China's internet wars have become global - William Bao Bean

William Bao Bean

Competition in China is bloody and fierce, but as the Chinese internet companies go global, also China's internet wars go global, says William Bao Bean, partner at SOSV to FTChinese. Didi taking on Brazil's 99, its home-grown taxi-hailing app, it a telling sign.

FTChinese:

“The focus for the partnership with 99 is on developing the enormous, untapped potentials of Brazilian and Latin American markets,” said Didi, adding that it has “a very firm commitment to a globalisation strategy”. 

“The war on one front is now being fought everywhere, globally,” said William Bao Bean, partner at SOSV, the Chinese software start-up accelerator. “Before it was fine to be the top app in China or in the US. That’s no longer enough for Uber or Didi.” 

Didi has also invested in Lyft, Uber’s main US rival, as well as GrabTaxi, which is popular in Southeast Asia. The three car-sharing apps are part of a global anti-Uber alliance in which users of one app can hail the others’ cars when travelling abroad.

More in FTChinese.

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What Xinjiang needs is de-escalation - Ian Johnson

Ian Johnson

While religion is getting more leeway in China, the opposite is happening for the Tibetans and Uighur, says journalist Ian Johnson, author of the upcoming book The Souls of China: The Return of Religion After Mao in the Globe&Mail. Just last week Xinjiang, home to the Uyghur, saw a strong increase in security forces.

The Globe&Mail:

The treatment of Tibetans and Uighurs offers a glimpse of the downward spirals that can emerge under harsh policies. 

In Xinjiang, what’s needed is de-escalation, “some kind of a peace process like the British had in Northern Ireland,” said Ian Johnson, a Pulitzer-winning journalist and author of The Souls of China: The Return of Religion After Mao. But that’s difficult to do when strict government policies have largely eliminated moderate voices and civil society. 

“It’s a tough hole for them to climb out of there,” he said. “And this is going to be the largest conflict area for religion and state in China going forward.” 

Elsewhere, China has so far been more lenient. Though hundreds of crosses were removed from churches in Zhejiang province, such action has barely been seen elsewhere – and virtually all Zhejiang churches remain open. 

There are signs, however, that China is preparing for stronger action. Draft rules released last fall threaten fines for those who rent space to unregistered religious organizations, and new restrictions on contact and financial transactions between Chinese believers and foreign groups Mr. Johnson warned that such a strategy could “create a lot more problems for them than they think. They’re essentially picking a fight with people who are not likely to back down.” Under Mao, he noted, the Christian church roughly quadrupled in size despite the imprisonment and death of pastors and priests.

More in the Globe&Mail.

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China's sexual revolution - Zhang Lijia

Zhang Lijia

Author Zhang Lijia explored for her book Lotus: A Novel China's sex trade. The book is also an account of the sexual revolution the country is going through, she tells City Weekend. "Some women get more pleasure with clients than they experienced with their husbands."

City Weekend:

Lotus has conflicting ideas about sexual pleasure. How are attitudes towards sexuality changing?  

China is going through a sexual revolution. Studies show that a much higher number of people are having sex before marriage than previously. In sociologist Li Yinhe’s 1989 study, 85 percent of people claimed they had no sexual experience before marriage. Among the sexually active 15 percent, some were already engaged, which means that they are already a couple by Chinese standards. 

According to 2012 statistics, 71.4 percent of people were sexually active before marriage.* This means more prostitutes, more pornography, more sex before marriage, more sexual partners, and a higher divorce rate. A woman can divorce her husband if he cannot satisfy her. Women will not stand for second-best because they don’t have to any more. 

Having a mistress to show status started with the Emperor, who would have many concubines. Maoist reforms changed that, even though Mao himself was doing all sorts of things with young women behind closed doors! For some time prostitution was uncommon in China. Now, men have mistresses to prove they have a lot of money and a high status. Ernais are just glorified prostitutes; that relationship is primarily economic, not about love. 

I met a woman who was empowered by her increased earning power and relative liberation since becoming a sex worker. People don’t get into the trade for sexual pleasure, but some women get more pleasure with clients than they experienced with their husbands.

