This week’s show guest is Marco Gervasi. Marco’s been working in China since 2004, advising companies on how to jumpstart their business operations, specifically within the country. Marco focuses on the technology sector and is one of the world’s foremost experts on e-commerce in China. Marco is a graduate of Singularity University and also wrote the very first book on ecommerce in China called East-Commerce. This is a very informative episode on the digital future of China that I know you’ll get a lot out of. Let’s get on to the show.

Jay: Hi, Marco. How are you doing? Thank you so much for coming on the show.

Marco: Hello, Jay. Thank you so much, guys, for having me. It’s always a pleasure.

Jay: Absolutely. I’m very excited to have you on because your area of expertise is extremely well followed at the moment, and it’s a good area that I think you’re going to provide a lot of value to our listeners. So, again, I appreciate you taking the time.

For our audience that’s listening in, perhaps you could give us just a quick introduction of who you are.

Marco: Yes, of course. I like to define myself as a man who has lived different lives, and I hope I will live even more. But in my first life, I was a securities lawyer. I was basically — and it was the beginning of the 2000s — working on the hottest IPOs in the tech sector before they all went bust. So that was my first introduction to the tech world.

And then I moved to China around 2004, where I worked, at the beginning, in a CPA firm helping foreign companies invest in China. And then I set up my own business in 2007. The company is called Red Synergy. I was assisting companies’ jumpstart business operations. Basically I was working with companies in mainly the manufacturing sector, which, in Europe, is pretty much established. And then I kind of went through a change.

I went first to Silicon Valley to see what was happening there. That was 2013. I attended this university which is now becoming quite well-known around the world called Singularity University. Then I came back to China and I re-focused my attention not only on the manufacturing sector but also on the digital sector.

And in 2016, I published a book called East-Commerce, which came out in three languages. What I was noting recently is that the book came out, the first edition, 2016, but it’s even more relevant now than before. These days’ news is that Alipay might be valued around $120 billion USD, which makes it the biggest unicorn in the world, and it may be even worth than Goldman Sachs. So a Chinese fintech company being worth more than a very modern, very established investment bank in the US —

A lot of people are kind of “Nah, that’s impossible,” but the truth is that this might be possible. These are very interesting times.

Jay: Absolutely. This is going to an exciting podcast episode. I can already tell. Just quickly, taking a step back, what made you come to China to begin with? You were a securities lawyer in Italy. Did you have a fascination with China? Did you know or see, early on, the view was shifting and that China was going to come to the forefront?

Marco: It’s interesting because I have a double degree in law and Chinese studies, but when I picked Chinese as a language and Chinese culture, I hadn’t been to China yet. But I had this feeling that — I don’t know — it seemed very exotic, and I wanted to learn Chinese to have an edge in the future. I had no idea how the language sounded and how the grammar looked.

And then, after a couple of years, I was invited by the Fudan University in Shanghai to attend summer school. And then I realized that… Actually, there were two things that made me realize that it was a right choice. The first one is that I was seeing a growth I have never seen anywhere else, that I had never seen anywhere else in the world. And the second thing is China, back then, was very meritocratic in terms of the more investment in terms of effort you put in, the more it gives it back to you, which was something that I wasn’t seeing anymore in Europe.

So I found it a challenging place where I could express myself, and it worked out. So far, so good.

Jay: I would say so. I think you made the right big bet that a lot of people probably hoped, wished that they had made when you made it.

Marco: It’s a little bit like bitcoins nowadays. I wish I invested before when everybody said it’s a scam. And then a lot of people, when I went to China in ’96 told me, “Come on. What are you doing in China? They’re so behind.”

I said, “Guys, they’re going to be ahead in the future.”

And then I remember a lot of my university classmates used to laugh at me, saying, “Why are you going there to waste your time? Why don’t you enjoy the nice life? Why don’t you go to the US?”

I said, “I think it’s going to be the next place.”

So a lot of my classmates now are looking at me and saying, “How did you know that?”

