BizChina

After an unexpectedly long sojourn in China, I returned to Silicon Valley for a week. It caused me to reflect on the different business cultures of my two homes; those differences collectively explain much about the continued dynamism of China's economy.

When visiting the U.S., I am always asking myself "where are all the people?" San Francisco downtown feels empty. I went to my bank, amazed to not see a long line of people getting waiting list numbers. I went to a FedEx ( FDX - news - people ) store, amazed to not see a long line of people getting waiting list numbers. I went to the doctor, amazed to not see a long line of people getting waiting list numbers. Medical care demonstrated how the U.S. and China have completely different cost structures. Dental cleaning in the U.S.: $289. Dental cleaning in China: $13. MRI in the U.S.: $855. MRI in China: $11, using a nearly identical machine.

China's growing economic weight means that it now exerts a substantial influence on the economies of other emerging markets.

Channels of Influence

China's impact on other emerging markets operates through trade and capital flows: 

This weekend, eBay’s CEO John Donahoe shared the stage with Alibaba’s maverick founder Jack Ma at his annual Alifest conference in Hangzhou, China. Gady Epstein, Forbes Beijing bureau chief, has an intriguing blog post about how Donahoe wished a happy birthday to Jack Ma who not only defeated eBay in China, but also “encroaches on eBay’s home turf.” Since Epstein referenced my recounting of the eBay-Alibaba battle, I thought it might serve readers well to provide an excerpt here from my book The Chinese Dream:

In 2004, eBay had just entered China and was planning to dominate the China market. Alibaba was a local Chinese company that helped small- and medium-sized enterprises conducting business online. Most people in the West had barely heard about it.

Alibaba Group billionaire Jack Ma’s annual AliFest conference in Hangzhou features an intriguing, one might even say unlikely, keynote speaker Friday morning: John Donahoe, the CEO of eBay.

Why unlikely? This would be the same eBay that got trounced in China by Alibaba’s online marketplace Taobao.com. In fact, Ma created Taobao to do battle with Meg Whitman and eBay, and he not only won, he utterly vanquished his foe.

Taobao now enjoys more than 80% market share in China. EachNet, a once leading (though not profitable) online marketplace in China that eBay purchased for $180 million, is now mere background radiation on the Chinese Internet, with low single-digit market share. Whitman surrendered in 2006, entering into a joint venture with the Chinese portal Tom Online to operate EachNet.

The victory wasn’t a foregone conclusion. The tale of how it was achieved is recounted in detail in an upcoming book by Helen Wang, The Chinese Dream: The Rise of the World’s Largest Middle Class. Wang (also a contributor to the Forbes China Tracker blog) writes about her encounter with the Alibaba camp in 2004:

When I asked a senior manager at Alibaba whether the company was worried that it would be bought by eBay, I was blown away by the answer: ―We will buy eBay!

That might have been a laughable notion at the time, when Alibaba.com was still just an up-and-coming e-commerce company serving small to medium-sized businesses. Little more than three years later, Alibaba.com went public in Hong Kong, raising $1.5 billion. It was the second-biggest Internet IPO after Google. Alibaba had become an empire, and, as Wang notes, Ma was hailed in The New York Times as “China’s new Internet king.”

Now Donahoe, who became Whitman’s right-hand man on global e-commerce as eBay was on its way to defeat in China, has accepted an invitation to speak at Ma’s annual Alifest conference. The two men don’t appear to have business to discuss – they already sealed a deal earlier this year allowing the use of eBay’s PayPal to settle transactions on Alibaba’s online wholesaling platform, AliExpress. That came a year after Ma visited eBay’s headquarters during a U.S. trip.

And there is no indication that eBay will ever try to dethrone Taobao in China. If anything, Taobao continues to encroach on eBay’s home turf, acquiring two U.S. companies in recent months — Vendio in June, Auctiva in August — that will help it do more business with eBay’s merchants in the U.S.

So what are we to make of Donahoe’s journey to Hangzhou? He may be stumping for PayPal, which is growing quickly in greater China. Beyond that, the visit may not amount to much of substance. But if I may take a bit of poetic and historical license here – in other words, if I may exaggerate wildly for my own amusement – this is almost like Napoleon’s top lieutenant returning to Waterloo to speak at the invitation of the British Empire: He came, he saw, he was conquered.