More at City Weekend.

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Bike hailing does not make business sense - Paul Gillis

Paul Gillis

Bike hailing services got another round of funding this week in hundreds of million US dollars, but Beijing-based observers like Beida accounting professor Paul Gillis just do not see how those companies, involved in a giant competitive war, will ever pay back those loans, he tells QZ.

QZ:

But widespread customer negligence and razor-thin margins could make it hard for these businesses to stay afloat. The very factors that make China’s bike-share services so convenient—low prices and ease-of-use, namely—are the same factors that could spell their death. 

“What they’ve got is a very interesting technology, but a basic business model that makes no sense,” says Paul Gillis, who teaches accounting at Peking University in Beijing... 

All of these factors merely compound the stress placed on an already shaky business model. Mobike and its rivals won’t reveal how much their bikes cost to produce, but an old estimate (which Mobike says has since decreased) places the cost of a standard Mobike at 3,000 yuan (about $437). Professor Gillis says that fares alone will hardly recoup these costs in a timely manner—let alone cover labor and R&D expenses. 

“They rent for one yuan every half hour, and they expect that they might be rented four times a day for a half hour, which amounts to four yuan per day,” he tells Quartz. “If you take four yuan per day and you take that into the 3,000 yuan, you’ve got a long time before you’ve recovered the cost of a bike.”

More in QZ.

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China's gunboat diplomacy, past and present - Howard French

Howard French

How do China's current global efforts to expand its power, link to its past as a world might? Journalist Howard French explores in his new book Everything Under the Heavens: How the Past Helps Shape China's Push for Global Power the historical roots of China's position as a world power. From ChinaFile.

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Repressing religion in China is not the big picture - Ian Johnson

Ian Johnson

The forceful removal of crosses at churches and the arrest of Christians have hit of Western media regularly. But that is not the big picture, says journalist Ian Johnson, author of the upcoming book The Souls of China: The Return of Religion After Mao, at CNN. Those government actions are mainly symbolic, he says.

CNN:

Hundreds of Christians have also been detained or arrested attempting to resist those demolitions, ChinaAid said. 

As the larger of the Christian denominations in China, Freedom House said Protestants had been “particularly affected by cross-removal and church-demolition campaigns, punishment of state-sanctioned leaders, and the arrest of human rights lawyers who take up Christians’ cases.” 

However, Ian Johnson, author of new book “The Souls of China: The Return of Religion After Mao,” said the focus on the cross removal misses the big picture. 

“I’d say that the most important point is that virtually none of these churches have been closed,” he said in a piece for CNN Opinion. 

“All continue to have worshipers and services just like before. In addition, the campaign never spread beyond the one province. Some pessimists see it as a precursor for a campaign that might spread nationally, but so far that hasn’t happened and there is no indication it will.”

More at CNN.

The full CNN opinion piece is here.

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Why we should not worry about Chinese nationalism - Kaiser Kuo

Kaiser Kuo

Sometime vehement explosions of nationalism have worried both the outside world, and the Chinese government. But today, nationalism is in decline, notes China-watcher Kaiser Kuo in SupChina. "I’m coming around to the view that we’ve exaggerated its proportions and the dangers it poses."

Kaiser Kuo:

But the appeal of nationalism in China appears to be dwindling. A recent paper by Alastair Iain Johnston of Harvard University, examining survey data measuring nationalist attitudes in the Beijing area over a period of 13 years from 2002 to 2015, suggests that at least in the vicinity of the capital, nationalism is indeed in decline. Johnston, aware that Beijing is not necessarily representative, notes that his findings nevertheless accord with nationwide surveys measuring those attitudes. 

The rising nationalisms of our times — and Trump’s “America First” approach in particular — may even have the ironic effect of diminishing nationalism’s appeal in China still further: Xi Jinping has, after all, stepped (even if opportunistically) into the role of standard bearer for globalization. His unapologetically globalist Davos speech played well at home. And if nationalism has an opposite number today, it is globalism... 

