Stepping down as chairman: Jack Ma waving
while standing for a photograph with Alibaba CEO Jonathan Lu (left) and
co-founder and vice-chairman Joseph ‘Joe’ Tsai in front of the New York
Stock Exchange. Ma is giving up the reins of Alibaba Group Holding Ltd
after presiding over one of the most spectacular creations of wealth the
world has ever seen. — Bloomberg
Alibaba Cloud, which set up a datacentre in
Malaysia last year, is considering a second one to further develop a
local ecosystem, its president Simon Hu said. — Reuters
Talk on trade: (from left) Interbase Resouces Sdn Bhd MD and
Lelong.com.my co-founder Richard Tan, Chong and SME Association of
Malaysia national deputy president Ong Chee Tat during a panel
discussion on Global is the New Local: The Changing International Trade
Patterns of Small Businesses in Asia Pacific, organised by FedEx.
More SME seen to be embracing technology
WHILE its been a constant lament that local small and medium-sized enterprises (SMEs) are not embracing digital technology, a new survey seems to suggest otherwise.
A recent FedEx-commissioned study on trends being adopted by SMEs in Asia Pacific (Apac) has revealed a high adoption of new technologies among local SMEs.
According to the study, Malaysia ranks fourth (among nine Apac countries surveyed) in digital platform implementation and third in adopting Industry 4.0 technologies.
Entitled “Global is the New Local: The Changing International Trade Patterns of Small Businesses in Asia Pacific”, the research revealed that an average of 88% of Malaysian SMEs are adopting digital economy platforms, such as e-commerce, mobile-commerce and social-commerce platforms.
FedEx Malaysia managing director S.C. Chong says it is critical for SMEs to take advantage of technological advancements as a catalyst to enter into new markets, improve customer service support and experience, and provide a more efficient end-to-end customer journey.
“SMEs are the engine of growth and form the backbone of Malaysia’s economy,” he says during a briefing on the survey, last week.
Chong adds that it is encouraging to see SMEs taking the initiative to grow their business through the adoption of new technologies, infrastructure-building, and expansion into international markets.
Citing the survey, he says that 61% of local SMEs are optimistic that the e-commerce platforms will help contribute to increased revenue growth in the next 12 months.
“The study also found that 69% of Malaysian SMEs have incorporated Industry 4.0 technologies into their operations such as mobile payments, automation software and big data / analytics in particular.”
Industrial Revolution 4.0 refers to the paradigm that machines are now able to autonomously adapt and coordinate their tasks to meet human needs.
The survey also shows a significantly high adoption rate of mobile payments among Malaysian SMEs at 90% (higher than the Apac SME average of 73%), with automation software and big data / analytics among the top Industry 4.0 technologies being used by SMEs at 84% and 77% respectively.
In addition, the survey also showed that 78% of respondents agreed that Industry 4.0 technologies have enhanced efficiencies in the supply chain and distribution channels, while helping reduce challenges brought by cross-border payments.
The results of the survey were based on interviews with 4,543 senior executives of SMEs in nine markets in Apac between March and April 2018. The markets included in the research were China, Hong Kong, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Vietnam.
The interviews were split equally by market with a representative mix of company sizes: micro (one to nine full-time employees), small (10 to 49 full-time employees) and medium (50 to 249 full-time employees).
Each market had an average of 500 respondents.
SME Association of Malaysia national deputy president Ong Chee Tat says SMEs and Industry 4.0 are key components towards the growth of the nation, as Malaysia works towards achieving a high-income economy.
“While technology may have reduced the gap between SMEs and larger industry players, SMEs still face various challenges in the adoption of the latest trends or tools in technology. Most SMEs may find that they lack sufficient finances, knowledge or workforce talent to adopt these new technologies.
“As such, we (the SME Association) are cognisant of the barriers to technology-adoption and continue to guide, empower and support SMEs by providing strategic advice or counsel and initiating networking platforms to facilitate knowledge exchange.”
Ong says that the SME Association is currently looking to set up an SME Academy to help provide training for local start-ups.
