Thursday, December 14, 2017

How China's state and consumer wallets relate - Shaun Rein

Shaun Rein
China is using its growing state power to put pressure on other countries and companies, but it is not only the government, argues business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order. The government has become very sophisticated in using also the consumer wallets to put pressure on foreign brands and tourist destinations, he tells The Diplomat.

The Diplomat:
The book outlines two separate but parallel tools in China’s economic toolkit: China’s “State Wallet” (decisions taken directly by the government), and the wallets of Chinese consumers, guided by Chinese citizens’ preferences. How are these two interrelated? To what extent does the Chinese state ‘control’ Chinese consumers’ interest in (or lack thereof) foreign brands or tourist destinations?  
Many observers say that Chinese are inflamed by government propaganda and thus unsophisticated. The reality though is that everyday Chinese consumers do tend to feel the government is correct and that other nations, like South Korea in THAAD’s case, hurt the security of China. These consumers thus vote with their wallets by forgoing trips to unfriendly nations or boycotting their products. This happened to South Korea, as I showed in the book, and to specific brands like Lotte, Orion Cream Pies, and Amore Pacific Cosmetics.  
In fact, while the government often fans the flames initially, they very often try to calm the situation after a certain point when the general population starts to get too angry and might stop the government from being able to forge friendlier relations again. 
This happens every few years when China-Japanese tension rises. The government via the state media inflame passions, so Chinese start to protest. Eventually, the government tries to peter down the protesting by stopping people from demonstrating on the street or by censoring the most inflammatory posts on social media. 
Having the Chinese state and Chinese consumer wallets directed at you in anger in tandem is a tough force to go against for any government, let alone company.
More in 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 stories by Shaun Rein? Do check out this list.
 

Migrants are the unsung heroes of China - Zhang Lijia

Zhang Lijia
A visibly angry Zhang Lijia, author of Lotus: A Novel on prostitution in China, shows that the eviction of migrants in Beijing - described by the insulting term "low-end population - is raising the tensions in China's capital. "We live in a socialist country," she fumes at CNN. "They are the unsung heroes of our country."

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

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Wednesday, December 13, 2017

Why the World Internet Conference mattered - William Bao Bean

William Bao Bean
The World Internet Conference in Wuzhen has long been derived as part of China's propaganda tool. But those days are over, writes William Bao Bean, managing director of the Chinaccelerator, who attended the conference last month, together with IT leaders from the US and China, he writes in Medium. "It is going to be a wild ride."

William Bao Bean:
While three of the top 20 political leaders in China attended the event, along with the Deputy Prime Ministers of Thailand and Mongolia, the more important part of the WIC’s guest list was its heavily curated group of global internet power elite, who gathered for open- and closed-door sessions over two days in a meticulously restored river village and adjoining conference facility built solely for the event. While Pony Ma and Jack Ma don’t hang out together like they used to, all the major players were in the house, and talking business. 
The main stage presentations were each about five minutes long, and there was nothing subtle about the order of company presentations — size matters, and the largest go first. Presentations focused not on new product announcements, but on market power and technology advantage. How many users. How much data. How many AI researchers. What can we do that you can’t. 
Like schoolyard rivals, each company strutted their stuff and radiated an unspoken challenge to the rest. The ARkit technology, to give one example, makes Apple the largest Augmented Reality platform in the world, because they make their existing iPhones and iPads AR-capable through software — and they don’t want you to forget it...
First it was copy to China. Then China innovation. Now even a company as big as Facebook is cribbing their Messenger product roadmap from Tencent’s WeChat
In 2015, the US saw about US$72bn in venture investing, versus US$12.5bn for Europe combined. China was at roughly US$60bn. In the two years since, local Chinese governments have reportedly poured another US$250–350bn into Chinese venture capital firms. 
At the conference, I learned that there are now 60,000 VC firms in the country, as well as 130,000 startups resident in some 3,200 incubators. There isn’t enough market in China to support this many companies at this level of investment, so China is going global. When you go from 50% market share to 15% in five quarters, as Indian handset brands just did, you will know what that means. Buckle up — its’ going to be a wild ride!
More at Medium.

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 innovation experts at the China Speakers Bureau? Do check this list.  