The specter of Chinese nationalism is invoked with some frequency by those who would douse the ardor for multiparty democracy. It’s invoked in this way, indeed, by many a liberal. It’s a twist of course on the familiar sùzhì 素质 argument — that the unwashed Chinese masses just aren’t ready for democracy. In this telling, the problem is that freed of its fetters, nationalism would run the table: “If we had free elections in China tomorrow,” said one liberal Chinese friend of mine, “we would elect Hitler next Tuesday and be at war with Japan by Friday.” The message is “Careful what you wish for.” In this view, some gratitude is perhaps due to an illiberal Party that serves as a bulwark against a nationalism that would be more illiberal still. 

The jury is out on what would actually happen were that bulwark to be dismantled, but I’m coming around to the view that we’ve exaggerated its proportions and the dangers it poses. While I’m not suggesting that Chinese nationalism is innocuous, and is not something we ought to continue to concern ourselves with, we really should keep in mind that nationalism is an ideology that feeds on perceived slights and tends, conversely, to diminish when it can’t claim to feel put upon. We should recognize it for what it mostly is — the unsurprising residue of China’s historical experience, utterly comprehensible by anyone with the least capacity for empathy, and remarkable mainly for its relative impotence.

More in SupChina.

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At last, Beijing might get serious about North Korea - Paul French

Paul French

China has been trying to ignore its unruly neighbor North Korea for as long as it was possible. And North Korea was more interested in talking to the US, and less to China. But Beijing might at last be changing its tune, says Paul French, author of North Korea: State of Paranoia (Asian Arguments) to the Washington Post.

Paul French:

Beijing’s current thinking may be that responding to North Korea’s recent bouts of belligerency with a coal ban punishes Pyongyang more directly (i.e., right in the wallet) than the Chinese have previously been willing to do while also letting Washington know it is not afraid to get a lot tougher with an old, but frustrating, ally. Though it’s worth considering that Beijing, with its horrendous pollution problems, is itself looking to diversify away from coal-fired power, so maybe there is no great sacrifice on the Chinese part here. 

Beijing’s recent policy of studiously ignoring Kim hasn’t worked. Chinese President Xi Jinping has visited locations as far flung as Fiji, Belarus and Zimbabwe but has never taken the one-hour shuttle from Beijing to Pyongyang. The coal ban then is the start of what may be a series of harsher measures that could include finally getting tough on North Korean bank accounts in China, putting limits on Chinese firms doing business in the country, restrictions on North Korean officials transiting through China, and a demand that Pyongyang rejoin the Six Party Talks or risk losing essential aid supplies. 

Trump, like President Obama before him, may be right that the way to contain North Korea is through Chinese pressure. But perhaps it is the events that Trump’s ascendancy appear to have unleashed from Pyongyang that will finally force Beijing to get seriously tough with their neighbor.

More in the Washington Post.

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Why most startups should avoid China - William Bao Bean

William Bao Bean

It sounds odd to hear from the managing director if the Chinaccelator in Shanghai, but William Bao Bean sees it as a success when startups decide to avoid the China market and explore other markets. "Interestingly enough, the greatest help that Chinaccelerator can give to start-ups considering China is convincing them otherwise," he tells Inc-ASEAN.

Inc-ASEAN:

“99% of international start-ups don't belong in China. Locals have a better market understanding and better ability to raise capital. China is the number two market in the world for VC investment—meaning no foreign company is ever going to be better funded, even UBER,” says (says William Bao Bean, the managing director of Chinaccelerator and MOX and general partner at SOSV.) Hence, it is important that the accelerator focus on international companies that have a competitive advantage in areas, such as adtech, education, fintech, and cross border commerce, and are difficult to clone... 

Bao Bean also feels that a data-driven approach is crucial when expanding, if only because relying on our own skills can lead us astray. 

“The biggest problem with international start-ups and even corporates is that what makes them a winner in their home market, their experience and domain knowledge, can be a liability when they go into new markets. Gut instinct and pattern recognition, developed over years of failing and succeeding, is suddenly more likely to send a founder in the wrong direction than the right,” he says, adding that their approach overcomes these biases and even leads entrepreneurs to make discoveries that hadn’t occurred to them previously. 

