ESG 2023 Highlights | New Trends and Opportunities in the US Market for 2023

During the roundtable discussion on the theme "2023 Forum on Expanding to the United States" held on June 2nd, four distinguished guests, Mr. Lei Ping, Vice President of Hofan Technology（浩方集团）, Ms. Li Li, Founding Partner of Next Capital（嘉程资本）, Mr. Wang Qi, Partner of Vision Plus Capital（元璟资本）, and Ms. Xu Dan, Partner and Vice President of Red Harp（红竖琴）, delivered insightful presentations. Ms. Du Min, Partner of Foresight Capital（远识资本） and Skyline Ventures（天际线创投）, served as the moderator for this session. The following is a summary of the roundtable discussion (with some omissions):

Du Min: Thank you all for joining the roundtable discussion at the Forum on Expanding to the United States. Let's first welcome our esteemed guests: Mr. Lei Ping, Vice President of Hofan Technology（浩方集团）; Ms. Li Li, Founding Partner of Next Capital（嘉程资本）; Mr. Wang Qi, Partner of Vision Plus Capital（元璟资本）; and Ms. Xu Dan, Partner and Vice President of Red Harp（红竖琴）.

Before we begin the roundtable, let me introduce Foresight Capital（远识资本）. We are an FA firm founded in 2019, focusing on three major tracks: deep tech, digitalization, and new economy. Previously, we have served a number of entrepreneurial enterprises with a strong focus on the North American market, including HICUSTOM（指纹科技）,the biggest POD supply chain for Amazon, and the Suncent Group（桑椹汽配） for international automotive parts.

Over the past year, we have been engaged in discussions with many investors on how to perceive Chinese companies' business development in the North American market against the backdrop of the China-US decoupling. Today, we are honored to have the four guests here to exchange views with us. First, I will hand over the floor to each of you to introduce your respective organizations and areas of focus.

Lei Ping: Thank you, I am from Hofan Technology（浩方集团）, and we are not newcomers in the cross-border e-commerce industry. In recent years, we have been continuously undergoing strategic transformations and adjustments. Currently, our focus is on assisting Chinese manufacturing companies in their strategic transformation towards branding, globalization, and digitalization. In this process, we not only help companies achieve breakthroughs in awareness, develop strategies, and implement projects, but also engage in continuous retrospection and iteration. We are committed to facilitating the strategic transformation of a large number of Chinese manufacturing companies from B2B to B2C through collaborative creation. It is an inevitable choice and a process full of challenges and opportunities. Over the past few years, we have assisted hundreds of companies in undergoing such processes, gaining valuable experiences and lessons. Today, I am here to share and exchange insights based on these experiences, hoping to bring new inspirations and achievements to everyone. Thank you.

Li Li: Thank you, the host. Next Capital（嘉程资本） is an early-stage investment firm focused on technological innovation. Our slogan is to provide the "first funding for innovators," and the entrepreneurs we work with are the young and energetic next-generation tech leaders. Our investments cover various fields, including artificial intelligence, deep tech, digital healthcare, global technology, biotech and life sciences, enterprise services, cloud-native, specialized innovation, and robotics. Over the years, Next Capital has invested in companies such as Chi Forest（元气森林）, Panda Remit（元气森林）, FINDING UNICORN（寻找独角兽）, SHOPLAZZA（店匠）, Shize Biomedical（士泽生物）, Xinsu Technology （芯宿科技）, Veminsyn（未名拾光）, GLZHealth（橄榄枝健康）, and Sibionics（硅基仿生）. Some of our invested companies started their operations in China and expanded to the United States. I am delighted to have this opportunity today to exchange ideas with everyone. Thank you.

Wang Qi: Hello, everyone. I am Wang Qi from Vision Plus Capital（元璟资本）which was established eight years ago and manages over 10 billion in dual-currency assets ( CNY and USD). As the market has been continuously changing in recent years, we have also been paying more attention to the U.S. market.

Regarding companies related to the U.S. market, we classify them into two types. The first type consists of companies headquartered in China, primarily targeting European and American consumers. The second type, which we have been focusing on since last year, includes early-stage companies founded by Chinese entrepreneurs or Chinese individuals in Silicon Valley. In the past few years, our invested projects have included LEADING IDEAL（理想汽车）, Lingdi Technology（凌迪科技）, Fantuan Delivery（饭团外卖）, and we have also invested in a credit card company called Stori in Latin America. All these companies are developing rapidly.

