A New Master of US China Super Ecosystem?

When you combine Netflix, Apple, Netflix, Samsung, Amazon and Tesla, what would you get? If you ask the founder and Chairman of LeEco, the company who bought #1 TV seller in Irvine, California-based Vizio yesterday for $2 billion, he will tell you that his company defies all the business models as none of them could define this new visionary company that promises “complete ecosystem, groundbreaking technologies, and disruptive pricing.”

Just a couple of months ago back, LeEco unveiled a new, 80,000 Square Foot North American Headquarters in Silicon Valley, with ribbon-cutting ceremony by Chinese Consul General in San Francisco Luo Linquan and San Jose Mayor Sam Liccardo. The new facility can support up to 800 new workers.

Last year LeEco’s TV business sold 3 million units in China, about half the size of the industry leaders in the Chinese market. LeEco is known as the “Netflix of China” and the company started in the realm of video content, and looks to differentiate itself through entertainment. It’s invested in creating and licensing content like movies, sports, and music, and also owns the means of distribution through TV and their own smartphones — which LeEco calls “superphones”. “LeMax 2”, the new flagship phone of LeEco, is offering powerful features and specifications inside an iPhone-like body for a relatively low price. The most distinctive feature of the phone’s design is that LeEco is the first smartphone manufacturer who omits the headphone jack in favor of USB-C. Above all, it also has a compatible VR headset, allowing you to watch all the 3D titles they licensed from US and China. Last year LeEco sold around 3 million smartphones in China, but estimates it will sell 15 million units in 2016.

Not ambitious enough? In CES this January LeEco is also bankrolling Faraday Future, the California-based EV startup that is currently building a $1 billion factory in Nevada. Besides, LeEco is also working with Aston Martin on its first electric car, the RapidE. In April it just introduced its own first electric car ahead of the Beijing auto show called LeSEE, and this concept sedan is designed to be fully autonomous with a fold-away steering wheel. Last, but not least, it is planning to build an Andriod-powered bicycle with 4GB of RAM (watch out, it may be in the next version of Citi Bike in New York city).

For the critics, many will doubt how a relative small company with revenue of $1.6 billion and around $14 billion on the Shenzhen stock exchange can conquer all these markets. However, for a company that was recently named one of Fast Company’s 2016 “Most Innovative Companies,” and Alphr’s “Best of Mobile World Congress – Most Innovative Company”, anything is possible. After all, LeEco is pursuing both the American and China dreams.

Looking back in 2015 for US and China and An Aperture for 2106

“Study the past if you would define the future,” said the Chinese philosopher and reformer Confucius, and that may or may not be true in today’s fast-changing world, some of the data below may give you an aperture of what 2016 will look like between the number one and two economies. US and China may just be the perfect frenemy of enormous proportion.

In terms of GDP, US is still the largest with $17.41 trillion and China is the second-largest with $10.4 trillion, and larger than Japan and Germany combined. China is a minor when it comes to share of global military spending, a mere 12% as compared to 34% of the US;

President Barack Obama, right, and Chinese President Xi Jinping, second from right, wave along with, wives Peng Liyuan, left, and first lady Michelle Obama as they arrive for a state dinner at the White House in Washington, Friday, Sept. 25, 2015. (AP Photo/Steve Helber)

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nevertheless China holds more than $1.25 trillion of US treasury securities. US trade deficit with China is a whopping $306 billion despite US exports to China grew 459% during the last 12 month.Even though China is no longer the lowest-wage manufacturing country in the world, in 2015 productivity-adjusted hourly rate in China is $14.60 versus $23.50 in the US.

The Chinese currency yuan has fallen again as in January of 2015 the US dollar was worth 6.21 Chinese yuan and by mid-December, it was worth 6.48 yuan. However, Chinese consumption shows no sign of slowing down and Chinese tourists are number-one consumers in the world. US-China tourism has recorded over 25 million trips between the two nations at an average annual growth of 7.6% since the China-US Tourism Leadership Summit was established in 2007. Among that, the number of Chinese tourists traveling to the United States has grown at an annual rate of 18.4 percent. Over 2 million Chinese people came to America for travel last year, making China the fourth biggest source country traveling to the United States. 2016 will be the US-China Tourism year, as announced by President Obama and China President Xi Jinping earlier this year, the number of Chinese tourists will push close to 4 million!

