Most Chinese firms not ready for major M&A - Ben Cavender

Ben Cavender

The sudden US$9.3 bn restructuring of the Dalian Wanda deals left many observers flabbergasted. Most companies in China simply do not have the experience to execute this kind of large deals, says business analyst Ben Cavender to the BBC.

The BBC:

The restructuring of the deal was "kind of crazy" said Ben Cavender, senior analyst with China Market Research. 

"It is very concerning, and it's very unusual at this late stage to have a $9bn deal, and then to have another deal with another company in place." 

He added Chinese firms were running into trouble because they did not have the due diligence or vetting in place for large mergers and acquisitions. 

"They put out a lot of press, then the regulators realise there's some issues that need to be addressed. I suspect that's what happened here." 

The initial transaction had been a surprise - not least because it represented a U-turn from Dalian Wanda's ambitions to expand in the tourism sector. 

The three Chinese theme parks had only opened in the past year, and were intended to compete with US giant Disney's ventures in the country.

More in the BBC.

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The trouble Wanda is in - Shaun Rein

Shaun Rein

China's richest man, Wang Jianlin, and his company Wanda, got kicked out of the Chinese lending system. Wanda is in deep trouble, says business analyst Shaun Rein to the South China Morning Post. Both in terms of assets backing up his purchases and political leverage.

The South China Morning Post:

The unprecedented instructions would close off any available avenue of financing for the highly leveraged Wanda, which may have contributed to Wang’s decision last week to sell the majority of his hotel and theme park holdings -- including a Harbin park that he’d opened barely two weeks earlier -- to Shanxi magnate Sun Hongbin for US$9.3 billion, in what would turn out to be the largest single real estate sale in China’s corporate history. 

“Wanda is in a lot of trouble,” said Shaun Rein, founder of the China Market Research Group. “ It remains to be seen how much of their growth was built on real asset development with cash flow and how much purely on borrowing money.”... 

“People forget that businessmen need to ensure they are low profile, and always give credit to the Communist Party first,” said Rein of China Market Research Group. “Sometimes as these guys get richer, they forget who’s really in charge.”

More in the South China Morning Post.

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How a game changes society - Matthew Brennan

Matthew Brennan

The Honor of Kings, a uniquely popular online game, is profoundly changing the Chinese society, says social media expert Matthew Brennan at eMarketer. Launched in November 2015 by tech giant Tencent, it even triggered off concerns by China's leadership.

eMarketer:

Tencent’s 2016 annual report stated that the game had amassed 200 million registered mobile users, including more than 50 million daily active users (DAUs). 

And according to data from mobile data provider QuestMobile, Honor of Kings led all mobile gaming apps in China with more than 180 million monthly active users (MAUs) in May of this year. HappyElements-owned Anipop was in second place, with 54.4 million fewer MAUs by QuestMobile’s count. 

That same month, Honor of Kings became the world’s top-grossing game as measured by revenues generated from Apple’s App Store and Google Play combined, according to data from app market research firm App Annie. And according to gaming industry database CNG, the game generated RMB5.5 billion (roughly $828 million) in revenues in Q1 2017 alone. 

Honor of Kings’ popularity has made it close to ubiquitous in China. “Now, wherever you see people using their phones around China, you can see that the game has a huge impact in society,” said Matthew Brennan, co-founder of China Channel. “People are making friends through the game and playing it together as a social activity,” he added.

More at eMarketer.

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US still top-destination for China's rich - Rupert Hoogewerf

Rupert Hoogewerf

Despite the election of Donald Trump, increased immigration barriers to the US and increased animosity between China and the US, the US is still the top destination for rich Chinese leaving their country, says China Rich List researcher Rupert Hoogewerf. Although the number of rich leaving their country is dropping, he tells the South China Morning Post.

The South China Morning Post:

The United States remains the top destination for rich Chinese investors looking to buy property and move overseas, according to a report released on the weekend.

The report, by Hurun Report and Visas Consulting, also said Chinese were more concerned about the depreciation of the yuan and their lack of knowledge about overseas investment. 

The assessments were based on interviews conducted between April and July with 304 Chinese who had already emigrated or planned to do so. Their average wealth was 20 million yuan (US$2.95 million or HK$23 million). 

Canada was the second most popular destination on the list, followed by Australia. Hong Kong was 15th. 

Within the US, the west coast had the greatest allure, particularly Los Angeles, Seattle and San Francisco. New York remained the fourth most popular city. 

