Tuesday, May 26, 2015

China´s creativity revolution - Shaun Rein

Shaun Rein
Shaun Rein
Innovation and creativity have been changing China profoundly, says business analyst Shaun Rein, author of The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in AsiaAnd those changes are about to change the rest of the world too, he tells the Globe and Mail.

The Globe and Mail:
“We’re seeing a creativity revolution in China and it’s being driven by two things,” Shaun Rein, the American-born founder of the China Market Research Group and author of last fall’s The End of Copycat China: The Rise of Creativity, Innovation and Individualism in Asia, said in a phone interview from Shanghai, his base for the past 20 years. 
“First, more and more Chinese consumers – especially young people – want to buy quality products made by Chinese for Chinese, so designers are responding to that. Second, the Chinese economy is slowing, so those designers and manufacturers who are being aggressive about meeting domestic demand are also thinking globally.”
More in the Globe and Mail.

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The complex maritime relations between China and the US - Wendell Minnick

Wendell Minnick
Wendell Minnick
The edgy relations between China and the US at sea have been tested over the past few months, and at last week´s International Maritime Defence Exhibition (IMDEX) defense analyst Wendell Minnick heard how crisis management tools between the countries have performed, he writes in Defense News.

Wendell Minnick:
On the first day of the exhibition, US Navy Adm. Michelle Howard, vice chief of naval operations, told a media roundtable that the Code for Unplanned Encounters at Sea (CUES) agreed upon in 2014 between China and the US was successfully implemented and tested in real time just before IMDEX began when CUES was used between the USS Fort Worth (LSC-3) littoral combat ship and a Chinese warship in the South China Sea. 
Both the Fort Worth and a Chinese Type 54A Jiangkai II frigate, 569 Yulin, were on display at Changi Naval Base for IMDEX as part of a 20-warship exhibition. 
"We had previously agreed with the Chinese, if we met at sea, to use CUES. 
So Fort Worth came across one of our counterparts" and the encounters were handled in a professional manner, Howard said. 
Navy chiefs at the Western Pacific Naval Symposium in China approved the use of CUES on a voluntary basis in April 2014, said Carl Thayer, a Southeast Asia security specialist at the Australian Defence Force Academy
"CUES is an important first step at norm setting and institutionalizing agreed procedures when military ships unexpectedly encounter each other at sea," Thayer said. "So far there have been at least three bilateral naval exercises practicing CUES: China-Indonesia, Vietnam and the US, and Japan and the Philippines."
More in Defense News.

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US try to overtake China again in Africa - Howard French

Howard French
Howard French
The United States are rethinking their Africa policies, and at the core of that process is the position China has gained at the fastest growing continent, writes journalist Howard French, author of China's Second Continent: How a Million Migrants Are Building a New Empire in Africa, in Foreign Policy.

Howard French:
There is one country that has not failed in its imagination about Africa in the last decade or so, and it happens to be the leading global competitor of the United States: China.". 
And it is China’s booming interests in Africa, and the appetite for African business that has been created in its wake in any number of other middle or rising powers — countries from Brazil and Turkey to Malaysia and Vietnam — that underscore the second major objection to the Smith appointment. 
Africa has 1.1 billion people today. By the middle of this century, it will almost certainly count over two billion. By the end of the century, Africa will astoundingly have between three and five billion people. The continent is presently urbanizing faster than any other part of the world. Its GDP is growing at least as fast as Asia’s – though few Americans have noticed. Its middle classes are already larger than India’s. Here, one finds irony in the way China has pursued an ideological competition with Washington in Africa, portraying itself as the non-judgmental foreign power that won’t get involved in other countries’ internal affairs, least of all questions of democracy. 
The United States has paid an enormous price to its credibility in Africa for its readiness to preach about democracy with states that are deemed relatively insignificant, while making little public fuss on the subject with long-favored authoritarians and deeply corrupt petro-states like Angola and Equatorial Guinea. Meanwhile, it has utterly failed to understand Africa in terms of its immense upsides, as a place of tremendous opportunities. In economic matters, Washington has made little effort to compete with China and other outside powers in Africa — something that most Africans would greatly welcome and which would be beneficial to all.
More in Foreign Policy.

