Wednesday, October 01, 2014

The worst scenario for Hong Kong, Beijing and the world - Sara Hsu

Sara Hsu
+Sara Hsu 
The ongoing conflict between Hong Kong protesters and the central government in Beijing can still move into different directions, writes financial analyst Sara Hsu in The Diplomat. But a violent crackdown would be worst of three scenario´s, not only for the Hong Kong protesters, but also for the global economy, she argues.

Sara Hsu:
Third, Beijing may use violence, perhaps real bullets, to crack down, in a Tiananmen-like confrontation. This is the least desirable outcome for both Hong Kong and Beijing, as it would stifle relations between the two regions for some time to come. It would dampen trade and investment with Hong Kong, harm the stock market, which contains a large percentage of Mainland-based companies, and put the Shanghai-Hong Kong Stock Connect program on ice. Currently, trade from the Mainland into Hong Kong measured at $384.8 billion in 2013, direct investment from Hong Kong into the Mainland weighed in at $73.4 billion in 2013, and the market capitalization of Mainland firms listed in Hong Kong amounts to $1.8 trillion. Disruption of these financial flows would cause a serious economic shock to both regions. 
Further, the wider economic implications of a crackdown should also be considered. A shock to the China/Hong Kong trade nexus, combined with an arrest in direct investment into the Mainland, would sharply impact the rest of the world, cutting off access to imported goods from China, and rerouting export channels to Shanghai, creating congestion and reducing exported goods to China. A crackdown would also call for an international response, possibly in the form of a trade embargo, as has been implemented against Russia. This would certainly disrupt trade, and would weaken economic ties between China and the West. 
Therefore, the first two options are best. The protests are expected to come to a head on October 1, National Day, which celebrates the founding of the People’s Republic of China. The world is watching with bated breath to see whether the Hong Kong protests end without violence, for if they do not, there will be serious ramifications across the globe. The reality is that Beijing cannot approach the Hong Kong issue with a hammer-hard line; the line must be softened for this Special Administrative Region, or else the economic repercussions could be severe.
More in the Diplomat.

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.

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Tuesday, September 30, 2014

Why China starts to celebrate ´martyrs´day´- Ian Johnson

Ian Johnson
+Ian Johnson 
China celebrates on Tuesday its first ´martyrs´day´ on September 30, a expression of new-found patriotism to remember those who died in fights with foreign powers.  Journalist Ian Johnson at the New York Times digs into the reasons for this new celebration.

Ian Johnson:
A new temporary exhibition highlights the global fight against fascism, including a section on the Doolittle Raiders, United States airmen who bombed Tokyo in 1942 and landed in China, where many were rescued. The museum also has the names of some Nationalist soldiers who died in the war.
Much of the museum, however, is heavily slanted toward the Communist Party’s version of the war’s history. Its 70,000 square feet of exhibition space is dominated by deeds of the relatively small Communist armies, who, most historians agree, rarely engaged with Japanese troops, leaving most of the fighting to the Nationalist armies.
Likewise, a recently released official list of the 300 most famous martyrs who died fighting Japan is heavily skewed toward Communist exploits. Over 40 percent of those on the list were soldiers in the Communists’ Eighth Route and New Fourth Armies. The former participated in one major campaign against Japan and the latter only in limited guerrilla operations. The Nationalist troops, who suffered 90 percent of China’s causalities in the war, account for 29 percent of the 300 martyrs.
The holiday is also seen as part of an effort by the Communist Party to elevate those who died for the nation. Until this year, China commemorated fallen soldiers on the traditional Qingming, or Tomb-Sweeping, holiday, which falls on either April 4 or 5 of each year.
“Qingming is generally for the dead, but the new holiday will be for martyrs,” said Zhang Xianwen, a professor of history at Nanjing University. “This will be a bigger, broader commemoration so people won’t forget those who sacrificed their lives for the Chinese people.”
Hu Ying, a professor of literature at the University of California, Irvine, said use of the word “martyr” had a long tradition in China. The Confucian classics, for example, speak of martyrs who died for virtue and ideals. In the early 20th century, as China was being carved up by foreign powers, the term was revived in reference to those who died for the modern nation state, such as the revolutionary Qiu Jin.
But Kirk Denton, a professor of East Asian literature at Ohio State University, said the choice of the word carried political undertones.
“To use that term ‘martyr’ is a politicized way of looking at death,” he said. “They want to control who is defined as one.”
The term is so emotive in China that it has also come to be used by some to describe those who died during the 1989 pro-democracy Tiananmen uprising, or even those who have killed corrupt officials.
Government censors routinely scrub the Internet of such terms, but Professor Hu said it showed the difficulty the party had in maintaining its version of history.
“The party wants to keep hold of this term ‘martyr,’ ” she said, “and not allow it to be used by other groups.”
More at the New York Times.