How China became a politicized society - Shaun Rein

Shaun Rein
Known as the ultimate consumer guru, business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order, now turned to politics in China, he explains at the Hong Kong Foreign Correspondents Club. In the past you could make a lot of money, no questions asked, he tells. Now you can still make money, but not that much and you need much more political sensitivity, he says. The pros and cons of Xi Jinping's anti-corruption drive.

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 strategic experts at the China Speakers Bureau. Do check out this list.

Tuesday, December 12, 2017

How to make money in China - Shaun Rein

Shaun Rein
Business analyst Shaun Rein, author of The War for China's Wallet: Profiting from the New World Order explained at the Hong Kong Foreign Correspondents Club how foreign companies become winners and losers in China. The “methodical, systematic plan” to garner support for the One Belt, One Road initiative was the result of a “divide and conquer” strategy on the part of the Chinese government, he said.

The Hong Kong Foreign Correspondents Club:
“China is no longer a cheap place to do business. The cost of doing business is crazy high,” he said at the December 12 club breakfast. 
Rein pointed out that foreign brands including KFC and Starbucks make a huge profit in China. But he warned that multinationals were increasingly adhering to the political goals of Beijing in order to operate there. Publicly backing the One Belt, One Road initiative – President Xi’s development strategy to establish trade routes between Eurasian countries – is one way of staying in favour with the Communist Party. Those who speak out against China, said Rein, risk economic punishment or outright banishment. He gave the example of the Philippines, whose mango imports to China were blocked after an international tribunal on territorial disputes ruled in favour of the Philippines. The block was lifted once Rodrigo Duterte came to power in the Philippines and declared allegiance to China over America. 
“The theme of the book is that China punishes and rewards countries,” Rein said. But he added that now China has also started punishing foreign companies for the actions of their countries’ governments, citing South Korea’s Lotte Group, which provided land in South Korea for the U.S. THAAD missile system. 
Rein said the “methodical, systematic plan” to garner support for the One Belt, One Road initiative was the result of a “divide and conquer” strategy on the part of the Chinese government. 
He predicted that multinational financial services would continue to suffer in China, but that foreign insurance companies would flourish, as would wealth management.
More at the website of the Hong Kong Foreign Correspondents Club.

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 strategic experts at the China Speakers Bureau. Do check out this list.

Monday, December 11, 2017

How Starbucks conquered a tea-drinking nation - Tom Doctoroff

Tom Doctoroff
Starbucks opened its largest outlet last week in Shanghai, and is moving from US to China as its largest operation. Marketing guru Tom Doctoroff looks at the strategy of the US coffee retailer who entered a tea-drinking nation, and gained tracking few foreign companies got, he explains in IdealsShanghai. "A Houdini act of Marketing".

Tom Doctoroff:
I once heard an analogy that Starbucks is a true modern day colonial power – one that quietly enters a country, builds four walls around people and puts expensive lattes in their hands. Of course, the actual concept behind the Starbucks brand in the West lies in Howard Schultz’s  ‘The Third Space’; being the space between home and work where consumers can slip into a plush chair and quietly read a book in total anonymity and relaxation. 
China, however, is a different beast entirely. For one, it’s a nation of tea drinkers, and secondly, consumer behaviour here is very specific. Yet this week brought with it the launch of Starbucks’ new roastery concept in Shanghai, another ribbon to add to a year that has seen Starbucks become the fastest growing brand in China, with 3000 physical stores, a new one opening every 15 hours, and plans to open 5000 by 2021. 
Starbucks has entered the China market with extreme precision. ‘The Third Space’ has no relevance in this market and they recognised this instantly. For a premium price and a premium brand, Chinese consumers don’t desire relaxed anonymity, they want to project an identity and status associated with their choice. It was critical that Starbucks localized their strategy, and they did. This is something I like to call ‘Houdini’s Act of Marketing’; Starbucks needed to work out how to maximise public consumption – only then could it charge premium prices. 
To a foreign brand looking to make a splash in China, scale is everything. When it launched, the real estate strategy was always to secure big stores in high end office buildings. Individual chairs were also demoted in favour of bigger tables to create social spaces. Starbucks was aligning itself with the ‘professional elite’ and the stores rapidly became a gathering site for people who wished to identify with, and more importantly, project this image.
More in IdealsShanghai.

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. 

