Author | Li Chengdong

Dong's Notes Issue 138:

I never intend to convince anyone to agree with my views, because time is the only standard to test the truth.

Why am I confident in Chinese companies and Chinese people? Not just because of diligence, but mainly because of their eagerness to learn and strong ability to iterate quickly. We have learned from Japan's modern corporate management experience, Singapore's economic zone/industrial park experience, German manufacturing, American technology, and venture capital!

I propose a new direction and topic: our Chinese nation is rapidly globalizing and needs to learn from the Jewish experience!

01 Read More Ancient Books, Avoid Detours

Zhuangzi said, "There is no beginning that is not an end; man and heaven are one."

Why emphasize going with the flow? It's like a race without a finish line—you don't know when it will end, so you can't judge the right or wrong of any event or person. What seems right now may later prove wrong, and vice versa.

Because there is no ultimate standard or final result, everything is relative. As someone said, if a person's life could extend infinitely, any success or failure would become meaningless. All successes and failures are merely matters of timing.

02 Overall, Future Consumption Resilience Remains Strong

Recently, while organizing data, I found two relatively obvious indicators for reference, which can clearly reflect consumer confidence: the savings rate and the loan rate. Previously, we focused more on absolute values, but relative changes are more telling.
 

In the first half of this year, the savings rate was 31.72%—meaning for every 100 yuan earned, 31.72 yuan was saved. The loan rate was 5%—for every 100 yuan earned, only 5 yuan was borrowed. This is even lower than during the 2008 subprime mortgage crisis. Considering that most people in most countries worldwide spend all they earn, whether in poor or rich nations, often living beyond their means.
 

Over the past three years, Chinese residents saved an average of 30% of their income. What does this signify? Foreigners have excessive consumer confidence, while China suffers from severe lack of confidence. The good news is that the public's assets remain strong: non-financial assets (mainly real estate) total 290 trillion yuan, held funds 80 trillion yuan, stock assets 24 trillion yuan, and cash deposits 144 trillion yuan, adding up to 530 trillion yuan. Bank liabilities are 44 trillion yuan (38 trillion yuan in mortgages). Lack of confidence is temporary; as long as the balance sheet is solid, China's future consumption resilience remains strong overall. Just like why, after the subprime crisis, U.S. consumption kept rising while Europe's declined—because America's wealth foundation was thick enough. Europe, living beyond its means and facing inflation, saw its business environment worsen.

03 Overseas Markets Have Weaker Competition, But Try Boldly and Carefully

Recently, I chatted with a second-tier internet executive who spent most of the past year and a half overseas, staying in major countries for a month or two each. Overall, overseas markets have relatively weaker competition; few are as diligent and cutthroat as the Chinese. If your product and business model are solid, you should try boldly but carefully. There are 200 countries and regions overseas, with compliance risks and barriers, making it harder to replicate and compete compared to China. Without naming names, a certain bubble tea brand in the U.S. earns over 1 million yuan per store monthly—ten times that of similar stores in China. In August, I visited Kenya, where a friend introduced a MINISO franchisee. They now have 20 stores in Kenya. I initially thought Kenya's consumption power was weak, but the data says otherwise. Companies like MINISO have become truly global brands, covering every corner. MINISO started global expansion in 2015, but real growth happened in the last four to five years. Post-pandemic, everyone realized how impressive MINISO is.

Ye Guofu stated at the earnings conference that MINISO has entered 110 overseas markets, with overseas revenue accounting for 34% of total revenue in 2023. From January to March 2024, MINISO's revenue from mainland China grew 16.2% to 2.502 billion yuan, while overseas revenue surged 52.6% to 1.222 billion yuan. MINISO accelerated global store expansion to 6,630 stores, with Q1 revenue of 3.724 billion yuan and overseas growth of 52.6%. In Q1 2024 alone, the company added 217 new stores—108 in China (total 4,034, surpassing 4,000 for the first time) and 109 overseas (total 2,596).

 

04 Going Overseas Only When Domestic Competition Is Unbearable Means Paying Tuition

A friend in Changsha supplies takeout containers to restaurants and recently noticed an interesting trend: struggling restaurants change containers very frequently, while successful ones stick to the same ones. He found that struggling owners have too much free time and obsess over cutting costs, scouring Pinduoduo for cheaper options. Successful owners are too busy with sales to bother with such trivialities, preferring stable suppliers. Though a small case, it reflects many business owners' mindsets. The better the business, the more focus on sales; the worse, the more on management. Prepare for rainy days during sunny ones. Those considering overseas only when domestic competition becomes unbearable will likely pay tuition.

 

05 Have Confidence in Getting Better, Not Worse

Whether one has confidence in China depends on personal perspectives, shaped by the quantity and quality of information one receives.

If bombarded with negativity, confidence is hard to come by. I mainly interact with entrepreneurs and capitalists—both big shots and grassroots founders.

One friend, a low-educated grassroots entrepreneur, built a billion-yuan revenue business in two years, now targeting 5 billion. Another, born in 1993 and from extreme poverty, founded a company nearing 30 billion yuan in sales in just six to seven years.

I could list dozens more such cases.

These outstanding entrepreneurs, future business leaders of China, created immense social wealth with no background, relying only on their hands and wisdom. This shows society is becoming fairer, not harder.

 

End

"When the mirror is bright, dust does not settle; when dust settles, the mirror is not bright. Long association with the wise leaves no faults." —Zhuangzi, "The Sign of Virtue Complete" Zhuangzi teaches us to stay away from negative people to avoid mistakes or burning bridges, and to seize opportunities!