How China's stock markets are different - Ann Rutledge

Ann Rutledge

China's is officially heading for more reforms of its financial markets. But their stock markets are still a very different creature compared to the stock markets elsewhere, says financial analyst Ann Rutledge in Knowledge@Wharton.

Knowledge@Wharton:

Indeed, China’s “top-down approach to market building” stands in contrast to the private sector’s way, where companies use assets and resources within their control guided by institutional market knowledge, says Ann Rutledge, adjunct associate professor at the Hong Kong University of Science and Technology. 

The key for foreign firms is to understand the raison d’etre of China’s securitization market, Rutledge says. It’s not about creating a market for its own sake but hitting another milestone towards modernization in service of its national goals. “Money is good but the needs of the people and the state come first.” 

Not to be overlooked is China’s desire to control its currency and one reason for its inward focus, Rutledge says. But its quest to internationalize the renminbi — where the currency is widely held by investors outside of China for use in payments, settlements, investments and reserves — has slowed down sharply since 2014 due to changes in economic conditions, BNP’s Lo says. It was once a high policy priority in facilitating China’s financial liberalization.

More at Knowledge@Wharton.

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Getting China's political aspirations right in marketing - Shaun Rein/Tom Doctoroff

Tom Doctoroff

International airlines, ignoring Taiwan is part of China, according to China, were the latest to get into hot water with their marketing. But China's sensitivities are nothing new, say Tom Doctoroff and Shaun Rein to OZY. It makes sense to let your China marketing vet by some China veterans, says both.

OZY:

Most companies targeted appear to have tried to accommodate Chinese demands by apologizing and amending references to Taiwan, for example, to read “Taiwan, China.” 

“There’s a lot of fear. Companies are all trying to figure out if anything they’ve done is wrong,” says Shaun Rein, founder of China Market Research Group, a Shanghai-based consultancy. “They are looking at their websites … not just their own but also their suppliers’,” he adds. 

The White House waded into the dispute in early May, calling Beijing’s demands “Orwellian nonsense,” and stating that Beijing’s demands were “part of a growing trend by the Chinese Communist Party to impose its political views on American citizens and private companies.”... 

Tom Doctoroff, a partner at Prophet, a U.S.-based marketing consultancy, says Beijing’s intervention has so far been just a “minor irritation” to multinationals. “China has always been extremely sensitive when it comes to its territorial integrity,” he says. Recent events underlined the importance of making sure that marketing and other materials were vetted by staff with knowledge of the Chinese market, Doctoroff adds. “China is a market with a completely different worldview from the West … it’s imperative that how you go to market is localized,” he says.

More in OZY.

Tom Doctoroff and Shaun Rein are speakers at the China Speakers Bureau. Do you need one of them at your meeting or conference? Do get in touch or fill in our speakers' request form.

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The critical trade relationship between China and the US - Wang Haiyan

Wang Haiyan

Political analyst Wang Haiyan discusses the critical relationship of trade between China and the US, after US president Donald Trump imposed new tariffs in a surprise move in the ongoing trade war between the first and second world economy.

Wang Haiyan 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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Generation Z turns to domestic brands - Shaun Rein

Shaun Rein

Chinese consumers always had a preference for foreign brands, because of quality and status. But the wealthy Generation Z - the post-millennials - is turning the tables, warns branding analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order in the South China Morning Post.

The South China Morning Post:

Huawei was considered the top Chinese brand it nevertheless ranked only 70th among global brands, according to Interbrand research in 2017. 

“What’s interesting about post-millennial consumers is that they’ve inherited a lot of wealth and this makes them more worldly and sophisticated than any Chinese consumer base before,” said Shaun Rein, managing director of China Market Research Group. “We’re starting to see brands designing products with these Post-00s in mind from the beginning, and releasing new products and services specifically for the China market.” 

China’s one child policy, which came into effect in the late 1970s and was dropped officially in 2015, makes this generation a unique group, whose parents are the only sons and daughters in their families. Described as an “unprecedentedly realistic” generation, the Post-00s actively ask for resources from their families to develop their own interests, the report [released this week on the country’s Post-00s generation] said... 

Rein pointed out that this generation has pushed China’s mobile services ahead of the world. “These younger consumers are quick to adopt mobile services, so social video companies like Kuaishou and Douyin are doing well,” said Rein. “China is two to three years ahead of Silicon Valley when it comes to mobile innovation.” 