And I said, “Well, I didn’t know that. I just felt it.”

Jay: That’s incredible. That’s a great analogy. Maybe we can dive into that later on in the discussion. But let’s get right in, because I know that we have a lot to cover. Let’s talk specifically about China — China’s digital world. You’re an expert in the field. Like you said, you wrote a book that’s probably still one of the only authorities in ecommerce specifically in China. Maybe you can give us a little bit of an overview of China’s digital world, as it is right now.

Marco: Yes, absolutely. One word on my book is that I think it’s still the authority because a strategic decision that I made when I wrote the book is that I didn’t want to take sides. So I didn’t want to… If you look in the bookstores, a lot of books about Alibaba, the Ali effect, the Ali economy — Ali is like the phenomenon — some books about JD, a lot of books about Tencent. So books are very polarized. It’s one company or the other. It was very fascinating describing the digital China as a phenomenon rather than boosting one company instead of another one. And I think that it’s paying off, because we are seeing that it’s not only Alibaba, but it’s a mix of different companies.

So a lot of people are saying, “China is catching up. China is better than the US. There used to be a lot of entrepreneurs traveling to Silicon Valley and learning what was happening in the US, but now it’s the other way around. Entrepreneurs are going to Shenzhen or Beijing or Shanghai.”

I think there’s a lot of hype about it, and also, there’s a lot of confusion. So if we have to make a comparison of where is China today compared to the US — is it ahead? Is it behind? Who is better? — I think you don’t have a black and white answer, but we have some numbers that can help you.

First of all, China is still behind the US. This is a fact. But it’s catching up very fast. So how fast is it catching up? If we compare the China tech industry to the US tech industry back in 2012, China tech industry was only 15% as powerful as the American tech industry. Now, let’s say end of 2017, China tech industry is 42% as powerful as the American. So in five years, it went from 15% to 42%. So it’s still behind, but it’s catching up fast.

Where is it behind? I would say some interesting figures that I found in a recent article that came out on The Economist that can really help us understand where is China behind and where it’s ahead. So what is the gap? First of all, in terms of market value, Chinese tech companies’ total market value is only 32% of American tech companies. So it is still behind. In terms of investment, the Chinese tech companies’ absolute budget is only 30% as big as that of the American companies. So this is why it’s only 42% as the American tech market. But where is it catching up?

This is the interesting part. In ecommerce, Chinese firms are collectively 53% as big as America’s. And in terms of unicorns, Chinese unicorns are worth 69% of the American’s unicorns. And VC activity — Chinese VC activity fostered by companies like Baidu, Alibaba, and Tencent — is 85% as big as America’s. So it’s really catching up.

But one data that is extremely interesting, because it’s catching up fast, is artificial intelligence or AI. Wherever you go now in Asia, when you mention the word AI, everybody’s eyes start glittering. It’s basically the keyword. Everybody talks about AI, AI, AI. And when you go at family office events and you have family office managers approaching you, the first question they ask you is, “Which AI company shall I invest into?” And sometimes they don’t even understand what AI is. AI is a very complicated concept. But AI is the word. You need to have an AI company in your portfolio somehow.

So let’s look at what is happening in China’s AI. First of all, China’s population of AI experts is only 6% of that of America. So it’s still very small. But when we look at the number of AI papers published by Chinese scientists, they are already 89% of the American level.

Jay: Wow. That’s incredible.

Marco: So it’s catching up very, very fast.

Jay: Suffice it to say that within a matter of five years — if not less time — basically, China has quickly caught up or well on its way to catching up with the US, as far as tech.

Marco: I wouldn’t say five years, but according to the economists backed by McKenzie’s study, they are saying between 10 and 15 years. But I think it’s going to be faster. So it’s interesting to see that… It’s very funny because sometimes when you study, when you were at university studying for an exam, if you have two months between the moment you started studying for the exam and the exam, you would take it very slow because the exam is very far. And then the last two weeks, you start panicking, and you start studying like crazy because the exam is approaching. Well, this is what is happening with the US and China.

