Grassroots Research in China!

“I literally don’t think you can get some of these candid takes that I’m giving because most sites are biased in some way. They can give the numbers but some of the analysis online makes no sense to me”

-Steven Han (my friend whose wisdom is shared before you in this lengthy, but hopefully slightly useful, post…

Hey guys this is Danny, HermanPotter’s son. My friend Steven Han, who just graduated from University of Texas in computer science and is going to begin his MS in Computer Science at University of Washington in the fall and his Ph.D. in China in 2020, has been in China visiting his family the past couple months. Steven and I play a lot of basketball together and during the life saving breaks in the shade from the Houston heat he asks me questions about investing. He’s a smart kid so when I explained some basic finance, accounting, and options related stuff he picked it all up in a couple hours. As is the Motley Fool nature, I encouraged him to do some grassroots research while in China. His curiosity is impressive and he begged me for some books before he boarded the plane so I lent him my copy of “One Up on Wall Street” and “The Education of a Value Investor”. I think those are good starters. He already told me he really liked them. I also gave Steven some probing questions to consider before he went to China. It’s a rather long list of requests but he told me to be as specific as possible. I’m not going to reiterate what I asked him because he does a good job answering everything and adding his own take. What I was most curious about was trends, brand perception, culture, labor standards, and most importantly the attitude towards Americans and American companies. I also asked him to gather findings specifically on 7 companies, 4 American and 3 Chinese. I own all 4 of the American companies along with Baidu and I am interested in owning the other two Chinese companies.

The American companies are: SBUX, NVDA, ANET, and MDB
The Chinese companies are: BIDU, BABA, TCEHY

Steven’s findings (so far, he’s still in China) start with a broad overview then delve deeper into specific questions that I asked him. He is in china for another few weeks so let me know if you want me to ask him anything specific. I’m sure he would be happy to help.

Alright here we go!

Volume 1

Volume 1 contains general trends of China’s social, economical and cultural landscape that any American (or westerner) will need to understand before understanding the Chinese market and its companies. This is about as unbiased of an analysis of China as you can get.

Basic facts: 1 USD exchanges for about 6-7 Chinese yuan. Big cities have massive public transportation infrastructures, and Beijing is probably 3 times to size of Houston. Traveling to different cities is by train, not airplane. Population is huge and the pollution still exists. Smog looks like fog/clouds, smells like dust. The attitude of Chinese people is entirely different from the West.

Service industry: As you know, due to the large population, labor is very cheap. Compared to the US, you will feel like it’s almost slavery. Therefore, services like taking rideshare/taxis are extremely affordable. Food delivery infrastructure is light years ahead of the US already. Without looking at numbers, I’d say 33-50% of food services have become delivery. Shipping has shifted away from post offices. There’s plenty of small scale delivery services, don’t think of them like FedEX or UPS but more like Favor/Uber eats for packages. These things are so affordable now the common low-middle class person can easily afford it. There’s a high supply of these services.

Technology: In terms of technology, China is close to or equal to the US. Per capita, usage of smartphones is likely higher than that of the US. The market has immersed the middle aged demographic, so literally everybody between ages 0-60 uses smartphones. I’d go so far as to say that most smartphone users in China are more addicted than the US. You see a ton of people chilling on the sidewalks staring at their phone. Overall smartphones are more useful in China than the US as well (obviously doing nothing productive). Apps exist for everything just the same as the West, but things like Alipay or WeChat pay are nowhere near as prevalent in the US when compared to China. Although some people use credit cards, they’re not as common as the aforementioned methods of payment.

Etiquette: While technologically China has caught up with the progression of the West, in many ways what needed development is modern culture and etiquette. Most of the over 40s grew up in a 3rd world country where they struggled to have enough food to eat, but suddenly just like that they all have access to smartphones. There’s a variety of still unhygienic and impolite practices that foreigners might find offensive or shocking. For example, dog poop sometimes litters the sidewalk, people spitting basically right by your feet, no toilet paper in the stalls provided bring your own, janitors sweeping the floor while you’re still standing there, etc. I believe these things will start to change as the younger generations start to take over. Let me know if you want me to elaborate further into this.

