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| Matthew Brennan |
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| Arthur Kroeber |
In addition to participating in trade talks, the Trump administration has restricted investment by Chinese companies in the United States and tightened export rules, steps that make a grand bargain between the two countries more remote in the short term.
“From the Chinese perspective, it looks like the U.S. is asking them to abandon a basic method of running their economy as well as implementing a containment strategy,” said Arthur Kroeber, an expert on the Chinese economy at Gavekal. “I think that even if we get a deal on trade in the next 30 to 60 days, it’ll be narrowly constructed and there will still be a lot of sources of friction.”
For Trump, a president known to boast about his negotiating prowess, even a limited deal with China may be enough to suit his needs. But the fundamental differences between the world’s two largest economies seem likely to remain an issue throughout the rest of his administration — and beyond.More at the Asia Society blog.
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| Harry Broadman |
At first glance, the proposed merger between Germany’s Siemens and France’s Alstom to fight off the future intrusion of the giant state-owned Chinese rail industry into the European Union market might appear to be in the public interest. After all, what better way to combat size than to scale up.
The EU Competition Commissioner, Margrethe Vestager, had the wisdom — if not the courage — to make the correct call in blocking Siemen’s acquisition of Alstom.While competing against firms from China is becoming tough going in virtually every sector across the globe — in large part because Chinese enterprises can get away by not having to play by the same rules as most businesses of other nationalities — sound public policy must be based on deftly balancing the welfare of a country’s consumers, workers, and businesses.
The fact is that businesses and the governments of the countries in which they operate need more innovative strategies to compete effectively with the Chinese — or anyone else — than simply increasing scale. Ask any Chinese boss of a lumbering state-owned-enterprise (SOE) he or she runs if they wish they had more agility to enhance their firm’s competitiveness against rivals.
Don’t be surprised if the answer is a resounding “yes”.
Indeed, for Siemens and Alstom the answer won’t be scale. That’s looking through the wrong end of a telescope.
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| Arthur Kroeber |
Amid reports that the United States will demand that China stop devaluing its currency as part of any trade agreement, Beijing has been urged to learn from the cautionary tale of Japan, which in 1985 agreed to a currency deal which has shouldered a good portion of the blame for its economy’s disastrous “lost decade”.
The US demands that China limit the yuan’s depreciation have been compared with the Plaza Accord, under which Japan, France, Germany, the United Kingdom and the US agreed to push the value of the US dollar down against the Japanese yen and German Deutsche mark.
The five countries began selling large amounts of US dollars, leading to a significant loss in dollar value.
The intervention resulted in the Japanese yen doubling in value against the US dollar in under two and a half years...
The clause demands that currencies are market-determined and that signatories avoid competitive devaluation, as a means of gaining a competitive advantage in trade.
It is the first time such a clause had been included in a major trade agreement.
China has previously signed up to to commitments at the G20 and International Monetary Fund that bar it from competitive devaluation.
However, critics claim that China has not upheld these commitments. In an interview with the Financial Times last year, US Treasury Secretary Steven Mnuchin noted that the yuan had fallen significantly over the course of 2018.
“As we look at trade issues there is no question that we want to make sure China is not doing competitive devaluations,” he said.
Arthur Kroeber, co-founder and research head at Gavekal Dragonomics, said that a currency agreement would be aimed at satisfying the demands of Mnuchin, a more dovish presence in the US administration, compared to hardliners such as US trade representative Robert Lighthizer.
“An exchange rate agreement is just a way for Beijing to collude with Trump administration doves like Stephen Mnuchin to trumpet a non-event as a big US victory,” Kroeber wrote.
Former US Federal Reserve chair Janet Yellen last week that it is “difficult and treacherous” to define when a country is manipulating its currency, warning US trade negotiators to think twice about asking China to maintain a stable yuan exchange rate.More at the South China Morning Post.
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| Rupert Hoogewerf |
A record 213 Chinese billionaires dropped out of the widely watched Hurun Global Rich List, as slumping stock markets worldwide wiped out a combined US$1 trillion from the fortunes of the world’s wealthiest individuals, a report released on Tuesday showed.