Kuaishou and Douyin (known as Tik Tok outside China) are two of the increasingly popular short-video and live streaming apps available in China – drawing massive interest from younger users, who like to post videos of themselves singing, dancing and generally larking around.

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.
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HK auditors: still not up to standards - Paul Gillis

Paul Gillis

Five years ago Hong Kong, once a center of international finance, was demoted by the European Union as a financial regulatory area on a similar footing. Beida accounting professor Paul Gillis applauds that after five years the HK legislators start to move to reform the auditors, but feels the action is far from enough, he writes on his weblog.

Paul Gillis:

Five years ago Hong Kong’s capital markets were dealt a humiliating blow by the European Union (EU). Hong Kong was removed from a list of jurisdictions deemed to have regulatory equivalency with the EU. The move happened because Hong Kong did not have an effective independent audit regulator, since the auditing profession in Hong Kong was self-regulated by the Hong Kong Institute of CPAs.  I have written many times about how the HKICPAs is a feckless regulator, reluctant to take on the big firms and when it is finally forced to enforce the rules, doling out miniscule penalties. 

It has taken five years, but finally Legco is preparing to take action. The Financial Reporting Council (Amendment) Bill of 2018 is working its way through the legislative process in Hong Kong. Unfortunately, the proposal falls far short of what is needed. I fear that the legislators have fallen into the trap of finding themselves up to their ass in alligators while forgetting that their original objective was to drain the swamp. The proposal has the fingerprints of the profession all over it, and has been weakened to the point of being mostly useless. 

There are two key problems from my perspective. The first is the composition of the supervisory board of the FRC. The second is adequate funding to make certain that the FRC can effectively function.

More at the Chinaaccountingblog.

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Ian Johnson, fighting into a subject

Ian Johnson (right)

Journalist Ian Johnson gained most recently celebrity by his latest book The Souls of China: The Return of Religion After Mao. Last week we got a peek into his research activities showing what immerging into a subject mean for a dedicated journalist like Ian.

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

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Europe lags behind China digitally - Mark Greeven

Mark Greeven

China is way ahead of Europe when it comes to its digital transformation, says Zhejiang University professor Mark Greeven, author of Business Ecosystems in China: Alibaba and Competing Baidu, Tencent, Xiaomi and LeEco to the NRC. Europe is way over-regulated compared to China, he says, and companies get in China much more leeway to experiment.

Mark Greeven:

China is more innovative than most people think. Europe is over-regulated while China is one large experimentation group for new companies, technologies and innovations. One of those areas of interest is digital technology, in particular digital payment. Despite – or because? – a centrally led economy, entrepreneurs are the digital innovators. 

We have seen nothing yet: Malong Tech’s artificial intelligence, Lens Technology’s leading thin glass, Mobike’s bike sharing, Hikvision’s global market leadership in security technology and Zongmu Tech’s technology for autonomous driving. The list is long and expanding.

More in the NRC. (in Dutch).

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.

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No children's day for left-behind ones - Zhang Lijia

Zhang Lijia

June 1 is Children's Day in China, but for those left behind at the countryside, there is no Childrens' Day, writes author Zhang Lijia in the South China Morning Post. Earlier she wrote Lotus: A Novel on prostitution in China and is currently working on her next book on left-behind children.

Zhang Lijia:

“Dear boss at the construction site,” wrote Liu Jiachao, a 12-year-old “left-behind child” from central China’s Hubei province, in his wish list one year ago. “Children’s Day is approaching. My father rarely does things with me. Could you please allow him a day off on June 1? I want to have a meal with him.”

Every year, millions of urban children in China enjoy a day off on Children’s Day, spending it in parks or playgrounds, often accompanied by their parents. For children of migrant workers such as Jiachao, however, the occasion reminds them of their disadvantaged position. 

This year, with Children’s Day around the corner, my thoughts once again turned to this group of children. In the past three years, I have spent many weeks at a picturesque village named Jidao in Guizhou province to research a book on left-behind children. Here, driven by poverty and lack of job opportunity, more than half of the able-bodied villagers have left for the city, joining the biggest tidal wave of migration in human history.

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 in the middle of moving from Beijing to London. Are you looking for more experts on cultural change at the China Speakers Bureau? Do check out this list.