For the fourth year in a row, education and “living environment” were the main forces driving rich Chinese overseas, the report said. Another major reason was access to better medical care. 

Nearly 20 per cent of the ­respondents said they were not confident about the country’s growth prospects. 

But the survey also revealed barriers to emigration. Almost 30 per cent of those surveyed said long waiting times were the biggest obstacle, ­followed by language barriers and difficulty in integrating into ­mainstream society. 

“Over the past decade, the number of Chinese rich considering immigration has remained at around 60 per cent, but this year [it] has come down to just under half, the lowest on record, but still not low,” Hurun Report chief ­researcher Rupert Hoogewerf said. 

More than 34 per cent of those surveyed said they were considering moving to a different city in China – a sign that property prices might stay high.

More in the South China Morning Post.

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

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One Belt, One Road needs much more debate - Zhang Ying

Zhang Ying

President Xi Jinping has embarked into a prestigious outbound investment program, One Belt, One Road (OBOR) worth trillions of US dollars. While the West has received the plan reluctantly positive, there is still much more debate needed at what it means for all participants, RSM business professor Zhang Ying explains in the EUReporter.

Zhang Ying:

Having participated in many forums about OBOR, my general observation is: for the West, OBOR is commonly accepted as a great idea. but the topic invokes lots of questions. Nobody seems to grasp that OBOR can function only as a joint project of all the participants involved. OBOR as an initiative proposed by China, is a global and a century project for helping to rebuild a better world order, however the ownership of OBOR rest with all the involved participants and not with China alone. This becomes evident when you look at the OBOR sister-project —- AIIB (Asian Infrastructure Investment Bank). This project has always been labeled a “crowdfunding, crowd-owned” project. 

Responding to such a concern, I believe that besides the East needs more patient and effort to help the West understand OBOR, including its past evidence, current reality, and the proposed prosperity of the future, more stakeholders need to join, and support more proactively the design of the project. My sense is that most of the audience at current is still confused about the rationale behind it, and couldn’t tell the difference between OBOR economic-social-environment formula and the current ones that each has been used to deal with for the current order of the world; meaning that different parties hold different calculations for OBOR, either desperate to attract Chinese investment, or hostile blaming unbalanced trade with China. Objectively speaking: All of these attitudes are not fact-respecting, with three arguments: Firstly, as for the world order in the past, if accepting the principle of competitive advantage, this opinion shouldn’t be supported, since respecting the rationale of competitive advantage and acknowledging the consequence of competitive advantage for each participants is the condition of free-market market; Secondly, as for the world order in the future, accepting the drive of the change and the consequences of the world order revision is the condition as well. Third, as for the current, accepting emerging countries such as China coming back (or saying catching up) and even leading up especially in terms of economy is the condition for the next round of preparation for globally inclusive growth.

More at the EUReporter.

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Reducing risk, at the expense of reform - Victor Shih

Victor Shih

China's leadership is setting a new economic agenda halfway July, and much of the measures focus on the reduction on risk, even if - says political scientist Victor Shih at Bloomberg - if that means announced financial reforms will be stalled.

Bloomberg:

China will proactively prevent and resolve systemic financial risks, and step up efforts to reduce leverage in the economy, the official Xinhua News Agency reported, citing Xi. He also called for greater accountability for regulators, saying it’s a “dereliction of duty” if they fail to spot and dispose of risks in a timely manner, and stressed that coordination of financial regulation should be improved, and weak links in supervision strengthened. 

“The heavy emphasis on risk prevention will put a damper on much-needed reform in the financial market,” such as developing derivatives markets, said Victor Shih, a professor at the University of California in San Diego who studies China’s politics and finance. “With the wording on holding regulators for any signs of instability, they will definitely err on the side of caution. But if regulations are too stifling, financial talent may leave the country.” 

Premier Li Keqiang also spoke at the meeting, calling for moderate credit growth and keeping liquidity “basically stable,” according to state television. He backed “professional, consolidated, penetrating” regulation of all financial businesses to reduce risks.

More at Bloomberg.

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Online literature writers make fortunes - Rupert Hoogewerf

Rupert Hoogewerf

While much of the book publishers try to get their act together now readers go online, China boast even a top ten of literature writers, earning more than US$150 million each. Chief researcher Rupert Hoogewerf explains to Global Times why the Harry Potter franchise did so well, also in China.

