The US just cannot stand China is doing better - Arthur Kroeber

Arthur Kroeber

Despite the fast ups and downs in the relations between the US and China, the fundamental animosity between the world's largest economies is just not going away, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® to the South China Morning Post. Despite Donald Trump's easing of the fight with ZTE, he does not expect a huge change in the tensions.

The South China Morning Post:

Some observers like Arthur Kroeber, research head at Gavekal Dragonomics, feel that relations between the countries are unlikely to improve. 

“It is possible that all this back-and-forth [visits and talks] will allow a reduction or delay in the tariffs that the two sides have threatened … but it will also be cosmetic.” 

He said the rivalry between the US and China is not principally about trade, and is only marginally about Donald Trump. It is really about China’s emergence over the last five years. 

“These developments have caused the American security and foreign policy establishment to conclude that the US is now in a long-run strategic competition with China for technological and military superiority, and for dominance of the global economic system,” he said.

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 to help you in dealing with the ongoing trade tensions between China and the US? Do check out this list.

European companies need to act fast to catch up with China - Mark Greeven

Mark Greeven

European companies are running behind in defining a good strategy in catching up with China, writes Mark Greeven, professor at the Zhejiang University,  in the LSE Business Review. "The reality is that Chinese companies have no choice but to innovate and upgrade in global value chains."

Mark Greeven:

The reality is that Chinese companies have no choice but to innovate and upgrade in global value chains. Their domestic competitive landscape is highly competitive and innovation advantages are necessary. Entry into Europe by many of China’s largest tech companies is a necessity, as they are looking for market experience, leveraging new technology and exposing themselves to international business. We have not even seen the real beginning of the international journey of Chinese digital giants. More is to come, as it is imperative to China’s business world. 

It is also worth noting that while Chinese companies no longer have a cost advantage, they do have a technology advantage. Chinese companies are globally number one in fintech; number two in virtual reality, autonomous driving, wearables, robotics, drones, and 3D printing; and number three in big data and artificial intelligence (McKinsey, 2017). Chinese research in deep learning for artificial intelligence applications has seen the largest growth rate, closing in on the US, while European companies are hardly increasing AI research and development. AI has been supported by recent national government policies in China. Already, there is a Chinese white paper on developing technology standards for AI. Combined with markets, capital and ambitious entrepreneurs, Chinese companies have a strong technology advantage to leverage in Europe. 

For European executives it is vital to understand what is happening and react as fast as possible, either to grasp an opportunity or to be ready to face an emerging threat. First, they should know and analyze in detail the latest solutions, value propositions and business models of the Chinese digital players, identifying the most innovative and disruptive elements. In several cases they can be taken as innovation benchmarks. 

As they are very unpredictable, it is crucial to map the different ecosystems to derive insights on whether and how Chinese players will penetrate a particular market space. Designing interconnections among the companies inside ecosystems helps understand the overall business models and next strategic moves. This is critical to define the best strategies to connect, partner or compete against them.

More in the LSE Business Review.

Mark Greeven 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.  

The risks and benefits of One Belt, One Road - Sara Hsu

Sara Hsu

China's massive One-Belt, One-Road program has often been compared with the US Marshal plan after the Second World War. Keen to reap the benefits, risks for investors have also been highlighted, writes financial analyst Sara Hsu at Capital Watch. US investors like Marc Merlino, head of Citi's global subsidiaries group started to explore the field, she writes.

Sara Hsu:

While investing directly in poorly screened OBOR projects directly may not make sense, Marc Merlino, to his credit, noted that ventures surrounding major OBOR projects provide huge potential for returns. Merino states, "it's the opportunities for micro infrastructure beyond the core projects. All the knock-on effects ...." Certainly, after OBOR plans are carries out and the success of the construction can be more easily understood, investing in micro infrastructure could be quite profitable. 

Past evidence of profitability of backward linkages between major invested projects and the rest of the economy can be witnessed in China's special economic zones (SEZs). The clearest example of this is the city of Shenzhen, which was established as an SEZ in 1980, when it was a sleepy fishing village of 30,000 residents. Today, Shenzhen has become a megacity with a population of 12.53 million, and one of the most economically important cities in China. The city grew not only because of the influx of foreign direct investment, but also because of the growth of supporting industries. Many people who invested in the city early on have enjoyed significant profits as the city grew. 

