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The week of 18 August– 24 August 2016
Volume 28 Number 01
Source: Capital Dynamics
A message showing a successful online car booking transaction in China.
In introducing the online car-hailing
regulations,
the Chinese
government said it is taking
advantage of the tremendous
business opportunity presented
by the Internet.
A major reason why
i
Capital has been
optimistic about China’s economic outlook in
the longer term is because China’s policymakers
have
consistently displayed important
qualities such as flexibility, pragmatism,
forward-looking, not being complacent, and
unwaveringly focused.
China on the move
Forward-thinking China
For those who have not
been to China in recent years
or those who already have
a preset or preconceived
or biased notion that China
is an authoritarian country,
governed by a rigid and
tyrannical communist
regime, it is very difficult to
believe anything good can
come out of China. The
frequent negative reporting
in the Western mass media
and even in countries like
Singapore about China
further strengthens the
negative image of China in
the minds of those who are
already prejudiced against
China. Therefore, when
China’s economic growth
slowed to 6-7% in the last
couple of years from the
low teens registered in
most parts of the “reform
and opening” period, it is
not surprising that many
people are quick to predict
a meltdown scenario for the
Chinese economy. Just ask
Jim Chanos or George Soros
or better still, Gordon Chang.
For most people, China
is the factory of the world,
manufacturing cheap stuff
with low quality or with
stolen copyrights. China’s
impressive growth since
the beginning of the 1980s
was mainly due to sweat
instead of brawn, massive
debt-driven investment
instead of innovation, and
As a result, if one fails to
recognise the significance of
this change and continues to
focus on the old model, one
would miss the point totally.
More importantly, all signs
are showing that the Chinese
government is very serious
about the shift in China’s
growth paradigm to move
to a new growth platform.
Hence, it is not afraid to take
long-term, bold steps and
reforms and make tough
decisions in order to move
forward, even though the
Western media often scorns
or laughs at these steps.
Last month, the Chinese
government formally
introduced regulations to
legalise online car-hailing
services, which Didi Chuxing,
China’s largest car-hailing
platform, referred to as
“the world’s first nationwide
online ride-booking
regulations”. China has
always been labeled as a
copycat, copying everything
from fashion labels to iconic
architectural structures from
the Western countries. In
addition, China’s education
system is misjudged and
seen as able to produce
students who are only
good at taking exams but
are unable to create and
innovate. However, by
giving the legal status to
car-hailing apps, the Chinese
government shows that it
is neither archaic nor rigid.
Instead it is a pragmatic and
forward-looking government.
The ubiquitous
smartphones and swift
technological changes
surrounding the Internet are
rapidly changing the way a
society functions and how
an economy operates. In
the future , more and more
goods and services will be
Internet-based and enabled;
thus, the sooner the society
is prepared and accustomed
to the Internet environment,
the faster changes will occur
and other positive effects
to follow. In introducing the
online car-hailing regulations,
the Chinese government
said it is taking advantage
of the tremendous business
opportunity presented by the
Internet.
The pragmatic
and forward-looking
approach of the Chinese
government runs in sharp
contrast to the timid and
narrow-mindedness of the
Japanese government. Last
year, Uber, the multinational
online transportation network
company, shut down a
ride-sharing trial in Fukuoka,
a city on Kyushu Island,
after the government called
it illegal. To get around the
legal restriction, Uber has
to partner with taxi and
hire-car operators in Tokyo.
The reluctance or tardiness
in embracing changes is
deeply entrenched in the
Japanese government and
has been a major cause of
Japan’s stagnation in the
last quarter of a century.
The Japanese governments
of the past 25 years have
failed to introduce policies
that would make Japan
more competitive. The
global economic setting
has changed tremendously
in the last few decades
due to globalisation and
the Computer and Internet
revolutions. However,
Japan has failed to make
appropriate responses to the
changes and as a result has
been unable to cope with
the challenges that have
inevitably come along.
A major reason
why
i
Capital has been
optimistic about China’s
economic outlook in the
longer term is because
China’s policymakers have
consistently displayed
important qualities such
as flexibility, pragmatism,
forward-looking, not
being complacent, and
unwaveringly focused.
These qualities are clearly
displayed in the legalisation
of the online car-hailing
services incident.
On 18 Mar 2004,
i
Capital started an exclusive section on China, an
immensely important, huge, and complex nation. As our managing
director described it, the emergence of China is an event that
happens only once in a millennium. Tracking its fast emergence and
understanding its development will be useful not only for investors but
also for businessmen and management. This exclusive series “China
on the move” started with “A Brief History of China”, made up of 8 parts,
started with the Xia Dynasty (
夏朝
) and rounded up by examining Deng’s
reforms.
China Today
China today is the world’s most exciting, dynamic, and successful
economy. What drove China’s phenomenal growth in the past few years
? In the previous parts of China Today, we examined her economic
structure, sources of growth, the current conditions, and her future.
unfair competition from
an undervalued Yuan
instead of rapidly improving
productivity. Now that the
massive investment has
given rise to a serious
excess capacity problem
in slected sectors, the
mounting debt problem
is threatening to blow up
in full force, and China is
losing competitiveness to
lower cost countries like
Vietnam and Cambodia,
how can China still post a
stable growth ? Exports have
been contracting in the past
one and a half years, the
manufacturing purchasing
managers index has been
bobbing up and down around
the 50% threshold in the past
one year, investment growth
has plunged from 20-40%
to below 10%, electricity
generation contracted 0.2%
in 2015 and grew just 1.0%
in the first half of 2016.
Given such weak numbers,
how can China still post
a stable growth ? Simple,
China must be manipulating
her economic data ! That
would be the typical
interpretation by the Western
mass media on China’s
economic conditions.
As
i
Capital has written
repeatedly, China is
undergoing a structural
transformation whereby new
and more sustainable growth
drivers are taking over from
the traditional growth engine
at an increasing speed.
A
| Market Opinion
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Capital Dynamics Sdn Bhd