April 2022 Tech Buzz China Newsletter
The Official Word on What Is Common Prosperity; Chinese SaaS is a Long Way from Having Its Own Salesforce; Tech Buzz China website revamp.
Spring has sprung, and now April has come 🌸 Tech Buzzers, hope you have an amazing April full of warm, beautiful, sunshine-y days. To provide a better user experience to our premium community Tech Buzz China Insider members, we didn’t get around to updating our Livecast this month, since we have been busy revamping our website (still very much a work in progress). We do have a few new episodes coming up though, so subscribe to our channel on any podcast platform on the planet!
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3/21/22 The Official Word on What Is Common Prosperity
I read the official book on Common Prosperity (published Jan 2022) so you don’t have to! Well, I raced through it, because as you might expect, it was kind of a bore. But I’ve tried to pick out the most interesting / unexpected / important points so you can get a better understanding of what the government officials are aiming for, or at least claim they are aiming for, as I think many of these goals are going to sound rather aspirational, and a lot are repetitive from what we know are existing issues that plague Chinese society. Nonetheless, there are a few new points, which I highlight at the end:
What exactly is Common Prosperity?
China is still in the beginning stages of socialism, and hasn’t yet become a middle-income society, so it cannot sacrifice “prosperity” to achieve “common,” as that will simply return the country to a time of “common poverty.”
It is about growth and distribution. Growth is self-explanatory but if distribution is unequal, and opportunities are unequal, then this actually presents obstacles to wealth. Thus, must continue the role of “the market” in resource allocation, and also improve the role of the government to create more equal opportunities for competition, and decrease inequality in secondary / later distributions.
The goal is to double GDP per capita by 2035 and become a middle developed country
Official data says China’s GDP per capita is just 16% of US in 2019, and domestic consumption per capita similarly lags behind (although it exceeds Japan’s)
Urbanization is 61% in 2019 but still far behind the 80%+ in developed countries
Similarly lagging in human development and human capital index
Wealth Gini coefficient is too high (0.8), even higher than income Gini coefficient (0.4). And while urban-rural disposable income is a difference of 2.56x and has been declining, it has not declined nearly quickly enough. It actually seems to be OK if you compare it to developed nations (US is over 0.8), but if the government thinks it's too high, then it's too high ...
3/13/22 Chinese SaaS is a Long Way from Having Its Own Salesforce
This was a fairly popular article on Chinese SaaS when it came out about a year and a half ago. I saw it cited again and wanted to put it here as food for thought because I think while the industry has made some progress, the below still largely applies.
It’s probably best paired with another article I cited previously - Chinese vs. US Enterprise Software Opportunity.
Compared to US SaaS companies, common problems that most Chinese SaaS companies have are:
Low retention, high sales costs
Top US SaaS companies have 90%+ retention rates, which are unheard of in China. To compensate for the high churn, Chinese companies hire massive salesforces.
In addition, US firms can use telephone (outside) salespeople, while Chinese firms largely can’t. This is obviously another huge inefficiency.
Here are the top 10 US (revenue in red, net margin in green) vs. Chinese (revenue in blue, net margin in yellow) SaaS companies, so you can see the stark difference ...
Besides these articles, we also wrote about:
3/16/22 Liu He’s Remarks and the Rebound from the “Policy Bottom”
3/6/22 Neil Shen's Suggestions at the Two Sessions for China Tech
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As you know, we are regularly featured in media. Here is a selection of our appearances in the last month! Take a read or listen and let us know what you think!
The Wire China, March 6, 2022. It’s the Real Economy, Stupid.
SupChina, March 17, 2022. It’s a crazy world out there! Rui Ma on this week’s wild stock market fluctuations in China.
The China Smart State Podcast, March 31, 2022. Tech Investment and Finance in China.
Financial Times, March 27, 2022. US-China Tech Race: Spies and Lies (Part One).
Thanks for reading this April 2022 issue of our newsletter. Let us know if you have any questions or comments, and we’ll see you in a few weeks!