Exchange rate and work: Despite the 1USD to 6-7Yuan rate, income per person is about 1/3 to 1/2 of that in the US. Large wage inequality. Food is cheap, transportation is cheap, (offbrand) clothing is cheap, housing is not. With the large workforce, there is almost a mandatory early retirement. This means most men retiring in their late 50s and women in their early 50s.

Real estate: China real estate is just ridiculous at this point. I’m not sure if this is a housing bubble or what, but prices have gone through the roof. In some areas of Beijing, it could cost 100,000Yuan per square meter. Consider that your room is probably 20-30 sq meters. A standard apartment sized house in Beijing or Shanghai could cost upwards of 1 million USD. One wonders how middle class families can afford these houses with their wages less than ours. These houses aren’t particularly nice or luxurious either. Yet house prices are still trending upward with no end in sight. This is where the real money is.

American companies: Since the beginning of this email, I’ve already changed my understanding of how Chinese people currently perceived American brands. They’re certainly considered quality in tech and fashion/clothing. The good brands from the US cost more in China than in the US, by maybe 20% more. Considering the Chinese brands already sold for about 1/3 or 1/2 due to different income levels, American brands are EXPENSIVE! I have plenty more thoughts on this topic for next volume.

That’s it for volume 1, this was just a primer that any American should know about the ever-changing landscape of China. I got some notes already waiting in the wings for Alibaba, Tencent, techno-political landscape, coffee related things, and American food/ drink companies.

Stay tuned.

Volume 2

This edition I’m going to talk about some the preliminary things regarding the Chinese powerhouse brands, plus let’s talk coffee. Let’s get started.

Here’s the what I believe in right now: Alibaba and Tencent. I’m skeptical about Baidu thus far. China is moving towards a cashless society, and most 90% payment is through smartphones.
Link on alipay/WeChat pay:…

Alibaba: It’s an absolute powerhouse in the payment and online shipping industry. Alipay and Taobao are arguably the top dogs in their markets. WeChat pay and Jingdong are their competitors in smartphone payments and online shopping, respectively. In smartphone payments, some smaller vendors only accept 1 or the other out of WeChat/Alipay, but any large store almost definitely accept both. Just in case you don’t know how WeChat/Alipay works, you basically just go on their app and register a bank account/debit card with your account. To pay either you scan the other person’s QR code or they scan you, and initiate a payment. Very simple and fast, and you enter a pin upon payment I believe. Although we have credit cards which give us an added layer of security and benefit for the customer, businesses in the US would benefit greatly cutting out from the 1-3% fee the credit card companies take off the top. I believe that the small Asian vendors on the street corners are disinclined to accept such a large service fee which is why credit cards like Visa have no chance in China but Alipay is growing extremely well. Alipay is growing this well while focused solely in China, so growth possibilities for other parts of Asia is favorable.

Tencent: I know Tencent has a lot of different businesses, but make no mistake. This company is the biggest and most influential through WeChat and in gaming. Let’s just start with WeChat. It’s the defacto method of communication between people and groups. They’ve captured the entire Chinese audience that uses smartphones, and made themselves social media which there is no real alternative ie Facebook with Twitter, Reddit, etc. Combine that with the fact they have WeChat pay, they pretty much know your interests and spending habits. What type of company do you know has this type of information? Just ridiculous. They could make an absolutely killing with ads, but they still keep it limited.

One thing you must know is that competition in China is often represented by sheer quantity. There’s so many knockoffs “shan zhai” that these knockoffs become legit brands in the Chinese market. Any successful product will instantly get pressured by a large volume of other companies so the real question is if they can withstand the competition onslaught and be recognized as the top 1-2 brands in a market.

Baidu: while this is supposedly Google of China, I’ve managed to completely bypass using it. If you get a nice VPN service like ExpressVPN, combined with the fact Baidu has a crowded interface when you go on it compared to Google’s simple webpage, I feel uncomfortable using the platform. If you are wondering how to use maps, there’s an app called GaoDe Maps (???)which I believe is superior to Baidu maps. Not a fan of Baidu’s search interface.

