Too much capital hurts the quality of China startups - William Bao Bean

William Bao Bean

A massive inflow of capital for startups has a negative influence on the market in China, says William Bao Bean, managing director of the Chinaccelarator in US News. VC's are under pressure to deliver to their shareholders, and that makes them less picking in selecting startups.

US News:

"You have like $70 (billion)-$80 billion a year going into venture (capital), but you are getting funded not just the good companies but also the bad companies," says William Bao Bean, managing director of Chinaccelerator, a Shanghai-based startup accelerator for software companies in China. That's happening, Bao Bean says, because of the pressure put on VCs to invest from shareholders and owners.

A bad company is not necessarily one that is unprofitable, experts say. Entities that are poorly conceived and put together present a much higher risk of never being successful. Such companies, although having the potential to temporarily create jobs, might ultimately hurt investors and damage consumer confidence...

Money also ends up being used as a "weapon," experts say, with the richest companies more easily attracting talent and destabilizing competitors.

"So if one company gets more funding than the others, the others just go in and steal all the competing company's employees or they'll take out the key employees," Bao Bean says. "And most people have an impression of China (as being all about) cheap labor, but compensations at (the) senior level are similar to Silicon Valley, and at the middle level maybe slightly below."

More in US News.

William Bao Bean 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.

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How Alibaba, Tencent destroy the VC market for startups - Shaun Rein

Shaun Rein

Venture capitalist firms have set the rules for investments in startups for a long time in China, but now Alibaba and Tencent moved into the industry, those rules have changed dramatically. And not for the better, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order, to US News.

US News:

"At the end of the day (even if those startups don't make money), they can always fold it in," says Shaun Rein, managing director of China Market Research Group, a Shanghai-based strategic market intelligence firm, and author of a book on Chinese innovation. "It's not like in venture capital firms where you have to be a lot more thoughtful on valuation because that is your only source of revenue. (Alibaba and Tencent) approach pretty much anything that comes out and hope that 1 of the 100 investments makes money."

Public officials in China have also created investment funds for startups, a result of Beijing's priority to create well-paying jobs for China's growing middle class. Premier Li Keqiang frequently boasts of the country's "mass entrepreneurship and innovation initiative," but rarely acknowledges the failures along the way...

These days, China's big tech companies appear willing to overpay for the development of new products that look good in the eyes of their shareholders, Rein says. This is bad, he adds, because new companies might need to struggle less with developing a workable business plan and simply focus on the concept they put forward.

"Tencent and Alibaba are not just throttling the market, but in many ways they are hurting innovation," Rein says. "Because right now basically people are saying, 'Let’s start a company. Let’s create something that sounds innovative, even if it’s not. Let’s not necessarily plan on research and development for five years, let’s instead create something that sounds good and then sell it to Tencent or Alibaba.'"... "If you are a tech startup you either have to get money from Tencent or Alibaba or you won’t be able to grow because these two companies control the tech ecosystem," Rein says. "Basically, any new idea is getting funded by one of the two and its major competitor is funded by the other one of the two."... Competition exists among investors in China's startups, as well. If "you come up with something cool, very soon there's going to be investors hanging around your doorstep because there's just so much money here and there's so few investments that investors in many ways have to beg to get in on deals," Rein says. To compete against the wealthy tech giants – namely, AliBaba and Tencent – experts say VCs need to do a better job at selling their services and expertise. This can prove challenging, Rein adds, because many venture capitalists in China lack entrepreneurial experience: "Most of them are deal-makers," he says.

More in US News.

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.

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What made Pinduoduo so big? - Ben Cavender

Ben Cavender

For many outside China the successful IPO on Nasdaq of group purchasing platform Pinduoduo, mildly comparable to the less successful Groupon, came as a surprise. Shanghai-based business analyst Ben Cavender tries to explain the success at Inkstone. It uses the popular Tencent platforms WeChat and QQ.

Inkstone:

Pinduoduo has a mini-game called “Duo Duo Orchard,” in which players plant a tree of their choosing on the app and collect points by logging in daily, making purchases and inviting friends. After collecting a certain number of points, users will receive a box of fresh fruit.

