No shortage of companies to watch as China leads way on innovation stakes
CHINA has leapfrogged the west in terms of innovation. Although a Communist country, the private sector is one of the most capitalist there is and competition is ferocious.
The second-largest economy in the world, it contributed 28 per cent of all global growth in the five years to 2018, more than double the US. There’s a captive market of over 1.4 billion people, but its China’s willingness to adopt new technology that truly sets it apart.
From Shanghai’s airport you are whisked away at 268mph on a train that uses magnetic levitation technology to cover 19 miles in just eight minutes. You pay for your ticket via mobile payment, since barely anyone uses something as old-fashioned as credit cards or cash.
You get a feel for the growth possibilities when you veer off the beaten track.
Take a truck journey along the Silk Road, through some of China’s most remote areas, and it brings home the scale of the middle class opportunity. Cities you’ve never heard of with populations of over three million are like Shanghai 10 years ago. They’re less developed, with poorer infrastructure and largely offline – but they’re only going in one direction.
With such vast opportunities, there are many companies to watch in China’s growth greenhouse.
Older generations in China often associate home-grown brands with poorer quality and a lack of social cachet, but millennials and Generation Z have grown up in an era of Chinese strength. As these generations come of age and into money, they are proud to purchase Chinese goods.
The sports apparel brand Li-ning has tapped into this rise in Chinese pride and spending power, and one example is its newly launched running shoe Red Rabbit, named after one of the fastest horses in Chinese history.
Li-ning’s share of the Chinese market is about 5%, but it is poised to vault further up the leader board and challenge Nike and Adidas’s dominance.
Healthcare company Burning Rock could lead its field. Its liquid biopsy tests from blood samples help determine the best treatment for many cancers. It also has a domestic first mover advantage, strengthened by its steady acquisition of patient data, which it uses to inform improvements to treatments.
Another even more exciting application of the biopsy technology is early stage cancer detection. This is a nascent industry globally, but Burning Rock’s data is as compelling as its western equivalents and the lives that could be saved and the possible reduction in healthcare costs are phenomenal.
A greener future is not solely a western goal, with the Chinese government targeting 25% of all new car sales to be electric by 2025. The country’s leading battery maker, CATL, controls almost half of the Chinese market, a proportion that’s unlikely to diminish.
Since CATL has such dominance, its costs are lower than anyone else’s. This means whenever subsidies for the battery industry are removed, CATL is likely to grow stronger. It also has the ability to expand outside China and already supplies BMW and Tesla, making it a company to reckon with.
Finally, Yonyou is the leading provider of software for large companies in China, with more than five million clients including e-commerce behemoth Alibaba and Huawei. Its founder, Wang Wenjing, who was born to a poor farming family in south-east China, embodies the rags-to-riches story woven into the fabric of many economic booms.
His customer-centric ethos is vital to the company’s success. He is reported to have travelled halfway across China to help a company struggling to install Yonyou’s software, despite being chief executive at the time.
In an industry relying heavily on customer retention to maintain strong revenue, such dedication to service is incredibly important.
Over the past decade, China has accounted for roughly a third of all global GDP growth.
Driven further by continual innovation, world-leading technology, and a middle class growing by tens of millions every year, there is so much more to come.
A journey on the Silk Road tells you scale of opportunity