It’s been a minute. There’s been a lot on my plate lately, my bad. I’ll share some of them in the near future. Just watch this space.
Today’s post isn’t really about investing in particular, although I have a few posts on that in the works, my considerations of JP Morgan and Ulta Beauty come to mind. Instead I want to simply talk about China.
In today’s world, I really don’t think it’s possible to talk about or do business at almost any level without thinking about or encountering China. They’re the 800 pound gorilla in everyone’s game. So naturally, I have encountered them. A lot.
First, Nigerians talk a lot about how they want to eventually compete with China on labor costs for manufacturing low tech stuff like clothing, shoes, plastics etc. The idea is that we’re essentially poor enough to make these items more cheaply than China can. But from what I’ve seen so far, I’m starting to be very skeptical of that view. I’m not saying it’s impossible I’m just saying, it’s not as simple as we seem to think. China has the ability to make stuff as cheaply as Nigeria can, at a larger scale, with better quality at almost every price point I’ve looked at, down to damn near N2 ,000.00. It’s mad. And they do all that, while taking advantage of better financing, better communication and transportation infrastructure, world class shipping, I mean they can get stuff from factory to the U.S or any other developed country faster and cheaper and in better shape, with better information flow than Nigeria can. No doubt. It’ll be a while before we can beat them at that game, let us be real.
At the same time, Chinese companies are aggressively expanding across the world and into sectors they formerly did not perform highly at. There’s Huawei, the chip and devices maker that I wrote about here that is expanding rapidly into the high tech gadget space. There’s their new fully domestically produced large airliner which will revolutionize that industry. In recently released news, they’ve also announced a return to about 7% growth in their economy, after a major slow down that saw commodity prices come tumbling down.
The most annoying part of it all is that they do all this, grow and partner across the world while simultaneously making it incredibly difficult to invest or operate in their own country. The rules about what a foreign operated or even a foreign invested company cannot do in China is longer than the Nile. To mention a few: you’re not allowed to do market surveys, period. Only Chinese owned companies can do that. You can’t aggregate money from Chinese investors within the country without a license, and if you’re a foreign company, good luck getting one. While Chinese buyers buy up real estate and hotels left and right, foreign investors cannot own office rental buildings or high end hotels. There’s a whole slew of other industries where you either operate through a joint venture with a Chinese company or you forget about it, spanning transport, agriculture, insurance, investments, manufacturing etc.
The bottom line is that the country is not playing far at all. When candidate Trump railed against China, he did have a point. But then, one thing I’ve come to learn more and more is that most winners do not play fair. A few do but most of them have a solid edge which they protect but hide it well in order to keep the appearance of fairness.
If Nigeria really wants to be a serious country, business wise, then they need to wake up and smell the coffee. They stand to learn a thing or two, or three from China. No one keeps winning forever, but right now, China is really winning and they are playing every trick in the book to keep it that way.
That’s all I’m talking about really. Is there a specific investment point to thinking about this? I don’t know. But as a business person, it pays to be attentive to the high level competitive landscape around you and also to have an awareness of the lay of the field but in the present, historically and in the future in order to understand what drives business in the future. You never know when that knowledge might become handy.