Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
Alibaba and Tencent were high-profile casualties as the central government stepped in to regulate free-wheeling tech firms with growing financial clout. To the relief of consumers and smaller competitors, exponential growth in the tech industry is over, tells Winston Ma, former managing director of the sovereign wealth firm China Investment Corporation (CIC) in New York to Reuters.
Reuters, quoting Winston Ma:
“The blockbuster IPO of Ant Group last November – and its suspension — was the tipping point that urged all relevant Chinese regulators to step up supervision of the major internet platforms. Now the comprehensive framework is being put in place, before the major platforms becoming “too big to regulate”.
“In short, the age of “exponential growth in the wilderness” for internet finance – and all cyber barons in various sectors — is over.”
Western media have been speculating about the whereabouts of Alibaba’s founder Jack Ma after he disappeared from the limelight months ago. Ma did get a dressing down from the government after he ushered criticism, says Shanghai-based business analyst Shaun Reinto AP. Ma is laying down, but there is no reason he is in real problems, Rein adds.
AP:
Some see Ma’s travails as a warning from the ruling Communist Party that even a wildly successful entrepreneur can’t publicly defy regulators. But finance experts said President Xi Jinping’s government already was uneasy about Alibaba’s dominance in retailing. As for Ant, regulators worried it might add to financial risks seen by the ruling party as one of the biggest threats to China’s economic growth.
Shaun Rein, a business consultant in Shanghai who said he meets Alibaba managers and people who know Ma, said none of them reports the billionaire is in legal trouble.
“They spanked him. He’s learned his lesson, and that’s why he’s been quiet for the past two months,” said Rein, founder of China Market Research Group. “Some of his friends told me they can’t believe how stupid he was.”
Ma, 56, stepped down as Alibaba’s chairman in 2019 but is part of the Alibaba Partnership, a 36-member group with the right to nominate a majority of its board of directors. He is one of the biggest shareholders…
The anti-monopoly investigation of Alibaba announced in December targets its policy that prohibits vendors and other business partners from dealing with its competitors.
Foreign investors were rattled, but Chinese businesspeople are “quite happy” with the crackdown, said Rein.
“A lot of people saw Alibaba and Tencent as monopolies and stifling competition,” he said.
Ma’s high profile is unusual in a society where folk wisdom warns, “a man fears getting famous like a pig fears getting fat.” Others such as Tencent founder Ma Huateng, who is no relation to Jack Ma, are known for avoiding reporters and public appearances.
China’s biggest change over the past two years has been the development of its retail ecosystem, says marketing veteran Ashley Dudarenok at her vlog. Not only by thinking it out, but by implementing a change that has affected retail profoundly.
E-commerce firm Pinduoduo is closing in on market leader Alibaba, show recent post-corona figures, says marketing expert Arnold Ma in Kr-Asia. Ma believes that the key to Pinduoduo’s growth is its continuing focus on its D2C (direct to consumer) model across manufacturing, agriculture, independent sellers, and new brands.
Kr-Asia:
The number of Pinduoduo’s active annual buyers in the year ended September 30 reached 731.3 million, an increase of 36% YoY, and closing the gap with rival Alibaba, which boasted 757 million annual active consumers in the same period.
General merchandise volume (GMV) in the twelve-month period ended September 30 2020 reached nearly RMB 1.5 trillion, up 73% YoY. In addition, the Shanghai-based firm recorded a net loss of RMB 784.7 million during the third quarter, narrowing from a loss of RMB 2.3 billion in the same quarter of 2019.
“Great to see such a positive quarter from Pinduoduo post-pandemic in China,” noted Arnold Ma, founder of Qumin, a digital marketing agency based in London and Shanghai, echoing Wu’s comments.
Ma believes that the key to Pinduoduo’s growth is its continuing focus on its D2C (direct to consumer) model across manufacturing, agriculture, independent sellers, and new brands. DuoDuo Maicai is a dedicated C2M function for farmers to directly reach consumers, which the company launched in October.
Pinduoduo’s strong performance is evidenced by the average annual spending per user increasing from RMB 1,857 (USD 280.84) in the second quarter to RMB 1,993 (USD 301.41) in the third quarter, despite the net addition of 48 million active buyers.
