Little Giants of China new weapon in tech war

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“Little giants” of China to lead new wave of tech war

“Little Giants”, startups in strategically important sectors of interest to China, are poised to be the new frontline fighters of the Asian nation’s tech war with the US, replacing the behemoths that were the apple of China’s eye for the past few years.

The title of “little giant” comes from a program by the Chinese Ministry of Industry and Information Technology (MIIT) of the same name that has been in place since 2016, though the underlying principles of that program have been bandied about in China since the turn of the century.

The program saw a surge of interest recently following the steadily strengthening regulatory crackdowns on the tech behemoths that used to be China’s pride and joy. However, with these tech giants hit hard, to the point of the tech moguls behind these companies losing some US$80 billion in combined net worth in 2021.

The principles of the program boil down to essentially supporting SMEs in specialization and innovation, especially in strategically important sectors like robotics, quantum computing, and semiconductors.

The title is awarded to startups that specialize and innovate in these fields, as part of the program that supports these startups and recognizes them as leading innovators in their field doing something unique.

Little giants coming through

Of course, with China’s leader, General Secretary Xi Jin Ping, putting his weight behind the program, the title of little giant now carries with it a certain amount of prestige and credibility beyond the usual perks of a grant or subsidy. This is not to say the usual perks are not lucrative, considering they include tax cuts, generous loans, favorable hiring policies, as well as making it easier for these companies to go public.

But now, the title is a label of government endorsement and a sign to investors and employees alike that the startup should not be subject to regulatory punishment similar to the tech giants. In fact, Xi attaches great importance to the development of SMEs, emphasizing that SMEs “can do great things”, to the point that these SMEs are key to China’s new strategy in the tech war against the US.

Investors, especially those that have taken losses following the big tech crackdown and its aftermath, have also taken to the label, with some venture capitalists only investing exclusively in government-identified little giants. Even the Beijing Stock Exchange has agreed to nurture more little giants.

A new battlefront

Having largely followed the Silicon Valley model until July 2021, which had little government oversight of entrepreneurs, China is now pivoting to supporting strategically important technologies, such as chips, of which there is currently a global shortage, in a bid for self-sufficiency.

After seeing the impact a blacklisting from the US can have following what happened to three of China’s best-known firms, Xiaomi, Huawei and Semiconductor Manufacturing International Corp (SMIC), it comes as no surprise that China now seeks self-sufficiency to prevent what amounted to a screeching halt for these companies from happening again.

In that, it turns towards these little giants, these niche SMEs that promise innovation in things like autonomous vehicles, semiconductor manufacturing, and other such industries to turn the tide in China’s tech war against the US.