Wednesday, November 26, 2014

Review: Shaun Rein´s "End of Copycat China" - Financial Times

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Raving reviews are coming in from Shaun Rein´s The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia, this time from the Financial Times. "An intriguing book, with many interesting anecdotes, mini-case studies, and interviews."

The Financial Times:
Such cases – for which Rein gives a few more examples from companies such as Tencent, Huawei or Xiaomi – have to show that a communist or developing country background can be as fertile of a ground for innovation as any other. Indeed, the innovations Rein puts forward use the flaws of communist China to their advantage, rather than to be paralyzed by them. For sure, Rein is not alone in his view that Chinese companies are getting to the innovation phase. Consulting firm BCG this year put four Chinese companies (Lenovo, Xiami, Tencent and Huawei) in its annual list of the world’s most 50 innovative companies
In the later chapters of his book Rein comes up with a number of fields in which we can expect to see Chinese innovation, such as health care, healthy living, or tourism. In each of the fields, Rein shows that with increasing demand from Chinese consumers, innovative solutions are likely. 
But are the examples of a handful of companies enough to prove the bigger picture? Or is innovation in China still the exception, rather than the rule? After being convinced by Rein’s appealing storyline in the first few chapters, the reader is left wondering just that. While we are prepared to accept that some Chinese companies have innovated to a significant extent, we are less ready to believe that this means that the longstanding habit of copying is dead, as the title of the book suggests. 
Yet Rein’s is an intriguing book, with many interesting anecdotes, mini-case studies, and interviews. If you discount the author’s obvious self-interest in writing it (he is, after all, the founder of a consulting group helping Chinese and foreign companies succeed in the Chinese market), you will be pleasantly surprised by the author’s fluency, and the “teachable moments” that arise from his writings.
More at the Financial Times.

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Tuesday, November 25, 2014

80% of China´s rich plan to send their kids abroad - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
The story China´s rich send their kids abroad is not new, but their numbers are growing and the ages of the kids are dropping, found the latest Hurun report. And says Hurun founder Rupert Hoogerwerf, they go to more different countries, he tells at

The report, according to Xinhua, found that some 80 percent of the country's rich people have plans to send their children abroad, the highest ratio in the world. 
Also, the report found that these rich people are most likely to send their children to the U.S. and the U.K., while other countries like Australia, Canada, Switzerland, New Zealand, Singapore, France and Germany attract most of the rest. 
Finally, the report said that the latest average age of the millionaires' children is 16 years old when they were sent abroad. 
The publisher of the monthly magazine, Rupert Hoogewerf, also known as Hurun, observed that 10 years ago, Chinese rich people could only send their children to Canada and Australia because there were a large number of Chinese people already living there. Now, because the Chinese rich people have a much broader social network, he said "they can find trusted people anywhere in the world and can rest assured sending children to any country." 
Hurun's the "Chinese Luxury Consumer Survey 2014" came from a poll of 400 Chinese parents who each had at least 10 million yuan ($1.6 million) in disposable income, according to China Daily
For undergraduate study, completing it in the U.S. tops the list among China's richest parents, with the U.K. second and Australia third. For a university degree, U.K. is their first choice and the U.S. as second for their children. 
Hoogewerf told China Daily: "We have been keeping a keen eye on overseas education as it indicates a trend in emigration. It is common practice for the rich to send their children overseas as a first step before they move to the country themselves when the children finish their education." 
Also, education has long been considered a high priority in China. On average, the country's high-net-worth individuals spend 170,000 yuan (about $27,000), to educate each of their children. This was the third-highest area of their spending, after travel and luxury goods, according to IB Times.
More at Yibada

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China´s YUP´s need new food products - Ben Cavender

Ben Cavender
+Benjamin Cavender 
As their professional life develops, China´s Young Urban Professionals, are looking for food products that make their lives easier, says retail analyst Ben Cavender in the China Daily. Products like Barilla´s Italian pasta´s are one of them, when they play their cards right.