Digital insurance has become one of the post-corona winners in China, says Rupert Hoogewerf, chief researcher of the Hurun China Rich List as his firm published the first list of top-10 digital insurers, according to Asia One. Health insurance was one of the key winners, he says.
Asia One:
The post-pandemic era has seen health becoming one of the hottest topics and diversified insurance products, said Rupert Hoogewerf, the chairman and chief researcher of Hurun Report. Quoting statistics from Insurance Association of China, Hoogewerf said Chinese insurers’ premium income increased by 6.5 percent year on year to 2.7 trillion yuan in the first half of the year.
Insurance agencies have played a crucial part in insurance purchases, whose premium income has accounted for over 80% of the total premium income for the past consecutive years, Hoogewerf noted, adding that the practice of independent service providing and marketing has shaped the insurance sector, and, at present, near 70% of China’s 700 national insurance agencies are eligible to market online.
Digital insurance in China has enjoyed leap-forward development in the past years, Hoogewerf said. He further explained that, besides internet giants Baidu, Alibaba, Tencent and JD.com, Ctrip, Didi, Meituan and other platforms have rolled out insurance services. Relying on massive active users and taking advantages of big data and cloud computing technologies, those companies have designed insurance products in accordance with the consumption scenarios of their original platforms, including entertainment, shopping, travelling and mutual health aid, to meet the insurance needs of different customer groups, said Hoogewerf. For instance, Hoogewerf added, Ant Insurance provides shipping insurance for online shopping and Ctrip offers insurance for flight accidents and delay.
In digital insurance business, there are other companies that worth gaining people’s attention, such as scenario-based health insurance marketing agencies represented by Qingsong Health Group’s insurance platform, and China’s earliest online platforms that obtained online insurance brokerage licenses represented by Huize Insurance, said Hoogewerf.
As insurtech embraces a new development era in both China and the global market, multiple business players have been competing for the position of industry leaders, Hoogewerf noted. He said the prospects of Chinese digital insurance agencies are promising, given the trend of independent service providing and marketing in insurance industry as well as the rapid development of internet technology.
Marketing guru Ashley Dudarenok interviews Aliexpress's Martin Wang on how his Alibaba' company is developing globally. Aliexpress started to sell products from firms in China to a global market, but now expands and offers its network to local producers everywhere by developing their digital platforms.
Already before COVID-19, American and Chinese internet giants fought for dominance in the booming market for food and grocery delivery, and the coronavirus crisis has caused another boom in the market, says William Bao Bean, managing director of global venture capital firm SOSV in Shanghai in Marketplace. Having dominance in their home market helps the Chinese players.
Marketplace:
William Bao Bean
“Ordering groceries online is much more advanced in China than the U.S., and when I say ‘advanced,’ it’s market penetration. I’d say more than double the amount of groceries are ordered in China for delivery versus the U.S.,” said William Bao Bean, with the global venture capital firm SOSV in Shanghai.
According to iResearch, the customers it surveyed used grocery delivery services one to two times a week in 2019...
These differences matter, given that U.S. grocery and food apps are now competing against Chinese giants for customers in Latin America and India. This is a global food fight.
“When you look at India, they’re definitely going more towards the China model,” said Bao Bean, the venture capitalist in Shanghai. “Whereas the U.S., the big-box format, with large parking lots and everybody driving a car, you’re simply not going to see that in Southeast Asia and South Asia.”
He said Amazon is not doing as well in India compared to Chinese tech firms, and Chinese money is backing Indian startups. A report by the MacroPolo think tank found that Chinese apps overtook U.S. apps in 2019.
Shaun Rein, founder of the China Market Research Group, believes a major challenge will be the growing strength of China's online movie sector, which is hugely competitive with platforms such as Iqiyi, Youkou and Tencent Video.
He said subscriptions were cheap at around $2 a month for a basic package, while movie tickets often sell for $20.
"Chinese players are just so cheap, often because they are subsidised as they are owned by giant internet players like Alibaba, Baidu or Tencent," he said.
"Aside from fears over catching Covid-19, consumers won't go back to cinemas anytime soon as the digital offerings are too good and cheap,"
He also predicted more pain for cinemas if film companies start to launch direct-to-digital offerings and charge higher prices for online movie releases on a pay-as-you-go basic on top of subscription rates. "I expect the cinema sector to face a massive bloodbath and many will go out of business," he added.
