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| William Bao Bean interviewed |
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| Matthew Brennan |
In many ways what they are doing dovetails with the central government’s goals of restructuring China into a service oriented economy, and making the country a leader in technological innovation. Because of this, industry leaders have clearly been given the green light thus far to forge ahead with their disruptions.
But Matthew Brennan of China Channel, a consultancy that has followed Tencent since it was listed in 2014, tells the Financial Times that he agrees with those who believe it and Alibaba have become too powerful.
Alipay and WeChat pay says Mr Brennan, for example, are good for the economy and put China at the cutting edge of mobile payments. But at the same time “they are undercutting the SOE banking sector and have done so very rapidly, and that could lead to instability . . . too much disruption going on could spill over into unrest. So maybe they [think they] need to clip their wings a little,” adds Mr Brennan.
Warning signs, as the FT writes, seem to be largely concentrated in the payments, financial services and gaming industries.More in ATimes.
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| William Bao Bean |
“Travel is a closed insular industry, there’s a lot of history and baggage. The incumbents really don’t want it to happen – it’s not in their interests to open up too much. It’s also hard to compete against the likes of Priceline that spends US$6 billion on marketing or Ctrip, which is so dominant in China.”
He however sees opportunities for “innovating around travel for companies that solve specific problems”.
Bao Bean said that SOSV, which groups seven accelerators, does about 150 investments a year, out of which there may be two to four in travel. In total, SOSV’s portfolio includes 700 investments, with the number one sector being biotech and fossil fuels. Bao Bean also founded MOX, SOSV’s Mobile-Only Accelerator, in partnership with GMobi, the largest mobile platform for South-east Asia and India.
In addition, he is also an active angel investor, doing about 40 investments a year personally.
His interests in travel range from luxury travel – one of his investments include Go Portier, the hotel concierge service used at The Siam in Bangkok – to the corporate segment through an app that offers services in 20 cities across Asia Pacific. He’s also involved in Rikai Labs, a Shanghai and San Francisco-based startup that builds chatbots that are distributed via messaging platforms like WeChat, Messenger and Slack.
Bao Bean is not afraid of testing – he tried social commerce for hotels “but it failed”. “You need decent engagement – event tickets, packages, weekend getaways, last minute trips – but it’s tough given Ctrip’s domination in the market.”More in WebinTravel.
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| William Bao Bean |
William Bao Bean, general partner at early stage venture capital firm SOSV, said at a panel at the Singapore Week of Innovation and Technology that significant sums of money were flowing into AI.
"So the last 15 years, entrepreneurs and [venture capitalists], like us, have been investing in companies that solve basic problems," he said, adding most of the problems today are solved "pretty well" in the country.
Currently, China is a "lot more like the U.S., where, in order to make an impact, you have to have a revolution in tech," Bao Bean said. "So you're seeing massive amounts of money going into AI."...
China not only has a vast population but a majority of the people have some form of access to the internet.
Some of the companies to watch out for in China's drive for AI, according to Goldman, are the big three internet giants — Baidu, Alibaba and Tencent. Others include ride-hailing company Didi Chuxing, on-demand services provider Meituan-Dianping and speech and language recognition firm iFlytek.
At SOSV, Bao Bean is also the managing director of a Shanghai-based accelerator program called Chinaccelerator that helps global start-ups enter the Chinese market and Chinese firms go abroad.
The big problem Chinese start-ups face at the moment, he said, is user acquisition due to the fact that so much of the market is dominated by a very small number of companies.
"Unless you ally yourself with one of the big players, no one will ever see your product," Bao Bean said.
Experts have previously told CNBC that, in most tech sectors in China, investors tend to bet on two-to-three dominant players. Often, some of those start-ups merge to capture the majority of the market. For example, in the ride-hailing sector, the merger between two of the top start-ups resulted in the creation of Didi Chuxing, which currently dominates the market.
Bao Bean also said at a CNBC panel on Monday afternoon that start-ups planning to enter the Chinese market needed to rethink their products and services.More at CNBC.
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| Shaun Rein |
Mention China alongside almost any food product, and people get nervous. After international incidents involving bleach-soaked meat, antifreeze-laced apple juice, and pine nuts “unfit for human consumption,” the country “is known for tainted food because of repeated quality-control scandals,” says Shaun Rein, managing director for the China Market Research Group.