“We hope to be able to launch this academy by this year,” he says.
The survey also revealed that 95% of Apac SMEs have made use of digital platforms such as e-commerce (82%), mobile-commerce (72%) or social-commerce (74%) in their business operations.
“In Malaysia, the top social media platforms are Facebook, WhatsApp and Instagram,” says Ong.
According to the survey, the top social media platform used in Apac markets is Facebook, with the exception of China (WeChat) and Taiwan (Line).
In comparison, Malaysia has an overall higher adoption rate of e-commerce (90%), mobile-commerce (87%) and social-commerce (86%) compared to other markets in Apac.
Also, the survey says 61% of Malaysian SMEs expressed confidence that the digital economy will help reduce barriers to finding global customers beyond Apac.
Chong says the finding is strongly supported by Malaysia having 146% mobile penetration, 22 million internet users, 18 million active social media users, and seven million online shoppers, leading to Malaysia ranking 31st among the most tech-ready countries around the world.
Meanwhile, Interbase Resouces Sdn Bhd managing director and Lelong.com.my co-founder Richard Tan says that by educating SMEs and raising their awareness on the digital economy, there will be a rise in brick-and-mortar SMEs having an online presence to augment and complement their business.
“At Lelong.my, our integrated online platform which comes with services such as e-payment solutions and digital storefronts, has allowed us to extend our reach to capture the younger generation of increasingly digital savvy customers and merchants.
“As an online retail platform, we continuously evolve and transform ourselves to ensure that we fully understand the consumer journey and experiences to make it a seamless, pleasant one.”
He also says that the rise in digital platforms will not result in brick-and-mortar outlets becoming obsolete.
“I believe they will complement each other,” he says, adding that this is why it’s important for companies to have both a physical and online presence.
“I might see a product at a store somewhere, but may decide to purchase the item off of the company’s website. On the flipside, I might see something online that I might like, but would want to physically see it first, before deciding to buy.”
Tan emphasises that it is in a situation like this that SMEs need to have a presence online.
“You need to have your content displayed on the Internet. If people can’t find your product on the web, they may just decide not to buy it at all. That’s the behaviour of the new group of consumers today.
“You have to digitize your content.”
Chong admits that having products and services accessible via the web nowadays is a given.
“However, there are still products and services that you can’t get online. But it’s important to be able to have your product on the web, so that people can learn about it and either buy it or choose to view it physically at your store.”
Growth opportunities
In conjunction with the recent “Take E-Commerce to the Next Level” conference by DHL Express Malaysia, the logistics firm said in a statement last week that there is great potential for Malaysian SMEs to grow their business overseas through e-commerce.
“By 2020, it is expected that one out of five e-commerce dollars will be generated through cross-border trade. Business to consumer (B2C) e-commerce has grown at a faster pace than most other industry sectors in recent years, with premium cross-border shipments growing from 10% to more than 20% of the volumes of DHL Express.
“This is further boosted by various incentives the government has provided to ensure that the local e-commerce sector has the potential to lift Malaysia’s total trade to RM2 trillion this year.”
Over 100 local SMEs attended the conference.
Its speakers included those from Amazon Global Selling, Payoneer, Everpeaks, Malaysia Digital Economy Corp (MDEC) and Malaysia External Trade Development Corp (Matrade), who shared their insights on the importance of logistics, digital marketing, payment options and sales methodologies as part of the entire B2C ecosystem.
“These takeaways are meant to better equip local SMEs to meet the increasing demand of customers who seek faster fulfilment and more variety at cost-effective prices,” says DHL Express.
In the same statement, e-commerce conglomerate Amazon encouraged more Malaysian SMEs to expand their business by tapping Amazon’s global reach.
Amazon Singapore’s Amazon global selling head Gijae Seong says: “South-East Asia has quickly grown to be one of the most important regions for Amazon Global Selling.
“In the US alone, Amazon has over 150 million monthly unique visitors. We hope that more local SMEs will consider expanding their business globally on Amazon in the future.”
