Speaker 1: In China. Everything happens through each at uber or venmo,
Speaker 1: or Yelp or Tinder, really everything. Hello and welcome back
Speaker 1: to the Bloomberg Benchmark Podcast. It's Thursday September. I'm Scott
Speaker 1: Lanman and economics editor at Bloomberg News in Washington, and
Speaker 1: I'm Kate Smith, editor here in New York. So, okay,
Speaker 1: which apps do you use on your smartphone? Most frequently?
Speaker 1: The Bloomberg Anywhere app? Unfortunately I'm a little addicted to.
Speaker 1: But I know our guest is giving us the loser
Speaker 1: symbol for let's see, mostly Snapchat, Instagram. I'm a I'm
Speaker 1: a millennial, so shamefully, what about you? You Facebook lighter Venmo?
Speaker 1: I just got rid of Facebook. I'm really proud of
Speaker 1: myself for that text messaging. I do text message. Yes,
Speaker 1: what about you, Scott? I would say definitely the Bloomberg
Speaker 1: That's my primary app, but yet but also Facebook, Twitter
Speaker 1: been using Venmo to pay our babysitter recently. Text messaging.
Speaker 1: But you know, I lived in China for a few years,
Speaker 1: and if you happen to be in China, you would
Speaker 1: have just one app for many of those functions. In
Speaker 1: Chinese it's called wasein, which roughly translates as micro message,
Speaker 1: and it's known as we chat in English. Now, when
Speaker 1: I was there, I was just using it for occasionally
Speaker 1: messaging with friends, but I was really just barely scratching
Speaker 1: the surface. And over the past few years, use of
Speaker 1: we chat has exploded and seems to permeate every part
Speaker 1: of people's lives, and I think it probably accounts for
Speaker 1: a good chunk of China's GDP. We're an economic podcast,
Speaker 1: and that's what we like to talk about here. So
Speaker 1: if it were to shut down for whatever reason, it
Speaker 1: could take a slice of the world's second largest economy
Speaker 1: down with it. And we're talking about seven hundred and
Speaker 1: sixty million users, and that's more than double the entire
Speaker 1: population of the United States, right, yeah, yeah, yeah, well more.
Speaker 1: That's incredible. And the company behind we chat, ten Cent.
Speaker 1: They're worth more than two hundred and fifty billion dollars,
Speaker 1: which that makes it one of the most i mean,
Speaker 1: i'm sorry, the most valuable company outside of the United
Speaker 1: States and ranks it tenth worldwide overall. Yeah, I mean,
Speaker 1: it's just unbelievable to think about that. But joining us
Speaker 1: to help explain all this is our colleague June Lawrence,
Speaker 1: who's going to tell us about what it was like
Speaker 1: to use we Chat in China. Done as a writer
Speaker 1: for Bloomberg in New York. She speaks Mandarin and lived
Speaker 1: in China for about five years, most recently in Beijing
Speaker 1: as a correspondent for Bloomberg. Now, she's a good test
Speaker 1: case for the magic of we chat in China because
Speaker 1: she left Beijing in two thousand nine before we Chat
Speaker 1: even existed, and recently went there and used it a lot. Hey, Dune, Hey,
Speaker 1: thanks for being with us. Yeah, I'm love we chat.
Speaker 1: So dude, can you tell us a little bit about
Speaker 1: we Chat? How is it different than what Americans tend
Speaker 1: to use their smartphones for. Well, again, I'm also a
Speaker 1: good test case because until, like fairly recently, I had
Speaker 1: a flip phone. I'm not joking, so I'm just so.
Speaker 1: I'm also a test case for like just the magic
Speaker 1: of mobile technology and generally, um, So, the main difference
Speaker 1: is that in China everything happens through we Chat, really everything.
Speaker 1: So all of those separate apps you have for Uber
Speaker 1: or Venmo or Yelp or Tinder, none of which I have,
Speaker 1: by the way, but I know they exist and I
Speaker 1: know a lot of people use them. And in China,
Speaker 1: all those things happen within the wee chat ecosystem. It
Speaker 1: looks when you open it up, you know, like what's
Speaker 1: app doesn't look that different from a basic messaging app.
Speaker 1: But then when you go further into the app, you know,
Speaker 1: you tap on your profile and then you tap on
Speaker 1: your wallet. It there's just this huge list of services
Speaker 1: that you can get to through we chat. So it
Speaker 1: includes ride sharing and ride hailing apps, includes like a
Speaker 1: Venmo style, you know, shared payment. It includes utilities you
Speaker 1: can pay your electric bill, include city services. You could
Speaker 1: go in and figure out the bus route you need
Speaker 1: to take, you could go in and figure out where
Speaker 1: to park your car, and then you can pay for
Speaker 1: all this through e chat. And how has this all
Speaker 1: changed life in China compared with when when you were
Speaker 1: there and what you saw more recently. It's just made
Speaker 1: everything so much easier. I mean, you talk about and
Speaker 1: I'm saying this not in economic sense, but it's just efficient.