The China Daily:
Easy-to-cook methods will make this Western dish more accessible and better accepted in the market, he said. Chinese consumers, who have very diverse tastes, are ready to put Western food on their tables at home and in restaurants, he said. 
Ben Cavender, principal at the China Market Research Group, said the market is progressing to the point where products such as Pasta Pronto will become very attractive to Chinese shoppers. 
Because lifestyles are changing and younger consumers are gaining more experience with international cuisine, there is increasing demand for easy-to-prepare foreign food, he said. White-collar workers are becoming more interested in cooking for themselves, and many do not have parents around to cook for them, so they are looking for easy solutions, said Cavender. 
The challenge is that while consumers have more awareness of Italian food, they may not be familiar enough with it to buy with a high degree of frequency, or understand how to choose Barilla over other brands, so there will need to be some product education, he said.
More in the China Daily.

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China struggle against illegal banks - Sara Hsu

Sara Hsu
+Sara Hsu 
A large chuck of China´s financial markets are underground. Every now and then, authorities dig up those illegal enterprises in an effort to curtail their power. Financial analyst Sara Hsu looks in the Diplomat at the position of those banks.

Sara Hsu:
The Beijing Municipal Public Security Bureau recently revealed in a statement on its website that it cracked down on underground banks in September. Ten underground banks, run from family homes, allowed clients to purchase foreign exchange and transfer funds abroad. Funds were converted through bank accounts that purchased up to the maximum of $50,000 in foreign exchange. 
In the sting, the police arrested 59 suspects and froze 264 bank accounts potentially associated with the operation. While there are various ways to transfer money out of China, such as export over-invoicing or casino laundering, this operation used registered bank account transfers overseas to appear above-board. Individuals are allowed to transfer up to $50,000 abroad annually through the banking system. In this case, however, many bank accounts were registered to one individual, allowing excessive transfer of funds abroad. 
This crackdown is nothing new – underground banks are periodically uncovered and raided. The bust also follows the anti-corruption trend that has attempted to control the illegal use of funds in targeted areas, as President Xi Jinping has demanded internal discipline within the Communist Party. CCTV’s exposé on the Bank of China, revealing that the bank had allegedly transferred large amounts of cash for individuals preparing to emigrate abroad, and the baring of a list of high-status individuals with offshore accounts, have been a part of the parallel trend within the media to uncover broader misuses of funds and capital flight. In the Bank of China’s Youhui Tong program, wealthy individuals can remit large sums of money abroad. CCTV asserted that the sums sent abroad are unlimited and illegal; the Bank of China rejected CCTV’s allegations, stating that the program restricts individuals to emigrating through investments or the purchase of property abroad. Similarly, the International Consortium of Investigative Journalists uncovered a list of 22,000 individuals from mainland China and Hong Kong with offshore accounts that may be used to disguise or transfer illicit wealth.
More in the Diplomat.

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Twitter is a tool, not a strategy - Tom Doctoroff

Tom Doctoroff
Tom Doctoroff
Branding needs more than social media tools like Twitter or Wechat, says Shanghai-based author Tom Doctoroff of Twitter is Not a Strategy: Rediscovering the Art of Brand Marketing on his book tour. Virals on social media do not build a brand, nor sell burgers, he says.

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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Monday, November 24, 2014

Why Macau is losing business - Shaun Rein

Shaun Rein
+Shaun Rein 
Chinese consumers have different requirements from what most international companies are used to. Gambling hotspot Macau is a clear illustration, says branding expert Shaun Rein, where an imitation of Las Vegas fell flat, he tells in Forbes, although it is a must go for mainland tourists, they miss a lot of business.

