「Looking for the Right Partner」

Sean：I'd like to start the discussion by saying that investment in China is a good opportunity at present. Post-Covid, the situation has changed, local governments are eager to attract investment and are more willing to offer deals on things like land, tax, and support to help startups establish a foothold.

Another notable change over the last couple of years, particularly in the consumer and tech spaces, is the increase in the number of capable small Chinese companies that can make good joint venture partners. They can bring various advantages such as the speed to the market, government relations, technology, or a customer base. 

Therefore, we now advise companies to spend more time looking for the right partner, as this can often be the key to a quick and successful establishment in the market.

Weiwen：It seems that the consensus is that China is indeed a good place for investment. The Chinese government is becoming more supportive and willing to offer incentives to attract investment.

However, it's important to be cautious and avoid sectors related to national security, data security, and privacy, as well as businesses that rely heavily on consumer data. Nevertheless, as long as entrepreneurs and startups are willing to compete at a high level and develop their capabilities quickly, they can find success in China.

James：The growing sophistication of China's supply chain is also a testament to the country's ability to support business growth and development. It's important for startups to have a clear entry strategy and to consider these factors when entering the Chinese market.

「Chinese Consumers are Going to Start Spending Again」

Weiwen：I think we're quite optimistic about various forms of consumption, especially instant consumption and off-premise consumption. There is so much pent-up demand for outdoor consumption, travel, restaurants, and entertainment. Just look at the Chinese New Year period, and how busy the cinemas were and the shopping malls. 

Source: Bain & Company

Another big area is luxury. The world of luxury should celebrate China's reopen as for the past 3 years, wealthy Chinese have disappeared from the flagship stores in Paris, Singapore, Thailand, Tokyo, and so forth. I think Chinese consumers are going to start spending again.  

Curt：From my point, one of the things to consider is China has a tremendous supply chain, which is now being translated into brands. The consumer-consumer connection on both sides is strong and people have taken advantage of China's support supply chain to create brands. These brands are now selling on Amazon, making it easy for Chinese brands to impact the US market.

「Environmental-friendly is not just a trend, but also a necessary step in ensuring long-term success」

Claire：I think it's important to note that environmental awareness and sustainability are becoming increasingly important in China as well. There has been a growing trend of startups and companies in China focusing on environmental and sustainability initiatives, such as renewable energy, carbon reduction, and waste management. The Chinese government has also made environmental protection a priority and has introduced policies to encourage the growth of these types of industries. 

This presents a significant opportunity for European startups that are working in the environmental and sustainability space to enter the Chinese market and potentially partner with local companies to drive innovation in these areas.

Weiwen：I believe “environmental-friendly” is not just a trend, but also a necessary step in ensuring long-term success. It's important to note that China has set ambitious goals for carbon reduction and environmental protection, and companies that can align their strategies with these goals will likely find more opportunities for growth in the long run. 

James： When it comes to environmental investments in China, a top-down approach is almost always taken, where the government signals its policy and implements it. This has been successful in reducing pollution, as seen by the improvement in air quality in cities like Beijing. 

However, working with the local government is crucial as most environmental projects are established by them, and without a strong technology advantage, companies may not have the same success as local companies. Additionally, these projects are project-based and typically established at the provincial or city level, which can make its scalability a challenge.

「In the Long Run, VC Players will Benefit from the Government Investment」

James：I believe that the government's involvement in investment activities will continue for many years. This is not a new phenomenon in China, where the government has been a major player in investing in infrastructure with fairly efficient results.
While some may argue that not all of the investment will be used efficiently, government investment will still be the main driving force behind economic development in China. In the long run, I think that VC players will benefit from the government's investment, especially when the government leverages its coverage by establishing government-guided funds to invest in local VCs.

Sean：A long-standing problem among Europe, the US, and China is the overinvestment in certain sectors like the solar and wind power industries, leading to unprofitability for both European and Chinese companies. However, China is now taking a smarter approach to the electric vehicle market, by encouraging consolidation to prevent overinvestment and over-subsidization. The rise of government-guided funds in China has led to investment in favored sectors but has also created better valuations and opportunities for investment in non-favored sectors.