Pinduoduo’s social media features give it “more stickiness” than Groupon, according to Ben Cavender, a senior analyst with the Shanghai-based China Market Research Group.

“It generates a lot more interest and there’s an entertainment value to the shopping process,” Cavender told Inkstone...

China’s online shopping market has long been dominated by two giants, Taobao of Alibaba (which also owns Inkstone) and JD.com.

Pingduoduo had 168 million monthly active users in May, behind Alibaba's 502 million and JD.com’s 273 million, according to data compiled by consulting firm Jiguang.

“I think increasingly what we are going to see is more space for different kinds of models,” Cavender says. “It may take some share away from Taobao and some of the low-end market share away from [Taobao-owned] Tmall and JD.com. But Pinduoduo’s not going to replace them.”

Currently, the majority of Pinduoduo’s users live in cities with populations of fewer than three million people – small cities with users who are more price-sensitive.

In the more affluent cities, Taobao and JD.com still dominate... “If Alibaba decides that’s a market they want to own, they are going to spend a lot of money, and Tencent has to decide how much they want to support Pinduoduo’s long-term growth,” Cavender says.

More at Inkstone.

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.

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China: best breeding ground for female entrepreneurs - Ashley Dudarenok

Ashley Dudarenok

China entrepreneur Ashley Dudarenok looks back for Ted-X at role models in communist Russia that shaped her worldview. China is the best breeding ground for female entrepreneurs, she argues.

Dudarenok 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.

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The vaccine scandal: China's moral decline - Zhang Lijia

Zhang Lijia

China's latest scandal on the fake vaccine for hundreds of thousands of children is the latest example of a deep moral decline in the country, argues Zhang Lijia, author of Lotus: A Novel, a research novel on prostitution in China, in the South China Morning Post. "I believe that the lack of a value system and a spiritual vacuum lay at the roots of China’s moral crisis."

Zhang Lijia:

Several high-profile incidents, such as the tainted milk scandal and the notorious “Little Yueyue Incident” – in which a two-year-old from Foshan, Guangdong, was run over twice by vehicles outside her parents' shop, and 18 passers-by walked past her body on the street without helping – shocked and disgusted people around the world. Some even called China a “material giant and a spiritual dwarf”. 

I believe that the lack of a value system and a spiritual vacuum lay at the roots of China’s moral crisis. 

We have imported the concept of market economy but not the corresponding ethics. Traditionally, the core values were benevolence, righteousness, proper rites, knowledge and integrity, as mandated by Confucianism. 

But all traditional and religious systems were destroyed after the Communist Party took power, especially during the Cultural Revolution, when Chairman Mao Zedong ordered the citizens to destroy the “four olds”: “old customs”, “old culture”, “old habits” and “old ideas”. The basic social fabric was torn to pieces. 

This mad political movement marked the beginning of China’s moral decay and lack of trust among the people. At that time, people were encouraged to report and denounce each other – even their teachers, neighbours and parents. 

In recent years, Confucianism, condemned by Mao, has gained popularity. Former president Hu Jintao’s call for a “harmonious society” was perhaps a sign of its rehabilitation. 

Today, our top leaders like certain aspects of Confucian values, such as the ruler/subject relationship and respect for authority. But many of its values, such as its attitude towards women, are not in line with modernity. 

That’s China’s problem: there isn’t really a united value system that resonates with the modern Chinese society.

More in the South China Morning Post.

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.

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Why the tariffs are not here to stay - Shaun Rein

Shaun Rein

The trade war between the US and China has been heating up, but - says business analyst Shaun Rein and author of The War for China's Wallet: Profiting from the New World Order - they are basically negotiation tools, not here to stay. Where Donald Trump is right, and where he is wrong, tells Rein in an interview at Marketplace.

Marketplace:

So you don't think these U.S. tariffs and Chinese counter tariffs today are here to stay? 

