Investment opportunities in China are on the verge of skyrocketing thanks to smartphones and the latest digital technology, Winston Ma — managing director of the China Investment Corp., the $800 billion sovereign-wealth fund of the People's Republic of China — told Newsmax on Friday.
“Number one, if you're talking about U.S. companies looking to the China market, they're looking at the largest middle class in the world … The size of the middle class in China is the entire population of the U.S. and is expected to double in a few years,” Ma said to Rob Williams, deputy editor of Newsmax Finance.
“Number two is the access to these consumers. In the past, people had to use traditional marketing, but now the consumers buy using mobile devices. With Internet access everywhere, they can find these products themselves. They’ve got the exposure to these foreign brands for the first time.”
Part of this investment explosion will also come via the growing use of artificial intelligence.
“[People are] seeing AI in their daily lives, so all of sudden it's no longer a research topic that's so far away from real life, but actually something that can be part of everyday activities. So I would say 2017 is a very big year for AI to breakout in China. Probably in the U.S. too,” Ma told Williams.
Smartphone use will also continue to grow, with many people even willing to plunk down $1,200 for Apple’s next generation of iPhones, Ma said. The next iPhone may even cost as much $1,400 in the U.S., USA Today reported.
“A premium brand like Apple makes a lot of sense to people. So that's why you see even people with very limited income are aspiring to have a brand like that. [There are also] a bunch of local Chinese brands coming up because they provide high-quality phones and moderate prices,” Ma said.
“But that probably is only phase one because for people who’ve never had a smartphone before or even people who’ve never had Internet access before, their first choice probably is an affordable, high-quality phone. As people's consumer power increases, probably they want a more high-premium phone.”
One of those Chinese smartphone brands is made by ZTE, which is breaking into the U.S. market with a line of lower-priced handsets that use Google’s Android technology. It can a tough slog, though, according to Ma.
“When Chinese brands … come to a new market, they have to deal with many different things — like the different legal systems, the different market characteristics,” he said.
“In China, people can sell a lot of phones online, but here most of the phones are sold through carriers so the carriers are very important.”
ZTE has been a major sponsor of U.S. professional sports, including the National Basketball Association.
“They are the sponsors of the Golden State Warriors, Houston Rockets and the New York City Knicks. It’s a way to connect with the young sporty people who would look for a phone with features that can serve their sport events picture-taking very nicely.”
Ma expects information consumption on smartphones to keep rising both in the U.S. and China.
“You can think of this as using information technology to promote consumption. For example, ecommerce. Because of the Amazon-type of guys, ecommerce becomes very easy to handle and people can buy stuff very easily,” he said.
“So that's using information technology to help and facilitate consumption. The second level is when people finish their retail consumption, actually they have demand for more, for entertainment.
“Information consumption also means consumption of information contents. So that's why in China you see people reading online novels on the subway. People watch a video every time they have a minute waiting in line.”
All of this content, along with the spread of mobile devices and ongoing improvements in technology — such as with broadband — makes the video quality “better and better,” said Ma, who added that companies providing services will get to intimately know their customers.
“The companies will understand the consumers very well. So in every interface … they can provide customized offerings to the people.
“So, for example, maybe for Newsmax, if you think about your viewers, you will offer automatically the selected contents, the created contents that are customized for them.”
Ma, a former vice president at JP Morgan Investment Banking and former head of Equity Capital Markets at Barclays Capital, is the author of "China's Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom,” published by Wiley.
The China Investment Corp., established in 2007, is a sovereign wealth fund responsible for managing part of the People's Republic of China's foreign exchange reserves.
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