China lockdowns hurt multinational firms – Ben Cavender

 

Ben Cavender

Global companies have been warning of the major effects of China’s lockdown on their operations, curtailing Shanghai for more than six weeks. But they have very few alternatives apart from sitting out the ordeal, says Shanghai-based business analyst Ben Cavender to CNN. The corporate exodus from Russia after the invasion of Ukraine did not help. For sure, consumption in China is down.

CNN:

The combination of both events has created a staggering one-two punch for multinational corporations, such as Estée Lauder (EL), which said last week that the “two significant headwinds” forced it to slash its outlook for the year.

The crisis is a stark reminder of China’s outsized importance to global companies.

“Like it or not, at this point if you’re a multinational, China is probably your first or second largest consumer market,” said Ben Cavender, managing director of the consultancy China Market Research Group…

“Frankly speaking, consumers right now are not worried about buying lipstick or coffee,” said Cavender. “They’re really much more focused on getting [necessities].”

In Shanghai, for instance, the lockdown initially led to a massive scramble for food and widespread complaints about difficulties receiving deliveries.

Now, even as access improves, many people concentrate on what’s known as “group buying,” allowing users who live in the same community to place bulk orders together for groceries and other essentials.

Even those who aren’t stuck at home may be affected. Consumers who live in cities without restrictions might also hesitate to go out and hit the mall, for fear of “what has happened in Shanghai,” where people remain in lockdown indefinitely, said Cavender.

“It’s been a very big negative drag on consumption.”…

Cavender said that the recent challenges in Ukraine and China had highlighted “a period of greater risk” more broadly for international firms.

“I do think there are a lot more challenges now to being a multinational than there have been in the past,” he added.

More at CNN.

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

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How Shenzhen overtook New York in number of billionaires – Rupert Hoogewerf

 

Rupert Hoogewerf

More Chinese cities overtake New York in their number of resident billionaires, Shenzhen being the latest, says Rupert Hoogewerf, chairman and chief researcher of the Hurun global rich list to NBC. “It is a significant indicator of where Shenzhen has come from and where it is going,” he said.

NBC:

According to the Hurun Global Rich List, an annual ranking compiled by a private Shanghai-based company, Beijing is home to the world’s greatest number of billionaires at 144, followed by Shanghai with 121. There are 113 billionaires in Shenzhen, compared with 110 in New York, while London came in fifth with 101.

The growing concentration of wealth isn’t news to people in Shenzhen, which added eight billionaires since last year.

“It’s almost more of a wake-up call for the rest of the world,” said Rupert Hoogewerf, chairman and chief researcher of Hurun Report, the company behind the list.

While rankings can fluctuate, he said the rising number of billionaires in Shenzhen reflected a “megatrend” that will draw more young entrepreneurs to the city in coming years.

“It is a significant indicator of where Shenzhen has come from and where it is going,” he said.

Shenzhen’s rise began in 1980, when it was named China’s first special economic zone as part of the country’s “reform and opening up” under then-leader Deng Xiaoping. That allowed the city to experiment with market capitalism in an effort to attract foreign investment. From 1979 to 2021, Shenzhen’s gross domestic product grew from less than $28 million to almost $475 billion.

Today, the city is home to some of China’s biggest tech companies, including telecom giant Huawei and the internet conglomerate Tencent, inspiring others to follow. Last year, 2,500 new state-recognized high-tech companies were set up in Shenzhen, bringing the total number to 17,000, according to the local government.

More at NBC.

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

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How China moved from imitation to creation - William Bao Bean

William Bao Bean (right) in Shenzhen

Innovation expert William Bao Bean acts as a city guide in hardware capital Shenzhen for NBC's Richard Engel to show how it changed from a fishing village into a booming city. This is what we call China speed, explains William.

The full program is available here.

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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Up to 50 bn US$ in capital waiting to enter A-share market - Ben Cavender

Ben Cavender

China´s stock markets get a setback as global stock-index compiler MSCI decided to delay inclusion of China at least still next year. Reason: the current 5% foreign participation is too low. But business analyst Ben Cavender expects China to open its market further this year and an estimated 20-50 billion US dollar in capital to enter the market next year, he tells Money Control.