Starbucks- it’s somewhat difficult to judge the perceptions of Starbucks because to me I feel that this is a new brand just entering the Chinese market. Chinese people do drink coffee but they also drink their fair share of tea. Often times restaurants give you complimentary tea like they do water when you sit down. I think coffee is showing up in Chinese culture, but companies fight to be the top brand and establish their market share. Starbucks is a little late to the Chinese market.

That’s it for Volume 2. I know it’s late but I’m going to start Volume 3 where I plan on answering each of your questions directly.

Peace out,

Volume 3

Hey Danny,

Quick turnaround to v3. Here I’m answering the questions. Just follow along the email you sent me.

1 Starbucks
• growth of the coffee culture is good. It’s as you’d expect, and younger people really start to accept coffee in everyday life. I don’t see it as tea vs coffee. It’s more like they can coexist. If that’s not true, then I’d say coffee is gaining a slightly larger market share over time due to young people.
• Let me start by saying people don’t treat jobs with that attitude in China. It’s a whole different perspective and they treat it as a job. Don’t think of their employees like American Starbucks employees. Perception as a brand in my opinion is that most younger people who are in touch know about it, older people have no clue what it is. It’s more hip than mainstream I think. What you have to think is there are serious competitors like Costa Coffee (based in London?) and caffe bene(I hope I spelled that right).
• Yes. People spend freely on food and beverages nowadays. Look no further than success of Pizza Hut, KFC, and McDonalds.
• Status symbol? Probably not. I think combining the factors like the competitors and it’s fairly late arrival to China, I would say it’s not as much of a status symbol as you’d like to think.
Thoughts: I think Starbucks has a long ways to go to solidify its brand in China. I understand it’s growing and expanding but it’s got a lot of work to do. Hard to say if it can outdo a competitor like Costa Coffee which from my perspective in China looks just the same, has very similar products and the Starbucks vibe in its store. Starbucks and Costa coffee may end up splitting a lot of business. Unlike a Pizza Hut that has that market locked down. This outlook may not be nearly as optimistic as you had imagined.

2 Arista
• I’m just gonna skip this topic and get back to you when I get back to the States. Probably not the best use of time to do this research in China on an iPhone.

3 Nvidia
• Please note that I’m not as close to the high tech scene here as I will be when I come to study here in 2020. When I study here’s I’ll have way more insight on what’s happening in China’s tech/data world. I’m a tourist this time.
• I feel that there was a point that computer gaming was hot but currently smartphones are the most important part of gaming now. I may be wrong but I don’t think GPU demand is that high at all in gaming. People are playing Chinese fortnite on their phones. There’s certainly a computer gaming scene but this isn’t like Korean esports
• How popular are esports? I don’t know. This is an interesting question but idk who to ask (without looking online). This might be a question for when I come in 2020 and do tech stuff.
• Another different question to ask. I have a distant cousin who’s working at a startup doing blockchain, so it exists and they need computing power for that. I don’t really what’s happening in crypto in China. 2020 question.

4 MongoDB
• I’ll look into this some more, but fortnite is definitely not the only game in this space. There’s some really popular fortnite knockoffs, which is normal because fortnite itself is a knockoff of games like H1Z1. So I don’t think fortnite is the most popular game, since there’s Tencent games that are very similar to fortnite.

5 Baidu
• I think Baidu is just “good enough”. If Google wasn’t blocked, they’d wipe Baidu out. I don’t think it has any particular element that impresses me, and after using Google all these years, Baidu search and maps have me unimpressed. I think it’s just better than its Chinese competitors in search so it got big because it’s China and it helps to be number 1 in China. But I don’t like it.
• I’m not sure but I’m gonna say no, not in search. All Chinese people use it for searching stuff so it is the top company in this field. As long as the Chinese government doesn’t allow, Baidu will be fine. If for some reason they unblock google, Baidu will be screwed.
• I’m using a VPN as I’m sending you this email through Gmail. A nice subscription based VPN like ExpressVPN is definitely worth it and you can bypass every and use the internet just like back in the US. I don’t need to use Baidu here
• I think we talked about Baidu’s self driving car platform Apollo, which I did my research project on, and Apollo did not work out for us. Maybe they’re making progress on it but I have some personal grudges against it for wasting my team’s time. iQiYi, the Chinese Netflix, costs about 5 yuan a month for online streaming shows. Let me remind you that things in China are cheaper and there is a larger customer base. iQiYi is nice and I’m sure people use it, but let me add another culturally important note. TV>computer in China. You have a cable box that everybody gets for about 18 yuan a month which is very affordable, has all the channels you need, can DVR/playback, and you can watch a lot of past shows just like Netflix. With that said, does anybody need iQiYi except for niche reasons to watch specific shows? I’d say probably no. You just watch TV and find the show on playback using your cable box.
• Baidu maps aren’t as good as GaoDe maps (???),Baidu wallet might be 4th on the mobile pay chain which means nobody uses it.
• Baidu is trying to compete in the takeout delivery business. Once again it’s third after MeiTuan (???) and E Le Ma (???)(no clue if that English name is right).
• Baidu does try to do a lot of things outside of search. Basically outside of search, it’s not a leader at anything else. Maybe it’s like Google in the respect…

