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China's Soft Power Struggles

China's Soft Power Struggles

China’s 19th Party Congress concluded with President Xi Jinping promising a rejuvenated China that wields more influence across the world. This declaration comes as the United States, erratic and unpredictable under Donald Trump, seems too preoccupied with turbulent domestic politics to care much about global engagement. In stark contrast to the West’s inward turn, Xi has defended globalisation and the need for global climate governance, and China is seizing this historic moment to reshape the geopolitical order. However, military and economic prowess are not enough; China is turning increasingly to soft power, with significant ramifications both domestically and internationally.

 



Under Xi, China has attempted to utilise economic soft power through the Belt and Road Initiative, which aims to export Chinese-style economic growth through massive investments in infrastructure. More than 60 countries have signed up.

 



At the same time, according to David Shambaugh, China is spending more than US $10 billion per year in a soft power push. Programs include academic exchanges and promotion of language and culture. Among the most visible efforts are Confucius Institutes, government-affiliated teaching and research centres often housed in colleges and universities worldwide. Confucius Classrooms are a similar initiative for primary and secondary schools. There are now 1,579 Confucius Institutes and Confucius Classrooms in operation.

 



In addition to these efforts, China has encouraged its state-run foreign language news media to circulate a well-managed narrative about the country, and it is clear that Chinese media’s global reach is growing.

 



News agency Xinhua has more than 160 bureaus worldwide, while CCTV International – recently rebranded as the China Global Television Network – broadcasts in English, Spanish, French, Arabic, and Russian. Chinese media have also supported training courses for journalists from Asia, Africa, and Latin America. According to a report about training for Ugandan journalists in China, these efforts focus on building a positive image of China and promote a particular model for media’s role in society.

 



Even the film industry exhibits elements of China’s soft power strategy. The country’s domestic film consumption market is tightly controlled by a quota system. While China’s box office value totals US $7 billion – the second largest such market in the world – only 34 foreign movies per year are allowed, although exceptions are granted to those co-produced with Chinese studios.

 



China’s Hollywood ambitions, however, have been tempered by strategic blunders and lagging sales. The proposed US $1 billion acquisition of Dick Clark Productions by Chinese conglomerate Dalian Wanda was blocked by the Chinese government, while the first major movie co-production between American and Chinese studios, The Great Wall underwhelmed audiences and underperformed at the global box office.

 



More broadly, Chinese entertainment has failed to gain the global popularity of soft cultural exports such as K-pop (South Korea), Anime (Japan), and even Bollywood films (India).

 



While these exports are not directly connected to geopolitical positioning, they are crucial for building national brands and goodwill. So far, China lacks this dimension, possibly due to the unwillingness of the country’s cultural industry to produce content that is edgy, satirical, or even lightly critical of the government. The country ranks 25th in an index of soft power strength, below smaller Asian countries like South Korea and Singapore.

 



Within Asia, China’s image is compromised by territorial posturing, while investments benefiting economic elites have led to concerns about the country’s growing influence. In Australia, a recent row over a university lecturer’s comments about Taiwan agitated Chinese students, doing little to soften an external image of China’s defensive posture about Taiwan and Hong Kong. Controversy has also arisen around the alleged control of Chinese students in Australia by the Chinese government.

 



Given the focus on state-supported public diplomacy and cultural initiatives, there is an apparent element of coercion in China’s approach to soft power. Confucius Institutes have encountered criticism in the West for censorship, discriminatory hiring practices, lack of transparency, and repression of academic freedoms. Responding to such concerns, the University of Chicago, Stockholm University, and McMaster University in Canada are among universities that have shuttered the institutes. More recently, a report from the National Association of Scholars, a politically conservative advocacy group, recommended that all universities in the United States close their Confucius Institutes.

 



Beyond these challenges, there is a sizable digital gap in China’s push for soft power. There are Chinese equivalents of Twitter, Facebook, and YouTube, but it’s debatable whether any of them have similar global market potential. Slick new websites targeting a young demographic, such as the Chinese language The Paper and the English language Sixth Tone, are attempting to push the boundaries of critical reporting and have had some success, but both are owned by the Shanghai United Media Group, a state-funded company. If these venues provide an editorially independent space for sharing ideas, they may have the potential to attract global viewership.

 



China’s domestic controls on expression and creativity, particularly as they relate to political sensitivity, limit the country’s credibility in developing soft power, and may be subject to further criticism if efforts to refashion the country’s image gain global visibility.

 



The development of Confucius Institutes and control of Chinese students abroad are indicative of a coercive mindset that may have worked in the pre-opening-up era but is now stale and ineffective. China has rich potential to develop soft power through language, culture, and the creativity and wit of its now-thriving civil society. Openness, transparency, and tolerance of debate are crucial for liberating this potential, but would entail a change of strategic focus that is likely to be unpalatable within government ranks.

 


China’s reserve of soft power capacity is supported in large part by historic economic growth and success in lifting hundreds of millions out of poverty. Given the apparent retreat from global leadership by nativist and populist governments in the West, China must look beyond the Belt and Road and the development of international economic institutions.

 



Focusing on global challenges like climate change, disease, and poverty are another important pathway for establishing global leadership, and can help other countries achieve the same transformational growth China experienced. Soft power may follow as China grows into its new role, but it will also test the country’s ability and willingness to liberalise state-society relations.

 

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Asit K Biswas is the Distinguished Visiting Professor, Lee Kuan Yew School of Public Policy, National University of Singapore, Singapore. Kris Hartley is a Lecturer in Public Policy at the University of Melbourne and a Nonresident Fellow for Global Cities at the Chicago Council on Global Affairs.

This article was originally published by the POLICY FORUM on November 9, 2017.

The race for the World's shared bike...

The race for the World's shared bike rental market.

It is almost two years since Mobike co-founder Hu Weiwei put around 50 bicycles on the streets of Shanghai and drove away. Ofo had a similar beginning, spreading out shared bikes on Beijing’s university campuses. This is how China’s dockless bike rental economy was born.

 

 

Today, bikes are so bountiful that they are literally blocking the streets of Chinese cities. Although both companies have been hesitant to release numbers, the latest iResearch’s data (in Chinese) show that Mobike has 8.65 million daily active users while for Ofo that number climbs to 9.65 million. During 2017, Mobike has raised $1 billion and Ofo $1.15 billion, according to their own data.

