BBH’s Global Regulatory and Market Strategists Carla Jane Findlay-Dons and Adrian Whelan recently travelled to Hong Kong and Beijing to discuss market hot topics with local clients and industry leaders. Adrian had the honour of delivering a keynote speech at the Asset Management Association of China’s International Business Committees Conference and they also managed to squeeze in a little fun. Here, in Part 2 of a 4-part series, he shares his personal China experience. Click here for Part 1.
Walking through the hotel lobby after dinner, I spotted a casually dressed man walking briskly by. I knew his face but could not place him. Then, like the lightning storm on my arrival, it struck me: he was Jack Ma, Co-founder and chairman of Alibaba Group. The man who not only established the world’s largest e-commerce site but has helped revolutionise the world of payment platforms through Alipay.
I am a major fan of Mr. Ma’s and fascinated by the businesses he has scaled so rapidly. Funnily enough, I had just read an article on the flight to Hong Kong about his new venture, a futuristic supermarket venture featuring 30-minute delivery services and facial recognition payment systems. I thought this chance sighting was a magnificent opportunity for a quick hello, a show of respect and appreciation, or even a selfie to help up my LinkedIn views! However, as I moved suavely towards Mr. Ma and what undoubtedly would be a lifelong friendship, my phone rang. It was the conference organizers checking that their star attraction would be in Beijing in good time the next day. After hanging up, alas, he was gone, escorted into an awaiting car right outside the lobby’s front door.
This near-run in got me thinking about how Alibaba has revolutionized sales of goods, distribution of services, and electronic payment systems through Alipay in Greater China. In the asset management space, while Chinese funds are still bought and sold through traditional means, retail investors are increasingly using mobile apps and social media platforms at a scale unmatched by any other country. WeChat’s TenPay and Tencent’s Licaitong wealth management platform, are successful routes to market and sell using web based platforms in Mainland China. The most quoted example of online fund sale success is Ant Financial’s Yu’e Bao which already has the world’s largest money market fund listed amongst its products. On China’s Mainland, asset managers also directly advertise their funds through Chinese social media platforms, such as Weibo and Baidu, which supplement bank or other more traditional financial intermediary channels.
This direct to consumer marketing and execution of fund sales is literally and figuratively a world away from the distribution models we generally see in the western cross-border funds markets, notably in the US and Europe. Direct-to-retail consumer mutual fund sales in the western world are more complex, primarily due to regulation, which requires additional layers of intermediation in the sales process, particularly in Europe. The US has a larger culture of direct retail participation in mutual funds but even then, not to the degree of success Mainland China has managed in such a short time.
Replication of the China model is difficult elsewhere as both rules and mindsets are hard to change, however it is becoming clear that asset managers must continue to find distribution methods that match the needs of their target client base. Today, more and more asset managers are increasingly using technology to acquire, service, and retain customers. Robo-advisor models are one still nascent concept gaining in popularity globally. Asset managers are also trying to reduce the number of intermediaries between them and the direct client where they can. This has resulted in some looking at direct-to-consumer methods, including increased utilization of key retail distribution platforms.
It was clear from several meetings during my trip that a primary policy ambition of China is to fully harness the power of all developing technologies to influence the next stage of development. The Made in China 2025 program explicitly calls for China to lead in various elements of technology by its deadline date. The ambitious program targets several areas including quantum computing, artificial intelligence, robotics, and distributed ledger technology. One of the primary aims of the program is China’s desire to create autonomy in terms of its technology supply or intellectual property required to run a technology-led economy.
What I did not realize until visiting Beijing was that Chinese smart phone companies, such as Oppo & Vivo, currently sell more smart phones globally than Apple or Samsung. That fact shows the ability of the Chinese market to become self-sufficient even in the most competitive facets of the technology industry.
Stay tuned for the next installment of our 4-part China series which focuses on asset management insights collated directly from the Asset Management Association of China’s International Business Committees Conference in Beijing.