China 2008: What lies ahead - Part 3 of 3

Written by || January 22 2008

The Olympics

Amongst all of the events happening in China in 2008, without a doubt, the most important item on the Chinese agenda this year is the Beijing Olympics. Seen by both domestic and international observers as a key indication of China’s development, the Chinese government has spared no expense in preparing for the games.

The entire city is getting ready. Massive construction continues as the government rushes to complete one of the most ambitions construction projects ever. Signs in Beijing are educating the public on proper etiquette during the games: no spitting, jumping queues or answering mobile phone during events. Standardised English menu translations are being circulated that ensure that "chicken without sexual life" is accurately translated to "spring chicken." During the games themselves factories will be shut down and many cars will be kept off the roads.

Many point to the 2008 Beijing Olympics as a natural inflection point in China’s economic growth. The rationale for this being that investment could slide significantly post-Olympics, which could pull down the asset markets and the economy. Largely this argument is overdone. Olympic spending has been spread out over 7 years and, on average, represented only about 13% of the fixed asset investment in Beijing last year and 0.43% of asset spending for all of China, so of small consequence to overall GDP. In addition, data from previous Olympics shows that some countries do have an economic decline in the year following the Olympics, but then recover quickly.

What about Fintech

2008 will likely be a difficult year for Fintech companies in China. Most banks and financial institutions have spent a boatload in 2007 to get systems in place and up to scratch for 2008. With an expected 3M tourists (600,000 from abroad) expected to come to Beijing for the Olympics, having the proper infrastructure (e.g. POS, ATMs) in place to support the influx was a key part of the main banks' 2007 strategy. Spending in China usually lags after Chinese New Year’s anyways but with the Olympics 6 months after New Years, not much is likely to happen in that time frame as few banks will be willing to take a risk so close to such an important event.

The implication for Fintech companies is clear – less 2008 technology spend. The best advice at this point are to follow the example of a lot of the bigger tech companies that we talk to in China: use 2008 as a building year. Really try to understand the market. Find solutions that make sense for the market. Finally, develop a solid strategy so that when banks start loosening their purse strings towards the end of 2008, you're prepared.

Final Thought

Through these three entries we've barely scratched the surface of all that's coming in China in 2008. We didn't even look at the Growth Enterprise Board and expanded futures trading which will both have a critical role to play in 2008. Nevertheless, I hope that the entries have given you a flavour of what's to come.

Calling 2008 the ‘coming out’ year for China is a bit of misnomer. China is already there. Witnessing the incredible growth of the country first hand gives an appreciation for the scale of what is happening here. 2008 will be a big year for China, but one of many big years.



Random “Year of the Rat” Trivia

Incidentally, Prince Charles, ice skating champ Sasha Cohen, rapper Eminem, and actress Scarlett Johansson are all rats…meaning that they were born in 1912, 1924, 1936, 1948, 1960, 1972, 1984, or 1996. Like the rat, they are always busily pursuing a personal goal or ambition, and are thus known as one of the hardest-working signs in the Chinese zodiac. For rats in 2008, any recent setbacks or obstacles can be overcome, so look forward to a year in which to really shine, either personally or professionally.