Hot pot: too early for a Western market - Shaun Rein

Shaun Rein

The successful hot-pot chain HaiDiLao is not only expanding fast in China, but has also set its eyes on foreign markets. That might be too early, judges business analyst Shaun Rein in Bloomberg. Moving into markets with different requirements might be too dangerous, especially outside Asia.

Bloomberg:

It will take time for Western consumers to understand what a hot pot is and flavors might need to be tweaked to broaden their appeal, said Shaun Rein, managing director of the China Market Research Group in Shanghai. It's difficult for the chain to replicate its Chinese model in the U.S. because of higher labor costs, he said. 

"When you're waiting in line in China, you get a free manicure," he said. "It's cost-prohibitive in the U.S. They might have to adjust their value proposition and, slowly, foreigners will eat their food." 

In any case, there is more than enough opportunity for HaiDiLao in the domestic market, Rein said. 

"They need to expand more in China before they start looking overseas too much," Rein said. "They don't have enough restaurants in China. You often have to wait two or three hours to get into HaiDiLao."

More in Bloomberg.

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Why our startups do not focus on the US, yet - William Bao Bean

William Bao Bean

Shanghai-based VC William Bao Bean explains why the China startups he supports focus on South-East Asia and Eastern Europe, rather than the US. "We are trying to break the grip of Google and Facebook on startups."

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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A spiritual revival changes China - Ian Johnson

Ian Johnson

Hundreds of millions Chinese turn to religion, as part of a spiritual revival, tells author Ian Johnson of The Souls of China: The Return of Religion After Mao to CBN. "While the government remains deeply suspicious of China's religious revival, Johnson says it hasn't stopped people from exploring matters of faith."

CBN:

Pulitzer Prize-winning author Ian Johnson believes what's transpiring in China is nothing short of "one of the world's great spiritual revivals" and says the world better take note because the impact of this "spiritual transformation" could have significant global implications. 

"People {in China} are looking for new moral guideposts, some sort of moral compass to organize society," said Johnson, author of The Souls of China: The Return of Religion after Mao. "So they are turning to religion as a source of values to help reorganize society." 

Johnson spent six years researching the "values and faiths of today's China." He says the fastest-growing drivers of this "religious revolution" are unregistered churches or so-called "house" or "underground" churches. 

"These groups have become surprisingly well-organized, meeting very openly and often counting hundreds of congregants," Johnson wrote in an article for The Atlantic. "They've helped the number of Protestants soar from about one million when the communists took power to at least 60 million today."... 

While the government remains deeply suspicious of China's religious revival, Johnson says it hasn't stopped people from exploring matters of faith. 

"Hundreds of millions of Chinese are consumed with doubt about their society and turning to religion and faith for answers that they do not find in the radically secular world constructed around them," Johnson writes in his book.

More at CBN.

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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Getting approval to buy MoneyGram might be tough - Jeffrey Towson

Jeffrey Towson

The surprise announcement Alibaba's Ant Financial is trying to buy MoneyGram International is not a done deal, warns Beida business professor Jeffrey Towson. Chinese companies buying Americans is under scrutiny and in the financial industry it would be a first one, he tells the VOA.

VOA:

The Ant Financial mascot is--an ant. The company hopes to expand in the U.S. 

If Ant Financial’s offer is accepted, the deal must still gain the approval of the Committee for Foreign Investment in the United States, known as CFIUS. Some experts believe this would be the first test for a Chinese financial company seeking to do business in the U.S. 

Jeffrey Towson is a professor of investments at Peking University’s Guanghua School of Management. 

He told VOA that “getting approval from CFIUS might be more difficult this year. Plus, Chinese acquisitions are more on the media radar than before. And finally, there is also a competing bidder, Euronet, and they will probably push for a regulatory denial based on security concerns.”

More at the Voice of America.

