Last week I was in Dalian, China for the World Economic Forum Inaugural Meeting of the New Champions. That’s a mouthful, so the Chinese simply called it the “Summer Davos”. It makes sense as this feels very much like Davos only a bit smaller and slightly more relaxed and less intimidating. It is still difficult to be really relaxed with some many diverse bright minds, but the scope of topics was more manageable the number of sessions made it easier to choose. There were still the same types of plenaries, panels, board room discussions and collaborative workshops. The focus was global, but the star of the show was China as the world's manufacturer, major outsource destination, next consumer society, and next world economic power.
Wen Jiabao, Premier of the People's Republic of China, speaking in Dalian. Photo courtesy of the World Economic Forum by Natalie Behring.
Given where we were, the Chinese government made a concerted effort to put on a really good show. Dalian is a city that most of the participants that I spoke to, including myself, had never heard of before this conference was organized. Few of us expected a large city with tall, new buildings, clean streets and significant infrastructure. While I expect some small, seaside fishing town, what I found was a major industrial port with tourist attractions and resembling a Chinese San Diego. Everything was big, clean and shiny. What I have heard is that Dalian was the point of Japanese invasion during World War II and the Sino-Japanese War of 1895. For good or ill, there has been a long history of connections to Japan that has encouraged investment in this industrial capacity and outsourcing. Much of the city looks like it has been built in the last decade. Companies such as Intel, HP and British Telecom have very large development operations there.
Due to the location, the spectacular growth and potential power of China, 1500 attendees came to the World Economic Forum event to learn more about China. The majority of the agenda of the conference focused on the role that China and the other “New Champions”, India, Russia and Brazil or the so called BRIC countries, will play in the global economy, including in information technology, outsourcing and innovation. I was particularly interested in software and technology development in these countries. As discussed in numerous sessions, by many measures China is the third or fourth largest economy and is on track soon to become the second largest economy. During the conference, several people described the United States as the Great Britain of the 21st Century and nobody disagreed. Still with large numbers that means a GDP of under $5000 in the coastal areas and $1000 in the interior and obviously still a developing country.
I was invited to a private lunch that benchmarked venture capital investment between China and India that featured some key venture capitalists like Joe Schoendorf from Accel Partners (who are an investor of Alfresco). One of the presenters, Professor Martin Haemmig from the Center for Technology and Innovation Management, has probably come up with the only analysis of the VC investing between the two countries and the US. Martin stated that over the last five years the median return on investment in Chinese technology has been an astounding 25 times, a top quartile return of 40 times and lower quartile return of 14 times. This compares with the US where the median return of venture capital is 6.8 times. Even the bottom return of a Chinese fund exceeds the best return of a US fund. As Martin points out, “No wonder all the VCs are piling into China.” Although China doesn’t really come close to matching the amount of VC investing in the US, it is now number two in the world. There is six times as much VC investing in China as there is in India.
Everyone anticipates continued growth in China, especially as the boom moves westward from the coastal cities. As in Davos, I focused much of my time on the interactive workshops that allow us to engage more directly the other participants of the conference. I will be writing up what I learned at those sessions and interviews with some of the people that I met that are from the IT sectors. I also like politics, so I will write up my views on what I learned just from being in China and one of the most controversial sessions featuring Thomas Friedman, the author of “The World is Flat”.
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