Getting the money flowing – how the Chinese get it right

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Dennise Williams

financiallyfocusedtv@gmail.com

 

 

Recently, the opportunity to spend a few weeks in China came my way and it was an incredible learning experience.  From traveling to different cities and walking around the towns and observing the flow of money, I have to wonder how we in Jamaica can copy the Chinese blueprint of circulating the money at home, growing wealth at home and then stepping abroad with confidence that our economy works.

 

Courtesy of the Ministry of Commerce from the Government of the People’s Republic of China and the Shanghai Business School, Jamaicans and other guests from 16 countries were invited to partake in a one month study programme on Bank and Monetary Mangement.

 

In April, while in the cities of Shanghai, Zhengzhou, Luoyyang, Dengfengog Henan Province, Qingdao of Shangdong Province and Wuzhen of Zhejiang Province, I along with other Jamaicans, visited a number of tourist attractions in which 99% of the tourists were local Chinese.  In fact, so shocking was it for the Chinese tourists to see someone different at a local attraction, that we actually became the subject of countless photos (some with a kind request to pose, others where they just grabbed you and starting taking pictures).  Despite having a tourism product with 5,000 years of history and priceless artifacts, there was no obvious need to market the product outside of the country.  The parking lots were filled to capacity with buses carrying locals to view (with great pride, I may add) their own history and culture.  Think about it.  To visit a tourist spot in another part of China, a Chinese national has to book airfare, hotel, transportation. Then there is spending in the visiting city at resturants, nightclubs and the like.  That is money that stays right in the country.  After seeing the crowds that local attractions brought in, several of my Jamaican companions swore that they are going to visit Ochi Rios, Montego Bay and other destinations because Jamaica is so beautiful and they had to come all the way to China to realize the importance of being a “dryland tourist.”

 

Another super impressive experience was a visit to the Shanghai Stock Exchange.  What an incredible building with incredible technology and an incredible 1,264 companies listed on the Shanghia index. The Jamaica Stock Exchange has 84 listed companies trading.   Of course, a country the size of China also has two other stock exchanges, namely the Shenzhen Stock Exchange and Hong Kong Stock Exchange.

 

Imagine, if Jamaicans embraced our own stock exchange with the fervour that the Chinese do for their own.  Even when the Shanghai stock market crashed between June 2015 to February 2016, it did not diminish the respect and support of Chinese investors for their own local stock market.  Now, I will admit that the Chinese stock markets have an important edge over the Jamaican stock exchange.  And it’s not size of the business sector or size of the Chinese population.  I would dare to say that the competitive edge is the fact that it is so hard to acquire real estate in China so that the stock market becomes the best option to grow wealth.  According to one of our lecturers, Meng Lei, Associate Professor at the East China University of Science and Technology, it would take 3 members of a typical Chinese family 100 years of working with no vacations to afford a property in Shanghai, Bejing or Hong Kong.  And we Jamaicans love our brick and mortar.  So as long as there is hope to buy a house, many of us are not even looking at stocks.  Yet, what if we did look at stocks?  The Jamaica Stock Exchange was the number one exchange in regards to return on investment in 2015 and remains in the top 10 for 2017, according to Robin Levy, deputy general manager of the JSE speaking in March of this year.

 

And speaking of real estate, given the fact that the Government of China owns all the land, every where you look, there are skyscrapers going up for residential housing which people lease. The leases create a guaranteed cash flow for the Government which provides the basis for building more apartment buildings.  And the residential lease from the Government to an individual can be as long as 70 years, so banks will take the lease as collateral and give loans to individuals for the purchase of cars, vacations or business start ups.  Did you hear that National Housing Trust?  Nuff said.

 

The Chinese also have a booming financial technology and construction industry going on.  While we push a still infant mobile wallet and online banking system, the Chinese have got it right.  The persons living in rural China come to the big cities to look for work in construction, tourism and retail.  And MUST have a bank account to get their salaries and pay for leased government housing (as real estate is super expensive to buy).  So when I asked a member of the Chinese Central Bank about unbanked Chinese, he looked at me blankly…it was an unheard of concept.  In China, you need a bank account but you don’t need cash.  Bus fare, train fare, a two piece meal at KFC, coffee at Starbucks, buying stocks, paying rent, buying strawberries from a road side vendor are all done with your cell phone.  And we are struggling here in Jamaica to figure out how to get the 35% of the population without a bank account to become a part of the financial system.

 

Did I say I was impressed with China’s financial system?  Well, I am.  The money is in a virtuous circle in which it is earned and spent amongst the population that creates self sufficiency.  Some people accuse China of currency manipulation.  I am no expert in that so I won’t comment.  I can only speak of what I saw first hand.  Imagine, just imagine, if all of us living in Jamaica committed to visiting local attractions a few times per year.  Then we committed to investing a portion of our salary to the Jamaica Stock Exchange.  Then we all had mobile wallets so that cash is not an issue in regards to crime.  In my dream, we would see beautiful apartment buildings constructed that persons are proud to lease and bankers view that lease as sufficient collateral.  And then we were able to create jobs that sustained our standard of living and allowed us to be a self sufficient, growing economy.  It’s my dream.

 

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