I view these tariffs as a negotiating ploy by President Trump to try to force the Chinese to open up their market better for American companies. Because frankly, Trump is right to criticize China. It's very difficult for American companies in the auto sector or in financial services to sell into the China market, because there's a lot of regulatory barriers. Good luck if you're a technology company. However, I think he's wrong for talking about the trade imbalance. Instead, he should be talking about reciprocity and allowing American companies the same rights in China that America grants Chinese companies when they try to invest and operate in the United States. 

All right so tariffs are a negotiating tactic. That conjures the image of this being a cool, calm, collected game of chess on both sides: Washington and Beijing. But the thing is some say the trade war started this morning, and in a war, it's not always calm or controllable or rational. 

Trump needs to be careful that he doesn't go too far and cross a red line and he's very close to doing that right now. President Xi, the president of China, is taking a much longer view than Trump because China's presidency doesn't have term limits. And President Xi is enjoying, like, 90 percent support from the Chinese population. He feels he can take a very strong line against Trump. And he also wants to indicate to his neighbors and the rest of the world that China is the new superpower that they need to get close to. 

So Trump should push, but he can't go too far, because at the end of the day, it's the American consumer who's going to get hurt the most. Because products that are made in China — from Apple products to Nike ones — are going to get expensive, and be more expensive on the shelves of Walmart for everyday American consumers.

More at Marketplace.

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 on the trade war between China and the US? Do check out this list.

The big four are back in China - Paul Gillis

Paul Gillis

The big four accounting companies - KPMG, EY, PwC, and Deloitte - are back in China, writes Beida accounting professor Paul Gillis at his website ChinaAccountingBlog. The method of counting market share has changed, but Gillis sees around 20% growth, he says.

Paul Gillis:

The rankings have changed quite a bit. The last two years have been very good for the Big Four, which have grown 20% while local firms experienced a minor decline in revenue of less than 1%. The Big Four share of the Top 100 market has grown from 27% to 34%, a remarkable reversal of the market share declines of earlier years. 

I believe that the poor performance of local firms can be explained by regulatory actions. Early in 2017 Chinese regulators shut down two of the largest local firms for several months due to audit failures.  Ruihua, which was ranked second in 2015 and which I thought might climb over PwC to first place, experienced a revenue decline of 29%. BDO, ranked third in 2015, slide to fourth with anemic revenue growth of 5%. While I support strict audit regulation, I fear that the Chinese system is unfair to large local firms that audit thousands of listed companies. 

For the first time, the CICPA has disclosed the split between audit and non audit revenues at the firms. The Big Four earn 84% of their revenue from audit while local firms earn 86%. Those ratios are much higher than accounting firms in other countries. The measures of market concentration reveal an Herfindahl-Hirschman Index of 498, higher than the two years ago measure of 444, but well below the 1500 typical of Western economies.

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.

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Auto industry: the effect of disappearing foreign restrictions - Mark Schaub

Mark Schaub

China is going to phase out restrictions on foreign ownership of the automotive industry over the next five year, president Xi Jinping announced earlier this year. Shanghai-based lawyer Mark Schaub summarizes the effects on the industry for the China Law Insight.

Mark Schaub:

The automotive sector is facing the twin disruptions of new energy and autonomous cars. 

It is eye-catching that one of the major initiatives to further open up China’s economy announced by President Xi Jinping at the Boao Forum on 10 April 2018 was large scale relaxation of foreign investment restrictions in the auto sector. 

Shortly after President Xi’s announcement the National Development and Reform Commission (NDRC) revealed that foreign ownership limits on automakers would be phased out over a 5-year transition period which would start on 17 April 2018. 

According to NDRC, foreign ownership restrictions on special-purpose vehicles and new energy vehicles (NEVs) will be removed in 2018. The liberalization will be followed by commercial vehicles in 2020 and passenger cars in 2022. The rule that currently prohibits foreign automakers from setting up more than two joint ventures in China will also be lifted in 2022. After the 5-year transition period, all restrictions on foreign investment in auto sector will be removed. 

