China's New Technology Companies Are Set to Drive Growth in Country

(Bloomberg) -- China’s new generation of companies, led by those in the technology sector, are driving much of the growth in the world’s second-largest economy, according to investors at the Milken Institute Global Conference.

Jin Qiu, managing director at China International Capital Corp., or CICC, the country’s top investment bank, said these technology companies are “very different” from established state-owned enterprises as well as private sector peers in other industries because they’ve received little financing from the nation’s finance and banking sector. They have instead turned to the likes of Japanese tech billionaire Masayoshi Son’s SoftBank Corp. and China’s IDG Capital for seed funding.

“They are very independent, nobody is too big to fail,” Qiu said Monday at the conference in Beverly Hills, California. He added that this had been enabled by a policy shift of Chinese President Xi Jinping’s administration to leave no one behind in the march toward common prosperity, from Deng Xiaoping’s infamous “cat theory” regarding capitalism.

Alibaba, Tencent

Chinese technology companies have also evolved -- from a stage where they’ve “copied” innovations of U.S. peers in the past to increasingly emerging on the forefront in areas such as mobile payments, biotechnology and 5G infrastructure, said Jason Tan, partner and chief investment officer of Jeneration Capital. A “pro-business” set of regulations with few antitrust restrictions have also allowed Alibaba Group Holding Ltd. and Tencent Holdings Ltd. to become giants.

China is expected to dwarf the U.S. in mobile payments, according to data from Deloitte shown at the conference. In 2011, the volume of mobile payments in China rose to $15 billion -- almost twice the $8 billion in the U.S. Five years later, China’s figures jumped to $9 trillion compared with $112 billion in the U.S., and are expected to exponentially surge to $47 trillion by 2020, with the U.S. trailing further behind at $283 billion, the data shows.

Changing attitudes and lifestyle of China’s younger population is also opening new avenues for landlords to develop different real estate offerings, said Goodwin Gaw, managing principal at Gaw Capital Partners. The younger population is becoming increasingly willing to rent, a departure from prioritizing investing in bricks and mortar with social taboos such as the concept of a “naked marriage” if a groom who is set to wed didn’t already own a home.

Gaw said his real estate investment firm has been focused on the concept of co-living, a practice in the U.S. where students move from dormitory living to similar housing with shared spaces and a sense of community. He remains interested in property investments on the West Coast of the U.S., describing it as “the innovation capital of the world.”

To tap on the changing trends in China, TPG Capital Asia’s Co-Head Tim Dattels expects cruises, hotels, real estate and restaurants to be the key beneficiaries from the heightened spending power of Chinese tourists in the rest of the world.

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