In addressing the challenges of SMEs to expand its presence on a global level, Matrade transformation and digital trade division director Noraslan Hadi Abdul Kadir points out that Matrade is Malaysia’s national trade promotion agency, and therefore has the mandate to promote local SMEs overseas.
“Our eTRADE Programme offers financial incentive valued at RM5,000 per company, which can be utilised to partially cover the on-boarding cost to be listed on world’s renowned e-Commerce platforms the likes of Amazon.com.
“We hope more SMEs can capitalise on the programme to kick-start their cross-border e-commerce business.”
Boost to property sector
The e-commerce boom is also set to be a boost to the local property market, with the industrial sub-sector being its biggest beneficiary.
According to the Valuation and Property Services Department’s (JPPH) Property Market Report 2017, the industrial sub-sector, though contributed the least to the overall property market last year , plays a significant role generating investments and employment opportunities.
“As Malaysia embraces Industrial Revolution 4.0 and the digital economy, a different ball game is expected of the industrial property sub-sector,” it says.
One initiative that is expected to support the sector’s performance, says JPPH, is the setting up of a Special Border Economic Zone in Bukit Kayu Hitam, which will be the new attraction for both domestic and foreign investors on the northern zone of Malaysia.
“Another is the establishment of a Digital Free Trade Zone (DFTZ), which will see KLIA as the regional gateway. The first phase of DFTZ is foreseen to have 1,500 small and medium enterprises participate in the digital economy and is expected to attract RM700mil worth of investment and create 2,500 job opportunities.
“On the same note, Cyberjaya will be transformed into a global technology hub and a smart city.”
In November, CIMB Research in a report said the industrial segment has a strong growth trajectory through acquisitions and organic growth, given the tight industrial space supply.
“Demand for new high-quality industrial assets will transform the segment, which has led to several new mega-distribution centres that carry high price tags as retailers start turning to logistics.
“Notably, UK-based retailer Marks & Spencer is building a 900,000-sq-ft distribution centre with one million products processing capability per day and will consolidate its 110 warehouses into just four.”
The sector is also expected to be bolstered by the growth of the e-commerce segment.
The growth in e-commerce, which in turn is spurring the online retailers sector, will lead to demand for larger warehouse spaces.
According to JPPH’s Property Market Report 2017, the industrial property sub-sector recorded 5,725 transactions worth RM11.64bil in 017.
“Compared with last year, the market volume increased by a marginal 2.1% but value declined by 3.1%. Most states recorded contractions in market activity but the commendable growth in Selangor and Johor at 19.5% and 9.5% respectively helped support the overall marginal growth.
“These two states accounted for 34.2% and 14% of the total market activity respectively. By type, vacant plots formed 31% of the total transactions, followed by terraced factory with 28.7% market share.”
JPPH says the industrial overhang remained minimal though the volume kept growing since 2016.
“There were 999 units worth RM1.51bil in 2017, showing an increase of 11.4% and 27.1% in volume and value respectively. Johor also took the lead in the industrial overhang with 40.7% (407 units) of the national total.”
JPPH adds that the industrial development front was less active as shown by the marginal increase of 0.4% in completion to record 1,851 units, whilst starts and new planned supply decreased by 20.7% and 34.3% respectively to 850 units and 710 units.
“As at year-end, there were 113,173 existing industrial units, with another 5,675 units in the incoming supply and 7,513 units in the planned supply.
“Prices of industrial property were stable across the board. One and a-half storey semi-detached factories in the Petaling District fetched between RM4.1mil to RM5.7mil. In Johor Bahru, similar factories in Taman Perindustrian Cemerlang ranged from RM2.3mil to RM2.7mil.”
As for the other property sub-sectors, the residential property market recorded 194,684 transactions worth RM68.47bil in 2017, which were 4.1% lower in volume compared with 2016, but they increased by a marginal 4.4% in value.
By price range, demand continued to be in the RM200,000 and below price points, accounting for nearly 45% of the residential market volume.
Last year saw 77,570 units of new launches, higher than those recorded in 2015 (58,411 units) and 2016 (52,713 units).
