There is no better snapshot of the changing balance of power than this week’s schedule of events. The UK is headed back into a Covid-19 lockdown having spectacularly failed to keep the pandemic under control. The US will hold a presidential election in which neither candidate looks capable of addressing the nation’s divisions and problems that include recording the highest number of Covid-19 deaths in the world.
Meanwhile, in Shanghai and Hong Kong, investors will be scrambling to get their hands on Ant Group shares as the Chinese payments company launches the world’s largest-ever IPO. It is set to raise about $35bn and make the company worth $315bn putting it in the world's top tier. As the offering has a particularly strong retail element it will enable small Chinese investors to feel they are sharing in the country’s rising wealth.
Compared to the contracting economies in the west, China’s economy grew 4.9% in the third quarter; life has more or less returned to normal after the country’s successful virus crackdown; and to top it all off one of its leading-edge companies is beating international fund-raising records. On this count it’s a fairly safe prediction that this week’s biggest party will be in Shanghai rather than in Washington or locked-down London.
It’s difficult to think that another four years of either Trump’s sabre rattling or a watered-down strategy from Biden could really be effective in slowing the country economically or technologically
Apart from providing a clear illustration of how economic power has moved east (and note that the Ant offering does not have any US element), the Ant success story also symbolises the rise of fintech and its challenge to banks, a trend that has gone further in China than anywhere else. This is partly due to a liberal regulatory environment that gave Ant and its former parent e-commerce giant Alibaba greater freedom to move into the banking space than most western fintechs have been allowed.
But that does not detract from the extent to which e-commerce and payments have been revolutionised in China enabling the country to skip over the credit card as a mainstay payments option and move directly to QR codes and phone-based apps. Ant’s Alipay app has 700 million regular users and back before the pandemic stalled tourism, visitors to China were warned that paying cash to the taxi driver might not be an option. On the e-commerce side, Amazon last year closed its Chinese domestic service after struggling to compete with the likes of Alibaba and JD.com.
On this evidence it’s difficult to think that another four years of either Donald Trump’s sabre rattling against Chinese trade or a watered-down strategy from Joe Biden could really be effective in slowing the country either economically or technologically.
Less well headlined than the Ant IPO are the backroom manoeuvres enacted in response to the US’s hardline trade policy. In light of attempts to exclude it from global supply chains, China’s government agreed in July to construct a new ‘internal circulation’ growth model, which envisages having all the upstream and downstream elements of production accessible within China. It seems hugely ambitious and expensive to achieve but definitely not impossible for a country that has transformed itself from an agrarian economy into an industrial powerhouse in just 40 years. Add to this the recent moves to create the world’s first central bank-backed digital currency (currently being trialled in Shenzhen) and China is well on the way to even greater self-sufficiency.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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