What explains China’s ascent in fintech and electric vehicles?

Rapid change in innovative parts of several important traditional sectors is generating intense interest globally. For example, the financial services sector – especially its fintech component – and electric vehicles have captured the attention not only of business practitioners but also policymakers as they look at the high-quality jobs, exports and revenues to be gained. First, take the growth of fintech. The fixation on fintech is especially apparent in two of the traditional leading financial centres, New York and London. This is partly because they are set in wider economies where more than 70 per cent of gross domestic product comes from services. Yet, the sector is also important for other economies which are less service-dominated. One example is China, where around half of GDP comes from services. China performs well in financial service centre lists, with Hong Kong, Shanghai and Beijing in the top 10 of the Global Financial Centres Index. However, Chinese centres feature more frequently and more strongly in the index’s fintech rankings with Hong Kong, Shanghai, Shenzhen and Beijing in the top 10, reflecting a focus on technology development. Second, consider the global electric vehicle boom. China provides an interesting example as domestically made small electric cars have taken off and could be poised to swamp other international markets, with versions of the Hongguang Mini EV, for example. This growth is driven by government support dovetailing with traditional manufacturing capability, but also by technology-related decisions. Using lithium iron phosphate batteries is cheaper than lithium-ion batteries, which require nickel and cobalt. What can help us explain the growth of fintech and electric vehicles in China? There are certainly institutional factors, ranging from a supportive ecosystem of relevant businesses and skilled people to infrastructure and government support. Yet, part and parcel of innovative businesses such as fintech and electric vehicles is the risk and uncertainty that surrounds such models of development. One could think of decision-making environments as being located on a spectrum of uncertainty levels and the chances of making a bad decision under a trio of conditions. At one extreme, there is the nirvana of decision-making certainty, knowing the consequences of every choice. At the other extreme is uncertainty, where the probabilities of various outcomes are not known. In the middle is risk, where the probabilities of various outcomes are known. This is, we would hope, the decision-making of the professional gambler. Furthermore, the uncertainty itself varies. This is in another trio of ways – by scale, by speed, and by fluctuation, with possible unclear patterns of evolution. Not only are there levels and types of uncertainty, but people’s acceptance of, and comfortableness with, uncertainty also varies widely. This is a cultural factor but one that is more difficult to quantify and measure. The famous Dutch psychologist Geert Hofstede distinguished six dimensions of national culture, each on a spectrum going from low to high. Countries could then be mapped out on these dimensions. One of the dimensions was “uncertainty avoidance”. In some cultures, people are more comfortable with ambiguity – such as in China, the United States and Britain – while in others, ambiguity creates anxiety, such as in Japan and France. This varied acceptance of ambiguity and uncertainty could explain to some extent the rise of fintech in China given the uncertainties around it. Hong Kong fintech can be the world’s gateway into the Asian Century This idea of comfort with uncertainty has key implications for leaders, managers, staff and policymakers in the fintech arena. In particular, it requires fintech leaders who are effective and whose thoughts and actions can be seen in the “3Cs”. The first is context, or the philosophical views that shape norms and patterns in countries. The second is culture, a company’s unique values and practices. The third is competence, a leader’s personal style, traits and predispositions. Effective leaders recognise and reflect on these. Skills are also part of competence. This includes technical skills – which lose importance as leaders ascend fintech hierarchies – as well as human and conceptual skills, which become more critical the higher in the organisation one rises. Conceptual skills are the mental ability to analyse and diagnose complex situations which require critical thinking. Fintech and electric vehicle business leaders need such skills and the ability to recognise and manage the importance of differences in levels of uncertainty, as well as people’s comfort in operating within it. If this can occur, it will help China face a more certain and brighter future in fintech, electric vehicles and other innovative sectors seen as risky and thus uncertain. Professor Chris Rowley is a visiting fellow at Kellogg College, University of Oxford, and professor emeritus, Cass Business School, City University of London