Global Times:

On Wednesday (last week), the Hurun Research Institute and domestic IP management agency Mopian released the Mopian Hurun Most Valuable Creative Works IP 2017 list, which lists the top 100 most valuable literature IPs in China after 1998. 

Fights Breaks Sphere written by 27-year-old author Tiancan Tudou ranked first on the list. Other well-known works that have been adapted into other mediums such as TV shows or movies in recent years, including Nirvana in Fire, Fighter of the Destiny and Grave Robbers' Chronicles also made it into the top 10. In the Name of People, a novel that was recently adapted into the hit anti-graft TV show of the same name, came in at 21. 

According to Hoogewerf, the ranks of the works on the list were determined by looking at data such as online viewership, number of fans and the number of times a work has been recommended on literature platforms, followed by a second round of assessment during which the Hurun Research Institute and veteran literature editors gave these additional points based on their social influence and literary value... 

Talking about China's IP market, Hoogewerf mentioned the Harry Potter franchise, one of the highest-earning IPs in not just his home country but around the world. 

"The Harry Potter franchise and the huge industry behind it had a great impact on the British economy," he said. 

"And for me, it's a meaningful thing to participate in China's IP industry," Hoogewerf  said, mentioning that he hoped the list will help improve the confidence of people who are considering entering the IP industry.

More in Global Times.

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At the end of a century of shame - Howard French

Howard French

After a century of submission under foreign powers, China is winning back its old glory, and its influence in the region and the world, writes Howard French, author of Everything Under the Heavens: How the Past Helps Shape China's Push for Global Power at the New York Times.

Howard French:

At an ocean research center on Hainan Island off China’s southern coast, officials routinely usher visitors into a darkened screening room to watch a lavishly produced People’s Liberation Army video about China’s ambitions to reassert itself as a great maritime power. 

As enormous, new naval vessels plow through high seas, a deep male voice intones: “China’s oceanic and overseas interests are developing rapidly. Our land is vast, but we will not yield a single inch to foreigners.” 

The 2015 video is one of many signs that China is seeking to emulate the United States’ 19th-century policy of taking exclusive control of security in the Western Hemisphere by excluding foreign powers from the region. Without officially saying so, China hopes to impose a modern version of the Monroe Doctrine on its surrounding oceans.

Much more in the New York Times.

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VPN access key for innovation - Andy Mok

Andy Mok

Panic struck when media reported China would ban all VPN activity in February 2018, allowing to circumvent China's internet censorship. That was a shock for many, and seems to have been confused with a business licensing system for VPN's. Whatever is going to happen, innovation and startups need unfettered access to VPN, says innovation expert Andy Mok to Bloomberg.

Bloomberg:

China’s government plans to allow businesses to keep using VPNs for access to the outside world -- if they obtain approval for corporate lines and register their usage. But it’s not clear how easily businesses will get VPNs approved and, even if they do, employees may be out of luck when they work from home or from their smartphones on the road. Ambitious entrepreneurs and startups may be hardest hit. 

“VPNs are absolutely critical and foundational to almost any businesses in China, large or small – and especially important for innovative businesses,” said Andy Mok, Beijing-based managing director at Red Pagoda Resources, which advises startups and other companies in China. “Denying access to VPNs in China would demolish the entire stack of the startup ecosystem here.” 

Chinese regulators for now are trying to assuage fears of a wider crackdown. The Ministry of Industry and Information Technology issued a statement Wednesday in which it emphasized its original January notice governing VPN use should remain the main point of reference, and promised not to sever legitimate means of accessing the global internet. Yet frequent users are mindful of the country’s spotty record on that front. 

Many software developers in China rely on overseas code libraries, which may be inaccessible without VPNs. For instance, the popular developers’ site Github was briefly blocked in China in 2013. 

“Despite all the advances that China has made, there’s still a lot of product innovations that happen abroad that entrepreneurs in China can and need to learn from, and they often learn through overseas news sites,” Mok said.

More in Bloomberg.

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Xi-Trump trade deal might be over - Arthur Kroeber

Arthur Kroeber

The deal between presidents Donald Trump and Xi Jinping on a mutual trade peace, reached a hundred days ago, might be over, and was not very realistic to start with, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® to the South China Morning Post.

The South China Morning Post:

China’s trade surplus with the US was pegged at US$107 billion in the first four months of 2017, according to US Census Bureau data. That puts the surplus on course for a full-year 2017 imbalance on par with the US$347 billion recorded in 2016, which Trump used to back up his anti-China rhetoric before taking office in January. 

