VC Eric Li says these companies will define China’s new economy – quartz

China’s tech campaign has made clear that Beijing wants to shift its economy away from consumer internet companies.

But if these big tech companies fall off official support, what kinds of high-tech companies would China prefer to prioritize?

Eric Lee, an outspoken Chinese-born and US-educated venture capitalist, argues that there is a simple way to find out.

If the consumer Internet era of the past two decades can be defined as “capital benefiting China,” Li said in a speech at an industry conference this month, then in the next two decades Beijing will want to ensure “capital increase for China.”

This may seem like an abstraction, but it reflects the preferences that Beijing has articulated in various official speeches and policy guidelines over the past two years.

For example, the authorities have talked a lot about the desire to develop a “real” economy rather than just a digital one (although they stress that this is still important). Rather than directing technology to things like transportation apps, food delivery services and social media platforms, Beijing wants to use the technology to boost its manufacturing prowess.

Industrial Internet, industrial robots, and advanced materials

Li identified three specific companies that embody Beijing’s vision for its new economy.

One of them is Baibu, a platform for the textile trade and digitization of the traditional textile sector. As Lee says, the goal is to connect China’s segmented textile manufacturing scene to improve efficiency and reduce costs, and transform physical factories into cloud-based factories capable of connecting thousands of looms.

Another company is UMA Intelligent Group (link in Chinese), which develops industrial robots to automate the traditional welding industry – a long-standing, labor- and skill-intensive sector.

The third company is Baiaoheng, which is developing a process for converting slag – a by-product of the smelting industry – to make a cement-like substance. Given China’s huge investments in infrastructure and real estate, the country needs a lot of cement.

The companies selected by me are examples of types Small giants” that the Chinese government wants to promote.

Small giants are so called because they are often smaller and less well known companies, but nonetheless have proprietary products and know-how across different supply chains in different strategic sectors including advanced manufacturing, semiconductors and critical metals. Beijing has so far identified several thousand of these “small giants” across the country.

Sponsoring these “little giants,” official thinking goes, would help China become more self-sufficient. At the same time, incorporating “small giants” into global supply chains would achieve another major goal: making other countries more dependent on China.

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