How did the auditors deal with the ZTE scandal? - Paul Gillis

Paul Gillis

ZTE got itself into trouble by violating a ban on using American components for products it exported to Iran and North-Korea. The punishment - no US components for ZTE for seven years - might kill the Chinese companies, who cannot work without them. What did the auditors do, wonders Beida auditing professor Paul Gillis on his weblog.

Paul Gillis:

The ban came about as a result of ZTE violating the terms of a settlement agreement entered into as part of its 2017 guilty plea for conspiracy to sell telecommunications equipment to Iran and North Korea that included American components that are forbid for export to those countries. ZTE agreed to pay a fine of $892 million and be under probation for seven years. An additional penalty of $300 million was suspended provided ZTE complied with the terms of the probation, which it is reported included the requirement for ZTE to fire four top executives and discipline 35 other employees. ZTE did fire the top executives, but instead of punishing the other employees it paid them bonuses.   

ZTE was also required to undergo independent compliance audits related to its observation of export controls. 

Because ZTE violated the terms of probation they have been banned from acquiring US components (including the Android operating system) and presumably has to pay the remaining $300 million fine. ZTE admitted the behavior, but argues that the penalty is too severe and is trying to negotiate a settlement that would allow the company to survive. 

ZTE reports under Chinese accounting standards. Auditors Ernst & Young (EY) issued an audit report on the 2016 accounts on March 23, 2017. The agreement for the initial settlement became effective on March 22, 2017 and is reported in the 2016 accounts with the penalty of RMB 6.2 billion reported in other expense.  The company stated that it was unlikely they would violate the probation agreement and have to pay the other US$300 million. 

The details of when the bonuses were paid are publicly unavailable. Chinese companies usually pay bonuses at Chinese New Year, which was at the end of January in 2017 and in February in 2018. It seems most likely the offending bonuses were paid by February of 2018, before EY issued its audit report on the 2017 accounts on March 15, 2018. 

So what does this have to do with accounting?  The issue is whether EY should have known that there was serious doubt by March 15, 2018 as to whether ZTE could continue as a going concern. Should they have tested compliance with the probation agreement? 

In its audit report EY states its responsibilities as including to: 

Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on ZTE Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to issue a qualified opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause ZTE Corporation to cease to continue as a going concern. 

EY did not draw attention in their auditor’s report to any events or conditions that may have cast significant doubt on ZTEs Corporations ability to continue as a going concern. I think there was information available to EY (the payment of bonuses in violation of the agreement) that should have led to its questioning the ability of the company to continue as a going concern. I believe that auditors rarely ask these questions, although if this were a loan agreement with covenants, I am quite certain they would have tested compliance with the covenants. 

The company got a clean opinion as of March 15, 2018, although only a couple of months later the survival of the company is in question. Should EY have blown the whistle earlier?

More at the Chinaacountingblog.

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Women benefited less than men from China's progress - Zhang Lijia

Zhang Lijia

China's economy went uphill dramatically over the past decades, but women profited less than men, writes author Zhang Lijia of Lotus: A Novel, on prostitution in China. It is time the government starts to enforce its own laws and regulations on gender discrimination, she tells in the South China Morning Post. 

South China Morning Post:

Gender discrimination is deeply ingrained in Chinese society, which, for centuries, was dominated by Confucianism which places women as inferior to men. Today, some of traditional attitudes and practices that had been repressed by Mao have resurfaced. 

Some companies set much higher recruiting standards for women, while others refuse to hire women of childbearing age, a practice that has worsened after the end of the one-child policy. Employers view women without children as employees who will potentially take maternity leave twice. 

 In theory, China has enough laws and regulations to protect the rights of female employees. But the lack of a specific enforcement mechanism often leaves victims in a vulnerable position. Besides, given the intense competition for jobs, employers have the luxury of being choosy. The authorities rarely pursue those who violate the rules and employers can usually get away with a few extra discriminatory requirements. 

But not always. In 2012, a young woman applied for an executive assistant position with a tutorial centre but was rejected on the grounds that the job was reserved for men only. She filed China’s first gender discrimination lawsuit and won a small settlement. 

 A year later, another graduate woman won a similar case. When I interviewed her, I was encouraged by her fighting spirit. Other successful lawsuits followed, but the compensation usually amounted to around US$300. 