Kuala Lumpur recorded the highest number of launches in the country with more than 22,000 units. Its sales performance was at a low 19.5%, followed by Selangor with 13,522 units and Johor, 7,926 units.
The commercial property segment, meanwhile, continued to decline but at a modest rate, says JPPH. There were 22,162 transactions recorded worth RM25.44bil in 2017, down by 6.7% in volume and 29.2% in value compared with 2016.
The retail sub-segment’s performance was stable at 81.3% in 2017 compared with 81.4% in 2016, recording an annual take-up of more than 6.78 million sq ft.
Kuala Lumpur, Selangor, Johor and Penang saw a significant take-up rate as their newly completed shopping complexes secured commendable occupancy.
Johor was leading with nearly 2.82 million sq ft followed by Selangor (1.17 million sq ft), Kuala Lumpur (1.01 million sq ft) and Penang (778,833 sq ft).
DON’T the rich always grow richer, while the poor well, remain poor.
If you’re already disheartened, it gets worst. The rich are getting richer, and at a faster rate too.
A 36-page report released by the Boston Consulting Group (BCG) last month showed that global personal financial wealth grew by 12% in 2017 to US$201.9 trillion.
This total, roughly 2.5 times as large as the world’s gross domestic product (GDP) for the year (US$81 trillion), more than doubled the previous year’s rate, when global wealth rose by 4%.
It also represented the strongest annual growth rate in the past five years in dollar terms.
“The main drivers were the bull market environment in all major economies, with wealth in equities and investment funds showing by far the strongest growth and the significant strengthening of most major currencies against the dollar,” said BCG in the report.
The increasing millionaires and billionaires now hold almost half of global personal wealth, up from slightly less than 45% in 2012, says BCG. In North America, which had US$86.1 trillion of total wealth, 42% of investable capital is held by people with more than US$5mil in assets. Investable assets include equities, investment funds, cash and bonds
In terms of asset classes, US$121.6 trillion (60%) of global wealth took the form of investable assets – mainly equities, investment funds, currency and deposits, and bonds, with the remaining US$80.3 trillion (40%) held in non-investable or low-liquidity assets such as life insurance, pensions funds, and equity in unquoted companies.
Residents of North America held over 40% of global personal wealth, followed by residents of Western Europe, with 22%. The strongest region of growth was Asia, which posted a 19% increase. All wealth segments grew robustly, but high growth rates were especially prevalent in the uppermost wealth segments.
The market sizing review encompasses 97 countries that collectively account for 98% of the world’s gross domestic product.
The personal wealth bands are generally measured as such:
1. Retail: below US$250,000
2. Affluent: between US$250,000 to US$1mil
3. Lower High Net Worth (HNW): between US$1mil and US$20mil
4. Upper HNW: between US$20mil and US$100mil
5. Ultra HNW: above US$100mil
Everybody is getting richer
The US is home to the largest number of people with more than US$20mil. Globally, the classes of the ultra-rich are expected to reach 671,000 by 2022.
Meanwhile, the Middle East is the region with the greatest share of wealth held in investable assets US$3.1 trillion of a total US$3.8 trillion. Western European residents held 56% in currency and deposits, while in North America the attention was on equities and investment funds, with 62% of US$47 trillion of investable wealth parked in those assets.
Should personal wealth creation continues at the rate of the past few years, BCG forecasts a compounded annual growth rate of about 7% from 2017 to 2022, in US dollar.
Events like stock market corrections and geopolitical uncertainties could knock that down to 4%.
In a worse-case scenario, such as a major economic crisis, global wealth might produce a compound growth rate of only 1% over five years, the study found.
BCG says opportunities abound for wealth managers seeking to increase their focus on different client segments.
For example, despite being far apart on the wealth spectrum, both the above US$20mil segment (upper HNW and ultra HNW) and the affluent segment are attractive because they represent very large wealth pools with high growth rates.
In 2017, the upper HNW and ultra HNW segments held more than US$26 trillion in investable wealth.
US residents held over 30% of this wealth, making the US easily the largest country of origin.