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The slow reform of health care - Sara Hsu

Sara Hsu
Sara Hsu
Reform of the health care is high on the political agenda, but to eradicate the massive inefficiencies will prove to be tough, writes analyst Sara Hsu in the Diplomat. "Some reforms, however, will take longer than others, particularly improving the quality of health care and changing patient views regarding local and private hospitals."

Sara Hsu:
The elimination of drug markups is to address the problem of excessive dependence on pharmaceutical income faced by hospitals. China’s leadership has committed to eliminate the mark-up on drug sales in hospitals over the next two years. County-level pilot programs eliminating the markup have faced losses, as an important source of income has been cut, even in the face of increased government subsidies and reduced price controls to hospitals in the initial pilot program. Prefecture-level cities are next as test regions before the reform becomes widespread. Government spending on hospitals is encouraged; currently, government expenditure in the area accounts for 5 percent of GDP. 
Price controls on drugs also present a problem for both patients and pharmaceutical companies. China is the third-largest consumer of pharmaceutical products in the world. 
Price restrictions have, in some cases, led to shortages in production of vital low-cost drugs. The rollout of guaranteed supplies of widely used drugs was carried out in 2014 to ensure the availability of low-cost drugs and pediatric drugs. In addition, price caps on 280 basic medicines manufactured by Western pharmaceutical companies and 250 medicines made by Chinese companies were lifted. China has also pledged to further lift price controls on medicines to promote innovative drugs. 
Public hospitals face challenges in providing care to those who need it. To combat this, the number of private hospitals has been on the rise, especially since China lifted restrictions on foreign investment in private hospitals in 2012. Smaller and financially challenged public hospitals have also faced privatization. However, private hospitals still provide less than 10 percent of total health care services. Patients are less familiar with private hospitals, which often have fewer qualified physicians and weaker local government financial support. The State Council has sought to expand use of private health care services to 20 percent in 2015. 
Public hospitals are also overwhelmed with demand because patients often tend to travel to larger hospitals even for mild health problems, neglecting local community-level medical institutions. The State Council has emphasized the necessity of increasing the quality of healthcare in local medical institutions. The National Health Family Planning Commission plans to address this issue soon to build up a multi-tier treatment system with two-way referrals. 
Health insurance is also on the reform agenda. Although China currently has almost universal health insurance coverage, limitations abound, particularly for those with severe illnesses. Public health insurance is basic, while private health insurance is underused. To encourage use of private health insurance, the government has announced a pilot plan to give tax breaks to private health insurance policy holders. Policyholders will be able to deduct 2,400 RMB per year from assessable income for health insurance premiums. 
China’s health care system is fraught with inefficiencies that the leadership is attempting to address. The active reform process undertaken by the State Council and the National Health and Family Planning Commission indicates that over time, these inefficiencies may be eliminated. Some reforms, however, will take longer than others, particularly improving the quality of health care and changing patient views regarding local and private hospitals. Yet these are essential components of building a modern society.
More in The Diplomat.

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What after the VIE disappears - Paul Gillis

Paul Gillis
Paul Gillis
For decades both Chinese and foreign companies in China used to circumvent murky Chinese corporate legislation by setting up so-called VIE´s on outside tax heavens, while the government basically looked away. Those days seem to be over, writes accounting professor Paul Gillis on his webblog, and the question is: what´s next?

Paul Gillis:
There is a interesting editorial in Caixin ... It was written by Wang Rao, CEO of Chinese investment bank e-Capital. Wang argues it is time for overseas listed Chinese companies to unwind their VIE structures and seek listing at home. The editorial comes on the heels of an announcement that Chinese investment manager Shengjing had launched an investment fund dedicated to helping overseas-listed Chinese to delist and list instead on China’s stock exchanges. I have long argued that Chinese markets are the appropriate place for Chinese companies to list, since Chinese investors and regulators are better able to understand the companies. The Chinese stock markets, however, have not developed sufficiently for this to happen, I had forecast it would take 5-10 for the necessary reforms to make domestication possible. It appears that things may be moving faster than I expected. 
The main factor driving this thinking is the rapid development of China’s own stock markets. The China Stock Market (SSE Composite) has more than doubled in the last year. Perhaps even more important is the success of China’s new third board, the National Equities Exchange and Quotations (NEEQ). NEEQ listed an average of 193 companies a month for the last four months, and now lists 2,343 companies with a total market cap of over US$180 billion. These are mostly small companies with an average market cap of only $77 million. Regulators have promised to tighten supervision of this lightly regulated market, and time will tell whether this market will be plagued with the rash of frauds that were seen with US reverse mergers on the US OTCBB.
More at the ChinaAccountingBlog.