These cases were part of the feminist activism that has emerged since 2012, when three women paraded the streets in bloodstained wedding gowns to protest against domestic violence. Others followed suit, queuing up in a public toilet to highlight the shortage of female toilets, and shaving their heads in protest against different university admission standards for women. 

Some activists set up a Weibo account to monitor and report violations. Some of their complaints were addressed. 

Sadly, the authorities’ crackdown on activism has hampered these efforts. The growth of gender discrimination in employment has been challenged but it may spread wider in the near future.

More in the South China Morning Post.

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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More stories by Zhang Lijia, you can find here.

Tension will move to non-trade areas - Arthur Kroeber

Arthur Kroeber

The US is moving from a trade war on commodities towards tech firms like ZTE and Huawei, trying to get a foothold with for example 5G into the US, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® in the Nikkei Asian Review. "I think there probably is a desire to try and do what can be done to retard the progress of the Chinese firms in that."

The Nikkei Asian Review:

"A lot of what we're going to see over the next couple of months will target much more directly [on] nontrade areas that have to do with technology transfer and investment," said Arthur Kroeber, founding partner and head of research at Gavekal Research, on an April 17 conference call. He also pointed to the upcoming competition for the next-generation mobile-telecom system. 

"I think the timing of this is significant, because it is also at a time where the U.S. is increasingly concerned that ZTE and the other Chinese telecom company, Huawei, are stealing a march in the development of 5G technology, the next generation of technology for mobile phones," he added. "And so I think there probably is a desire to try and do what can be done to retard the progress of the Chinese firms in that."

More in the Nikkei Asian Review.

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.

Are you looking for more experts on the trade war between China and the US? Do check out this list.

Social commerce: leading for sales in China - Shaun Rein

Shaun Rein

Chinese consumers love to follow their friends' recommendations for buying, and with a mobile at hand, social commerce has become a leading force, says business analyst Shaun Rein and author of The War for China's Wallet: Profiting from the New World Order, at the South China Morning Post. Fun in shopping has become for blue-collar workers as important as the price, he says.

The South China Morning Post:

“The potential of social commerce is huge because people like to buy what their friends recommend. Increasingly, in China’s e-commerce landscape, people don’t know what sales channel to trust, but if they see their friends purchasing things on social commerce sites they are more likely to buy,” said Shaun Rein, the managing director of China Market Research Group and author of The War for China’s Wallet: Profiting from the New World Order... 

“Social commerce becomes a form of low-cost mobile entertainment, especially for blue-collar workers. Almost everybody has a smartphone now and shopping is not only cheap but fun,” said Rein.

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.
Are you looking for more experts on China's consumers? Do check out this list.

Jack Ma, do not leave women behind - Zhang Lijia

Zhang Lijia

Gender discrimination is commonplace in China, out of line with international agreements and practices. Author Zhang Lijia asks Alibaba's chairman Jack Ma, and other tech companies like Tencent, and the government, to end rampant discrimination against women on the work floor, for the New York Times.

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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Lotus: A Novel

The race for technical leadership – Arthur Kroeber

Arthur Kroeber

The trade war, triggered off by US president Donald Trump, is about much more than trading commodities. The real struggle is about technical leadership between China and the US, says leading economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® to the Los Angeles Times.

The Los Angeles Times:

"Consensus is growing in Washington that the U.S. is in a race with China for technical leadership," Arthur Kroeber, managing director of Beijing research firm Gavekal Dragonomics, said he recently told clients. And some think "economic cold war is the answer."

More in the Los Angeles Times.

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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State firms move in where private investments fail abroad - Shaun Rein

Shaun Rein

State moloch CITIC moved in to pick up 49% of Czech assets from CEFC Europe, owned by tycoon Ye Jianming. It is part of a trend, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order to the South China Morning Post, as state firms are easier to control by China's central government and expand its policies abroad.

The South China Morning Post:

Since Ye’s problem in mid-February, the Rosneft deal has been stuck in limbo. 

“State firms are the most ideal ones to take over the overseas projects because they are less sensitive to profits and more reliable politically,” said Shaun Rein, managing director of China Market Research, a strategic market intelligence firm. 

“They will also take over assets in countries that China is trying to wield more political power. As for the Czech Republic, it along with Hungary, are critical to China’s ambitions in Europe. It is easier to buy influence there,” he said. 