China Market Research Group founder Shaun Rein is one of the foremost authorities on mainland consumer tastes and trends. His new book, The End of Copycat China, looks at how Chinese companies have been driven to innovate now that low-hanging fruit of the past two decades has been picked bare. (For those who contend Chinese companies can’t innovate, ever heard of Alibaba?) The book also looks at mainland consumer dynamics helping drive innovation, building on the portrait of consumer trends in Rein’s 2012 book, The End of Cheap China
“Our research suggests that Macau is a must stop for all Chinese travelers and that outbound Chinese travel will continue to rise 15-to-20% a year for the next five years,” Rein, an American living in China since the 1990s, says. “There are easily 50 million Chinese who could visit Macau this year and be important gamblers.” 
Mainland arrivals to Macau last year were 18.6 million, 63.5% of the 29.3 million in total arrivals. Many of those mainland arrivals are the same people making several trips. So by Rein’s reckoning, Macau is capturing a small fraction of the potential players from its key market, including those coveted premier mass tier players and the burgeoning middle class driving outbound growth figures. After a recent visit to Macau, he outlined reasons Macau may be missing out on a large chunk of mainland travelers. 
“The casinos need to expand their offerings outside of gambling in order to attract families,” Rein says. “Specifically, casino [resorts] need to cater to women and children with exhibits, dining, amusement parks, shopping so that they can have fun while husbands are gambling. The current offerings targeting children, like those on the Cotai Strip, are not good enough.” 
Shopping is one area where Macau remains too male oriented. “The retail component is critical for Macau to remain competitive, but the mix needs to move away from just luxury that targets male consumers and the typical standard brands of Louis Vuitton and Gucci,” Rein says. ”Newer niche brands targeting female consumers like Tory Burch or Michael Kors need to be given better locations to make Macau more appealing to family trips or just-the-girls trips.” 
There’s a further female issue where Macau can do better. “The casinos also need to be more friendly when stopping women at entrances,” Rein says. “They are not all hookers.”
More in Forbes.

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Closing the wealth gap by cutting executives´salaries - Zhang Juwei

Zhang Juwei
Zhang Juwei
Worldwide corporate executives might earn more than ever before, China is cutting their salaries to reduce the gap between poor and rich. China´s state owned companies (SOE´s) are setting an example, says Zhang Juwei, a research fellow at the Chinese Academy of Social Sciences (CASS), at the Global Times.

Global Times:
The executives' payroll will also be capped at seven to eight times the average pay of SOE employees, a decrease from the current rate of about 12 times. 
With the new pay regime that adds incentive income to SOE executives' salary evaluation, the executives are likely to become more involved in longer-term growth of their enterprises, Zhang Juwei, a research fellow at the Chinese Academy of Social Sciences, told the Global Times on Sunday. 
Pay cuts for executives at the 72 central SOEs will also be used as a reference for regulation of bosses at other SOEs, Zhang believes, urging stricter oversight of the executives' performance to keep them motivated. 
The 72 central SOEs are the first batch of State firms to face executive pay cuts, with more batches of SOEs set to face similar pay cuts in the future though the dates are still unknown. 
Because executives at the 72 central SOEs are appointed by the central government, their salaries should be different from chiefs selected by companies, Liu Quanhong, a research fellow at the Academy of Macroeconomic Research under theNational Development and Reform Commission, told the Global Times on Sunday. 
The 72 central SOEs are mostly in fields such as finance, energy and telecommunications where the State companies are seen as having a monopoly, Zhang said, noting it is reasonable to cut salaries of executives at these SOEs in order to avoid an excessive income gap.
More at the Global Times.

Zhang Juwei 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.  

Developing an anti-stealth radar - Wendell Minnick

Wendell Minnick
Wendell Minnick
An anti-stealth radar, able to spot intruding stealth fighters, is yet another military industry where China is making inroads, reports defense analyst Wendell Minnick from the Zhuhai China Airshow for Defense News.

Wendell Minnick:
One of the most noticeable was the road-mobile JY-26 “Skywatch-U” 3-D long-range air surveillance radar. China had plenty of road-mobile radars on display, but this one claimed a unique capability — “stealth target detection.” This towering radar is a clear symbol of China’s continued desire to locate and destroy stealth aircraft like the B-2 bomber and F-22 and F-35 fighters. 
According to a brochure by the East China Research Institute of Electronic Engineering (ECRIEE), this radar “boasts double stealth target detection virtues thanks to operation in UHF [ultra high frequency] band and owning of large power-aperture product” for both air breathing targets and tactical missiles. The range of the UHF radar is not cited on the brochure, but other details are, including electronic counter-countermeasures and a complex digital active electronically scanned array (AESA) radar capable of tracking 500 targets.
Can Defeat Stealth? China claims that its JY-26 Skywatch-U 3D long-range air surveillance radar can detect stealth aircraft. (Wendell Minnick/Staff)

More in Defense News.