Speaker 1: There's efficiencies and it makes everything so much easier from
Speaker 1: a business perspective too, So that's got to have huge
Speaker 1: economic knock on effects. But one thing that we can't
Speaker 1: forget when we're talking about, you know, apps in China,
Speaker 1: especially when it comes to social media, is that so
Speaker 1: many of them are not usable in mainland China. So
Speaker 1: I'm think king of Facebook and Twitter, right, those aren't Yeah,
Speaker 1: so so much is that contribute to we chat success?
Speaker 1: I think that contributes a great, a great, great deal
Speaker 1: to it. I mean on the economy side, it's never
Speaker 1: been an economy with very strong services in a lot
Speaker 1: of ways, um, And it's also just on the internet side. Obviously,
Speaker 1: there are a lot of restrictions on the internet. It's
Speaker 1: a very specific space. A lot of foreign companies have
Speaker 1: been barred from providing services on the Chinese Internet. So
Speaker 1: that that has definitely contributed to we chat success and
Speaker 1: means to a certain extent that you know, whether it
Speaker 1: can move beyond China is an open question, and it
Speaker 1: hasn't really been very successful in doing that. But also
Speaker 1: China's a huge market. Do they need to move beyond China?
Speaker 1: I mean I was reading something about we Chat a
Speaker 1: couple of days ago talking about how little they've really
Speaker 1: focused on attracting non Chinese customers, and like they were
Speaker 1: talking about like the stickers that you can use and
Speaker 1: they have tons and tons and tons as the circles
Speaker 1: that you can use for Spring Festival, for example. But
Speaker 1: I think like when you searched Ramadan, there was virtually nothing,
Speaker 1: So I mean, why has the company not even I mean,
Speaker 1: it sounds like they're not even interested in really bringing
Speaker 1: this outside of or I mean, I guess anything besides
Speaker 1: the shell of the messaging service outside of China. I mean,
Speaker 1: it doesn't really sound like there's any incentive for them
Speaker 1: to do so, I don't know, I can't really answer that,
Speaker 1: but I think I think they have definitely made efforts,
Speaker 1: but it's a it's basically a totally different business outside
Speaker 1: of China, right, It's a totally different endeavor inside China.
Speaker 1: And also just culturally now like we Chat has formed
Speaker 1: the culture. People are so used to it, and they're
Speaker 1: so used to going through we Chat for everything that
Speaker 1: is just you know, they don't have to do that much.
Speaker 1: They keep on offering. They have this incredible pace of
Speaker 1: offering new services and new platforms. And I was thinking, Scott,
Speaker 1: when you said, how we Chat if it just disappeared,
Speaker 1: would take out like a large chunk of the g
Speaker 1: d P. I was just thinking more, it would be
Speaker 1: sort of mass insanity. People would just lose their minds.
Speaker 1: It's so it's so much something you depend on. Is
Speaker 1: it possible to live your life in China, you know,
Speaker 1: no matter what age you are or what business or
Speaker 1: who your employer is without having we Chat these days,
Speaker 1: I'm sure it is. One guy I talked to who
Speaker 1: works on a we Chat based company that does English tutoring,
Speaker 1: made this funny comment that I that I loved, which
Speaker 1: was that it's sort of this socially awkward thing to
Speaker 1: not use we chat. So it's like he was grasping
Speaker 1: for an analogy and he said, it's sort of like
Speaker 1: refusing to wear shoes and going everywhere barefoot. So I'm
Speaker 1: sure that there are people who do it, obviously, but
Speaker 1: you know, if you're in the mainstream, you're using we chat.
Speaker 1: So I have a question for you. I'm thinking about
Speaker 1: like the evolution of like Facebook, at Twitter, Instagram, now snapchat.