And here is Ian Johnson´s news article about the Day.

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Monday, September 29, 2014

Why teaching Chinese manners is so tough - Zhang Lijia

Zhang Lijia
+Lijia Zhang 
This week millions of Chinese tourists will visit foreign countries, for many the first time. And they will shock the natives of the guest countries by their loud voices, spitting habits and pushy ways to jump queues. Author Zhang Lijia ponders at her weblog why it is so hard to teach Chinese some manners.
 
Zhang Lijia:
I ask myself: Why are the citizens of China, a country that boasts the oldest continuous civilization, incapable of comporting themselves in a more civilized fashion? 
I think some aspects of such bad behavior can be attributed to cultural environment. Take for example the habit of speaking in a loud voice. The Chinese environment is often quite noisy, and if you speak too softly – or ‘hum like a mosquito’ as we would say – no one can hear you. My ex-husband, a Brit, used to complain that I spoke unnecessarily loudly. But that was just the way I was brought up. My father never speaks but thunders, which always startled my children when they were little. 
As to China’s ubiquitous spitting, the Chinese people do seem to spit more than anyone else. Many claim to do so for health reasons: hacking and spitting are just the way to clear the lungs and throat. There’s also a deep belief that swallowing phlegm is bad for you whereas some westerners consider it preferable to spitting in public. 
And spitting is generally socially acceptable. Li Hongzhang, the late Qing’s de facto foreign minister, frequently disgusted foreign dignitaries when he spat into his spittoon that he carried with him everywhere. 
Some poor behavior is just not excusable. I blame the Chinese people’s lack of public concern, one of the short-comings of our national character. Some of my neighbours casually throw rubbish out of their kitchen windows while keeping their own floor as polished as a mirror. 
The better educated citizens tend to have better public manners. But those who can afford overseas holidays are not necessarily well-educated, worldly or sophisticated. Indeed it takes greater effort to acquire sophistication than money. Newly-gained wealth might have lent certain arrogance to some who feel that they are entitled to do whatever they are pleased simply because they are paying. 
Plenty of Chinese have not learnt to respect the local cultures or the local laws. “The rule of law” isn’t well-established in this country. If they can break the multitude of regulations without facing the consequences, many will readily do so. It’s little wonder that the smoking ban in restaurants hasn’t worked at all, something I’ve always predicted. 
American and Japanese tourists also met with similar criticism when they first ventured abroad and misbehaved in public (I am not sure they were ever quite as rude as some of my compatriots.) Chinese tourists, ambassadors of the country, simply have to behave. The sheer volume – nearly 100 million Chinese travelled abroad last year – means their behabior has an impact. 
An online survey conducted by South China Morning Post last summer indicated that more than 50 percent of Hongkongers held negative feelings towards Mainlanders because of the ill-behaved tourists. The people from the former colony are better-mannered, partly because they were spared of the brutal regime of Chairman Mao who deemed one’s good manners as “bourgeoisie pretention”. The Japanese have become the most popular tourists in the world for their willingness to spend as well as their courtesy. 
In the long run, with more money, higher education levels and more exposure to the outside world, I trust our fellow citizens will also adopt appropriate manners. I myself have modified the speaking volume, except when I give a public speech. I still spit, mostly into my own tissues. And I’ve learnt to refrain myself from spitting on the British ambassador’s lawn when I am invited to attend the Queen’s birthday party there.
More at Zhang Lijia´s weblog.

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Friday, September 26, 2014

How China´s climate for start-ups improved - Shaun Rein

Shaun Rein
+Shaun R
China is fast becoming an innovative economy, and one of the key changes is the improved climate for start-ups, tells author Shaun Rein of The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia. Especially in mobile, China is leading, he tells Knowledge CKGSB.

