Good morning from China! Hope you guys all have a great day, despite all the economy hot mess. When talking about China,  some people think that China only manufactures and copies things from others, and when will the innovation take place?

Lately, there was an interview talking about the assessment of China innovation done by The Wall Street Journal. Chief of Flex, Mike McNamara and GGV Capital managing partner, Jenny Lee were the interviewees. They have different opinion  about this criticism, stating that, this kind of criticism is not really applied to China anymore. Not only them, but more and more investors and executives who know well about China also have the same opinion.

Jenny Lee, One of the Most Powerful Women in the World. Forbes Magazine

Mike McNamara

Jenny gave 3 reasons why China now, is a mature market:

1. The talent pool growth. Some entrepreneurs who have grown up working at Baidu (China’s search engine company), looking at Tencent (China’s communication company), people who are experienced and have gone into the next stage into what’s going to make China show talent.

2. The evolving business model. Based on the research, globally  there are 2 billion smartphone users and 600 million of them are come from China. For example, in Shanghai, if you take the subway, inside you will find people mostly are staring at their mobile phone, watching videos from Youku (China’s video hosting company), checking goods from Taobao (widely known as Alibaba), etc. If you are hungry, you can just buy food using a phone apps, there you can search for so many restaurants around you that can make the delivery to your place. If you are confused about where to eat, you can search so many restaurants using an apps, you can see the appraisals and you even can buy voucher from there. If you want to take taxi, you can just book the taxi using Didi Kuaidi (China’s taxi-hailing service that beats Uber China, read the article here); and many more examples. In terms of real mobile-Internet user behavior, China is starting to give rise to a lot of very local usage behavior. To do that well, you have to understand it is about using the mobile phone anytime, anywhere, connecting large groups of users from a demand perspective, a consumer perspective, and then service providers to bring that together. It’s not going to be possible if you don’t have the back-end processing ability as well.

3. Ideas. The ideas that we’re seeing in China are really driven by the whole mobile convergence as well. And this technology convergence is coming from the base.

Chinese Using Smartphone Inside the Subway

Having the same thought like Jenny, Mike McNamara shared his thought. He stated that he saw a lot of innovations are going on and increasing rapidly. He took Huawei as the example. At Huawei, they’re achieving virtually 20% to 25% growth in a marketplace that elsewhere is stagnant, it’s on the back of innovation, not just low-cost prices and cutting special deals. Another examples are Tencent, Alibaba, and WeChat that have business-model innovations. With tens of millions going into cities, the way they use the Internet, services, assets, and mobility instead of cars; all of these issues will create new and different ways of working, living, and playing. That is going to create a lot of innovation, and much of that’s going to be China-based.

When asked about other Asian countries that have a good business opportunity, both says India (Read the Make in India article here)! McNamara added, that the world is moving to more distributed demand patterns which can create a lot more purchasing power and as consumption becomes more distributed, manufacturers have to have more operations closer to the customers’ marketplace. Southeast Asia, Indonesia, or even Mexico (LaTam) are also in the consideration. (read the article about The Business Guide for Mexico here).

Related to the current market slump, Jenny said that it does affect for those who are in the late-stage company, a growth-stage company, and public company. But, for those who are further down the chain on the early-stage side, then the capital markets play less of an impact, but it does affect how those companies now think about the quality of that capital, the stability of the capital, and the investor behind the capital.

“We cannot solve our problems with the same thinking we used when we created them – Albert Einstein”

Source : WSJ

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