Speaker 1: Facebook when it first came out was like, you know,
Speaker 1: the first adopters, and it was your younger people. It
Speaker 1: was cool to use it, and now Facebook is really
Speaker 1: just like you know, everyone's grandparents are on it, it's
Speaker 1: your aunts and uncle and now people don't really use
Speaker 1: it anymore. They moved over to Instagram, and now it's
Speaker 1: like now everyone's aunt and grandmother is on Instagram, So
Speaker 1: now they're moving over to Snapchat. Like, is there any
Speaker 1: kind of like evolution of moving onto the latest greatest
Speaker 1: thing in China? Or is it just kind of like
Speaker 1: we chats it and that's it doesn't matter how new
Speaker 1: and cool it is, people are always using it. Well, yeah,
Speaker 1: I mean, I think there's a difference between something that
Speaker 1: you like to use because it's cool and something that
Speaker 1: has a fundament mental impact on the ease with which
Speaker 1: you live your life. And that is the difference between
Speaker 1: we Chat in China and Facebook outside of China, and
Speaker 1: I think it's something that Facebook is trying to address.
Speaker 1: But that is something that makes me chat extremely valuable,
Speaker 1: you know, and extremely powerful because it's not a coolness factor.
Speaker 1: There are cool elements to it, and they are introducing
Speaker 1: new elements all the time, but the basic utility is
Speaker 1: more sort of fundamental to your life than it is
Speaker 1: for us using an app here, right, all right, for
Speaker 1: some more perspective, let's bring in gond Lee, who's joining
Speaker 1: us on his cell phone from China. He's an economics
Speaker 1: professor at Texas A and M University, but he also
Speaker 1: has another major role as director of the China Household
Speaker 1: Finance Survey at the Southwestern University of Finance and Economics
Speaker 1: in the city of chang Do. Professor Scott, thanks for
Speaker 1: hiving me here now. Professor, you spend a lot of
Speaker 1: time in both the US and China. What are the
Speaker 1: main differences you see and how people use their phones
Speaker 1: in the two countries and how people use we chat
Speaker 1: in China. So lots of people using cell phones, lots
Speaker 1: of people on the smartphones, and all the time. This
Speaker 1: is posed to in the United States and in China.
Speaker 1: So the major difference from years ago is you see
Speaker 1: everywhere people just look at the phones. In still of
Speaker 1: interact with were saying, nine, you don't interact with you
Speaker 1: with a person around you, You just look at your
Speaker 1: cell phones. I think for smartphones makes people one way
Speaker 1: to makes people close to each other from far away.
Speaker 1: Another way I think actually makes people even for people
Speaker 1: close to you far away. So I don't see difference
Speaker 1: in that in that one. But in terms of which had, yes,
Speaker 1: I agree with everything just said. The witch had which
Speaker 1: has become a major part of the people's daily life.
Speaker 1: And there's no estimate, but I would guess personally, I
Speaker 1: would guess that people spend let's say hours a day
Speaker 1: on witch Head. At least how many hours a day
Speaker 1: do you spend on wit Chat? I spend maybe two hours,
Speaker 1: one hour, two hours on days the things I use,
Speaker 1: which had to travel a lot, even within China, so
Speaker 1: I use which had as a major work too. I
Speaker 1: talked to my people using witchad. I basically bring people together,
Speaker 1: have conferences on witch Head. So it's been not me
Speaker 1: just for entertainment. Mostly is not for intedtaim Mostly is
Speaker 1: actually is a tool people use for the productivity for
Speaker 1: two to work together. It sounds like it really permeates
Speaker 1: people's lives there. But let's talk about some broader perspective.
Speaker 1: If you remember ten Cent, the company behind wa Chat,
Speaker 1: they're actually China's most valuable company based on market capitalization,
Speaker 1: and by that measure, it's bigger than you know some
Speaker 1: major US companies like JP, Morgan, Wells Fargo, even Walmart.
Speaker 1: Does it contribute to China's GDP the way those companies
Speaker 1: contribute to the US economy. So Penson major profits are
Speaker 1: coming from online games. The wait chad produced very little
Speaker 1: revenues for Tencent. I think Penson has not yet figured
Speaker 1: out how to make money, or basically they're not interested
Speaker 1: in making money via their you know, the dominance on
Speaker 1: the communication tools over the wait chat. About we chat
Speaker 1: has a major tool. As I mentioned that it has
Speaker 1: contributed to the Chinese GDP, it's very difficult to calculate.
Speaker 1: I was thinking about how to calculate that which had
Speaker 1: contribution to the GDP. It's it's difficult, right, And I'm sure,
Speaker 1: I'm sure it's difficult to calculate how Facebook or Twitter
Speaker 1: contribute to us GDP. One thing that I focused on
Speaker 1: a lot when I was visiting in April was just
Speaker 1: I thought how interesting it is that it makes that
Speaker 1: we Chat makes it so easy for startups to kind
Speaker 1: of throw themselves out there and to raise money, to
Speaker 1: get followers and you know, create these sort of mini businesses.
