This is irrelevant to the fact that a very large market and testing ground exists today among the Chinese-speaking and Chinese-cultural population, both inside and outside China.

Most successful startups in post-2000 China are largely privately owned. While they are indeed subject to regulatory constraints, needing to work together with the government is largely a constraint to survive, not a reason for success. Their successes have very little to do with the government and much more to do with the market, rising economy, and better infrastructure (e.g. education, venture capital, incubators, startup "hotspot" cities, etc.) for startups to build upon, as well as the sudden explosion of a middle class that can afford the various things these new startups are offering.

I'd say a large part can be attributed to the fact that China and USA both have similar market sizes and both countries are each reasonably homogeneous in culture compared to, say, Europe.

So you're saying that Google could come in and compete? If you're a foreign business in China, even if you are a Taiwanese business, if you don't have proper government relations, you'll find that business applications take so much longer.

And that you have little hope with Chinese law before a Chinese judge and a favored Chinese company. It is a hostile atmosphere to even Chinese-speaking countries -- if you are not connected to the government.

I'm saying it's very hard to discuss market forces from "free" market principles when the most successful companies in China shall be deeply connected to government. You wouldn't say Gazprom is a product of the Russian economic environment. Nor is Alibaba and Baidu.

@threatofrain You are correct in that without proper local connections your foreign business will die in China. I'm not disputing that.

My point is completely orthogonal; I'm simply saying that regardless of how business is done in either USA or China, each has its own massive market testing ground that speaks a single language, each has its own reasonably homogeneous culture and each has its own reasonably homogeneous set of consumer problems.

This is very different from, say, Italy and Sweden which are different on so many cultural levels. I'm simply supporting the point that Europe should not be treated as one market.

If you're saying that initial market size and uniformity is a big factor behind Silicon Valley-esque places (a large gathering of investor money and tech workers), then I agree with that point.

I think that protectionism disallows existing giants from carving up large slices of a market. Having to compete against the tactics of big giants is a capricious barrier to market, and probably not a good nurturer of innovation.

Had many countries severely gimped or barred Google / Microsoft from entering their country, while funding internal alternatives, the world might look very different.