The US-China trade deficit, explained for Donald Trump - Sara Hsu

Sara Hsu

The trade deficit between China and the US is a little bit more complex than simply comparing import and expert, says financial expert Sara Hsu to the CGTN. It starts with American companies making a profit by manufacturing in China and then exporting it to the US. And then goes on. Reducing the trade deficit might not be straightforward.

Sara Hsu is a financial analyst 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 trade war between the US and China? Do check out this list.

Nationalism: key feature in Xi's foreign policy - Arthur Kroeber

Arthur Kroeber

Nationalism has been a double-edged sword in China's domestic policy, where the leadership mostly tried to control this natural sentiment among its citizens. But Xi Jinping is clearly taking a different direction when it comes to his foreign policy, 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:

Rising nationalism in China will also make it hard for Beijing to change its policies. 

“If you look at some of the speeches Xi Jinping has made or plans highlighted in his presentation, he is presenting a sort of nationalist message,” said Arthur Kroeber, research head and co-founder of Gavekal Dragonomics. 

Xi told last week’s meeting of the Central Foreign Affairs Commission that leadership on foreign affairs would become more centralised in order to achieve the “Chinese dream” of national rejuvenation. 

“I think the evidence we have is that most people in China respond positively to that. They think it is very important for China to become more powerful and more independent and that if the US is trying to restrain China, then it is good for China to fight back,” Kroeber said... 

Washington’s seven-year ban on selling US components to Chinese telecoms firms ZTE over sales of its equipment to Iran – which Trump has since said he will revisit – has fuelled debate in China about its heavy reliance on chips imported from America. After the ZTE penalties were announced, Communist Party mouthpiece People’s Daily called for China to develop its own hi-tech industries, invoking Beijing’s drive to develop its nuclear and space programmes in the 1960s. 

“I think both in terms of a disciplined policy system and in terms of the power of nationalist message to a broader audience, they are important tools for Xi Jinping in constructing his response to the US,” Kroeber 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.

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Internet giants changed into investment vehicles - Shaun Rein

Shaun Rein

Internet giants Baidu, Tencent and Alibaba increasingly buy into innovative companies to stay ahead of the competition. Increasingly, they have become dominant investment vehicles, 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.

The South China Morning Post:

The investment splurge by Chinese technology companies is not too dissimilar to that of their US counterparts, many of which historically acquired or invested in firms that were deemed as key to future growth. Facebook, for example, bought photo-sharing app Instagram in 2012 and messaging platform WhatsApp in 2014, while Google acquired YouTube in 2006 and navigation app Waze in 2013. 

“Companies like Baidu, Alibaba and Tencent have become like investment companies. They are sitting on top of piles of money and they are figuring out how to try and make the best use of it,” said Shaun Rein, managing director at China Market Research Group. 

“The rate of investments is increasing because they’re trying to stay ahead of each other. Their major business lines have got so big that they are not going to get the same growth they are used to and it’s faster to buy technology and market share than to grow it organically and sustain a similar pace of growth.”... 

“Baidu is looking to become a technology leader. They’re trying to come up with innovation in artificial intelligence and autonomous driving,” said China Market Research Group’s Rein. “Baidu needs to find another growth driver, as the search business doesn’t have the same stickiness factor with consumers and advertisers that Tencent and Alibaba have with social media and e-commerce. So in a way, their back is against a wall where they must innovate to keep up.”

More at the South China Morning Post.

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

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Reducing China's trade deficit with US$ 200 billion sounds impossible - Victor Shih

Victor Shih

Rumors - denied by China - say China is willing to offer a reduction of its annual trade deficit with the US by US$200 billion. Even if China would be willing to do so, it would almost be "difficult to contemplate", says political analyst Victor Shih to Bloomberg.

Bloomberg:

The U.S. and China were expected to exchange new trade proposals during the Washington talks, Trump economic adviser Larry Kudlow said earlier Thursday. 

Mnuchin is leading the talks with Liu, along with Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer, according to the White House. 

Victor Shih, a professor at the University of California in San Diego who studies China’s politics and finance, said he finds an agreement to cut the U.S. deficit by $200 billion “difficult to contemplate.” 

“Even with a drastic reallocation of Chinese imports of energy, raw materials and airplanes in favor of the U.S., the bilateral trade deficit may reduce by $100 billion,” he said. “A $200 billion reduction would mean a drastic reduction in Chinese exports to the U.S. and a dramatic restructuring of the supply chain.”

More in Bloomberg.

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

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The 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.

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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.

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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.

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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.

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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.

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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.