The Boao forum: a stepping stone in China's global policies - Shaun Rein

Shaun Rein

The ongoing Boao Forum in Hainan never attracted as much attention as this year, as China's global aspirations expand, and US president Donald Trump is heading for a trade war, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order to the South China Morning Post.

The South China Morning Post:

Shaun Rein, the founder of the China Market Research Group, said this year’s event was more significant than ever because of the “potential for a massive trade war between the US and China”. 

“And there is a lot of concern about whether China is going to be open for foreign business, and what [incentives] it might dole out to Europe and Asia as a way to keep the US down,” he said... 

Rein, who is also the author of The War for China’s Wallet, said he expected China to try and lure countries attending Boao with “sweeteners”, adding that he expected there to be a spike in new trade deals between China and its guests as Beijing sought to show the world that it did not need the US. 

“There is an opportunity for Xi to show that it’s business as normal, and calm a market that has been stirred up by what Trump is doing,” he said.

More in the South China Morning Post.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

Trump needs allies to challenge China on trade - Harry Broadman

Harry Broadman

US president Donald Trump is not necessarily wrong when confronting China on trade, but he has to realize he cannot solve the issue by himself, without allies, writes China veteran Harry Broadman in Forbes. "Mr. Trump’s insistence on handling China in a U.S. ‘go-it-alone’ manner is just plain wrong-headed."

Harry Broadman:

President Donald Trump and his U.S. Trade Representative, Robert Lighthizer, are more than correct that the Chinese do not abide by fair, systematic, transparent and market-based rules for global trade. But the tit-for-tat approach the White House is currently taking to create disincentives to try to alter China’s behavior—centered on applying higher and higher and more expansive tariffs to Chinese exports to the U.S.—is not only self-defeating, it is actually aimed at a largely irrelevant facet of the real and far deeper problem at hand. 

Beijing has not fully effectuated the changes in its domestic governing economic institutions—what we economists call ‘behind-the-border’ reforms—it agreed with the world trading community 17 years ago it would institute. Simply put, Mr. Trump and his economic team are ignoring the proverbial 1.3-billion-ton ‘Gorilla in the Room’:  China has not lived up to some of the most important commitments made in 2001 when the country’s leadership sought, and was granted, accession to the World Trade Organization (WTO). 

At the same time, Mr. Trump’s insistence on handling China in a U.S. ‘go-it-alone’ manner is just plain wrong-headed.  Rather than using the ‘power of collective action’ and building a coalition of other major trading powers—many of whom like the U.S. have been exposed to China conducting trade inconsistent with prevailing norms—Mr. Trump’s efforts will have him falling flat on his face. 

Yes, although so far Mr. Trump is engaging in his classic blustering, bluffing negotiation style—you’d think we’d all catch on by now—the dustup he has generated is causing serious economic dislocation on the ground in China and the U.S.  More pernicious is the extensive rotting out of the credibility of the U.S. on the world economic stage.

More in Forbes (here reprinted with the kind permission of the author)

Harry Broadman is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on the US-China trade war? Do check out this list.  

How Tencent, Alibaba dominate private business - Shaun Rein

Shaun Rein

Private companies in China can only survive when they team up with Tencent or Alibaba, creating a business scene that is unprecedented, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order  to the South China Morning Post. “They basically have a gun to your head and you have to choose which of the two companies you want to work with.”

The South China Morning Post:

Among all of China’s 124 unicorns – private companies with a valuation of US$1 billion or above – 50.8 per cent are controlled or backed by BAT, according to a February report by information service provider ITJUZI. 

“It’s impossible to be independent. Alibaba or Tencent would either copycat your technology or business model or they’ll invest in your competitor,” said Shaun Rein, managing director of China Market Research Group. 

“They basically have a gun to your head and you have to choose which of the two companies you want to work with.” 

Rein warns that if the Chinese internet landscape ends up looking similar to Japanese keiretsu or Korean chaebol – conglomerates that control huge swathes of their respective country’s industries – innovation will be stifled over the long term because large companies often become less nimble... 

“If a [huge] company like Ele.me can’t even exist individually then what others companies can?” asks Rein, who is author of the book The War for China’s Wallet: Profiting from the New World Order.

More in the South China Morning Post.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts who can help you to make sense out of China's digital transformation? Do check out this list.