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How young consumers have become different - Jeffrey Towson

Jeffrey Towson

The first wave of Chinese consumers has always been hard to get: prudent, and worried about their future. Beida business professor Jeffrey Towson describes at his weblog how the millennials have become an altogether different breed of consumers. On brand loyalty, emotion and confidence.

Jeffrey Towson:

There are approximately 200M Chinese between 15 and 24 years of age. They are about 15% of the population and have, by and large, been raised in abundance. Unlike previous generations, most have no memory of hunger or extreme hardship. They have mostly grown up in modern apartments with modern conveniences. 

They are a very different and pretty awesome group. Here are three ways they are different: 

1. They are more brand loyal than other middle class Chinese consumers. They are also more interested in trying new products. 

2. They are more emotional (in terms of buying) and less concerned with being frugal. If you are focused on up-trading consumers, this is your group. 

3. They are really confident about their own financial futures. This group is super-confident and that enables spending. 

Basically, this is the demographic the whole world has been waiting for: emotional, confident, big- spending Chinese consumers. They are also the demographic that is most similar to consumers in developed economies.

More at Jeffrey Towson's weblog.

Jeffrey Towson 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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Illegal churches: large, and condoned by the government - Ian Johnson

Ian Johnson

Not registered gatherings of religious believers have been a major force in the growing search for religion in China, but - says author Ian Johnson of The Souls of China: The Return of Religion After Mao in the Atlantic - they have largely been condoned by the government, and Johnson does not believe that might change.

Ian Johnson:

China, the world’s rising superpower, is experiencing an explosion of faith. The decades of anti-religious campaigns that followed the 1949 communist takeover are giving way to a spiritual transformation—and among the fastest-growing drivers of that transformation are unregistered churches. 

Once called “house” or “underground” churches because they were small clandestine affairs, these groups have become surprisingly well-organized, meeting very openly and often counting hundreds of congregants. They’ve helped the number of Protestants soar from about 1 million when the communists took power to at least 60 million today. Of these believers, about two-thirds are not affiliated with government churches. In other words, Protestants in non-government churches outnumber worshippers in government churches two to one. 

This fascinated me, and I wondered how it happened. Why were these independent churches so effective in appealing to China’s burgeoning middle class? And how do they survive despite government efforts to rein in religious groups not part of government-run places of worship? To find out, I knew it would be important to report from the ground up. If you rely solely on newspaper headlines and human rights reports, you’ll only understand one aspect of a society: its problems. For instance, after reading the recent Freedom House report about intensifying religious persecution under Chinese President Xi Jinping, you may come away with the impression that in China the main story of religion is repression. But any casual visitor to the country can tell you that the number of churches, mosques, and temples has soared in recent years, and that many of them are full. While problems abound, the space for religious expression has grown rapidly, and Chinese believers eagerly grab it as they search for new ideas and values to underpin a society that long ago discarded traditional morality.

Much more at the Atlantic.

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China's political thinking on the move - Howard French

Howard French

China is inching up as a world power, and author Howard French of Everything Under the Heavens: How the Past Helps Shape China's Push for Global Power  finds it about time to dive deep into what moves the country's political thinking, says the Irish Times in a review. French: " “China will wish to restore itself to the pinnacle of affairs in East Asia.”

The Irish Times:

Digging deep into history, French shows how China’s belief in its authority over tian xia or “everything under the heavens” informs its territorial ambitions in the South China Sea, which have brought it into conflict with nearly all of its neighbours, many of whom have historically been tribute states to dynastic China. 

To understand China’s foreign policy, it is necessary to understand how deeply feelings of “inside” and “outside” run in the political thinking of successive dynasties and governments. 

Hard times for China have always followed periods of “inside disorder and outside calamity” and French combines wide scholarship with the instinct of a dogged reporter to show how the current government under Xi Jinping is set on ensuring this doesn’t happen again. 