6 Alibaba
• With respect to Alibaba, you’ve got my notes prior notes on it. I’m a big believer on the possibility of growth not just in China but also across Asia in the near future. Maybe even the US, but we’re still using our way outdated physical credit cards. (Why aren’t we using credit cards directly through our phone? The principle of credit card could be the same but we should be using our phone rather than a physical card). I think it would be hard for Alibaba to mess up at this point.
• Alipay collects .55% from vendors only I believe. Please read the link I sent last time. But more importantly they collect the data from your buying habits. Then they have Taobao aka amazon. You can buy pretty much anything, including movie tickets or concert tickets, or services like English lessons or haircuts. Taobao can give special discounts as they please, and that’s a game changer. Using the data they get from Alipay, and applying it on Taobao will be highly effective. They can keep tuning their strategy to increase profits.
• Outside of Alipay and Taobao, I think they lend some money, do a solid job with cloud computing. Not too familiar with those things

7 Tencent
• WeChat is the dominant messaging app and will continue to be the best for a while. FB, instagram, Twitter, Reddit, WhatsApp, Skype are banned. It’s functionality is FB, instagram, and reddit combined. WeChat wallet also allows you to easily access third party services from WeChat itself to buy anything you need, including paying internet and electricity bills, buying train tickets, calling cabs, hotels, etc. With all this functionality, you almost don’t need any other websites. Alipay has similar functionality too but I prefer WeChat because it’s got messaging and paying.
• Tencent gaming is very popular and they have a wide range of titles, I can’t name any off the top of my head so I’ll get back to you on the titles. Frankly these fortnite type games basically just rip each other off with minor variations, but their games are mostly for the Chinese audience, which makes it successful. I get the feeling smartphone app gaming is what’s hot right now, while online PC gaming is more niche (I reserve the right to backtrack this statement)
• I make get a better understanding of the other businesses that Tencent runs in 2020. You have my notes from the previous volume on the wealth of data it has. They have people’s spending habit from WeChat pay and hobby/interests from the social media/gaming side. That’s info that no American company possesses, since they’d have one or the other but not both. The 35% growth rate seems like a moderate estimate. Tencent is still trending up, and they have a wealth of options on what they could do next. This company is really good.

Let me know what questions you have ASAP so I can have time to find the answers.


I was in China two weeks ago on vacation (Shenyang and Dalian, both cities of about 7-8 million people). China has three cities in the 20-30 million people range (Beijing, Shanghai, Chongqing), a few cities in the low double digit to mid teen millions (ex. Shenzhen, Guangzhou, Chengdu), and roughly ten-ish New York-sized cities in the high single digit to low double digit millions. On these trips I fly into tier 1 city Beijing, visit with some friends there, and then either take a train or flight over to Shenyang and/or Dalian. Shenyang and Dalian are considered big cities in China but not super big. Maybe think of them like the San Diego or Dallas of China.

WeChat is definitely all over the place. My wife is Chinese and so we have many big family meals with all sorts of relatives, young and old. They’re all on WeChat, from the 70 year olds to the 30 year olds in the family. Riding subways and buses, I can see that the 20 year old and younger crowd is all on WeChat too. That said, all this isn’t very different than what I saw two years ago last time I was here. Just fun to see anecdotal evidence to what you read in business news.