Only 658 super-rich individuals living in the Greater China region made it to the 2019 list, down from 819 last year.The squeeze felt by Chinese billionaires was much deeper than their peers in other countries, as the country’s worst stock market performance in four years was compounded by a weak yuan.
A year-long bearish stock market, partly attributed to the trade dispute between the United States and China and partly caused by a slowing economy and Beijing’s deleveraging campaign, saw the Shanghai Composite Index drop 25.7 per cent year on year as of January 31 – the cut-off date for the Hurun list. During the same period the Chinese stock market lost 13 trillion yuan (US$1.9 trillion) in market capitalisation.
“A big drop in the Chinese stock market coupled with a 6 per cent drop in the Chinese yuan were the main causes of the drop in [the number of billionaires from] China,” said Rupert Hoogewerf, chairman and chief researcher at Hurun Report, which compiles the list of individuals with a wealth of more than US$1 billion.
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| Ben Cavender |
Crossover retail or brands building cooperation with each other for new products is the new buzzword for companies looking to gain an edge in China's rapidly changing retail marketplace.
New crossover products that have made waves recently include a creamy candy shaped lip balm infused with White Rabbit creamy candy, a bottle of pink perfume jointly developed by baijiu maker Luzhou Laojiao, and a paprika lipstick from fast food chain Zhouheiya whose signature product is spicy duck necks. The lipsticks launched by US soft drink brand Coca-Cola and South Korean makeup brand Face Shop have the smell of Coca-Cola.
"There is definitely a broader trend toward brand collaboration happening globally and especially in China," said Ben Cavender, principal of Shanghai-based China Market Research Group (CMR). It allows brands to connect with a broader group of consumers and imbibes a feeling of nostalgia, he said.
Millennials, or those people born after 1980, have been the face of the crossover shopping.
For many like Dong Biyong, a millennial shopper, the crossover products are fond remembrances of her childhood. "I was extremely upset after I failed to get the creamy lip balm on the debut day, but luckily enough could get some later," said Dong.
She was referring to the lip balm launched by White Rabbit creamy candy and Maxam, a brand owned by cosmetics maker Shanghai Jahwa...
CMR's Cavender said the crossover trend has not necessarily been just with cosmetics, but also with apparel brands. An example in this regard is the streetwear brand Supreme doing collaborations with Louis Vuitton.
Regardless of the specific crossover product category, analysts suggest there are challenges for brands in seeking an alternative product other than their specialty.
"Quite a few crossover products have been launched. But not all of them can be termed successful," said Jin Qiaoying, research director of the beauty and personal care sector at Mintel China.
"Part of the challenge is in making the product meaningful to consumers," said Cavender. If consumers don't have affection for both brands they are unlikely to buy, so there has to be good brand synergy and retailers need to understand their target customer well, he added.More in the China Daily.
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| Sara Hsu |
In 2018, the growth of China’s peer-to-peer (P2P) lending sector dramatically reversed: 1,407 internet platforms that offered P2P lending services shut down due to increased regulation between July 2017 and June 2018. This year, the government has continued to lead a reorganization of the industry:
More companies will die: As of February 17, only 60 percent of online lending institutions had disclosed their operational information for January 2019, including five problematic platforms.
However, the current asset quality of the online lending industry has improved significantly according the data from firms that did report.
As of the end of January 2019, the accumulated amount of the online P2P online loan industry was about 7.78 trillion yuan ($1.16 trillion). The total loan amount in January was 91.4 billion yuan ($13.61 billion), down 55.1 percent year-on-year and down 1.3 percent from the previous month.
Further consolidation of industry players is certain. Some experts quoted in media reports predict that the scale of future online loans will continue to shrink because of regulation.
Some listed companies, such as Aoma Electric and Panda Financial Companies, have abandoned their P2P businesses.
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| Kaiser Kuo |
The Civil War that followed not long after the Japanese surrender in August 1945 was arguably touch-and-go for the CCP as well, and depended very much on the dispositions of external powers, most notably Stalin’s Soviet Union and the U.S. It’s too much to go into here, but it was by no means a foregone conclusion that the CCP would emerge victorious in that fight.