Can a trade war hit the Big Four? - Paul Gillis

Paul Gillis

Import duties - increased during a trade war - focus on goods, not services. Nevertheless, the Big Four accounting firms can still suffer from a trade war, writes Beida accounting professor Paul Gillis on his weblog. But those subtleties might not be spent on China when they are drawn into a full-scale trade war.

Paul Gillis:

Services are not subject to import duties, but China has shown no qualms about punishing foreign business for the sins of their government. The Big Four are technically not American companies. The operations in China are not subsidiaries, but more like franchises owned and operated mostly by local Chinese. But they are generally viewed as American and may face regulatory crackdowns and may see an acceleration of the process of transferring major accounts to local CPA firms. Some smaller US CPA firms operate in China in ways that are technically illegal under Chinese law and would be easy to crack down on. 

It would be easy for the Chinese to crack down on the Big Four. They simply need to strictly enforce their own rules. Few audits can survive a critical examination by regulators, evidenced by the high rate of audit deficiencies identified during inspections by the Public Accounting Oversight Board (PCAOB) of domestic firms. Earlier this year China temporarily banned several local firms for audit deficiencies. 

The Big Four had best watch their back. The Big Four will likely also suffer from a decline in business serving US multinationals. All multinationals must carefully reexamine their global supply chains and some of the China business is going elsewhere even if this spat is settled. Even if this dispute is settled, it has highlighted the risk of overreliance on the Chinese market.

More at the Chinaaccountingblog.

Paul Gillis is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

Are you looking for more financial experts at the China Speakers Bureau? Do check out this list.

Related articles

• China warns US it will unveil retaliatory tariffs soon
• WTO Head Warns on Economy: We Are Seeing First Signs of Trade War
• Trump's wall won't stop China's AI
• Trump to punish China on trade as US companies fear backlash

Running an international operation from Shanghai - William Bao Bean

William Bao Bean

William Bao Bean, managing director of the Shanghai-based Chinaccelarator, tells about his busy week, trying to help foreign startups to enter China and helping Chinese companies to go global. The main problem of his international operation? "You never have a holiday."

William Bao Bean is a speaker at the China Speakers Bureau. Do you need him to speak at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts at China's take on its digital transformation? Do check out this 
list. 

Ban online bibles signals broader crackdown - Ian Johnson

Ian Johnson

Bibles have been legally available in China, both in print and online. But a recent crackdown by the authorities on online bibles might signal a wider crackdown, writes journalist Ian Johnson, author of The Souls of China: The Return of Religion After Mao, for the New York Times.

Ian Johnson:

The Bible is printed in China but legally available only at church bookstores. The advent of online retailers created a loophole that made the Bible easily available. This was especially important in China given the growing dominance of online shopping.

The closing of that loophole follows new government religious regulations that have effectively tightened rules on Christianity and Islam, while promoting Buddhism, Taoism and folk religion as part of President Xi Jinping’s efforts to promote traditional values. The moves also come as China is engaged in negotiations with the Vatican to end the split between the underground and government-run Catholic Church. 

This would end a nearly 70-year split between the Chinese government and the global church, which Beijing traces to the Vatican’s historically strong anti-Communist stance. Observers said the new measures could be a sign of a broader crackdown. At a news conference Tuesday outlining Beijing’s approach, a government spokesperson said the Vatican would never be allowed control over the clergy in China. That came after a recent government reorganization in which a hard-line Communist Party department took over management of religious policy. “It sounds like the opposition force within the Chinese authorities who oppose the Vatican-China relations have their voice,” said Yang Fenggang, head of the Center on Religion and Chinese Society at Purdue University. “It clearly shows that they worry or are concerned about Catholics as well as Protestants.”

More at The Star.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list. 

Related articles

• 'This Is Making a Lot of Christians in China Very Nervous'
• Easter: Archbishop administers sacrament on 14 prison inmates

Online identities in China - Tom Doctoroff

Tom Doctoroff in Paris

"Chief Insight Officer" Tom Doctoroff explains change and consistency of China's consumers in a fast digitalizing world at China Connect Paris 2018. "Basic motivations remain the same." Doctoroff is the author of What Chinese Want: Culture, Communism, and China's Modern Consumer.

Tom Doctoroff is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more consumption experts at the China Speakers Bureau? Do check out this list.

Mixed chances for a political backlash against US companies - Ben Cavender

Ben Cavender

The trade war between China and the US is heating up, raising fears for a political backlash against US firms in China. Business analyst Ben Cavender feels it will vary very much according to the position of companies in China, he tells Reuters.