 

 

The meteoric rise of the bike rental market has drawn much attention, not just for its disruptive business model, but also because it is one of the first tech trends coming from China that has swept the entire world.

 

 

Different paths, same goal

The two bike rental giants have taken very different roads to success in China. Ofo took the fast route by quickly spreading cheap bikes from campuses to the streets of Chinese cities. It then worked on its technology with the help of investors China Telecom and Huawei by adding GPS tracking and upgrading its locks.

 

 

Mobike was more meticulous in planning: the company first set up its own factory to produce sturdy bikes integrating GPS and QR code authentication and then moved on to expanding their business.

 

 

As Grace Gu, principal at one of ofo’s backer ZhenFund, explained during this year’s ChinaBang Awards, Ofo showed a typical Northern China style of expansion, while Mobike has the Southern China business style.

 

 

“In short, Southern style is bottom-up with a ready product, and Northern style is top-down strategy and later do optimization,” said Gu. The two companies have transplanted their styles into the global arena. Ofo is following its co-founder’s Austin Zhang’s credo “rapid spread, yellow will cover the world” Besides Chinese cities, the little yellow bikes can currently be seen on the streets of UK, US, Singapore, Thailand, Austria, Malaysia, Kazakhstan, and Japan. Last September, the 22nd World Car Free Day the company announced it will be launching in a cluster of four European countries of Russia, Czech Republic, Italy, and Netherlands.

 

 

Ofo also went beyond the simple yet effective marketing tactic the two companies have been using in China. With their flashy colors, the bikes market themselves; all they had to do is offer free rides and the good word was spread by the users. Now, Ofo is taking a more vocal approach: it has teamed up with UNPD to offer grants for green projects and has announced smog-filtering bicycles. It has even gotten Rihanna on board by sending bikes to schoolgirls in Malawi through the singer’s foundation.

 

 

Mobike, on the other hand, has been behaving in the Southern Chinese fashion—slow and cautious. According to the company’s Head of Global Partnerships, the company is now focusing on raising their efficiency through technology and strong support from the local government.

 

 

Mobike has set the same target as Ofo for this year—200 cities. Besides China, the company has so far entered Singapore, US, UK, Italy, Japan, Thailand, and Malaysia.

 

 

But Mobike has been compensating for its lack of speed by investing in AI data monitoring platform Magic Cube which will help operate its bikes and fight illegal parking. The company has also partnered up with tech giants such as Foxconn, Qualcomm, Vodafone, AT&T, Cisco, and Ericsson. This plays in line with the fact that Mobike is at heart a technology company.

 

 

But Ofo is catching up on the big data game. In Japan, Ofo is cooperating with SoftBank C&S’s division for IOT, robotics and the cloud. It was also the first bike rental company to announce implementing near-field communication (NFC) locks which will enable users to unlock bikes even faster.

 

 

Bumps, curbs, and potholes

The two companies have geared up to fight for the global market, but the road ahead will be slippery. The success of expansion into other markets will be in part based on these factors–including population density (i.e., high capacity utilization and high availability), economic factors, conducive environments for safe biking (i.e., physical layouts, base rates of crime, etc.), and state/government regulations that do not hinder growth. One of the bigger issues is gaining the trust of local governments. Bluegogo’s example reminds us that not all cities are willing to take the risk of flooding its streets with shared bikes. The company shipped hundreds of bikes to San Francisco just to have the government issue regulations that would make it unfeasible to operate in the city.

 

 

Even when the cities agree to welcome shared bikes, there are other factors to consider: The Parisian docked bike-sharing scheme Vélib which reported half of its bikes were stolen, some of them being discovered as far away as Romania. And while vandalism and theft are not rare in China, bike sharing companies in foreign markets will be left without the possibility of quickly replacing stolen and damaged bikes.

 

 

Finally, both Ofo and Mobike will have to face local competition. US companies are joining the race: LimeBike already covers nine cities and it is taking on ofo in Seattle along with Spin, while Vbike is starting is growth in Dallas. Even regulation-obsessed Europe has welcomed its first homegrown dockless bike rental scheme Urbo. Recent news from Singapore—both Mobike’s and ofo’s first foothold abroad—has shown that the Chinese bike rental giants could lose out: local company oBike is currently the most popular bike renting option and it is making its way to London.

 

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This article first was first published in TechNode: started in 2009 by Dr. Lu Gang, TechNode began as one man’s attempt to tell the world about what’s happening in China’s tech and startup ecosystems. Their annual innovation and entrepreneurship awards ceremony ChinaBang sees the best and brightest of China get recognized for their contributions to their community and industries. Additionally TechCrunch events connect the Chinese startup community with the rest of world.

 

 

Tales of the 573: Bus Etiquette in China

Tales of the 573: Bus Etiquette in China

By Paul Ross.

 

 

On the 573, an empty seat doesn’t stay empty for very long, even if the seat is next to another one that is also empty. If you want one of them, you have to move fast otherwise one of your fellow passengers will most certainly get there first. And when he does, I can guarantee that he will take the outside seat, effectively blocking access to the seat unoccupied. 

 

 

Grabbing the aisle seat like that while leaving the one by the window stranded is a move that would not be tolerated in a New York or a Paris where a passenger who even contemplated such a thing would in short order be shamed by his fellow passengers into moving to the seat by the window.  On the 573 (or, for that matter, any other bus in China), I have never seen any passenger who has taken the aisle seat and blocked the seat by the window exhibit the slightest bit of discomfort or remorse. Nor, to my knowledge, has anyone ever raised an objections to this practice much less raised an eyebrow in disapproval.

 

 

As to what accounts for the “stranded seat” phenomenon, a number of hypotheses have been put forth that range from the socio-cultural to the purely practical.  The more practical and, arguably, most selfish reason is that people want to make it as easy as possible for themselves to get off the bus when it reaches their stop. They don’t want to be bothered with climbing on or around someone else in the process which they would have had to do if they had taken the seat by the window. A passenger sitting by the window, especially in Summer, is more directly exposed to the sun’s rays,  which can make for an uncomfortably hot ride not to mention the potential health hazard.  From a socio-cultural standpoint, those living in China, in general,  have a greater tolerance for a more restricted personal space than those in less populated places might have. So the close physical contact that comes from getting into and out of an empty seat by the window might not be regarded as as much of an inconvenience by the local passengers as it would be by passengers on buses in large cities outside of China.

