What Effect Do Chinese IPOs Have on Global Supply Chains?

Do you remember Alibaba's stunning $25 billion NYSE IPO in 2014, the biggest in history?

This year, we again expect to see several enormous Chinese IPOs including Didi Chuxing (ride sharing with 450 million users), Meituan-Dianping (group discounting), and Xiaomi (smart phones and laptops), among others.

According to Rebecca Fannin, founder of media company Silicon Dragon, the combined market capitalization of these new listers could surpass a quarter-trillion dollars. No matter if the IPOs are in New York or Hong Kong or Shanghai or Shenzhen stock exchanges, the amount of capital involved is breathtaking.

Once again, we are astonished at the economic miracle of China where, in just a few decades, the country has gone from an undeveloped rural economy to the second largest industrial economy in the world. ($11.9 trillion) And now, China is taking the innovation lead in several product categories supported by the largest IPOs.

But what do these jaw-dropping investment amounts have to do with global supply chains?

All of this money flooding into the top Chinese companies gives them a lot of competitive ammunition. In the manufacturing sector, this is an opportunity for companies to expand their operations and global reach. That means a lot more products shipped to global markets. That's great for transportation and logistics providers, but that's not all. It also means global suppliers and sub-suppliers to these manufacturers will also expand. Distribution networks will expand. Competition in the marketplace will become more intense.

Take Xiaomi, for example – one of the largest companies in the world that you never heard of. Xiaomi makes a smart phone called “Mi Mi” that rivals Apple and Samsung. However, it is not yet sold in the US. Just imagine a very high-quality smartphone sold at a reasonable price. Xiaomi also manufactures laptops, headphones, speakers, routers, and other electronics. Going public may give Xiaomi just the incentive it needs to break into the U.S. market.

We know that increased competition drives down prices and as a result, consumers reap the benefits. Competition also drives innovation. Can you imagine what new products are coming next with the flood of capital into these companies?

The potential enormous volume of new products shipped to new markets also creates a grand opportunity for supply chain innovation. We can use our best creative and analytical skills to optimize current processes and design new approaches to global sourcing, distribution and global fulfilment. Disruption of this kind helps us to rethink our supporting processes.

These big IPOs are definitely good news for global supply chain business and for the development of new ideas and products. I can't wait to see what happens. How about you?

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MR