Back in November, I blogged about what is sometimes referred to as The Pacific Century. There are a number of scenarios that could still play out that would make this not the case. However, the odds-on favorite to emerge as the next global economic super-power is China. And right on queue, the Chinese are also becoming prolific global domainers.
Chinese Investment — you ain’t seen nothing yet
The history of Chinese Foreign Direct Investment (FDI) has historically been dominated by State-owned enterprises. However, in this next phase we are seeing a significant regulatory easing of outbound FDI controls, not just for enterprises but also individuals who have access to online payment platforms, credit cards and overseas bank accounts. As China continues to increase its Foreign Exchange Reserve, look for more of these reserves to get promptly converted into hard assets.
In recent years, a significant portion of the FDI has been in the form of acquisitions of arable land — notably in Africa and South America. Some people call this neo-colonialism, only instead of having to conquer territory by force, or threat of force, in these cases, land is acquired from legal owners, and the right to use the acquired asset is protected by domestic or international rule of law. And with China racking up a $28.7 billion trade surplus in July alone, look for more cash to get put to work in the months ahead.
What does all of this mean for ownership of the Internet? Private ownership of the Internet is well-established. If the Internet economy is going to be a significant foundation for the continued expansion of global commerce, it goes to follow that the most desirable raw land on the internet will also become contested territory. And so, look for the Chinese to stake their claim on a territory near you.
Chinese Domainers going global?
Recently, I, and others, have noticed a trend. Chinese domainers are aggressively buying domains on the drop. One of the main themes is that these individuals have been buying the .com versions of existing China-based companies that are going global. I believe this is just the tip of the iceberg. The bigger story is only starting to unfold. Here are a couple of scenarios to look out for in the not-too-distant future.
- Converting dollars into hard assets: I have long argued why Domains are better than dollars, including here and here. The decision by the Fed today to continue the policy of loose monetary policy — loose for major banks at least — puts further pressure on dollar holdings to find safe haven elsewhere. The Chinese are among the most aware of this because of their enormous holdings of US Treasuries. The DXY dollar index is one to watch, particularly at levels of around 74 and 70. As the below chart shows, the DXY has never gone below 70.
- Direct export of finished goods to consumers: The other scenario that I think is highly probable is direct sale of finished products via the Internet to consumers. Consider for a moment whether you have ever talked to a live person at Amazon.com. If you are like most people, odds are against. So, if the consumer can engage in a direct transaction with Amazon.com, and Amazon is in the business of distributing product manufactured by others, at what point does the supply chain close the loop and start shipping directly to the consumer? I believe that day is not far away at all. If that is the case, (Chinese) manufacturers of consumer goods will be looking for ways to take more direct control of the online retail supply chain. With Epik now powering more than 3,000 online stores, we are watching this area with great interest as we prepare to integrate dropshipping and e-commerce.
Coming to Seattle in September?
The upcoming conference and auction on September 15-17 in Seattle is a great opportunity for China-based Domain developers and investors to build their portfolios with income-producing properties. Here are some key opportunities worth noting:
- The live auction event on September 16 will feature 100 developed websites. The extended auction will feature an additional 200 developed websites. These turn-key websites are fully operational and ready to go to the next level. Price points for turn-key sites are as low as $500.
- The domain swap event on September 17 is the domainer’s version of Ruilverkaveling, or land exchange, between domainers as domain owners optimize their portfolio to have more of what works for them, and find a safe landing for the names they will never develop.
- Also, on September 17, there will be an opportunity for domainers who are long on domains but short on cash to put their domains to work by working directly with Epik to trade domains for development services, as well as finalize development partnerships that turn undeveloped domains into income-producing developed sites.
And for the Chinese who plan to attend, we extend a hearty Ni Hao, in advance and hope to see you in Seattle in September! The early bird registration has been extended to this coming Friday, August 13 and the Edgewater Hotel still has some discounted rooms available through August 16. Register here.