In recent years, we have been searching for early-stage entrepreneurial enterprises in Silicon Valley that can leverage the advantages of the Chinese supply chain, understand the local market, and meet the demands of local users. We hope to have more opportunities to exchange ideas with everyone. Thank you.

Xu Dan: Hello, everyone. I am Xu Dan from Red Harp（红竖琴）which maybe you are not familiar with. Previously, Red Harp assisted multinational consumer goods companies in brand marketing and sales in China. Brands such as Johnson & Johnson and Procter & Gamble were among our previous clients. Later, Red Harp was acquired by BlueFocus（蓝色光标） and operated as an independent company. Currently, our main focus is helping Chinese brands with brand localization, overseas sales system establishment, and brand marketing in the European and American markets. Since 2018, we have served clients such as Zepp Health（华米）, Gree（格力）, DREAME（追觅）, and KEEP. Thank you.

Du Min: During the introduction of your organizations, some of the topics related to our discussion were brought up, such as the connections between your organizations and the U.S. market, whether it is investing in U.S. domestic or overseas companies or assisting companies in conducting business in the United States. With the backdrop of the macro interest rate hike and the general belief that the U.S. is entering a "moderate recession," is this a suitable time for entrepreneurs to enter the U.S. market? What opportunities are you, as institutional investors or top service providers, focusing on?

Lei Ping: This topic is quite hot right now. Honestly, the so-called "global uncertainty" is often on everyone's lips. In the process of actually conducting business, I feel that it's like preparing an umbrella when it's about to rain. Whether as an entrepreneur or a company seeking strategic transformation, I believe that while the environment is undoubtedly important, we should focus on our current situation and identify our opportunities.

In my opinion, in times of major changes like this, while enduring significant environmental pressures, it is crucial to carefully examine market opportunities, users, niche markets, the competitiveness of products and services, strategies, and the effective utilization of resource leverage. It's an opportunity for another round of transformation and adjustment. Indeed, many companies have fallen, but even more and better companies have emerged in such an environment. Therefore, I believe that entrepreneurs should think about how to face the market with a more positive attitude and more effective strategies, rather than being passive or complacent. The market will never reach a dead-end. Thus, I feel that in a crisis environment, finding one's path to breakthrough is the most effective approach.

Li Li: Thank you. Coincidentally, I spent a long time in the United States last year and this year, visiting prestigious schools on the East and West coasts and meeting with many laboratories and researchers. Overall, I have a profound feeling that Chinese innovation in technology is rising. Looking back, we have also invested in many overseas companies. In general, I think Chinese companies going global are entering the third generation of opportunities.

The first generation of opportunities was about "Made in China," high-quality Chinese products, and China's global supply chain. For example, goods from Yiwu and various manufacturing clusters across the country, ranging from clothing to jewelry to various consumer products, went global about ten years ago. Some typical companies emerged from this, such as Anker Innovations（安客创新）.

The second generation was a more rapid wave, the global wave of mobile internet. This included TikTok and a variety of mobile internet applications, from gaming to social media. The combination of the second generation with the first generation also created larger companies, such as SHEIN and recently Pinduoduo's TEMU, which are larger-scale super platforms.

Up to now, I believe the third generation wave is even more exciting. China's emerging supply chains, industries, and technology clusters are exporting globally, including new energy vehicles, the photovoltaic industry, and biotechnology. China's CDMO capabilities are leading globally in these areas. In this wave of AI, although the United States has many large models and technology companies, China also has a huge pool of high-tech talent and holds a unique advantage in the application layer. After the accumulation of the previous 10 years of the mobile internet, China has a large group of "product managers" who are very active in the innovation field of the new wave of AI, both at the application and infrastructure layers.

Therefore, I believe this is a new wave, a new opportunity, and we need to look at the future world with a new perspective. Among the companies we invest in, we can see that PingCAP, Singularity Infinity, and others have established offices in Silicon Valley and are heading towards internationalization. The companies I previously angel invested in, Lexin and Tiger Securities, are both listed on NASDAQ, and their international business is also growing, including the strong expansion of Chi Forest（元气森林） in the North American market. Although there may seem to be a lot of uncertainty at the macro level, at the micro level, every era has its opportunities.