Prudent analysis would require that investors financing micro projects surrounding an OBOR project should perform the due diligence that China's policy banks might have failed to undertake. This may require more resources to carry out than individual investors have, but is feasible for large institutional investors or lenders like Citi. In sum, investors need to proceed prudently with regard to OBOR projects and recognize that many of the projects have been insufficiently vetted. Plans surrounding visibly successful OBOR projects may bear fruit as long as investors focus on assessing and hedging against risks. After this work is done, one can be cautiously optimistic about such plans. 

More at Capital Watch.

Sara Hsu 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 One-Belt, One-Road program? Do check out this list.  

At last: opening the China markets for IPO's - Shaun Rein

Shaun Rein

Many successful Chinese companies listed in the US, rather than in China, because of the stringent regulations in their own country. Now going IPO in China is at least becoming easier, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order to Harbour Times. And some Chinese companies might come back from the US.

Harbour Times:

Xiaomi filed documents in early May to list in Hong Kong. The company is expected to raise $10 billion from the offering and aimed for a valuation of about $100 billion, despite the head of the company’s top lawyer Zhang Liang said in March 2015 that the company had no plans to list within the next 5 years. 

The application came after the China Securities Regulatory Commission reportedly issued new listing rules in April in hopes of retaining potential technological giants in the home market, by promising fast-tracked approvals and easing regulations, on top of additional incentives. 

The new rules allow non-listed local companies to conduct initial public offerings without meeting the traditional financial requirements, according to reports. 

“Changing the requirements will unlock opportunities for both start-ups and investors and is something that should have been done years ago,” said Shaun Rein, managing director of the China Market Research Group in Shanghai. 

“Many Chinese firms that would prefer to go public in China ended up listed in the US instead because of onerous profit requirements. In fact, many great companies like Amazon never would have been allowed to go public in China if they had been Chinese start-ups.” 

Meanwhile, the pain of losing out on a listing by Chinese e-commerce juggernaut Alibaba in 2014 has also prompted the Hong Kong Exchanges and Clearing (HKEX) to examine new measures.

More at the Harbour Times.

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

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

Social currency in an online society - Tom Doctoroff

Tom Doctoroff

China's deep Confucian roots do influence the way the internet has developed, says marketing veteran Tom Doctoroff, author of What Chinese Want: Culture, Communism, and China's Modern Consumer, to the South Morning Post. “I call it pride commerce, where there is the idea that you are what you buy … and that sharing your interests is a way to make your identity stronger,” Doctoroff said.

The South China Morning Post:

Social+ apps have also gained traction because Chinese tend to be more expressive and open online compared to in person due to the strong influence of Confucian values that minimise individualism in favour of the collective good, according to Tom Doctoroff, chief cultural insights officer at branding and marketing consultancy Prophet. 

“The Chinese often generate social currency through their activities and online persona. The online world is a place where you can project your identity safely, and so there is a greater amount of expressive liberation happening online in China relative to other countries,” he said. 

As China continues to prosper and its middle class becomes more affluent, many Chinese want their interests or material possessions to reflect that they are “sophisticated and worldly”, so many are happy to share their personal interests or purchases with others online, he said. 

“I call it pride commerce, where there is the idea that you are what you buy … and that sharing your interests is a way to make your identity stronger,” Doctoroff said.

More in the South China Morning Post.

Tom Doctoroff 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 branding experts at the China Speakers Bureau? Do check out this list.

US and China lock horns on tech - Arthur Kroeber

Arthur Kroeber

The trade dispute between the US and China is moving from commodities to tech, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® to the South China Morning Post. Getting a deal will be tough, says Kroeber: “The problem from China’s perspective is: can you trust the US to stick to any deal you cut with them?”

The South China Morning Post:

Arthur Kroeber, research head of China-focused Gavekal Dragonomics, said rivalry between China and the US was intensifying.

“Some kind of deal on tariffs or deficit reduction is possible but the underlying tech and strategic issues will not go away,” he said. 

