In the late 90s, I was an equity analyst with a bank in Hong Kong – my job was to cover listed companies in Southeast Asia – it was an interesting and tragic time thanks in large part to the Asia financial crisis and surging interest in technology/Internet related start-ups.
Around that time, famed global macro (hedge fund) trader Jim Rogers and his fiancée Paige set out on a three year 245,000 kilometer track around the world – aptly named The Millennium Adventure – Rogers & Co traversed the globe in search of blossoming macro trends and investment opportunities.
While mirroring Rogers’ keen investment sense has proven, well, very challenging, I’ve been fortune enough to retrace numerous segments of his Millennium Adventure – yet, of all the places I’ve been to, one locale has continued to elude me – Korea – specifically, Democratic Peoples Republic of Korea (loving known as North Korea). That was until this June when several of my friends from Hong Kong, Taiwan and Shanghai decided it was time to visit the boys in the North - the plan was to heading into DPRK first week in September 2006.
But, that was before last night, when we got word from Pyongyang that the 2006 Arirang performance (Mass Games) had been cancelled due to the recent large scale flooding (evidently, the flooding is considerably more serious than the outside world has been led to believe – humanitarian aid might be needed). The connection between this massive propaganda event and our visit is tied to our visa window – US citizens are allowed entry in to North Korea under the umbrella of attending the Mass Games – now that there is no more Mass Games there is no more visa. Drat!
This is totally disappointing – one of my favorite articles written by Rogers during his Millienium Adventure told of his observations in Korea – the article titled “The Curious Shortage of Girls” was written in June 1999. I am completely curious to see how his predictions have played out (and while much of what he has to say pertained to South Korea, Rogers seems convinced South and North shared very similar characteristics – viewing the two as a single entity). Below are some excerpts:
Women constitute nearly 40 percent of the labor force, about a third of whom work on family farms. The rest work in services, health care, and textile and electronics manufacture, whose work force is 70-90 percent female. What has most bowled over Paige and I about Korea is the shortage of girls.
This demographic shortfall is true all over Asia, in Japan, Taiwan, and other countries, the first time these civilizations have faced this particular problem. In Korea in 1993 there were 115.6 boys born for each 100 girl babies. In 1995 only 47.9% of primary school children were female, which meant an extra 200,000 6-to-11-year-old boys. Local sources estimate that by 2010 there will be 128 men to every 100 women in the 27-to-30 year cohort.
This presents a serious demographic problem. Oddly enough, a similar situation occurred in Europe just before the year 1000, when for similar reasons girl babies were killed. As a result, back then it wasn’t the bride’s father who paid a dowry, but the husband who paid the bride’s father to obtain his new wife.
Rogers goes on to conclude that not only will this shortage of females mean an Asian imbalance, but it will also mean more and more women would delay getting hitched, opting to remain in the work force longer and longer – translating into growing demand from everything a young woman might desire to set up her own household (e.g. kitchen appliances, furniture) to frozen food and other easy-to-prepare meals.
How is this playing out in China today?
In February 2006, China’s State Bureau of Statistics reported that China’s population grew by 8.1 million people in 2005 to 1.307 billion – whereby there were 119 boys born for each 100 girls (source: Family Planning Commission of China) – in practical terms, this translates into about 40 million Chinese mainland men who won’t be able to find spouses by 2020.
If you walk around the supermarkets, talk to “independent women” or just plain old “people watch” (no peeping tom here) you’ll find that more and more women are getting hitched later in life, and that, yes, in fact, frozen food and ready made meals are gaining in popularity. Furthermore, the number of fitness centers and spas catering (and offering exclusive services) to women have grown exponentially over the past couple of years – and, although the make-up of the clientele at my local gym, Fitness First, breaks evenly across the male-female line (about 51% to 49% according to Fitness First in Shanghai) – the trend is favoring a larger number new female members over new male members.
Where do we go from here?
Already, several foreign companies have picked up on this trend – thanks to data mining – and thus are truly marketing themselves to women (e.g. snack food/ice cream retailer Diary Queen’s core clientele are young women between age 15 and 35). However, the vast majority are still scratching their heads – trying to figure out what to do with a growing number of independent women actively engaged in the work force - that I ex-ladies social hour at the tea house segment.
But, maybe we need to take a step back - maybe we’re getting too far ahead of ourselves - perhaps we need to resolve the macro picture first before trucking down the segmentation highway – my general view is that Chinese companies/organizations/government bodies are still trying to figure out how to deal with needs of the overall population (talk about full circle)…
Here is what I’m talking about. This week, Chinese airlines reported first half 2006 (H106) combined loss of US$321 million on the back of what regulators from General Administration of Civil Aviation of China said where “higher fuel costs”. Okay, well, that makes sense – or does it? Not really – there has to be more to it than just fuel costs – especially, during the same period a vast majority of US based airlines that have reported earnings have posted profits –- some that were double Wall Street’s expectations.
Anyone who has flown in China (particularly between Beijing – Shanghai – Hong Kong over the past 12-months) will tell you that delays have not just skyrocketed, but are seemingly out of control. The number of people traveling in H106 ratcheted higher by 18% to 74.3 million people – a pace which is on track to reach analyst forecasts of over 100 million passengers by first quarter 2007.
I don’t see the profitability issue at all related to fuel costs – the problem (big picture) is all about efficiency – or rather the lack of efficiency and proper logistics in China’s airline industry – demand is stretching the limits of existing infrastructure and personnel – well beyond capacity. And, short of banning the number of air travelers, there really is no solution in sight…
China is unique to any other country I’ve ever visited – there are so many business opportunities and niches to exploit that an investor/entrepreneur could spend a lifetime in the trenches - and yet China is still trying to figure out how to connect the dots on some of the most basic services.
So, rather than coming up with yet another virtual wallet or video search engine maybe we should be focusing on the basics – like, entertaining people waiting in a long line or sitting in an airport lounge.
Interestingly enough the boys over at Mr. Softy (Microsoft) are catching on to this as well. Last Thursday, MS CEO Steve Ballmer said “…we’re trying to grow two new cores, one online and one in [digital] entertainment services…which should help…bore deeply into the emerging markets…”
Companies, such as MS (assuming they can pull it off) that offer services that address the needs of regular people – providing them with products/services (and there a lot more out there than simply casual gaming) that they can participate in through the places that already touch their lives – places they are familiar with, such as airport lounges – are going to be winners.
Of the winners, however, there will be a select few who rise to the top - these are the guys who are not just first to establish basic (comprehensive) services but also have the ability to rapidly scale/offer more specialized services/products – addressing the needs of, say, independent women…