Kaluga Queen, which produces its caviar about 300 miles southwest of Shanghai, is mindful of these associations
“The biggest obstacle is the low trust of Chinese food safety,” says Lily Liu, marketing manager for parent company Hangzhou Qiandaohu Xunlong Sci-tech Co....
Until recently, Russia and Iran dominated the caviar export market, harvesting the delectable eggs from beluga sturgeon in the Caspian Sea. Overfishing there eventually landed them on the endangered species list, and as supply dwindled, other nations, including Japan, Israel, and China, have started to fill the gap.
“Exports of Chinese caviar will boom because of sanctions and limited supplies from Iran and Russia,” Rein says. “Many restaurateurs will buy Chinese caviar because of good quality, reasonable price, and ample stock.”More in Bloomberg.
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| Victor Shih |
It's a social problem the government is fighting to contain. Victor Shih, associate professor in political economy and China expert at the University of California San Diego, says a combination of factors have spurred the spread of these scams.
"The rapid proliferation of pyramid schemes is caused by high growth in living costs, especially housing costs, which enticed many to look for higher returns - and previously light regulation at the local level," Prof Shih says.
Under pressure to grow their economies, local governments had in the past endorsed some dubious investment schemes - without properly understanding them - on the belief they would deliver strong returns and spur growth.More at the BBC.
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| William Bao Bean |
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| William Bao Bean |
"I think Australian start-ups should take a look at expanding closer to home. The vast majority do not belong in South East Asia or China," he said. "Something you build for Australia is almost certainly not going to work in the rest of Asia. If you want to expand there, the first step is to take your product and throw it in the garbage. Then take your special sauce and build a new product."
Mr Bao Bean, who has also worked with Softbank China and India and SingTel Innov8, also recommended Aussie entrepreneurs interested in Asia "get out of the building" and spend time exploring and understanding the market before attempting to launch a business there.
Despite his hesitancy around the potential of Australian businesses in Asia, Chinaccelerator has backed two local companies in the last three years – travel services business Chozun and careers platform QLC.io. To meet more local start-ups, Mr Bao Bean has arranged an event at Sydney start-up hub Haymarket HQ on Wednesday. With both companies he has backed, Mr Bao Bean said rather than being specific to the Asian market, he saw potential in them as global platforms. "It comes down to solving a problem. For Chozun, it's not a Chinese problem, it's for international travellers. With QIC, they're solving a problem for millennials and connecting them to jobs in start-ups and those jobs are all with English-speaking companies," he said.
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| Mark Schaub |
Automated driving road testing is key step to move automated driving vehicles from the theoreticals of the lab to the realities of the market. A number of jurisdictions are taking the lead in this regard. Although, China has made great advances in constructing closed test sites it has not kept pace with others in respect of regulatory rules or guidelines on road testing.
China may wish to consider the approaches of other jurisdictions when formulating China’s automated driving test regulations in order to lay a good foundation to enable China to become a global leader in development of automated driving vehicles.More at China Law Insight.
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| Jeffrey Towson |
Robin Li, the founder and CEO of internet giant Baidu, likes to mix things up.
He turned his performance at the company's summer party into a family affair this year. His daughter sang "Call Me Maybe" while accompanied by professional dancers. Proud papa, dressed in jeans and a polo shirt, strolled on stage at the end of the song, strumming the last few bars of the song on an acoustic guitar while his daughter crooned along.
That performance was understated compared with a 2015 extravaganza, when Li donned a studded gold lamé outfit to sing and play the drums in a dazzling routine -- complete with smoke machines and a laser show -- at the company's annual gala.
Many other Chinese business leaders like to put on a show, according to Jeffrey Towson, a private equity investor and professor at Peking University.
"You see these kinds of crazy events all the time," he said. The outlandish galas allow bosses to be playful and self deprecating while also demonstrating how successful the company has been, according to Towson.More in CNN.