China’s ambitions to become a tech superpower through programmes like its “Made in China 2025” strategy to support the domestic hi-tech sector and the belt and road trade and infrastructure plan were perceived as “a direct challenge to US geopolitical and geo-economic leadership”, Kroeber said... 

“China is struggling to figure out what would be the right strategy because it is difficult to negotiate with the Trump administration,” Kroeber said. “The problem from China’s perspective is: can you trust the US to stick to any deal you cut with them?”

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 to help you in dealing with the US-China trade war? Do check out this list.

How 'social' became crucial for internet business in China - Shaun Rein

Shaun Rein

Social connectivity has become crucial for life and business in China. "If you want to do well as an internet company today, you need to be strong on the social aspect, otherwise you won’t be able to gain any traction," tells business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order, to the South China Morning Post.

The South China Morning Post:

Such business models are successful because China leapfrogged the personal computer era and saw tremendous growth in mobile internet and smartphone users, according to Shaun Rein, managing director of China Market Research Group. 

“Smartphones are inherently social devices, and many of China’s tech companies built services with the smartphone in mind. Social networking was also an area where China’s technology companies had little competition because foreign players were blocked from entering the market by the government.” 

Such favourable market conditions allowed Chinese internet companies to greatly influence how social media and social networking sites operated in China. 

“Social has now become a big part of the Chinese internet and the ecosystem of services. If you want to do well as an internet company today, you need to be strong on the social aspect, otherwise you won’t be able to gain any traction,” Rein said... 

“In a landscape where Chinese consumers are unsure of which products and services are good they are more likely to trust what their friends are using, buying or recommending,” said China Marketing Research Group’s Rein.

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 on China's take on the digital transformation at the China Speakers Bureau? Do check out this list.

What does China want? - Shaun Rein

Shaun Rein

China is adamant when it says it does not want to replace the United States as an international player. But what does it want, asks The Diplomat Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order. " Many nations feel Western, historically ethnically white nations have an outsized say in institutions like the World Bank or IMF and feel the U.S. contains their growth."

The Diplomat:

Describe the core construct of China’s new world order. 

American policymakers need to understand China is not looking to challenge and replace the American-led world order as the Soviet Union wanted during the Cold War. President Xi wants China to have a greater say in international affairs that an economic power of China’s size deserves. Many nations feel Western, historically ethnically white nations have an outsized say in institutions like the World Bank or IMF and feel the U.S. contains their growth. 

By launching initiatives like One Belt, One Road [OBOR] and using economic carrots and sticks with other nations, China hopes to gain more influence. Worried about President Trump upending long-term alliances and relationships, many nations like the Philippines are moving closer to China’s orbit and benefiting from China’s economic largesse. However, such economic carrots come with a price — adherence to China’s political aims and loss of political independence. Like it has done with South Korea, Norway, and Mongolia, China will punish nations that cross it politically by stopping trade and by using the state-owned media to rally consumers to boycott brands. 

Explain how China’s innovation and investment strategy shapes China’s world order. 

China uses economic carrots like low interest loans and infrastructure investments to curry political favor from nations in a divide-and-conquer plan. For example, many ASEAN nations criticize China for its reclamation of islands in the South China Sea which many countries view China using as unsinkable destroyers in the event of war. 

To blunt criticism, China essentially buys support from nations like Laos and Cambodia by showering them with low interest loans and infrastructure projects. In return, Cambodia mutes criticism of China in ASEAN pronouncements. There is clearly a quid pro quo deal in place. 

China uses similar strategies in Europe with Hungary and Ethiopia in Africa. For example, earlier this month every European nation ambassador in China except for Hungary signed a letter criticizing China for not opening up projects enough for foreign firms in the One Belt, One Road initiative. Most likely China will dole out economic benefits to Hungary in the coming months in a similar to way that it opened up 12 direct flights for Ethiopian Airlines to China, just weeks after Ethiopia publicly supported China while other African nations were criticizing it, making that country’s national carrier the main hub for Africa-China flights.

More at the Diplomat.

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 international expansion? Do check out this list.

In China's working culture, time's are changing - William Bao Bean

William Bao Bean

For a long time, working around the clock - from 9 to 9, six days a week known as the 996-rule - was common in China's startup working culture. But those times are changing, says SOSV managing director William Bao Bean, a leading voice in China's startup scene to the BBC. “China has moved from a society that was told what to do, to one that is doing what it wants to, and that’s also a millennial thing,” he says.