Wang Qi: In any era, I believe opportunities and pressures coexist. The biggest challenge of this era, as the host mentioned, is the uncertainty of the overall environment, the instability of US-China relations, and the fluctuations and black swan events in economic and trade exchanges. I think in the next few years, this reality won't change quickly, and we all have to face this reality.

I would like to share a few points. First, for those who are already in entrepreneurship, especially those whose companies have reached a certain stage, they should consider whether their products and business are suitable for entering the global market, especially North America. Of course, some companies may be more suitable for Southeast Asia, and this needs to be analyzed individually. The cases we have encountered, including companies in our portfolio, are all seriously considering this. Going global is a relatively certain trend. For example, the company Chi Forest（元气森林） that Mr. Li invested in and the largest Chinese food delivery company we invested in North America are also cooperating with Chi Forest（元气森林）.

We have recently come into contact with many domestic chain catering companies that want to expand into the North American market, and I think this is a good trend. Chinese entrepreneurs have already set their sights far beyond China, and it is also a response to the current situation of intensified. Therefore, for these entrepreneurs, it is important to assess whether their services and products are suitable for the North American market or overseas markets.

Secondly, for entrepreneurs who have not yet started a business and are seeking direction, we believe that if they want to restart their entrepreneurial journey now, they should consider going overseas. We have seen an increasing number of similar cases where industries with advantages in China are thriving in the United States. Industries such as the Chinese supply chain, internet innovation products, and e-commerce have significant global competitive advantages. For example, game companies must target the global market, and there are tremendous opportunities because Chinese game companies are currently the strongest globally. By exporting China's strongest products and services to overseas markets, with localized adjustments, there are significant opportunities in this regard.

Thirdly, there may be opportunities in the supply chain. We have a strong supply chain capability. We invested in a Silicon Valley smart coffee machine company whose product has limited demand in China but has a strong demand in North America. At the same time, China has the world's highest-quality supply chain. By combining the demand in the United States with China's high-quality supply chain, along with product design and cultivation tailored to the local market, as well as local operations and branding, there are significant opportunities. We believe that one can explore products with high demand in the United States or Europe but not particularly large demand in China.

For such companies, the competition is actually minimal. Chinese peers are less likely to identify local demands in Europe and America. If entrepreneurs can find a relatively powerful factory in China or transform an existing one, the overall barriers for the company would be very high because globally, there may only be one production line capable of producing similar products. For example, the coffee machine company we invested in collaborated with a major supply chain company for Apple to create a coffee machine production line. I believe that the combination of China's supply chain advantage and locally informed market insights creates significant opportunities for entrepreneurs.

Of course, entrepreneurship in the United States is very different from entrepreneurship in China in terms of legal regulations, intellectual property, and various other aspects. Chinese entrepreneurs need to be particularly cautious in this regard, especially in terms of the law, as sensitivity and strictness may be even greater than in China. Therefore, when starting a business overseas, it is important to adhere to local customs, traditions, and even religion, as these are aspects we need to adapt to.

Xu Dan: As the guests mentioned earlier, this era inevitably involves both opportunities and risks. Based on our own experiences, many of my clients are either immersing themselves in the American experience, living in the United States for a period of time to gain a deeper understanding of the market and the local environment. However, some clients feel that the North American market is challenging and choose to give up. In such circumstances, companies should evaluate whether they have opportunities and advantages in the US market based on their industry, attributes, technological barriers, supply chains, and all available resources. Regardless of the macro situation, the United States remains a market worth cultivating, depending on the company's own resource advantages and the industry they operate in. Thank you.

Du Min: Thank you to all the guests for their insights and discussions on capturing front-end demands, understanding the market, and defining products, which are all concerns for entrepreneurs. Of course, under the changing landscape, it is essential to proactively address certain issues. In the past, Chinese entrepreneurs could afford to be more risk-oriented, focusing on scaling their operations. However, now, when going global, it is necessary to proactively consider compliance, financial risks, legal risks, and various other factors. Another question is, North America is one of the earliest globalized markets and has produced many multinational and global companies. After Chinese companies enter the North American market, we can clearly see both competitive advantages and shortcomings compared to local companies and those multinational enterprises that have emerged from the region. Where do you think the distinct competitive advantages and shortcomings lie?

Lei Ping: This is an excellent topic. I will share my perspective both internally and externally.