Up to 496 million shares of Shenzhen-listed CEFC Anhui International were frozen by four Chinese courts in late March. Shanghai-based CEFC, established by Ye in 2002 when he was in his mid-20s, had spent at least US$1.7 billion since 2015 buying energy-related businesses in Romania, the United Arab Emirates, Russia and Chad. The company also invested another US$1.2 billion buying financial services assets in the US and the Czech Republic. 

Besides financial services, CEFC has stakes in Czech brewery group Pivovary Lobkowicz, Prague soccer club Slavia Praha, the national airline, hotels and property.

More in 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.

Are you looking for more experts who can help you in dealing with Chinese investors abroad at the China Speakers Bureau? Do check out this list.

China's answer in US trade war: carefully calibrated - Arthur Kroeber

Arthur Kroeber

China's is sending carefully calibrated messages to the US, as US president Donald Trump is moving to a trade war, tells economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know®, to the South China Morning Post.

The South China Morning Post:

Arthur Kroeber, research head and co-founder of Gavekal Dragonomics, said China surely has “an equally specific, but longer”, list of targets ready to go when Washington finally unveils its Section 301 tariff list. 

“The strength of this response was carefully calibrated to send a clear message that Beijing will stand up to the US, but will not try to escalate the spat into a confrontation that could seriously threaten the global trading system,” Kroeber said.

More at 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.

Are you looking for more experts to make sense out of the US-China trade tension? Do check out this list.

Employment rates: improved but still a political tool - Arthur Kroeber

Arthur Kroeber

China has greatly improved its unemployment statistics, compared to the past, but they still do not give the real picture, says leading economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know®, to the South China Morning Post.  State intervention would still be a factor, he said.

The South China Morning Post:

Arthur Kroeber, co-founder and research head of Gavekal Dragonomics, said the broad-based jobless rate was “an improvement” on the previous one. 

The quality of Chinese economic data has been an issue of debate for decades, with independent economists questioning the figures and Beijing defending their reliability. But few indicators have drawn as much criticism as the registered jobless rate – which was 3.9 per cent at the end of last year... 

[N]ot everyone is convinced that Beijing’s new unemployment rate will provide the full picture. 

Kroeber at Gavekal said it did not adequately measure underemployment, such as high-skill workers in low-skill jobs and people in part-time work who would rather be employed full-time. He also said state intervention would still be a factor – Li said in his report that Beijing wanted to keep the rate under 5.5 per cent this year.

More at 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.

Are you looking for more experts to manage your China risk, do check out this list.

The global implications of the China-Afrika engagement - Howard French

What are the global implications of the growing China-Afrika engagement, journalist Howard French, author of Everything Under the Heavens: How the Past Helps Shape China's Push for Global Power wonders at the Delaware State University on April 12, 2018.

Howard French 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 experts at the One Belt, One Road program at the China Speakers Bureau? Do check out this list.   >

China produces one unicorn every three days - Rupert Hoogewerf

Rupert Hoogewerf

Rupert Hoogewerf - chief researcher and founder of the Hurun China Rich List - is a busy man. Every three days, a new unicorn - a company valued over 1 billion US dollar and unlisted - emerges in China, shows his latest report. "If model, talent and capital are all in place, start-ups can move very fast," said Rupert Hoogewerf to the Global Times.

The Global Times:

The total number of such companies stood at 151 as of the end of March, said the report. 

Among 33 newly listed unicorn companies, Tencent Music, a streaming and downloading services provider like Spotify, ranked first in terms of market valuation worth 150 billion yuan ($23.89 billion), followed by JD Logistics with 70 billion yuan. 

Around one-third of the companies are in the internet services sector including Ziroom, an online platform for apartment renting and sharing. 

Next came culture, entertainment and mobility, with Aiways Technology Co, a 1-year-old Shanghai-based internet start-up focused on intelligent and electric vehicles, being the youngest unicorn. 

Aiways said on Sunday that it has secured three rounds of financing totaling 7 billion yuan, industry news site tmtpost.com reported. 

"If model, talent and capital are all in place, start-ups can move very fast," said Rupert Hoogewerf, chairman and chief researcher of the Hurun Research Institute. 

Among all the unicorn companies surveyed by the Hurun report, Ant Financial, an affiliate of Alibaba Group Holding, topped the list with a valuation of 400 billion yuan. 