Reuters:

The highest profile corporate casualty was South Korean conglomerate Lotte Group, which saw its plans for mega shopping complexes indefinitely suspended and nearly all of its Lotte Mart stores in China shut for much of the year over alleged fire safety issues. Ben Cavender, an analyst at Shanghai-based China Market Research Group, said U.S. businesses in China such as Starbucks were more firmly entrenched in the country, making them less likely to receive similar treatment. 

“A lot of the brands are employing Chinese workers, essentially they’re Chinese companies in their own right,” he said. However, he warned that everyday consumption goods could nonetheless be hit. “You can see consumers saying we’re not going to buy a Ford , or a GM product, and we’re going to buy a European product or a Chinese product instead,” he said.

More in Reuters.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

Related articles

• Trump's wall won't stop China's AI
• Trade war unsettles stocks in US, China
• WTO Head Warns on Economy: We Are Seeing First Signs of Trade War

Foreign brands can both over-localize and under-localize - Shaun Rein

Shaun Rein

For foreign brands working on the China market is tough, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order. They can both over-localized and under-localize, he tells Hicom-Asia. Some of the pitfalls for foreign companies.

Hicom-Asia:

HI-COM:  In your experience, what have been the most common misconceptions about China held by foreign companies? 

Shaun Rein: Companies entering China can over-localize or under-localize.  When I say over-localize, what I mean is that they can forget their core brand, their core DNA, and the result is that they have no clear direction or strategy when launching in China.  One example is [Mattel’s] Barbie.  When Barbie launched in China, they opened a Barbie themed store and Barbie themed café, avenues they had never pursued elsewhere in the world.  The result was that Barbie’s China entry appeared a bit confusing.  In another sense however Barbie under-localized; the outfits for Barbie sold in China were too ‘sexy’ and didn’t fit the local taste of young Chinese girls who generally prefer fashion that is more ‘cute’ and girly. 

Another misconception foreign companies often hold when entering China is thinking there is no need for a local mainland Chinese on the management team.  Companies would be well advised to have a local Chinese on their team and empower this individual to be able to guide and steer strategy.  This local representative knows better than anyone the unique political, regulatory and consumer dynamics that are at play in China and can help steer or pivot your company as needs be. 

HI-COM:  When it comes to a successful China market entry, what would you say are the critical elements companies should be aware of? 

SR:  Understanding what consumers want through undertaking ongoing research that has regular feedback loops.  Consumer preferences and channels can change so quickly in China that it is vital to closely monitor what is happening on a quarterly, if not daily, basis.  Understand that e-commerce as a distribution channel is huge here.  You need to also get the right manager that is aware of government policies and can help you pivot strategies as needs be.  Politics and the market are so intrinsically tied in China, creating a unique ecosystem that is not found elsewhere in the world.

More at Hicom-Asia.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more branding experts at the China Speakers Bureau? Do check out this list. 

The forgotten left-behind children - Zhang Lijia

Zhang Lijia

Very slowly the dreadful verdict of China's approximately 30 million left-behind children on the country-side is slowly getting more coverage. Journalist Zhang Lijia, preparing a book on the issue, summarizes the problems for the New York Times. Why have they been forgotten?

Zhang Lijia:

And while urban children have thrived academically in recent decades, that has not been the case for their rural cousins, especially those who have been left behind. A study by Stanford University researchers, in collaboration with Chinese academics, found that children in the countryside were much less likely to complete high school. Those with both parents having left for the city perform markedly worse in school than those having one parent around, and boys are affected more than girls.

Other factors contribute to low academic achievement in rural China — notably, poor teaching standards and facilities at rural schools, and prohibitively high tuition costs (only nine years of school is free). But the crucial factor is the absence of parents.

Even children from the countryside who move to the cities with their parents are unlikely to get a good education. In recent years, restrictions on migrants to the cities have been easing. But in most cities, migrant parents still have great difficulty sending their children to good local schools because they need documents such as a resident permit, job and rental contracts, proof that taxes have been paid and so on. 

Several sensational stories in recent years have brought attention to the problem of left-behind children. Among them, in June 2015, four left-behind siblings committed suicide together by swallowing pesticide in Guizhou Province. 

