Lack of Technical People
I am actually here to attend a joint-event organized by Hong Kong and Shanghai entrepreneurial organizations trying to promote entrepreneurship in our culture. Generally speaking, people who came here are mostly with general background or those who wants to be on the "consultancy" side. It is lack of talents with technical skills (not that I have seen are on the bleeding edge of technology). They do not understand technology.
Bad signs. Why? Eventually, for any successful technology-related company, the company must develop a technical niche which has an absolute advantage over other competitors. Such kind of technical niche could never be developed by companies which you outsource to, as those companies do not share the vision that you are having. When developing a web application, at the end, it is all the subtleness of the interface and smooth infrastructure that creates great user-experience. Through all these subtleness, you are delivering message to user which other people cannot copy. User experience is the key.
In terms of web development, China is still an adopter rather then an inventor. It is much easier for them to copy something from the US and implement a Chinese version, which works without any legal violation at all and they can make a lot of money from it. As such, there are no incentive for them to invent new ideas. Inventing something new probably takes 100 times the effort of copying something which has proved to work somewhere else. But who cares in China?
I just met a girl who worked on a github clone in China http://www.geakit.com/ in Shanghai. I am highly skeptical about how open-source can become a culture in China. It is a challenge to the Chinese culture. People who are interested in doing open-source are not working for money, because they are working for social status and respects from the community. When people are still worried about their living, will they care about this higher level of needs?