As with any entrepreneur looking for the next gold rush, I’ve been eyeing the Chinese market with great interest. At the invitation of the Chinese government, I’ve spent the last two weeks in Guangdong, China getting to know its tech ecosystem and exploring opportunities for collaboration.
During my two weeks there, I saw technology weaved intricately into people’s lives, in a way that I’ve haven’t seen anywhere else in the world. To understand business in China first requires an understanding of how deeply ingrained technology is in people’s everyday lives.
Here are some observations and anecdotes from my time there, which will hopefully give other entrepreneurs looking to expand into China a very tiny (perhaps superficial!) glimpse into this land of endless possibility. The next gold rush is already here.
By now most people would have heard of WeChat. It’s China’s version of Facebook + Whatapp + Venmo, on speed. And that is understating the power of WeChat.
Someone has just given you their business card? Scan the QR code to add them on WeChat.
In a tiny village somewhere and need a snack? Pay the street vendors on WeChat by scanning their QR code.
Touring the country and want to find out more about what you’re seeing? Scan the QR code, up from WeChat pops an audio tour and Chinese & English description of the place.
Want a drink from the vending machine? Simply scan the QR code, take your drink and WeChat will automatically detect and deduct the price of whatever you have taken. It’s like Amazon Go, except that the technology has been in China for so long that no one thinks much of it anymore.
Want to choose a song on KTV? Scan the QR code on screen and pick your songs via WeChat. (Oh and as an aside, they can also score how well you’re singing in real-time!)
Ran out of charge on your phone? For RMB 1 per hour, you get to rent a charger, all payable on WeChat Pay of course.
And that’s just scratching the surface.
Takeaway? Any business catering to the Chinese market needs to understand WeChat and all its potential uses. It can be a payment channel, a social network, a distribution channel, a storefront and so much more. It is a utility.
[Without a Chinese bank account, it’s not possible to transfer money into your WeChat Pay account. Previously, entire tour groups used to come to China and spend a few days solely focused on setting up a Chinese bank account so that they could use WeChat Pay. However, from 2018, the Chinese government has started clamping down on foreigners having bank accounts in China, unless they had a business interest in China or were students. So many of these bank accounts have been shut down. For a foreigner without a Chinese bank account, the only way to fund your WeChat Pay account is to ask a Chinese friend to transfer money into it. Even though cash is still widely accepted, WeChat is considered the safer way to take payment as there is still a concern around fake banknotes being circulated.]
I don’t know many people who would say that the Chinese are synonymous with good service. The Chinese have always been efficient — yell for a top-up in tea and you might get a blank look or no response at all, but you’ll get your tea pretty quickly. Efficient, yes. Polite and service-minded, not so much.
And being cheated is still a risk. A friend got into a taxi after a night out, and after the car had started moving, was told by the taxi driver than he had to pay a flat fee of RMB 100 for the trip given that it was late. It was 4am, my friend was tired, so he agreed. I was in the next taxi, a more honest one perhaps, so I only had to pay the meter price: RMB 45.
None of that is surprising for anyone who has visited China. What was surprising to me though, was finding out that the behaviour of service providers on tech platforms was markedly different from the behaviour of service providers offline.
Service providers on tech platforms behave a lot more like what I would expect in London or Singapore. Didi Chuxing (the Chinese Uber) drivers are exceptionally polite, with one of my drivers even driving twenty minutes out of his way to pick me up, as I had entered the wrong address. At the end of any Didi journey, I would hear the familiar refrain: “Five stars?”
Merchants on Taobao (the Chinese Amazon) often put in little gifts to surprise their customers with each purchase. It definitely makes buying a delight when you get something extra.
And I’ve found the user experience on the tech platforms far better than those that I have grown accustomed to. Better than Uber, better than Amazon.
Need to message your Didi driver but you’re in a hurry? Don’t worry, there are pre-set messages which you can click on.
You don’t speak Chinese? Don’t worry, the messages are translated for you.
Your friend has shared an item on the Taobao app with you? All you need to do is copy the link and open the Taobao app. Taobao will automatically detect that you have copied a link and will send you to the item’s page.
Need to buy something online? No problem, it’ll be delivered to you within 1–3 days on average, regardless of where in China the item is located.
