In its early years, China’s internet ecosystem begged, borrowed, and stole from Silicon Valley. Many of China’s early internet giants were founded by Chinese students returning from the U.S., funded by American venture capital money, and inspired by Silicon Valley culture. Of the three Chinese internet companies that were the first to list on the Nasdaq, two of them had deep roots in the United States. The first major Chinese-language search engine was named Sohoo, a thinly veiled tribute to the Silicon Valley company that defined the field, Yahoo. (The company later changed the spelling of its English name to “Sohu.”) Sohoo was the brainchild of Charles Zhang, a Chinese-born physicist with a PhD from MIT. Zhang launched his first internet company in Beijing with funding from friends in the U.S., and after a meeting with Yahoo founder Jerry Yang, Zhang switched his focus to creating a search engine, taking on funding from Intel’s venture arm to make it happen.
Few people did as much to spread the early gospel of Silicon Valley in China as Eric Xu, a Chinese-born PhD in biology at Texas A&M. Xu was working at a biotech start-up in Silicon Valley when he decided to create a documentary showcasing the Silicon Valley ecosystem for Chinese audiences. Xu interviewed U.S. entrepreneurs, programmers, and investors, introducing Chinese viewers to concepts like start-up culture and venture capital. When the time came to interview Jerry Yang, the Taiwan-born and U.S.-raised whiz kid behind Yahoo, Xu brought along his friend Robin Li, a Chinese-born and U.S.-educated software engineer in the Valley.
“I got inspired,” Xu said in an interview with Bloomberg Businessweek. “I’m sure Robin got inspired, too, seeing an ethnic Chinese who created such a powerful company.”
Xu’s film, A Journey into Silicon Valley, was broadcast on China’s main state media channel, giving millions of Chinese their first glimpse into a region, culture, and business ecosystem that would reshape the world. At a screening of the film at Stanford, Robin Li’s wife approached Xu and told him that she wanted her husband to be an internet entrepreneur. Soon after, Xu and Li together founded Baidu, the Chinese search engine that would fight tooth-and-nail with Google and go on to become one of the most powerful technology companies in the country.
NAILING JELL-O TO THE WALL
While Xu spread the gospel of Silicon Valley in China, the Valley’s own techno-utopians were proselytizing a lofty vision of what the internet would become. They envisioned cyberspace as a world wholly detached from the stodgy political order of the twentieth century, and framed the internet as an almost organic sphere beyond the fumbling grasp of hapless bureaucrats. That philosophy crystallized in the 1996 essay “A Declaration of the Independence of Cyberspace,” a manifesto by John Perry Barlow, a former lyricist for the Grateful Dead and founder of the Electronic Frontier Foundation. The manifesto was initially a response to the United States’ Telecommunications Act of 1996, but it spun a much larger prophecy about the fate of the global web.
Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather. . . . I declare the global social space we are building to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear.
China’s Public Security Bureau had other ideas. As internet access grew, what began as sporadic shutdowns of controversial student message boards in China quickly coalesced into a more comprehensive set of controls. By 1997, authorities already had a relatively well-functioning filtering mechanism that came to be known as the Great Firewall. All Chinese internet traffic to the outside world had to pass through a limited number of physical cables, and searches or requests to access websites containing “sensitive” keywords could simply be turned back at the border. In its early incarnations, the Firewall blocked many Western news sources and a smattering of overseas Chinese human rights sites.
Those mechanisms of control were crude, and many in the technology community viewed them as the last gasps of an archaic political system on its last legs. And it wasn’t just wild-eyed techno-utopians who saw China’s efforts to control the internet as doomed to failure. President Bill Clinton captured the zeitgeist of the era in a typically down-home metaphor:
“In the new century, liberty will spread by cell phone and cable modem. . . . We know how much the internet has changed America, and we are already an open society. Imagine how much it could change China. Now, there’s no question China has been trying to crack down on the internet—good luck. That’s sort of like trying to nail Jell-O to the wall.”
China’s political system may have survived the fall of the Soviet Union and the turmoil of Tiananmen Square, the thinking went, but it wouldn’t survive the internet.
BOOM TO BUST IN BEIJING
American observers often framed the Chinese internet as a tool for the liberation of information, but in the late 1990s many of China’s first-wave internet entrepreneurs were focused on cashing in at U.S. stock markets. The same hot air that inflated the U.S. dot-com bubble had spread to Beijing and was ballooning expectations for overnight internet riches. During the year 2000, Chinese portal sites Sina, Sohu, and NetEase all listed on the Nasdaq to much fanfare. That same excitement spread to Li Zhifei, who fresh out of college joined China MobileSoft as a software engineer, hoping that his own millionaire-making IPO was around the corner.
The timing was perfectly wrong. By the summer of 2000, Silicon Valley’s dot-com boom was coming unraveled, and it wasn’t long before investors soured on China’s tech giants. Stocks for all three plummeted, with Sohu and NetEase sinking so low that the Nasdaq’s own rules on minimum values threatened to boot them unceremoniously from American capital markets. China’s first internet gold rush fell apart as quickly as it had come together. It had been inspired by Silicon Valley culture, funded in part by American venture capital money, and driven by returnees from American universities and Silicon Valley companies. The Chinese internet had shown its first hints of promise, but in the context of the global internet it was still a backwater. For now at least, the real action, real money, and real innovation was in the U.S.
And so Li Zhifei headed across the Pacific. In 2004 he enrolled in the computer science PhD program at Johns Hopkins University, in Baltimore. There he would dig into machine-learning algorithms and lay the foundation for a career on the cutting edge of artificial intelligence.
Li and his cohort were part of a new generation of Chinese students in the U.S. The generation that came before him was largely composed of elite PhDs, most of whom wanted to stay in the U.S. long-term, preferring the middle-class life of an immigrant engineer in America to the barely controlled chaos of entrepreneurship in early-reform China. But Li and his cohort were different, and so was the China they left behind. The rough edges of 1980s China were slowly being smoothed out, and the first seeds of the country’s start-up culture had been planted. Chinese tech wasn’t ready for the prime time yet, but there was potential there.
“When I decided to go to the U.S. the main reason was I wanted to broaden my vision and get advanced training,” Li told me. “But my real goal was to come back to China to do a start-up.”
As Li soaked up algorithms and international best practices, the battle