 
 

Another unique aspect of local etiquette applies to the way passengers make their way off the bus. The broadcast announcement of a bus’s pending arrival at its next stop is the signal that sets in motion a complex maneuvering. Passengers who want to get off the bus begin to push their way towards the door shouting ‘huan yi xia, huan yi xia” (change places, change places !) obliging those closest to the door to move out of the way. Like the interlocking pieces of a Rubik’s cube, the two groups slide past each other as they move to fill the spaces that are being vacated. 

 

 

This ‘pas de deux’ is difficult to execute on a bus that at peak hour is crowded to overcapacity and is particularly disruptive on a bus in motion when fare cards are being passed up and down the aisles and passengers are already struggling to keep their footing.  I personally find it difficult to appreciate the urgency that motivates this moving and shifting and fail to understand why some passengers feel it’s necessary to put so many others to such great inconvenience just so they can secure a pole position for themselves when the doors open.  

 

 

In my experience, when the passengers who are already closest to the door begin to make their way off a path naturally opens up that makes it possible for those who standing further back to get off quickly and usually with plenty of time to spare. To prove the point, I’ve made calculations. From the time the door opens at any given stop to the time it closes an average of 1 minutes and 53 seconds has elapsed.  A passenger standing within ten meters of the door, a distance that  roughly speaking covers midway to the back of the bus, can comfortably make his way off in 46 seconds, even on a bus that is at full capacity. It is clear from this analysis that under normal operating conditions not only does a passenger have sufficient time to get off from a starting point anywhere on the bus, but that there is still ample time left – 1 minute and 7 seconds, to be exact.

 
 

The way you should address yourself to the driver (to complain about his driving skills, for example) also follows a certain etiquette. The official mechanism for expressing one’s views is a notebook marked ‘Suggestions and Comments” that hangs suspended from a hook by the driver’s seat.  The book’s yellowing cover and dog-eared pages suggest that it is provided more to meet a specific design specification and round out the decor than to be used in any meaningful way.

 

 

In practice, no one ever engages the driver except, perhaps, to inquire about the route or the fare. I have found by trial and no small amount of error that the most acceptable way to share feedback is to preface the feedback with the words “wo you yi ge xiao jianyi”.   (“I have a small suggestion”) .  This phrase, in particular its inclusion of the word “xiao” (small), expresses a humility that will make even the most belligerent  driver more receptive.

 

 

The other evening I was on the 573 heading home. The bus had just rounded the corner on its return route up Jinqiao Road when a man who had taken the aisle seat and left the window seat empty suddenly reached up and began tugging on my sleeve pointing to the open seat next to him. My inclination was to refuse the offer, as well-intentioned as it was. I wasn’t so desperate to have a seat that I was willing to climb over someone to get to it.  But in this case, much to my astonishment, the man moved over to the seat by the window, ceding the prized outside seat.  I still didn’t take him up on the offer because I found his uncommon behavior suspicious. He was too solicitous. After further reflection, I came to the conclusion that the man was perhaps a harbinger of change in traditional bus etiquette that was still too new and unexpected to be appreciated for what it was.

 

 

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Paul Ross is a telecommunications executive who has worked in China for more than 10 years. He has written numerous articles for hi-tech publications such as Wireless Week and Red Herring.

 

 

Putting China’s growth into perspectiv...

Putting China’s growth into perspective.

The sheer growth and scale of China’s economy in a global context can be difficult to visualise. An economy which is expected to overtake that of the US by the end of the decade can be difficult to put into perspective. While Chinese GDP has slowed in recent years, its is still growing at a remarkable scale and is perhaps the most important international event since the end of the Cold War. We believe the two graphics below help you to understand this growth phenomenon

 

 

This chart looks at the annual Chinese GDP growth going back to the year 2000, comparing it to the equivalent total GDP of other nations around the world.

 

 

Source: HSBC research, Visual Capitalist.

mHealth: the next evolution in Chinese...

mHealth: the next evolution in Chinese healthcare?

By Daniel Addyson.

 

The Chinese healthcare system is struggling to provide adequate medical access for its 1.4 billion citizens. But the Chinese may have already have built the foundation for sustainability: their love of mobile technology.

 

 

Getting medical care in China

 

 

For a westerner visiting a Chinese hospital for the first time, it’s an eye-opening and sometimes mind-boggling experience. During the few trips I have made to China over the last decade, I’ve occasionally had to visit local hospitals. The scene can be at once chaotic and yet oddly more efficient than the US. Typically, visiting the doctor means going a large hospital (as opposed to outpatient settings like the US), which houses multiple specialties ranging from primary care, to maternity wards, to high-end surgery. Much like standing in line at the grocery store, you grab a ticket and wait in line to see the receptionist, who then directs you to the appropriate specialty center. From there another ticket is taken to wait for the specialist. The process continues on to other specialties if needed, such as X-ray or lab draws, until finally you end at the original doctor, who will examine the accumulated results and make a final determination of the condition.

 

 

When I first encountered this style of healthcare, I was somewhat enamored. I compared the experience to the US, where I had to book an appointment to a primary care physician or specialist, then a separate appointment on a different day across town for a blood draw, then return to the original doctor on yet another day for my follow-up consultation. A few hours of actual medical intervention were stretched into days or weeks. The system I first experienced in China seemed to compact all of that waiting and scheduling into a much shorter span of time. This is the prevailing paradigm of clinical care in China and other East Asian countries. Although smaller outpatient clinics do exist, most care still takes place in large, multi-specialty hospitals.

 

 

The Problem: insufficient capacity

Thankfully, my experiences with healthcare abroad have been relatively minor and infrequent. For the average Chinese citizen, and even expats, the experience can be far worse. Shaun Rein, a US expat and market research expert living in China, writes about his experience with Chinese healthcare in his book, The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia:

I went to 38 doctors. I became used to Chinese hospitals, and they are not pleasant places for everyday people. If you don’t have lots of money to buy VIP time slots or connections to skip queues, you just have to grab a ticket and wait in line to see a doctor. Patient rooms are often filled with dozens of other patients so privacy does not exist. The frazzled, overworked doctors in top-tier hospitals have so many patients to see that they often spend less than a minute per patient.