First, the US market is still the largest single market globally, with a vast capacity. It is challenging to explore in a market with limited capacity. Second, the US market has good inclusivity, a high deGree（格力） of globalization, a sense of consumption, and a sense of crossing borders. It is easy to find niche points in such a market. Third, Americans encourage innovation, and the innovative and optimization points of enterprises are readily accepted by the consumer base in this market. The cost of trial and error and consumer tolerance are in a very positive state. From a global and international perspective, the US market cannot be abandoned. That's the first point.

The second point is how we approach the US market. Internally, we often mention a simple phrase: "me too, me better." Investors often focus on innovative products, but I still believe that as a newcomer, where are your advantages? Where are your core resources? Many foreign trade factories have supplied the US market for many years, but they don't have their own brands or customers. They haven't participated in product definition; they merely handle manufacturing, production, quality management, and delivery for the factory, keeping a considerable distance from the end-users. We guide these factories to start capturing users and scenarios using the Internet, deeply understanding the problems, optimization points, and improvement points in the user experience process, and then differentiate themselves based on that foundation. The innovation of a company is based on an understanding of the users, not arbitrary innovation. Based on this, we define brands and values, combined with an understanding of localization. The connotation of the brand is not arbitrary.

Furthermore, we can quickly iterate and optimize through online channels, which is why we believe in the MVP (Minimum Viable Product) model. This process allows us to control the timing and cost, support rapid validation and adjustment. This is our experience with the US market over the years. We have many cases in this regard, and I believe that this practical process is extremely valuable. It is not a mere concept; it requires practice, adjustment, continuous correction, and, most importantly, it significantly saves time. The fundamental issue here is returning to the consumers. When a company can grasp the consumers, continuously optimize products and services around them, the direction will not be wrong. I think recognizing this point is a significant breakthrough.

Li Li: I think there are several aspects to consider. First, Chinese people in North America are very proactive, whether they are investors or entrepreneurs; they are extremely hardworking. In April of this year, when I was in the United States, I found that both in Boston and Palo Alto, there was a lot of Chinese presence. Chinese funds were actively engaged, and I would have seven meetings a day, meeting with 15 or 16 individuals from morning till night. Some Chinese-founded funds were organizing various events with over a hundred attendees.

The Chinese partners who flew over are all working hard. Although we are all in the same city, the only time we could meet was late at night because everyone was working overtime. I also visited some technology companies or university labs, such as the robotics lab at Johns Hopkins. Typically, labs finish work at 6 o'clock, but I usually met Chinese students for dinner after 6 pm and found that only foreigners would come out at that time. Chinese students would stay in the lab until late at night.

The second characteristic is a localized and international team. Chinese companies venturing into North America, whether it's PingCAP, Singularity（奇点控股）, Tiger Brokers（老虎证券）, TEMU, TikTok, have all built localized and diverse teams. These teams consist of members from different countries and ethnic backgrounds, allowing them to adapt well to the local culture and explore local channels.

The third point is compliance with local regulations and requirements, especially for technology companies like SaaS and cloud-native enterprises. They need to obtain various certifications, including quality certifications and industry-specific certifications, which helps establish trust mechanisms within the supply chain. These are three points that I find particularly profound.

Wang Qi: I agree with what Li Li mentioned about being "proactive", and I'd like to further explore this concept. Chinese people are well-suited for businesses centered around operations, such as fresh produce, food delivery, e-commerce, warehousing, and logistics. Xu Xu, the founder of DoorDash, the largest food delivery platform in the United States, is a Chinese person who moved to the U.S. during high school. His team has drawn heavily from the experiences of Chinese companies like Meituan, even hiring several executives from Ele.me and Meituan. Many of the companies we invest in the U.S. are also engaged in "dirty" and labor-intensive work that Americans are not willing or able to do as well as the Chinese. We recently invested in an end-to-end logistics company in the U.S., also led by a Chinese team, which draws on many experiences from China. The consumption in these sectors in China far exceeds that in the U.S.

Furthermore, we have just mentioned online financial companies that we invest in North America, and Chinese people have the strongest expertise in online risk control. Americans lack similar models and experience. In these areas, leveraging the core capabilities that Chinese people have developed in the Chinese market, there is an opportunity to compete in the global market. This is the first point.