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| Sara Hsu |
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| Ian Johnson |
How about this sociological answer: funerals are a reflection of a person's status in society. In some parts of Chinese society, status has been achieved through the centuries—whether at a funeral or a fair or a wedding—by having a big raucous party: something renao, or hot and noisy, in Chinese. What’s more renao than a stage full of drag queens belting out songs or wailing for the dead person?
Unprecedented? No. Since the 1980s, many rural Taiwanese have had strippers at their funerals. The dead like to have fun. They liked strippers while alive and so they get strippers after they’ve died—with a hole cut in the coffin so they can peek out at the girls as they doff their clothes. In 2011, the documentary filmmaker Marc L. Moskowitz made the film “Dancing for the Dead” about the phenomenon. He noted that highers-up—like officials over the millennia—were embarrassed about the practice, seeing it as bad publicity for Taiwan, while locals carried it on as, in their views, part of “tradition.”
What tradition? The ethnomusicologist Chiung-Chi Chen wrote about this in a 2006 doctoral thesis, “From the Sublime to the Obscene.” She wrote that half the temple fairs she observed in Taiwan and many funerals included strippers as a kind of super renao catalyst. She posits that ghosts are kinds of hooligans. Hooligans like strippers so ghosts must too. Another idea is that funerals are places where social constraints are loosened and people can do what they usually can’t.More (including pictures) at ChinaFile.
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| Paul Gillis |
There is a shocking report that Goldman Sachs has suspended its work on HNA’s planned US IPO of subsidiary Pactera because it was unable to meet the bank’s internal “know your customer checks”. HNA has been criticized for its opaque ownership structure, but it is surprising that Goldman Sachs could not get a look under the sheets.
Bank of America Merrill Lynch, Citigroup and Morgan Stanley were reported earlier to have dropped HNA because of concerns over completing know your customer checks.
HNA’s public companies are audited by PwC. This raises the question of how PwC is able to continue as auditor. Auditing standards require auditors to annually assess whether to continue a relationship with a client.More at the ChinaAccountingBlog.
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| Shaun Rein |
You’re probably best known as the author of ‘The End of Cheap China’. What are the effects of the end of cheap labour pool and how do you think we’re seeing them being played out?
When it came out I was heavily criticized. People said that China was a cheap place and would always be, and I’ve been proven 100% right. Five years later salaries are still going up 10-15% a year, it’s only about 20% cheaper to manufacture in China than in the United States. People need to understand that China is no longer cheap for labour and that’s not going to change. Secondly, rents are soaring. So the only time you want to manufacture in China right now is if you’re trying to sell into the Chinese market or if you’re going into high-end value-added manufacturing, because it’s still cheaper to do high-end consumer electronics here than in the United States.
There are some things companies are doing to handle this. They’re moving west, into Sichuan or Chongqing. They’re expanding operations in the United States. And they’re working on worker efficiency and automation. Automation grew about 58% last year, there’s a lot of investment in robots and China is really leading the way in manufacturing innovation.
Your second book ‘The End of Copycat China’ was published in 2014. Your thesis was that Chinese companies did not innovate technologically because they didn’t have to but now they’re doing so. We’ve seen a huge wave of M&As – is that in pursuit of technology?
It’s hard for lots of Chinese companies to develop technology internally so they either buy technology from overseas or they buy the companies. Germany actually exports more to China than China exports to Germany. There is some technology innovation that’s taking place organically with companies like Alibaba and Tencent. But there’s definitely innovation in China. There has to be, because if companies don’t focus on innovation, they’re not going to be able to earn profits. Even SOEs understand this. A couple of weeks ago, I gave a keynote as the State-owned Assets Supervision and Administration Commission (SASAC). They brought me in to give a keynote to 200 leading cadres from SOEs to talk about how innovation is changing China and how they have to reform and recruit the right talent in order to keep innovating. Even the SOEs understand this.
The question is does the senior government get it? And because of the way SOEs are set up, where they are very risk-averse, how do you create the right incentives for SOEs and their executives to focus on innovation? If you are in an SOE, if you innovate but you lose a lot of money, you’re not going to get promoted. And if you lose your job you’ll probably never get a good job in an SOE. So they have to change the culture. And that’s what SASAC understands and why they brought me in to talk to the cadres. The private sector really gets it. They’re making tons of money and they understand that the SOEs are dinosaurs. If Bank of China was halfway decent, there’s no way anyone would have made AliPay.More in Business Tianjin.