Beefing up its military prowess in the past years, the question is what will China do with its new powers? At the very least, French argues, “China will wish to restore itself to the pinnacle of affairs in East Asia.” 

China has built islands and military aircraft ready on remote reefs to back its claims to most of the South China Sea, through which one-third of the world’s maritime trade passes every year. Taiwan, Malaysia, Vietnam, the Philippines and Brunei each have competing claims with China.

More in the Irish Times.

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China's search for a moral foundation - Ian Johnson

Ian Johnson

To get rich is glorious was China's leading principle for decades, but slowly the country starts to search for a moral foundation, says author Ian Johnson of The Souls of China: The Return of Religion After Mao to PJMedia. "According to Johnson, China lacks the mechanisms the U.S. has available for creating social change. In China."

PJMedia:

The issue of spiritual emptiness is not exclusive to the Chinese, Johnson said, opining that many in the U.S. probably share this disillusionment with modern capitalistic society. He pointed to populist movements in the west, which are building momentum against a system that many see as rigged, where too much weight is placed on economics. 

“Society since the reform era has become defined by economics: to get rich is glorious. And that there aren’t too many other values in society,” Johnson said. 

Like in the U.S., there is an increasing suspicion of unfairness in China. Johnson described a scenario that one might witness in Beijing: a Chinese citizen who worked for the government 15 years ago and was awarded 10 apartments in Beijing that are now worth about $1.5 million each. Johnson said this scenario is “perfectly possible.” That person can afford to drive around in sports cars and send their children to expensive schools, flaunting their wealth.

“People are not stupid. They realize this is how a lot of money was made in China, and they feel cheated,” he said. 

Johnson admitted that there are plenty of brilliant entrepreneurs in China, as well.

“There are people who really deserve the millions that they make, but there’s a whole lot of people, probably the majority of millionaires in China, I would guess, earned this through what sociologists call rent-seeking efforts,” Johnson said. 

According to Johnson, China lacks the mechanisms the U.S. has available for creating social change. In China, the media does not have free editorial discretion, and there are no trade unions – another reason many of the Chinese are turning inward and toward faith-based groups for answers. 

Johnson said that inequality and the growing divide brought on by an increasingly globalized and capitalistic society were not as obvious or as widely flaunted in the era of Mao. Some Chinese who are in their 60s and 70s who grew up under Mao’s leadership are nostalgic for their youth, he said, but also for a time when perks and privileges weren’t rubbed in their faces. 

“There are certainly people who are nostalgic for the past,” Johnson said. “Just as you find people in Russia who are nostalgic for Stalin, there are people nostalgic for Mao.”

More in PJMedia.

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Bailing out banks does not help - Victor Shih

The scandal that rocked the once-famous private Minsheng bank has put the question of the role of the government towards the banking system. Bailing out banks create more problems than it solves, says financial analyst Victor Shih to the New York Times.

The New York Times:

But those bailouts create their own challenges. Investors, assured that the government will come to the rescue, do not worry about the potential risks and continue to pour money into the products. According to the state news media, Chinese investors have put $4.4 trillion into wealth management products, equivalent to about 40 percent of the country’s annual economic output. 

“It invites moral hazard,” said Victor Shih, an associate professor at the University of California, San Diego, who specializes in the politics of Chinese banking policies. 

“When you tell people that they will get bailed out, then they will engage in very, very risky behavior and also opportunistic behavior on the part of the banks.”

More in the New York Times.

Victor Shih 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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The tough issue: shadow banking - Sara Hsu

Sara Hsu

Financial analyst Sara Hsu looks at the new  chairman of the China Banking Regulatory Commission (CBRC), Guo Shuqing, and the man he replaces, Shang Fulin. What has Shang done to deal with this murky financial sector, and can Guo do better, she wonders in Asia Times.

Sara Hsu:

Despite this long list of achievements, Shang has been criticized by some for not cracking down more on shadow banking. These criticisms are misplaced. For one, it was difficult to know in 2011 and 2012 how shadow banking would evolve, and regulations were focused on the greatest risks of that time. 

