Location times three. They say it’s the main law of real estate, and you could say it also applies to succeeding in business.
Wealth Migrate CEO Scott Picken said his company’s opening of an office in Shanghai, 18 months in the making, arose from a strategic decision to focus on people in Africa and Asia who want to invest in the first world.
“That is where the need is,” Mr. Picken said. “The first world is also looking at the third world but there are more fears.”
Before Wealth Migrate could open such an office in Shanghai however, they had to find quality partners in China, a step that was crucial in their success in Australia, Great Britain, and the United States, he explained.
Mr. Picken attended his first crowdfunding event in Asia last July, when he visited Singapore. But it was not until a December event in Hong Kong that progress began to be made.
He said he had a chance encounter with a woman who published a large independent Chinese newspaper and who was based outside the country. She explained the Chinese government had concerns about crowdfunding and peer-to-peer lending, which are called “internet finance” in China.
Mr. Picken had been invited by the World Bank to speak at the first ever crowdfunding forum in China this past June. One week before Beijing announced a completely new approach to internet finance, one that seemed to encourage its growth.
“It was a complete change from their previous approach,” Mr. Picken recalled. “It became a great opportunity.”
Mr. Picken explained that China wants to transition from a manufacturing-based to more of a knowledge-based economy and they see a role for internet finance in that pivot.
While the opportunity is huge, it is not as simple as opening up shop and waiting for remnibi to roll in, Mr. Picken said. Wealth Migrate knew they had to gain a deep understanding of Chinese business practices and social culture and not walk in assuming they could apply a standard business model in the country.
“You can never be arrogant and assume you can walk in and automatically conduct business,” Mr. Picken said.
“There are no complicated financial products over there.” – Scott Picken
Wealth Migrate took a much more deliberate approach, as they identified local partners who knew the business climate, and who could fluently speak Mandarin.
“It is effectively a joint venture,” Mr. Picken explained. He added Wealth Migrate literally had to redo everything, as they translated business cards to white papers into the local language.
Mr. Picken said investors in the emerging world are hungry to invest in developed markets.
“Last year alone, $15 billion left China for the United States, ” he explained. “An additional $10 billion went to Australia and a similar amount to the United Kingdom.”
“The volume taking place is astounding.”
Mr. Picken said that 25 million Chinese own a property outside the country that is worth at least $1 million. And that is with exchange controls which limit such investments to $50,000 per person each year.
The Chinese government is considering the loosening of those controls, Mr. Picken said. That could increase the number of Chinese with funds to invest to as many as 400 million, a group larger than the combined populations of Canada and the United States.
“The average Chinese investor can put their money into two things – real estate or stocks,” Mr. Picken explained.
“There are no complicated financial products over there.”
The easing of those restrictions could unleash an amount of capital that could have a worldwide effect, Mr. Picken believes.
“You have 100 million people looking to do something with their money now, and the government looking to release exchange controls that could add $1.6 trillion in the next five to ten years.”
This opening of investment will have effects on both sides, Mr. Picken believes. In China, investors will benefit from improved technology and transparent reporting.
The capital influx may also benefit everyday people in some of North America’s hottest regions, where Asian investors have been blamed for pricing the locals out of the residential market. That has become an issue in the Canadian federal election, as Canadian Prime Minister Stephen Harper has promised to research the effect Asian investment is having on residential prices.
“That is not just an issue in Canada, it has also been raised in Australia and London,” Mr. Picken explained. “In some places, foreign buyers are only allowed to purchase new properties.”
Residential property values could actually fall because investors working with knowledgeable platforms will be able to access North American commercial properties for the first time, Mr. Picken said. Up until now investors were essentially acting on their own, and found it easier to vet residential properties than commercial ones.
“They will find the best partners are worldwide partners,” Mr. Picken said. “Things work best when they work together.”