Money Control:

Latha: I am sure you are looking at the way China is progressing on these matters. Is China poised to increase foreign participation beyond this 5 percent very rapidly? 

A: It seems like they are moving in a direction and maybe more quickly than people might think. Last year we had the Shanghai, Hong Kong Stock Connect programme open up. Looking at the Q1 this year we are going to see the Shenzhen market open up probably in a similar way. Since the last year they have increased quotas about 50 percent. So they are clearly making steps to move in that direction. The question is how long is it going to take for them to kind of get the rest of the weigh and I wouldn’t be surprise if we see that happen even within the next 6 to 8 months. 

Sonia: Do you see China continue to outperform market like India and what do you think could be the extent of the fund flows that move into the China A-shares once they get included? 

A: Looking at A-share market, we have seen a tremendous run-up over the last year. Shanghai is trading at 20 times earnings; Shenzhen is close to 60 times earnings. So in some sense shares are not undervalued in China any more. So from an institutional investor perspective they might be initially cautious but if they have to track emerging market indexes and China is included - I could see that leading to anywhere from USD 20 billion to USD 50 billion coming into the China market if quotas are relaxed, so a lot of money. 

Latha: China is already battling a slowdown internally or at least even mildly encouraging it. If you have this kind of money coming in then there is a problem of Chinese yuan appreciation. Do you think China for separate reasons could go slow on allowing so much of money to come in one shot? 

A: I could see them trying to slow things down, little bit control the situation but at the end of the day I think they have more gains in opening market up by bringing in institutional investors would probably stabilise the A-share market to some extent and one of the issues we have is the market driven right now by retail investors who are gambling about things going to happen in the future. So bringing in some special investors could calm things down.

More in Money Control.

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 financial experts on the China Speakers Bureau? Do check out this recently updated list.  

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What can Detroit learn from China? - Michael Justin Lee

+Michael Lee 

Can Detroit learn from the way China pulled its economy out of misery, wonders lecturer Michael Justin Lee in ChinaUSFocus. "There actually was no great secret to the success of China’s SEZs. The government butts out to incent private capital in. That’s pretty much it." 

Michael Justin Lee:

There actually was no great secret to the success of China’s [Special Economic Zones or] SEZs. The government butts out to incent private capital in. That’s pretty much it. Of course, government butting out includes lowering or even better, eliminating, taxes so Mr. Orr must expect a barrage of artillery fire. But without tax advantaging, no one would plant new capital now in Detroit. And without that new capital, even a Federal lifeline would be no more than a band-aid measure. Detroit has nothing to lose in trying. Unfortunately, this is not just a figure of speech. 

Detroit, in fact, has literally nothing left to lose. But with all due respect to those eminent economists Lennon and McCartney, just because something can’t get no worse is no reason why it must get better. Detroit might stay down permanently if something drastic is not enacted. 

In exchange for bankruptcy protection from creditors, Mr. Orr should offer the creation of the Detroit Special Economic Zone, the whole free market shebang. Come one, come all, just like in Shenzhen. Detroit gives nothing but full opportunity. But that’s enough. You make a buck in the Detroit Special Economic Zone, you keep it all. That’s a mighty fine incentive for someone to consider making a first investment or hiring a first employee in Detroit. 

Deng Xiaoping could not have enacted his magnificent capitalist experiment until the situation in China was as bleak as Aragorn’s in the Lord of the Rings. Mr. Orr has the same “golden opportunity.” Detroit’s ruinous former mayors Coleman Young and Kwame Kilpatrick would never have considered this route. But paradoxically, precisely because of the tragic legacy that those two men left behind, in a few years Detroit could be the very model for emulation for the rest of metropolitan America.

More in ChinaUSFocus.

Michael Justin Lee 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.