Believe it or not, the Cultural Revolution also nearly brought on the collapse of the Party. People don’t remember it this way, necessarily; they conjure up images of throngs of identically-dressed Red Guards in Tiananmen all holding aloft Mao’s Little Red Book and imagine that this was the Party in absolute ascendancy. It was Mao who was in the ascendant — not the Party. Mao Zedong had turned the forces of his zealous young revolutionaries against the Party itself, and against any manifestation of its institutional authority, whether in the bureaucracy, in industry, in educational institutes, in hospitals, or even in the villages. It was actually a grim time for the Party — not its day in the sun.
More predictions in SupChina.Finally, there was of course 1989. It’s hard to say just how close the Party might have come to “collapse” in May and June of 1989. But it’s clear that there were deep schisms within the Party leadership about how to respond to the student-led protests of that year. And individual decisions made by individual unit commanders in the 38th and 27th Armies appear, sent in to quell the “turmoil” eventually, appear to have made the difference between the “successful” quashing of the student and, by mid-May, also working-class demonstrators, on the one hand; and what just might have been civil war.
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| Ashley Dudarenok |
Nicole: So would you say then that KOLs are just as inherently important to the world of marketing in China as it is in the West? And if so, would you say they influence more or less than our image of a social media influencer?
Ashley: I’d say that they’re more important in China and have more influence. In the West, people have a different relationship with companies and traditional advertising and fewer trust issues in terms of that kind of advertising. Companies and ads have been regulated for decades. In China, there have been issues of trust in companies and their products from piracy to toxic ingredients. Traditional ads don’t have the power they once did and the market is flooded with them. Influencers, on the other hand, who have a good reputation and close relationship with their fans and followers, are trusted.
Nicole: With this in mind, do you think if Western companies want to extend their marketing into China, should companies, startups, and businesses shift their approach to being more of a KOL themselves or could they use the strategies of a social media influencer? Why would maintaining the mentality of Western e-marketing be effective or not?
Ashley: A typical Western approach wouldn’t be effective, as the market is just so different culturally, economically, content-wise and platform-wise. Western companies should definitely craft China-specific strategies, like giving more content and format freedom to key opinion leaders, being bold with new platforms like Douyin and so on. KOL marketing in China is even more important in your total marketing mix. And as Chinese influencers sell, they are also much more expensive and much more picky with the products, content and angles they promote.
Nicole: So you do think Western influencers have a lot to learn from China as far as being effective e-marketers and vice versa?
Ashley: Yes, both can and do learn from each other. Western influencers can learn from the way Chinese KOLs build their own brands and online retail channels all online, without using reality TV, risque content, controversy and without using other channels, while maintaining a loyal following. They can learn from the way they jump on hot topics and always maintain a positive tone. The level of content creativity in China is also high. There are so many KOLs in China and the competition is fierce, so they need to innovate even more. While Chinese bloggers can learn to use Western channels even more. Few, apart from Papi Jiang, have really given it a go. They can also learn from Korean pop stars who use Western social media well and are building larger and larger audiences outside of Asia.More in Vultlab.
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| Andy Mok |
Andy Mok, a non-resident fellow at Center for China and Globalization, stated that 5G was more than high Internet speed.
"Those '90 percent underwater' part of the 'iceberg' that people didn’t know about 5G would trigger the essential breakthroughs for the industry 4.0," he said.
"All of these applications that are for faster download speed to consumers is sexy, but I think what’s really important is the 90 percent underwater part that people don’t see.
More at CGTN."What 5G is enabling, is hundreds of billions of devices to talk to each other. And that would change every industry, whether we are talking about transportation in driverless cars, health care in telemedicine, urban management with smart cities."
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| Ian Johnson |
You published regularly in the Hong Kong-based magazine The Initium. It’s blocked in China but were you able to circulate the articles inside China?
I have my own public account on [the popular Chinese social media app] WeChat, but basically every time I publish something, it’s deleted. And now it’s deleted faster and faster! It used to take them a day to delete, but now it’s gone in an hour or faster. And The Initium is collapsing. They have no money anymore.
What can you do now?
