Whether we acknowledge this or not, China is becoming a more and more important player on the global scene and the various China funds that are popping up make this crystal-clear. Now of course, their growth will probably not be linear. In fact, there will be rough patches along the way, just like there have been rough patches in the history of the United States as well for example but in the long run, pretty much everyone agrees that China will end up becoming the world’s dominant economy. Through this guest post, I will try to explain to people like me, earn a living online, what changes are likely to occur as a result of this phenomenon.
Entrepreneurs like you and me will, whether they were interested up until this point or not, become more and more familiar with the Chinese culture and with Chinese spending habits. Think about it: you sell whatever it is you sell on the Internet, the Chinese have money. Therefore, it’s in your best interest to gain exposure to this market and sell to the Chinese yourself. To do this effectively, however, a relatively steep learning curve will be required. The Chinese culture is fundamentally different to the Western one. It’s not like someone from the United States learning how to sell to the Europeans or the other way around, things are considerably more complicated.
Assets Chinese buyers find attractive will tend to go up in value faster than other types of assets. I am a domain investor as well and when it comes to domains, I can attest first-hand that my statement is extremely accurate. Over the past few years, domains Chinese buyers find attractive, short domains such as three letter .coms and especially numeric domains such as three or four number .coms have risen in value far more than other domain categories.
In the long run, we might unfortunately be moving towards a world with less freedom. There are a lot of good things one can say about China but freedom is definitely not one of their strengths. In the long run, I fear the Internet will have the tendency to copy certain particularities of the world’s dominant economy, so unless something happens in China such as the transition from freedom inhibition to more freedom, the Internet might just end up becoming less awesome from a freedom perspective.
Capital allocation mistakes will abound. As mentioned previously, the average Chinese investor has more and more money at his disposal. However, he does not have all that much experience when it comes to affluence. Therefore, one interesting aspect I have noticed is the fact that Chinese investors often make huge capital allocation mistakes. From mistakes made by the Chinese administration itself such as building ghost cities to investments made by the average investor who overpaid in some cases grossly for certain assets, we have to understand that in light of the emergence of this new class of investors, we should expect capital allocation mistakes to become more frequent.
There will be losers as well. Don’t make the mistake of being overly excited about the fact that there will be more capital floating around as a result of China’s emergence as the world’s number one economic superpower, things are a bit more complicated. There will without a doubt be losers as well. From assets the average Chinese investor doesn’t consider investment-grade to products and services which fit the same description, we have to understand that since the West will get poorer in the long run and the East is poised to get richer, there will be losers as well. Let’s just say we do have to understand this facet of the scenario as well.
Getting to know your potential Chinese customers will be anything but the walk in the park. Don’t make the mistake of assuming that understanding Chinese buyers is as easy as understanding the habits of someone from Europe as if you’re from the United States or the other way around. While understanding what makes someone from China click will be more complicated, it will also be nothing short of fascinating.
You will probably learn or have to learn to be more indirect during negotiations, for example. This is especially valid if you’re let’s say a straight shooter, as a lot of people from the United States are. The Chinese tend to appreciate it when people engage in for example small talk before starting to talk business, this is something you will need to become accustomed to.
You have to come to terms with the fact that misunderstandings will probably occur rather frequently. Deals may indeed end up going south, not because you or your Chinese counterpart did anything wrong but rather simply because the communication barrier between the two of you has been so wide that misunderstandings ended up influencing your collaboration. As time passes these things will become less of an issue but make no mistake, you will without a doubt end up dealing with quite a few misunderstandings throughout your experience with Asian buyers.
Coming to terms with the fact that there is so much capital in China and getting to know your Chinese counterparts will indeed be difficult but on the other hand, it will be extremely fun and interesting. You will be able to grow as a businessman as well as a person and this, in and of itself, is worth its weight in gold.