China Weekly Hangout

What is behind due diligence firms in China, we asked ourselves as one of the leading voices in the industry, Peter Humphrey was arrested last summer for illegal business practices. The +China Weekly Hangout will discuss due diligence of the due diligence firms on September 25. You can read our announcement here, or register for participation at our event page. Joining us from Taiwan is Miguel De Vinci (aka 李洛傑).

The relation between China and Hong Kong keeps on being tense. Is the Occupy Central going to make a difference? How eager are the Hong Kong people to get one-person, one-vote. CSR expert +Brian Ho answered in the +China Weekly Hangout on July 1 the questions by +Fons Tuinstra of the China Speakers Bureau.

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Are China's authorities starting to listen to revolting workers? - Zhang Lijia

Zhang Lijia

Apple, and its supplier Foxconn, are in the middle of revolts by workers in Beijing, Shenzhen, Wuhan and Wukan, who are standing up for their rights. Former factory worker Zhang Lijia supports their actions, and hope China's government will continue to support those workers, she writes in The Guardian.

Zhang Lijia

I  felt the pain of my fellow workers because I, too, slaved for 10 years at a factory and endured its strict rules. The restrictions at my state-owned factory, however, paled in comparison to those of cold-hearted capitalism. There is labour law that forbids a 16-hour working day, among other malpractices, but it is not forcefully implemented by the local authority. After all, the private or foreign-invested enterprises bring revenues. 

I was very pleased to see the migrant workers beginning to resist. Shortly after Foxconn's suicides, workers from several Japanese-owned Honda factories revolted. They went on strike until their demands for better pay and working conditions were met. In chatrooms on the internet, several Honda workers argued that it would be better to put up a fight than to take one's life. Compared with their fathers, the young workers are savvy about the internet, better educated, more worldly and far more aware of the law and their rights... 

I was relieved and delighted by the approach the authorities have taken in both the Wukan and Wuhan cases: they have clearly recognisednongmin's rising demands for rights and equality. But a soft approach alone isn't enough. I hope China's leaders will really listen to the farmers, opening up more channels for them to express their grievances, and allowing some kind of independent labour union or at least a collective bargaining mechanism to ease the conflicts. And ultimately, they'll have to grant the same rights to those who make gadgets such as the Xbox and iPhone as those who use them.

More in The Guardian.

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.

More on Zhang Lijia and China's moral crisis

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Shenzhen Attitude - Mark Obama Ndesandjo

Mark Obama Ndesandjo

by Mark Obama Ndesandjo

During a recent discussion with some children, I suggested a game. I proposed giving each of the 26 letters in the English alphabet a number: A is 1, B is 2, C is 3 and so forth. “Find me a word whose letters add up to 100,” I asked. “It has to do with dreams and success.”

While the children were thinking, I reflected on the power of dreams. Dreams are about the future and our individual potential to carve our own path. It was a dream that brought me to China eight years ago, a dream that I would start a new life, based on learning the language and making a difference.

The city I chose to live in was Shenzhen. To many it is a boom town, sprawling, uncultured and ugly. To me, it is young, dynamic, conveniently situated next to Hong Kong, and full of people from all over China — all seeking their dreams.

Although “Shenzhen speed,” like “time is money,” are catchphrases that help characterize this 30-year old city, I prefer to think of another Shenzhen, a place that is part of the future of China but also has its feet rooted in tradition.

The traditional Shenzhen is still here: All you have to do is look behind the glimmering new skyscrapers and fancy shopping malls. At the gas station on Lian Hua Road, next to the near-bankrupt massage parlor whose gray, neon-lit walls always seem on the verge of collapsing, and where the new subway station has turned the area topsy turvy, one discovers Jing-tian Road almost by accident.

At once there is a hush in the air, as though the street is singing a silent benediction. Tall, leafy mangroves line both sides of the road.

Walking up the gentle incline, I see families playing badminton in a small park to the right. On the left, I spot a woman sitting in her idling, brand new, white Honda, leaning out her window as she chats with a friend, but her mind really focused on showing off her beautiful car. On the right, I see the liu da , or slow walk, of grandparents as they meander behind their grandchildren. As I cross the intersection, branches from the trees dip down precariously so that the leaves feel like they may touch my head.

