Journalist: Teresa Wang | Editor: April Cho
In blockbuster Crazy Rich Asian, multiple “Chu” moguls reside in many different Asian countries. The families, however are ethnically Chinese and retain traditional Chinese characteristics like language, culture, and social norms. When considering whether to enter Chinese-speaking markets, global investors could take a card from the Chu playbook, looking to those markets beyond mainland China toward countries like Hong Kong, Taiwan, or even Singapore and Malaysia.
Yes, the mainland Chinese market is great. Lots of money, population and innovation. However, it is a huge risk and investment. I’ve heard a lot of entrepreneurs telling me that they’d love to enter Chinese market, but they are not sure whether the reward is worth the risks and the investment. One thing to consider: countries like Hong Kong or Taiwan afford significant advantages to Westerners looking to break into the Chinese-speaking market -- particularly for blockchain companies looking to break into a Chinese-speaking market with smaller risks and lower costs.
I chatted with Evgeny Tchebotarev, VP of Asia Growth for Skylum and Co-founder of 500 Px, which has a slightly different strategy toward the “Asian market” broadly defined. When asked about his global strategy he said:
“Why we target Hong Kong and Taiwan is because we’ll have a deeper understanding of what works in Chinese-speaking markets at a much lower cost than launching in China directly.”
Tchebotarev also saw an increasing number of western tech companies started in Hong Kong. Testing the water in Hong Kong and Taiwan with smaller investment might be a good idea to learn how to navigate in the Chinese-speaking world before jumping into mainland China.
9 reasons why Taiwan and Hong Kong are a great launching pad for blockchain companies
Entering Hong Kong and Taiwan do not require joint ventures (unlike China): Due to high levels of political influence and the complexity of the Chinese market, it is hard for companies to enter and do well in China on their own. GM entered China 20 years ago through a successful joint venture with SAIC, a state-owned Chinese automobile maker. Amazon not-so-successfully entered China by acquiring Joyo, a then leading Chinese online retailer.
Unlike China, which seems to require local partners, some Bay Area companies have achieved significant success in Taiwan and Hong Kong without diluting their equities or even setting up a local office. As of 2018, Facebook has a staggering penetration rate of almost 80% in Taiwan and Hong Kong. Higher than the 68% penetration rate in the US. It is worth noting that Facebook achieved the success all by themselves.
Governments are pro-blockchain: Both Hong Kong and Taiwanese governments are supportive of blockchain and fintech innovations, although regulations around token issuance are more ambiguous. In fact, one Taiwanese congressman Jason Hsu, is dubbed as the “Crypto Congressman” because of his public advocacy for blockchain technology. Taiwanese government also passed the fintech sandbox law last year to create more leeway for startups and support fintech innovations. The Hong Kong government is launching a trade finance blockchain platform cross different banks and stakeholders. Hong Kong Exchange and Clearing is also developing blockchain solution for foreign investors to trade Chinese equity.
Local populations are more Westernized: Hong Kong, as an ex-British territory, is English-friendly. Taiwan is less so, but developers’ English levels are generally better on average than in mainland Chinese markets. On top of speaking better English, people use Facebook, Google, Youtube and Telegram. Using familiar marketing and communication tools lowers the barrier to entry significantly.
Hong Kong houses many Chinese blockchain companies and crypto funds: After the Chinese government clamped down on blockchain exchanges and ICO in 2017, many companies migrated to Hong Kong and Singapore to raise funds. Although Hong Kong does not have a lot of blockchain-native companies, it is home to many well-known blockchain funds and exchanges. Notable names include Kenetic, Coinsuper and Bitfinex.
Taiwan has a strong developer network: Thanks to decades in the IT industry development and a robust STEM education, Taiwan is a great place for building a developer community. In fact, Google, IBM and Microsoft are all expanding their Taiwanese R&D centers. Blockchain development communities in Taiwan have been vibrant too. Taiwan is home to the Robinhood equivalent of cryptoexchange - Cobinhood.
People speak Chinese: In each country, the local populations use the same language (albeit with different local dialects). This means the countries share also a significant amount of cultural and social norms.
Internet is not censored: In Hong Kong and Taiwan, as long as you’re not doing something clearly illegal (selling drugs) your website will be stay up and running. The running joke among many of my friends in the Taiwanese startup scene is that you know your website is successful when it gets blocked in China
The smaller, more homogeneous market is easier to navigate: As opposed to China’s 1.3 billion strong population, Hong Kong has 7 million people and Taiwan has 24 million people. Although the populations might seem like small peanuts compared to China, there are merits to smaller markets. They are easier and cheaper to run marketing campaigns, segment out the right audiences and refine your product to find the right product market fit.
Hong Kong and Taiwan are proximate to key Asian Markets: Taiwan and Hong Kong are both centrally located in Asia. Within a 5-hour flight, you are able to access the entirety of East Asia from Tokyo to Singapore. Of course, your favorite vacation spots are covered within the range too.
In sum, countries like Hong Kong or Taiwan are great places to ease into significantly more complex mainland Chinese markets. Companies can learn the corporate “soft skills” to deal with transcultural differences in business practices. At the same time, they can work with local partners to develop the understanding of how business partnerships, and politics work on the mainland.
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