Other economic areas with large pools of ultra HNW investable assets include developing markets such as China (in second place), Hong Kong, India, Russia and Brazil, and developed markets such as Germany (in third place), France and Italy.
The share of wealth held by upper HNW and ultra HNW individuals varies widely aong the top 15 countries, ranging from 47% in Hong Kong to 8% in Japan.
Over the next five years, the upper HNW and ultra HNW segments wealth is likely to post the highest growth across all regions.
“Financial institutions looking to acquire and serve these segments will need to bring a broad international skill set to the table,” said BCG.
Affluent individuals
Afluent individuals is a segment whose population is burgeoning, hold a large and increasing amount of the world’s personal wealth at US$17.3 trillion or 14% of investable assets in 2017. (see chart)
This group of about 72 million people represents the growing middle class and many of its members will become the millionaires of tomorrow.
“We expect the wealth of this segment to post a compound annual growth rate (CAGR) of around 7% over the next five years, increasing its pool of wealth to nearly US$25 trillion. To successfully tap into this segment, wealth managers must have at their disposal an efficient service model and significant skill in and innovative digital technologies,” said BCG.
Entrepreneurs
The entrepreneur segment represents another attractive opportunity for wealth managers to tap into money in motion and provide needed services.
“We expect these individuals, who have equity in their own companies – recorded as unquoted equities (non-investable wealth) – to significantly increase their pool of investable assets, by liquidating some or all of their equity through sales and by earning new wealth through their entrepreneurial activities. The largest pools of entrepreneurial wealth are in the US, France, Italy and Japan.
Asia
Personal wealth in Asia grew by 19% to US$36.5 trillion, with residents of China holding nearly 57% of that amount, and the region registered per capita wealth of US$13,000. Although the asset allocation share of equities ad investment funds has grown over the past five years (from 22% in 2012 to 31% in 2017), Asia remains a cash-and-deposit-heavy region, with 44% of personal wealth held in this asset class. We project regional wealth to grow over the next five years at a CAGR of 12%.
Meanwhile Switzerland remains the largest offshore centre, domiciling US$2.3 trillion in personal wealth in the country. The next largest booking centres are Hong Kong (US$1.1 trillion) and Singapore (US$0.9 trillion) which have grown at yearly rates of 11% and 10% respectively – more than three times the rate (3%) of Switzerland over the past five years.
In an interview with the South China Morning Post, Alibaba founder Jack Ma shares his views on the Chinese economy and the importance of entrepreneurship in supporting development.
CHINA’S economy will face “a difficult three to five years” but the slowdown will be good for its long-term development, Alibaba executive chairman Jack Ma told the South China Morning Post (SCMP) just before the e-commerce giant’s takeover of the 113-year-old newspaper.
Ma said the Chinese economy was indeed grappling with structural problems and that the authorities were working hard to steer it onto a new growth path.
But he dismissed fears that China would follow Japan’s route to stagnation, saying the country still had huge potential waiting to be tapped.
The rapid growth of China’s Internet economy and consumer culture could help the country through its temporary difficulties, Ma said.
China would likely continue to grow at a rate “enviable to most other major economies for 15 to 20 more years”, he said.
Ma gave the two-hour interview in Hangzhou, eastern Zhejiang province, during which he also discussed his vision for the SCMP, cultural differences between the east and west, and his concerns for Hong Kong’s next generation.
Commercial and residential buildings in Guangzhou, Guangdong province.
China’s economy has been grappling with structural problems but Beijing is working hard to steer it onto a new growth path.
On China’s economy, the businessman said it was unrealistic to expect an economy of such scale to maintain double-digit growth indefinitely.
“There is no reason to expect that an economy of such size can maintain such a growth rate indefinitely, nor is it good for China to continue to grow at such speed,” Ma said.
“After more than 30 years’ growth, spending a few years to adjust its course is reasonable.
“Some say the actual (growth) number could be just 5%. But even with 5% growth, there is no other economy of such size growing at that speed in today’s world.”