Chinaccelerator is itself expanding, in a manner of speaking. According to Bao Bean, they are partnering with venture capitalists and accelerators in Southeast Asia and even South Asia to help recruit start-ups with an interest in China. Interestingly enough, the greatest help that Chinaccelerator can give to start-ups considering China is convincing them otherwise. 

“Our biggest value can sometimes be to tell a company that it doesn't make sense for them to enter the Chinese market,” he says.

More in Inc-ASEAN.

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Labor: China's massive challenge - Ben Cavender

Ben Cavender

Rising wages have already put China in the same cost-league as Portugal and South-Africa, forcing manufacturers to low-wage countries. But that is only one challenge for a major shift in the labor market, says business analyst Ben Cavender to CNBC.

CNBC:

As China's economy expanded at breakneck speed, so has pay for employees. But the wage increase has translated to higher costs for companies with assembly lines in China. Some firms are now taking their business elsewhere, which also means China could start losing jobs to other developing countries like Sri Lanka, where hourly factory wages are $0.50. 

Apparel manufacturing has been hit "extremely hard," said Ben Cavender, a principal at Shanghai-based China Market Research. "The result has been that factory owners have gone on a massive investment spree outside of China."... 

With fewer jobs available — and perhaps more robots buzzing on factory floors — experts maintain unemployment will be an ongoing concern, especially as the government works to maneuver the world's second-largest economy away from manufacturing and toward services. 

"You're talking about a way to re-skill millions of workers, but it's not clear what jobs they're going to be placed into," Cavender said. "They're creating white collar, clerical jobs here as quickly as possible, but it's still not enough to go around."

More in CNBC.

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China's new top-planner did not perform well - Victor Shih

Victor Shin

Amid the reshuffle of China's top-officials, He Lifeng will take the helm at the powerful National Development and Reform Commission. But some senior analysts doubted his skills as a planner. Just look at his work in Tianjin, says political analist Victor Shih in AP.

AP

And yet, in the selection of He as top economic planner, some political observers saw a throwback to a retrograde model of wasteful spending and runaway borrowing that many policymakers in the party blame for dragging down China's economy. 

As the No. 2 party official, He oversaw a building spree in the coastal city of Tianjin that was envisioned to be a new financial hub to rival Manhattan but now sits unoccupied, said Victor Shih, a political scientist at the University of California, San Diego. 

"He Lifeng presided over the largest ghost city in China and built even more empty office towers in it," Shih said. "His reform credentials are questionable to say the least."

More in AP.

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IPO-hungry tech firms might jump the queue in China - Paul Gillis

Paul Gillis

Financial authorities in Beijing are playing with the idea to give tech firms a faster-track IPO in China, says accounting professor Paul Gillis at his weblog. Taking away some of the cumbersome restrictions for IPO's in China might lead to the expected abolishment of variable interest entity or VIE's, a side-track allowing Chinese firms to list in the US, he suggests.

Paul Gillis:

Chinese tech companies often also faced restrictions against foreign ownership. That should have blocked foreign venture capital investments and foreign IPOs, but a workaround was developed. The workaround was the variable interest entity (VIE), which enabled the listing of companies controlled through contracts instead of ownership. VIEs have been a source of pain for many investors, since the contracts proved difficult to enforce and control through contracts proved to be vastly inferior to control through actual ownership. 

A few formerly US listed companies have succeeded in relisting in China. Before doing so they needed to restructure to get rid of the VIE structures and offshore structures (and control features) that had been put in place for the US listings. 

The Reuter’s article points to three companies that may be the initial beneficiaries of the queue-jumping initiative - Ant Financial, the world's most valuable financial technology company, Zhong An Online Property and Casualty Insurance, and security software maker Qihoo 360 Technology Co.  Ant and Zhong An would be doing IPOs, while Qihoo went private in 2016 and would be relisting in China. 