The BBC:

There are historical reasons behind the emergence of the 996 culture. When China’s tech and start-up scene started to flourish in the early 2000s, most companies sought employees willing to work around the clock, something which helped some of them grow into the country’s biggest companies. Tech company Tencent, for example, is among the world’s five most valuable firms. 

“For the last 10 or 15 years, the work culture has been extremely intense,” said William Bao Bean, a venture capitalist and the managing director of start-up accelerator Chinaccelerator. And because China’s tech companies, who were among the first adopters of unpaid overtime, are now the largest employers, companies in other fields have also started to make their staffs work longer hours in a bid to match their success. 

The normalisation of unpaid overtime led to the invention of the phrase 996 – but Bao Bean says the very existence of the phrase is also a sign that attitudes might be changing.   

“The fact that there is now a word for it and that we are having a conversation about this shows that the market is maturing,” he says. 

However, Bao Bean says that people who like their work environments are not grumbling about the hours. Companies who inspire their employees offer good compensation packages and that are prestigious can find people to work 996 without complaint, he says. 

“China has moved from a society that was told what to do, to one that is doing what it wants to, and that’s also a millennial thing,” he says.

More at the BBC.

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

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

The 2008 Sichuan earthquake is still sending aftershocks - Ian Johnson

Ian Johnson

The devastating 2008 Sichuan earthquake is still sending tremors into China's society, writes journalist Ian Johnson, author of The Souls of China: The Return of Religion After Mao, in the NY Review of Books."China’s supreme rulers today also have a strong hold over their citizens, but their edifice might not be immune from seismic change in society."

Ian Johnson:

Today’s state—as, in centuries past, dominated by ethnic Chinese—offered a modern version of historic patterns of displacement. First, Qiang cultural practices were recorded and turned into ethnographic objects as “intangible cultural heritage.” This was then packaged as a tourist destination for Chengdu’s inhabitants. Slogans were tossed about, such as turning the stretch from Chengdu to Jiuzhaigou scenic area into a “Tibetan-Qiang cultural corridor.” 

Probably the most dubious example of this was in the town of Beichuan, which was one of the centers of the earthquake. Its ruins were not torn down or rebuilt but reinforced and left as an aestheticized freak show for visitors—a town in what scholars have called a “fixed stage of collapse.” One of its special features is the Earthquake Science Experience Center, where movies of earthquakes are shown. Opened in 2016, it is located directly beneath the site of the ruined Beichuan High School—a graveyard of hundreds of children. 

Besides entertainment, visitors are encouraged to “work energetically for the country’s prosperity and glory.” The government’s heroism is emphasized, with Communist Party officials praised for working for the public good despite their personal losses. 

The state’s dominance is reflected in Beichuan’s memorials. Over the years, locals have tried to put up their own small places of remembrance, but only government memorials are allowed. Most locals refuse to visit them because they get so much tourist traffic. Instead, the bereaved burn incense or put flowers at the site of their loved ones’ demise—but these are quickly cleaned away by the authorities. It is little wonder that a local teenage girl told a team of visiting Chinese and foreign researchers that “the city is rebuilt, we are finally settled and life takes up its course again, and yet people haven’t found peace and serenity.” 

In China, the state’s presence is overwhelming—and often dictatorial. It locked up Tan Zuoren and beat up Ai Weiwei. It closed down the Chinese journalists’ trying to report on corruption. It bulldozed the Qiangs’ culture and means to turn them into minstrels for Chinese tourists. And yet, from the state’s perspective, these are perhaps regrettable side-effects of a larger good: its ability to rule. 

This is what the political theorist Richard Löwenthal called a “development dictatorship”: it develops, therefore it is. It has impoverished mountain people and so, while mouthing pieties about participation and sending out teams of academics to conduct field surveys, it builds highways and hotels up into the mountains to rescue them from their own culture and history. 

As for the do-gooders in Chengdu, the authorities understand that people need something to believe in—after all, in the past, people actually believed in Communism, too. So they pass NGO and charity laws that allow these bleeding hearts to band together—under government supervision, of course—to donate their time and money. 