My wife funded her WeChat account so she could pay with it. I just paid cash. This is the first time we tried paying with WeChat. It was a very smooth experience. Even street food vendors are set up to accept WeChat payments. Some even seem nonplussed if you want to pay with cash. I asked people if they preferred WeChat to AliPay. The answer was typically indifference. They liked both. Some places only accept one or the other.

One thing I learned about both AliPay and WeChat Pay that I didn’t know previously is that people are incentivized to use them over cash because they get various coupons when they use them vs. when they use straight cash. Currently it seems AliPay is a bit more generous than WeChat is with these payments. In this way it’s sort of like a credit card rewards program. My aunt, who is retired and has time on her hands, is quite happy to go grocery shopping a couple times a day in order to use the coupon in the afternoon for a free something or other she got in the morning’s shopping trip. The coupons have relatively short expirations (like a few days) so they encourage more shopping, which the seller likes too.

Baidu/Google, WeChat/Facebook, ExpressVPN
I agree with your friend on Baidu. Google would probably take out Baidu over time if allowed in the country. Google Maps in the U.S. is much better than Baidu maps in China. That said, it would take time for Google to map China like it has the U.S. and Europe. Try Google mapping Beijing and while you get satellite photos, there’s no street view or 3D view, and the road overlays don’t match the satellite photos well.

Unlike Google/Baidu, I don’t think Facebook would easily kill WeChat if allowed in country. WeChat is really slick. I use WeChat for social messaging relatives and friends in China, and when using it I’ve never felt it’s a poor substitute for Facebook like I do when using Baidu instead of Google. In certain ways I like WeChat better than Facebook/Whatsapp (scanning someone else’s QR code to instantly add them as a friend, the seamless chat transfer process when upgrading to a new phone, payments, now that I saw how WePay is so convenient).

Yes, ExpressVPN is great. It’s a very dependable VPN, only thirteen bucks a month, and you can use one subscription across multiple devices.

Real Estate
Still lots of building going on here. In both Dalian and Shenyang, as well as in some of the more rural parts in between these two cities. There are still lots of apartment buildings and office towers going up. Signs for buying real estate and signs for real estate companies are still all over the place. I’d agree that real estate prices are quite high in Beijing, roughly on par with what you’d see in the more expensive parts of Southern California but cheaper than what you’d see in San Francisco and Washington, DC (maybe around $1,600 a month for a one bedroom apartment). Average salary though is nowhere near the average salary in Southern California.

If you go to tier 2 cities and below though, real estate is much more affordable. In Shenyang you can buy a nice two bedroom condo for around $150,000. Real estate has not appreciated nearly as fast and as far in tier 2 cities and below as it has in the tier 1 cities. People I know in Beijing complain about the real estate prices like my friends in San Francisco do. My friends and relatives in Shenyang and Dalian don’t view real estate costs as a similar problem.

American Brands (and Tencent again)
American brands are big there and like you mention, expensive. As guests, one of our responsibilities when we go is to buy a bunch of American designer brand merchandise in bulk at an outlet shop and then give them as gifts in thanks for hosting us. We made the unfortunate choice of getting a bunch of Coach wallets as gifts. When presenting them, several people laughed good-heartedly and said they don’t use a wallet any more these days due to WePay. Oh well.

Yeah, I’m interested to see how this goes. No one in my friends/family circle over there is into coffee. When we come over they make sure to get a little bit of coffee for our morning fix but that’s just them being nice to us. They drink tea. Yet Starbucks is expanding like gangbusters there and it’s where Starbucks’ management is depending on for future growth. I definitely saw a lot of Starbucks stores there and they had people in them, so hard to say. If everyone were like my relatives Starbucks wouldn’t be doing well there.



Let me know what questions you have ASAP so I can have time to find the answers.

Thanks for the insights!

I appreciate all the info since I am currently invested in a number of Chinese stocks. I own a sizable position in BIDU which I have owned for about 5 years. It’s done well although not exceptionally so. I am disappointed in your feedback on BIDU but it is still top dog in search in China. And I don’t see GOOG allowed in anytime soon. Even if this happened, there are numerous cultural/regulatory hurdles to navigate. So I think I will keep my position for now. I might consider trimming to add to other positions.

