How China is changing the world - Any Mok

Andy Mok

The world has been eagerly hoping to see how China would adjust to the Western world. What they did not realize, says Andy Mok, managing director at Red Pagoda Resources in Beijing in Newsmax. What the world did not see was how much China started to change the world.

Newsmax:

The rise of Chinese tech powerhouses isn’t exactly new, even if it’s recent headlines – the pounding of Uber, the faltering of Apple – that have caught readers’ attention overseas. “What a lot of western policy makers and institutional investors have not recognized … they’ve been focused on how the outside world is going to change China. What many people have missed is actually how China is going to change the world,” says Andy Mok, managing director at Red Pagoda Resources in Beijing. He cited how Chinese audiences are now influencing Hollywood casting decisions. “The more and more the Chinese middle class becomes a driving force globally of product decisions, that’s becoming more apparent.”

More in Newsmax.

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Uber is not down after the China deal - Andy Mok

Andy Mok

Uber threw in the towel at the killing ride-hailing wars in China, but that does not mean Uber is out, especially on a global level, says Andy Mok, managing Director at Red Pagoda Resources, especially on a global level, he tells Bloomberg. "They want to be the Cisco of the physical world."

Bloomberg:

By shedding its losses in China, the move may clear Uber’s path to an eventual initial public offering. And as part of its deal, Kalanick joins Didi’s board -- literally gaining a seat at the table as the effort to dominate the world’s largest ride-sharing arena unfolds. 

So never count Uber out, at least on a global level, said Andy Mok, Managing Director at Red Pagoda Resources in Beijing. 

“They want to be a Cisco of the physical world, the network that routes physical people and objects,” said Mok. “In a way, this frees up space for more technology development.”

More in Bloomberg.

Andy Mok is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

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China startups: tougher to get capital - Andy Mok

Andy Mok

Getting funding has just gotten a bit harder for China´s booming startup scene, says VC Andy Mok in Bloomberg. “There’s a greater emphasis on revenue and profitability among startups that they are focusing much more on top line and cost control.”

Bloomberg:

For now, the pain should be confined mostly to smaller startups. China’s home to the largest herd of unicorns or billion-dollar startups outside of the U.S., with at least 79 private companies worth more than $1 billion, according to Shanghai-based IResearch. The U.S. in comparison has about 96, according to CB Insights. 

“There’s a greater emphasis on revenue and profitability among startups that they are focusing much more on top line and cost control,” said Andy Mok, managing director of Beijing-based headhunting firm Red Pagoda Resources LLC. “It’s shifted from growth at any cost to more scrutiny of traditional business metrics and they’re looking much more carefully at headcount.”

More in Bloomberg

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How Baidu is revolutionizing take-out delivery - Andy Mok

Andy Mok

Baidu, one of China´s giant internet companies, is making big inroads into the take-out delivery market for white collar workers, writes startup investor Andy Mok at LinkedIn. "Baidu Takeout Delivery has an estimated market share of almost 80% in Tier 1 cities."

 Andy Mok:

The white collar market is an industry bellwether because this market segment not only uses third party takeout platforms most frequently but also spends the most money per order. Specifically, the white collar segment on Baidu Takeout Delivery orders on average 4.2 times per week with 31% ordering more than five times per week and 40% of customers with an order average of more than RMB30. In addition to being the most frequent users and delivering the highest average revenue per transaction, the white collar segment is also the least price sensitive. There are two reasons for this: First, they have high incomes and so have more money to spend on takeout. Second, according to Future X/DCCI this market segment cares most about food safety, delivery speed and accuracy of delivery time. As a result of this focus on the white collar market segment, Baidu Takeout Delivery has an estimated market share of almost 80% in Tier 1 cities. 

Baidu Takeout Delivery also has one of the most vertically integrated third-party take out delivery offerings with more than 40,000 delivery people serving about 30 million users in 140 cites throughout China. Also, Baidu Maps with more than 300 million monthly active users and Baidu's leadership position in search provide it with important advantages in efficient routing for food deliveries and large scale lead generation, respectively. According to TechInAsia, a leaked Baidu document suggests that Baidu Takeout Delivery did RMB 8 billion ($1.2 billion) in transactions in 2015, and that its target for 2016 is a total transaction volume of over RMB 25 billion ($3.8 billion). 

Baidu Takeout Delivery is well-positioned to reap significant financial gains as a leading third-party takeout delivery platform due to its strengths in customer acquisition and to-the-consumer “last mile” urban logistics. However, its potential impact on the supply chain of its merchants is less obvious but perhaps more profound. Internet+ (or IoT in American parlance) is based on providing every imaginable object with an IP address. With respect to food production and delivery, there are significant areas of wastage and inefficiency as well as food safety issues for which Internet+ applications are uniquely well-suited to address.

More at LinkedIn.