Secondly, returning to the supply chain dividend mentioned by Lei Ping, it also includes the advantage of "human resources." Nowadays, people often talk about "Global Chinese," referring to Chinese people or ethnic Chinese who are globalized. This group has become increasingly competitive. We have also invested in many Chinese engineers who have come out of Apple and Tesla. They have dreams, ambitions, and have lived and worked in the U.S. for many years. They understand the local market, laws, and regulations, and have local resources. We have high expectations for entrepreneurs like them. When combined with China's supply chain, as well as China's research and development or engineering teams, there is an opportunity to create products that are welcomed in the European, American, and mainstream markets.

Furthermore, it is important to analyze our own core capabilities and build products around them. On the flip side, Chinese teams may not excel in businesses that primarily rely on branding and marketing. For example, various new consumer products in China that focus on eating, drinking, and entertainment have emerged in recent years. If Chinese teams remotely enter the U.S. market or even try to expand locally, I believe the challenges will be greater than those faced by technology-based products.

From our observations, American consumers tend to be more loyal than Chinese consumers, and they exhibit stronger brand loyalty to products they have used or trusted brands. For entrepreneurs, if they want to disrupt a completely new brand, they only have one chance, which is to create a new category. Moreover, this new category must rely on iterative technology, and Chinese people happen to be the strongest in that particular technology. A typical example is new energy, where Chinese electric vehicles have a significant competitive advantage in the global market, and there is an opportunity to create high-end products in this direction.

However, if there is a lack of support from new technologies, whether it's cosmetics, food, or any other product that Chinese people want to create from scratch and enter American households, I believe it is significantly more challenging than developing technology-driven iterative products. Therefore, for entrepreneurs, it is important to seize their own advantages in China, whether they are overseas Chinese as part of the "Global Chinese" or Chinese people in China. Entrepreneurial teams should carefully analyze their strengths and weaknesses.

Xu Dan: Chinese people are indeed known for being hardworking as we "proactive" expand globally. Chinese companies have a significant advantage compared to American companies in terms of their quick response and technological innovation in the application field, as well as the mature Chinese supply chain.

At the same time, Chinese companies also have shortcomings. Understanding the local culture and consumer habits deeply is an area where we have a lot of room for learning and improvement. If we can respect and understand local consumers and culture in the process of strategy formulation and product innovation, it is undeniable that Chinese brands will "proactive" move toward the world. Thank you.

Du Min: The upcoming questions will focus more on the business focus of each guest. First, I'd like to ask Mr. Lei,you have been working with Chinese manufacturing entrepreneurs in the past. We know that manufacturing is cost-driven, whether it's scale manufacturing or lean manufacturing, the ultimate pursuit is cost optimization. However, when it comes to reaching end consumers, capturing demand, defining products, market costs, and brand asset management, many entrepreneurs have shortcomings in these areas. As a third-party company, how do you align with entrepreneurs in this process? In your experience, what are the main reasons for failure, and what are the reasons for success?

Lei Ping: Our clients, who have an advantage in production volume on the supply side, indeed focus on supply chain and cost optimization. As the host mentioned, the supply chain is still distant from the consumers. However, as we discussed earlier, in the process of achieving product globalization, it is meaningless to talk about branding if we don't reach and understand the consumers. The logic behind globalization is that companies need to be localized. If they don't understand the local market, it will be very difficult to accomplish their own transformation.

Taking our clients as an example, even if they contract manufacturing for multiple top global brands, they lack awareness when it comes to questions like "What is 'Made in the USA'? Why do brands do it?" Because the product definition and design are done by others, and they only need to produce based on orders.

In this process, we need to engage in deep collaboration with clients in several aspects. The first is data-driven consumer insights and end-to-end management of the consumer experience. We always talk about making products for users, but have we designed a closed-loop process for consumers from touchpoints to decision-making, usage, and sharing? Are there any issues in each loop? It's not just about specific product features and performance. In the collaborative process, we need to build models together with our clients.

Secondly, this model should be implemented in stages. The project cycle is generally long, so we need to quickly validate each stage, review whether there is market demand, whether the product is competitive, and whether it's worth continuing to invest. Should we adjust the product line, positioning, or even target customer groups? This is an iterative process.

Finally, through the aforementioned process, it is important to work with clients to explore the true needs of local consumers. For example, the sensitivity of consumers to products and services varies across different categories, such as daily necessities, household appliances, and even new energy. Only by obtaining valid data from users can we understand their true experiences. In this process, we often interact with consumers through methods such as micro crowdfunding, micro-surveys, and micro-iterations. The main goal is speed, as the "Chinese kung fu" emphasizes speed and efficiency. When we can complete four rounds of iteration in one quarter, the results for the whole year will be completely different. Therefore, I believe that in manufacturing, it is crucial to quickly find effective ways to connect with consumers and continuously iterate and optimize, finding a more effective path to breakthrough.