These policies were swiftly followed by regulatory action and on 28 June 2018, NDRC and the Ministry of Commerce (MOFCOM) jointly issued the Special Administrative Measures for Admittance of Foreign Investment (Negative List) (2018) (“2018 Negative List”)[1] which is due to take effect from 28 July 2018.[2] 

The 2018 Negative List confirmed the pledge to fully remove foreign investment ownership limits on auto industry over a 5-year transition period. 

In addition to making it easier for international companies to sell more cars to China the government has also significantly lowered import tariffs for vehicles. Starting 1 July 2018 import tariffs on autos were reduced to 15% from 25% and auto parts will be subjected to 6% tariffs. 

The relaxation on foreign ownership restrictions should open up China’s auto industry and for this reason it may have a major impact on domestic and international OEMs alike.

More at the China Law Insight.

Mark Schaub 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.

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Why cheating is so common in China - Kaiser Kuo

Kaiser Kuo

No day passes by without another story on Chinese cheating themselves into university, IP theft, corruption, avoiding of the rules. China veteran Kaiser Kuo dives into the culture of cheating for SupChina.

Kaiser Kuo:

I don’t think there’s much of a mystery here. It’s all basically a function of scarcity and of the intensity of competition, and these in turn come down to the fact of China’s enormous population, breakneck development, and brutally pragmatic focus on results. 

In the nearly 40 years since reform and opening began at the very end of the 1970s, China has been a place where a kind of Social Darwinian law of the jungle has prevailed. A society where the bedrock Confucian ethics already tended toward situational, where there’s never really been any dominant religious institution claiming transcendent moral authority, and where access to every rung on the ladder of success was already contested, the introduction of an ethos of “to get rich is glorious” was bound to create something of a mad scramble. 

To be sure, there are still many, many good and honest people in China for whom the rules still matter, who would never think to cheat, or to falsify data, or to jump the queue or bribe an official. But I think anyone who looks at China today honestly must recognize that those solid citizens have diminished in number appreciably over the last four decades.

More in SupChina.

Kaiser Kuo 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.

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How the World Cup turned mobile in China - Andy Mok

Andy Mok

The past World Cup not only gathered a massive audience in China but also marked a switch from classic TV to mobile, says China analyst Andy Mok at CGTN. Content creation has become a major industry in this traditional sport.

CGTN:

Andy Mok, a digital economy observer, said the large World Cup viewership on China's mobile Internet was game-changing, and was made possible by technology, its user base and content creation. 

"The smart phone revolution totally reinvented the viewing content participation experience. It used to be many people around one screen, passively absorbing content. Today, it's a multi-screen experience and this is the way, especially the young people, consuming, creating and distributing digital content," Mok told CGTN.

More in CGTN.

Andy Mok 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.

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German relations with China follow former US track - Ian Johnson

Ian Johnson

Less than a decade ago, the relations between China and the US dominated globally, not only for the economy but also for human rights. When the flight of Liu Xia, the widow of Nobel prize winner Liu Xiaobo, to Berlin last week, shows one thing, it is that Germany is taking over that role, says Pulitzer price winner Ian Johnson, author of The Souls of China: The Return of Religion After Mao, who gave a eulogy on Liu Xiaobo in Berlin, last Friday, at DW.

DW:

"The German government is one of the few major Western governments that is still actively pursuing a human rights agenda," said Ian Johnson, a Beijing-based, Pulitzer Prize-winning author who also spoke at the ceremony. "The US has retreated to just trade issues, the same with the UK." 

Johnson added that the service would encourage people in China "who are fighting for a more open society to know that there's a church full of people commemorating Liu Xiaobo here."

More at DW.

You can read a translation of Ian Johnson's eulogy at the ChinaFile here:

‘Liu Knew His Responsibility in History’.

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.

Ian Johnson at Friday's meeting in Berlin

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How marketers can address challenges of China's affluent - Tom Doctoroff

Tom Doctoroff

China's affluent class is growing fast, but matching the newly found wealth with traditional roots offers them major challenges, writes marketing veteran Tom Doctoroff at AdAge. He offers marketers five tips to deal with those growing challenges.