Rein goes on to describe the causes for the massive inefficiency in Chinese medical care, which in fact are fairly basic: 1) doctors are not paid very well, so it’s not seen as a lucrative or desirable profession to enter; 2) there aren’t enough medical providers to see the number of citizens in China’s rapidly urbanizing cities. Consequently, there are a number of knock-on effects that further exacerbate the problem: social acceptance of bribery (“red envelopes”) for quality care; paying extra to skip waiting queues (“VIP service”); or using personal connections (“guanxi”) to schedule appointments with doctors. The problem even extends to device and pharmaceutical sales, where reps bribe providers to use their products.

 

 

Rein’s assessment is that the situation is gradually improving, and he credits President Xi Jinping’s crackdown on fraud for helping stem the abuses in the healthcare system. However, China is still left with its fundamental problem: quality care is still often unaffordable or inaccessible for many poor and middle-class Chinese citizens. Although the government has plans to dramatically increase the number of medical providers throughout the country , the prospect of overwork and little pay doesn’t make the medical field particularly attractive to Chinese college graduates. This means that there is still a very high risk of chronic shortages of qualified staffing in rural areas and for certain specialties.

 

 

Why mHealth can help

Daxue Consulting and the Brookings Institution have highlighted specific areas where mHealth can help in developing healthcare capacities in the country:

  • Continuity, Quality of Care & Data Access: Using mobile platforms can provide consumers with a pipeline to their medical history: medications prescribed, previous visits to providers, diagnostic results, etc. Rather than trying to navigate a fragmented care environment where a patient might be shuttling between different hospitals and trying to maintain separate sets of medical records, mHealth platforms can consolidate this data and help patients make sense of it. On the same token, data collection from mHealth options allow both patients and providers to better monitor chronic conditions, medication adherence, and other important data points in the care process.
  • Freeing up hospital capacity: One of the primary goals of mHealth is to increase the availability of healthcare by reducing costlier and time-consuming face-to-face communication between patients and providers and replacing it with digital communication. In this regard, mHealth has performed well in a few different areas. Two primary examples are below:
  • Routine counseling: reaching out to patients for follow-up and routine care via phone or app rather than having them come back to an actual clinic. 
  • Digital diagnosis: In addition to patients texting or sending photos to their providers for remote diagnosis, there are a number of initiatives to turn smartphones into self-contained diagnostic tools. App developers and data scientists are using machine learning technologies to identify cancerous skin lesions based on image recognition. Even the way we use our smartphones are being used to predict our health status. These kinds of advances are poised to provide much needed decision support to overworked medical staff.

 

 

Why China is unique: its love of mobile technology

It’s clear that China’s healthcare system is literally at overflow capacity. The country needs innovative solutions to lighten the service burden on major hospitals. Fortunately, China’s love of mobile technology makes mHealth solutions a perfect fit to get better healthcare access to its citizens.

 

 

China’s mobile focus

Healthcare technology companies seeking to make inroads in China face a market that is already primed to adopt mobile solutions. China has embraced mobile technology in a way that’s hard to imagine in the US or other Western nations. According to a Verto Analytics report, “As many as 94% of all Chinese online users use smartphones vs. 70% in the U.S.” In addition to the popularity of smartphone usage, the Chinese market has unique characteristics that make it uniquely open to mHealth uptake:

 

 

  • The prevalence of mobile commerce: Mobile options for everything from shopping to in-store payments to social media are just as, or more, prevalent in China as the West. An illustrative case in point: mobile pay. There are now effectively two options for making payments in China: cash or mobile pay, with mobile being the far more preferable choice with both small and large vendors. Most B2C transactions in China effectively run through one of the country’s mobile payment giants, such as WeChat or Alipay. The Chinese market is also much more open to using mobile options for their day-to-day needs. For example, Rein cites the relative success of mobile grocery shopping in China compared to the US, where uptake has been minimal. Rein explicates a number of reasons for the popularity of digital lifestyle, ranging from convenience to safety concerns from air pollution. These numerous factors have helped acclimate much of the population to conduct business over their smartphones; healthcare companies who can take advantage of this stand to quickly gain substantial market share.

 

 

  • Multi-function smartphone apps: An additional feature that sets China apart is not only the prevalence of mobile options, but the integration of multiple functions into a single app, (ie. payments, messaging, social media, and shopping). Unlike Westerners who are accustomed to apps with one or two primary uses, the successful Chinese model is based on a few apps providing diverse and multiple services. WeChat stands as an illustrative case in point: chat features, ride sharing services, and mobile payments among others, are all housed under one platform. Companies seeking to implement mHealth and telehealth programs in China can leverage existing platforms, which already have wide and stable customer bases, to reach their desired patient populations.

 

 

With Chinese consumers adopting mobile options much more readily than in the West, companies seeking to implement mHealth technologies already have a primed market and the technology infrastructure to facilitate its adoption.

 

 

Challenges to implementation

 

 

Although the market appears ripe, effective implementation in the Chinese market also faces unique challenges. It’s no secret that companies often fail :

  • China’s rural and offline populations: mHealth and Telehealth platforms are frequently cited as ways for providers to reach rural and other low-access populations. But there’s a converse problem: rural populations also tend to have lower access to infrastructures like wireless data that make mobile technologies work. Although the government has made a huge push to consolidate the Chinese population through urbanization programs, roughly 43% of China’s population still lives in rural areas. Additionally, in spite of the high proportion of smartphone users, only 50% of the total population is even online. Smartphone penetration is expected to reach over half the population by 2019, and with it the infrastructure needed to make smartphone use practical (namely, wireless and cellular data access). Nevertheless, companies need to accurately assess their target population before trying to enter the market.

 

 

  • Patient perceptions of quality & safety: Rein’s Copycat China dedicates an extensive amount of space to the concerns Chinese have for quality products and services. With the number of scandals regarding food and medical safety, as well as the prevalent air pollution problem, Chinese consumers place very high value on product quality. mHealth technologies, whether telephonic outreach to patients or digital diagnostics, need to clearly demonstrate that they provide high quality medical care. Consumers need to be convinced that they’d be just as good or better off staying home rather than going to a top-tier hospital for routine medical needs.