Comparing China with an ocean liner, Ma said the Chinese leadership understood that the country’s old growth model was unsustainable and that they needed to chart a new course.
“It is easy for a small boat to change its course. But as the world’s second-largest economy, China is like an ocean liner... we have to choose either to not slow down and overturn the ship, or to slow a bit to make the turn,” he said.
The key was to create enough jobs to keep the economy stable and buy time so the country could complete its much-needed transformation, Ma said.
Fortunately for China, he said, the rise of its Internet economy happened at the right time.
China’s gross domestic product grows 6.7% in first quarter – a good start to 2016
“The traditional industries are struggling, but we also see growth in domestic consumption, the services industry and the hi-tech sector, and young talents are flocking to these areas,” he said.
“The logistics and delivery industries create plenty of jobs for low-skilled workers. We still have a lot of room for growth.”
Ma said the deciding factor in a true economic transformation would be the country’s ability to unleash the entrepreneurial spirit among the young and create an environment to help it flourish.
“I believe there will be some great enterprises arising from China,” he said.
“The monetary policy and supply-side reforms are very important and can help rejuvenate China’s economy.
“But to me, the most important thing is entrepreneurship. If this can flourish in China, China will become successful.”
China’s slowdown had triggered panic among foreign investors, with some choosing to leave the country.
But this actually created fresh opportunities, Ma said.
History had proven that those who bucked the trend to invest in China during difficult times always received good returns, he added.
“China needs to develop its rural areas; China needs to develop its cultural industry. It is also shifting focus to services and IT industries. There are still plenty of opportunities around,” Ma said.
In the second part of an interview with SCMP, Ma says he envisions the newspaper to leverage on Alibaba’s technology and resources.
JUST why does Jack Ma want to own a newspaper, and what will he do with it?
Those are the biggest questions that have confronted readers of the South China Morning Post (SCMP) since news broke of Alibaba Group’s acquisition of the 113-year-old English-language newspaper late last year.
Now, for the first time since the Chinese e-commerce giant’s takeover earlier this month, Ma has outlined his vision for the newspaper.
The acquisition has raised eyebrows, with some suggesting that the SCMP – which has for decades been reporting aggressively on China – would change its direction.
A few even believed the newspaper might henceforth gloss over sensitive or controversial issues that risked incurring the wrath of the Chinese leadership.
In a face-to-face interview with the SCMP in Hangzhou, eastern Zhejiang province, Ma addressed these concerns, explaining why he believed in having a narrative on China that was different from that of both the mainstream Western media and Chinese state media.
“I don’t see it as an issue of (coverage) being ‘positive or negative’,” the Alibaba executive chairman said. “It is about being impartial and balanced... We should offer a fair chance to readers (to understand what is happening in China), not just a fair chance to China.”
China’s growth will remain enviable for the next 20 years, says Ma.
As a reader, Ma said, he valued the importance of obtaining unbiased information in order to draw his own conclusion based on the undistorted facts presented to him.
“I believe the most important thing for the media is to be objective, fair and balanced. We should not report a story with preconceptions or prejudice,” he said.
With its access to Alibaba’s resources, data and all the relationships in its ecosystem, the SCMP can report on Asia and China more accurately compared with other media who have no such access.
“Sometimes, people look at things purely from a Western or an Eastern perspective – that is one-sided. What the SCMP can do is to understand the big ‘why’ behind a story and its cultural context.
“I want to stress the importance of being fair to our readers. You should not impose your own view and prejudice on the readers and try to lead them to a conclusion. As a reader, I understand what a fair report is.”
The tech tycoon said his vision was to transform the SCMP into a global media agency with the help of Alibaba’s technology and resources.
Alibaba, the world’s biggest online trading platform, is aggressively developing big-data and cloud technology. Every day, it analyses and processes a massive volume of data that can provide powerful insight into the world’s second largest economy.
Ma reiterated his promise that Alibaba’s management would not take part in the SCMP’s newsroom operations. Rather, it wanted to represent readers’ interests and give feedback on how to improve readers’ experience, he said.