I also own TCEHY, SINA, WB, BZUN, JD and IQ.

I really like TCEHY but it is an expensive stock with an already large market cap. Everything I have heard has been good and it is top dog in gaming. I don’t own BABA since I have heard mixed info on them. There are concerns about its corporate culture although this might not matter given its huge lead in ecommerce. I’m not as high on SINA but more so on WB. I’ve been increasing my position in the latter and may drop SINA (which is mainly a play on WB). I’m also growing more bullish on IQ which has a massive opportunity as people transition from tv. I have a small position and will likely add soon on the pullback.

Overall, it sounds like China still has major growth opportunities although it likely will hit some speed bumps.

Do you have any feedback on WB, SINA, JD and BZUN?



I really like TCEHY but it is an expensive stock with an already large market cap.

Tencent has a large market cap but I’d disagree that it’s expensive relative to the growth numbers it should conservatively be able to put up over the next few years. I bought some Tencent recently after its price got hit due to the recent trade war fears.

I laid out my investment thesis for Tencent along with a valuation estimate (roughly $66 a share) in another post here:



Gaming cannot justify the current stock price. Nvidia has a big lead in the AI/Deep Computing area (including self-driving cars). The potential market is enormous, which is what investors are betting on. The risks are fairly large as well.

It’s always nice to hear some one else’s perspective on China. I spend about 20% - 25% of the year there every year and have done so for the last several years as my wife is Chinese. But, we spend the majority of our time in Guilin, so my experience in Guilin is the basis of my opinions. I realize this is a constrained perspective.

I agree with a lot of what Steven reported, but I do have some disagreements and at least one correction.

First, the correction, unless something very recently happened, Skype is not blocked. Not long ago it was very popular for communicating with family members around the globe, but since We Chat has added video conferencing, Skype’s popularity has fallen off. But so far as I know, it’s still available and still in use. It’s my understanding that WeChat is only available on a mobile platform, so if you want more screen real estate, you’ll use Skype on a PC.

Disagreement about Starbucks competition. There really is none. The primary Starbucks location in Guilin is right downtown along the estuary from Rong lake to the Li river. Before Starbucks took over the location it was a Chinese owned and operated coffee house. When I went there to buy coffee it was dark and almost always nearly vacant. Since Starbucks moved in, they vastly remodeled such that there’s lots of natural light. It’s always crowded, mostly with young people who are always dressed to be seen as Starbucks is the scene to seen at. This is also true for the main store in Xi’an. There used to be a Starbucks in the Forbidden City in Beijing, but they got kicked out and there’s now a not very popular Chinese coffee house in its place (or there was a few years ago when I was last in Beijing).

Facebook was legal and popular in China until 2008. It was being used (or at least it was alleged to have been used) to organize demonstrations in Urumqi, Xinjiang during the lead up to the Olympics (maybe FB was “used” in Lhasa, Tibet as well). In any case, it was subsequently blocked. With all the negative publicity about how FB was used in the 2016 elections here, there’s no chance they will allow it back in China no matter how many Mandarin speeches Zuck’s wife teaches him. WeChat is ubiquitous among the Chinese wherever in the world they live. Even if it were unblocked, I think FB would have a tough time in China.

Digital payments and home delivery has seen amazing growth. I was last in China in spring '17, only my nephew shopped via smartphone. My wife’s sister-in-law lives walking distance from the main downtown shopping area but now shops and pays for everything but groceries online (she may even pay for groceries with Chatpay or whatever it’s called). Shopping online is cheaper and more convenient in that the items are delivered to the door so she needn’t carry them home. This change in a lifelong habit has occurred since I was last there a little over a year ago.

I fully agree with your friend about Baidu. As with most Chinese websites, the home page is a cluttered mess. I think this is a legacy of very slow baud rates so web designers put as much crap on a page as possible. Baud rates have improved, but web design has not, which is weird in that the Chinese are generally very design conscious.

Alibaba: It’s an absolute powerhouse in the payment and online shipping industry. This surprised me in that it’s my understanding that Ali Baba does not have shipping and logistics in house (while does). But it’s a fast changing world, they may provision these services internally now, but that would be a big change.

