In the 44th episode of OppenheimerFunds’ World Financial Podcast, Brian Levitt and Drew Thornton are joined by Bhavtosh Vajpayee, Senior Research Analyst on the Emerging Markets Equity Team, to discuss the current and future backdrop of the Chinese economy.
Below are a few highlights from the episode:
[2:00] China Tech Giants Aren’t Copycats: Bhavtosh clears up the common narrative that China is stealing popular technology from the United States. “There is a feeling that Chinese technology businesses copy intellectual property from U.S. business models, but in many cases, they work very differently,” says Vajpayee. That said, China has in some ways followed the U.S. blueprint to grow its economy. With a large population, growing middle class, and increasingly affluent user base, China has quickly scaled new technology in a way similar to how the U.S. did in the past.
[7:00] China Enters Golden Age of Retail: China’s growing middle class is not only changing the tech sector, but retail and consumer habits as well. In China, brick and mortar stores were never the preferred way to shop. What happened is the retail sector was established on the back of both physical and online storefronts. This helps explain the high penetration of e-commerce services in China. In addition to an expanding middle class, the retail sector should also get a boost from Chinese Millennials entering their prime spending years.
[16:00] What’s Next for Chinese Innovation: “There’s no telling where Chinese innovation will go. Right now, the simple answer is everywhere,” says Vajpayee. A company like Tencent has averaged about two investments per week over the last 18 months, he explains. The real question is whether each investment will make a real impact or fall flat.
[24:00] Three Areas of Transformation: A lot of attention will be paid to the retail sector, semiconductors, and financial technology in the coming years. Specifically, the blend of online and offline commerce will dominate the story of retail in China. As for semiconductors, China is still playing catch up to other leaders in the space. With ample government support, semiconductors can expand production and design to compete on a global stage. Finally, Chinese fintech should continue to establish deeper penetration in insurance distribution and micro-lending.
For more, listen to Episode 44 of the World Financial Podcast, China Technology: The Nexus of Innovation.
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