Here is a letter that I send to my friends about the oppotunities in China.
Hello All:
I am very glad to hear that you guys had a wonderful time in CA. I went to ShenZhen, Zhuhai, Guangzhou to witness the latest capitalism in China during the summer vacation. I then went to Kunming, Dali, LiJiang, Chendu and Xian for a half mouth back packing tour.
I agree with Ping that the chance for an IT guy to get rich in the silicon valley is rather slim. I also believe that the future belongs to China. Along the way in my journey into the south and west of China, I have met many Chinese people including businessmen, school teachers, street vendors, government officials. I can tell you one thing, China is booming with energy and all the people are busy doing something. With the correct government policy, this country is moving ahead at the extraordinary speed. As the old saying, when the tide goes up, it lifts all the boats. So, I will stay here to ride with the wave.
I recently read articles on Business2.0 and BusinessWeek. They have stories on how the American entrepreneurs are making it in China. Good articles with stories from real life. China is not full of gold on the street waiting for us to pick, but with persistence and hard-working, it offers countless possibilities.
The larger trends in China are:
1: The rise of the middle class. The family who has an apartment or a house, a car, enough food, enjoys traveling twice a year sometimes outside of the country. This class will demand products and services that we have never seem before. Have you noticed that China has huge amount of message paroles, restraints, travel agents, car dealers, outdoor stores, English training centers. All these services are designed for the rising middle class. With the buying power in China as 1 to 5, the middle class is defined as whom the household income is over 20,000 USD including the gray income.
2: The heavy foreign direct investment flooding into the country. With the political stability of the country and the internal problems slowly been worked-out, investment in China is going to look very attractive. Many of the investment opportunists that I personally looked at have 20% or more returns of investment. Compare this with average 10% in the US or much less in the rest of the world, China is looking more and more attractive. 10 years ago, China is a land for opportunists, now with the law and order in place? it will be the land for interferers and businessmen.
3: The dominance in the manufacturing and soon in the research and development area. If you go to Guangdong, ShenZhen and look at how the Chinese work in their factories, you will understand why this world is going to bow to the Chinese price. Small or big, with the labor cost nearly zero, the factories are using almost all the western style management such as Kanban, JIT, and quality control. One of the small workshop owners told me he is thinking of flatting me the management chain so that his front line worker can communicate with him directly. This is business process reengineering, folks. Foxconn (the world biggest OEM supplier is sending hundreds if not thousands engineers and middle level management to schools like Tsinghua to be trained with western management techniques.
Intel, IBM, Siemens, Microsoft have all set up research facilities in China. Yes, it is true, that the Chinese trained researchers are not as good as US trained ones. But they get 1/5 of the salary and are 1/2 as good. Most importantly, they work 12 hours / day. They absorb every bit of creativity and methodology from the US trained researchers. When the country is getting rich and can allocate more resource into research and development, it is going to compete with the US in many areas.
With such, I think that the opportunities lie in these areas:
1: Commodity trading with China, like oil, steel, etc. China will import these from the international market
2: Any products and services that are tailored for middle class. A lot of money can be made in media production and distribution which was formally controlled by the central government. A good example of the Super Girl show which was ended last month.
3: International trading. With the opening of China deepen into the western regions, china will import and export services and products that they want and the world also want.
So time is right to get in and start doing something in China. By the way, the digital map services that we discussed during our last summit were sold to Sohu.com for 9 million USD. Not bad.