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Why WeChat might outrun Facebook - Andy Mok

Andy Mok

Can a Mark Zuckerberg emerge from Asia, wondered VC veteran William Bao Bean this weekend. If so, his name is probably Tencent´s Allen Zhang, writes investor Andy Mok today in LinkedIn. Despite a stellar performance by Facebook, he puts his bets on WeChat.

Andy Mok:

As impressive as Facebook’s performance as been, Tencent’s WeChat actually has a brighter future and, I argue, this is largely due to the more compelling product vision (and execution ability) of Allen Zhang, who launched WeChat in 2011 and currently heads Tencent’s recently formed Wechat Group. As seen in the chart below, WeChat has massive market share in China and still grew MAU at 29% in the most recent quarter... 

For those not yet familiar with WeChat (or weixin 微信 in Chinese), it started as China’s What’s App, a social messaging app. However, since its launch in 2011, WeChat has steadily added features and functionality to become the remote control for the lives of hundreds of millions of Chinese. For example, a WeChat user in China can (and does) book a car ride (like Uber), transfer money (like PayPal), book plane or train tickets (like Expedia), buy goods online (like Amazon) and even make investments (like WealthFront) - but all without ever having to leave the WeChat app. Users can also use WeChat for booking doctor appointments, paying electricity fees or traffic fines. As of December 2015, WeChat has over a billion created accounts, 650 million monthly active users; with 70 million outside of China. Much more impressively, WeChat’s DAU is approximately 570 million giving it a jaw-dropping 88% DAU/MAU ratio. 

As evidenced by its DAU/MAU ratio, WeChat actually has a much stickier app that it is operating at scale with hundreds of millions of users. This is because it is the first app to truly integrate online-offline capabilities of payment, e-commerce and a host of other functions that for many tech companies in the West, including Facebook, are still a somewhat far off vision. 

One of the keys to WeChat’s success is Zhang’s ability to develop viral features to drive adoption and usage. A well-known example of this was the introduction of virtual red envelopes in Chinese New Year to leverage the tradition of offering monetary gifts during the biggest holiday in China. The introduction of this feature resulted in more than 200 million users linking their debit cards to their WeChat account and 32 billion virtual red envelopes being delivered this past Chinese New Year.

More at Linkedin.

Andy Mok is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

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China, Iran trade: beyond oil and gas - Andy Mok

Andy Mok

China and Iran are preparing for mutual trade of about 600 billion US$, tells Beijing entrepreneur Andy Mok to Iranian TV station TV-Press. But the recently reopened trade offers much more than the usual suspects, oil and gas.

Andy Mok is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.  

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The two faces of China´s economy - Andy Mok

Andy Mok

China is a country of two economic speeds, writes business analyst Andy Mok at LinkedIn. While parts of the economy is doing bad, especially the new economy is booming like never before. "The new economy is firing on all cylinders."

Andy Mok:

The new economy is firing on all cylinders. Investment capital is abundant with traditional VC funds like GGV having recently raised $1B+ new funds while corporate titans like BAT (Baidu, Alibaba, Tencent) continue to invest ever larger sums in startups and acquisitions both inside and outside of China to bolster their competitive positions. According to a recently released survey by SPD Silicon Valley Bank 85% of Chinese startups surveyed expect business conditions in 2016 to be better than that of last year, which was higher than the 64 percent in the US and 58 percent in the UK. 

The explosion in e-commerce is one cause for this optimism. According to eMarketer, China’s shoppers spent $672 billion online in 2015 with $1.21 trillion forecast for 2017. While growth rates are anticipated to fall from 42% in 2015 to 30% in 2018, the opportunities are enormous in both absolute GMV (gross merchandise value) and percentage growth terms. It’s also worth mentioning that online sales in China accounted for 16% of all retail sales in 2015 and are expected to rise to 30% in 2018. 

The further mainstream adoption and globalization of augmented reality/virtual reality, drones and robotics will also bring rapid and large benefits to Chinese entrepreneurs and their investors, both domestic and foreign. 

Inland, things are bleak. Not only are key economic indicators generally below national averages, but former pillar industries undergirding the proletarian ideal such as steel, cement and mining are in secular decline. Furthermore, because both labor and capital goods are not as fully fungible as microeconomic theory describes, systemic redeployment of these factors of production is doubtful. 

The good news is that the central government has both the financial and intellectual horsepower to address these problems. Besides one-time ex gratia payments to laid off workers, it would not be surprising to see cutting edge policy responses such as an unconditional basic income as part of an integrated set of policy responses to ameliorate the structural dichotomy between China’s new and old economies. 

So, while China’s two economies face very different prospects, the country is governed and united by a strong single-party system that has the will and capacity to address the challenges of the old economy. While past performance doesn’t predict future performance, that is certainly the way to bet. Given the success of China’s leadership in navigating past development crises, perhaps this is just one more victory on the road to the rejuvenation of the Chinese nation.

More at LinkedIn.