 

 

  • Managing providers’ expectations: Providers also need to see the value of putting in the time and effort of new initiatives for medicine. The Brookings Institution report recommends that the government incentivize providers to participate in telemedicine programs, but expectations for mHealth solutions also need to be managed. Digital platforms are typically promoted as a way for more patients to get to doctors. However, doctors who are already overworked need to see how mHealth options can reduce their crushing workload, otherwise they are likely to see little reason to participate.

 

 

Conclusion: Focus on delivery strategy and solving targeted needs

In spite of these challenges, mHealth can be a major win for the Chinese healthcare system and for the companies who provide these services. Rather than trying to foment a major revolution in the Chinese healthcare system, companies interested in implementing mHealth solutions will most likely find success in developing focused, strategic partnerships that solve specific needs for patients. By working with hospitals and government health plans to access patient populations, as well as popular mobile apps to effectively run their platforms, mHealth technologies stand to create substantial progress in improving quality care access in the Chinese health system.

 

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Daniel Addyson is a data scientist and healthcare analytics consultant. His work specifically focuses on health technology and analytics implementation for emerging markets, with a specialization in East Asia. Dan's work can be found at www.linkedin.com/in/danieladdyson

 

 

China's Groundwater Crisis

China's Groundwater Crisis

Two of the world’s most densely populated regions, northern India and northern China, are experiencing high levels of groundwater depletion, according to a 2015 study sponsored by NASA. For these and many other highly stressed aquifers, natural replenishment through precipitation is unable to offset human-led extraction, threatening water quality and supply sustainability. Three notable cases are the Ganges River and Indus Basin (both in India), and the North China Aquifer. Given that these areas account for a significant percentage of the national population in the world’s two largest countries, groundwater depletion should be an urgent policy imperative.
 


In China, significant efforts have been made to address water shortages in scarcity-prone regions, including pipeline transfers, desalination, and stronger urban design standards. Nevertheless, depletion of groundwater continues and the impacts are dire, both for individual users and for urban health and safety in general.
 


In rapidly developing regions, groundwater provides a quick and easy way to satisfy unexpectedly high demand. However, increased usage resulting from population growth, industrial expansion, and lingering agricultural activity is causing water stress where groundwater reserves are already overdrawn.
 


Increasingly erratic weather and saltwater intrusion, both associated with climate change, can alter groundwater levels and quality. The impacts of lower levels are dire; not only is there less to consume, but lower quality can worsen public health crises and burden existing purification systems (or require the purchase of expensive new ones).
 


In China, a population equal to 20 per cent of the world total relies on less than 6 per cent of the world’s groundwater. The overstressed North China Aquifer serves 11 per cent of the country’s population, 13 per cent of its agricultural production, and 70 per cent of its coal production.
 


China’s solutions have, so far, been inadequate. The massive South-North Water Transfer Project has supplied Beijing with an annual 2 billion cubic metres of Yangtze River water since 2014, but is not a long-term solution. The project, costly and imposing as it is, could mask the need to address other water management challenges such as leakage, ageing infrastructure, and wasteful usage. As the largest such project in the world, the transfer also brings negative impacts to source regions, including over-withdrawal during dry seasons and displacement of communities (a common problem for China’s dam projects).
 


Further, a government-led study of groundwater quality, which included source regions for the Yangtze River, found that 80 per cent of the country’s groundwater is contaminated by toxic metals and other pollutants, rendering supply unfit for human consumption.
 


Desalination is another solution with thus-far unrealised potential. In coastal areas near Beijing, restrictions on extraction of groundwater for industrial use have been adopted to force desalination into the supply portfolio, but desalinated water has not been incorporated systematically into China’s municipal water systems. Additionally, the negative impacts of scaled-up desalination on marine and coastal areas may be overlooked at great peril to sustainability and ecological health.
 


The incompleteness of these measures has perpetuated dependence on groundwater, and over-extraction is having severe impacts on Beijing; including that the city is dropping by 11 centimeters (4.3 inches) per year due to the gaps left after extraction, causing subsidence and damage to infrastructure. The problem is particularly acute in the Chaoyang district, which encompasses the capital city’s eastern suburbs – areas that are rapidly expanding with dense, high-rise construction.
 


In the United States, the highly-publicised case of a new luxury tower leaning several degrees only years after construction, due to poor foundation standards, illustrates the legal, financial, and social challenges of building in areas with geotechnical instability. San Francisco’s leaning tower is 57 floors tall, but many in Beijing’s rapidly subsiding districts are far taller. Will it take a disaster to generate calls for robust demand management?
 


According to the authors of the NASA study, “It is important to understand where existing socio-economic tensions may collide with water stress to produce stress-driven conflicts.” In China, the desire for economic growth has long conflicted with environmental protection and public health; crisis-level air pollution is a continuous reminder of this. As water governance occurs largely at the central level, high-level policies should target continued economic growth and urbanisation only within the confines of water resource limits. Efforts such as the “three red lines” initiative require cities to constrain water consumption to enable more effective regional allocation. Similar restrictions could be imposed for water-intensive industries and other heavy users.
 


Water conservation is also dependent as much on individual decisions as on national policy-making. One example is California’s 2015 water shortage. Governor Jerry Brown called for a state-wide reduction in usage of 25 per cent in July 2015, and the state exceeded expectations by reducing usage 31 per cent. Much of this reduction came from changes in personal habits; fewer people watered lawns and washed cars. The state also encouraged municipalities to actively manage demand; in turn, many imposed surcharges on individual users who exceeded stipulated limits. Pricing is a powerful water demand management tool.
 


China’s demand profile for water does not closely resemble California’s; both markets have high usage for agriculture (64 per cent in China and 80 per cent in California), but China’s manufacturing activity as a share of economic output is larger than California’s. Furthermore, Chinese citizens are less likely to use water for lawns and washing cars. However, China must adopt a more aggressive volumetric pricing program to manage demand, particularly for industrial users. On a per cubic metre basis, water tariffs on businesses and individuals are less than 12 per cent of those in Denmark and less than half those in the world’s developed countries. China’s implicit subsidization of water serves little purpose, least of all in prompting conservation and innovation.
 