The financial technology giant is preparing to raise $9 billion in a private funding round ahead of its IPO, which may value the company at about $150 billion, the Wall Street Journal reported on April 10, citing people familiar with the matter.

More in the Global Times.

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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What does China's GDP mean? - Arthur Kroeber

Arthur Kroeber

Media reported widely the 6.8% GDP growth over the first quarter in 2018 in China, but economist Arthur Kroeber wonders what such a number actually means. Also: the impact of the announced US tariffs on Chinese products would hardly make a dent in economic growth, he tells the South China Morning Post.

The South China Morning Post:

Some analysts say the lack of volatility in the range of the GDP figures has reduced the relevance of the data in gauging the health of the world’s second-biggest economy. 

“Do we have a high degree of accuracy in quarter-to-quarter China GDP as other advanced economies? The answer is no,” said Arthur Kroeber, co-founder and research head of Gavekal-Dragonomics, a research firm. “Chinese government calculation about GDP is basically designed to reduce volatility”. 

Kroeber said China’s economic growth rate was expected to slow over the next two or three years and a trade war with the US might knock off about 0.3 percentage points if it involved the US imposing tariffs on US$100 billion worth of Chinese imports.

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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How can you be a China expert without knowing the country? - Shaun Rein

Shaun Rein

China analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order, tells on the EM+BRACE “Mentorship Series” at LinkedIn why he hates some opinion leaders are called China experts without having actually inside knowledge of the country. And why media should be careful position somebody as a China expert.

The EM+BRACE "Mentor Series":

Robert: You’re known for speaking up against analysts who have a bearish view on China, yet don’t know the country firsthand or understand the language. What would you say to those critics who contend that on-the-ground observers, such as you, are missing the forest from the trees? 

Shaun: Look, my biggest problem against some of the bears are not their predictions or lack of understanding China. Rather, how can you call yourself a China expert, like Peter Navarro, Trump's advisor, if you have not visited the country over the past ten years? Or even visited China once, like Jim Chanos, who has been calling for China's economic implosion? I guess these folks are just carving out their niche and trying to get ahead like the rest of us. What I greatly resent is the media for giving these analysts a microphone to talk. At some point, credibility and track record should count for something. How can you quote someone as a China expert who has never lived or barely lived in China? Who does not speak the language? Our media needs to be held to a higher standard. Take Gordon Chang who has predicted the collapse of China for twenty years. He has been wrong on just about every one of his predictions, yet he is constantly quoted by the media as a China expert. Lately, he has been the go-to talking head in the US on North Korea! Gordon is a nice guy frankly. He gives great sound bites and is just trying to get ahead. But the media should look at his track record and not go to him as an expert. 

Robert: Shaun, did you have any mentors during your career. If so, who were/are they and what did you learn from them? 

Shaun: I have been very, very lucky in having some great mentors over the years, ranging from Ambassador Nicholas Platt, to Harvard professor William Kirby, to venture capitalist Gregg Stone. They taught me so many things from how to treat people, take risks, and network, but perhaps what sticks the most is that they were willing to take the time to give me great advice despite being so busy while they were reaching the top of their respective fields. They also taught me that it is important for me to mentor younger people as they did for me — my career never would have been so successful without them. Now it is my turn to give back.

More at the EM+BRACE "Mentor Series".

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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Trump's trade policies good for the year 1818 - Harry Broadman

Harry Broadman

US president Donald Trump's bilateral approach for solving trade issues would have worked in 1818, not in 2018, writes China veteran Harry Broadman in the Gulf News. The US do have serious trade problems with China, but the US would be better off if Trump would be able to create more alliances.

Harry Broadman:

US President Donald Trump sees international trade negotiations as if he was living in 1818 when commerce between countries more often than not was conducted bilaterally. He’s proclaimed on several occasions that he can get a far better bargain taking up trade agreements with other heads of state on a one-to-one basis. 

Indeed, the US Negotiator-in-Chief is “Bilateral Man”, hardly surprising for someone who cut his teeth doing one-off commercial real estate deals within the confines of New York City. 

But this is 2018, and trade consummated even between two countries generally is comprised of multiple intermediate transactions mediated across several national borders. 

Hence, that is why the bedrock rules governing trade agreements today — embodied in the World Trade Organisation (WTO), the successor organisation to the General Agreement on Trade and Tariffs (GATT), which was founded in 1947 — are multilateral in nature and negotiated among sovereign, not business, entities. 