Pinduoduo has been challenging e-commerce giants Alibaba and JD during the corona crisis. Marketing analyst Ashley Dudarenok looks if Pinduoduo can keep up in the e-commerce wars in China, for Bloomberg.
China's e-commerce players JD, Alibaba and Pinduoduo tried to build leverage during the coronavirus crisis, explains marketing guru Ashley Dudarenok at Bloomberg. And how are they profiting now the demand for Chinese products in the rest of the world is down?
Private companies in China have become more important than sometimes appreciated, says Rupert Hoogewerf, chairman of the Hurun Research Institute in its latest report, according to the South China Morning Post. They have grown eight times in the past decade, pay most taxes and create most jobs. "Creating value is more than making sales," says Rupert Hoogewerf. The China Morning Post:
China’s 10 largest companies have grown eight-fold in value over the past decade, according to an inaugural Hurun Research Institute report, shedding light on a sector that contributes half of the nation’s tax receipts and 80 per cent of jobs.
The South China Morning Post:
The 10, led by e-commerce behemoth Alibaba Group Holding, were valued a combined US$1.8 trillion, a size that would rank them as the 10th largest by gross domestic product surpassing Canada, were they an economic entity, based on International Monetary Fund data. The snapshot comes from an inaugural list of 500 most valuable private companies released by Hurun on Thursday, and based on data up to November 2019.
Alibaba (US$545 billion), Tencent Holdings (US$408 billion), Ping An Insurance (US$215 billion) are the top trio. Huawei, the subject of US security scrutiny over alleged embedded spyware in its telecoms systems, was ranked fourth, with a valuation of US$172 billion while Alibaba’s unlisted affiliate Ant Financial came in fifth at an estimated US$143 billion...
“Companies on the Hurun China 500 create significant value for local governments, in terms of GDP, industry development, tax revenues and skilled labour,” said Rupert Hoogewerf, chairman and chief researcher of the Hurun report.
Half of them are in emerging industries, especially in the fields of advanced manufacturing, health care, media and entertainment and e-commerce, the report shows. About two-thirds are listed companies, while the rest are non-listed companies or only partially listed, he added.
“We are in an era when it is about value created rather than sales generated that ought to be used to differentiate the best companies in China,” Hoogewerf said. “Some of the Hurun China 500 make only relatively small revenues, but create massive shareholder value.”
Getting into hot water with China's consumers, its government or both happens regularly to foreign brands. Business analyst Shaun Rein uses the latest NBA-upheaval to explain how those boycotts work, and how foreign brands can deal with them, according to the Marketplace.
The Marketplace:
China’s nearly 1.4 billion consumers take issues about the country’s territorial integrity seriously.
“They go back to what they consider humiliation during the Qing Dynasty,” said Shaun Rein, author of the book, ‘The War for China’s Wallet.’
“They feel that the Western powers, led by the British, enslaved the Chinese to opium [and] destroyed the country’s economy.”...
Chinese firms suspended or canceled sponsorship deals with the National Basketball Association last month after Houston Rockets’ general manager, Daryl Morey, tweeted support for protesters in Hong Kong.
Ecommerce giants Alibaba, JD.com and Suning voluntarily removed Houston Rockets merchandise from their platforms.
“They’re showing the government that they will support the motherland,” Rein said. There are some signs that NBA is on a slow route to recovery in China. While Chinese state broadcaster CCTV has not resumed airing NBA games, internet giant Tencent has — except for the ones involving the Rockets.
Rein, who is also founder of the China Market Research Group, suggested the best way for foreign brands to combat these boycotts and bans is to issue a sincere apology.
“What we tell our clients is stand up, apologize [and say] ‘We are sorry. We respect China. We respect China’s sovereignty issues,’” he said. “Then afterwards you can say pretty much anything, as long as you’re showing respect to the Chinese people.”
Rein said the NBA fell far short of that but, even so, that public anger appeared to have subsided after Chinese state media stopped covering the controversy. There are times, however, when the central government, via the state press, whips up public anger. In 2016, China felt threatened when South Korea signed a deal with the U.S. to deploy an American anti-ballistic missile shield called the Terminal High Altitude Area Defense (THAAD). Rein said the government criticized South Korea in the Chinese state press.