Tom Doctoroff:

With incomes rising and lifestyle choices expanding, the motivations of China's emerging affluent class—primarily consumers in their 30s and 40s—are evolving rapidly. Compared to 10 years ago, they are driven by the challenges of balancing multi-dimensional roles, rather than merely achieving basic professional success. 

What does that mean? For one, China's upper middle class invests in "experiences" to provide a broad worldview. From sharpening expertise in health and wellness to exploring different cultures and cultivating a broad range of personal hobbies, projecting a multi-faceted identity defines success. Wide horizons are a weapon on the battlefield of life. 

There's a tension there: "I want to do more and be more but I struggle to balance it all." This anxiety is a modern-day manifestation of the ancient Confucian "doctrine of the mean"—or zhong yong—which espouses maintaining balance and harmony. 

Both men and women have trouble achieving harmony between competing roles, interests and identities. Speaking in generalities, men want to be providers for the extended family, professional role models and masters of taste and manner. Women hope to be protective mothers, accomplished professionals and "new generation individualists." 

Marketers that offer brands and experiences that resolve this conflict of the heart will earn loyalty. Here are five ways to do this.

Five tips at AdAge.

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.

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Why the investors did not buy Xiaomi's valuation - Paul Gillis

Paul Gillis

The Hong Kong IPO of China's success story Xiaomi disappointed greatly. Beida accounting professor Paul Gillis explains at Quartz why the investors did not buy the company's valuation. "I think it is hard for investors to buy the valuation."

Quartz:

What accounts for the listing’s tepid response? One read is that retail investors didn’t buy Xiaomi’s pre-IPO narrative any more than early subscribers did. In the run-up to the IPO, found Lei Jun described the company’s business model as a “new species” and a “triathlon model” with three components—smartphone sales, third-party hardware sales, and “internet service” sales, namely ads and media. While smartphones drive most of the revenue, the company hopes that internet services will eventually drive most of the profit (currently at about 40%)... 

It’s an unprecedented structure with many uncertainties. The Android smartphone business is notoriously unstable and has turned giants like Sony, HTC, and Nokia into casualties. Meanwhile, there has never been a tech company to successfully sell undifferentiated, commodity hardware as a means to boost an internet business unit—which might account for investor skepticism. 

“I think it is hard for investors to buy the valuation. The company has to transform to justify the valuation and there is too much uncertainty about whether it can do that,” says Paul Gillis, who teaches accounting at Peking University in Beijing.

More at Quartz.

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.

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Next in the trade war, the consumers? - Shaun Rein/Victor Shih

Victor Shih

China has been reluctantly been shooting back with tariffs at US imports up to know in the Donald Trump trade war. It might be even more reluctant to use the powerful tool of its consumers in the trade war, says political analyst Victor Shih in the Financial Post. But it could, and Apple and Starbucks should prepare, says business analyst Shaun Rein on Fox News.

Financial Post:

China has been careful to pose as the good guy in this fight. The spectacle of Beijing unleashing nationalist boycotts on Procter & Gamble Co., Coca-Cola Co. and Apple would make that facade harder to maintain, and give ammunition to the U.S. argument that China’s economy is ultimately a tool of the Party. 

The lack of consumer boycotts is “a bit unusual, but consistent with the Chinese rhetoric that China would be a defender of the global trading order,” Victor Shih, an associate professor and expert on China at the University of California, San Diego, said. “The reality is that the status quo allows China to protect many of its industries, so China wants to maintain the status quo.” 

Don’t count on that forbearance continuing if tensions escalate. In all, Chinese subsidiaries of U.S. companies had about US$223 billion in revenue in 2015, according to Deutsche Bank AG. Reduce those sales by just 20 per cent – a rather modest target, given what consumer boycotts did to Korean firms last year – and you’ve already done US$45 billion in damage, more than equivalent to the 10 per cent tariff the U.S. is threatening to levy on a further US$400 billion of imports if Beijing doesn’t back down.

Fox News:

Shaun Rein, managing director at the China Market Research Group in Shanghai, told The Post that the Chinese government could stoke anti-American sentiments among consumers, similar to its boycotts last year on South Korea’s Lotte Group, causing dozens of their stores to close. “If I was Starbucks or Apple,” he said, “I would be scared right now.”