Most wealth management and trust products were on the rise, and the worst practices were only just materializing or had not yet come to pass. 

Second, some top officials were inclined to allow shadow banking activities to take place because of the boost they gave to the slowing economy of the time. 

For example, Governor of the PBOC, Zhou Xiaochuan, stated in 2012 that “shadow banking is inevitable when banks are developing their business … but there are fewer problems here than the shadow banking sector in some developed countries that have been hit by the global financial crisis.” 

Guo’s appointment indicates that China’s leadership is acutely aware of the financial risks that are building in the economy because of mounting debt and an increasingly unwieldy shadow banking sector. 

Real estate property bubbles, overcapacity in some sectors and supply-side reform are just a few of the challenges the government needs to tackle. As Guo stated on March 2, “we will put priority on financial risk control to make sure there won’t be any systemic financial risks.” Guo also noted that the banking sector controls business risks and it should “strengthen the sense of responsibility” toward these risks. 

What is not yet clear is how Guo will balance the need for growth with financial risks. But it is comforting to know that he has ample experience in implementing market-oriented financial reforms that dampen risk while creating room for economic activity. 

Still, the challenges are immense and only time will tell how Guo will balance these contradictions.

More in Asia Times.

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When your stomach is full, you start thinking about sex - Zhang Lijia

Zhang Lijia

Zhang Lijia, author of Lotus: A Novel on prostitution in China discusses at TimeOut Shanghai her book, the growth of prostitution and how it relates to women's lives. "When your stomach is full, you start thinking about sex."

TimeOut Shanghai:

Is the character Lotus typical of these women’s experiences? 

'She’s not based on one person, but many of the small details are real. Of course, a prostitute’s life is not a fun life, but they are still three-dimensional women. Their lives are not complete misery either. There is a very famous book by Lao She called Yue Yar – the character Yue Yar is a prostitute – and oh my God, her life was totally, utterly miserable the whole time. The character was just not believable. 

'I spent lots of time listening to very funny anecdotes – these girls could be so much fun, and they really support each other and form strong relationships. Some of them had experienced sexual pleasure they had never had with their husbands, they received compliments and flattery they might not get elsewhere, sometimes even gifts and flowers. One woman said to me, "Flowers! Why didn’t he just give me more money!?". One even told me that a client wanted her to dress up like she was from The Red Detachment of Women, the ballet from the 1960s [laughs]. 

'I think these women were able to enjoy the power brought by money. I saw some who improved their position in the family, or with their husbands, because they were bringing in their own money. They often became more assertive. And their life is not all miserable.' 

Do you think prostitution is growing in China? 

'Definitely yes. China has been repressed for quite a long time, but there is now growing wealth, a relaxing of control, and a sexual revolution. STDs are growing fastest among older men – they often feel they’ve missed out on something and want to go to prostitutes who they believe are experienced and skilful. Their wives are in their 50s or 60s, and were brought up to believe that women shouldn’t be interested in sex, so tend to be quite conservative. The men don’t have knowledge about protecting themselves either. 

'It’s also a cultural thing – after all, my grandfather took my grandmother as a concubine. It’s an old way for men to show their wealth and prestige, and this old mentality is coming back with the ernai [mistresses] among rich men. We have a saying in China: When your stomach is full, you start thinking about sex.'

More at TimeOut Shanghai.

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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Religion: ways for a better society - Ian Johnson

Ian Johnson

Author Ian Johnson of The Souls of China: The Return of Religion After Mao discusses Taoism, Christianity and Buddhism and how they help Chinese citizens' ideals and hopes for a better society at the Asia Society.

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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Tencent pays exec more than Apple, IBM to retain them - Shaun Rein

Shaun Rein

Top executives at China's internet giant Tencent earn higher salaries than their counterparts at Amazon, Twitter, Intel Apple and IBM, according to job portal Zhaopin.com. Business analyst Shaun Rein is not surprised, he tells the South China Morning Post. There is no other way to retain their talent in China.

