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Jeff Feng | February 12, 2015

China will soon compete on innovation, not just cost

Although it’s only been a few weeks since I arrived in China for my extended research trip, I’m already impressed by the level of innovation that is visible throughout everyday life in urban centres.

From a consumer perspective, exciting technological innovations are happening in areas such as mobile payments, Internet-based micro-lending and e-commerce.

These innovations offer consumers convenience and lower prices, improve efficiency, expand markets for businesses and enable new services and business models to crop up on a regular basis. All this adds up to a huge, and growing, domestic market for consumption and services and handsome rewards for creative and entrepreneurial people.

These opportunities, combined with a large, well-educated and ambitious talent pool, give China an enviable advantage over many other countries, which will surely drive continued economic growth.

I believe that in the not-so-distant future Chinese companies will compete with international rivals less by leveraging cost advantage, as has been the case in the past, and more on strong innovation. This, in my mind, is a game changer.

It’s also worth noting that transportation in China’s urban centres is much, much more convenient than my experience at home. Thanks to extensive subway networks and a world-class, high-speed railway system (built in the last decade), getting around is less painful and traveling between major cities can even be enjoyable – something I bet Toronto’s frustrated transit users might find hard to believe.

If you have any questions about the work I’m doing in China or anything else related to the Funds, please feel free to leave a comment below.

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2 responses to “China will soon compete on innovation, not just cost

  1. Gordon,

    The inflection point, in my opinion, has already come.

    Here’s an interesting example to illustrate. The middle class in China now accounts for 16% of the total middle class population globally. A recent survey from Ctrip, a leading online travel agency in China, indicated that among people in China who plan to vacation for the current Chinese New Year, half of them will travel overseas.

    In South Korea, for instance, JoongAng Ilbo reports that the average Chinese tourist spent about US$2200 in 2014, compared with US$630 for tourists from other countries. To put this in perspective, Chinese tourist spending in South Korea equaled roughly the same amount as 700,000 Hyundai sedans sold!

    Thanks for reading,

  2. Jeff, I was wondering if you can shed some light on the whole exporter nation to consumer nation theory. Based on what you are seeing, are we really going to see this transformation? Will it be a slow evelotion, or will there be a massive inflection point?

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