More in the Financial Post and Fox News.

Both Shaun Rein and Victor Shih are speakers at the China Speakers Bureau. Do you need them at your meeting or conference? Do get in touch or fill in our speakers' request form.

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US remains main destination for China's rich - Rupert Hoogewerf

Rupert Hoogewerf

Despite talks for trade war and erratic tweets and policies by US president Donald Trump, China's rich still see in the US the preferred destination for migration, says the 2018 Hurun report on immigration and China's HNWI'd. And despite talk of the Brexit, London is moving upwards in its annual rankings, says Hurun chief researcher Rupert Hoogewerf.

The Hurun Report:

Rupert Hoogewerf, chairman and chief researcher of Hurun Report, said, “The United States is definitely the first choice for Chinese HNWIs who are considering immigration. London has risen rapidly to become the sixth most popular destination for purchasing overseas property, overtaking Vancouver, Toronto and Melbourne for the first time. It is also interesting to note that 90% of those considering immigration intend to live in China after retirement. I am delighted to release the White Paper for the fifth consecutive year in association with leading Chinese immigration brand Visas Consulting Group. We hope that this report will help Chinese HNWIs (those with family assets worth US$1.5m to US$31m) considering investment immigration make better decisions.”... 

This year, Visas Consulting Group and Hurun Research reveal the top ten countries that constitute the Visas Consulting Hurun Report Chinese Immigration Index 2018 (CII 2018) based on the eight categories of education, investment destination preferences, immigration policy, property purchasing, personal taxation levels, medical care, visa-free travel and ease of adaptability. The United States remains the most popular destination for HNWIs investment emigrants for the fourth year running, while the UK has risen from third place to second. Emerging immigration destinations Ireland and Greece performed well, with Ireland moving up four places to third, and Greece occupying sixth place in its debut appearance on the ranking. Canada falls two places to fourth, while Australia is down one place to fifth. Rupert Hoogewerf said, “The United States far surpasses other countries as the first choice of Chinese HNWIs in terms of immigration destinations.”... 

The UK climbed from third place to second with a score of 8.5. Despite the UK being set to leave the EU, London remains one of the world's leading financial centers, and British education is regarded as second only to that of the United States. Investment immigration to the UK comes with the benefits of one’s children enjoying an elite British education, and of the family gaining access to its high quality medical and welfare systems. Furthermore, a favourable exchange rate makes investment in the UK more attractive. Rupert Hoogewerf said, “Brexit has had little impact on Chinese entrepreneurs. At present, British property represents good value, with uncertainty over Brexit and the weakness of the pound making it relatively cheap”.

More at the Hurun 2018 Report.

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.

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China trade, investments to Eastern Europe still lagging - Sara Hsu

Sara Hsu

Eyes were on Sofia, Bulgaria, last week, as China's prime minister Li Keqiang tries to improve relations with Eastern Europe. Economist Sara Hsu puts Li's efforts into perspective as both trade and investments between China and Eastern Europe have been stagnant, compared to other countries in the One-Belt, One-Road initiative, she tells at CGTN. Also: the contagious relations with the EU.

Sara Hsu 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.

Are you looking for more experts on China's investment program? Do check out this list.

Real fallout of trade war can still be avoided - Wang Haiyan

Wang Haiyan

First shots have been fired on tariffs in the trade war between the US and China, but the impact has been limited up to now, tells economist Wang Haiyan to CGTN, as the affected numbers are still relatively small. Escalating the effects can be avoided, but to need a compromise by the end of the summer, she says.

Wang Haiyan 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 experts on the emerging trade war between China and the US? Do check out this list. 

How to deal with WeChat blocks - Ashley Dudarenok

Ashley Dudarenok

Foreign brands know they need Tencent's WeChat to sell their products to Chinese consumers, but working with WeChat mean dealing with blocks, says marketing expert Ashley Dudarenok, author of Unlocking the World's Largest E-Market: A Guide to Selling on Chinese Social Media at AshleyTalks. Not only they have to deal with official rules, also Tencent does not like links to its direct competitors like Alibaba. How to deal with them?