Knowledge CKGSB:
Q. During your interactions with Chinese CEOs and entrepreneurs, how do you think their opinions on innovation have changed over the years? 
A. I’ve been in China since the mid-90s and I was investing in tech start-ups in around 2000. When you spoke to entrepreneurs then, they were very desperate.. There were so many obstacles to innovation and making money in China that the entrepreneurs just wanted to go for quick easy wins. They just wanted to copy technologies and tweak [them] for the local market. For example, Sohu and Sina looked at Yahoo and the other portals at the time and said, “We can do that for China. We don’t need to focus on technological innovation. Let’s just take that business model and tweak it for the country directly.” It was safer, it was easier, the government approved it and you can get money from venture capitalists. Now when you talk to entrepreneurs, especially in the mobile space, people are not looking into the US or Western Europe for the technological lead; people are now saying, “Let’s develop the coolest, best stuff in China”, especially mobile devices, because there is a much larger mobile device community in the country. The entrepreneurs want to create innovative companies for China right now. They are still not looking at going global, but that’s going to happen in the next couple of years. 
Q. How will innovation in the mobile sector drive up innovation in other areas? 
A. It is going to help. But the issue is that there are still a lot of low-hanging fruit out there. There are still many ways to take technology from the western world to China and localize it. That’s not technological innovation, but business model innovation. For instance, Xiaomi didn’t invent the mobile phone, but there is massive business model innovation and that’s why they are doing well. I think the mobile space is going to see a lot of the best innovation, because it’s cheaper to produce. So when you get into some of the industrial innovation, which is happening in China, you need tens of millions or hundreds of millions of dollars and hundreds of engineers. In the mobile space, you can have four programmers, and because the market is so new, you can put something together in months, rather than years or decades. But I think overall you are going to see that many industries are going to improve from that. It’s going to happen for one major reason.When you see a mobile company like 91 Wireless, sold for $1.9 billion just a couple of years after it started, then everybody says, “Wow, we can innovate and make money.” So it’s going to create a sea change within entrepreneurs and venture capitalists, who now are not looking for the easy wins, but innovative deals because that’s where the most money is right now.
More at Knowledge VKGSB.

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Should the state leave China´s economy? - Sara Hsu

Sara Hsu
+Sara Hsu 
China´s economy is state-run, and despite changes, the government is still present everywhere. That now might not be a good idea for a good economic development, argues financial analyst Sara Hsu in the Diplomat. If the economy needs to growth, the state should leave.

Sara Hsu:
China’s current economic slowdown, including weaker factory growth and the bursting of the property market bubble, has led some analysts to argue that China may be in for a “hard landing.” A recent report by Naoki Kamiyama and David Cui of Bank of America-Merrill Lynch even argues that China’s economic position today is even worse than that of Japan just before the “Lost Decade,” in which Japan lost competitiveness and even the ability to recover. So, what does this mean for China: Does it imply that the exceptional Chinese growth model of a Communist government coupled with a market economy doesn’t work in the long run? If China is indeed in for a hard landing, is its market-state juggernaut grinding to a halt?... 
The dependence of the market economy on the legitimization by the state is also illustrated by the relatively low level of consumer spending in China. Consumer spending is low because residents save money to cushion themselves from financial shocks resulting from, in large part, high out-of-pocket medical care expenditures. Insufficient health care coverage by the Chinese state has resulted in high out-of-pocket expenditures by patients; therefore, individuals often find themselves responsible for many medical expenses. While private health care may offer better medical care and lower out-of-pocket expenditures for patients, Chinese citizens are unused to market-based social services, and are reluctant to make use of private health insurance, which, again, lacks legitimization by the state. Therefore, until the health care question can be resolved, consumer spending remains constrained. 
The market economy may better contribute to growth if state legitimacy is not required. The trust sector, if expected and allowed to self-police, may have performed far better. Risks could have been more tightly controlled, trust company management structures could have been improved, and monitoring and auditing could have been implemented. Private health insurance, if trusted by Chinese citizens, could help reduce or at least stabilize out of pocket costs, resulting in an increase in the consumption of other goods. The fact is that there are very real financial and human resource constraints to the government’s involvement in the economy that are now constraining growth. The only long-term solution to bringing about continued growth is to reduce the role of the state, not just in terms of ownership, but also in terms of legitimacy, and promote market-based economic solutions. 
So in answer to the questions posed, it appears that the market-state juggernaut is grinding to a halt at least in the short run, as the focus of growth is transferred to other sectors, and possibly in the long run, if the state’s presence in reformed sectors also persists. While there are other potential sources of growth, the current sources of growth have been offset to a large degree by the need for the insertion of government power – somewhere, somehow, the power of the state must be reduced to allow China’s economy to expand. Only in this way can the cycle of growth be made persistent.
More in the Diplomat.

