Relatively new Chinese consumer brands are garnering the same respect as trusted U.S. brands that have been around for generations, according to a keynote speaker at a forum in New York.
"(Chinese companies) have been able to truncate a normally long journey to build trust and an emotional relationship with particular brands," said keynote speaker Michael Chu, founder of private-equity firm L Catterton. "That behavior, of course, attracts lots of capital."
China has been able to build trust with its consumers, he said, because it is a leader in artificial intelligence (AI), machine learning and data analytics, and technology-saavy consumers can "develop their own course through the maze of data and find where they want to transact and what kind of business they like."
In contrast, in the US and Europe, although there is a lot of early adoption of new brands, they usually hit a plateau because a lasting relationship has not been built, he said.
Chu and other industry and academic experts spoke on a wide range of topics pertaining to China at the forum on Wednesday that was sponsored by the news website SupChina.
For China's economy to continue to grow, Chu said, it must be driven by its burgeoning consumer economy – a cornerstone of President Xi Jinping's recent speech at the 19th National Congress of the Chinese Communist Party – and not export and investment, as in the last 20 years.
Asia, said Chu, will soon become the largest consumer geography in the world because it has a growing population of confident middle-class consumers, which will increase to 2 billion from 1.2 billion by 2020 – the US will only have 125 million.
Steven Roach, former chairman of Morgan Stanley Asia, said, however, that consumption is not powering China's economy in the way expected, because of the lack of a social security net, which might encourage people to spend more.
Yong Ma, executive vice-president of risk management and regulatory compliance at Bank of China, who wrote his computer science doctorate thesis on machine learning, said that AI is hyped and cautioned against investing in it.
"When machine speed exceeds certain limits, it can do certain things, but AI will never replace humans," he said. "Many, many years ago, they talked about how AI machine translation would replace all the translators in the United Nations. Guess what: It didn't happen."
Financial technology, or fintech, is an area where China has advanced greatly, particularly through mobile payments on the social media app WeChat.
Chu said that 50 percent of global e-commerce – with mobile payments as a major catalyst – is projected to be done in China this year, up from 1 percent in 2005.
"There are a lot of very inefficient and indebted industries that will either go away or be transformed because of this technology," Chu said. "That is partly why so much capital has come into the market."
Joseph Zeng, CEO of Greenwoods, one of China's largest hedge funds, said that reforms in the Hong Kong Stock Exchange would encourage innovation and motivate companies to grow faster and be listed sooner.
The lack of M&A in China due to the government being one of the largest shareholders is one of the key differences from the US equities market, Zeng said.
"The reason why you don't see the M&A in the market is because you don't have the incentive. You don't have the investors knocking on the door of management and saying, 'You have to do something to realize value,'" said Eric Almeraz, co-founder of Apis Capital.