Ashley Dudarenok on the official WeChat rules:

WeChat has its own rules and regulations related to external links and specifies ten types of content with external links that may be blocked. Here is the English translation:

1. Content that forces or entices users to share something (e.g. a WeChat article) in order to proceed to the next step, like getting information, winning a prize or taking part in a campaign; sometimes with benefits provided, including but not limited to cash, coupons, discounts and prizes
2. Content that forces or entices users to follow an official account in order to proceed to the next step, like getting information, winning a prize or taking part in a campaign
3. H5 games and tests that entice users for interactions, including friend Q&A, personality tests, online fortune telling or prediction games, etc.
4. Fraudulent content, including fake red packets or campaigns, and content that imitates the style and domain name of otherWeChat articles and accounts and may cause confusion
5. Rumors or false information that may cause harm to individuals, corporations, or other institutions
6. Spam, ads, and junk content, including information about counterfeit goods, ads making fraudulent claims, ads for cryptocurrencies, etc.
7. Content with sensational, exaggerated, or misleading headlines that don’t match the content as well as pornographic, erotic, and vulgar content
8. Content designed for the collection of users’ personal data or information without the user’s knowledge or consent
9. Content soliciting donations to religious organizations
10. Content offering payment for votes

According to WeChat’s regulations, once found, these external links will be blocked immediately and the related official account may also be sanctioned. In the worst case scenario, this can lead to a permanent ban.

More tips to avoid blocks at AshleyTalks. Ashley Dudarenok 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.

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Why Alipay has a hard time cracking Hong Kong - Shaun Rein

Shaun Rein

Alibaba has been successful in cracking China's financial markets, but going global, even to Hong Kong proves to be tough. The difference: innovating in China proved to be long overdue, while Hong Kong had already a well developed financial system, says financial 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:

But AlipayHK faces competition from other providers as well as a mature payments market in Hong Kong, dominated by the city’s home-grown Octopus stored-value card. 

“The Octopus card was very innovative, allowing people to store money on a card and pay for the MTR or 7-Eleven. But this was so popular that it hurt innovation,” said Shaun Rein, managing director of China Market Research Group. 

“Everybody in Hong Kong has a credit or debit card, so there isn’t a pressing need to figure out a new form of payments system, because what they had worked, while Hong Kong is also so convenient that e-commerce hasn’t taken off in any meaningful way, so there also isn’t a need for online or mobile payments to take off,” he said. 

Adding to the difficulty are concerns over data privacy because of a perceived connection between AlipayHK and its mainland China peer Alipay, as AlipayHK discovered in a recent survey it commissioned in Hong Kong. The survey found that only 30 per cent of the 1,049 respondents had experience of mobile payments, while over 55 per cent expressed worries over “personal data leakage”.

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 financial analysts at the China Speakers Bureau? Do check out this list.

Why mobile commerce does not equal e-commerce - Ashley Dudarenok

Ashley Dudarenok

Selling online in China needs a completely different approach compared to the rest of the world. Marketing veteran Ashley Dudarenok, author of Unlocking the World's Largest E-Market: A Guide to Selling on Chinese Social Media explains to CER what the difference is between e-commerce and mobile commerce, and why mobile is dominant in China.

CER:

A: Traditional retail is still the biggest retail channel in China, but this is changing rapidly. When we talk about e-commerce and offline retail, what is happening is that people don’t want to migrate either to one or the other, but instead radiate into the middle ground – the ‘new retail’ experience. That shift happens one the one hand because of the tastes of the consumer, but also the competitive drive from Alibaba and Tencent. 

How big is e-commerce itself? It’s big, but I’d say more important is mobile commerce. Last year, mobile commerce overtook e-commerce in terms of number of purchases made in China, but both are still smaller than offline channels. The key is that new retail is going to merge the online and offline into one ecosystem. We will not see offline stores disappear, certainly not. Instead we are about to see the evolution of these brick-and-mortar stores into the ‘new retail’ experience. I don’t believe employees are going to disappear from grocery stores or coffee shops, for instance, as people all seem to imagine when they picture the future of Chinese retail, they’re just going to be doing different jobs. They won’t be changing the price tags but entertaining us in the store in some way. 

