The One Billion Chinese Digital-first Consumers

Pr. Jeffrey Towson discussing China’s middle class consumer

Nicknamed China’s “celebrity professor”, Jeffrey Towson (陶迅) is the #1 followed professor in China (+3M followers on LinkedIn). He is a private equity investor, Peking University professor, best-selling author and keynote speaker. His writing and speaking are on digital China – and on Asia’s latest technology trends.

  • Abdelhak Benkerroum: What’s the first thing that comes to your mind when you hear the words China and Digital ?

 Jeffrey Towson: “One billion Chinese digital-first consumers.” That’s at the center of everything we see today. Every time something happens with Chinese digital-first consumers, it takes off and tends to be better than what’s in the West. What’s happening in business is happening because that mass of digital-first consumers are demanding it happens that way. For instance, if you want to sell in China, you have to offer mobile payment and same day delivery. That’s the expectation and everyone has to conform to that. It’s in China. And it’s unique.

  • Many of your analysis and predictions regarding Chinese digitalization turn out to be accurate. Where do you see the future of digitalization in China?

China digitalization is a consumer first story. Look for e-commerce, media, and communication. These will keep moving fast. Following behind are financial services. Think micro-credit, insurance, wealth management…etc. The next big thing to keep an eye on are smart cities where china is the global leader and keeps moving quickly. Half of the smart city projects in the world are in China. First iteration are cameras and surveillance, but also traffic, water usage, garbage, and so on. That’s the combination of two things. The first one is that China is very good at building infrastructure. The second one is all those people walking around with their smartphones. Those people become your workforce and your moving sensors. We see it now with Shanghai’s new garbage sorting plans. People can scan their trash, and it will tell them what trash goes to which bin. And if you drop them all at the right bin, you get points that you can redeem on JD.com.

The world has already understood that e-commerce and mobile payments in China are better than anywhere else. Next thing they will figure out is that the cities in China are smarter. 5G and artificial intelligence play a very important role in that.

The world has already understood that ecommerce and mobile payments in China are better than anywhere else. Next thing they will figure out is that the cities in China are smarter. 5G and artificial intelligence play a very important role in that.

  • What could slow down all these progresses we are seeing now in the tech sector in China?

The decoupling of tech supply chains. Technology prospers with global supply chains. Today you could buy a chip from a US company that designs it in the UK, then places it on a Korean TV that is assembled in China. All this is integrated. But now the US and China are decoupling. It’s a two-steps-back sort of situation. You have companies like Huawei that now cannot use the full version of Android and will have to make their own chips. I’m sure they can overcome this problem, but it takes time. The argument is that most things in the world don’t work better when each works by itself. You don’t want to have domestic supply chains, but global ones. US China decoupling will cause those supply chains to turn domestic. That’s a disruption but not in a good way.

  • This looks like a bleak future. Where do you see the future of the tech sector in China in general?

When Luckin or Mobike came out, it was not really a big tech change. Luckin is a coffee company. Mobile is a bike rental business. These are easy to predict. Didi is not that complicated… you get a taxi when you go to work, ok. What is hard is predicting what these business are going to be 5 years from now because the environment is so complex and has too many moving pieces. What’s e-commerce going to be? How are supermarkets going to operate? These are the real disruptions. To analyze them, I focus on the consumer side, and consumers are predictable. Tomorrow people will wake up and go to work. Some will grab a coffee on their way to work. Some will buy that coffee on their phone. People will one day buy a house. These things we can predict. But other things are harder to predict, like how will Chinese consumers consume media in the future? How will 1 billion Chinese tourists travel in the future? It gets harder to understand when you look at the B2B side of this because it’s more opaque than the consumer side. Do I really know what’s going on inside an oil company with regards to their tech initiatives? No.

  • Because of this complexity, what curriculum would you suggest your visiting foreign students and executives to take when they are visiting China for courses or training?

Send them to my webpage and I can train them on Asia tech. Literally today I’m launching an online course for executives and MBA’s.

