James Anderson: Forget the naysayers, China is still the future

I’m writing an hour after the privilege of a meeting with Jack Ma. The founder of Chinese internet giant Alibaba was in ebullient mood as he was preparing for the start of Singles Day – a company-invented occasion that now attracts a TV audience twice the size of the US Super Bowl and dwarfs any other shopping day anywhere in the world, be it online or through traditional channels. Alibaba expects to process 360,000 transactions a second in the coming 24 hours. No other company in the world comes close to this scale.

Singles Day and Alibaba symbolise developments that are transforming our economic and social lives. The forces set in motion are highly likely to dominate our lives and financial markets. Alibaba’s rise encapsulates the ascent and challenges of the power of technology, its scale signals the awesome power of a small number of giant corporations, and its example is a harbinger of an age of Chinese progress and global leadership that is barely grasped in even the most ambitious forecasts.

Clever plan behind singles day

Why does Alibaba promote Singles Day? It’s great publicity for sure, and probably helps boost the business overall. But that’s not the point. As Ma explained, it’s a stress test for the future. In about eight years’ time, Alibaba thinks it will be dealing with such volumes every normal day – around 10-12 times current average levels. The logistics systems need to learn how to cope. Alibaba’s human and machine scientists need to learn how data can be sorted and interpreted to strengthen links to individual customers.

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At present the US and China compete for global leadership in machine learning and artificial intelligence. But it’s likely that in the next decade Chinese leadership will become firmly established. As Martin Lau of Tencent (the other Chinese technology giant to have added a mere $200 billion of market value in 2017) puts it, scale is more of an advantage to China in a data age than it was in the manufacturing era. And in turn, data is the most important factor of production in our new economy. From the delivery of food through to autonomous driving, this gives brilliant and blindingly ambitious Chinese entrepreneurs a giant canvas to work on.

Beneficial consequences of data

There follow wider and beneficial consequences. It’s already clear that Alibaba, Tencent, Baidu and a host of their smaller and usually affiliated brethren are expanding progress in data into early explorations of the potential to improve healthcare and education after the paralysis of recent decades. In these contexts, parallel efforts in China and America are more likely to be helpfully symbiotic than damagingly exclusive. That’s great for us all.

In healthcare the combination of data empowering personalised medicine and the collapse in the price and rise in performance of genomic sequencing will permit earlier and better diagnosis of health problems. Advances in gene therapy and synthetic biology ought to match cures with diagnosis for many societal challenges.

But let’s refocus on the specifics of Alibaba and the Chinese economy. Alibaba has recently celebrated its 18th birthday. Its revenue is still growing at over 60 per cent annually. As the company points out, over this period China’s per capita GDP compounded at an annual rate of 14 per cent. This means that the average citizen is almost 10 times better off than when Alibaba was born. But with its help, China now possesses the most advanced mobile internet technology in the world. Its physical infrastructure is modern and often superb. Education levels are generally high. There will be 200 million graduates per year. Social solidarity is strong.

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So why would China stop growing? As I discussed with Jack Ma, shouldn’t we instead be thinking that China has every chance of being as rich as the US on a per capita basis? Although this will take time to come to fruition, if 7 per cent annual growth continues for another decade then even Anglo-American commentators might have to acknowledge a shifting world order. In any case, pessimism about world growth would have proved rather overblown.

Just ignore the daily nonsense. Throw market forecasts in the nearest bin. Investment life is best lived in the exponential extremes. We’re lucky to live in an era where companies and economies can grow to the sky.

James Andersonis co-manager of Scottish Mortgage IT.

This article is one of our Original Thinker pieces, which are showcased in Money Observer’s annual wealth creation guide. The January 2018 issue of Money Observe now on sale at WHSmith, selected Tesco and J Sainsbury supermarkets and many independent retailers. To order online and ensure you pay the lowest rate per issue, visit our subscription page.

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