China lags far behind the US in producing genuine hi-tech unicorns in artificial intelligence, robotics and biotech as it is still paying catch-up in scientific research, according to Credit Suisse.
In a report released on Tuesday titled “China Unicorns, Preparing To Gallop”, Credit Suisse said that although China accounted for nearly one third of the world’s 326 start-ups valued at US$1bil (RM4bil) or more, its share of unicorns in sectors requiring more advanced scientific research capability such as artificial intelligence (AI), big data, robotics and software was just 14%, compared to 40% in the US.
“It is fair to say that … there are probably more genuine hi-tech companies among US unicorns at this stage,” said the report’s authors.
Even in terms of valuation, China accounted for only 30% of the estimated US$1.08tril (RM4.39tril) plus combined valuation of all unicorns globally.
Credit Suisse said that nearly half of the country’s unicorns were still dominated by internet and e-commerce companies because they are driven more by business model innovation, which takes advantage of the nation’s large, fast-growing but fragmented consumer market.
These unicorns include BeiBei, a maternal and infant products e-commerce platform; 17zuoye, an online education platform offering smart homework solutions; and the mega-unicorns of Didi Chuxing, an app-based ride-service valued at US$56bil (RM227bil); and Toutiao, China’s largest news aggregator valued at US$75bil (RM305bil).
“Despite its huge size, China is a relative ‘newcomer’ in the game of R&D and innovation, and it takes time for R&D spending to translate into commercial products or services,” the report said.
China’s R&D investment as a percentage of gross domestic product has risen quickly in recent years, reaching 2.1% in 2017, from 1.2% of GDP between 2000-09. But that share is still much lower than smaller economies that invest heavily in technology, such as Taiwan, Japan and South Korea.
The Swiss bank said that most of China’s R&D spending is in experimental development, as opposed to basic research, “which is consistent with why most of its unicorns are basically engaged in business model innovation rather than new technology products”.
Despite its expectation that the internet sector will still dominate Chinese unicorns in the future, given the increased R&D spending in the last few years, Credit Suisse said it expects more technology-focused unicorns to emerge from China. – South China Morning Post