Before this, the latest news of Alipay and Alibaba and what is happening in China, the US market was still very skeptical about China. So they would behave like there’s still two months before the exam. But now that they’re seeing these numbers, they’re saying, “Hang on a second. Wait. This company might be worth more than Goldman Sachs.” So it’s like two weeks before the exam. “We’ve got to do something about it.”

So who are these Chinese companies and how do they work? Jay, the funny thing is that when I wrote my book two years ago, I would describe this because it was logical when you were in that market. But people are starting to reach out more now than before, because they see, before their eyes now, than before. So it’s very interesting.

Jay: I think that China itself is probably on everyone’s radar, whether they actually know or have read about it or actually dug into the data as deeply as you have — which probably most haven’t. But every headline that we read these days is “China this, China that…China, China, China.” Given the fact that it’s pretty much consensus view that China is — if not currently, will be soon — the largest economy in the world, the largest retail market in the world, definitely a leader in tech and on the bleeding edge, so to speak, why don’t you tell us a little bit about how ecommerce has evolved in China from the time that you moved over there till now. And what are the key differences that you see between what’s happening in China and the West?

Marco: Let’s say that the evolution of China ecommerce is not something that comes out of a Harry Potter movie that you think, wow. This is like magic. It follows a very logical development. China went from an agrarian economy to a manufacturing economy and now to be the lab of innovation of the world. The data about AI that I just gave you are very clear. China is catching up very fast, and the government wants China to be an AI leader globally by 2030. I would say that it follows a very logical path, but it’s accelerating. Ecommerce has evolved in a very simple way. Contrary to what happened in the US, China has gone from not having a developed infrastructure — let’s say a retail of commerce infrastructure — to basically leapfrogging the normal offline infrastructure and building a directly online infrastructure. So let me give you an example because this is something that we see a lot.

Chinese New Year 2018 has just finished. We have entered the Year of the Dog, and according to Financial Times, Tencent disclosed that around 800 million people send money using WeChat. So it means that 800 million people send hongbao using WeChat. Now, according to McKenzie, by 2020, paper money in China will disappear and give way to digital currency. So what is happening is that mobile payments basically leapfrog credit card payments. Why? Because there was not a strong legacy with Chinese banks. So people decided that it’s more convenient to use their mobile app than going to a bank.

So instead of building a vast bank retail network, like we have in the West, the Chinese went from a sufficient retail network to a very efficient, digital retail network or digital payment network. And this is the same thing that happened with ecommerce. Instead of having a very developed… I’m talking about, not the course, but I’m talking about inside China where there is millions and millions and hundreds of millions of people living. Instead of having the Walmarts or the Macy’s or the Tesco of the world, you didn’t have much. And then the second tier, third tier or fourth tier went straight to digital.

So this is what allowed Chinese ecommerce to grow so fast. They basically had a green field that they could take over instead of having people to adopted from going to the supermarket to buying online. I still study Chinese. My Chinese teacher, who is 80, she buys all her groceries using her mobile phone, which is something incredible considering my father, who is younger than her, cannot still nowadays turn on his computer by himself. So it’s kind of interesting, I would say.

Jay: That’s right. That term that you used — leapfrogging — is very interesting as well. I think you mentioned this in one of our previous conversations, is basically how another example of this would be even something as simple as the desktop computer that many in the West are still chained to their desk. And you go into China and basically, it’s all on mobile. And people don’t really own computers, because they can do everything they need to on their mobile. And not only that, they don’t carry wallets anymore, because they can do — like you said — everything on mobile banking. So it’s pretty incredible if you think about how they’ve literally just skipped an entire generation of maturity in the digital world.

Marco: Yeah. If you look at the latest results that Alibaba posted in its financial reviews, according to their CFO, 80% of total ecommerce sales were done using mobile phones. It’s a lot. And this is happening, I would say, the last three, four years. When I started doing the research for my book, it was the end of 2013, and mobile wasn’t even 50%. And now it’s already 80%. So it’s a lot.

