I was at LendIt China last week, or Lang Di as it should rightly be called. As readers know, I always get a buzz from visiting China, and this trip was no exception. It made me reflect in fact upon my last twenty plus years of coming here and seeing the country change.
I first visited China in 1997, and visited the head office of the Bank of China. 30,000 people worked there. An incredible place. It made me realise just how big China is, and how many people. Today, there is around 1.2 billion people in this country. That’s twenty times more humans than those living in the UK. It’s a big place.
I wrote about this over a decade ago, in my first book. I made a statement back then, in 2006, predicting:
China will be teaching us how to deploy bank infrastructures ten years from now … The biggest lesson European and American banks will learn from China is in technology. Just as America has been the technology powerhouse of the world for the last half a century, China intends to be the world’s technology powerhouse for the next.
I remember I presented these ideas at American trade shows: it didn’t go down well. In fact, I was pretty much booed out of the room. It was especially hard for Westerners to hear me predict that the biggest banks of the world in the 2010s will be Chinese.
This is true today, and the leadership in technology coming from China in banking I will blog about tomorrow. But it really struck me how prescient my words were when I heard Chinese banks talking about the cost of processing loans is now just three cents an application. That’s USD 0.03 cents per onboarding process. WTF?
But one thing that China doesn’t do well is regulation. For example, there was a fascinating discussion about the Chinese peer-to-peer (P2P) lending market that is dramatically failing, During the summer, one panellist claimed that up to five P2P lending platforms were failing daily. With over 2,000 platforms out there, maybe that’s the reason why.
Then a lawyer was asked how the UK and China differed, from a regulatory viewpoint. The lawyer has worked in both markets and her answer was very telling. In London, she said, you would just call the regulator – the Financial Conduct Authority (FCA) – and they would have a conversation with you. It is fast and easy. In Shanghai, it is different. Here, you must find the person you need to talk with, which is difficult as even at a provincial level – not even a national level – no one will show you the organisation chart of the regulator. You need to know who it is by finding out.
Then you find out you need to talk with … Mr A or Mrs B … but you cannot approach them direct. You must be introduced. So, you then need to find out who knows Mr A or Mrs B, and is willing to connect you. It’s a far lengthier process.
But then I thought her answer reflects the cultural differences between the West and the East. The UK, like many European nations, has been influenced heavily by America over the past century. Therefore, we like a direct approach. Let’s get to the heart of the matter as fast as possible, and make a decision yes or no. Not all of Europe behaves this way, but the more North you are, the more likely you are to appreciate a direct approach.
In Asia, I’ve always found that there’s a lack of trust of strangers. Culturally, we in the West trust strangers until they prove they cannot be trusted; in Asia, no one trusts a stranger until you prove you can be trusted.
It’s a very different cultural mindset and is the reason why the Japanese fear the Gaijin, the foreigner, and why most Asian cultures prefer that you are networked and introduced before you do business. There must be a trust created first.
Interesting that this was raised during the regulatory debate, but it really made me note that twenty years after my first visit to Beijing, China has changed fundamentally in its position in the world … but it’s culture still has a way to go.
Mind you, just as a footnote to this story, I had a tour of Shanghai with a young local, 34 years old, who told me that she was rejecting many of her parents’ ways. Her parents live in a village farming rice; she lives in the City, giving tourists a guide to the city. Her parents want her to be married and regularly go to the marriage making market to advertise her availability; she doesn’t care a stuff about what her parents do, and won’t marry anyone unless she loves them. Her parents have hardly ever left the village; she has been to many Asian nations and loves to travel.
I personally see this everywhere and believe it’s a sea change in the world’s thinking. Our current leaders are trying to control a networked world, and impose domestic borders on that world. Our future leaders live in a networked world and don’t give a jot about old world rules and regulations.
It’s going to be interesting to see what the next generation does when they lead the world.