In response, in 2016 the government called for better social services to protect such children. But on my recent visits to the countryside, in interviews with children and parents, it’s clear that a great deal more needs to be done. Rural education and village-level social services still lag. And migrants must be allowed to send their children to good local schools in urban areas where they work — and not substandard, makeshift schools for migrant kids. 

Without effectively addressing the problems facing left-behind children and providing for the needs of rural youths, the vaunted “Chinese Dream” will remain unfulfilled for much of the country.

More at the New York Times.

Zhang Lijia is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more political experts at the China Speakers Bureau? Do check out this list.  

How KPMG Hong Kong got itself into serious problems - Paul Gillis

Paul Gillis

Beida accounting professor Paul Gillis describes on his weblog how auditor KPMG Hong Kong got itself into trouble for signing off papers on China Medical, a company convicted in 2012 for looting US$400 million from its investors. Problem: KPMG Hong Kong was not really in charge and now the Hong Kong legal system caught up with this omission.

Paul Gillis:

Matt Miller of Reuters has an interesting update on the troubles KPMG is having in Hong Kong with a failed US listed Chinese company. In my view the problems are of its own making. 

KPMG Hong Kong was the auditor of China Medical Technologies Inc., which failed after management was charged by the US Securities and Exchange Commission with looting over $400 million from the company. The company was put into liquidation in 2012 in the Cayman Islands, where it was incorporated. 

Actually, KPMG Hong Kong was not the auditor, and that is the problem. Several years ago I wrote about KPMG’s labeling problem where they had a practice of using Hong Kong letterhead to sign audit opinions on audits done by KPMG Huazhen, KPMG’s China affiliate. To me, this was like a Wenzhou shirt maker sewing a made in Italy tag on a shirt made in China.   ... 

KPMG Hong Kong is in a terrible place. They signed off on an audit without doing one. The Hong Kong Institute of CPAS (HKICPAs), regulator of Hong Kong accountants, should investigate this violation of auditing standards, but I think it is unlikely they will.  The HKICPAs is a feckless regulator and is unlikely to pursue a case against a Big Four firm, especially a case that relates to a company not listed in Hong Kong. There are legislative proposals to strengthen audit regulation in Hong Kong, but the proposals will likely have no effect on this case. 

KPMG was the most egregious at mislabeling their audit work, but all of the Big Four in Hong Kong have had this problem, which I believe came about because the firms failed to recognize the importance of respecting their legal structure. While the China member firms of the Big Four have generally been managed from Hong Kong since the early 2000s, they have always been separate legal entities.

More at the Chinaccountingblog.

Paul Gillis is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more financial experts at the China Speakers Bureau? Do check out this list.  

VPN cat-and-mouse game will continue - Matthew Brennan

Matthew Brennan

China's internet authorities have strengthened the rules on VPN's - popular tools to jump the country's online censorship. Nevertheless, getting online with a VPN is still relatively easy, says internet expert Matthew Brennan to The News Lens, but he is not giving a guarantee that will still be the case in one year time.

The News Lens:

There have been many fears that China would tighten its VPN enforcement in the past – with rumors circulating of bans on Jan. 11 and Feb. 1 – but this one is backed up by official statements. The MIIT announcement came less than two weeks after the state-run Global Times denied that a ban was in the works, quoting a “China Telecom staff member.” 

WeChat expert and frequent technology commentator Matthew Brennan told The News Lens that these moves should come as no surprise: “The Chinese government's stance with regard to enforcing sovereignty over its citizens’ use of the internet has been consistent. This will become a game of cat and mouse between an increasingly sophisticated firewall and VPN service providers.” 

A ban would be excellent news for the approved VPN providers, who happen to be the three state-run telecom companies, China Telecom, China Unicom and China Mobile, who advertise direct links to the outside world, a service geared towards corporate clients... 

While privacy from prying Communist Party eyes has already been compromised, censorship will not be absolute. The restricted use of VPNs and which sites are blocked varies widely depending on location, the level of political tension, and a host of other reasons, and there is no reason to believe that this will change. 

As Brennan said, “Right now, it's still relatively easy for anyone who is determined to do so to jump over the firewall. Whether that's still the case in a year's time, we'll have to wait and see.”

More in the News Lens.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.  

How lagging China became a frontrunner in mobile payments - Ben Cavender

Ben Cavender

Cash was king, not so long ago in China. But as wealth and the middle class increased, mobile payments had an advantage, says business analyst Ben Cavender. Because other payment tools like cards did not have a solid footprint, eager smartphone users adopted mobile payments quickly, he tells That's Magazine. But: “Realistically, I don’t think cash will go away entirely, but it will certainly be relegated to a less important role.”