It would appear that the modern — and yes, complex — system of trade agreements is far outside of Trump’s comfort zone, perhaps even his understanding. 

As indicated by his handling of the trade problems between the US and China — which are indeed serious and haven’t been dealt with sufficiently by earlier administrations — his anathema towards building coalitions among the 162 other countries that are WTO members to improve governance of international trade exposes all of us to significant risks.

More in the Gulf News.

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Is the Trump approach of China working? I do not think so - Sara Hsu

Sara Hsu

US president Donald Trump has been going aggressively after China as a trade partner. But is it working? Political analyst Sara Hsu does not think so, she explains in Forbes."From the Boston tea party to the Smoot Hawley tariffs imposed during the Great Depression, protectionist measures have always imposed far higher costs than benefits."

Sara Hsu:

The aggressive Trump stance hasn't worked because Chinese diplomacy is nuanced and officials do not use threats as a negotiation tactic. The Chinese generally negotiate through reciprocity, which is why we saw Xi Jinping making concessions on automobile tariffs. Within the philosophy of Confucianism, Chinese negotiators attempt to avoid conflict and save face, or show mutual respect. Relationship building is essential, and the bonds of the relationship are not meant to be broken. 

If pushed, however, the Chinese often use silence or long negotiation processes as a response tactic. Chinese negotiators may also attempt to use a response that targets the weakness of the counterparty, especially if the counterparty is not viewed as civilized or friendly. The Chinese Thirty-Six Strategems calls for using specific tactics to deal with a hostile party, which including "wait at leisure while the enemy labors" and "watch the fires burning across the river." Chinese officials indeed waited to respond to Trump's bluster and hoped that he would wear himself down by griping and tweeting about his issues with the Asian nation. 

China's strategy appears to be working in the sense that the nation has, to some extent, benefited from Trump's aggressive mentality. Its diplomatic response has been calculated and staid. As Trump rants and raves about China, Chinese officials have emphasized the need for cooperation. It couldn't be clearer who is speaking the voice of reason. If Trump had a better knowledge of economics, he would realize that history has shown that trade showdowns don't work. From the Boston tea party to the Smoot Hawley tariffs imposed during the Great Depression, protectionist measures have always imposed far higher costs than benefits.

More in Forbes.

Sara Hsu 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. 

Are you looking for more experts on the US-China trade war at the China Speakers Bureau? Do check out this list.   

US-China trade frictions are here to stay - Arthur Kroeber

Arthur Kroeber

The current trade frictions between China and the US are here to stay, for the time being, says renowned economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know®. Neither of the two countries will or even can afford to give in to the other, he tells the South China Morning Post.

The South China Morning Post:

Arthur Kroeber, co-founder and research head with China-focused Gavekal Dragonomics, based in Hong Kong, said that deep underlying frictions with China would not quickly go away as long as the US was not completely clear about its objectives. 

“The US playbook for this competition is still being written,” he said. “China is in a strong position and will not soon budge on the key issues that anger its trade partners.”... 

Gavekal’s Kroeber also ruled out a quick solution to end the friction and expected the economic rivalry to continue “on a high simmer”. 

“China will not retreat from its industrial policy goals, and the US will not be fobbed off with the usual concessions”.

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.

Are you looking for more experts on the US-China trade war? Do check out this list.

National rules for self-driving cars - Mark Schaub

Mark Schaub

After local regulations in Beijing, Shanghai, and Chongqing to organize tests with self-driving cars, China's central government now has issued national rules to streamline those tests, writes Shanghai-based lawyer Mark Schaub at the China Law Insight.

The National Rules include regulations for:  the regulators, test applicants, requirements for the test driver, requirements on test vehicles, the testing application, the testing process regulation, traffic accidents, and the automation level of self-driving cars.

Mark Schaub:

The National Rules have been issued subsequent to local regulations on self-driving car road testing being issued in Beijing, Shanghai and Chongqing in recent months (“Local Regulations”), and will take effect 1 May 2018. 

The National Rules are based on both best practices in other jurisdictions as well as some of the initiatives pioneered in the Local Regulations. The National Rules stress safety which is no doubt a response the Uber accident fatality in Arizona... 

The issuing of the National Rules adds further momentum to China’s regulations in respect of road testing for autonomous vehicles and paves the way for increased road testing of self-driving cars across China. It seems that little will slow down the development and commercialization of autonomous vehicles in China. 