The South China Morning Post:

“A lot of these guys can very easily go out and start their own companies at billions of dollars of valuation, because they are so well respected” by the private equity world, said Shaun Rein, the managing director at China Market Research. 

“The reality is they are performing that well,” Rein said. “If they want to retain the top talent, the compensation makes sense.” 

Tencent operates Weixin -- and its offshore version WeChat -- the Chinese social messaging platform that allows 889 million users to do everything from video-messaging to exchanging documents, and even hail rides, navigate and pay their utility bills. 

The company’s net profit last year jumped 43 per cent to 41.1 billion yuan, bolstered by sales growth in online games and advertising. Its shares rose to a record HK$231 last week, boosting its market value to US$281 billion, making it Asia’s biggest company.

More at the South China Morning Post.

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

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Ctrip: Airbnb's real threat - Jeffrey Towson

Jeffrey Towson

Airbnb has a chance in China, unlike many other US companies in the past, argued Beida business professor Jeffrey Towson earlier in the Guardian. On his weblog he gives the US company six additional advises, including marrying into Tencent and Alibaba. Also, Airbnb's real threat it the travel company Ctrip.

Jeffrey Towson:

Airbnb should worry about Ctrip. This is their biggest threat. 

In September, Airbnb announced it has had “a 500% increase in outbound travel from China in just the past year.” They also said “since 2008, there [has] been over 2 million guest arrivals from China at Airbnb listings worldwide.” These numbers strike me as pretty suspect (if you have good numbers in 2016, you don’t point all the way back to 2008). But let’s assume they have some decent adoption in China today. 

As mentioned, there is no chicken-and-egg problem for Airbnb cross-border. They already have an international network of apartments and guests. And, most importantly, they already have many of the strengths I mentioned in Part 1: a network effect, economies of scale in operations and marketing, a full suite of features and services, an ability to bundle services, and an ability to subsidize across their MSP. 

I don’t think Chinese competitors can compete with them internationally in home-sharing. It is very difficult to launch an international two-sided network in general. But to do so against an entrenched incumbent is next to impossible. So I think Tujia and Xiaozhu on their own have very little chance against Airbnb outside of China. However, Ctrip is a serious competitor internationally. They are making moves in this area (i.e., their recent acquisition of UK-based Skyscanner). They also are the largest investor in Tujia. 

Ctrip should worry Airbnb. My next article on the US-China platform wars is about Ctrip vs. Expedia internationally.

Five more tips for Airbnb at Jeffrey Towson's weblog.

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

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

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Chinese, using religion to make sense out of their world - Ian Johnson

Ian Johnson

The South China Morning Post reviews Ian Johnson's book The Souls of China: The Return of Religion After Mao and delves into the hearts and souls of the growing number of religious believers in China.

The South China Morning Post:

While religious practices have been allowed to return to the mainland, there is still a cautiousness, especially when it comes to foreign involvement in such activities (and the example of the Falun Gong is always there, for those religious groups who might consider growing too large or becom­ing too independent from the state). 

Throughout the book, Johnson is by his subjects’ sides as they search for greater meaning or perform age-old rituals. He engages in Buddhist and Taoist meditation, seeking his own answers, and he attends a retreat with a 94-year-old Taoist, Nan Huai-chin, who is described as China’s most famous contemporary sage. He also attends a meditation course in caves in southern China. 

The Chinese, in an effort to catch up with the West, have discarded many of their traditions and instead tried out new ideologies “like suits of clothes” – warlordism, fascism, communism and “authoritarian capitalism”. Many are now wondering what has been lost and who they really are. 

Johnson writes, “Hundreds of millions of Chinese are consumed with doubt about their society and turning to religion and faith for answers that they do not find in the radically secular world constructed around them.”