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Bike-sharing: only at the start of their development - Jeffrey Towson

Jeffrey Towson
Bike-sharing companies in China had a rough year, combining huge investments and limited returns. Smaller ones went bankrupt and market leaders Mobike and Ofo are rumored to discuss a merger. Peking University investment professor Jeffrey Towson still see enough room for success, he tells the South China Morning Post.

The South China Morning Post:
For users, the cost of a ride is a pittance – about one yuan, or 15 US cents, for an hour – with much cheaper deals available. In a recent promotional campaign to lure riders from its competitors, Mobike offered unlimited rides for three months for only five yuan. Rival Ofo has a similar inventive scheme. 
Despite the unattractive economics, Jeffrey Towson, an investment professor at China’s elite Peking University, said bike sharing is “definitely not a fad”. 
“The economics of the business are becoming clearer. Rental revenue is still the foundation. Advertising revenue may be part of the picture,” he said. “Some Ofo bikes, for example, have had Minions advertisements on them. And perhaps delivery and e-commerce revenue will come in the future.” 
While Towson is bullish on the industry’s business prospects, he is not confident that more than a couple of companies can peacefully coexist. 
“If it was in the United States, I think it could end up as giants with many smaller players coexisting. But there seems to be a Chinese phenomenon to eliminate the competition by taking over the entire industry,” he said. 
One example in the car hailing business was the fierce rivalry between Didi Dache and Kuaidi Dache. In 2015 they merged to form Didi Chuxing, which absorbed Uber China the following year, becoming the only dominant player in the mainland Chinese market.
“Investors tend to step in to stop a price war because it is their money. It is better to spend the money on growth than fighting each other,” Towson said. 
Bloomberg first reported in October that Ofo and Mobike were in merger talks, but neither company would confirm the speculation. In November Zhu Xiaohu, a tech sector venture capitalist and early investor in Ofo, called for such a merger during a forum attended by Mobike co-founder Hu Weiwei
Despite pressure from investors, there is no sign that the two bike-sharing giants will merge any time soon. Ofo is raising another US$1 billion from investors, including Alibaba, and is expected to put any proposed merger plan with Mobike on hold, according to a number of news outlets, citing market sources. Ofo has declined to comment. 
“The merger of Ofo and Mobike is going to be a big topic of discussion in 2018,” Towson said. “But [whether it happens] depends on the availability of capital … and in China there is a lot of capital.”
More in the South China Morning Post

Jeffrey Towson 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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Management skills needed for China's outbound investments - Shaun Rein

Shaun Rein
One of the key barriers in China's massive outbound investment programs, like One Belt, One Road (OBOR) is the lack of management talents, tells author Shaun Rein of The War for China's Wallet: Profiting from the New World Order on the Human Resources page at LinkedIn. "Private Chinese companies have the capital and will pay for consulting services, especially companies in the tech sector."

Human Resources:
Rein: China wants to raise USD 1 trillion to invest in dozens of countries under the OBOR initiative in order to grow economically and cement power. What are the odds of success? I think it will succeed but it won't be easy. Many companies Chinese companies simply don't have enough management talent to operate across dozens of different countries led by diverse ethnic and religious groups. As companies grow regionally, they will need to recruit and retain the right country heads and regional leaders.Right now too much decision-making is in the hands of CEOs and founders. Chinese companies, as well as corporations from nations like Pakistan and Malaysia that are part of OBOR, will need to rely on executive search firms to find the right talent quickly.    
LZ: What sectors are Chinese state-owned enterprises and private Chinese companies investing in the most as they expand overseas? Are there specific regions or sectors they are targeted? 
Rein: Private Chinese companies have the capital and will pay for consulting services, especially companies in the tech sector. They understand they need top talent as they expand, predominantly into Southeast Asia and Africa.    
LZ: What are the underlying reasons behind the international expansion of Chinese companies? Are they political or economic? Do Chinese firms prefer to grow organically or through mergers and acquisitions? 
Rein: Chinese companies typically look to grow abroad for three main reasons: 
1. To gain access to technology quicker than developing it organically. We have also seen examples in the construction industry where Chinese companies grow via acquisition. Zoomlion acquired Dutch crane maker Raxtar to move into the high-end hoisting sector, for example. 
2. To acquire western brands to bring back to China. Building a strong brand can take decades, so it is easier for Chinese companies to buy brands abroad. A Chinese company bought Australian condom maker Jissbon, for instance. 
3. To diversify revenue streams. Although China still enjoys strong growth, it is not at the 10% clip of years past, so Chinese companies are looking to buy assets abroad to diversify revenue streams away from China. Businesses like Alibaba and Baidu, for example, have been investing aggressively in the US, for example.    
LZ: Some criticism of China’s outbound strategy is that companies, especially SOEs, bring their own machinery and talent pool when they expand abroad and don’t source equipment and labor locally as much as local politicians expected. Do you see non-Chinese nationals being allowed into key management positions to bring strategic input to the business? 
Rein: In some cases, China companies actively support promoting non-Chinese to senior executive positions.Take Geely automotive has injected capital and connections into Volvo but kept most of the leadership in charge of the famed Swedish automaker. In another example, Alibaba hired Michael Evans, formerly of Goldman Sachs, to be its president of international operations. Chinese firms acquire assets abroad to get brands, technology and management know-how.
More at the LinkedIn page of Human Resources.