About five years ago, after a busy workday I returned to a street that just that morning had been lined with 30-year old cypress trees. Now, barely 8 hours later, it was a naked patch of concrete, punctured in regular intervals by large gaping holes where the trees had been torn out. I complained to a Chinese friend, who replied, “Don’t worry, it’s just development. It’s good for Shenzhen.”

I wonder: Does Jing-tian Road face that future? I hope not.

I believe that in the future China, the current Shenzhen disposition will become more relaxed, more traditional. “Time is money” will become “time is precious but can be shared with strangers.” Or, in the words of Confucius,

Don’t just treasure the water, treasure the mountain; don’t just move, but be still, don’t just enjoy, but preserve.

So perhaps by the time the kids of today’s Shenzhen grow up there will be a change in the current attitude toward headlong growth. Perhaps they will begin to ponder questions like: Do they have a wholesome life based on values such as establishing a quality-based economy and social responsibility, and not living just to pursue a quick yuan? Will they begin to stop to check out the blue skies, safely drink water direct from the tap, have more time to be with loved ones, volunteer, and walk where tree leaves gently touch?

The scene on Jing-tian Road mingles the ancient Chinese respect for the environment with a dancing, almost ebullient, sense of repose. It is rooted in the past, experienced today, and, I believe, will be part of that future, wholesome, life.

A pursuit of a dream brought me and millions of others here to Shenzhen. As we Shenzhenites continue to barrel into the future, we will remember our dreams, but also keep an eye on tradition.

As for the word that adds up to 100, take a guess.

Mark Obama Ndesandjo is the author of the novel “Nairobi to Shenzhen.” This article was adapted from his upcoming memoir. Earlier published in the New York Times; here republished with the kind permission of the author.)

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Strike hits German firm in Shenzhen

Chinese media report that over 5,000 employees, mostly female migrant workers, started a strike at a German producer of mobile phone components, Feihuang Electronic Factory at Shenzhen. The strike started at the evening of August 22 as a protest against proloning work hours and lowering wages, writes the China Tech News.

According to the workers, from last month on, the factory asked each of them to make 90 more chargers every hour and if they could not finish the task they needed to work extra hours, or they would not get the basic salary. From the evening of August 22 on, about 5000 workers began their strike and some of them reportedly broke into the facilities of the factory.

The factory has about 10,000 workers in total.

Is the Shenzhen Big Brother project going to work?

In China there is never a shortage of crazy big plans and the intention to use Shenzhen as a guinea pig for a massive monitoring of the population, as here reported by Bloomberg, seems one of them. All its residents get a residence card with chip with all the information you need on it, including for example "one-child conditions" and "personal credit history". Additional 20,000 camera's equipped for facial recognition will come on top of that project.

About $390 million will be invested for the project in Shenzhen. The government plans to first use the technology in Shanghai and Shenzhen, then adopt the identity cards in 660 cities if the pilot program is successful.

While it is a scary enough development to be watched, the chances of this becoming a success in China seems rather slim. A rather small place like Singapore could perhaps be able to do so, but how would that work in a country with 1.3 billion people where 150 million migrants are an important part of the economic system? In a country that is terribly short of government funding for education, health care and policing? It would only work if China would be a police state, and it is not.

A new nail house in Shenzhen

Isn't it a beauty? Simon World cuts-and-pasts from the otherwise unlinkable South China Morning Post (SCMP).

Mr. Choi and this wife got inspiration from the earlier success in Chongqing:

He admits he has been inspired by a Chongqing couple who held out for 11 days, while their house stood on a mound in the middle of 10-metre-deep pit, until the developers paid up. "The couple is my model. I'm sure I will win this battle as they did," Mr Choi said of the pair, whose home was dubbed the "coolest nail house" - slang for holdouts who refuse to be hammered down while their houses stand erect like nails after those around are demolished.

Striking crane operators win pay raise and union

Crane operators in the port of Shenzhen went on strike last Friday, AP reports, and resumed work at the beginning of the Sunday after they got a pay raise and were allowed to set up a trade union. Details are still lacking.