This is all very well—after the fashion of a harried parent who allows a child to cut the grass with a plastic mower. Except that, in reality, the child is a co-owner of the house and has ideas about how to manage the yard, while the parent obsessively demands control and recognition. Thus, when China’s then leader, Hu Jintao, left power in 2012, one of the scenes shown at his farewell video tribute was of him visiting the site of the earthquake. Later, when Xi Jinping took office and issued his slogan of creating a “China Dream,” his propagandists included images of soldiers rescuing people from an earthquake. Good Samaritans are well and good, was their message, but it’s the big boys who do the real work. 

Just as people were naïve to assume that the activism of 2008 would become the norm, though, it is also premature to conclude that today’s retrenched state dominance is the final word. When the surplus capital created by the Dujiangyan waterworks helped Qin Shihuangdi unite China for the first time more than two millennia ago, his empire seemed unassailable. And yet his zeal to unify and control was his undoing—he was deposed after just a decade in power. 

China’s supreme rulers today also have a strong hold over their citizens, but their edifice might not be immune from seismic change in society.

Much more in the New York Review of Books.

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

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

How brands can overcome political problems - Tom Doctoroff

Tom Doctoroff

Cartoon Peppa Pig was the latest to get into China's political crosshairs, but it was not the first and will not be the last, says branding expert Tom Doctoroff. For Mumbrella Asia he gives a quick overview of those problems, and some tips to avoid them, and limit the damage when you get caught.

Tom Doctoroff:

But, once anger abates, normalcy returns. Chinese consumers are even more pragmatic than nationalistic. Superior value always wins the day. 

That said, there is no room for complacency. 

The best armor is a compelling and well-defined brand purpose, a consistent long-term relationship between consumer and brand that underpins all subsequent engagement with that brand. It articulates a brand’s calling and how it contributes to consumers’ lives. 

SK-II overcame its scandal by elevating the brand’s purpose from functional anti-aging to an emotive “power to change your destiny.”  It resolved a conflict between women’s desire to both conform to conventional standards of beauty and escape the confines of societal expectations. The brand’s efforts were multidimensional. For example, it created a social movement to arm “left behinds” – unmarried women over the age of 27 – with the confidence to be beautiful at any age. 

Brands must also be “customer obsessed”. 

In an era of consumer empowerment fueled by technology, experience is king. From a delivery app that reveals courier location to facial recognition that generates tailored menu recommendations, KFC occupies a high ground of “seamless personalisation” within the quick service restaurant category. 

Starbucks has overcome media brouhahas about tainted meat and price gouging. But business is booming – there are more than 3,000 stores across the PRC – because the brand offers inspired customer experience, not just coffee.

More in Mumbrella Asia.

Tom Doctoroff 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 branding experts at the China Speakers Bureau? Do check out this list.  

Chinese spinoffs: a different story - Paul Gillis

Spinoffs are typically business transactions where the total of all entities increase their value by splitting up their existing business. But not so for Chinese companies, listed in the US, argues Beida accounting professor Paul Gillis. Not the shareholders or the company gains, but mostly management, he explains at his weblog.

Paul Gillis:

Spinoffs are situations where a corporation disposes of part of its business by giving shares in the business to shareholders. When they work, the value of the parts is greater than the value of the whole. “Spinoffs” of US listed Chinese companies work differently. 

A favorite transaction of US listed Chinese companies is to "spin off" parts of the business in a new entity in an IPO transaction. Shareholders of the parent company are not distributed shares of the company that does an IPO although they may benefit if the value of the underlying shares is recognized in the stock price. There have been a number of these transactions and several in the pipeline. 

I have observed, however, that the biggest winners in these transactions appear to be members of management. Management typically ends up with a big chunk of these deals which are structured in a way that does not report as expense the value transferred to them. 

Rather than point to a specific transaction, I am going to examine these transactions through a straw man. When I look at specific transactions, I find the public documents obscure what is going on and add bells and whistles that do not alter the essence of the transaction while providing arguments to counter any attacks on the structure. So, the transaction I describe below is fictitious, although I think fairly represents what is going on. I leave it to others to apply this to specific transactions. I apologize, but this simplified example is still complicated as hell.

