*The following is an excerpt from our new One Hour China Contrarian Book (which is available here.).
“Jonathan Woetzel (McKinsey & Co, Peking University) and I have written three speed-read China books together. In this latest one, we have put together a collection of our essays that basically make four main contrarian points. These are:
Point 1: China needs smarter, not faster growth.
Point 2: Yes, Chinese consumers are rising. But they are changing even faster. And they are disrupting everything.
Point 3: China can innovate big time.
Point 4: At home and abroad, Chinese companies can beat you fair and square.
For Point 4, we argue that Chinese companies have gotten to global scale in record time. They are now global in the sense that they have scale, they are competing with global players in and beyond China and they are at global levels of capability. According to a recent analysis by MGI, the top quartile of Chinese companies now earn returns comparable to US companies. And among the top 5,000 companies worldwide by market capitalization (2015), Chinese (excluding Hong Kong) companies now account for 1,107, a significant rise from 326 back in 2000.
Most of this is because these companies are big in China. China now has 110 companies in the Fortune 500, even though less than 15% of their revenues come from outside China. One implication of this is they have a lot of global growth potential provided they are competitive. And that is our main point.The best Chinese players can now compete with companies virtually anywhere – and they can win fair and square. Companies like Huawei, ZTE, Midea, Lenovo, and Chinachem are already dominating their industries globally.
Much of this competitive ability globally is because competition in the Mainland remains brutal. Competitors rise and fall quickly, depending on the industry. The levels of technology and other capabilities advance very rapidly. Jeff has frequently described competition in China as the world’s most well-capitalized knife fight – and something that is routinely underestimated.
It is the winners of these brutal domestic markets that are now going global. When you look at someone like Alibaba’s Jack Ma, try to imagine how many thousands of competitors (including eBay) he has beaten over the past twenty years. Chinese CEOs are the Spartans of global business. And they are coming to your market right now.”
Thanks for reading, jeff
I write and speak about Chinese consumers and digital China.