Speaker 1: So anecdotally, even though Tencent hasn't really figured out how
Speaker 1: to monetize we chat for their own purposes, I mean, anecdotally,
Speaker 1: I think it seems to be promoting consumer spending, promoting
Speaker 1: job creation and entrepreneurial endeavors. Things like that. So again,
Speaker 1: I mean I read that it would it's hard to measure,
Speaker 1: but just if you talk to people, the ease is
Speaker 1: not just in daily things like buying your food or
Speaker 1: hailing your taxi. The ease in is in sort of
Speaker 1: more sharply economic things like raising money or starting your
Speaker 1: own business. Well do you get that sense, professors that
Speaker 1: it has kind of helped in some intangible or entrepreneurial
Speaker 1: ways that aren't measured in the GDP statistics. There are
Speaker 1: other similar products, one of them which I've been used
Speaker 1: before I thought served as a similar tool like I
Speaker 1: don't even heard of. That called Dindin is actually made
Speaker 1: by ali Baba once upon a time. There are a
Speaker 1: few pire of time ali Baba requires their communication official
Speaker 1: complications via Dindin instead of which had. So that's what
Speaker 1: that's how I have to use it, install the Dindin
Speaker 1: in my cell phone. My point is, yes, which had
Speaker 1: indeed helps a lot, and all these entrepreneur activities or
Speaker 1: other activities a lot. But if there were no witch Head,
Speaker 1: I'm sure there other softwarees would fill in the gap.
Speaker 1: My point here is it's a technology innovation. It's a
Speaker 1: it's a smartphone era of the smartphone have made all
Speaker 1: these activities become much easier, makes our lives, it makes
Speaker 1: work become much easier. So it's not necessary the uh,
Speaker 1: it's necessary the witch head itself, I would say, it's
Speaker 1: a smartphone itself, I think, which has done a wonderful
Speaker 1: job facility the process of people using smartphones, and so
Speaker 1: that's of course it's I'm sure it is that case. Yeah,
Speaker 1: But let's let's say, for example, ten Cent ran into
Speaker 1: some trouble with the government and they decided to suspend
Speaker 1: the app for some reason. Would that be disruptive to
Speaker 1: hundreds of millions of people until they figure out how
Speaker 1: to communicator you business? Otherwise I would say that hospital
Speaker 1: is very slim. I know the Tencent team reasonably well.
Speaker 1: I was very very careful in terms of not doing
Speaker 1: anything offending the government. But yes, and I think that
Speaker 1: that interruption, of which if you're happened, it will disrupted
Speaker 1: a lot of the country, but for a short period
Speaker 1: of time because other software we're filling in the gap quickly.
Speaker 1: I wanted to talk a little bit about kind of
Speaker 1: the downside of having one company, because you were saying,
Speaker 1: you know, other other companies could fill that vacuum, but
Speaker 1: as it stands up, it sounds like there's kind of
Speaker 1: one that dominates, and I wanted to talk to you
Speaker 1: about the downside of that. So here in the US,
Speaker 1: I know that a lot of people get very concerned
Speaker 1: about companies like Google and Facebook and kind of the
Speaker 1: ubiquitous use of those and all of the information that
Speaker 1: they track on those users, you know, to the point
Speaker 1: where you know you see very very specialized advertisements when
Speaker 1: you're using those platforms. Is there any concern with in
Speaker 1: China about that happening on we Chat because it's it's
Speaker 1: so much more information and it's so much more centralized.
Speaker 1: So at this stage, I don't think there's any concerns.
Speaker 1: Which had has been rather careful not offending people's privacy,
Speaker 1: not pushing up too many advertisement pencon knows and everybody
Speaker 1: knows that which can make a lot of money, they
Speaker 1: can use which had to make a lot of money
Speaker 1: for sure because of the ecosystem, because of the so
Speaker 1: many people are using it and so many people depend
Speaker 1: on it. But Pence has not found that, not found
Speaker 1: it because they're very very careful about to raise people's
Speaker 1: concern about their dominances online and use that dominant dominance
Speaker 1: to online to to make money or to do anything else.
Speaker 1: So not yet in you're traveling between the US and China,
Speaker 1: I mean, can you talk a little bit about the
Speaker 1: privacy expectations when people are, you know, using websites online.