The full case at the Chinaaccountingblog.

Paul Gillis 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 financial analysts at the China Speakers Bureau? Do check out this list.  

Why the trade talks will lead nowhere - Arthur Kroeber

Arthur Kroeber

The Trump team has started trade talks in Beijing, but it is very unlikely they will get anywhere, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know®, in CBS. The internal divisions in the US team are only a part of the problems to gain ground, he says.

CBS:

The talks are unlikely to accomplish much, noted Arthur Kroeber, head of research for Gavekal Research. The American "coalition of trade warriors and national security hawks" agree that China poses a threat to U.S. dominance, yet they haven't formed a "coherent strategy," he said in a research note. 

"Above all, the professionals are hamstrung by President Donald Trump, who absurdly insists that the main goal should be a US$100 billion reduction in the bilateral trade deficit," he said. 

He added, "The team-of-rivals delegation brings differing objectives to Beijing. Mnuchin would probably like to cut a deal on tariffs and deficit reduction and focus on improving market access for US firms in the lucrative China market."

More on CBS.

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 ongoing trade war at the China Speakers Bureau? Do check out this list.

US tries to win a trade war it lost decades ago - Shaun Rein

Shaun Rein

The Trump team trying to negotiate the next phase of a trade war has arrived in Beijing. But Donald Trump is trying to win a trade war it lost already decades ago, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order to Marketplace.

Marketplace:

Shaun Rein with China Market Research Group and author of “The War for China’s Wallet” said China is no longer stealing jobs from the United States, so he said if Trump hopes to move jobs back to America it is an “unwinnable war.” 

“That ship has sailed decades ago,” he said. 

He said Chinese officials will give enough “economic crumbs” to the Trump administration to placate it, but China will not simply unblock Facebook or Twitter and allow U.S. internet giants to operate freely because the leadership is keen on controlling information.

More at Marketplace.

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 the ongoing trade war between the US and China? Do check out this list 

Why China wants to rebuild Syria - Sara Hsu

Sara Hsu

Rebuilding war-torn Syria might cost around US$250 billion and China raised its hand to participate. Financial analyst Sara Hsu figures out what it behind that offer, while the rest of the world tries to steer clear from Syria, for Triple Crisis. China sees some clear interests, she writes.

Sara Hsu:

China’s choice to fund Syrian reconstruction also appears to be economically motivated, in large part because Syria provides an important pathway along China’s Silk Road. On the ancient Silk Road, the city of Aleppo acted as a key market for buying and selling international goods, and the west coast of the country continues to provide access to the Mediterranean Sea. At present, Syria has the potential to be an important logistics hub. Not only that, but the construction of infrastructure itself will generate income for Chinese firms that have shown interest in taking part. This will aid Chinese firms, especially since the Asian nation is going through a period of slowing economic growth that has led to lower rates of infrastructure investment. 

In addition, serious security will help ensure that Chinese investments in the region will remain intact. Some of these are located in Egypt, Iran, Turkey, and Saudi Arabia. The region is essential to Chinese investment in energy and infrastructure, and is viewed as an important crossroads between Asia and Europe. The security of this region can help to stabilize Xinjiang, home to Uighur separatists that China views as a threat to security and an important node on China’s new belt and road. 

The U.S., Europe, and Gulf Arab allies are steering clear of funding reconstruction in Syria, as they believe that the wrong side won the Civil War. These nations have called for Assad’s departure as a precondition for receiving reconstruction aid, as they believe Assad is responsible for myriad atrocities carried out on his own people. The U.S. took the side of moderate Syrian rebels. For his part, Assad has stated he will reject aid from nations that supported the opposition during the war. Syria has received aid from Iran, Russia, and China, and will likely continue to do so. 

Despite the opposition of the West against Assad, China’s decision to support the current Syrian government does not appear to be motivated by anti-Western sentiment or the desire to compete for influence with the United States. There are those who rally around the Chinese flag due to opposition to the United States, for sure, but these include less powerful nations, like Syria or Iran, that are politically and/or ideologically opposed to U.S. hegemony in the region and in the world. 