That's Magazine:

According to official data, China’s mobile payment transactions reached RMB81 trillion over the first 10 months of 2017, an increase of almost 30 percent compared to the total amount recorded in 2016 (RMB58.8 trillion). 

Ben Cavender, principal at China Market Research (CMR), believes that besides the added convenience for consumers and merchants, timing has played a critical role in propelling the Middle Kingdom and its 1.4 billion citizens ahead of the rest of the world in mobile payment adoption. 

“The growth of China’s middle-class population coincided with the rising popularity of smartphones,” he explains from his Shanghai office. “People who didn’t previously own any electronic goods suddenly have iPhones in their hands. It’s their primary tool and initiation point for technology, whereas in the West, a lot of older consumers who grew up with their desktops and laptops still primarily use those for their online activities.”... 

Since its introduction in 2004, Alipay has always been the preferred payment solution for any Taobao or Tmall purchases. For nearly a decade, Alipay enjoyed almost a total monopoly in China’s electronic payment game until WeChat Pay came along in 2013. 

Competition heated up when Tencent collaborated with the CCTV Spring Festival Gala to launch WeChat Red Envelope on Chinese New Year’s Eve of 2015. The infamous publicity stunt resulted in 1 billion hongbao transactions across the nation, making the platform a formidable opponent to Alipay. 

With WeChat being China’s dominant instant messaging platform, Cavender says its offerings resonate with how today’s Chinese consumers use the internet and social media, hence its ‘stickiness’ makes it slightly easier to integrate with people’s daily lives... 

Credit card companies and many Westerners’ ingrained habit of using cards as their primary payment option have prevented mobile payments from taking off, according to ... Cavender.  In a country where Visa, Mastercard and American Express still have yet to fully penetrate through the masses, Chinese consumers were able to easily move on from cash and plug themselves directly into the ecosystem that Alipay and WeChat Pay have created. 

The downside of this arrangement, Cavender points out, is that tech companies are not held to the same fiduciary standards that traditional financial institutions follow: “At the end of the day, your money is being handled by companies whose main objective is to sell you all sorts of services. There’s definitely a conflict of interest [that works against consumers].” 

By signing up for WeChat Pay or Alipay, users are not only giving Tencent and Alibaba instant access to their online shopping behaviors, but also their offline spending habits too, not to mention their personal identity information and how much savings they have in their bank accounts... 

But for many countries, an entirely cashless economy is still a long ways away. In China, for instance, cash still makes up a significant chunk of the Chinese economy – 66 trillion yuan in 2016, according to a central bank payments report. Though the number has been decreasing in recent years, completely eliminating cash will be difficult in practice, CMR’s Cavender says. “Realistically, I don’t think cash will go away entirely, but it will certainly be relegated to a less important role.”

More in That's Magazine.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

Related articles

• How China is rebooting physical retail in the era of online shopping
• China opens payments market to foreign players
• The Chinese herbal cough syrup that has taken New York by storm

Both Alipay and WeChat Pay can survive in China - Matthew Brennan

Matthew Brennan

Much attention goes to the epic battle between China's internet giants Alibaba and Tencent. But WeChat expert Matthew Brennan does not see why one of their payment systems, Alipay and WeChat Pay, should defeat the other. He sees room enough for both, he tells That's Magazine.

That's Magazine:

At present, China’s two major players in the mobile payment space, Alipay and WeChat Pay, hold about 54 and 40 percent of the market share respectively, according to a 2017 iResearch report. China Channel cofounder Matthew Brennan attributes their dominance to the strengths of their parent companies, ecommerce giant Alibaba, and Tencent, the world’s most valuable social network conglomerate... 

Brennan adds, “Both platforms, however, have successfully adapted themselves into the virtual world and into the offline economy… at the end of the day, I don’t think it’s about one winning or losing, as both are well-equipped to thrive in the market.” 

The US might be the world’s largest economy, but when it comes to mobile payment, the Chinese are way ahead. China’s total mobile payment transaction revenue was 50 times more than their American counterparts in 2016. Meanwhile, 52 percent of Chinese say less than 20 percent of their monthly transactions are conducted with bills and coins, according to the ‘2017 Mobile Payment Usage in China’ study published by China Tech Insights. 