Jay: Maybe you can break down a little bit. Give us a little bit of background on the large players that we see in China. So there’s a clear power struggle that’s happening between the likes of Tencent and Alibaba. You see them rapidly expanding beyond their original core businesses and trying to make acquisitions aggressively, trying to branch off into different parts just to capture market share. Give us your insider’s view and overview on how this is all playing out.

Marco: It’s very curious because when I started in 2013 doing research, it was everybody against everybody. It looked like a mixed martial arts fight, tournament. It’s very interesting that you would see Jack Ma against the world. And then you had Tencent on the other side, and then you said, I would say, a very established offline business like Wanda, which is like the biggest real estate developer in China that was also trying to catch up. And then, I would say, around 2014, 2015, the big guys decided that it would be smarter for everyone to become partners rather than kill each other to death, that the zero-sum game wasn’t useful to anyone.

So what is happening now is that everybody is partnering with everybody, according to the different sectors. But one thing that is common to all of these — and this is something that you hear more and more because you hear about the Alibaba economy or the JD economy or the Tencent economy — is that each one is creating its own ecosystem. And the ecosystem reflects what is always happening in the offline world in China — or in Asia, I would say — the mindset, the idea of creating a conglomerate.

For example, let’s look at what happened in Hong Kong where you had conglomerates of real estate, shipping, and then retail and entertainment. And what is happening in China ecommerce is the same. You have ecommerce companies going into entertainment, and then they’re going to cinemas. Then they’re going into integrating online and offline. So I would say that you see the three kingdoms like Tencent, Alibaba, and JD, but you also see a lot of, I would say, secret passages and also non-secret passages between the kingdoms.

So it’s very interesting to see the logic behind it, and I think that it’s just there is a lot of sharing of consumers. Because like it or not, China is becoming saturated in terms of consumers because ecommerce has enriched everyone, or almost everyone, who can purchase now, from a small amount of money to a big amount of money.

So what they’re doing now is that they are kind of exchanging consumers and creating alliances.

Jay: Right. So let’s take Tencent, for example, which is probably… Tencent, Alibaba are the two household names that everyone in the West even are very well familiar with. Tencent started off as a gaming company, and it’s not worth — what? — half a trillion dollars. It’s WeChat messaging; it’s payments… Maybe you could break that down for us a little bit. What else does Tencent have in its bag?

Marco: It’s funny because I like it. One thing I like about Chinese companies — they are nationalistic in terms of “Yes, we are so proud of being Chinese” and then they also define themselves using American names. So this is the contradiction of the love and hate. So Tencent, it calls itself now the Disney of China. It’s funny because when you look at the company which started as a gaming company — and gaming is still a very big deal for Chinese and entertainment, a lot about gaming — so Tencent now has its biggest app that is WeChat, which has more than 960 million users. But then you look at what Tencent is doing around the world, and then they bought a minority in Spotify. But also, when you look about music, Tencent owns the three biggest music apps in China, which is QQ Music and Kugou and Kuwo. All of them combined have around 700 million monthly active users, which is an incredible number.

And then, something that is curious is that when you look about… Well, it’s not curious, but it’s very logical. When you look at reading or content, Tencent owns China Literature Group, which owns almost 50% of the country’s e-reading market. So we’re talking about 6.4 million users.

And then, of course, then you’ve got the publishing and the video games and everything else. So you see a company that is active in many, many, many areas, and its main goal — which is a little bit like Disney — is to entertain the user. So it’s interesting, because when you look at the numbers, yes, of course, people outside China know Tencent, but people outside China know Disney more than Tencent. But when you look at the numbers, Tencent is as powerful, as big, as Disney.

Jay: One of the things that you mentioned in your book, East-Commerce, was you were discussing the different models between the West and the East, so to speak. I think you called them the developing versus the developed countries’ models. Walk us through that framework and tell us what exactly is happening there between the developed countries, like the West, did developing cons, such as China.