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Thursday, May 21, 2015

The hypermarkets are dead, consumer trends - Ben Cavender

Ben Cavender
Ben Cavender
Brands and the origins of brands have come a key consumer trend, retail analyst Ben Cavender told a fruit conference in Shanghai, according to fruitnet.com. The hypermarkets and first-tier cities are out, he said.  

Fruitnet:

 “The focus shouldn’t be in first-tier cities,” Cavender told delegates, adding that the key to success is to focus on developing trust among consumers in tier-two and tier-three cities. “There’s been a lot of changes in the past five to ten years in how consumers see the world.” 
Pollution, food safety and the crackdown on corruption have all influenced consumer trends, with a move away from tangible items towards ‘experiences’ and premium, healthy food – an opportunity for the fresh produce industry to make inroads in China's emerging markets. 
As a result, branding and brand origins are increasingly important, said Cavender, adding that companies should focus on what their brands stand for and building a story behind their brand. .. 
While there is a transition to high-end grocers, in tier-two and tier-three cities demand is outstripping supply, with consumers increasingly travelling overseas and to tier one cities, seeing the produce and products available, and so turn to online retailers to meet their demands. 
“Ten years ago it was about the hypermarkets – they were the premium space. Now, hypermarkets are dead to the consumers – they don’t like the shopping experience,” Cavender said. 

More at Fruitnet.com

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Wednesday, May 20, 2015

Walt Disney tries to regain its China market - Ben Cavender

Ben Cavender
Ben Cavender
Walt Disney is not only opening an entertainment park in Shanghai, but also on Wednesday the biggest retail operation ever, wit 2,000 products on 860 square meters. The company is trying to win the China market, that was dominated by counterfeits, says retail analyst Ben Cavender in the China Daily.

The China Daily:
Ben Cavender, an analyst at China Market Research Group, said: "Disney is very concerned about branding and about developing its image in China." 
He said operating a flagship store selling merchandise is both a way to market its theme park but also of retaking control of its merchandise and control quality in the country. 
Cavender said the company had been working on developing a retail presence in China for some time but ultimately it has to deal with what has become a persistent counterfeiting problem, and the perception that its product prices are high. 
Only by controlling its retail experience and ensuring product quality can the company entice consumers to spend, he said. 
Another issue facing Disney in China, he said, is its prices in the mainland compared to Japan. 
"The company thinks the market can bear these prices, but we are still to see how sales go over a longer period of time to see if this proves the case," he said.
More in the China Daily.

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US-China clash in South China Sea "unlikely" - Wendell Minnick

Wendell Minnick
Wendell Minnick
China is flexing it maritime muscles in the South China Sea, and military analysts different on how dangerous the situation can get. Defense analyst Wendell Minnick thinks a clash between China and the US is unlikely, but cannot be excluded, writes Asia One.

Asia One:
A military stand-off and any exchange of fire would be the worst-case scenario, they say. 
Defence News' Asia bureau chief Wendell Minnick said while it is very unlikely, the possibility of "a Chinese commander firing an anti-ship missile and having things escalate from there" cannot be ruled out. "The nationalistic fervour is so great right now that you're not sure how far that might push a commander." 
The reaction of the Chinese navy also remains a huge source of uncertainty as it has not been observed in combat before, Mr Minnick noted, adding that the Sino-US crisis management mechanism meant to avoid unwanted clashes can also be improved... China is likely to use "swarming tactics" rather than a direct military confrontation, Mr Minnick said. This means sending Chinese fishing boats and coast guard vessels to harass the US ships while the Chinese navy watches at a distance, Beijing's usual tactic. He said: "But the US military can't do this forever. It is likely to demonstrate its physical presence, then slack off before bringing it back during a crisis."
More at Asia One.

Wendell Minnick 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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Tuesday, May 19, 2015

Charity not high on China Richs`agenda - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
Billionaire Bill Gates has tried in vain to engage his Chinese counterparts to spend more on charity. China Rich List founder Rupert Hoogewerf explains in Knowledge CKGSB why China´s wealthy give no priority to philanthropy.