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.

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How Hong Kong lost its importance for Beijing - Arthur Kroeber

Arthur Kroeber
Arthur Kroeber
When the recent spat between Hong Kong and the central government on how the island state should elect its leaders has proven anything, it is that Hong Kong lost the importance it used to have, says economic analyst Arthur Kroeber in Gulf News.

Gulf News:
China’s willingness to tolerate opposition in Hong Kong has declined in tandem with the territory’s perceived importance to the Chinese economy. When Chris Patten, Hong Kong’s last colonial governor, assumed his post in 1992, China’s economy was only about five times bigger than Hong Kong’s. Today it is 35 times larger.
“It has clearly become an asymmetric relationship,” says Arthur Kroeber at GaveKal Dragonomics, a consultancy. “In the 1990s Hong Kong was much more important to Beijing because China needed a lot of money and expertise from Hong Kong and they really depended on Hong Kong infrastructure, such as its port.”
Beijing also trod more carefully during much of the 1990s because a smooth transition of power in Hong Kong was critical to the restoration of its international standing after the 1989 Tiananmen Square massacre.
But 25 years on, a newly assertive Beijing appears unfazed by the opinions of others. Kroeber says there is “little concern in Beijing about how its Hong Kong policies will appear to the rest of the world”.
More in Golf News.

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E-commerce: massive growth expected - Wei Gu

Wei Gu
Wei Gu
What is the room for newcomers in China´s e-commerce after Alibaba´s successful IPO? WSJ wealth editor Wei Gu discusses with Jef Walters of Boston Consulting, and finds that massive growth is still possible. Only half of China´s internet users is purchasing online, and mobile is still taking off in a country where most users have mobile.

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Thursday, September 25, 2014

Innovation, Individualism driving change in China - Shaun Rein

Shaun Rein
+Shaun Rein 
Change in the key word to understand China, tells business analyst Shaun Rein in an interview with the Sourcing Journal. "What works now, will certainly no longer work in three years time, says the author of The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia.

Sourcing Journal:
SJ: How can brands and manufacturers compete with the Asian giant? 
SR: What worked in China three years ago might now work anymore and certainly won’t work three years from now. It is important that brands and manufacturers really understand the drivers changing the economic landscape—the consumer and political driven ones—and re-address how they approach China. Before the market was relatively small and there was little competition so it was easy to forgive small mistakes but now the stakes are too high. China is the largest market in the world for Porsche, Qualcomm, and KFC so profits are to be made but savvy, well-capitalized domestic Chinese brands are rising. 
SJ: How are rising costs in China affecting the market? And how is China dealing with these increases? 
SR: The government has set urbanization of 3rd-5th tier cities high on the priority list. This is causing rents to go up, so it is very difficult for retailers and expensive to get good locations. Rents are higher in suburbs in China than in most other urban cities in America, so the hypermarket model for instance just does not work here as in America. Moreover, pollution problems are so bad right now that many consumers tell us they do not want to shop outside. The result is consumers prefer to shop online, and retailers are finding it is cheaper and more profitable to push e-commerce. 
SJ: What has Alibaba in particular done to position itself as the e-commerce leader that it is? 
SR: Alibaba has become the giant in the country for e-commerce—they have so much eyeball traffic that retailers want to sell there and because so many retailers are there consumers keep shopping there. We expect e-commerce to grow 35 percent a year for the next three years with Alibaba benefitting the most. That said, Alibaba is facing a serious threat from mobile shopping. Another Chinese internet giant, Tencent, dominates mobile so Alibaba has been on an acquisition spree in the past six months scooping up mobile players. 
SJ: What’s next for China? 
SR: China’s growth will undoubtedly slow over the next few years. The 10 percent growth rates of before are gone, and frankly, that is good because there was too much overcapacity in some sectors, rising non-performing loans and too much pollution. President Xi is now focused, rightly, on more sustainable growth. The real exciting opportunities will come not in tier one, famous cities like Shanghai and Beijing, but in the central and western part of the countries like Sichuan. Those are the regions that the government is pushing urbanization and where costs are still attractive enough for companies to relocate to. The world also better get used to innovative global Chinese brands. Companies like Tencent (specifically with their WeChat tool) or handset maker Xiaomi are becoming global brands in southeast Asia. Sooner than people realize they will make great inroads into the U.S. and Europe.
More in the Sourcing Journal.

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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