China has made some effort to address these challenges. The sponge-cities program, a modified version of low-impact development (LID) that focuses on permeable surfaces and water infrastructure, seeks to increase groundwater absorption. The central government has set a target for 80 per cent of Chinese cities to meet sponge-city standards by 2030. This is a crucial step in aggressively and publicly addressing groundwater depletion under urban areas, including Beijing.
 


However, there appears to be a tepid appetite for private investment in these projects. More aggressive inducements may be needed to prompt public-private partnerships for sponge-city development.
 


Addressing the groundwater depletion problem – and in broader measure the growing crisis of water scarcity amidst rapid urbanisation – will require a multi-pronged approach that includes unequivocal political will, transparency regarding the impacts and costs of depletion, creative policy initiatives to manage demand, and support for technical innovations to improve efficiency in usage. Both China’s economic and environmental sustainability are at stake.

 

------------------------------------

Acknowledgements

Asit K Biswas is the Distinguished Visiting Professor, Lee Kuan Yew School of Public Policy. National University of Singapore, Singapore. Kris Hartley is a Lecturer in the Department of City and Regional Planning at Cornell University, a Faculty Fellow at Cornell’s Atkinson Center and a Nonresident Fellow for Global Cities at the Chicago Council on Global Affairs. This article was first published by the Policy Forum on 12 April 2017.

 

Less instant noodles and more local...

Less instant noodles and more local food: China's independent travelers

By Michele Gelaotto,

In late 2014 president Xi Jinping, while visiting the Maldives, advised Chinese travelers to eat less instant noodles and more local food when in other countries. Despite the economy slowing, the impact on outbound travel from high-net-worth individuals seems to have steadily grown. The length of travel is also increasing for some, and more Chinese travelers are even taking an entire “gap year” abroad. Historically speaking, the Chinese have never really been interested in exploring the world before. But according to a recent report of Business Intelligence Fung Center, the number of Chinese tourist travelling abroad is constantly growing and could be doubled in 2020 to reach 234 million of tourist. And the tourist’s expenses are growing too. International trips are predicted to rise by 25% over the next three years, while adventure trips, polar expeditions, and road trip travels will increase by 52%, 38%, and 75%, respectively during this time.

 

 

The different demographics of Chinese outbound tourism

 

 

A study by Bank of America Merrill Lynch found that it exits different types of tourism in China.

  • 40% are group’s travelers traveling once every 2 or 3 years and are usually aged between 46 to 54 years old. 81% of them prefer to go with group tours.
  • 35% are semi-independent travelers traveling many times in a year and planning some organized programs but keeping independent. Most of the time, they are between 25 and 35 years old. 66% of this group belongs to the high-income bracket, and their financial standing is expected to increase as their careers advance. The majority hold white collar executive or professional jobs, the annual study found. Once this group hits their 30s, they become much more concerned with their appearance: 9 percent of those in the age group of 31 to 35 have traveled for beauty treatments and cosmetic surgery, compared to 6% of all millennials and 4 percent across all age groups.
  • 25% are independent travelers traveling by themselves and aging between 20 and 25 years old. They’re also more open-minded about staying in hotels that might not focus on catering for their specific cultural and other needs, and the younger contingent (age 18-20) is more willing to stay at hostels and backpacker-type places.

 

 

This not seems to be just the beginning of this new wave. The growth of standard living in China with the emergency of a middle class, an opening mind to the western cultures, the increase of direct flights between international destinations and China and facilities concerning visa process have enhanced this phenomenon. In 2014, China and United States have agreed to lengthen the visa validity short term for the business travelers, tourists and students with 10 years multiple-entry tourist visas.

 

 

China’s young rich travelers are in search of unique and adventurous travel experiences

 

 

The young luxury travelers have high standards when it comes to hotel choice. Personalized service is the biggest area of consideration when choosing a hotel, they also prefer hotel brands featuring “art and design that make the travel experience feel unique and fun,” while demanding high-tech digital equipment. Young Chinese travelers are also more likely to use digital platforms for their trip research, including official WeChat accounts, and word-of-mouth through Wechat friends, as well as Chinese travel booking sites—the three most popular are Ctrip, Qunar, and Tuniu.

 

 

According to data from market research group GfK, this group of consumers are more ‘hedonistic’ in their willingness to spend money to indulge and pamper themselves and slightly less price sensitive. They are looking for meaningful, adventurous and exciting experiences. They are technologically savvy and highly involved in sharing experiences on social media platforms. Brands need to understand the shift from an older organized tour traveler to a new world independent Chinese traveler

 

 

The four to six weeks before the trip is seen as a key time to engage them as they research, plan and book their trips. In the lead up to the Chinese New Year in February, for example, iClick Interactive worked with Michael Kors to help it promote a collection of Lunar New Year of the Monkey products to potential outbound Chinese consumers traveling to the UK, France and Italy.

 

 

While resorts in unique locations have ample opportunity to take advantage of the trend, luxury brands have also been coming up with creative in-store experiences in China and across the world such as special events and product customization. LVMH-owned DFS, which has locations in Bali and across the Pacific Rim, teams up with luxury brands to provide limited-edition items available only in a given location.

 

 

Tech-savvy Chinese tourists

 

 

The new Chinese tourist is digitally oriented, with 50% using mobile booking. When planning their trips, they rely less on travel agents and more on review sites and online accommodation booking, while 30% use social media. They also want to stay plugged in when they get to their destination—63% of all Chinese millennial travelers surveyed said that WiFi is a key amenity they look for in a hotel. This gets even more important as they get younger—among 18 to 20-year-olds, WiFi is important for 70%.

 

 

For the Chinese consumer, digital is key. In the past some luxury brands had the attitude that “we are luxury – we don’t do online” but no one would think that now. As more and more Chinese consumers research products from overseas, a globally aligned branding strategy is essential. Brands coming into China and positioning themselves as very high-end, can face consumer backlash and brand devaluation if products are discovered in home markets that don’t match that perception. Chinese consumers can now see where and how things are being sold overseas and this can undermine whole marketing strategies in China.

