The Chinese Are Coming

When I arrived at Orrick, Herrington & Sutcliffe LLP in Menlo Park yesterday, the presentation had already started. Jane Jie Sun, the CFO of Ctrip – the Expedia equivalent in China, was giving an enthusiastic talk about the company’s success. The room was full of aspiring entrepreneurs, mostly Chinese, who are trying to catch a slice of China’s economic boom, or at minimum, to admire what others have achieved.

This is one of the events put on by HYSTA – an entrepreneurial association in Silicon Valley. Standing in the audience, I couldn’t help to be impressed. Just look at the following facts:

- China’s travel industry is growing double digits every year and there is no sign of slowing down due to the emergence of the middle class.

- Ctrip aggregated more than 80 % of a fragmented market, which was typically characterized by mom-and-pop hotels, and handles a daily volume equal to the volume one travel agent does in a year.

- The company’s revenue is growing at 50 % year to year, with a gross margin as high as 80 percent (whew, where on earth can you find a business like that?!).

Although Ctrip is a copycat of Expedia, it successfully adapted to China’s situation and provides the services that are “China unique.” For example, we already know about the call-center and free ticket delivery, but its “express service” is quite remarkable. In Beijing and Shanghai, because traffic is so bad and people cannot predict how soon they will get to the airport, Ctrip invented a service that allows people to call while riding their taxis to the airport, and issues the air ticket including boarding pass within one hour. Wall Street analysts said Ctrip is the only company in the world that is doing this.

Other things I have learned are: since 2006, GDP growth in the second-tier cities in China has surpassed that of first-tier cities. Recently, China relaxed visa restrictions for people to travel to the U.S. as tourists. It is predicted that by 2020, China will be the largest outbound travel country in the world. A minor point, it will certainly help the huge trade deficit between the United States and China.

A friend of mine told me that her sister, who works in IBM Beijing, travels every year, and each year to a new country. For the young Chinese middle class, travel to see the world is an essential component of their lives. Some consider it an important achievement in their lifetime. We will see the Chinese are coming.

Chinese Tourists and Cars Abroad

When I traveled abroad ten or fifteen years ago, I hardly met any Chinese who were traveling as a tourist. Wherever I went, people would point to me and say: “Japanese! Japanese!”

Things are very different now. I have met many Chinese tourists in Egypt during my short stay in Cairo and Luxor. Our tour guide Ali told me, in the last two years, the number of Chinese travelers exploded. The Chinese tourists have become the second largest tourist group in Egypt, with approximately 400,000 to 500,000 people each year (Russia is the No. 1 with about 1 million tourists in Egypt last year). And this is just the beginning. As the affluent Chinese middle class grows, more and more people can afford to travel abroad. Now, wherever I go, people would greet me: “Ni Hao!”

Another interesting thing is that Chinese cars are becoming more and more popular in Egypt. According to an Egyptian newspaper, “20 Chinese auto companies have sold their vehicles in the Egyptian market since 2003.” Compared with the Western auto makers, Chinese cars have relatively lower prices, but also good quality. I have seen the tour buses made in China and labeled “Yutong” (宇通) running all over the tourist attraction spots in Cairo. I was also told that a Chinese-run travel agency “Solar Empire” (太阳帝国) is gaining popularity in Egypt.

We visited the famous Khan al Kahlili in Cairo – the biggest bazaar (marketplace) in the Middle East. It sells souvenirs, jewelries, textiles, gold, silver, and many other things. Ali told me that all the souvenirs, scarves and shawls are made in China. But the Egyptian dealers changed labels to “Made in Egypt” to attract the tourists.

In addition to all the merchandises made in China, Chinese tourists and Chinese cars are the first signs I have witnessed of China’s rising presence in the world.