Rail is the primary means of distance travel and high speed rail is connecting more and more city pairs. It is cheaper and faster to travel between Guilin and Guangzhou by high speed rail than air when you take into account travel time to/from airports and waiting time at the gate and luggage carousel. The rail stations are located inside the city limits, so you can get off the train and take a subway from the same station (in Guangzhou) or a bus or a taxi to your final destination. Very convenient. One can only wonder when the US will catch up with the rest of the world in this respect.

Frankly these fortnite type games basically just rip each other off with minor variations This is very telling about the Chinese attitude around IP. I tried to explain this on the NPI board and got ripped by a few members as they thought I was justifying the theft of IP by the Chinese. The fact is that stealing IP is not considered a big deal in China, it’s pretty much the way everyone conducts business and they have done so for centuries. To the Chinese, it’s just not the same crime that we think of it in the West. So, when we get all hot and bothered about IP theft, what the Chinese hear is us telling them that they need to play by our rules. How well would that go over if the Chinese tried to impose their cultural norms on the US? I’m not saying I agree with it, but I am trying to put it in perspective. To the Chinese, IP theft is just part of business. Just like paying bribes. But it’s changing, the Chinese, I think, had second or maybe third place last year in number of patents issued. So it looks as if they see the benefits of IP protection, it remains to be seen how much it mitigates theft.


Ok just back from my latest trip to China so given the recent interest in sharing experiences and reflections here are mine:-

I’ve been in Asia for ~10 years and visited China about 30-40 times. I’ve been to China 3x (Nanchang, Shanghai and Xiamen) in the last year plus Macau and HK. This visit I went to Xiamen.

Xiamen is in Southern China about level with Taiwan. It is a small city by China standards - 3.5m people and recently promoted from tier 2 to tier 1. I had heard that the quality of life and wealth here was good (an ex GF of mine had mentioned that their ancestral family in Xiamen were now wealthier than the Singapore relative!)

Ok the place is great - no pollution, high quality built environment and awesome food and the people are very friendly. They have killer tourist attractions like the UNESCO heritage sites of the Hakka Tulou villages and the amazing island of Gulangyu which is like combining the Beijing Hutongs and the Shanghai French Concession into a small pedestrianised island with lovely beaches and coves with cafes, restaurants and amazing architectural examples of the 19th century - it would be the rival of any high quality island in the mediterranean.

Pretty much the whole city seemed middle income without rich/poor extremes you see in other cities in China or elsewhere in Asia. There were plenty of Universities, spoken English is definitely improving and waistlines are expanding. People were just busy getting on with their jobs, making and spending money and didn’t seem to be bothered about trade wars or anything else. Infrastructure was excellent - the roads and bridges in very decent shape, LED street lights installed throughout, wifi everywhere and a full range of industries on show from shipbuilding to container ports to business parks to hospitality and retail, to cruise lines to biotech.

Ok - the reason I was there? I was attending a conference titled International Conference for Managing the Asia Century - linking Smart Biotech with One Belt One World. China is tying up its foreign relations and industrial policy with the One Belt One Road strategy that is basically acting like China’s Marshall plan, only unlike the original US version where Europe was the intended direct beneficiary (and US indirect); China will be the direct beneficiary whereby all foreign investments totalling 1 Trillion $ will be channeled to recipient countries with the proviso of construction and development fulfilment being undertaken in China or by China. China is literally hitching every country to the China wagon via OBOR from China to Western Europe overland and by sea.

Investible intel:-
Car ownership continues to rise. The majority of foreign western cars are: Buick, Chrysler, VW/Audi and Mercedes. Otherwise local car makers seem to be on the rise and Japanese and Korean car makers do well.

Apple, Huawei Xioami and Oppo are dominant cell phone makers.

ZTO express seems to be a recurring freight player on the roads

WeChat - that’s all anyone uses period. Whatsapp is blocked although every now and then messages seem to get through but it is not a viable platform in China.

Payments - credit card acceptance is often limited to Union Pay but everyone uses WeChat Pay for everything (restaurants, hotels, tourism trips, food, cafes, transport) including P2P money transfer. Ali Pay also available and used often.

