Glimpses of the Future
By Tony Craddock, Director General
Insight 1 – Difficult is not necessarily bad
It’s overwhelming sometimes. The regulations are complex and changing. The behaviour of consumers is slow to change, yet quick to excite. Partners are hard to find and are demanding.
Doing business here is unquestionably difficult. But when put alongside the scale of the opportunity, then managing difficulties and overcoming them will be rewarded. The country has 20 times as many people as the UK with a growing middle class with voracious appetite for new goods and services. There is an emerging demand for high quality, value added.
Being married can be difficult. But the rewards are so great that just because it’s hard, it does not mean we should not do it.
Doing business in China, albeit difficult, can bring significant rewards.
(By the way, it’s a bit difficult to import consumer goods from China. But you can take a zero off a £20,000 furniture suite if you do so. Try aliexpress.com).
Insight 2 – (Some of) China is in trouble
The recent quarterly survey by Professor Tie Gan, Professor of Finance at CKGSB in Shenzhen, ‘in overcapacity, i.e. not enough orders to fill the plant. Re Government Index production and employment indices all indicate contraction’. Overcapacity is at a historical high
But financing is not a bottle neck nor is availability of technology or government policy. “What China needs” says the professor “is supply-side reform with a focus on reducing over capacity and improving industrial structure.” Government intervention is still necessary in such a sprawling mass of entrepreneurship to help drive painful changes required.
Insight 3 – There’s lots of money about, but it’s not all ‘good’ money
Many investors have been spoilt by receiving very high returns on a fast growth business with high margins. Such investors have become spoilt and go in to new investments expecting similar returns.
Meanwhile, the number of hot prospects available for the investors is falling, and they get snapped up quickly. That means that companies seeking investment must take care to avoid enthusiastic Chinese investors looking to make a quick Renminbi.
Insight 4
I’ve seen the future; it’s called ‘Wechat Pay’
At Tencent:
Wechat and Wechat pay is only in Thailand, Singapore, New Zealand, Indonesia, Japan, and China
Wechat Pay supports over 25,000 supermarket stores, 50,000 convenience stores, 500 hospitals, over 1000 shopping malls, over 300 CBD’s, ad 25,000 hotels. What this does eventually, for 800 million potential users (300 million of which are live), is to provide them with a broad, frictionless, low cost payment network that does not rely on MasterCard, Visa, Discover, or American Express, or an issuer, or an acquirer.
If you can get your head around the massive systemic implication of that – and I am just starting to – then the future power base of tomorrow’s payment industry will look very different. Imagine a world where the payment schemes become unnecessary for most people’s payments, made both online and on a mobile?
Wechat Pay could fundamentally change payments. It’s a shuddering thought. And an exciting one.
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