Marco: Actually, when the book came out in 2016 for the first edition — it was May 2016, so almost middle of the year — you could see it wasn’t clear yet, but you could still see that there were two models. I would say the developed country models, which I call the Amazon model, and the developing country’s model, which I call the Alibaba model… Now what is the difference between the two? Very simple. The Alibaba model fosters entrepreneurship — so small and medium enterprises. It’s basically an infrastructure that empowers small and medium buyers and sellers to operate. So they were paving the road for the highway so that the cars could drive through while Amazon was bringing commerce to everyone. So it was less about empowering and more about giving access to. It was pretty obvious that Alibaba would go in the developing world and that Amazon would go in the developed world.

But then something happened, which is the Indian market. And it’s very funny because the Indian entrepreneurs see… All the India entrepreneurs in the tech business — well, I won’t say all but a lot — call themselves the Jack Ma of this or the Jack Ma of that. So it’s curious because the Chinese use American names to define what they do, and the Indians are now using Chinese names to define what they do.

So “This is the Alibaba of India” or “This is the Alipay of India.” It’s extremely interesting to see that China is a closer proxy to India than the US, and a lot of Indians in the tech business are educated in the US. So it’s funny to see the shift. But anyway, India became, I would say, the turf where you could see Alibaba and Amazon fight — they’re still fighting now — to conquer the market. But what is really happening is that to basically just say that Alibaba is the developing-country model and Amazon is the developed-country model, it’s, I would say, it’s not precise yet. Because what is really happening is that Alibaba and Amazon are becoming both models for the developing and the developed world. And why I’m saying this is because when we look at one of the biggest business units of Alibaba, which is AliCloud, the cloud business like AWS for Amazon… Actually, Alibaba cloud business is going massive into the developed markets, especially what we see now in Europe.

What I’m seeing now is that the two models are converging, creating a model that applies both to the developing and the developed world. Now, if we look at one model that is the combination of the two models, where is each company compared to this common model? What I’m seeing is that Alibaba is ahead. The reason is that it’s moving faster than Amazon. Let me give you an example.

Let’s look at what is happening in the mobile payments world. Amazon just struck a big partnership with Bank of America to create a new — I would say — product, which is the corporate lending. But this is something that Alibaba already has, and actually, Alibaba owns… Well, it doesn’t own yet, but it’s going to own 33% of Alipay. So it’s like saying that Amazon will own 33% of Bank of America, which is not happening now, yet. They’re just a partnership.

So when we look at the two, you see that Alibaba in China is moving swifter, I would say, than Amazon. So it’s becoming interesting because the two models are actually really converging.

Jay: That’s fascinating. I’m speaking of the developing and the developed models and worlds converging. It’s very interesting because I think you moved here almost 20 years ago. I’ve been in the region for 16 years, and when I first moved over here, it will still the China 1.0. When I say that, what I mean is you see all these Western companies trying to come in and muscle their way into China without really knowing what they were doing, and the majority of them failed, and a lot of the large multinationals would spend millions and millions of dollars trying to penetrate China, and they just weren’t able to do so. A lot of them have turned around and left with their tail between their legs. It’s definitely no question that it’s very difficult to do business in China, to invest in China.

So from someone that has been there on the inside from both the manufacturing and now a technology standpoint, digital standpoint, what do you see as the best way to do business in China or to invest into China or to do cross-border ecommerce, if you were interested in doing that?

Marco: Actually, it’s extremely interesting because I was talking to a friend of mine yesterday who runs, I would say, a quite established German outdoor brand in Asia, and I wanted to catch up with him to understand what is happening. And it’s extremely interesting, Jay, because there are different forces at play. Let’s look, for example, at the retail sector. What you’re having now in China, thanks to this U Channel, which is the online channel, is that you have consumers who are very savvy. They are very, very knowledgeable about how much they should pay for something. It has become extremely unusual for a consumer to pay full price for a product. So they know exactly where the find the product at the best price.

