6. The Chinese Internet

The Internet is a recent phenomenon in China. About 60 percent of the 550 million Chinese who are now online have only begun using the Internet in the past three to four years, and overall penetration remains just 40 percent of the population compared with 80 percent in the US. This potential for further growth is underlined by another fact: Internet users in China spend five to six more hours online per week than Americans. User behavior is also markedly different - while search and email dominate online activities elsewhere, in China users have gravitated to instant messaging and online video.

Consider the growth of Tencent. Founded in 1998, it now has more than 700 million accounts for its instant message service QQ. Over the years, it has added service after service to become, as one observer has noted, an amalgam of AOL, Facebook, Skype, Yahoo, Gmail, Norton, and Twitter, with a market capitalization of nearly $100 billion. In 2013, co-founder Ma Huateng—known as Pony Ma—was ranked as China’s third-richest person with a net worth of $7.2 billion. The company is now spending heavily to expand overseas, particularly in gaming.

“China is developing so rapidly and on such a vast scale that instability is a natural by-product. It is experiencing regular booms and busts across its economy the same way a rocket ship experiences turbulence. Yet underlying this volatility are powerful economic and demographic mega-trends that are broad and long term. They did not change last year, will not change this year, and will remain the driver of most of China’s daily business and economic activity”, says Jonathan Woetzel.

“A lot of people view China business as mysterious. In fact, consumers behave pretty much the same everywhere, and competition is pretty much the same everywhere. You just need to ignore the hype and focus on the basic fact that in China today, there are six big trends. They are like tectonic plates moving underneath the surface. If you can understand them, the chaotic flurry of activity on the surface becomes a lot more understandable—and even predictable”, says Jeffrey Towson.