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China´s rate cut: weaknesses, but no panic - Shaun Rein

Shaun Rein
+Shaun Rein 
The rate cut by China´s central bank PBOC took the markets by surprise on Friday. Business analyst Shaun Rein sees at CNBC some weaknesses in the countries economy, but no reason for panic. China is moving towards services and innovation, and that transition comes with some bumbs.

Sonia: What does China’s rate cut mean for the global economy? 
A: The rate cut means that you are going to see other countries or other regions like the European Union might reduce some of the rate cuts so it might spur a lot of funds flowing into equity markets, so I expect that you are going to see some strength in Asian equities, in Hang Seng in Hong Kong over the next day or two. I think it is good for the equity market but I do not think the government is going to do too much because of concerns about credit problems that are very real in the country in China today. 
Latha: Do you expect growth to pickup anytime soon in China? Is that the market’s belief at least? 
A: The reality is no. I do not see the economy here growing to 8-10 percent a year like it has done the last three decade but that is a good thing. I think overall the government by allowing slowdown is actually doing the right thing and pushing towards economic reform. There are two parts to that – (1) you were starting at such a low base in the last three decades, growth has been high but the promise that too much of growth was based on export oriented and that’s not how they think. The government is trying to switch more towards more consumption and services. I had a new book that came out two weeks ago called 'The End of Copycat China', which looks at the shift and the government pushing up services and innovation. 
Latha: Should this rate cut fire up metal stocks if the intention is to generate different kind of growth? 
A: In the long-term it’s not going to be the major difference on growth. It’s going to increase stock because you got the hedge funds, there are investing based on sentiment rather than economic numbers.
More at CNBC.

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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Friday, November 21, 2014

China firms going international: friend or foe? - Joel Backaler

Joel Backaler
+Joel Backaler 
Chinese companies going abroad are mostly new kids at the block for domestic and international companies. How to look at them, was a question consultant Joel Backaler, author of China Goes West: Everything You Need to Know About Chinese Companies Going Global often got. His third installment of his post-Europe trip.

Joel Backaler:
From the corporate perspective, this means Western multinationals will increasingly find Chinese companies taking on new roles in the international business landscape. Their new relationships with Chinese firms will vary depending on whether the Chinese firm is a competitor, partner, or owner. 
The extent to which Chinese firms compete on equal footing will be determined by the level of oversight and regulation provided by the government where the investment occurs. In advanced economies like the US and EU where regulations are more strictly enforced than many emerging markets, Chinese firms do not play by a separate set of rules – and if they attempt to do so, they will face consequences. Take the case of Sinovel, a Chinese wind turbine producer that divested its U.S. operations last July after it was charged in federal court with stealing trade secrets from its former U.S. supplier. 
Over the course of my trip and during my ongoing interactions with my firm’s clients, I find that more and more Western multinationals are interested in identifying ways to partner with Chinese companies overseas. Western firms should proceed with caution. To cite just one example, Hollywood studios like DreamWorks and Chinese firms like Alibaba and Dalian Wanda are forming partnerships at a rapid pace. As collaboration between Hollywood and Chinese firms deepens over time, it will be interesting to see the impact these partnerships have on the Chinese movie production industry. What will happen when Chinese firms begin producing blockbuster international films of their own? 
Last year I was surprised to discover that a former client, Virginia-based Smithfield Foods, had been acquired by Shuanghui International, a Chinese pork producer. Smithfield is not the only American firm to be acquired by a Chinese company and it surely won’t be the last. Chinese ownership presents a unique alternative for American companies seeking strategic investment beyond traditional routes like private equity investment or acquisition by a larger domestic industry incumbent.
More at the China Observer.

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