China could soon overtake the US as the tech unicorn capital of the world, according to a recent report by a leading consultancy group, coming on the back of successive reforms and policies aimed at boosting innovation and startups in the country.

Boston Consulting Group’s (BCG) report, released last week, found Chinese tech start ups are reaching the one billion US dollar valuation barrier – the valuation they officially need in order to qualify as a unicorn – three years faster than their US counterparts, taking an average of four years, compared to seven for American companies.

The report, compiled with the support of Alibaba’s AliResearch, Baidu’s Development Research Center and Didi’s Strategic Research Institute, also revealed that 46 percent of Chinese unicorns reached valuations of one billion US dollars in less than two years, compared to only nine percent in the US.

Following BCG’s study, China’s National Development and Reform Commission (NDRC) released its own report on Monday, showing that 5.5 million new companies were registered in 2016, a 24.5-percent increase on the previous year and a sign that entrepreneurship is booming.

So what is giving Chinese startups an edge over their US rivals? Is China’s tech boom a bubble, or is Silicon Valley destined to fall behind Shenzhen, Hangzhou and Zhongguancun?

The most obvious edge Chinese unicorns have over US startups is the size of their domestic market. Xinhua reported in August that there are now 751 million people surfing the web in the country, 724 million of whom use their mobiles to get online. 2016 saw 26.1 trillion yuan-worth of e-commerce transactions (3.8 trillion US dollars), representing a year-on-year growth of 19.8 percent.

China’s tech boom came at the right time for companies that were already relatively new players in their respective industries, lacking market maturity and suffering from gaps and flaws that tech was ready to quickly fill.

For example, China’s personal finance industry has been able to embrace tech in a way that mature, established US banks were slow or reluctant to do so. Alibaba’s Yu’e Bao controlled assets of 165.5 billion US dollars as of April this year, overtaking JPMorgan to become the world’s biggest money market fund.

BCG’s report found that in 2016, China spent 8.5 trillion US dollars through mobile payments – 70 times more than the amount spent in the US, and more than double the entire nominal GDP of Germany. Lin Guangyu, head of the digital payments for Ant Financial, told NPR that Alipay was set up “to resolve the issue of trust between people. And by resolving the issue of trust, we've also resolved the issue of payment.”

While Yu’e Bao represents a leap ahead for traditional financial sectors, China is also embracing entirely new concepts like live streaming and P2P lending to the extent that the rest of the world is being left behind. There are some 300 live streaming companies competing with each other in China, compared to just 50 in the US, according to BCG’s report.

Likewise with P2P lending, there are already some 3,000 companies in China in this new sector, controlling 850 billion yuan (129.5 billion US dollars) of outstanding loans. The US by comparison has only 100 online P2P companies, according to BCG.

As long as there are entrepreneurs, there will be new ideas – and entrepreneurship is very much on the rise in China. A Renmin University of China's study this year found half of more than 300,000 students were considering setting up their own businesses, while new policies to encourage graduates to fund startups are being rolled out across the country. By the end of 2016, China had set up 901 government guide funds, which have attracted 1.1 trillion yuan (167.5 million US dollars).

However, funding still remains a problem – Xiaomi founder Lei Jun has warned that while Chinese tech investment is huge, it is unevenly spread and concentrated on latter-stage funding rounds. At the Tianjin Summer Davos in 2016, Lei said that “the angel round is the hardest for Chinese startups… and it’s not easy for them to get bank loans.”

Lei went on to cite the risks or slow rate of return on angel round investments as reasons why venture capitalists are reluctant to fund new tech startups in China, as well as blaming China’s tax structure.

Despite Lei Jun’s complaints, Chinese Premier Li Keqiang’s mass entrepreneurship and innovation program, initiated at the 2014 Summer Davos, has clearly played a big role in China’s unicorn phenomenon. This week’s report by the NDRC showed that there are currently 71 Chinese unicorns valued at over one billion US dollars, and that 41.7 percent of the country’s entrepreneurs are “young people.”