More in the South China Morning Post.

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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Trump: confused and directionless on China - Arthur Kroeber

Arthur Kroeber

Not being predictable has been US-president Donald Trump's trademark on foreign policy. When it comes to China, economist Arthur Kroeber prefers to phrase it in another way. "US policy towards China in both security and economic terms remains confused and directionless," he says in the South China Morning Post.

The South China Morning Post:

“Three conclusions dribbled out from (the Trump-Xi) meeting, said Arthur Kroeber, co-founder of the China-focused research service Dragonomics in Beijing, wrote in a note on Monday. 

First, the risk of a damaging trade war between the two countries has evaporated. Second, the urgent North Korea problem has pushed other elements of the strategic rivalry into the background; but fundamentally the US has no new useful ideas on that and the uneasy status quo will likely persist. 

And third, Trump’s economic policy toward China remains tangled among conflicting aims which include protectionist deficit-reduction, knocking down China’s barriers to investment, and increase China’s investment in the States, and unable to prioritise any of them, he added. 

“From China’s perspective, this is fine: it can offer the US a few concessions on trade and investment that costs it little, and get on with the task of expanding its economic and political influence in Asia,” Kroeber said. 

“But all in all, US policy towards China in both security and economic terms remains confused and directionless.

More in the South China Morning Post.

Arthur Kroeber  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 United can learn from McDonald's - Jeffrey Towson

Jeffrey Towson

United Airlines was the latest to discover the ire of the China consumers, and they were not the first. China consumers are changing the rules of the game many Western companies thought they knew how to play, says Beida business professor Jeffrey Towson on his weblog.

Jeffrey Towson:

I also made the point that the China consumer phenomenon works in both positive and negative directions. If you have a popular in-vitro fertilization center in Los Angeles or lavender farm in Tanzania, you can find yourself literally overwhelmed by Chinese tourists. Right now, there is a small town in the UK called Kidlington that has become over-run with Chinese tourists, for no reason that anyone can figure out. Chinese tour groups just decided they like stopping there to take pictures. Also recently, avocados are becoming popular in China for the first time. According to Produce Report, avocado imports to China jumped 375% between 2014 and 2015. And so on. 

These types of surprise China consumer stories happen virtually every week, in both positive and negative directions. When Chinese consumers change their mind about something in significant numbers it now ripples out into the world. As United Airlines has just discovered. 

The best approach is smart offense and fast defense. 

For multinationals and other companies, the reactions and changing preferences of Chinese consumers create a challenge. You can no longer wait for an issue to happen and then try to respond. You need to proactively engage with Chinese consumers all the time. The best approach I know of is “smart offense” and “fast defense”. And the best example I know of this is McDonalds. 

McDonalds in China (and Japan) has been hit by a couple of food scandals in recent years. This is an expected event given the rampant problems in the food supply system of China. If you are a famous restaurant in China, you are going to have a widely reported food quality issue at some point (whether real or fake). 

McDonalds does a very good job of smart offense in this situation, especially on social media. They pro-actively market themselves as safe food for Chinese consumers virtually every day. They widely publicize the quality of their ingredients on their webpage. And they are known for giving tours of their kitchens to show how clean they are. If you’ve ever been in a typical Chinese restaurant kitchen, you can see how effective that would be. That’s smart offense. 

And when an issue does happen (or is fabricated or charged), they play “fast defense”. Social media can whip accusations into a frenzy within hours. When McDonalds was the subject of a food quality expose (not the 2014 one), they responded on their Weibo account within 1 hour of the report. And they closed the outlet in question within 24 hours. That’s fast defense. And the speed of their response actually reinforced their reputation for caring about customers and food quality. Compare this to how United Airlines has responded this week.

More at Jeffrey Towson's weblog.

Jeffrey Towson 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 interested in more stories by Jeffrey Towson? Do check out this list.    

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