Philipp Staab and Florian Butollo DIREKT 04 /  2018 DIGITAL CAPITALISM – HOW CHINA IS CHALLENGING SILICON VALLEY AT A GLANCE Over the past 20 years Facebook and Co. have successively risen to a position of global dominance over the internet. Today, however, the rise of several Chinese internet companies presents a serious challenge. These firms play key roles in the Chinese version of digital capitalism. In China they form a link between highly flexible industrial production and digitally supported distribution and consumption processes as well as ubiquitous state surveillance. The commercial internet as known in the West has for some time been in the hands of a very small number of very large corporations. The key“leading companies”(Dolata 2015) of digitalisation, often summarised by the acronym GAFA(Goog­le, Apple, Facebook, Amazon), have successively built up their market power since the collapse of the dot-com bubble in the late 1990s. Today they dominate the commercial internet mar­ket in much of the world. THE GEOGRAPHY OF DIGITAL CAPITALISM If one limits one‘s perspective to the commercial internet of the West, one overlooks the places where the GAFA complex has been unable to achieve the position of dominance it occu­pies in the US and Europe. Two regions of the world, in par­ticular, stand out. In the Russian-speaking world, in the envi­ronment surrounding companies like Yandex(originally a search engine, today a complete digital ecosystem) and the Mail.ru group(Vkontake, Odnoklassniki), players outside of the GAFA complex have been able to hold their ground on the market. In China a handful of corporations have developed – especially a trio comprising Baidu, Alibaba and Tencent (owner of Qzone), subsequently referred to as BAT – that have already closed the technological gap separating them from the giants of Silicon Valley. In terms of market power in China, the BAT firms leave the GAFA companies in the dust. From an analytical perspective, as well, they exhibit several distinctive characteristics. If we look at the digital economy with regards to geostrategy, economic dominance is not as unilateral as one might think from a Western perspective. What lies behind BAT? Is the success of these companies the first step in the rise of the fortunes of Chinese business? Does this mark the beginning of the ascent of China, which, as the workshop of the world, has in the last few decades played a significant yet secondary role when compared to Western brands, finally to the status of economic superpower? STATE INVESTMENT In works on the development of the digital economy on the American West Coast, critical researchers have often pointed out that, by opposition to self-descriptions in the field, not only“disruptive”(Christensen 1997) technologies and entre­preneurial personalities(Thiel 2014) but primarily the state played a decisive role in the rise of the digital economy. Dan Schiller has, for example, shown in his groundbreaking works on digital capitalism(2014), that more than anything Keynes­ian military investment programmes laid the foundation for the later success of the leading digital companies. Marianna Mazzucato(2014) has, for example, impressively demonstrat­ed to what extent publicly financed research played a pio­neering role in the development of the key patents of the first iPhone. In China today we see a specific structure of state invest­ment that significantly exceeds that which is known about the history of Silicon Valley. Chinese high-tech strategy is based on a strategic industrial policy with the goal of estab­lishing technological and economic autonomy. This policy is an expression of a state capitalism 3.0, which has been iden­tified as typical of large developing countries(Brink 2016), >