MetLife China CEO George Tan recently spoke with Columbia’s Graduate School of Business during the fall Sir Gordon Wu Distinguished Speaker Forum, breaking down China’s so-called “digital dominance.”
Tan began by pointing out four crucial differences between the Chinese and American markets that give China a significant leg up. First of all, 86 percent of the Chinese population has mobile connectivity compared to the 63 percent in the U.S. Secondly, the $454 billion Chinese e-commerce market—the largest in the world—easily surpasses the $306 billion U.S. market because of the massive difference in population. Third, the Chinese trend of “one-stop shopping,” where apps “cross sector lines” to combine the functionalities of search engines, e-commerce and social media, for instance. And lastly, Tan explained the Chinese model to “get to scale first and worry about making money later” gives companies a chance to gain traction without having to immediately answer to shareholders.
These factors led to the miraculous rise of well-known Chinese e-commerce companies like Alibaba Group. The Hangzhou-based company, founded less than 20 years ago, now owns Taobao, the country’s largest consumer-based online shopping platform, along with Tmall and AliExpress and numerous other affiliated companies. In 2014 the company debuted the largest IPO in world history, valued at $25 billion.
According to Tan, Chinese financial technology (“fintech”) services such as insurance, wealth management, online payments and lending are leading the charge in the digital sphere, in part because they “tend to start with entrepreneurs” rather than institutions. Tan attributes the reasons why they’re so creative to “an open, supportive regulatory environment, established distribution channels, enormous consumer demands for inclusive finance and a trial-and-error mentality in which eventual rewards justify risks.”
With regard to the “one-stop shopping” trend, Tan explains that young and old Chinese “digital powerhouses” are equipped to meet demands and create new ones.
“People watch TV, shop, eat, and purchase travel and health items, all though one provider,” he said. “They want to use a single source to do everything that pertains to key life events, including babies, school, marriage, house purchases and maintenance, retirement and end-of-life care.”