbering Indian science and engineering PhD graduates three to one in the US.

“There’s a lot of navel-gazing in the Chinese community in Silicon Valley on why Indians made it and they didn’t,” said a tech investor with close China ties, requesting anonymity given the growing US-China tension. “It’s an active topic, how to fill this gap.”

Some of the headwinds appear beyond China’s control. Chinese investment in the US, particularly in the tech sector, has dropped sharply as US-China distrust soars and the Trump administration ramps up US export-control and foreign investment restrictions. Students, professors and researchers of Chinese descent face growing suspicion as potential spies. US tech companies with even minority Chinese stakes face pressure to break their ties.

China hasn’t done itself any favours either.

Xi’s brash, nationalistic style and outsize tech ambitions have raised hackles in the Valley amid concern that Beijing’s “win-win” plans are increasingly a one-way street fuelled by state-sponsored competitors bent on industry domination. China’s growing restrictions on data, market access and censorship – effectively blocking Google, Twitter and Facebook from its massive market – have further hardened Valley sentiment.

During that 2015 trip by Xi to Seattle, China’s internet tsar pressured US executives to attend a forum with the Chinese president or risk greater regulatory scrutiny in China – raising eyebrows, according to James Mulvenon, director of the Defence Group’s Centre for Intelligence Research and Analysis.

There’s also a growing perception that Chinese workers more often violate non-compete clauses and divert crucial technology to Chinese state-linked ventures, whether in wind technology, high-speed rail, semiconductors or telecommunications.

Growing disenchantment has made even left-leaning tech executives more supportive of US President Donald Trump’s tough China stance, even if they view his focus on tariffs as blunt and counterproductive.

“China has made a choice it’s going to compete with everyone in the world,” said Gordon Feller, a former Cisco Systems executive and a founder of Meeting of the Minds, a civic group focused on smart and sustainable cities. “The Valley’s got quite sophisticated about stolen technology. And they increasingly believe China’s market is not so great if Google can’t even make it.

“So when the Trumpians decide to swing that hammer, there’s some fertile ground.”

India’s comparative success is widely evident. Executives of Indian descent head Google, Microsoft, Micron Technology, Adobe and Nokia, among others. They are also well represented at the senior vice-president level and within venture capitalist firms. The combined 2018 revenue of the top seven companies headed by Indian American CEOs exceeded US$360 billion, greater than the GDP of all but 34 countries.

While executives of Chinese descent have led Sequoia Capital, Himalaya Capital Management, YouTube and Yahoo!, the bench is not nearly as deep. And many are Taiwanese or American-born Chinese well steeped in US culture.

The Indian and Chinese paths into Silicon Valley have also differed.

Indians gained traction in the 1970s when graduate students stayed on to work, moving from call centres into consulting, outsourcing and software industries at such companies as Infosys, Wipro, Accenture and Cognizant. Growing trust saw them become deeply embedded in US corporate DNA. Growing security concerns and software’s migration to the cloud increasingly play to India’s strengths as an English-speaking, rule-of-law democracy.

While Chinese engineers also stayed after acquiring PhDs, they arrived later. China’s strength in hardware resulted in less corporate teamwork between Chinese and Americans. And rather than growing start-ups in the clubby Valley, Chinese investors have tended to funnel US technology back to China – as seen with Huawei, Baidu and Tencent’s R&D centres in the Valley. While US companies have been interested in partnering for the prestige or access to China’s massive market, relationships have often been more transactional.

“Most countries focus on getting their companies integrated into the Valley. China focuses more on finding start-up companies here they can support and bring back to China,” said Sean Randolph, senior director of the Bay Area Council Economic Institute. “In many ways it’s a more natural relationship with India because of their market economy, which has its own complexities but lacks the extensive political overlay you have when working in China.”

Indians also have built a strong community support system to leverage their footprint; TiE, or The Indus Entrepreneurs, is a non-profit organisation with 15,000 members in 14 countries that has mentored and financed 10,000 start-ups. While the Chinese have the Tsinghua Entrepreneur and Executive Club, or TEEC, it is far smaller and less influential.

One difference may be the lure of returning to China’s exploding tech market, leaving fewer high fliers in the US to help colleagues leapfrog. According to the Bay Area Council, twice as many Indian science, technology, engineering and maths students stayed in the US after graduation in 2017 than Chinese.

Another difference may be shortcomings in China’s education system. Even on engineering projects where English proficiency is less crucial, Chinese appear less successful at managing complex projects requiring the monitoring, inspiring and motivating of multiple teams.

Corey Glickman, partner with Strategic Design Consulting, a unit of Infosys, suggests that young Chinese may be less adept at handling setbacks in an international context than Indians.

“It’s the first time they’re told they don’t get two gold stars,” said Glickman, who recruits heavily from both countries. “Folks from India have more resiliency when they’re not the star.”

Silicon Valley can also be clubby in ways that don’t necessarily work for Chinese entrepreneurs. Despite its stature as a global innovation centre, it is at heart a small town driven by networking, back-scratching and distinct rules, insiders say. Venture capitalists tout their “pattern matching” skills in funding start-ups, relying on instincts borne of vetting hundreds of companies. That practice has been criticised for undervaluing “women, people of colour, or any profile besides that of a nerdy white dude in a hoodie,” the business news site Quartz found.

Even so, “with a guy from China, there’s very little pattern matching”, said the tech investor with links to China.

Potential investors assessing a start-up’s prospects “don’t know if Zhejiang University’s department of machine learning is good or not. And it’s about telling a story, which many Chinese don’t know how to do in the same way.”

India’s oversized role in the US tech industry has hardly been free of controversy. Over the years, India has been blasted for exporting US jobs and slammed for its tax, intellectual property and foreign policies.

Distrust of China relative to India is also a mark of respect, evidence that Beijing’s ambitious, state-assisted tech ecosystem is emerging as a formidable rival, some said. India announces a “100 Smart Cities Mission” programme that withers, they note, while China announces a similar plan and it is built.

“We view China as a full-fledged competitor in a way that India is not,” said Kevin Klowden, managing economist with the Milken Institute. “China wants to be viewed as an equal. Now it is and, ironically, faces much greater scrutiny. Be careful of getting what you want.”

Growing constraints, tougher US trade and investment rules and China’s economic downturn have forced many Chinese companies to retrench, even as visa worries and the more toxic US social atmosphere drive Chinese talent home, further undercutting China’s presence in Silicon Valley.

Huawei laid off 600 workers at its US Futurewei subsidiary in July after being placed on the US entity list. Chinese venture firm Sinovation, founded by ex-Google China head Kai-Fu Lee, shifted operations to Guangzhou this year from the Valley.

At the end of the day, analysts said, the US has benefited hugely from foreign brain power – whether Indian or Chinese – and needs to tread carefully as it grows more protective and vigilant about safeguarding trade secrets.

“The US is grappling with a 21st century problem with 20th century tools. We’re trying to build moats around our technology, strengthening export controls and considering immigration restrictions,” Manuel said. “Instead of playing defence, the US should be doing a lot more to compete effectively, get our own house in order, for example by putting more money into basic science.”

“China is making great progress and we’re twiddling our thumbs,” Feller echoed. “It’s the most important relationship in the world and we’re treating it like amateur night.”