Speaker 1: I mean, what's the difference. I'm trying to get an
Speaker 1: idea of someone a user on wi chat kind of
Speaker 1: what their expectations are compared to a user on let's
Speaker 1: say a Venmo or a Facebook. So, um, many people,
Speaker 1: at least the many I was internaturals, quite many internatural
Speaker 1: aware that Witch had never leave, uh so anything on
Speaker 1: the wit chat. They don't. It's not on their servers
Speaker 1: all they are honest on their server, not for a
Speaker 1: very short period of time, then deleted, not kept on
Speaker 1: the server. That actually makes a Witch had a pretty
Speaker 1: good pool for for for people's private talks, for protecting
Speaker 1: people's privacy side, which has been doing quite well. Let
Speaker 1: me turn to a broader question about the economy. In
Speaker 1: our coverage of China's economy, we talk a lot and
Speaker 1: write a lot about how China is trying to change
Speaker 1: from an export and investment led economy to one that's
Speaker 1: more led by consumer and services. How important has we
Speaker 1: chat been, you know, along with other things like Ali
Speaker 1: baba and talbau in this rise of the consumer economy,
Speaker 1: and how how important will it be in common years? Actually,
Speaker 1: it's quite important, It's very important. The most recent data
Speaker 1: have been showing that the consumption that you know has
Speaker 1: contributed to h three quarters of the total growth of
Speaker 1: the Chinese GDP. So that's uh, the consumption has already
Speaker 1: become I would say quietly, not very not any fanfare
Speaker 1: becomes a major driving force of Chinese economy. The more important,
Speaker 1: the most important part of that is a online consumption.
Speaker 1: So typically Chinese consumption grow about ten percent nine percent
Speaker 1: a year, but online uh consumption has growed by t
Speaker 1: thirty per sen a year. Most recent data so much
Speaker 1: much faster. So I think the data said of the
Speaker 1: Chinese consumption now happen online. I'm not sure about US data.
Speaker 1: I would say, my, my, just got feeling in the
Speaker 1: US probably is not even that high in terms of
Speaker 1: percentage wise online consumption, So I would say, yes, uh,
Speaker 1: you know, online consumption has been quickly and quickly has
Speaker 1: become a critical part of the Chinese economy. And I'm
Speaker 1: sure the witch head and uh, and it's a football
Speaker 1: and other online payment system or people help people depend online.
Speaker 1: They use to spend a lot of time online on
Speaker 1: the under cell phones and smartphones has contributed a lot
Speaker 1: to that. Yeah, it's really something that, you know, even
Speaker 1: as prominent as we chat spin has been a little
Speaker 1: bit under the radar as a theme supporting China's growth. Professor,
Speaker 1: We're going to leave it there. Thank you very much
Speaker 1: for petty much Ye, So, Kate, did we learn today
Speaker 1: that an app can bring down China's economy or is
Speaker 1: it maybe a little more complicated than that. I think
Speaker 1: it's a little more complicated. It sounds like it's more
Speaker 1: the lubricant to kind of changing China's economy to be
Speaker 1: more service friendly. I mean, yeah, it's amazing how much
Speaker 1: life has changed with w chat and other kinds of
Speaker 1: payment systems and doing business online texting in the last
Speaker 1: few years. It's part of this broader development of China's
Speaker 1: economy in the past four decades since they opened up
Speaker 1: after decades of isolation. So you know, it's it's definitely
Speaker 1: part of the story. And I really do think if
Speaker 1: you were to take it away, there would be insanity,
Speaker 1: as as student says, maybe not destroy the economy, but
Speaker 1: it would be very, very highly disruptive. Well, I'm thinking
Speaker 1: about how people freak out when like Gmail goes down,
Speaker 1: like it's all anyone can talk about. Like Twitter, that's
Speaker 1: all anyone's tweeting about. It's and that's just like one.
Speaker 1: I mean, I'll be at large, but like one thing
Speaker 1: that people use, So I can't imagine if that was
Speaker 1: also Venmo and Facebook and Twitter and Instagram. Like well,
Speaker 1: if you know, the Chinese government does not want one
Speaker 1: point four billion people freaking out, So, as the professor said,
Speaker 1: it's a slim chance that that's going to happen. But
Speaker 1: that's another thing to keep in mind. Uh So, thanks
Speaker 1: to our guests June Lawrence and gon Lee, Benchmark will
Speaker 1: be back next week and until then, you can find
Speaker 1: us on the Bloomberg Terminal and Bloomberg dot com, as
Speaker 1: well as on iTunes, pocket casts, and Stitcher. While you're there,
Speaker 1: take a minute to rate and review the show so
Speaker 1: more listeners can find us and let us know what
Speaker 1: you thought of the show. You can talk to us
Speaker 1: and follow us on Twitter at by Kate Smith and
Speaker 1: at Scotland and and You can also find June at
Speaker 1: at Dune Lawrence, See you next week. Bye bye, s.