Lots of people still misunderstand e-commerce and think it is omnichannel, with a company present across the spectrum, from mobiles to websites to stores. In reality, new retail is all about putting the consumers at the top and creating a huge data pool around their shopping trends – where, how, and what do they buy. From this, retailers both online and offline, distributors, suppliers etc. plug in and communicate with each other to optimally serve that individual. That’s the uniqueness of this experience. 

So we shouldn’t ask how big is e-commerce now, but how big will it be in three years. 

CER: You make the distinction between e-commerce and mobile commerce. Are they not just variations of the same thing? 

A: In China there is a huge difference. E-commerce is the traditional desktop ordering platforms such as Taobao. Mobile commerce is accessible by apps that often do not have a popular desktop version, like WeChat or some live-streaming platforms. This ability to use a phone to quickly complete the entire transaction is the main idea, and it is a huge business in China. 

CER: Why do you think online retail and mobile payments are so much more popular in China than in other parts of the world? 

A: There are many factors, the first probably being privacy. Westerners are very paranoid about privacy, but the Chinese just have a completely different approach to personal information. Just having a WeChat account, for example, basically requires uploading a passport – imagine how many users would flee Facebook if they started asking for such details. I think Western consumers tend to think beyond just convenience and are sceptical of how retailers might abuse any information provided. In China, there is less fear of being harassed or spammed, but instead giving out more info may just lead to better service. Take WeChat again: they do not allow many types of advertising or spamming etc., and really do focus on quality of service for the user over quantity of payments generated. Its users are at the centre of things, and users themselves know that if they give WeChat their bank info and other data, when they step out of their house later they will get a notification about a discount on their favourite coffee at a Starbucks they are about to walk past. 

A second is the integration of technology and society. The technology in the West just isn’t there. But in China the speed at which people adopt new ideas is rapid. Grandmas and grandpas are using mobile payment and shopping apps to guide their daily lives, but in Europe and the US people of that generation would most likely need their sons and daughters’ help. This extends to companies too, which expand and develop so fast here. There is that saying: ‘perfect is not fast enough.’ Trial and error will push forward progress much faster than a perhaps more mature approach of Western companies to achieve perfection before moving on to the next stage. This cautiousness and adherence to procedure is exactly why many foreign retail brands are suffering in China – they just can’t keep up with the locals. 

CER: Let’s focus on the companies themselves then. How are foreign retail brands competing with the homegrown players? 

A: It depends on the market segment. International B2B (business-to-business) firms just don’t have a clue what to do in China. FMCG brands are also losing market share year on year. 

Luxury brands, on the other hand, have retained their prestige for historical reasons, it has nothing to do with their adoption of technology. They are certainly going through a digital transformation right now, but they can afford to go a bit slower for this reason. They don’t have to worry about local firms beating them in terms of quality or image. Furthermore, luxury brands’ core Chinese consumer base is around the 35+ age group, which still has an affinity for traditional retail practices. 

But make no mistake, they want in on China and know a special approach is needed. A common strategy for a luxury group is to pick a single brand and digitalise it for the Chinese market, and if it works apply it to the other brands. 

CER: Lastly, what effects do you think there will be on businesses from Beijing’s increasing oversight of industries like mobile payments and peer-to-peer lending? 

A: Beijing is getting concerned with the amount of money flowing around in blockchain, cryptocurrencies and individual lending, but let’s remember China’s general policy: if it’s not forbidden, it’s allowed. So in the short term, until there are acute changes in policy, companies will keep doing what they’re doing. 

There will be more regulation in the long term, however, and an adjustment period will be necessary for retail companies. But I think once this is over it will be good for the industry. Are some brands going to be hit? Yes. But once the playbook is laid out, once firms know what they can and can’t do, companies can start setting up a solid, long-term infrastructure.

More in CER (here quoted in Chozan.

Ashley Durarendok 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 experts on China's digital transformation? Do check out this list.