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‘Arrogance’ why Western tech firms fail in China: Top VC

"Western imperial arrogance" rather than government regulation is the reason technology firms fail in their attempts to expand into China, according to the chairman of a top Silicon Valley venture capital (VC) firm.

In a fireside chat hosted by CNBC at the Money 2020 fintech event in Copenhangen Monday, Michael Moritz, the chairman of Sequoia Capital who has invested in the likes of Google, and Sebastian Siemiatkowski, the chief executive of $2.25 billion Swedish payments start-up Klarna, discussed companies entering China.

Moritz, an investor in Chinese start-ups, said that Western companies have misconceptions about the Chinese market and think they can just crack the territory as easily as other regions.

"I think the Chinese government (is) interested in having American companies, despite what the Western press says...succeed in China. It's good for the Chinese economy, it's good for Chinese consumers," Moritz said.

"The reason that most Western companies fail in China is because of their own doing. It's got nothing to do with the Chinese government or regulation, it's a whole series of Western imperial arrogance that brings about the downfall of many of these companies in China."

Klarna is a direct competitor to PayPal and provides a payment service to merchants which means users don't need to register and can place an order by simply entering their email and zip code. Once the product arrives, users can choose when they want to pay within a 14-day period.

Siemiatkowski ruled out jumping into the Chinese market because of the dominance of Alipay, the payments service run by Alibaba affiliate Ant Financial.

"I would never go to China because Alipay is one of the most impressive companies I've ever met," Siemiatkowski said, adding later that he is "tired of hearing the Chinese copy everything".

'Blindness'

China has been a key focus for the world's major technology companies as well as some start-ups. Google has been steadily hiring staff in the world's second-largest economy while Facebook has been on a charm offensive with the country's government. Both services are effectively banned in China.

The country has been a hotbed of highly valued start-ups too with companies like Didi Kuadi in the taxi space. Uber has also launched in China and is investing heavily to make strides there.

While Moritz did not name specific companies that have employed the wrong strategy in China, he was critical of Western firms' perception of the country.

"The amount of deafness in the west and blindness and arrogance about the enormous success, innovation, drive, ambition, work ethic, determination to succeed, ambition to build really meaningful long-term companies in China, people in the West on the whole just don't get it," the venture capitalist said.