This creates an incredible downward pressure in terms of prices. So when you are a brand and you are in the Chinese market, you see that prices are going down because there is always someone, there is always a channel, selling your product at a cheaper price.

On the other side, you have costs that are rising. So you have the retail cost that is going up; the labor cost that is going up. So you have downward pressure in terms of prices and upward pressure in terms of cost. So the brands are squeezed.

Now how do this deal with this squeeze? And this is the interesting part. What is becoming common more and more in China is that people coming from Europe or the US — I’m saying middle management — is becoming cheaper than employing Chinese people. Why? Because their expectations are, I would say, more level with what is happening around the world while Chinese expectations are much, much higher. So you see a lot of Chinese brands hiring middle management from Europe or the US because they’re well trained, perfect English, but most of all, their salary expectations are more in line with what happens in their countries.

And this is extremely interesting because, for example, my friend was telling me that he just hired a head of retail who is Spanish, and then the guy, in a few weeks, they caught up and was up to speed with what was happening in China. So it’s like the crisis in Europe has allowed people to become more humble in terms of their expectations but also much more efficient in terms of how fast they’re catching up because they need a job. And this is interesting because what I’m seeing…

I think it’s a good thing, Jay, because China is becoming very expensive, and Europe is becoming extremely competitive. So this is what I’m seeing in the manufacturing sector. Because of labor costs increasing in Europe in the past and everybody moved to China, outsourced to China, a lot of companies needed to basically find more efficiency out of what they had.

So when I visit factories in Europe, every time I ask, “Where do you see this factor going in five years?”

And the answer is always the same: “We are not going to catch up. We are going to maintain the same number of employees we have, but we’re going to double the efficiency.”

And I always ask, “How are you going to do that if you don’t hire more people?”

And they say, “Very simple. Automation” or “artificial intelligence.” So we’re talking about something called the factory 4.0 or smart manufacturing. And this is something that I haven’t seen in China yet. So we are seeing a European or US market becoming much more savvy in terms of efficiency and creating solutions that I haven’t seen in China, which has been… I would say they have wasted more. There have been more spoiled, like we have been in the West. So I’m seeing a rebalancing between the two.

Now in terms of opportunities, what I’m seeing is that Chinese are really, really very focused on two things, which belong to the same category, which is living a better life, a better quality of living. So you see an incredible number, an increasing number of Chinese traveling around the world but also, when they come back to China, they want to experience the same products that they have experienced overseas.

So thanks to cross-border ecommerce, a lot of Chinese are now buying — once they’re back in China — the same products that they have experienced in the US or in Europe or even in Africa, and they want to have it back home. So you see a lot of companies…

Let me give you an example. In the consumer products, I would say in the food supplements, there’s a company in Australia called Swisse, which has been purchased by Procter & Gamble, and Swisse is huge in China in terms of food supplements. A lot of Chinese spend a lot of money buying online Swisse products directly from Australia because they trust the product, and it’s good for the health. So Swisse started in China very, very small, and then it boomed because the quality of their product and their marketing in terms of giving people a better life is something that appeals to the Chinese public.

It’s true that it’s hard to get into the market, but if you align with the trends, then your product is definitely going to work.

But then I need to add one more thing, which is something that I see a lot in the West and, for me, it’s completely crazy, which is online and offline marketing.

Let me tell you this. If we were in 2012, and you, as a brand, decided to have an online presence, and you only have an offline presence, and you set up your own shop on Tmall, you would expect a single-digit growth would be okay for the first year.

Now five years after, let’s say that you have some offline presence, but you have absolutely no online presence. Your growth in online goes immediately to 30% of your total national revenues, which means that your online presence is immediately very, very, very powerful.

Now, what is happening is that I see a lot of brands having the online department and the offline department not talking to each other, completely managing in silos, and then they don’t even conceive the idea of unifying the two departments, which in China is absolutely crazy. So if I may give an advice… When you come to the Chinese market, your online and your offline departments must be absolutely connected because it’s becoming the same thing.

