China's Transformative Economic Agenda

  • William Laraque, Managing Director at US-International Trade Services

  • 13.11.2015 00:00 am
  • undisclosed
It is counterintuitive that a Chinese enterprise would teach western retailers how business will be conducted in the future but this is exactly what just happened. Alibaba scored big on  Singles Day. While western retailers express anxiety about the upcoming Christmas season and count once again on deep discounting to generate sales, Alibaba hit it out of the park.
Only 1 percent of small businesses in the United States tap global markets for fresh revenue growth, according to government statistics. Of that total, only 2 percent export to more than one country. There’s a lot of money to be potentially gained from sales generated abroad. 
The WSJ reported this morning that Apple Inc. is in discussions with U.S. banks to develop a payment service that would let users zap money to one another from their phones rather than relying on cash or checks, according to people familiar with the matter.
It was stated in this regard that this initiative is an attempt by Apple to compete with PayPal. If so, the strategy is hopelessly short-sighted! Why? Because Apple's competition is not national, it is global; Apple's competitor is not PayPal, it is Alibaba. It is Alipay.
Let us explore one more area before coming to grips with strategy. It is revealed today that the crowdfunding of small businesses in the U.S. is failing and so U.S. states are getting involved in providing equity financing to small business. There is no more certain indication of impending disaster than when government, on any level, gets involved in providing financing directly to business. The Ex-Im Bank, global ECAs and the U.S. SBA provide ample example of what is needed to help enterprises, particularly small enterprises to expand...globally. It is bank guaranties in support of mostly short-term, self-liquidating, legitimate trade. SBA guaranties are based on FICO or Fair Isaac Scores and U.S. Ex-Im small business pre and post export working capital guaranties are based on an evaluation by regionally-located business experts of whether a small business has a legitimate chance at export success and on whether the bank to be guarantied knows a thing or two about international business. In addition, foreign political and commercial risk is covered by export credit insurance. 
While the U.S. Congress was busy making sure that the U.S. was globally uncompetitive, Alibaba was busy expanding China's global reach.
By basing its strategy on global convenience and superb logistics, Alibaba has ensured China's global competitiveness. There is a lesson in this for Apple, FedEx, UPS, mass retailers, federal, state, local governments and banks.

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