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| Rupert Hoogewerf |
The report is different than some others that rank global markets on the basis of affordability in that it considers the annual house price changes and rental yields alongside the change in the value of the Chinese renminbi, the currency with which Chinese investors typically start out with as they look to invest.
Also unlike some other reports, it focuses on the most popular Chinese investment destinations, with the result that there may be cities in the world with higher property rises than those included in its database but which aren’t included because they aren’t considered of interest to Chinese high-net-worth individuals.
With respect to the rapid house-price rises in these Chinese cities, Rupert Hoogewerf, the British founder, chairman and chief researcher of the Hurun Research Institute, noted that they are generating “real concern in China about the impact on the future economy”.
“Although there are measures in place to curb excessive growth, by restricting high prices on new developments, for example, there is an underlying demand for housing that is fueling further potential price hikes.”
Among high-net-worth Chinese, Hoogewerf went on, “global asset allocation”, led by real estate, remains a major trend, in spite of Chinese government efforts to curb overseas investment by its citizens.More at International Investment.
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| Shaun Rein |
Ant Financial and Tencent, which according to iResearch make up the lion's share of China's 22.7 trillion ($3.4 trillion) mobile payment market, have just completed a weeklong battle in which they dished out generous incentives to lure users to their payment systems.
Ant said in a statement that it will comply with the requirements of the central bank. Tencent said it will cooperate with regulators and other relevant parties to build a justified, fair and source-sharing platform for a nonbank payment network.
"Online payments generate a significant amount of data that payment firms can use to their benefit," said Shaun Rein, managing director of China Market Research Group.
More in the China Daily."The government should really step up to limit their power and ensure financial security."
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| Rupert Hoogewerf |
Complied by research house Hurun Report, the study highlights growth in global home prices in the 12 months to June 30, with 42 of the 50 cities under the spotlight from 12 countries it examined, being hit with price rises of more that 10 per cent in the period.
The five cities to suffer the fastest growing prices were Toronto, Reykjavík, Wuxi, Hong Kong and Zhengzhou, the provincial capital of Henan Province.
Six Chinese cities were named in top 10, while that total of 21 makes the country the most listed, followed by the US (Seattle, Orlando, Dallas, Denver, New York, Sacramento and Miami), Germany (Berlin, Hanover, Stuttgart, Frankfurt, Munich and Hamburg), Canada (Toronto, Hamilton, Victoria and Vancouver), Australia (Melbourne, Sydney and Canberra), Ireland and New Zealand with 2 cities each...
Maybe surprisingly, the eastern Chinese city of Wuxi – around 140 kilometres or a 2-hour drive, west of Shanghai – overtook Hong Kong, recently dubbed “the world’s most expensive housing market”, to become the Chinese city so see the highest growth in home prices, as it is much less known than other major population centres such as Beijing and Shanghai..
Wuxi, in the southern Chinese province of Jiangsu, borders two other large cities, Changzhou to the west and Suzhou to the east, and saw a 22. 9 per cent rise in prices in the period, exceeding Hong Kong’s 20.8 per cent rise, according to Hurun Report, which is best-known for its rankings of the richest people in China.
The other four Chinese cities in top 10 are Zhengzhou, the capital of east-central China’s Henan province (+20.2 per cent), Changsha in Hunan province (+18.5 per cent), Guangzhou (+17.9 per cent) in Guangdong province and Shijiazhuang (+16.1 per cent) in Hebei.
“Global asset allocation is one of the biggest trends now for China’s high-net-worth individuals, led by real estate,” said Rupert Hoogewerf, chairman and chief researcher of Hurun Report.
More in the South China Morning Post.Jinan, Hefei, Wuhan, Xiamen, Hangzhou, Xi’an, Fuzhou, Nanjing, Tianjin, Nanning, Chongqing, Beijing, Qingdao, Nanchang and Shanghai are those ranked outside the top 10 but also among the top 50, said the report.
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| Ben Cavender |
So far this year, about 70 percent of China's outbound deals have been valued at $1 billion or less, according to Dealogic data. Experts said they expect the trend of smaller acquisitions to continue.
