Shanghai Starts Up

Unlike American workers, these employees do not personalize their hutches with pictures of family members, science-fiction toys and company swag: just computer manuals and a piece of paper with their names, including an Anglicized first name that they choose when they are hired, to make it easier for American customers to address them. Everyone at the company must learn English, and is required to use it in all e-mails and even instant messages. It all contributes to the confidence of the teams at Augmentum. "We are ready to win this long war," says Augmentum software manager Daniel Wong.

The emergence of these software whizzes, and certainly the masses at the Software Park, is no accident. For decades, China itself has been engineering an entry into the top levels of computerdom. Twenty years ago, Deng Xiaoping decreed the government would begin bankrolling key science and technology research. (The program was named 863, after the date of its origin, March 1986.) Spurred by 863, China has more than 700 multinational research and development centers, including Microsoft's Beijing lab, which is a magnet and training ground for the country's best brains. And 59 percent of Chinese undergraduate students pursue science and engineering degrees (almost twice the U.S. figure of 32 percent).

Nonetheless, China's emergence as a top software power is still in its nascent stages. For one thing, once you get past the top universities the level of science instruction gets sketchy. "The No. 1 school in the U.S. might be five times as good as the school that's No. 50, but here the No. 1 school is a thousand times better," says Kai-Fu Lee, head of Google's new research lab in China. So while China does graduate many topnotch engineers, your average programmer is not up to the level of your random geek hired by a Silicon Valley start-up, particularly when it comes to the sort of innovation required to execute difficult design problems. That's why Liu maintains an Augmentum office in Foster City, Calif., using U.S. talent to do some of the higher-level work. (He limits this contingent to 10 percent of his work force.)

The Chinese government wants badly to close the creativity gap. "Every meeting I go to, some government official gets up and talks about independent innovation," says Kai-Fu Lee. It's hard for a state-run program to inculcate ideals like thinking out of the box. But China does have a secret weapon: the ferocious economic competition within the country itself. "China has 12 million companies, and they compete with each other with astounding aggressiveness," says former FCC chairman Reed Hundt, who has an upcoming book called "In China's Shadow." He believes that a Silicon Valley-style explosion of even more companies will create a crucible by which software talent (all kinds of talent, in fact) will be forced to be innovative in order to win. The talent is there, as is the hunger to succeed--all that's missing is the know-how. "Today in China," says Jack Ma, CEO of Alibaba, China's answer to eBay, "we have the entrepreneurial spirit but don't know how to do it." But with mentors like Liu and the experienced masters that Google, Microsoft and other companies hire for their China-based research divisions, that will change. With the process further accelerated by Darwinian competition that hones both the winners and losers in every round, China is poised to rocket up the learning curve. "The top fifth of the American job market is very exposed," says Hundt.

"This is a historical moment," says Leonard Liu. "You know, the U.S. had been the only chef in the kitchen since the second World War. Now there is a second chef who needs to be dealt with." Liu, of course, is aligning himself with the new chef. He's on track with his plan to double Augmentum's work force every year, until it is 40,000. That's a lot of great jobs.

With Melinda Liu in Beijing and Brad Stone in Silicon Valley

© 2006