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 interested in more experts on China's outbound investment? Do check out this page.

Friday, December 08, 2017

Why Tim Cook kowtowed to China - Shaun Rein

Shaun Rein
Apple removed many VPN's from its Chinese app store, and CEO Tim Cook joined China's internet propaganda show last week. Author Shaun Rein of The War for China's Wallet: Profiting from the New World Order explains in ChinaFile why Tim Cook got an audience in Wuzhen, and Google's Sundar Pichai not.

Shaun Rein:
The rewards China bestows on the these foreign Internet companies can be huge—China is Apple’s largest market outside of the United States. It generated 18 percent of Apple’s global revenue in the third quarter of 2017. Most of its products are assembled in China. Executives salivate at the size of the Chinese consumer market. It has become the largest market outside of the U.S. for companies ranging from Starbucks to Nike. 
China has a long memory, too. While Tim Cook spoke to a packed auditorium in Wuzhen, his counterpart at Google, Sundar Pichai, spoke to an empty room. Reports were that authorities never made it clear what time Pichai’s speech was set, so no one knew when to attend. But Cook’s words in support of China’s Internet policies will be used in propaganda by the government to show how open they are to foreign players. And Cook will be rewarded with continued access to the lucrative Chinese wallet. 
China has smartly used it wallet to get what it wants politically beyond its own borders. See how publisher Springer censored its own book catalog. China’s wallet is a power so large and lucrative that no single Internet company can withstand it. Going forward, it is only at the government-to-government level that these issues can be worked out. It is surprising that neither the Obama nor Trump administrations made a bigger push for greater access for Western technology firms in China—such a push should be couched not as a human rights issue but one based on money. America’s Internet companies are losing out on billions of dollars of profit under the current policies.
More at ChinaFile.

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 internet experts at the China Speakers Bureau? Do check out this list. 

Thursday, December 07, 2017

Will bike-sharing firms merge? Not yet - Jeffrey Towson

Jeffrey Towson
Will Mobike and Ofo, China's largest bike-sharing companies merge, like car-sharing firm did in the past? Not yet, says Peking University professor Jeffrey Towson. International expansions goes well, capital is freely available, and a crippling price war has not yet emerged, he argues.

Jeffrey Towson 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 War for China's Wallets" now available - Shaun Rein

Shaun Rein
Shaun Rein's long-awaited new book The War for China's Wallet: Profiting from the New World Order is now available at Amazon and possible a bookstore near you. "This book covers more geopolitics than my previous two books and looks at how China is cementing its power through economic carrots/ initiatives like One Belt One Road and by punishing countries like Norway and companies like Lotte that do not follow its wants politically. The book looks at how China is dealing with Southeast Asia, the Korean Peninsula, the Middle East, and how the US needs to respond," he writes at the publisher's website. 

Shaun Rein:
There is still a lot of money to be made from China's rise, but the profits come at a cost as governments and companies must adhere to the wants of China's government. These are turbulent times politically, and I wrote this book to help governments and companies understand how to navigate China's rising political ambitions. Many argue a war between the US and China is inevitable -- I disagree with this notion, but better understanding is key as are building economic ties.
More at the publisher's website.

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.