Their policy paid off as the border opened, which saw the company responding to the demand by swiftly recovering the ability of its workforce and the capacity to host millions of customers ready to travel.
There is an impetus for a strong recovery in travel with predicted “revenge travel” by people. The challenge is ensuring that the governments and partners also fall in line and can bounce back. The company is working with its hotel, airport, and airline partners to ensure that their plan to recover 30 percent in the first quarter, 60 percent in the second quarter, and total capacity in quarter three is realizable. By the end of 2023, Jane is hopeful that the company will be able to resume normal operations.
With the positive headwinds of a strong recovery, the most challenging aspect for the industry is facilitating cross-border travel. There has been a three-digit growth in terms of demand for cross-border travel. Trip.com is working closely with global partners such as international airlines, airports, and hotels to ramp up its capacity to bring more people from China to the rest of the world and vice versa. Cross-border transactions have reduced significantly in the past; hence China is ready to welcome international visitors to conduct business in the future.
Government intervention in the property sector is vital to economic growth. That pivot, and the focus on resolving issues in the technology sector and positive international investor sentiment, is a good sign of better things to come.
Hong Kong Yoking the Potential in Chinese Tech
While the HKEx is deemed a favorite destination for the Chinese tech sector, the HKEx looks to the mainland to drive trading volumes, and the mutual market access they share is evident in the 100 companies lined up to go public. As the CEO of the HKEx, Aguzin outlined the market’s buoyancy despite 2022 headwinds during which 90 companies received listing in the stock market. The potential attraction for tech and innovation stocks is evident in the global listings, where nearly 70 percent of the capital raised worldwide had come from the combined markets of Shanghai, Shenzhen, and Hong Kong, a lot of which got channeled into the innovation and technology sectors. Since the introduction of Hong Kong’s new listing regime in 2018, nearly 254 companies went public, raising a trillion HKD, equivalent to US$130 billion.
There is optimism amid many market changes to ensure it becomes attractive to tech companies. Tech and innovation have a lot of policy backing. The HKEx sees potential in the Greater Bay Area – an integrated economic area described as the Silicon Valley of China with a population of 87 million people and a GDP of nearly two trillion dollars where companies are dabbling in innovation. To harness the potential in the mainland, in 2022 HKEx submitted a Consultation Paper on New Listing Rules for Specialist Technology Companies. It proposed lowering the bar for innovative technology enterprises with a lack of revenue but significant spending on R&D to enter the market. That includes companies engaged in quantum computing, space technology, and AI, which are essential areas in innovation but lack profitability to qualify to enter main markets, which Hong Kong is trying to attract through reforms.
The platform economy is being increasingly regulated around the world, including in the US and Europe, owing to issues on data monopolization, self- preferencing, algorithm discrimination, and algorithm abuse leading to a plethora of antitrust laws to regulate the digital platform economy. In tow is China. China, too, has taken steps to regulate the platform economy. Several required remediations have been achieved to a great extent with positive feedback combined with a lot more optimism about companies’ ability to tap international markets, concerning the big platform economy, according to Aguzin.
SOEs propel economic development. In terms of labor productivity, central SOEs work four times the market average and have done well in growth terms.
The Role of SOEs in China’s Growth
China’s central SOEs have a unique position in the Chinese economy. They play multiple roles. One, they have to work with companies of different ownerships. China has 160 million economic entities involved in various businesses, especially utilities, and petroleum. To the work of the central SOEs, there is a smooth flow of utilities to consumers while there is a continuation for utility providers. To the credit of the central SOEs, the oil price in China is at an international average rate.
In contrast, water, electricity, and gas are priced lower than the international average. Electricity prices in Renminbi terms for residential use in China have been half a Renminbi. In 2022, amid soaring global energy prices, Chinese businesses and residents didn’t feel the change because they were in a very low-cost environment.
