What's happening in China





Vested interests in supply chains tend to resist growth of technology, which is best hope for most of us everywhere

The larger the commercial entity, the more powerful are the vested interests to protect the status quo, or at least protect their interests within that economic sector.

One classic example are the longshore unions of America and to a lesser extent everywhere else that have choke hold on the markets they ostensibly serve, but in reality master by having physical control over the flow of the goods crossing the docks they rule.

Technology has proven to be their bete noire because not only does it amount to a labour saving device, it also saves the increasing cost of labourers. From a gangs of 10 and 20 men to move 20 tons an hour in the 1970s, one now takes three men and a gantry crane barely three minutes to move 20 tons every three minutes.

Undoubtedly, this has and will continue to create social problems, which have yet to be resolved and still promise to bite society more severely in years to come as more and more workers are displaced by technology. The union response, and indeed the reaction of politicians who depend on syndicalist voting blocs to stay in office, is to block technology.

While it is fair to say that it is unjust that increasing numbers are without work to sustain them, because of technology, it is also equally unfair that one group of unskilled and semi-skilled workers could prevent technological advancement in order to make exorbitant charges for their labour because they control access to a market to which all must have access to survive.

Thus, the demand of the International Longshore and Warehouse Union members on the US west coast for example, is no longer restricted to the loading and unloading of ships, but all other work done on the waterfront.

For example, they insist that union members not only do the maintenance work on container chassis, but determine whether such work needs to be done, and the extent to which it must be done and how much it will cost. Which given that docker wage scales match those of medical doctors and FBI agents with law degrees, this is astronomical for low-skilled labour.

Overburdening an already overly complex process made deliberately more expensive is a problem that can be solved by technology. Technically, ship-to-shore crane operations can be done remotely, far away from the waterfront itself completely in the dark night and day. And done from one's home computer.

And because of the coronavirus outbreak in recent months, the world has come closer than ever to a workaday reality of telecommuting. There are still problems and security issues blocking the way to full development, but the worldwide pandemic and the demand for self-isolation has given a big boost to the work at home world.

Much of these technical advances, of achieving interoperability, have been accomplished in China’s digital economy. China's dictatorial communist regime may not be to everyone's taste, but because of it, there are ways and means of doing things that have not been pursued because western vested interests, not the least of them trade unions, block the way and make it pointless to invest in the directions.

Now new user growth in China, and increasingly in the rest of the world, is now of a size to offset digital businesses’ strategic and commercial missteps. Double-digit or triple-digit monthly active user (MAU) growth tends mute criticism of flimsy unit economics and lackluster income streams.

Now, internet user saturation within China’s consumer class makes it harder to avoid scrutiny with eye-popping user growth. Companies like Meatus, JD, and Zhou are facing tough questions. Shareholders and investors want to see whether these platforms can turn their impressive scale into profits.

Weaker players might have a hard time meeting impatient investors’ demands for return on investment, but China’s digital giants are adapting. They are repositioning themselves to adjust to new market dynamics, developing strategies to take advantage of enduring opportunities as mature businesses.

Previously, China’s internet companies grew by latching onto investment frenzies in a particular product or industry vertical, known as fengkou (literally “a gap where a strong wind blows”) in Chinese startup lingo. These rapid influxes of capital and speculative behaviour are so notorious that leading Chinese executives have joked that investors could pump in enough money to make pigs fly.

Such internet frenzies have reshaped markets. While, they brought on the dot-com bust of 20 years ago, they also delivered exponential growth since, and minted some of the world's biggest internet successes. Meituan, Didi, and VIPKID, to give a few Chinese examples, were built on the crazes of yesteryear. These companies found space, shaped user behaviour, and benefited from the capital influx to achieve scale and outlast a slew of competitors to win winner-take-all or winner-take-most positions.

Upon this result the west and east, not to mention the poorer nations of north and south can move forward to effect greater digital advances still. The new and massive impetus has been the outbreak of the coronavirus that has given these digital developments the priority of wartime imperatives.

With more and more working from home to ward off disease, we are inadvertently creating new demands, where the complexities involved with connecting with cross-industry and cross-sector servers must be eliminated if we are to function at a level of mass participation, and no longer let this field be the exclusive province of boffins and techies. Think of the simplicity provided by an old fashioned radio: One turns the dial to the right till it clicks on, with continued turning increasing volume. Turning to the left, decreases volume to till clicks off. The goal is to achieve that simplicity. No longer can software engineers think making things more complicated makes them more "powerful" when the reverse is more likely.

One can think of the scale of the technological advances made in the five-year span of World War II, from the RAF's cumbersome Walrus biplane in 1939 to the Luftwaffe's jet fighter Me262 in 1945. One can expect an exponential scale of development over a shorter time span because all things technological continually accelerate. Not because we want it to happen, but because we must have it to function at any level beyond a primitive subsistence level.

Nor does one suspect there will be much in the way of flashy new apps that to dazzle techies. Instead, the focus will be idiot-proofing what we do now simply. In other words, one can look to abandon the difficulty of working present system, which is something akin to running a Model T Ford 100 years ago that had to be cranked up to start and was prone to flats and breakdowns, to something closer to a vehicle which is turnkey ready and can be operated reliably with ease over years.

We can speak of future developments, of urban implosion (if people did not need as much office space, does that increase housing and shorten distances from urban centres to the countryside burning less fossil fuels to achieve more?) and other attendant advances, but it largely depends on increasing digitisation. It will cause social disruption to be sure, but such blows have been absorbed before and the world can be expected to cope with such things again. After all, despite our present woes the world has never been in better shape since the dawn of time.

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We know technology in the form of dockside container handling equipment, combined with other advances in the supply chain that have resulted in the introduction of economies of scale, but do you believe, as the author does, that digitisation is the best way forward?

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