That's because with larger acquisitions, "you start getting questions on national security ... and overall stability and growth of the Chinese economy, so there's a lot more scrutiny over large, marquee deals," said Benjamin Cavender, principal at consulting firm China Market Research.
But "when you're talking about small, medium enterprises, there's a little less pressure — the government doesn't see that as having any way to shape the economy, or cause issues with policy," he said.More at CNBC.
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| Rupert Hoogewerf |
The Luxury Consumer Price Index, released by Hurun each year, aims to measure the price changes for a predetermined basket of goods and services purchased by China's high-net-worth individuals (HNWI). The index covers the consumption activities of wealthy Chinese in the following 11 categories: real estate, health, education, luxury tourism, weddings, watches & jewelry, accessories & beauty products, cruises & private jets, lifestyle, liquor & cigarettes, and automobiles.
The 2017 index, which gauges prices from June 2016 to June 2017, was calculated based on a basket of 116 high-end goods and services, 20% of them imported. The issue marks the 11th edition of the index.
The depreciation of the Chinese yuan against major global currencies over the past year has been the main reason for the decreasing purchasing power of China's rich population with respect to buying luxury property worldwide and high-end imported goods.
Based on Hurun's estimates, there were nearly 1.34 million HNWIs in mainland #China by May 2016, while the number of individuals with over a billion yuan of wealth was close to 89,000. Over the past year, this population has borne the brunt of the price spike in the areas of luxury property, liquor, lifestyle and travel.
'What impresses me most, this year, is how much the price of real estate, baijiu (a traditional Chinese liquor) and Tesla has increased,'said Rupert Hoogewerf, chairman and chief researcher of the institute, 'completely lifting up the luxury CPI.'
For affluent Chinese buyers, the price of luxury property has gone up 16.6% since last year. Domestically, a villa in China's southwestern city Chengdu spiked 56.5%, followed by properties in Hainan (a rising tourism city) and Shanghai. Housing prices in overseas cities such as Vancouver, San Francisco, Los Angeles and New York also jumped.More in Asia Times.
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| Mark Schaub |
The registration procedures for infant formula outlined by the Registration Measures were based upon the PRC drug management system and accordingly the registration procedures for infant formula are complicated and time-consuming. The registration procedure for infant formula has several stages, namely acceptance, review and evaluation, on-site verification, sampling inspection, determination and issuance of decision.
In addition it should be noted that each stage has a time limit and these time limits can be complicated to determine. At most the procedure will take 170 working days to finish registration commencing from acceptance until issuance. This period does not include collection of supplementary documents required by the CFDA.
However, it should be noted that the Registration Measures do not provide clear guidance as to how to proceed with on-site verification and sampling inspections for imported formula products and verification periods.
The Registration Measures provide detailed provisions aimed at avoiding false advertising and causing confusion amongst consumers in respect of the products including:
As the Registration Measures would become effective on October 1, 2016, as such, unless the laws stipulated otherwise, the infant formula milk powder manufactured in and imported to China via the trade in goods would subject to this Registration Measures sooner.
- Prohibited to use ambiguous terms such as “imported milk source”, “ecologic pasture”, “imported raw materials”. The applicant is required to clearly identify the source of the product;
- Prohibited from explicitly or implicitly expressing that there is a health care function;
- Prohibited from including functional expressions, implicitly or explicitly, that the products may increase intelligence, build up resistance, increase immunity or protect the intestine;
- Prohibited from using misleading or negative expression(s) (i.e. “no additives”);
It is important to note the complexity and time limits in respect of registration it is recommended that both domestic or foreign manufacturing enterprises engaging in production of infant formula milk powder to start preparing for and initiating registration procedures as quickly as possible.
Time is ticking – it should be noted that PRC Ministry of Finance regulations[2] require that registration requirements for infant formula will come into force on January 1, 2018. Accordingly, although there is still time for companies to register but the clock is ticking.
Brands relying strongly upon the cross-border ecommerce channel should start registration preparations immediately. It is likely that supervisory requirements and procedures for formula products which have not been imported to China via general trade will become more complex and subject to more scrutiny.More at Lexology.