 

 

How to travel for free? Become a Chinese KOL

 

 

In China, KOL (Key Opinion Leaders) are very popular among cosmetics and clothes brands. But several travel agencies also had the good idea to offer free trips to stars or celebrities in exchange for them to post their holidays on social networks, including, why not, live broadcasting apps. A few years ago, Yaochen (a very famous Chinese actress) made the buzz by posting photos of her holidays in New Zealand. This led to a crave for the country never seen before.

 

 

Adventure tourism is the real symbol of this second wave of tourism

 

 

A lot more Chinese travelers are now repeat travelers and they’re looking for something more novel. Adventure tourism activities really don’t exist in China like they do elsewhere. Safety is also a top concern as Chinese are often more trusting of foreign adventure attractions following stringent guidelines than those closer to home.

 

 

New Zealand is the top destination for Chinese adventure travelers who can’t find many extreme sports or activities in their homeland. The country is known for outdoor activities transcending the intense sensuality of those in many other regions, albeit, Tourism New Zealand says adventure activities aren’t the most important factor for Chinese tourists making the relatively short hop to the destination. Between 14 and 19% of Chinese who plan to travel to the island nation rank adventure activities and adrenaline rushes as their top motivators.

 

 

In line with the growth in demand for exclusive “adventures”, the Polar regions are becoming particularly sought-after destinations for China’s luxury travelers. Other exotic long-haul destinations such Africa and the Middle East. This means the proportion of luxury Chinese tourists planning on visiting Hong Kong, Taiwan or Macau fell from 32% in 2015 to 19% in 2015, while the Southeast and South Asia regions saw their share decrease from 34% to 24% over the same period.

 

 

Independent Chinese tourists are often more confident and in control of their travel itineraries than previous types of Chinese tourists. And they are often more inclined to participate in adventure activities when they are abroad than when they are at home. Because of this, adventure activities are becoming more and more popular for Chinese globetrotters.

 

 

Adventures this new wave of Chinese tourists are looking for usually include:

 

 

  • Camping in secret spots. Chinese adventure tourists are looking for ways to experience well­-known destinations in an unusual way. As more and more Chinese tourists become repeat travelers, they will constantly be looking for somewhere more novel and intriguing to rest their heads.
  • Zip-lining over volcanos. Anything that can provide a dramatic view of the volcanic landscape and provide some GoPro footage.
  • Riding in a hot air balloon. A growing number of Chinese adventure­ seekers are looking for the best vessel to carry them to the highest heights and to be able to see landscapes from awe­-inspiring angles.
  • Abseiling or caving. For those Chinese tourists who are ready to take their adrenaline­-rushes to the next level, abseiling or caving in exotic locations like New Zealand and Australia are one of their top travel dreams.
  • Tubing, water sledging or river surfing.

 

----------------------------------

 

Michele Galeotto is an Italian creative with expertise in designing integrated communication strategies. Michele has worked with many forward thinking companies in China or engaging with China. In 2013 he started Design Hotpot, an online platform where he writes about the mushrooming creative industries in China.

 

Beijing reining in Capital Flight

Beijing reining in Capital Flight

China is reining in its record deal-making spree. According to Bloomberg, Chinese regulators will bar overseas investments of $10 billion and above, while leaving room for some strategic deals. They will also restrict overseas investments of more than $1 billion in industries outside a buyer’s core business, as well as foreign property deals of $1 billion or more by state-owned enterprises.

 

 

The moves come in the wake of unprecedented merger and acquisition (M&A) activity in the Asia-Pacific region led by China. So far in 2016, outbound deals by Chinese companies have doubled to $218.23 billion from last year. Chinese companies have been on a record acquisition spree, buying into everything from blood plasma to airline food. Most notable of which are:

 

 

Robot bartenders

Chinese home appliance maker Midea Group Co. agreed in May to the $4.5 billion purchase of Kuka AG, a German maker of industrial robots so nimble they’ve been used to mix cocktails on cruise ships. Kuka machinery also assembles Audi sedans and Airbus jets.

 

 

Clash of Clans

Tencent Holdings Ltd, the Chinese tech powerhouse led by billionaire Pony Ma, is making the biggest acquisition Finland has ever seen as it seeks to build up its universe of entertainment content. In June, Tencent said it will lead an $8.6 billion takeover of Supercell Oy, the Helsinki developer behind popular mobile games Clash of Clans and Clash Royale.

 

 

Lexmark inkjet printers

Chinese investors swooped in on Lexmark International Inc. after the US printer maker reported years of falling sales as it battled cheap ink refills and customers switched to digital documents. Apex Technology Co., a Shenzhen-listed maker of toner-cartridge parts, and PAG Asia Capital led a group in April that agreed to buy the Lexington, Kentucky-based company for $2.5 billion.

 

 

Blood plasma

Chinese drugmaker Creat Group Corp. agreed in May to spend $1.2 billion to buy Bio Products Laboratory Ltd, a supplier of blood plasma products that’s been around for more than six decades. UK-based BPL processes more than 650 tonnes of blood plasma annually from American donors and supplies its products to more than 45 international markets.

 

 

Delta airplane food

HNA Group Co. agreed in April to acquire airline caterer Gategroup Holding AG for about $1.5 billion, putting the Chinese company in charge of your meal if you’re flying Delta, United Airlines Inc. or Emirates. Frequent flyers should take note that HNA could also be carrying their luggage after it bought baggage handler Swissport International Ltd in February.

 

 

Online bingo

Billionaire Shi Yuzhu came up with a solution for Chinese gamers who find Vegas out of reach. A consortium led by Shi’s Shanghai Giant Network Technology Co. announced a $4.4 billion deal in July to acquire Playtika Ltd, which operates casino-style online games such as Bingo Blitz and Caesars Slots.

 

 

A lot of planes

HNA has averaged more than two acquisitions a month in the past year as the Chinese company expands its global aviation empire. One of its latest targets is CIT Group Inc.’s $10 billion plane-leasing business. The purchase will help HNA create the world’s third-largest aircraft lessor, with 910 planes valued at more than $43 billion.

 

 

AC Milan

China has been buying entry into the European leagues in a big way. A little-known Chinese investor group sealed an $830 million deal in September for Silvio Berlusconi’s famed AC Milan club, following the purchase of cross-town rival Inter Milan last year by another Chinese company.