I can’t do really big investigations because I don’t have the budget to travel widely. But I’m doing profiles of people who resist. And more about artists, too.
You don’t know if you can publish them but you still write them?
Yes, I just write them anyway. I feel I have to write them. As an independent journalist, if I think it’s important, I can write; so I do. In the past, you were always being told you can’t write about this or that. Now, I can write.
But you can’t make a living.
For the past few years, I didn’t consider money. I just felt it was important and I’d do it. For years, I had a good salary and so I have savings. We own our apartment.
How long can that go on for?
I’m not completely divorced from reality. It’s coming up on three years and I think I might have to find a real job. I might go back to find work, but then I wouldn’t be able to write about sensitive things.
One of the few bright spots in Chinese social movements has been the rise of a new generation of feminists, including the Feminist Five. They were detained, but women’s issues still seem to be discussed, at least in some circles. How do you view it?
Feminism is important. Those five young activists, the Feminist Five who were detained in 2015, attracted a lot of attention. It wasn’t really a radical action—just something in the subway in Guangzhou—but the way the police acted was radical, especially in Guangzhou, which we always considered as having more space [for dissent than the more tightly controlled Beijing]. I think they attracted a lot of attention because they could publicize their cases well, as young people on social media. And their actions were different from those earlier generation of people who struggled. It was more modern. This event was unusual, especially given the deterioration of the atmosphere here recently.
The Tsinghua University professor Liu Yu [see my 2015 NYR Daily interview with her here] criticized the MeToo movement for using public denunciations instead of legal processes. She thought it was too much like the Cultural Revolution.
In that article, Liu Yu maybe didn’t quite understand MeToo and what it was. She’s not that old, but she might not have been paying attention to Feminism 2.0, so perhaps she was a bit out of touch. She said, Why did those women have to protest? Why didn’t they go to the law? A friend said that Liu Yu should go with a student who’s been harassed and try to report sexual harassment. Then she’d see how hard it is. But the criticism of Liu Yu was terrible. She was cursed horribly online. This was far out of proportion.
In your recent essay “You Look Like an Enemy of the State,” you wrote, “You and I are both in prison. Before, the prison was visible; now it isn’t.” How do you deal with this sort of hopelessness?
There’s a term in Buddhism called chulixin. It means you don’t consider this time, or a lot of things in life, as that important. That has helped me.You can read the full interview here.
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| William Bao Bean |
William Bao Bean has been active in startups and investing in Asia since 2004, and he says in the last few years there has been dramatic consolidation - similar to what has happened in other technology sectors - that has left three dominant players: Alibaba, Tencent and Ctrip.
“This makes it challenging to be a startup,” he says.
“It’s almost like the mice trying to run around while three elephants are walking around. And every once in a while they’ll accidentally - or maybe on purpose - step on the mice and there’s nothing the mice can do about it.”
To survive in what he says is one of the most competitive markets in the world, startups must provide something that is truly unique and useful.
“Going back five or 10 years, all you needed to do was show up and run faster than the next guy and you could build a pretty decent business,” Bean says.
“Whereas now you need to actually provide an order of magnitude better service in order to make a play.”
But even with a superior product, survival is not guaranteed. Companies trying to reach a meaningful segment of China’s more than 1.4 billion residents need deep marketing budgets to pay for exposure on WeChat, Baidu and other mobile platforms.
“Everywhere in the world customer acquisition cost is high, but in China it’s really, really high,” Bean says.
“In the U.S. you might be able to spend $2 or $5 to get a user. In China, to get a user to download an app and open it once, it’s between $5 and $100.”
So where are there opportunities for travel startups in China? Bean sees potential in areas such as experiences, particularly those offering unique, specialized products, and for startups that can create benefits for existing travel suppliers.
One example that SOSV has invested in: U.S.-based Portier Technologies, which puts mobile phones in luxury hotel rooms, giving guests access to free data and minutes and giving the hotels a cut of revenue from services booked through the phone.
But for non-Chinese companies such as Portier to succeed in that market, Bean says they need local market knowledge.
“So if you are a big global player, you basically have to have a China play. But the issue is the infrastructure, the market, how you advertise, how you retain. Everything in China is a bit different,” he says.