  • What books are you reading these days?

I have this list of 10 books that I think are the best on China.

Competition demystified by Bruce Greenwald

Thinking, fast and slow by Daniel Kahneman

The innovator’s dilemma by Clayton Christensen 

Berkshire Hathaway annual shareholder letters

Damn right! By Janet Lowe

Valuation by McKinsey & Co (This is a textbook)

Dead companies walking by Scott Fearon and Jesse Powell

King Icahn by Mark Stevens

Influence by Robert Cialdini

Dream big by Cristiane Correa

  • What’s the thing that fascinates you the most about China, beyond digital?

My interest is in the intersection of business and software and how software is transforming businesses. That’s a huge global event and China happens to be at the center of that.

I also like the ambition. China is a country full of ambition, from top to bottom, at the company level, individual level, and Government level. It’s fascinating. I don’t get the same overwhelming sense of ambition in Europe. In China everyone wants to start a company, every company wants to be the next Apple, and I love that. I would say that this ambition can be seen across Asia. China is the biggest story but there is also Indonesia, Singapore, Thailand…etc. This century might end up being the Asian century.

  • What advice would you give to other countries, say in Africa, that want to emulate or do something similar to what is taking place in China?

Each country has its own model. China has its model, like Indonesia has its own and Thailand has its own. When you build digital, some things are easier to do than others. It’s not easy to build smart cities, but it’s easy to move on communication, media, and ecommerce. A country should think about what regulatory framework could enable communication to happen? You just give people cheap phones and cheap internet data plans. You do that in India and people start using Tiktok. You do that in Africa and people start sending money through phones. You need then to have infrastructure like roads and warehouses to facilitate ecommerce. Once you have that infrastructure in place you will have Didi’s and Mobike’s. So you must lay the ground-work for all these things to take off.

Today as a country, you don’t have to do all that. For instance if you want to build a security system, you don’t have to install the infrastructure yourself, and get the data sent to the cloud, and have an AI analyzing it. Just outsource this to a Chinese company and they will do everything. Chinese companies are going global with their services because many of what they do is scalable. They will give you the software, the hardware, and the algorithms. It’s easy. It’s like Netflix. Netflix can go to a new country in a day! They just translate their information, enable payments in a specific country, and you are live. That’s what Netflix did with Cuba.

So my advice: Regulations, infrastructure, smartphones, internet, and mobile payments. Smart cities would come afterward.

  • I will give you a list of words or sentences, and I would ask you to comment on them with only 1 word: China 2025

Question mark

  • Trade War

Economic war

  • Chinese tourism

Upgrading/increasing

  • Belt and Road Initiative

Harmless

  • BAT 

TMD (Toutiao Meituan Didi)… Although the BAT is outdated

  • How is BAT outdated?

We need to move away from this vision of Baidu Alibaba Toutiao. Baidu is 1/5 the size of the other two. There are tons of AI companies that are equally good. I would say when we think equivalent of US GAFA’s we should think in terms of 10 top internet companies in China. We should not ignore Huawei either, Bytedance, Ping’An…etc

  • What is your advice to young students coming to china to learn business?

Go small. Study something small. People like to think big things like labor market and political system…etc. This is of course interesting stuff, but you are better off studying a chip company in China, or studying the retail convenience stores in Hebei. Try to study something that is small, just some type of business, and when you get good at it, study another one. You can easily figure out the small stuff, like e-sport in China for example. You can never figure out the large stuff.

  • To conclude, I have one last question, a personal one. You are an influencer. How could one person achieve greatness and have greater and better impact on society?

Daily habits. It’s not the big things. It’s the things you do every day for 10 years that will make all the difference. You want to learn a new language? Study an hour every day. You want to run a marathon? Run every day. Most things in life are a long hike to the top of the mountain. Daily progresses with daily habits is what gets you there.

  • Thank you very much for your insights Jeffrey.

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