“They basically said: ‘How dare this little country install something that could be an offensive tool against us,’” he said.
Chinese consumers took the cue. They stopped buying Korean cars, cosmetics and snacks.
South Korean supermarket chain Lotte, because it provided land for the South Korean military to build the THAAD system, was the hardest hit.
The Hangzhou government raised eyebrows as it announced last week it would send 100 officials to private companies to check on them. Professor Paul Gillis at Peking University’s Guanghua School of Management did not see that much news, he tells Bloomberg.
Bloomberg:
Government agencies may also be heightening their monitoring of the vast private sector at a time the Chinese economy is decelerating — raising the prospect of destabilizing job cuts as enterprises try to protect bottom lines.
Alibaba is hosting its annual investors’ conference this week in Hangzhou against the backdrop of a worsening outlook for the country.
“They might be checking whether the [Chinese] Communist Party [CCP] units are working effectively within the companies,” said Paul Gillis, a professor at Peking University’s Guanghua School of Management.
“While China legitimized capitalism, the level of government influence was never intended to disappear. Occasionally private entrepreneurs forget about this and are reminded of it,” Gillis added.
Zhejiang is considered the cradle of modern Chinese private enterprise, home to a generation of self-made billionaires from Alibaba’s Jack Ma (馬雲) and Geely founder Li Shufu (李書福) to Wahaha’s Zong Qinghou (宗慶后).
E-commerce in China showed drama this month, as Alibaba purchased NetEase's Kaola for US$2 billion, says e-commerce expert Ashley Dudarenok at her vlog. The number one and two in cross-border e-commerce did not change hands so easy, and Dudarenok explains why.
Alibaba will not be the same after its charismatic chairman Jack Ma has left, says business analyst Shaun Rein, according to the China Daily." "I'm not sure that people want to meet Daniel Zhang in the same way they want to meet Jack Ma."
The China Daily:
Analysts were cautious about whether his departure would dent Alibaba's globalization ambition of serving 2 billion users and creating 100 million jobs by 2036 amid economic uncertainty and rising protectionist sentiment.
"He has got the charisma to call the CEO of a big company in America and say, 'Let's sit down and talk'," Shaun Rein, managing director of consultancy China Market Research Group, told Nikkei Asian Review. "I'm not sure that people want to meet Daniel Zhang in the same way they want to meet Jack Ma."
Ma has been explicit about devoting more time and energy to education and philanthropy upon his resignation as Alibaba chairman. His inspiring speeches have been praised by many people across China.
In China, the internet is the economy. SOSV managing director William Bao Bean explains how international firms can enter the China market. With magic information on how Tencent and their WeChat dominate the playing field, and how you can win that war. And how Chinese companies are conquering the world.
Tech companies in China became big by asking their workers to make long hours, 996 in jargon. But those days are over says business analyst Shaun Reinto CBS. Not only is it illegal to let people work those long hours, but qualified workers also leave their jobs, because they want to have a life next to their work too.
CBS:
The term "9-9-6" means nine in the morning to nine in the evening, six days a week. That includes hours and hours of unpaid overtime. It's illegal -- but the government turns a blind eye, because long hours build China's tech giants, like Alibaba and Huawei, that employ millions and make billions.
But change could be coming. "If you're going to have 9-9-6 work culture, I'm sorry, you're not going to be able to get the top Chinese talent anymore," said Shaun Rein of the China Market Research Group. Rein said that a decade ago, young people were inspired by the race to make China a world leader in tech. But now the thrill – and the promise of striking it rich – are largely gone.
"Younger Chinese just don't want to slave away either working for a multi-national company…" Rein said, "[or] work in a factory or even work for a Chinese billionaire like Jack Ma. And they're starting to push back."
Not everybody agrees with Shaun, though, like William Bao Bean: "Chinese tech leaders must build an environment where everyone feels they are part of a team, not just an employee, where they are empowered to make a difference."
Investor Jim Rogers tried to buy an ice-cream in Beijing but discovered you cannot buy it for money, you need a mobile. Alibaba and Tencent have become giant technology firms that have changed day-to-day life.