Du Min: The next question goes to Mr. Li Li. As an early-stage investor, what qualities do you look for in entrepreneurs who are truly global in their approach? What kind of entrepreneurs impress you the most?

Li Li: Successful entrepreneurs with a global approach first need to have a global vision. They should have a strong command of English or other international languages and be able to understand the culture of the target market. Since 2010, Chinese students studying abroad have become the largest group of overseas students in the United States. The number of Chinese students studying in North America has exceeded 300,000, far surpassing the second-ranked Indian students. Currently, there are even more Chinese students studying in North America.

Secondly, when entrepreneurs are searching for opportunities, they should not rely solely on speculative logic but should innovate based on a deep understanding of the industry. In recent years, we have seen many entrepreneurs start in China after returning from the United States or overseas. They have established new-generation technology companies and expanded their products and services to global markets, quickly gaining traction and even surpassing well-established players in certain product lines. For example, I have learned that in Los Angeles, the sales volume of certain robot products from companies like HAI ROBOTICS（海柔创新） and Geek+（极智嘉） exceeds that of certain product lines from Boston Dynamics.

When I communicate with some top local fund partners in the United States, they also recognize that China possesses many innovative capabilities that the United States does not have. For example, there is a lack of a short video ecosystem in the United States and no large-scale MCNs. Wang just mentioned that many game products from China are superior. These are opportunities that arise from the international vision and opportunity-seeking abilities of Chinese innovators.

The third point is that we see an important opportunity in the "reverse supply chain." While everyone is talking about going global, "Made for China" is also a simultaneous trend: integrating relatively low-cost or supply chain-advantaged goods and services from around the world and providing them to the Chinese market. We have seen examples such as COCONUT PALM（椰树牌椰汁）, which mainly imports raw materials from Southeast Asia. Weidendorf（德亚牛奶） imports milk from farms in Europe and Australia and has made significant progress in the Chinese market. Regarding the common qualities of global entrepreneurs, I believe it is having an international vision, identifying opportunities, and executing firmly, achieving stage-by-stage results. Otherwise, even with a good strategic vision, the lack of effective execution can pose problems.

Du Min: Thank you. Next, I would like to ask Mr. Wang Qi. Vision Plus Capital（元璟资本） is currently paying great attention to the new opportunities brought by LLM large language models in AI entrepreneurship. What insights do you have regarding the participation of the new generation of Chinese AI entrepreneurs in global competition?

Wang Qi: AI is definitely an unavoidable topic, whether it's for US dollar funds or CNY funds, as they are all seeking the next generation of AI products and services. We went to Silicon Valley in March and had in-depth discussions with algorithm and AI engineers from major tech companies, most of whom were Chinese. During the exchange, we found that the wave of AI is certain, at least reaching the level of mobile internet or even internet. However, it is still in the very early stages.

At the current stage, the United States still has a significant advantage in underlying large models as they started early. But we have also witnessed the rapid pace at which Chinese companies are catching up. Major Chinese companies including Alibaba（阿里巴巴）, Baidu（百度）, and ByteDance（字节跳动） are all following suit and have even released first-generation products. Although these products may not be perfect yet, the speed of iteration by Chinese companies is beyond our imagination.

Therefore, our judgment is that in the future, underlying models may not be scarce products, or a large number of vertical "medium models" or "small models" may emerge, suitable for various application scenarios. This trend will form in the next six months to two years and is a great opportunity for Chinese entrepreneurs. Chinese entrepreneurs are skilled at combining practical applications, work scenarios, or life scenarios for in-depth development. The United States may have certain advantages in general models, but once combined with vertical applications, the advantages of Chinese people will be reflected.

Of course, many model-based applications and services currently have high technical requirements for teams at the present stage. We propose a viewpoint that models are products, and models are services. The first-generation AI products or services currently available on the market are actually transforming models. This requires teams to have the ability to deeply transform AI models, whether it's Stable Diffusion or the ability to transform these basic models. Therefore, the CEO or the "second in command" of the company must be an expert in models. This is an important characteristic in our judgment of the current application entrepreneurship wave. If the team background is purely business or purely sales, this wave may not be their opportunity. We suggest that these teams wait for the underlying large models or medium-sized models to mature before they have the opportunity to quickly utilize models for applications and services.