“Rumours continue to percolate that Trump is preparing for more aggressive trade action,” Arthur Kroeber, founding partner and managing director at Gavekal Dragonomics, said in a recent report. 

“The basic deal Trump thought he offered Xi at the Mar-a-Lago summit – a light touch on trade in exchange for more cooperation on North Korea – was absurdly unrealistic, given China’s obvious unwillingness to change its North Korea policy.” 

With reports due from the US Commerce Department on steel and aluminium trade and calls for more scrutiny of Chinese investments in the domestic tech sector, Trump has another card to play in Germany.

More in the South China Morning Post.

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US and China dominate list of young billionaires - Rupert Hoogewerf

Rupert Hoogewerf

Young and self-made billionaires are mostly coming from the US and China, says a new listing of the Hurun China Rich List. That should serve as a wake-up call for the rest of the world, says Hurun chief researcher Rupert Hoogewerf to the South China Morning Post.

The South China Morning Post:

In China, the top spot belongs to the man behind drone maker DJI, Frank Wang or Wang Tao in Chinese, with an estimated fortune of $4 billion, placing him ninth. Wang turned his Hong Kong dorm room start-up into one of the world's largest sellers of consumer drones and now supplies 70% of the market. 

All told, the United States is home to 20 of the individuals, followed by China's 18. US-based firms that have created more than one billionaire on the list include Uber, Snapchat and Airbnb. 

Rupert Hoogewerf, the chairman of Shanghai-based Hurun Report, said the rankings should serve as an international wake-up call. The domination by the US and Chinese entrepreneurs "should be pretty scary for the rest of the world", Hoogewerf said. The list also gave insight into the rapid speed at which massive wealth is created in the new economy.

More in the South China Morning Post.  Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. Are you looking for more stories by Rupert Hoogewerf? Do check out this list.  

Xi Jinping has few friends in the Party - Victor Shih

President Xi Jinping's position at the helm of his country seems pretty secure, says political analyst Victor Shih, author of Factions and Finance in China: Elite Conflict and Inflation to the Economist. Although, his support at the next layer in the Party seems pretty meagre, he adds.

The Economist:

Even so, Mr Xi’s authority remains hemmed in. True, his position at the highest level looks secure. But among the next layer of the elite, he has surprisingly few backers. Victor Shih of the University of California, San Diego, has tracked the various job-related and personal connections between the 205 full members of the party’s Central Committee, which embodies the broader elite. The body rubber-stamps Mr Xi’s decisions (there have been no recent rumours of open dissent within it). But the president needs enthusiastic support, as well as just a show of hands, to get his policies—such as badly needed economic reforms—implemented. According to Mr Shih, the president’s faction accounts for just 6% of the group. That does not help. 

Admittedly, this number should not be taken too literally: it is difficult to assign affiliations to many of the committee’s members. Doubtless, too, many members who are not in Mr Xi’s network support the president out of ambition or fear. Still, Mr Xi can rely on remarkably few loyal supporters in the Central Committee because he did not choose its members. They were selected at the same time he was chosen as party leader in 2012, a process overseen by the dominant figures of that period, Mr Hu and the long-retired Mr Jiang.

More in the Economist.

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Foreign auditors get more legal space - Paul Gillis

Paul Gillis

China has diminished limits on foreign businesses with its new negative list for 11 free trade zones. That includes accounting, writes Beida accounting professor Paul Gillis at his weblog, although most foreign accounting firms had already workarounds for most legal limitations of the past, he adds.

Paul Gillis:

Accounting was initially off limits to foreign investment. The international accounting firms entered in the early 1980s through representative offices that were not allowed to practice. In the early 1990s they were permitted to enter joint ventures with state-controlled CPA firms. In the late 1990s the state-controlled CPA firms were separated from the state. In the early 2010s the Big Four restructured into special general partnerships (SGP) that allowed up to 20% ownership by unlicensed foreign partners (started at 40% and phased down). 

Allowing any ownership by unlicensed foreign partners was a concession to the Big Four that is unique to China. I believe China is the only country that allows any unlicensed partners in CPA firms. The Big Four were built in China using foreign partners (mainly Hong Kong) although local partners are now in the majority. 

