In the final weeks of 2022, the predictions on China were gloomy (as with the rest of the world): covid spreading widely, disrupted supply chain, weakened consumption, housing debt, a looming demographic crisis. And of course, the effect of Chat GPT. 

On Wednesday, Hong Hao, a famous China Market Analyst, published a report called “Lessons of 2022” that started with this: 

Hong Hao actually used a tweaked version of the Buddhist sutra called Dharma`mudrā

The three points In english: 

  • Impermanence: everything is ephemeral. At market extremes, bears are bulls. And vice versa. 
  • Sentiment: market swings between lusts and fears. The obsession with profit plunges us into emotional euphoria and panic. Rise above it. 
  • Cycles: The market runs in cycle. What is lost will be found again.

In the text there is actually an additional point that he did not use: “The eternity is nirvana”. 

A friend of Momentum Works quipped: how much loss, regulatory beating and investor pressure would lead the analyst to become so enlightened?

The past three years have been tough, for all businesses in China and tech /VC circles in particular. 

The question is – have we gone through the bottom? And how will 2023, and the future, look like? 

Leaders and decision makers are cautious. As we elaborate in our book “Seeing the unseen: behind Chinese tech giants’ global venturing”, Chinese tech leaders take a lot of cues from history and have learnt to stay low profile whenever and wherever possible. 

When the government suddenly relaxed seemingly-permanent ‘zero-covid’ restrictions in January, many must have breathed a sigh of relief; When the government said they would support the internet platforms recently (after two years of beating), another sign of relief. 

However, nobody exhaled loudly. Why? Not much different from the reason why ecommerce companies have been quiet about 11.11 sales in the past two years. While Chinese tech stocks rallied – the increase is rather muted. 

Investors were cautious. Who knows whether another regulatory beating, or another black swan event, is around the corner? Investors, in other words, are like 惊弓之鸟 (Chinese idiom: birds startled by the mere twang of a bow-string). 

But this might not last long – the economy is humming. Anyone living in Beijing or Shanghai can tell you that after the initial scare – people are already back to the streets, restaurants queues are forming, and flight ticket prices are surging. It is a matter of time before it spills out of China. 

Those of you familiar with the hyper competitive environment in China must already be familiar with the word Involution (内卷)  – the incessant competition where everyone works extra hard for small gains. 

The competition will force all the companies to also increasingly focus on markets outside China – a theme we have elaborated extensively in the book. 

While Jack Ma is relinquishing his control over Ant Group, we see other entrepreneurs coming back. Tencent’s Pony Ma, JD’s Richard Liu, and even Baidu’s Robin Li have recently made strong-worded remarks in internal management meetings. 

They criticised managers of illusion, deception and even outright corruption. They also lamented that if nothing is done, their great companies will drift towards failure or irrelevance. 

It is a signal that these legendary Chinese tech leaders (check out our analysis on tech leaders with Chinese characteristics), who had taken their companies from humble beginnings to behemoths, are back in charge. We see this is a good sign. 

Pinduoduo went a step further with its Temu subsidiary making waves in the US; Meituan is launching Hong Kong, its first non-Chinese mainland market. 

We see more to come. They will still have huge challenges of people, organisation, product and ultimately leadership (POP-Leadership). However, just like the catfish in a tank of sardines, these companies will revitalise the global tech competition. 

We are optimistic about 2023. 

Happy New Year. 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].