Playing the China card

What do the richest people in the world have in common? Most built their wealth working with intelligence and ideas rather than making industrial products. Bill Gates, Steve Jobs and Warren Buffet became billionaires not through the way they used their hands but with how they used their heads. Their riches came not from hard labor but good thinking.

The same phenomenon is found in China. China may be the world’s factory. But the big money is made not from hardware but software. Of the 10 richest people in China last year, six are in the information and technology industry. Two more are in automaking and the other two
in real estate development. The top four are Jack Ma, founder of e-commerce giant Alibaba, with an estimated wealth of 24 trillion won ($21.9 billion); Ma Huateng, founder and CEO of Internet service portal Tencent (17 trillion won); Robin Li, CEO of Baidu (14 trillion won); and Liu Qiangdong of JD.com (8 trillion won). Those four take up 65 percent of the 10 richest Chinese’s total wealth of 99 trillion won. Technology is where the money is made in China as well.

China’s riches were made from the mouse clicks of the world’s largest population. During the days of ideological warfare, “political power came from the barrel of a gun” as Mao Zedong famously said. China’s current economic power comes from fingers on keyboards. China
has 650 million Internet users and 1.27 billion mobile device users.

The trajectory of innovation shows that its beginning and end are never the same. Innovation my sprout in rough and barren fields but its fruits are harvested in a place with the most consumers. The industrial development that started with the steam engine began in England and blossomed in the United States with the automobile industry — and the most extensive road network in history.

The Internet revolution was born on the west coast of the United States, but it is likely to flourish in China with the greatest number of users of the Internet and mobile technology. It may not be long before the list of the world’s richest people
is dominated by Chinese names.

The most popular university among the Chinese is not the elite Tsinghua University, which produced two presidents, or Peking University or Fudan University. It is Hangzhou Normal University, formerly Hangzhou Teachers’ Institute, which has produced the country’s most
famous entrepreneur: Alibaba’s Jack Ma, who emerged as the world’s 24th richest person and China’s most wealthy after the record-shattering $24 billion IPO of his company on Wall Street. Ma has achieved more than all the elite bureaucrats turned out by those other three prestigious universities.

With a bachelor’s degree in English, Ma started his career as lecturer in English and international trade. He turned into a businessman not because he was smart but because he had the nose to smell money. He discovered the World Wide Web during a trip to the United States in the mid-1990s and began an Internet business when the concept was foreign in China. He debuted on Wall Street when the market and technology world were hungry for a new rising star. His nose told him that Americans who did not know his name or what his company could do would be lured by the limitless potential of the Chinese Internet and mobile market, where users are more than triple the number of American users.

The better Alibaba does, the more money is made by the company’s largest shareholder, who is not Ma but Softbank founder and CEO Masayoshi Son. Son owns 34 percent of Alibaba and Ma 8.6 percent. Son saw the potential in China’s startup industry 14 years ago and invested$20 million in the company, to be rewarded with riches almost beyond counting.

There is a saying that even a fly can travel thousands of miles upon the back of a horse. If Korea rides on the back of China, its economy could trade a 3 percent growth trot to a gallop at the pace of 7 percent at least. Korea would have to learn American-style innovation for the future, but for now it should make most of the explosive Chinese economy.

On average, a Chinese tourist spends $2,200 during an overseas trip. If Korea can draw 20 million Chinese a year, they can contribute 3 percent of our country’s gross domestic product. Korean factories are run on three shifts a day. In a country with per capita income of $30,000, no conveyer belt industry can hope to survive. The relocation of Korean manufacturing businesses is inevitable.

Korea must compete with China in services or finance, not manufacturing. If it is not competitive in the manufacturing sector, Koreans must be able to smell money and invest cleverly like Son. China now allows foreigners to invest in its companies and has attracted nearly 1 trillionwon already.

China is the hotbed of the Internet industry, a fact that only the foolhardy will ignore. If there are investors that can earn 3,000 times what they put into China, like Softbanks’ Son, Korea has a future even if it loses manufacturers to China. Zero-sum games are rare in the globalized world.

*The author is director of China Economy and Finance Research Institute.

By Jeon Byeong-seo