Takeaway: Poor service and trust issues still very much plague the offline world, albeit to a lesser extent than before. However, in the digital world, poor service and trust issues are very much left in the dust as the Chinese tech giants work extra hard to gain their customers’ trust and provide a seamless, truly on-demand, customer experience. In fact, the level of service is so high that the thought of meeting Chinese consumer expectation in the digital world is a little intimidating!
During the two weeks, we visited a variety of old and new industries: tech incubators, mobile phone makers, household giants, car axle manufacturers, and WeChat.
At every visit, the person showing us around would open by introducing the government’s policy in their area and how their business has been affected by government policy. The government’s hand in driving business was undeniable.
Dongguan, an industrial city also known as the ‘factory of the world’, is responsible for producing many of the world’s goods (e.g. at one point, 95% of the world’s woollen products are estimated to be produced there). When Chinese exports were badly hit by the 2008 financial crisis, Dongguan suffered the most.
In recent years, Dongguan has repositioned itself as a robotics base and the fingerprints of the government can be found all over this reinvention.
We visited huge R&D centres established with grants from the government with the sole purpose of upskilling the industries in Dongguan to enable them to catch up with their more technologically advanced neighbour, Shenzhen, the Silicon Valley of China.
The R&D centres were tasked with visiting the factories of Dongguan one by one, to assess what new technologies were required and to help the factories bridge any skills and technological gaps they had.
This resulted in the advancement of robotics technology to automate entire factory lines and upskilling workers so that they were able to operate the new technology. This way, Dongguan wouldn’t be left to become obsolete while Shenzhen thrived — they would all thrive together.
Witnessing this, it made me wonder whether Brexit would have happened if the UK government had stepped in when factories, shipyards and mines were closing in the 1980s, and helped to upskill those industries and workers rather than leave them to become obsolete. I know Brexit wasn’t merely about jobs but, still.
In our group, we had an entrepreneur-turned-government-official from Malaysia who later commented that this was the first time in her life that she understood the purpose of government. Throughout her career, she had wondered whether the sole purpose of government was politics, and only in China did she understand the immense power of government to drive the economy and make change happen.
In case you were wondering, this isn’t simply because our visit was organised by the government. I was part of a different trip to China last year — visiting companies like Alibaba, Disney, Astra Zeneca, Corning — organised by INSEAD business school. And the themes were similar: government policy drives everything in China so businesses were razor focused on staying close to the government and aligning their business model to government policies.
On the other end of the spectrum are the Chinese companies that are looking to expand in the US. We were told that due to the recent US-China trade war, some Chinese companies with US interests were now very careful not to be seen as being too close to the Chinese government. Government grants have been returned, and contact with the government has abated somewhat. Some company visits that were initially planned for our trip had also been cancelled on our trip at the request of the company. When government is so big, businesses have a delicate balancing act to perform.
Takeaway? Success in business in China correlates strongly and directly to where the government winds are blowing, more so than perhaps anywhere else in the world.
The trip was organised by the Guangdong government for Southeast Asian entrepreneurs to bolster ties between persons of Chinese ethnicity and China. It was the first time I had heard of this kind of trip, but others in the group had participated in multiple such trips over the years. All-expenses-paid. This underscores the extent of the soft power that the Chinese are exerting.
The 2008 financial crisis had hit Chinese exports hard, and we were told that this made China realise that America was less reliable a trading partner than it had initially thought. Since then, China has redoubled its efforts to increase its trade with the rest of the world.
Everywhere we went as well, people were keen to connect. They wanted to know about the opportunities in our countries and how we could collaborate. The Chinese in Guangzhou loved durians. Could we have a durian export business? Food safety issues played on many of their minds. Could we export wheat from Kazakhstan to China via high speed rail? How about medical tourism? So long as the potential business remained sufficiently small as to not threaten any domestic industry giant, any opportunity was up for discussion.
At the end of every meeting, no matter how senior the person meeting us, they added us as a contact on WeChat. We were repeatedly assured that we should message them directly if we thought of a way we could work together.
Takeaway? The message from the Chinese we met was loud and clear: we’re open, let’s make money together. The crux being, together. The Chinese government is notoriously protective of their domestic industries, and I don’t expect that to go away anytime soon.
Hopefully these observations are useful to founders who are eyeing the Chinese market with interest, like I am. I came back teeming with ideas and incredibly hopeful about all the potential business opportunities in China — it really is the modern-day gold rush for those who dare.