'Silicon Dragon': Why China might dominate the tech world

Journalist Rebecca Fannin argues in her new book, Silicon Dragon, that China will gradually emerge as the world's center of innovation, supplanting Silicon Valley for venture capital and exciting technology.

Forbes.com asked her to explain her ideas in an interview:

You argue that China is "winning the tech race." But it seems like the more mature companies in China have followed American business models, and this innovative generation of companies is still very young. In what sense is China "winning?"

Well, you have to consider the time frame. It's going to be years before it becomes very pronounced, but China is slowly emerging as the next Silicon Valley.

If you look at venture capital money flowing in, it's a phenomenal rate. China has been the fastest-growing target for venture capital in the last four years: far faster than anywhere else in Asia or the U.S. or Europe.

Venture capitalists used to say they'd never invest outside a 30-mile radius of their offices. Now VC firms like Sequoia Capital, Kleiner Perkins Caufield & Byers, and Accel Partners are all focused on China. Virtually all of the major venture capital firms in the U.S. have teams and funds there. It's been a huge shift. And for every startup that's funded in China, there's a startup that's not funded somewhere else.

This is still a leading-edge trend. But Silicon Valley won't always be the center of the universe. If you talk to VCs, they'll agree with that.

I haven't read the book, but there is certainly a dose of reality in her assessment. What I wonder is whether the innovation will not be split into two types: language-dependent, and what I might call "pure technology."

For innovations in the tradition of Google, Amazon, and Web 2.0 applications, the translatability of applications or the size of the market supported by a given language is key. Chinese firms depending on a Chinese-reading audience will depend on the continued explosion of Chinese Internet usage and a huge surge in willingness to spend online. If these trends slow or reach a plateau, VC may not be so enamored with China-based ventures.

If, on the other hand, we're talking about raw development that speaks the language of science--equipment meeting international standards, biotech, energy innovation, etc.--then the market is not a problem, and I suspect the flood of skilled developers in China will indeed fuel a wave of innovation.

Whether all that's enough to supplant Northern California is not something I know how to estimate...