Knowledge CKGSB:
Beyond the numbers, the reputation of China’s elite as being tightfisted when it comes to philanthropy was solidified in 2010 after media reports that many had turned down invitations to a dinner in Beijing hosted by Gates and Warren Buffet that was intended to raise awareness about philanthropy. Gates later said that two­thirds of invitees attended the event. 
Rupert Hoogewerf, founder of the Hurun Report, says that for the wealthy, charity is “low down on the priorities”. “They feel that… the best way they can give back to society is to grow a strong, healthy business.” ... 
The system also doesn’t help incentivize philanthropy, says Hoogewerf. He points to the absence of US­ style inheritance taxes, from which gifts to charity are usually exempt, as a further reason why the wealthy don’t donate as much as they could. 
The desire of many of China’s wealthy to keep a low profile, so as not to draw attention to their riches and the scrutiny it would inevitably bring, also works against significant philanthropic gestures. And when big gestures are made, they are often dismissed as publicity stunts rather than true philanthropy, as has been the case with Chen Guangbiao, an entrepreneur who made his money in the recycling business.
More in Knowledge CKGSB.

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Monday, May 18, 2015

Why lawyers should think twice before moving to China - Mark Schaub

Mark Schaub
Mark Schaub
Moving to China still seems attractive for many professionals, including lawyers. Shanghai-based lawyer Mark Schaub explains to the Law Gazette the barriers you might meet twice, and why you could consider the move very well. And that does not only is true for lawyers.

Law Gazette:
Before moving to mainland China, there are other practicalities to consider. ‘The trailing spouse is often a woman, but nowadays you see more and more trailing spouses who are men. It can be very difficult [for them] to get jobs here, especially if you are a bit older or you are a foreigner or you don’t speak Chinese,’ says Mark Schaub, international partner at King & Wood Mallesons in Shanghai. ‘For the person who is working, China can be a very exciting place because there is a lot happening, but very often a spouse who is not part of the package can have a difficult time adjusting,’ he relates. 
There is no shortage of international schools, with the largest concentration in Beijing, Shanghai and Guangzhou. But fees are high and waiting lists long for places in the most popular schools. Schaub recommends contacting schools well in advance of the move... 
‘The best thing to say about the air in Shanghai is that it is better than in Beijing,’ Schaub says. 
‘Pollution is generally bad in Shanghai, but in Beijing it is through the roof. Simply because of the pollution levels, I would not move to either city if I had a baby or a small child,’ Elshafei adds. But you can have fun too. ‘I am a big fan of the city,’ says Schaub, in Shanghai since 1993... 
So what is there to be gained by a move to mainland China? ‘The work is very interesting,’ says Schaub. ‘You can get exposure to big matters relatively early on. It is a complicated place with interesting kinds of problems to solve.’ Schaub was the first foreign lawyer to join China’s largest law firm, King and Wood, in 2000. The firm merged with Australia’s Mallesons Stephen Jaques in 2012... 
‘Most people who come to Beijing or Shanghai have a very positive experience,’ says Schaub, who has clocked up 22 years in the country. ‘Not many stay as long as me, but most people do enjoy it here.’
More in the Law Gazette.

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Growth over reforms? - Sara Hsu

Sara Hsu
Sara Hsu
President Xi Jinping entered his tenure with a clear commitment to reform. But slacking economic growth might jeopardize that promise, writes analyst Sara Hsu in the Diplomat. One main reason: central and local governments have very different interests.

Sara Hsu:
One reason that the leadership is in such a bind with local governments is that fiscal imbalances between the central and local governments have still not been corrected. Local governments have been desperate for sufficient revenue to cover their massive expenditures on social services and infrastructure and continue to face no reprieve. The recent fiscal reform appears to have even skewed revenues a bit more in favor of Beijing, as service enterprises will switch from paying the business tax, which generally goes to local governments, to the VAT tax, which is transferred to the central government. 
Another reason why local governments were allowed to use LGFVs is because the attempt to expand the municipal bond markets was insufficient. Local governments rolled out 400 billion RMB in 2014, which proved insufficient to finance local government projects. Land sales have also slowed, resulting in smaller revenue intake. 
China needs additional fiscal reform, particularly with redistribution from central to local coffers, but this is unlikely to happen as both central and local government are pressed for funds to stimulate growth and implement reforms. Certainly the leadership has a challenging road ahead. The reversal on local government debt channels is just one harbinger of obstacles to come.
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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