The National Rules are just one indication of China’s ambitions to lead the world in this new technology. Chinese president Xi Jinping also stated at the Boao Forum on 10 April 2018 that there were plans to further open up China’s economy including relaxing foreign investment restrictions in the auto sector. Having support at the highest level bodes well for the development of autonomous cars in China.

More at the China Law Insight.

Mark Schaub 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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Nutrition additions: room to grow in China - Ben Cavender

Ben Cavender

The recent US$ 620 million purchase of Australian vitamin company Nature’s Care by Chinese investors made other firms in the industry wonder what their chances are for a similar deal. "There is a lot of room for growth in China," says business analyst Ben Cavender to Reuters.

Reuters:

Chinese investors have been hunting for deals in health foods, vitamins and supplements overseas to meet growing demand from China’s burgeoning middle class who are becoming increasingly health and fitness conscious. 

Australian firms in the sector including Swisse Wellness and Vitaco Holdings have lured Chinese buyers in recent years, while Chinese drugmaker Harbin Pharmaceutical Group Holding Co (600664.SS) said it would buy a 40 percent stake in U.S. nutritional supplements maker GNC in February. 

“There is a lot of room for growth in China,” said Ben Cavender, Shanghai-based principal at China Market Research Group, who added that Australian firms especially had built up good cachet and brand awareness in China. 

The buying consortium added in their statement that there was “explosive growth” in Chinese demand for “high quality nutrition supplements from overseas countries like Australia”, helped in part by a flourishing cross-border online market.

More at Reuters.

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How WeChat Pay took off with digital red envelopes - Matthew Brennan

Matthew Brennan

When Tencent started during the 2014 CCTV New Year show to promote giving red envelopes online, few realized it was the successful kick-off what is now known as WeChat Pay, says WeChat expert Matthew Brennan to the JingDaily. Some luxury brands did not like the concept though: "The idea of a discount communicates value and is generally not an incentive that luxury brands want to be associated with."

The JingDaily:

“It was a very important moment when red envelopes became popular because it is not an exaggeration to say that WeChat Pay itself was built upon the success of ‘lucky money’ or ‘red envelopes’ on WeChat,” said Matthew Brennan, a known WeChat expert and co-founder of China Channel. “Without lucky money, WeChat Pay wouldn’t have the adoption that it has today.”... 

There have been a number of other ways brands have adopted the concept of the red envelope in their daily marketing schemes through cooperation with WeChat Pay. After buying something in-store using WeChat Pay, consumers may, for instance, receive a red envelope with a surprise discount. Sometimes, payees are also prompted by the brand to send ‘lucky money’ to a friend, helping the brand expand its customer base. In most cases, Brennan says, the participating companies are consumer brands because the idea of a discount communicates value and is generally not an incentive that luxury brands want to be associated with. 

However, as WeChat and Alipay race to find ways to retain users for their mobile payment ecosystem, they continue to explore ways to incentivize shoppers and even promote various new technologies. Last year, on the tail of the global Pokemon Go phenomenon, Alipay included red envelopes in an augmented reality (AR) game where users could give the app access to their cameras and locations in order to see digital hongbao floating in front of them. Brands have gotten involved by teaming up with Alipay and “hiding” AR red envelopes in their stores or among their products, promoting online to offline (O2O) engagement among followers. WeChat has also empowered retailers to tap into O2O gamification using red envelopes, working with a mall to incentivize shoppers with a hongbao scavenger hunt. 

Luxury brands such as Hermès are already using mobile games as a marketing channel. In place of offering discounts, they can instead reward engagement with exclusive products or access to events. 

Alipay and WeChat Pay present significant new opportunities for brands operating in China. 

“There’s an intense war to protect those payment platforms and also to integrate increasingly more with offline payments, merging online and offline retail experiences,” Brennan said. ”From the backend, this also means utilizing data better and improving logistics as the expectations of the consumers in China are increasing.”

More in the JingDaily.

Matthew Brennan 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 fintech experts at the China Speakers Bureau? Do check out this list  

Digitization of China's manufacturing - Arthur Kroeber

Arthur Kroeber

China has been leapfrogging into the digitization of the consumer industry but is now moving into the established manufacturing too. Economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® looks at the progress, and potential barriers for robotizing China's factories.

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.  

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