Included in the deal to allow foreign partners was a restriction that said the senior partner of the SGP must be a local Chinese. This restriction likely violated China’s WTO commitments to not have nationality based restrictions, but the Big Four figured out a workaround. They would nominate a local partner to be senior partner of the SGP, but all power was vested in the senior partner of the firm, who typically was a Hong Kong citizen based in Hong Kong. I do not believe any of the Big Four currently have a local Chinese senior partner, but I expect the next generation of senior partners will all be local Chinese. China has removed the nationality restriction on the senior partner of the SGP in the latest iteration of the negative list. I think this will have little effect since the Big Four effectively ignored the rule, although there may be a few Big Four partners with foreign passports whose career prospects have improved.

More at Paul Gillis' weblog.

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Will China face a pushback? - Howard French

Howard French

China's erstwhile "peaceful rise" has been less peaceful over the past years. Will China face a pushback from its neighbors, asks former foreign correspondent Mary Kay Magistad author Howard French of Everything Under the Heavens: How the Past Helps Shape China's Push for Global Power in a wide ranging interview about his book in PRI.

PRI:

French: That's really the $64,000 question, and it's kind of the core of my book really. I think that we are entering, right now, a moment of very serious danger, which in my view, and I kind of roll out this argument in an extended way in my book, is likely to last for the next 10, 15, at the longest 20 years, after which, I think, if we can get through this transitional period, tensions will subside. 

But we are entering the danger period. And we're entering the danger period because China has advanced so far, so quickly. And its strength, economically speaking, in terms of industrial competitiveness, military capability, and particularly in terms of capacities for self-defense and projection of force in the nearby seas, have come to draw close to the capacities of the United States. In a situation where you’ve had a rising power and a status quo power in history, where the gap between the two narrows rapidly and dramatically, that is the precise situation of highest danger — because neither side is absolutely certain that it is able to prevail in a moment of instability or of conflict. 

In the rising power, you have strong constituencies that are tied up in the investment and effort to acquire capabilities, which say, 'what's the point of acquiring all of these capabilities, if you don't use them?' 

And meanwhile, in the status quo power, what was once a very clear and unambiguous lead in all of these key areas from economic strength and competitiveness, to high tech to military capacity, as the gap narrows, anxiety begins to increase. And ... a corresponding constituency says, in effect, ‘if we don't do something now to nip this threat in the bud, then it's going to be too late. We have to assert ourselves now to make clear who's in charge, or to make clear what the rules are.’ 

What's happening in the surrounding region is that, again I think one most usefully must resort to the realism that political scientists speak of. The neighboring powers are watching kind of anxiously to understand which way the wind blows. And so, how did they respond to this? Well the first thing they want to do is to avoid having to explicitly choose sides. And that means that most of them will want to obtain the benefits of economic cooperation with China, because China has been growing so fast and represents a huge market that's right on their doorstep, and to simultaneously enjoy the benefits of security arrangements with the United States, because the United States is this off-shore power far away that has been the trustee and guardian of the established rules of the road and who doesn't seem threatening. 

And so you see lots of countries — Vietnam is the most interesting example of this — Indians are training Vietnamese submarine crews on how to run submarines that are used, among other ways, to deter Chinese attacks. The Japanese are helping pay for a new Philippines Coast Guard, and a Vietnamese Coast Guard as well. Australia plays in this game. All of the smaller countries, Malaysia, Indonesia, the Philippines, Vietnam, Thailand are seeking ways to balance against China — soft balancing against China in ways that are not meant to be offensive to China, but allow them to hedge their bets. 

Magistad: You mentioned an important point in your book, which is, if China doesn't show respect for the rules and norms of the region, it pretty much encourages those countries to seek assistance, to seek support, to seek backup from the United States, and that actually plays against China's interests. How much do you think China's leaders are aware of that? 

French:  So there's a political scientist named Edward Luttwak, who I quote in the book at one point, who has developed a theory. He's basically a strategic thinker. And he's developed a theory, which is not exclusive to China, but describes a mentality or mindset that's common to very fast rising powers, as they begin to emerge, and to begin to more and more obviously contend with the status quo power. This mentality that he speaks of is called Great Power Autism. And, apologies to anyone who might take offense at this — this is not my term. 

The point he's trying to make is that rising this far this fast is a giddy experience. And amid the giddiness that you experience during this rise, caution and all sorts of other perspectives are kind of lost. And so, you are not likely to be terribly perceptive of the cost that you may incur by offending other people, meaning in this case, your immediate neighbors, much smaller countries, because you think that when you rise as far and as fast as a country like China has risen, that this is an affirmation of your correctness. 