In conclusion, China’s position of support for Assad’s Syria underscores its security and economic interests in the region. While any measure of support for a particular regime may be viewed as political, China is attempting to refrain from engaging in directly political activities in the country and in the Middle Eastern region. China’s aim is to make economic gains through One Belt One Road, employing its own firms in the construction of much-needed infrastructure, and attempting to ensure security in order to do so. While the West may dislike China’s support of the Assad regime, China’s involvement in the reconstruction process is likely to bolster its role in the Middle East and strengthen its global soft power going forward.

More at Triple Crisis.

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 China's One Belt, One Road program? Do check out this list.  

'Made in China' is no longer inferior, but who knows? - Shaun Rein

Shaun Rein

Chinese brands like Alibaba, WeChat and JD.com still face the perception they deliver inferior products when going global, says business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order. They mainly focus on Chinese consumers who know better, but the barrier exists for global expansion, he tells the South China Morning Post.

The South China Morning Post:

By offering shipping to countries outside China, the e-commerce sites are giving Chinese brands an opportunity to expand internationally. Foshan-based furniture maker Linshimuye and domestic electronics brand Joyoung are just two well known Chinese brands using e-commerce platforms like Tmall to expand to other countries. 

One of the barriers facing Chinese brands going global is a perception that the “Made in China” label means inferior products, according to Shaun Rein, the managing director of China Market Research Group and author of The War for China’s Wallet. 

“The reality is that in many categories Chinese brands are as good or even better than multinational companies,” he said, adding that the global strategy for most local brands is to piggyback on sales channels from Alibaba and JD.com to reach end consumers outside China.

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 stories by Shaun Rein? Do check out this list.

WeChat: the new normal for 900 million users - Matthew Brennan

Matthew Brennan

WeChat, Tencent's mobile platform, is now reaching 900 million users in China, and in four year time it has become an indispensable tool for anybody living in the country, says WeChat expert Matthew Brennan at InTheBlack. "WeChat is not a social media. Think of it as an operating system for your life in China’,” says Brennan.

In the Black:

WeChat’s reach has expanded into all walks of life. The effect has been that while you certainly can do business and socialise in China without WeChat, using the platform gives you direct and instant access to everyone. 

“It would now be very difficult to live in China and be a normal functioning member of society without having a WeChat account,” says analyst and WeChat specialist Matthew Brennan. 

“The a-ha moment for me was about four years ago when I used WeChat Pay in a convenience store for the very first time. I realised then that it was really cool, it was really convenient, and it was going to change the whole of China – and it has. I realised it was not just messaging, it had a much, much greater ambition, and that’s the way it has played out.” 

Brennan’s Beijing-based China Channel company charts trends and developments on the platform, while also offering training sessions for businesses that want to learn what WeChat is all about. There is one thing he always tells people during a training session. 

“The first thing I say is ‘don’t think of WeChat as social media. Think of it as an operating system for your life in China’,” says Brennan. 

“In China, we went from nothing to mobile payment. There have been credit cards but they have never been used in the same manner as they have in Europe or America. That habit of reaching for plastic whenever you have to pay for something, like the Americans do, was never ingrained in the Chinese.” 

These days, the Chinese daily press comes full of tales of small isolated villages where people are quickly dispensing with their traditional means of doing business – and WeChat is the leading alternative.

More at In The Black.


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 experts on the digital transformation in China at the China Speakers Bureau? Do check out this list.  

China is not a push-over like Japan in the 1980s - Arthur Kroeber

Arthur Kroeber

China as a country is much stronger than Japan was when it got into a trade war with the US in the 1980s, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know®. Unlike Japan, China will not give in to any demands from the US, especially when those demands are hard to guess, he tells the Hellenic Shipping News.

The Hellenic Shipping News:

Beijing has not been shy in pushing back at the US, either in talking tough or in retaliating with new tariffs of its own. In its confrontations 30 years ago, Tokyo could not be so bold. Japan was in a far weaker position because of its economic reliance on exports generally and the US market particularly. 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 Hellenic Shipping News.

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.

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.

Paul Gillis 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.  

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.

Zhang Lijia is moving from Beijing to London early May. Are you organizing meetings in Europe after May? Do get in touch.
More stories by Zhang Lijia, you can find here.