Secondly, whether it's in hardware or AI, one should return to their core competencies. The core competencies of Chinese entrepreneurs are still reflected in several advantageous industries, including education, e-commerce, gaming, as well as fresh food logistics or short videos that require heavy operations. We believe that there are huge AI opportunities in education and gaming. These two fields naturally have deep integration with AI. For example, in an educational setting, teachers may no longer need to find real people and can entirely use AI virtual instructors for teaching. ChatGPT has already solved the problem of interaction. Therefore, future digital teaching only requires inputting course materials and training models, or it can even be personalized and customized for various subjects and markets. The AI transformation of education is an inevitable trend, and Chinese people definitely have a huge advantage in it, as with gaming.

In the process of game development and player experience, there are opportunities for AI transformation. AI can save a lot of development time or greatly improve the efficiency of various processes. We have seen the emergence of AI companies that provide game development services. If game companies can make good use of the capabilities of models, the games they create will undoubtedly be more enjoyable. Of course, the metaverse that we have been talking about cannot be achieved without AI because the metaverse must be based on strong intelligent interaction. Therefore, the maturity of AI also brings great opportunities for the concept of the metaverse.

Thirdly, robots are also an opportunity. As mentioned earlier by Mr. Li, we have been actively paying attention to it recently. The biggest problem with robots used to be insufficient intelligent interaction. However, with the integration of AI large models, robots' interaction capabilities, thinking abilities, and proactivity will have a significant leap. We have already seen some interesting products, although it is still very early. But AI will definitely provide great support to the entire robot industry, whether it's service-oriented, companion-oriented, or entertainment-oriented. Chinese entrepreneurs also have a significant advantage in this regard. We have a strong supply chain, especially in Shenzhen and Guangzhou. So, I think this direction is worth paying attention to.

Du Min: Thank you, Mr. Wang. Our team has been looking at AI robots since the beginning of the year and found that the entire industry chain is similar to the wave of new energy vehicles, becoming cost-effective rapidly. The advancement of AI technology has brought the timeline for intelligent robots closer, from the previous 20 years or more to something we can expect within 10 years. Next, we would like to consult Mr. Xu. Hongshuqin has been providing brand planning and overseas omnichannel construction for companies expanding into the international market. In your opinion, what rules should companies follow when expanding their channels to the US market? Which channels are essential for companies to continuously cultivate, even if they may not provide immediate returns?

Xu Dan: First and foremost is compliance with local laws and regulations, which is the primary factor. The construction of the entire channel system does not have a fixed sequence. Companies should consider which channels are more suitable for their own category or industry. I have seen many companies that start with B2C and then move to B2B, as well as many factories that start with ODM before building their own brands. In fact, channels mainly depend on the company's own conditions. Choosing the right marketing platforms and channels is relatively important.

Audience Question 1: I would like to ask the investors about the changes in Chinese-backed funds investing in the US in light of the current US-China relations.

Li Li: This is a very good question. I believe that Chinese entrepreneurs are likely to obtain their initial funding from funds with a Chinese background, whether they are Chinese funds based in the US or domestic funds in China. The next stage of development is also crucial. If the business is performing well, it is possible to attract investments from US-based funds, but there is still a high probability of seeking Chinese-based USD funds and investments from local players, or even pursuing global capital. When it comes to fundraising, a founding team that combines Chinese and local executives is more attractive and can gain the trust of international investors.

In addition, if founders are seeking funding, they should not be afraid of difficulties and strive forward, seizing opportunities on a global scale. In fact, there are institutions in the Middle East or Japan that are willing to invest in Chinese entrepreneurs. Ultimately, it is important to stay grounded and treat each fundraising round as if it were the last. Therefore, the self-circulation of the entire company, including factors such as orders, cash flow, and positive user experience, becomes crucial. The era of relying solely on investor funding is already over.

Wang Qi: Mr. Li has provided a comprehensive answer, and I would like to add some practical issues encountered when investing in US companies. The US has some laws that actually restrict foreign investment in domestic companies, and although these laws appear to target all foreigners, they are primarily aimed at Chinese individuals. Therefore, it is important to consult with lawyers in this regard, as the sensitivity of different industries may vary. In general, Chinese investors should try to avoid involvement in highly sensitive sectors, such as space technology or companies that require extensive collection of US citizens' personal data.