So the next 10 years could be very messy, by accident or by design, to one degree or another. China could push in a way that involves hard power, to make gains in the immediate region at the expense of the status quo powers, most importantly for this conversation, the United States and Japan, which are the most important status quo powers in the region. And there could be a war. Or there could be at least some more limited form of conflict that could be ugly and very dangerous. 

That's one scenario that's very real, cannot be discounted, which we must be very attentive to, and that our diplomats have to figure out a way to prevent. 

You can imagine a leadership that says 'look, in 10-15 years, we can be down to 2 to 3 percent economic growth per year. ... This is the moment when we have to go we have to make our big push. We have to lock in whatever gains we can lock in right now, meaning in the next 10 years.' 

Still, I'm hopeful that we'll muddle through. Once we're past this transitional period of 10, maybe 15 years, then other things begin to happen. The demographics of China, I think, kick in — with hundreds of millions of people over the age of 65, with immense costs in medical care, possibly residential care, and China doesn’t have that infrastructure yet, because it hasn’t yet been at that stage of economic development. And so, if we get past this transitional period of 10 or 15 years, I'm very hopeful that China will say, 'listen, the status quo isn't as bad as we thought it was. We don't need to be such a grudging, victim-centric country. We've done well. We've come a long way.

More in PRI.

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Trump will stick to symbolic action against China - Arthur Kroeber

Arthur Kroeber

US president Trump seems to have been on a warpath with China. Political analyst Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® expects no real action, but - like mostly - symbolic action against his Mar-a-Lago friend Xi Jinping, he tells in the Chicago Tribune.

The Chicago Tribune:

A downturn in ties was effectively announced on Twitter on June 20, when Trump declared that China's pressure on North Korea had "not worked out." 

Arthur Kroeber, managing director of Gavekal Dragonomics, a consulting and research firm, said Trump may have miscalculated, too. 

"The basic deal Trump thought he offered Xi at the Mar-a-Lago summit — a light touch on trade in exchange for more cooperation on North Korea — was absurdly unrealistic, given China's obvious unwillingness to change its North Korea policy," he wrote in a client note But Kroeber said he still did not expect Trump to embark on a "stupid and self-defeating trade war" with China. 

"The more likely outcome is that he will settle for largely symbolic actions" that will "do little to change trade flows but enable him to crow to his political base that he has got tough with foreigners who are cheating Americans out of production and jobs," he wrote.

More in the Chicago Tribune.

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Brainpower: How China changes the world - Jeffrey Towson

Jeffrey Towson

Apple's Steve Jobs was the first American CEO to discover China's massive brainpower potential when he got the first iPhone produced in six weeks time, by 200,000 workers and 8,700 engineers. China's massive brainpower is a disrupting force for the world, says Beida business professor Jeffrey Towson, co-author of The One Hour China Book (2017 Edition) on his weblog.

Jeffrey Towson:

There are two important aspects to this story – which may have become somewhat embellished over time. The first is how incredibly fast, flexible, and smart the Chinese manufacturing ecosystem is. This situation was not about being cheap. It was about speed and flexibility. Figuring out how to redesign iPhone screens took lots of brainpower deployed quickly. In the US, the iPhone screens simply could not have been redesigned in such a short timeframe. 

The second is that Apple had 8,700 Chinese industrial engineers overseeing production. That is a lot of engineers. The New York Times reported that Apple had estimated it would take 9 months to find this many engineers in the US. In China, they found them in about 15 days. 

This is a story of Chinese brainpower as a game-changer in global business. The ability to mobilize so much talent, so many engineers, and so quickly, is something new in the world. 

But we have also heard this kind of story before. 

Twenty years ago, the scale of Chinese manufacturing began emerging as a similarly game-changing phenomenon. Suddenly, everything from shoes to bicycles began to become much cheaper than before. Low-cost Chinese manufacturing changed what was possible in industry after industry. “Made in China” became a household phrase. 

Businesses around the world have since incorporated the large-scale and low-cost of Chinese manufacturing into their operations. And it wasn’t really optional. Businesses either had to take advantage of the phenomenon or suffer as their competitors did. 

The large scale and low cost of Chinese brainpower is another game changer. Suddenly thousands of engineers can be ramped up in a matter of days. And this phenomenon is starting to ripple through industry after industry. What is the impact on the pharmaceutical industry if companies can now access tens of thousands of scientists cheaply? If your competitor is opening a research and development center in China with 10,000 technical specialists, how big of a problem is that for you? Chinese brainpower is starting to impact many industries – often in unexpected ways.”

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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