“As I said to Joe (Tsai), you are going to the SCMP as a representative of its readers. You don’t have to represent shareholders. You speak for the readers,” Ma said, referring to Alibaba’s executive vice-chairman who is now the chairman of the SCMP.
Ma, who last year unveiled a HK$1bil fund to help Hong Kong’s young entrepreneurs start up their businesses, said he invested in the newspaper because he “loves Hong Kong”.
Hong Kong was stuck in a rut and in danger of losing its direction, the billionaire said, urging Hong Kong’s youth to hold on to the city’s uniqueness and have faith in its future.
“The city has lost its can-do spirit. The big businesses are less willing to take risks. I talked to some young people in Hong Kong and they said they are lost. Young people indeed have fewer opportunities than before. But is it true that there are no more opportunities for them? No!” he said.
Hong Kong had many strengths that were unique to the city, Ma said.
“It has the best location. The ‘one country, two systems’ allows it to enjoy the good things from China’s growth and the best things from the West... The quality of Hong Kong’s graduates can match the finest from any other city. Its services industry is first class,” he said.
“Hong Kong people say Hong Kong needs to preserve its uniqueness. I say Hong Kong’s uniqueness is in its diversity, its tolerance of difference cultures... China does not want to see Hong Kong in decline. I have full confidence in its future.” – SCMP
Colour of success: A Chinese actress dressed as a Red Guard and holding a ‘Little Red Book’ performs in front of a portrait of the late Chairman Mao Zedong at a restaurant in Beijing Xiaohongshu says its name has nothing to do with Mao’s famous tome. — Reuters
HONG KONG: The “Little Red Book” has become a symbol of capitalist success in Communist China.
E-commerce start-up Xiaohongshu, which means “Little Red Book” in Chinese, has raised US$100mil from Tencent Holdings Ltd and other investors at a valuation of about US$1bil, two people familiar with the matter said.
The online shopping site co-founded in 2013 by Charlwin Mao, which connects overseas merchants with local buyers, becomes China’s newest billion-dollar startup. It also attracted investment from Genesis Capital and Tiantu Capital in its latest round, the people said, asking not to be identified because the matter is private.
The funds will help bankroll the Shanghai-based startup’s expansion. Xiaohongshu -- which calls itself RED and stresses its name bears no relation to Mao Zedong’s book of quotations - works by letting its mostly younger female users post pictures of favorite products. It then connects them with sellers abroad of everything from Body Shop anti-dandruff shampoo to Lotte peach liquor.
Its fundraising comes as venture capital firms grow more cautious about valuations in China, an economy forecast to grow this year at its slowest pace in a quarter-century.
Genesis Capital is a late-stage investment firm founded by Richard Peng Zhijian, who oversaw Tencent’s investment unit. Genesis and Tencent didn’t respond to e-mailed queries. Calls to Shenzhen-based Tiantu’s general line went unanswered. Xiaohongshu co-founder Mao said he couldn’t immediately comment.
Three-year-old Xiaohongshu claims 17 million registered users on its LinkedIn page and had attracted investment previously from GGV Capital and Zhen Fund.
It specialises in cross-border e-commerce, marketing foreign brands to increasingly wealthy local shoppers.
That’s a market forecast to reach 6.5 trillion yuan (US$1 trillion) by 2016, the state-run Xinhua News Agency cited the Ministry of Commerce as saying in March.
It didn’t elaborate on that figure.
The company says its name has nothing to do with Mao’s famous tome, considered one of the most-printed works in history and known to English-speakers as the “Little Red Book.” The late Communist leader’s book is called “Hong Bao Shu” or “red treasure book” in Chinese. “Why isn’t your website called ‘Little Black Book,’ ‘Little Blue Book,’ ‘Little Purple Book’ or ‘Big Red Book’?” reads a question posted by Xiaohongshu in a section of its website sketching out its origins. “We don’t know. But anyway, our name isn’t because of Hong Bao Shu.” — Bloomberg
Related:
IT WORKS! The Famous Little Red Book That Makes Your Dreams Come True! Law Of Attraction
