Western-Unicorns and PRC-Dragons, outlook on what’s coming after the CPC congress

By Franco L Maglio

The 19th National Congress of the Communist Party of China is right now being held in Beijing. The decisions made here, will have a major impact on the next 5 years of China's development and on how China wants to cooperate with other countries and markets. 

What we have witnessed in the recent years was a very powerful and successful China foreign diplomacy, finding ways to create wealth for the countries involved, and create larger market blocs. 

Ten Southeast Asian countries like Thailand, Singapore, Malaysia and Philippines are working in ASEAN together to build an economic bloc, together with China. I just came back from a visit in Malaysia and Thailand, the growth is impressive. The cities are bustling and new construction sites with high rise building projects are representing a kind of this growth. More than 100 countries and international organizations joined the AIIB and are working in the One Belt One Road initiative to create infrastructure as prerequisite for an integrated economic bloc, a huge market that once in place will reach from Paris to Beijing. 

Photo taken on Feb. 24, 2017 shows workers carrying a monocrystalline silicon stick at a factory in Ningjin County, north China's Hebei Province. [Photo: Xinhua]

That is a new kind of scale that investors and economists have to get used to. This new scale offers a lot of market opportunities for "China Dragons". They are playing on their home turf, knowing the language, the domestic culture and the customers. Companies like Tencent, Alibaba, Baidu, JD, Ctrip will in the next 5 years outperform their western counterparts and create new technology and market applications. End of 2014 I published an article on Sina Finance that accurately predicted how the capitalization of China's capital market would evolve--《当资本市场成为国家武器 forecast 2015+3.》 Based on the comparison of GDP, Bond market and equity market capitalisation between the U.S. and Chinese mainland, I predicted a 300% increment in total capitalization within three years. At that time very few economists had such an outlook. 

For the next five years I believe the pivotal drivers are the new technology created by PRC-Dragons and the establishment of economic blocs of new scale, these two factors will have a larger stimulating effect on global growth, than the quantitative easing of western central banks in the past. There is a quote attributed to Bill Gates, a nice sum up of how even experts easily neglect or belittle pivotal drivers that shape our future job opportunities and economy: Be nice to nerds, chances are you’ll end up working for one. In the light of the last 5 year's achievements under Xi in terms of economic innovation and foreign diplomacy, I leave it to the reader's foresight or vision, to make some adaptations of Bill's quote in the comments. 

Bill Gates and Paul Allen formed 1980 a partnership with IBM to bundle Microsoft's operating system with IBM computers, paying Microsoft a royalty for every sale. And in the 1990s, they had captured over 90% market share of the world's personal computers. A misjudgment then by IBM's decision making layer? 

China is offering a new style operation-system for global economic development, the same as Bill Gates offered a new style operation-system for IBM computers. The next five years will show if the policymakers in western countries can get a deep understanding of this new operation-system and cooperate, or make the same misjudgment like IBM 30 years earlier.

(Author: Franco L Maglio is a Mandarin-speaking independent Swiss economist)