Credit card companies and many Westerners’ ingrained habit of using cards as their primary payment option have prevented mobile payments from taking off, according to Brennan...  In a country where Visa, Mastercard and American Express still have yet to fully penetrate through the masses, Chinese consumers were able to easily move on from cash and plug themselves directly into the ecosystem that Alipay and WeChat Pay have created.

More at That's Magazine.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more fintech experts at the China Speakers Bureau? Do check out this list.

Related articles

• How China is rebooting physical retail in the era of online shopping
• Alipay expands US network with 35,000 new merchants
• After supermarkets, Alibaba moves into furniture

In China, branding and politics get in each others way - Shaun Rein

Shaun Rein

When brands enter China, they not only have to figure out what their demanding customers want but also have a good look at politics, argues business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order, in a wide-ranging interview at Knowledge CKGSB.

Knowledge CKGSB:

Q. One of the key arguments in your book, The War for China’s Wallet, is that Chinese consumers can be mobilized to reward or punish brands based on a country’s relationship with China. The most striking example recently has been South Korea. How worried should brands be about this trend? 

A. Brands need to be very worried. They need to understand the geo-political situation better now than at any time before. Five, ten years ago, you basically had to understand: what did the Chinese consumer want, what types of products or services, what’s the right marketing communications strategy? But now, it’s very clear that China is using its economic wallet and its muscle to reward and punish other countries—and, increasingly, companies—to ensure that they adhere to its political wants. 

Q. What practical measures can brands take to protect themselves from this? 

A. It’s not easy, frankly. I think there are a couple of things. They can, first and foremost, show from the very beginning that they’re friends of China. In the book, I used the example of Yum! Brands— KFC. They have always shown the everyday Chinese people that they respect the culture, respect the people. And they have done it by creating egg-and-milk food programs for poor schoolchildren throughout the country. That’s really important, because when there was South China Sea tension a year ago, sales in some parts of China for KFC dropped dramatically. But they rebounded after a month or two, because at the end of the day, the consumer realized KFC is a friend of China, and that’s a really important thing. 

Secondly, you probably need to join associations. No single company can push back against the Chinese government, so you need to form blocks of 20, 100, 200 companies. Then, if one of them gets attacked, they can unify together and say: ‘Hey, wait a minute. This is not this company’s problem, this might be a government issue, don’t punish us.’ 

Q. How can brands from countries that generally enjoy a positive image among Chinese consumers take advantage of this without making themselves vulnerable? 

A. It’s tough. I think iconic brands that represent a country are dangerous. It’s better to be affiliated, but not too representative. For example, Costa Coffee customers don’t always know it’s British. 

Right now, Harrods is doing fabulously well, because for Chinese, when they go [to London], it’s a destination. If you go to the UK, you have to shop at Harrods. The risk though, for Harrods especially, is that if there ever is tension between China and the UK, Harrods will be the first thing to get hit. Costa Coffee won’t be. It’s Toyota, it’s KFC, it’s Starbucks, it’s Apple… It’s good to show you’re from a certain country, but it’s also not good to emphasize it too much. 

Q. Is there a chance this approach will become less effective if used too often? 

A. That’s a great question. I think Chinese consumers don’t view it as propaganda, but rather as pride in the country. I think it’s a strategy that they can employ over the next 10-20 years, and it’s not going to make a difference. Even when we interview Chinese who were educated abroad and they come back, they still get really worked up. 

The bigger risk is: will China go too far and cause too much worry for other governments, to the extent that that they do band together and they push back? Maybe they don’t band together in ASEAN, but maybe they band together in TPP. There are all these new organizations that are popping up. China needs to worry about that, that they don’t oversell their economic power.

More at Knowledge CKGSB. 

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

Are you looking for more branding experts at the China Speakers Bureau? Do check out this list. 
 

How state and religion are intertwined in China - Ian Johnson

Ian Johnson

In China power and religion are intertwined, argues journalist Ian Johnson, author of The Souls of China: The Return of Religion After Mao and you cannot understand China without knowing its religion. At the UC San Diego School of Global Policy and Strategy, he explains how religion moved from apparently irrelevant to crucial in today's China. Why religion is not going away, as many intellectuals have thought.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for other stories by Ian Johnson? Do check out this list.

Western fashion brands fail on China's millennials - Shaun Rein

China's millennials are increasingly defining the country's consumer space, and Western fashion brands fail to appeal to them, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order, to the South China Morning Post. Brands like Marks&Spencer failed because they focused on the middle-class, he says.