Secondly, even when investing in non-sensitive industries, there are differences between investing in the US and China. The US may impose restrictions in terms of veto power and influence over business operations. The investment terms commonly used in China may not be applicable to investing in US companies, and we may need to relinquish some rights that are commonly seen in China. This also depends on the specific investment case. I would recommend seeking professional legal advice if planning to invest in the US, as regulations are constantly changing and difficult to predict. Indeed, investing overseas entails higher legal risks compared to China, so caution is advised.

Audience Question 2: SHEIN is a major client for us, and recently we encountered a concern following the TikTok hearing. We are worried whether SHEIN and TEMU might also be affected due to their significant presence. I would like to ask how you predict the future development of TikTok and what potential impacts SHEIN and TEMU might face?

Li Li: I don't have much to say. From an investor's perspective, I believe that these companies, whether it's Pinduoduo or ByteDance, have faced numerous challenges since their establishment, and they have experienced countless ups and downs. In the process of globalization, these Chinese companies have reached the pinnacle of global success for the first time, so encountering such problems is inevitable. I think these entrepreneurs will eventually resolve these issues, so I believe it's important to have a long-term perspective. Although it sounds mystical, I trust that these entrepreneurs can overcome significant difficulties at each stage and lead their companies forward.

Wang Qi: We cannot predict whether TikTok will face extreme punishment. To be honest, all we can do is offer our well wishes. I hope that the US-China relationship does not descend into malicious competition but rather remains in a cooperative state. Competition is inevitable between the world's two largest economies. However, the extent to which competition will evolve is not something that can be resolved at the company level. What companies can do is diversify risks. TikTok has made significant strides in Southeast Asia and is expanding in South America and the Middle East. I believe it may need to diversify its operations across different markets, which is an inevitable choice for the entire company. At the same time, companies operating in the US may need to pay early attention to government relations. Even Chinese companies in Silicon Valley may have to hire a competent team of lawyers or introduce a senior executive responsible for government and media relations earlier than startups in China. The requirements are higher.

Xu Dan: I'd like to add something. Our US team has recently been conducting in-depth research on TikTok. The reason we chose this timing is mainly due to the significant moves made by TikTok in the US, such as promoting e-commerce and influencer-driven sales, whereas it previously focused mainly on entertainment and social scenes. We have also chosen this timing to plan our next steps, integrating China's supply chain, good products, and strong brands. We will also establish our presence in TikTok's official store and build an entire ecosystem of influencer operations, warehousing, shipping, and payments in the US. We will collaborate with local Key Opinion Leaders (KOLs) to bring Chinese products and brands that meet the demands and quality standards of the US market.

EqualOcean and the EqualOcean Summit for Globalization

Established in November 2018, EqualOcean is a business information platform and think tank that focuses on serving Chinese brands' globalization efforts and helping overseas companies or institutions seize opportunities in China's development. For clients aiming to expand into the global market from China, EqualOcean provides macroeconomic and political analysis, overseas market and industry research, international branding guidance, and assistance in building overseas resources.

EqualOcean operates Chinese and English websites, making it one of the few domestic institutions with the capability to provide in-depth English reporting and research. The English content produced by EqualOcean is authorized for publication on platforms such as Bloomberg Terminal, Refinitiv, SeekingAlpha, and Nasdaq. EqualOcean's business analysts are frequently interviewed by renowned media outlets such as The Wall Street Journal, The New York Times, Financial Times, and SCMP.

The EqualOcean Summit for Globalization (ESG) is the top industry summit organized by EqualOcean, focusing on the direction of global expansion. It takes place in early June each year and invites top entrepreneurs, investors, scholars, and diplomats from China and abroad to participate. In the background of "de-globalization," the "new globalization" led by China is accelerating. Globalization brands and talents originating from China are increasingly taking center stage on the world platform.

During the EqualOcean Summit for Globalization (ESG), a series of reports and rankings are released, including the "EqualOcean Globalization Youth 30," "EqualOcean Global Expansion Investment 30," and "EqualOcean Globalization Rising Stars 50," which receive significant attention and acclaim.

EqualOcean Chinese website: https://cn.equalocean.com/EqualOcean

EqualOcean English website: https://equalocean.com/