Jay: That’s fascinating. You’ve given us a few good pointers here at the end here. I’m eager to hear a little bit more. I think this is, going back to your analogy of missing bitcoin when everyone was calling it a fraud or a scam or a fake, for those of us sitting on the outside, perhaps that aren’t as knowledgeable or don’t have the connections but really want to get in on some of these big trends that you’re seeing there in China, other than buying Tencent or this sort of thing, what are the next five to ten year big themes that you would bet some decent money on that you’ll likely see play out?

Marco: Whenever I look at China, the first thing I focus on is infrastructures. What is happening is China is really playing a huge bet and investing a lot of money in this policy which is called One Road One Belt. And then even Alibaba defines the One Road One Belt policy as an important tailwind for their cross-border ecommerce. So growth or ecommerce is getting saturated in the Chinese but growth or Chinese cross-border ecommerce is really booming.

The first thing that I’m seeing is that Chinese will still carry on buying foreign products because it’s a matter of trust. I’m not saying the Chinese products are bad. On the contrary, I’m seeing a lot of nationalism, and a lot of Chinese factories and companies going overseas to buy brands, for example, like Puma, which might soon become a Chinese company or owned by Chinese, like Volvo is now owned by Chinese. When you look at self-driving vehicles or electric cars, there’s a Chinese brand, brand new car called Neo, and it’s like the Tesla of China. And then when you look at their website and what they’re doing, it’s absolutely astounding. It’s incredible what they’re doing. So they are aligning with foreign brands.

But still, I would say that the foreign brands appeal is very big in China. So one trend that I see is that cross-border ecommerce will carry on growing.

Another trend that I see is that, looking at the Chinese market itself, everything that is related to, of course, the quality of living and then the industrial sector, so industrial solutions that are going to create efficiency in China, and even the medical sector is booming. They’re going to boom, absolutely, because they all fall into the same category of improving the life and the quality of the life of people in China.

But how do you know that that is going to work? Very simple. You go and look at the sectors that are encouraged by the Chinese government, where you can invest, and then you realize then, of course, these are areas falling into those sectors.

For example, One Belt One Road or high tech or energy or natural resources, agriculture, all this are going to be sectors that would definitely carry on in China. But another thing, Chinese companies are coming outside China, so they’re investing overseas.

Now, again, let’s look at bitcoin and what happened. Bitcoin went from being an unknown currency to being in the mouth of everyone because of the speculation, how the currency, the valuation has exploded, and then it busted again, and then it’s up and down. This is the same thing that is happening with Chinese FDI, foreign companies going outside. You’ve seen this incredible flow of Chinese money going outside China, like the rise of bitcoins, and then, all of a sudden, the Chinese government said, “Hang on a second. It’s too much too fast.” So let’s stop again, then boom. So it busted. It went down, and then all of a sudden, a company like A.C. Milan, which was almost bought by Chinese investors, they bailed, and they waited months before finalizing the acquisition because the Chinese government didn’t allow the investors to transform their RMB, to convert their RMB, to US dollars.

So this is something I’m seeing happening now. But, again, China is forced to go out and invest because it needs the resources outside China to carry on growing.

Let’s me give you an example. Let’s look at commodities. Let’s look at cobalt. Now cobalt is used for electric batteries. Now the biggest owner of cobalt supplies is China because China plans to become the EV biggest market in the world. So you have to… You have to follow the flows of the obvious. What is it that we need to grow? And where you find an answer — this is what they need to grow — then you find an investment there. So that’s a sector that is going to be growing up very fast.

Jay: That’s right. And that’s the smart way to go about it. There’s two other areas that I wanted to ask you quickly about that you alluded to before. One of them is obviously AI and then big data. These companies like Tencent and Alibaba — all the ones that are within the digital technology/social media space, obviously they’re probably the most valuable thing that they’re collecting is this massive amount of data about the Chinese population. How do you see that playing out? Big data and then AI, which you obviously mentioned before that you were looking at as well.