Bean cites Airbnb, a company his firm has worked with to understand the Chinese market, as an example of the learning curve. “Chinese culturally generally do not like being hosts. They really, really do not want some random person in their frickin’ house,” he says.
"But the funny thing is, Chinese are perfectly willing to go live in somebody else’s house - especially if it’s in a nice neighborhood, in Los Angeles, in the hills. They love that. So Airbnb has not done particularly well signing up hosts, but they’ve been very successful at signing up Chinese who are traveling abroad.”
Bean says the very large outbound market of travelers wanting new, unique and local experiences provides many opportunities for innovation.
“As an investor, will I do another online travel agency? No. But there is still a lot of opportunity around travel, and there is still a lot of money to be made.”More in Phocuswire.
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| Jim Rogers and his daughter Happy |
China's economy is slowing, fortunately for China and fortunately for the world. When anything goes straight up without a pause is going to have a huge crash someday. The situation, the way I read it, well, you know what's happening with Trump, you know what's happening with the trade war and things of that sort. But also China has built up a lot of debt in the last decade or so and the government is now insisting, demanding and forcing people to start reducing their debt. When you go from adding debt to reducing debt, you're obviously going to have a slowdown. That's my assessment but I'm sure there are other things going on as well.More at Jim Rogers' weblog.
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| Ian Johnson |
In 1975, he was released from Qincheng but sent back to his mountain exile. It was only after Mao died and Deng Xiaoping took power at the end of 1978 that Mr. Li was given back party membership. He returned to Beijing to rejoin the Ministry of Water Resources. He again opposed plans to build the Three Gorges Dam, teaming up with the journalist and environmental activist Dai Qing to prevent the gargantuan project.
He later was transferred to the party’s influential Organization Department, where he helped oversee the recruitment of new officials. But his career ended abruptly in 1984 when he refused to give special preference to the offspring of senior officials.
“Between choosing telling the truth or a promising career future, he always chose the truth,” Ms. Dai said in an interview. “He has been true all his life.”
That began the most influential stage of his life: elder statesman with a conscience.He lost the battle over the Three Gorges Dam, which hard-liners pushed through in the wake of the 1989 Tiananmen massacre and the defeat of reformers in the Communist Party.
But he wrote a highly influential book about the Lushan meeting, “The Veritable Records of the Lushan Conference,” which countered the party’s story that the famine was not Mao’s responsibility. He also wrote essays, articles and open letters to senior leaders calling for more transparency and tolerance.
Perhaps most importantly, he became the patron saint of “Yanhuang Chunqiu,” or “China Through the Ages,” an edgy journal that took on sensitive historic issues, such as the Great Leap Famine or the Cultural Revolution, that the Communist Party wanted forgotten.
“He was idealistic,” said Wu Si, its editor until 2016. “He didn’t work for political gain.”But Mr. Li’s vision of a more open and democratic China faded. By 2016, Mr. Wu was fired as head of the magazine and it was taken over by hard-liners.
“I’m afraid there was nothing that Li Rui could do,” Mr. Wu said. “It was beyond the ability of one person to protect.”
Mr. Li refused to back down, however, writing critically about President Xi Jinping, China’s most authoritarian leader since Mao. In an essay, he contrasted Mr. Xi with his late father, Xi Zhongxun, who had been known for his tolerance and opposition to strongman rule.
Mr. Li wrote that around 2006 he went to Zhejiang Province, where Mr. Xi was then serving as party secretary. Mr. Xi took him out to dinner and Mr. Li urged him to speak out against abuses in the system. According to Mr. Li, China’s future leader rebuffed him:
“How can I emulate you? You can hover on the fringes” — the implication being that the ambitious Mr. Xi wanted to be at the center of power.
Mr. Li added a damning comment to the story: “In the West there is a saying that power corrupts and absolute power corrupts absolutely.”
For the Chinese historian Zhang Lifan, Mr. Li epitomized the tragedy of a generation. Many initially saw the Communist Party as China’s salvation, watched as it turned into a dictatorial force under Mao’s nearly 30 years at the top, and then yearned that the reform era would finally bring changes — only to see these hopes dashed by the party’s inability to renounce authoritarianism.