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Why Uber is going to win in China - Andy Mok

Andy Mok

The bloody competition of taxi-hailing apps can be won by Uber, argues business analyst Andy Mok on this page in LinkedIn. While many foreign tech firms have lost their struggle to enter the China market, Andy Mok sees five reasons why Uber might actually win this war. Here is two of them.

Andy Mok:

1.hailing is not a winner take all business 

For companies commanding a certain level of resources, there are few obvious barriers to entry and the business is essentially a city-level local one. As such, each market of a certain size (e.g. 北上广深, etc.) should be able to support at least a handful of competitors - the end state is not a monopoly but most likely an oligopoly. Also, because capital requirements for market entry in any particular city is very low, even “small” cites in China can be economically viable markets for ride hailing businesses. 

Next, switching costs are low to non-existent. Unlike Facebook or even Twitter, the ride hailing business has no network effects. In fact, adding more users actually degrades system performance so there is a sort of negative network effect at work. It’s also worth noting that because of low switching costs current market share is not that valuable an indicator of future or continued dominance. Aggressive pricing or new product features can result in rapid shifts in market share. 

Given this, on its own and barring oligopolistic price fixing or (unlikely) government intervention, the ride hailing business would be a marginally profitable business at best.Uber is also in the business of overcoming entrenched political and special interests 

2.Uber has been masterful at mobilizing public opinion and aiming it at entrenched political interests, especially local ones, and this has now become an indispensable part of its toolkit. The hiring of David Plouffe, former Obama senior political operative, and Bradley Tusk, former Michael Bloomberg campaign manager, not only legitimizes Uber’s ability in this area but also underscores its strategic importance. 

What remains to be seen is how transferable these skills are to China.

More arguments at Andy´s page at LinkedIn.

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The Uber, Kuaidi fight might last much longer - Andy Mok

Andy Mok

The taxi-hailing service Uber is fighting a multi-billion dollar fight with competitor Kuaidi Chuxing.  And despite the huge losses, it does not look like Uber is going to throw in the towel, says business analyst Andy Mok to ABC News.

ABC News:

In Australia and other many cities around the world, Uber's biggest challenge has been regulators and the traditional taxi industry. But in China, the $80 billion tech giant is an underdog in a two horse fight for control of the rapidly growing market. 

ANDY MOK: The competition between Uber and Didi Chuxing is actually throughout the entire country of China, and it's incredibly ferocious. Both of these companies are throwing literally billions of US dollars into winning the market and hoping to knock the other one out. 

BILL BIRTLES: Beijing-based start-up consultant Andy Mok has watched the battle between the two companies unfold. He wasn't surprised when Uber recently announced it had spent more than a billion dollars in China in just the last year. 

ANDY MOK: So they're spending that money on offering subsidies, so for example if a cab ride normally cost $5 say, they would say to the customer, to the consumer, well we'll only charge you $2. And therefore subsidise the other $3 of that cab ride. But they'll still pay the cab driver $5 in fact, may even pay more than $5 to encourage more drivers to join their platform. So that's where all the money is being spent... 

ANDY MOK: In theory at least, this could go on for quite a long time because the amount of capital available globally is enormous.

More in ABC News.

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Dealing with Chinese companies is sometimes an art in itself. Innovation expert William Bao Bean explains how the successful internet giant Tencent, partly owning Didi Chuxing, is organized.

Switzerland, China cooperate on innovation - Andy Mok

Andy Mok

The  Sino Swiss Economic Forum convened this week in Beijing, and celebrated the cooperation between both countries on innovation. Innovation expert and entrepreneur Andy Mok attended the meeting and gives at LinkedIn an overview.

Andy Mok:

Panelists included Mr. Hongzhang Wang, Chairman of China Construction Bank Corporation; Mr. Peter Voser, Chairman of ABB; Mr. Meng Mei, Chairman of TusHoldings; and Mr. Christoph Mader, Head of Legal & Taxes, Syngenta International. Despite an uncertain overall economic outlook, the panelists expressed confidence in the opportunities for cooperation between China and Switzerland in the areas of financial services, infrastructure and technology under the overall rubric of One Belt One Road. In particular, Hongzhang Wang, noted the opportunities for China Construction Bank to further accelerate both process and product innovation in the financial services sector, especially through cooperation with its Swiss counterparts. He also noted that while technological advances such as robotics and AI (artificial intelligence) has reduced the number of call center staff required at his bank many of these employees have been redeployed to retail branches to provide a higher touch customer service experience. As such, these labor replacing technologies may not have as large an impact on employment as some observers fear. 

Overall, the synergies between China and Switzerland plus the clear-eyed diplomatic and economic development strategies pursued by Switzerland bode well for Sino-Swiss relations and present worthwhile economic opportunities for those businesses and other organizations able and willing to contribute to these initiatives.

More at LinkedIn.

Andy Mok is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

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Andy Mok and the Swiss ambassador in Beijing, Jean-Jacques DE DARDEL