Marco: I think that big data and AI are definitely the hottest sectors in the next years to come. Again, AI is fed by big data, so they are completely intertwined. But it’s funny because when you look at investors talking about investments, they always say, “Okay, big data. But actually, we want AI.” They don’t understand that without big data, you don’t have AI. So you need one to get the other.

Let me give you an example. Last year, at the beginning of 2016, I interviewed the Alibaba CTO who basically is the father of Ali Cloud, and we talked about big data, and we talked about computing capability, cloud computing capability, and also the importance of data and what is Ali going to do with data. Alibaba has a unit called Alimama, which is basically its big data unit. When your see how they crunch data in order to understand, from advertising point of view, which banners go where to which customer, and then how to basically improve the return on each page, you realize that everything is based on that.

First of all, you see China improving as a computing capability and a computing capability will be, in the future, an index to define how strong is one country in the global playground. So what is the American or European or Chinese computing capability? That is going to be an index, definitely an index, because, based on that, you basically crunch something to get output. So I see a huge improvement of that.

What I’m seeing now is that I see a lot of Chinese tech companies really calling, like what happened in the 2000s where your company is like the beginning of Alibaba or Yahoo! or CNET. A lot of Chinese living in Silicon Valley, they return to China to set up these companies which then they list back in the US, because it was the right time to do it.

What is happening now is that a lot of data scientists working for Alphabet or working for Facebook, Chinese — because you have a big Asian population in California — they’re going back to China, lured with incredible salaries, to work on something that they say, “Yes, I have a great life in California, and I had a great job at Alphabet, but how many times in my life will I have the opportunity to work in the biggest big data market in the world?” So I see a lot of appeal and a lot of development in that.

Jay: That’s fascinating. Marco, what are you currently working on yourself? Once again, Marco, I have to thank you for taking the time and just for the vast amount of knowledge and insight that you’ve given us here today. We really appreciate it. I think the audience is really going to get a lot out of this discussion. What are you personally working on? Is there anything exciting? Any projects you’re working on that you’d want to share with our audience?

Marco: Yes. First of all, I hope I haven’t given you too much information, because I tend to be very detailed when it comes to this. So I collect a lot of data. But my job is fairly simple. I assess foreign companies with both local establishment in China and then ecommerce consulting and learning about Chinese digital models. So what I’m doing now is I’m helping my clients focus on two main sectors. One is the retail sector in one; I carry on in the manufacturing sector, but I call it the smart manufacturing sector. So I’m still helping them to get into the Chinese market, or, once they’re into the market, then how they develop. And I’m also working with Chinese companies that are coming out of China — mainly in Europe — to understand which are the hot areas now to develop their business here.

There is still an incredible amount of cultural differences. So matter how good you speak your English or your Chinese, the cultural differences will always be there. So thank God they are there, so they still give me a good salary.

Jay: That’s good. So these are corporations that you’re working with, both inbound and outbound. Is that right?

Marco: Yes, absolutely.

Jay: Fantastic. For any of our listeners or anyone that needs help, Marco is your man. Finally, Marco, what’s the best place that people can find you or follow you or learn a little bit about the work that you do there?

Marco: They can definitely reach me at my company email which is Marco.Gervasi@theRedSynergy.com. And then, of course, my book website is www.East-Commerce.com. So these are the two main addresses where they can learn about me, and they can reach me. And of course, on LinkedIn, my profile is public, so they can find me there.

Jay: Fantastic. We’ll have that all linked up in the show notes. Marco, it’s been such a pleasure. Thank you so much, again, for the time and the valuable insights. I’m sure we’re going to get a lot of questions and feedback thereafter, so hopefully we won’t bombard you. We appreciate having you on, and I can’t wait to see how the China thing plays out. I’d love to have you on again maybe in six months to a year, and we can rehash what’s happened, because things move extremely fast there.

Marco: They do. They do. Thank you, Jay. Thank you very much. It was an honor and a pleasure.

Jay: Thank you. Take care.

Marco: Bye.

Jay: Bye.