Didi is their Uber that everyone relies on.

Whilst I didn’t see Ali Baba advertised I did see advertised a few times.

Coca Cola has translated itself brilliantly here and dominates the soda scene (didn’t see any Pepsi), otherwise folks drink tea. Beer seems dominated by TsingTao as well as Pearl River and Harbin. Some foreign beer is available - led by Budweiser.

Hilton/Doubletree chain seems to established itself firmly as has Starwood Group across Chinese cities.

CTrip dominates the international and domestic travel scene, a accommodation reservation was fulfilled by C-trip for me (acting like a local AirBnB network operator of serviced apartments).

Chinese airlines are booming, Xiamen Airlines was a very competent operator within the Sky Team alliance competing with Air China, China Southern, China Eastern amongst others. Most seem to be using Boeing aircraft with a very young fleet. The airport seemed to be operating at full capacity.

Starbucks seems like the only western coffee establishment around, the rest were all local affairs.

Baidu is the default search engine but their mapping is rubbish - interestingly Apple Maps works there even if Google Maps doesn’t (which compromises websites that rely on Google Map plug ins like and tripadvisor).

Gaming - Everyone seems to be playing mobile gaming and even PC gaming when they are not on WeChat pretty much all the time.

Overall - very impressive and whilst I don’t under-estimate China, I think much of the world has not caught up to where China is now. It has arrived. Forget about this developing world stuff - it will have 600m middle income citizens by 2020. Twice that of the US or EU populations.



Know what you mean by your last para. but for me there is more to ‘developing’ than skyscrapers and a middle class (for want of a better description). Taking as a reference point say, the free market, always subject to competition and the rule of law, ease of starting a business, an unintrusive bureaucracy and the absence of corruption, cartels, licensing, not to mention screams coming from the basement of the secret police etc. - indeed some body does produce an ‘index of economic freedom’ on these lines. It is not a given that a western country is outstanding either.

1 Like

The Heritage Foundation. Interesting read.

Oh - sorry one additional note I took that I forgot to mention. I know AO Smith got kicked around on this board a while back and was referred to for its potential in India. Well the serviced apartment I stayed in in Xiamen had a Hitachi/Panasonic piece of junk of an aircon system that looked like something from the 70s and sounded like I was sat at the Cape Canaveral launch site whilst in the bathroom there was a very hi tech looking water heater/monitoring system by AO Smith. Water heating systems are on the roof of every Chinese house/block. If AO Smith is making inroads into China as well as India that is huge.

Know what you mean by your last para. but for me there is more to ‘developing’ than skyscrapers and a middle class (for want of a better description). Taking as a reference point say, the free market, always subject to competition and the rule of law, ease of starting a business, an unintrusive bureaucracy and the absence of corruption, cartels, licensing, not to mention screams coming from the basement of the secret police etc. - indeed some body does produce an ‘index of economic freedom’ on these lines. It is not a given that a western country is outstanding either.

Honestly Strelna mate, on this last point - frankly yes anyone of us can sit here and lecture developing countries on whether a nation is truly developed in absence of freedoms etc but I think that is more in your/our minds than it is for anyone in China.

10 years in Singapore has taught me that. It is the richest country in the world per capita (minus some petro-states) and they don’t give a toss about absence of press freedom or ability to chew gum no matter how much the rest of the world lectures them - literally not a second in the day is wasted thinking about it. Same for Chinese - they just want to make money and take care of family period, it’s that pragmatic. They don’t think about these points anywhere near what we think they do or should do - they are too busy making money hand over fist and if you/we don’t get that we are missing the point and as you say the West is looking less and less a paragon of virtue on this stuff all the time.

They also are very proud of China as it is - it’s not called the middle kingdom for nothing and they see world economic domination as their destiny. That’s what they are focused on and they definitely don’t see truth, justice and the American way or anything resembling that as a necessary direction of travel to reach this destiny.

What China is achieving now has never been done on this scale. It has reached developing world escape velocity and is pulling half a billion into middle income in one decade. Forget about the failed state experiences in LatAm, Mid East, Africa and Asia this is for real.


I am sure the people of Tibet will be greatly reassured to know that making money hand over fist is the priority and they are missing the point.