US may have invented the Internet and online shopping, but China has been the e-commerce champion of the two since 2013. Alibaba, China’s leading eCommerce local champion, handles more e-commerce transactions than Amazon and eBay combined. Mobile commerce, which includes smartphones, tablets and mobile devices amounted to $180 billion last year, about 38% of all Chinese e-commerce. In 2016 it will reach $506 billion, more than 56% of all e-commerce transactions, according to eMarketer, a US research firm. The number of Chinese online shoppers is now 410 million, more than the entire US population. On November 11th, Alibaba’ s total value of goods transacted during its Singles’ Day shopping festival was $14.32 billion, more than US’s Cyber Monday and Black Friday combined.

US is known for our innovations, but China filed more patents and trademarks than the US. Last year innovators filed some 2.7 million patent applications to mark another worldwide annual rise, as application activity in China outstripped the combined total in its next-closest followers, the United States and Japan. Globally, patent offices receiving the highest number of applications in 2014 were China, with 928,177 filings, followed by the US with 578,802 filings. China also saw, by far, the highest trademark filing activity– with a class count of 2.22 million, followed by the US with 471,228 applications.

Last, but not least, China led in number of initial public offerings with 266 IPOs and the US was second at 203. The best performer among the top 20 IPOs was China National Nuclear Power, up 194.4 % from its June 10th offering.

Is that Ben Bernanke?

The following is a true story.

Date and Time: Monday, October 27th at around 11:35 a.m.

Place: Midtown East, New York City

I was about to walk into the Citicorp building at Lexington Avenue. I was meeting two business executives from Cornell University at a client’s office.

Suddenly I saw a gentleman, neatly but casually dressed without a tie or jacket, standing near the entrance. This gentleman looked very familiar to me. He was not a movie star. In fact, he looked a lot like the nation’s former top central banker.

How Did Alibaba Become the Biggest IPO in 15 Years?

When Jack Ma was being interviewed by CNBC about the biggest IPO in the world, something struck me that I wanted to share. America is an already established, well-oiled machine, in terms of infrastructure, as opposed to China who has not had that for the last 20 years. Even today, China is still trying to establish the infrastructure and systems to be more like a modern country.

One thing that really stood out in that interview was the discussion about trust. Alibaba got a lot of money and a lot of trust from the shareholders, many of whom are actually small business owners.

Our Book Is Launched!

September 30 was a defining moment in my career as my co-author and I kicked off our book tour for China’s Super Consumers. The tour began with the New York Times at the Tourneau flagship store on 57th street in midtown Manhattan. Guests included Arthur Sulzberger, Jr., Chairman and Publisher of the New York Times and EVP. Also joining us for the celebration was Meredith Levien and Ira Melnitsky, CEO of Tourneau.

Having such luminaries join us along with many of our friends and supporters, was quite an amazing moment for a first-time author. Our goal, since the launch, is to get 15,000 books out in the first 2 weeks of publication.

We invite you to help us reach our 15,000 book goal. Books are available at Amazon and Barnes & Noble.

Below please enjoy some photos from the book signing.

 

Savio Chan
schan@uschinapartners.com
www.saviochan.com
212-984-0788
U.S. China Partners
100 Park Avenue, Suite 1600
New York, NY, 10017

China’s Super Consumers

If you read the news today, you will see Chinese consumers are really dominating the headlines.

• Recently they were talking about Hong Kong billionaire, Ronnie Chan, who donated $350 million to Harvard. It’s the single largest donation to Harvard Business School, ever. He gets his wealth from Hang Lung Group which he owns. Hang Lung Group has the largest luxury shopping center in Shanghai, among many, many other real estate holdings.
• In April this year, a Chinese collector paid a record $36 million to buy an ancient Chinese ceramic cup at auction from Sotheby’s, Hong Kong. Mr. Liu, who is the number one Chinese collector of art, not only bought this expensive artifact, but the story is, he paid for the cup with his American Express card. Have you ever heard of anybody who buys $36 million in one purchase on American Express? (We should mention that this humongous purchase coincidentally earned him 421,860,000 American Express points. That’s about about 28 million frequent flier miles.)
• The Alibaba initial public offering (IPO) is the perfect manifestation of the power and influence of China’s super consumers. Alibaba is roughly about twice the size of Amazon and three times the size of eBay. It just happened that our book, China’s Super Consumers: What 1 Billion Customers Want and How to Sell it to Them was released in the same month as the Alibaba IPO. It’s almost like we are doing it in tandem, but it’s not planned, just a lucky coincidence. I think the IPO will put Alibaba front and center on the world stage.