“The ‘China Through the Ages’ incident was a sign that Li Rui and his peers’ dream would never come true,” Mr. Zhang said. “But I understand Li Rui: To deny the party would have meant denying his own life.”
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| Sara Hsu |
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| Jim Rogers |
Paper money is going to disappear and it's going to be on the internet but this is going to be government money; it's not going to be anybody else's money. Money is already disappearing in China and in many countries. China's far ahead of the United States for instance.
While I'm extremely optimistic about blockchain and I'm extremely optimistic about the changes of money to the internet which I know is happening it's not going to be cryptocurrencies because the governments are not going to let it happen.More at Jim Rogers' weblog.
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| Sara Hsu |
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| Sara Hsu |
The problem is that the world is so globalized at present that hurting Chinese interests also harms US interests. Trump’s imposition of tariffs on American consumers and producers, including multinationals producing in China, has resulted in rising costs and economic losses. At present, the world is waiting to find out whether the trade war will escalate or whether tensions will die down. If the Trump administration doubles down on Chinese tariffs, unemployment in the US will rise and economic woes for both nations will set in.
Trump’s nationalist ideology might have felt like a necessary antidote to fighting the unseen adversaries of globalization. For a man who sees the world in black and white, and for Americans tired of losing jobs to their cheaper Chinese counterparts, making China the primary enemy of the US is a winning strategy. However, this approach is already backfiring, creating costs in the US and abroad.
What Trump has gotten wrong is that while China is most definitely a rival of the US, it is not a foe. It’s dangerous to position other nations as antagonists, because this opens the door for hostilities to grow. While Obama’s approach to China was far more subtle, it did less harm to the global economy and preserved a key partnership between the two nations.
Going forward, it will be challenging to restore this critical connection while also maintaining a healthy rivalry. In all likelihood, even after the political tides have changed, nothing the US will do to check China’s global ambition will be looked upon benignly. The most important bilateral relationship in the world has become a game of brinksmanship, under reactionary strongman politics. So much for globalization.
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| Matthew Brennan |
Tencent does not sell access to user-data to third parties, such as advertisers. The data of the Chinese app is to all intents and purposes the handsets of the users. “It would have been possible to compare We Chat to Facebook, Baidu to Google or Alibaba to Amazon ten years ago, but that’s no longer possible today,” insists Matthew Brennan a consultant specializing in Chinese IT...
The most widely used of WeChat’s secondary functions is WeChat Pay. Until recently, Chinese people’s attachment to paying with hard cash was the norm. Nowadays, e-commerce represents 14% of all retail sales, against 8% in France. With WeChat Pay, you can use your phone to settle a bar tab or pay an electricity bill. Even the famous hongbao red envelopes Chinese use to exchange monetary gifts are being replaced by the application. During the 2017 Chinese New Year period, 14 billion transactions were carried out using the app. “Tencent has taken advantage of the lack of a developed baking sector in China, where the use of credit cards is not commonplace,” adds Brennan. By cannibalizing all the different services available on smartphones, WeChat has become a killer app, which the competition find impossible to match.
Tencent is the big winner from the success of WeChat. Not only does the company take a percentage of every transaction made using the app, but it has developed its own content for the platform. “WeChat does not monetize data, but it is a growth lever for other businesses in the Tencent group. It’s a bit like iOS or Android in that regard,” stresses Brennan. Via WeChat Tencent can commercialize other businesses, such as Tencent Video or Tencent Music. In total the average mobile phone user spends 55% of their time on a Tencent service. The case of streaming services is particularly instructive. Thanks to WeChat, Tencent has managed to increase the subscriber base of its VOD platform Tencent Video, seizing a quarter of the Chinese market. The company claims to have more subscribers than Netflix even.
Between 2016 and 2017, Tencent made 318 investments in startups and diversified number of sectors it is involved in in order to propose more services on WeChat. Tencent has invested in Karius, a platform specializing in the diagnosis of infectious diseases, and branched out into the connected agriculture sector.More in Leadersleague.
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| Ashley Dudarenok |