The South China Morning Post:

The London-based retailer struggled to make a mark in China’s high-street fashion scene, despite a growing retail market in China and a fondness from consumers towards many other traditional British brands. 

“One of their problems is they tried to sell to a middle-class consumer by creating middle-class brand positioning,” says Shaun Rein, managing director of China Market Research and author of The War for China’s Wallet: Profiting from the New World Order. “Most brands that do that in China fail.” 

Marks&Spencer failed to cater to consumer tastes by offering styles that were too “middle class, suburban, UK housewife”, Rein says. Sizes for Asian body types were also not considered. Meanwhile, at locations such as Marks & Spencer’s brick and mortar stores in Beijing and Shanghai, Chinese consumers could go right next door to H&M to shop the youthful and more on-trend styles that reflect one of China’s biggest emerging markets: millennials. 

Another problem for Marks & Spencer is how Chinese shoppers perceive value. Rein says Chinese consumer behaviour is defined by what he calls the “CMR Hour Glass Shopping Model”, meaning they shop both at the top and the bottom of the spending scale. 

“Anything that’s not great value – it doesn’t give them prestige, it doesn’t give them status, it’s not an aspiration – is something that Chinese don’t want unless it’s dirt cheap,” he says. “So they’ll go out and buy very expensive lipstick but they’ll buy the cheapest garbage bags because they don’t want to spend money on garbage bags. 

“Things in the middle like Marks & Spencer or Macy’s just sort of die because their products are not cheap, but they’re not good enough value either.”... 

Macy’s, meanwhile, is still in China in a partnership to sell through Tmall that started in 2015, even though it has been struggling with brand positioning and product assortment and had to cut short its first attempt at launching an online point of sale in 2012. 

“It is a great retailer in the US, but the name had no resonance here,” Rein says of Macy’s. “And it was selling Ralph Lauren – but you can buy Ralph Lauren directly here, either online or in stores, so what’s the point of going to Macy’s for Ralph Lauren?”

Marketing and advertising are also critical for a company’s long-term success, Rein says, and he thinks many brands can do a lot better. 

“They go to the same five celebrities too often,” he says. “They all go to Jackie Chan, to Zhang Ziyi, to Angelababy, so the problem is you have these guys that are representing 10 or 20 different companies, but consumers don’t know who they’re representing any more. They might affiliate them with one brand and one brand only.”

More at the South China Morning Post.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more branding experts at the China Speakers Bureau? Do check out this list.

China's International deals shrank in 2017 - Rupert Hoogewerf

Rupert Hoogewerf

Overseas mergers and acquisitions by Chinese companies went down in value over 2017, says a report by Hurun. Especially the real estate and energy industries went down, says Hurun chief researcher Rupert Hoogewerf to Global Times. Retail, technology and manufacturing did relatively well.

Global Times:

In 2017, M&A deals by Chinese companies fell 1.7 percent year-on-year to 400, said the report. 

Among these deals, 312 disclosed the amount of investment, which was 960 billion yuan ($152.11 billion), down 28 percent year-on-year. The value of the top 100 M&A deals slumped 37 percent to 880 billion yuan. 

The manufacturing industry had the largest number of M&A deals in 2017, followed by technology, retail, energy, mineral, public services, medical, financial services and property, the report noted. 

Compared with 2016, the energy and real estate sectors had the biggest declines in transaction numbers, while manufacturing, technology and retail had the largest gains, Rupert Hoogewerf, chairman and chief researcher of the Hurun Report, was quoted as saying in the report. 

The largest deal involved a consortium led by property developer Vanke, Bank of China Group Investment and venture capital firms Hopu Investment and Hillhouse Capital Group, which acquired 78 percent of Singapore-based logistics company GLP Group for 104 billion yuan. 

The US was still the hottest destination for Chinese investors in 2017, with 16 investments. But the number of M&A deals fell 14 compared with 2016, according to the report. The report said that the Belt and Road initiative has offered new opportunities for Chinese companies. In 2017, the transaction volume of M&A deals in countries and regions along the Belt and Road routes surged 25 percent year-on-year to 240 billion yuan. By 2030, investment is estimated to reach 30 trillion yuan.

More in the Global Times

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on the One Belt, One Road (OBOR) program at the China Speakers Bureau? Do check out this list.