Two, SOEs propel economic development. In terms of labor productivity, central SOEs work four times the market average and have done well in growth terms. The operating income of 2022 was close to four trillion Renminbi. The total profits were 2.55 trillion Renminbi, a growth of 5.5 percent. The goal for 2023 for central SOEs is to exceed the current target for GDP growth or even better so that they can create better conditions for the Chinese economy, making better economic conditions for China’s international partners.
Three, new energy, artificial intelligence, new materials, and heightened manufacturing targets are future-oriented, and doing that involves increased cooperation between the state and private sectors.
Four, companies with all types of ownership must move forward and develop together benefitting supply chains with an emphasis on equity and cooperation. Improved competitiveness is a challenge for all companies. SOEs and other companies need to improve. Central SOEs don’t have preferential policies, but they compete on a level playing field and all work on the same stage. First, they must improve efficiency to improve value addition. Second, China needs a new three-year reform program for SOEs to simultaneously become more dynamic and innovative. Third, China must pay more attention to tech R&D to have a greater impetus behind its development. Industrial companies are investing three percent of their operating revenue in R&D. Tech companies are investing ten percent of their operating income in R&D.
In closing, Weng Jieming insisted that China is keen to work more closely with foreign companies and the private sector to play to their respective strengths so that everyone can reach the dividends of China’s development.
China is more of a trading partner than the United States in two of every three emerging economies. That could create a new web of collaborations extending beyond supply, touching on demand for R&D flows and organizingstrategies.
The Way Forward Amid Geopolitical Nuances
The frayed relationship between the US and China looks unceasing. For some time now, China has been alleging that the US is restricting its access to critical technology, especially chip manufacturing, while supposedly lobbying allies and partners to cut Chinese tech companies out of their supply chains.
US measures, said Rudd, don’t occur in a vacuum. It’s part of the bigger picture. The bigger picture, he said, is the strategic competition between the United States and China which has been underway for at least five years, and even if either of the countries refuses to recognize it, it is a reality playing out on the world stage. The challenge for geopolitics is finding a stabilizing mechanism, given the reality of that competition, to prevent it from escalating into a future crisis, conflict, or war. The favorable outcome of the Biden-Xi Jinping summit in Bali in November 2022 was to take tentative steps to manage their differences and prevent competition from escalating into conflict. There was a predisposition to put some guardrails around the relationship, the so-called “each other’s red lines.”
In 2015 China launched the “Made in China 2025” national industrial policy program aimed at becoming self-sufficient in ten critical technologies. Furthermore, the Central Economic Work Conference report of December 2022 recognized key technologies for its economy, dubbed “frontier technology,” aspiring to achieve national self-sufficiency in quantum computing, semiconductors, and artificial intelligence. These measures, according to Rudd, by and large, predated the American reaction in recent times. In the future, Rudd was skeptical about the problem-prone technology-based competition between the two superpowers becoming anything but stable. Any possibility of moving forward hinges on resolving the underlying geopolitical stabilization issue. Otherwise, that competition will continue and spill over to new areas such as quantum computing and artificial intelligence. Given the interdependence of the two countries on technology, “technological decoupling” is being touted in response to the tensions. Rudd cautioned that without enough done to quell the pressures and the paradoxes of the US-China tech relationship, the decoupling of the two countries’ tech ecosystems could become real.
Challenges to China from China Plus One Strategy
According to Marcos Troyjo, geopolitics is becoming a decisive factor in changing supply chains. Rather than relocating supply chains, he proposed making impactful structural changes, such as creating value networks to benefit all stakeholders. For instance, he pointed out that in 2002, the China- Brazil trade was a billion dollars a year. Today, it’s a billion dollars every sixty hours. China is more of a trading partner than the United States in two of every three emerging economies. That could create a new web of collaborations extending beyond supply, touching on demand for R&D flows and organizing strategies. What is more important than the geopolitical discourse is that the balance sheet will determine the reallocation of supply chains, thereby forcing a rethink on resource allocation to areas that matter.