Bloomberg Invest Asia 2019: Takeaways Relevant to Pre-IPO Chinese Companies

 I thought it would be useful to share key takeaways from the recent Bloomberg Invest Asia conference, an invitation only event for international business leaders to exchange ideas regarding China’s role in the investment community.  

Overall, U.S. investors have a strong interest in Chinese companies. This makes sense given the co-dependent relationship between China and the United States and the strides China has made when it comes to innovation. According to the most recent tally, China has more than 180 “unicorn” private companies (companies with a valuation of more than $1 billion), representing the majority of the 325 unicorn companies globally.

While the entire conference was highly engaging, three key themes stand out.

• Hong Kong remains a resilient and competitive market. The changes in both Hong Kong and domestic markets have enabled them to be more competitive. Now, pre-IPO companies have more choices for where to list. This provides an opportunity to evaluate each exchange individually and collectively, within Asia and the United States.

While we do find that the United States’ diversified and deep sources of capital make it a top choice for larger companies, Hong Kong remains a highly attractive option – especially for smaller companies that can survive in less diverse markets. Typically, the decision on where to list depends on the company’s growth goals, timeline, sector and most significantly, their IPO financial readiness - including their ability to meet U.S. SEC listing standards.

• Artificial Intelligence (AI) is a Necessity. Sentiment prevailed that every company needs to incorporate AI in some way such as investing in talent. Perhaps Chinese companies can take a cue from pre-IPO U.S. companies Pinterest and Airbnb. Per FORTUNE, both companies just announced new AI focused talent: Pinterest is hiring Jeremy King, formerly chief technology officer (CTO) at Walmart, lead engineering; coincidentally, Airbnb has hired former Pinterest CTO Vanja Josifovski to become the CTO of Airbnb Homes.

It’s likely China will continue to use AI to thrive, particularly in the mobile payments space given that preeminent players Ant Financial and WeChat have already tapped into the country’s massive population. In fact, according to the People’s Bank of China, in 2018 alone, a total of 60.53 billion mobile payment transactions were conducted. Over the past five years, total transactions reached 277.39 trillion yuan ($41.51 trillion) in 2018 — a more than 27-fold increase from five years ago.

• The Biotech Boom is Real. The prospects for biotech are significant for two reasons: 1) the aging population and needs for medical advances; 2) growing government spending - five trillion RMB as of 2018, three of which were invested in pharma. Further, the panelists predict that in ten years, there will be more first class drugs developed by China to treat global patients.

These insights align with the Made in China 2025 plan, which identifies biomedicine and high performance medical devices as priorities. We are also seeing a growing pipeline of pre-IPO companies in the biotech space which is further evidence of the increased investment in this area and capital markets opportunities ahead.

We welcome feedback and ongoing dialogue regarding these important trends. A big thank you to Bloomberg for hosting my team, and we look forward to continuing to track and assess the impact of China on the global investing community.