It is not known whether China plans to change its rules to facilitate control structures. Ant is owned by Jack Ma and his associates. Jack Ma insisted on a control structure for Alibaba. It would also appear that it will be difficult for foreign investors to participate in these transactions, since foreigners can only purchase shares on the Chinese exchanges through the Qualified Foreign Institutional Investor (QFII) programs or the Hong Kong Connects. 

I have been hearing rumors that China soon plans to announce that the VIE structure will no longer be tolerated for foreign investment, while at the same time grandfathering existing VIE structures. China had earlier proposed to change the foreign investment rules to exclude companies that were controlled by Chinese from restrictions, effectively encouraging the control structures, but these rules were not adopted when the foreign investment rules were modified last year. 

If VIEs are banned (and the rules are actually enforced), it would likely mean the end of new US listings of Chinese tech (and other restricted sectors such as education and finance) companies. The queue-jumping program might foreshadow that announcement.  The big losers would appear to be US venture capital firms and US investment banks.

More at Paul Gillis' weblog.
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Why and how should prostitution be decriminalized - Zhang Lijia

Zhang Lijia

In China most women enter the prostitution on their own free will. The government is criminalizing them, forcing them into a submissive position. What can be done? Author Zhang Lijia of Lotus: A Novel on prostitution researched the sex trade in China, and possible solutions and discusses government approaches.

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Is there room for paid internet platforms? - Andy Mok

Andy Mok

More Chinese internet users are looking for good answers and are willing to pay for it. Paid Q&A apps emerge in China and business consulent Andy Mok discusses at CGTN America their business models and their chances to succeed.

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The success of China's Communist Party - Ian Johnson interviews Sebastian Heilmann

Ian Johnson

Few scholars have looked into the inner workings of China's Communist Party like Sebastian Heilmann,  founding president of the Mercator Institute of Chinese Studies (Merics) in Berlin, a government professor at the University of Trier and author of China's Political System. Journalist Ian Johnson interviews him on the success of the party for the New York Times.

Ian Johnson:

A key question you pose is how much of China’s success can be ascribed to this political system. What’s the answer?

There are several important elements. One is the party successfully sets long-term political goals, such as the modernization of industry or technology, or infrastructure planning. As Deng Xiaoping made clear in the 1980s, it can concentrate resources in priority areas. I see this as a strength in the initial phase of development, from say the 1980s to the mid-2000s.

Another crucial element is experimentation. This is something we ignore in the West — how unexpectedly flexible China’s deeply bureaucratic system can be. This flexibility has been demonstrated in the ability to set up pilot projects in special economic zones, in local tests — such as for housing reform or bankruptcy in state enterprises. Very difficult measures were regularly tested in pilot projects for several years before national laws were enacted.

You show how this flexibility arose from the Communist Party’s revolutionary experience.

This is very important. Because we have to ask ourselves, how did a socialist bureaucratic system get this kind of adaptability that you didn’t see in Eastern Europe? It’s due to the specific historical experiences of this party [in the 1930s and 1940s before coming to power]. It controlled very spread-out and not contiguous districts. So when it tried something like land reform it was done experimentally and in a decentralized fashion. This was fundamentally different from the Soviet Union....

Toward the end of the book you offer several scenarios for how China might develop, and poll Merics staffers for their views. Most support the first scenario, which is a “centralized and disciplined party and security state (the Xi Jinping system).” You are less sure, arguing that the risks are greater than people realize.

I’m not sure that the party can achieve everything it’s set out to do. It’s tried to keep a lid on all changes in society, but I doubt this can work over time. There are different lifestyles and forces in society. I’m not sure they can be unified. I’m very skeptical.

Also, we shouldn’t forget that hierarchical systems are susceptible to shocks. If Xi Jinping became seriously ill, what would happen to the political system? The system has been tailored to him. Or, if there are military skirmishes, how will the nationalistic forces in society react?

This system is built for expansion, especially economic expansion, and setbacks are very hard to justify. It’s easier in Western systems because you can change the government. But in China you can’t. So the potential for disruption is greater than people imagine.

More at the New York Times.


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.

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Ian Johnson will publish his much anticipated book The Souls of China: The Return of Religion After Mao in April.
 

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