 

 

A heap of garbage

Beijing Enterprises Holdings Ltd, which sells everything from beer to energy, is proving that one company’s trash is another’s treasure. The state-controlled conglomerate said in February it will buy EEW Energy From Waste GmbH, which incinerates garbage to generate power, for $1.6 billion. The deal is the biggest Chinese direct investment in a German company to date.

 

 

“So You Think You Can Dance”

Chinese property tycoon Wang Jianlin, who bought the producer of the Godzilla and Dark Knight film franchises earlier this year, is now expanding his influence into American television. Wang’s Dalian Wanda Group Co. said this month it will spend $1 billion to buy Dick Clark Productions Inc., the studio behind the Miss America competition and the hit show So You Think You Can Dance.

 

 

So, what is the underlying rationale behind the moves? According to experts, it is part of an effort by Chinese authorities to keep China’s money supply within China. A new SAFE (State Administration of Foreign exchange) directive to banks on additional exchange control last week, making it harder to convert RMB (Renminbi) into USD and invest in USD out of China, discouraging capital flight.

 

Besides M&As, the moves would also potentially impact fund-raising by private equity and venture capital funds.

 

Why China could lead the next phase...

Why China could lead the next phase of Globalization

Donald Trump is on his way to becoming the 45th president of the United States. Among his promises are a 45% import tax on Chinese products, the cancellation of the Paris climate agreement and, as was confirmed today, the end of the Trans-Pacific Partnership trade deal.

 

 

If he doesn’t go back on his plans for global trade and international affairs, Trump will give room to other nations to take the lead in shaping globalization. While the US might be taking a step back from the world – a world it helped to create, to a large extent – China in particular can be expected to take on a more prominent role.

 

 

While the US is currently the world’s largest economy, in purchasing-power terms China is expected to overtake it in 2016, according to the International Monetary Fund. China has benefited significantly from globalization. Over decades, it has invested in enhancing its capabilities and built economic links with many countries. It has become viewed as an important overseas partner and investor.

 

 

Something China understands very well is the importance of connectivity – and hence transport infrastructure – for economic growth and development. Its major development framework is the One Belt One Road initiative with its two pillars, the Silk Road Economic Belt and the 21st Century Maritime Silk Road. This development project involves a territory equal to 55% of global GDP, 70% of the global population and 75% of its known energy reserves. “The investments will involve about 300 projects extending from Singapore to Turkmenistan,” reports Reuters.

 

 

One building block of One Belt One Road – also known as OBOR – is the Regional Comprehensive Economic Partnership (RCEP). This China-driven alliance will comprise Australia, New Zealand, China, India, Japan and South Korea – as well as the ASEAN region. In 2014, ASEAN was the seventh-largest economic power in the world. It was also the third-largest economy in Asia, with a combined GDP of US$2.6 trillion – higher than all of India.

 

 

China on the world stage

On the African continent, China is lending billions towards large-scale infrastructure investments, again part of OBOR, and particularly in transportation. One of its flagship projects is the Standard Gauge Railway in Kenya. There’s also the development of deepwater ports in cities such as Dakar, Dar es Salaam and Djibouti. These are likely to become industrial hubs, following the model of China’s development of the new Cameroonian deepwater port of Kribi.

 

 

The Russian Trans-Siberian Railway (TSR) is at the origin of rail transportation between Europe and Asia. Recently Newsweek reported that Vladimir Putin may be envisaging a Hyperloop Silk Road. This could present an alternative to the planned construction of 64,000 kilometres of rail tracks that are intended to strengthen existing pathways between the east and west. CRRC Corp, China’s largest maker of railway equipment, was in talks for a potential investment in Hyperloop One, the company behind the idea.

 

 

Meanwhile, China is launching an $11 billion fund for Central and Eastern Europe, targeting investments in infrastructure and high-tech manufacturing, among other things, both in the region and beyond. Supply-chain operator DB Schenker started running weekly block trains between China and Germany as long ago as 2011. Four years later, the first train carrying containers from China arrived in the Rail Service Centre freight terminal in the Port of Rotterdam.

 

 

With the New Development Bank (NDB), the Silk Road Fund and the Asia Infrastructure Investment Bank (AIIB), China has prepared itself for responses to major financing needs – within and beyond the Belt and Road area. This shows some similarity with the Marshall Plan, the US support plan that helped to rebuild western Europe after the end of the Second World War.

 

 

With the US pulling out of the TPP, as Trump has indicated it will, China holds an advantage. The binding agreement, which connects Asian countries to North and Latin American nations, has been perceived by many as an obstacle to China’s reach and a way to solidify US alliances with other nations in the Pacific region. Other Asian countries with high export potential, such as Malaysia and Vietnam, are expected to benefit significantly from TPP, while countries that did not sign the agreement, such as the Philippines, risk losing out. This could have a disruptive effect on the region due to trade and investment diversion.

 

 

So far, China has faced scepticism and criticism for its international activities. Many have questioned its development in Africa, for example. But China could yet regain a level of moral authority; it could lead the global climate adaption effort if the US pulls away, for instance. It has already warned Trump against backing away from the Paris climate deal.

 

 

What’s in store for relations between the US and China? For a start, there may be tough negotiations over the US import tax on Chinese goods. If both nations find the right balance, they will not only avoid a global trade war, as in the 1930s when the implementation of the Smoot-Hawley tariff act intensified nationalism around the world, but they could also move their bilateral relations to new grounds.

 

 

Whatever happens, if the US pulls away from globalization, China stands ready to fill the gap.

 

 

Source: This article first appeared in World Economic Form 22/11/2016 and is reproduced here in its entirety.

 

 

A football revolution in China?

A football revolution in China?

On the shoulders of Marcello Lippi now rest the hopes of a billion-strong Chinese and their soccer-mad chief, President Xi Jinping, whose ambitions for soccer glory have fuelled a prodigal scramble to buy success. Recently appointed as China`s national team manager, Lippi is one of the most successful managers in history having led Italy to victory at the world cup in 2006. This is off the back of China struggling to qualify from the group stages having lost to the footballing giants of Uzbekistan and Syria. 

 

 

China is investing heavily both in the development of it`s domestic game and in international clubs. Italy's AC Milan and England’s Aston Villa, Wolverhampton Wanderers and West Bromwich Albion are all now in Chinese hands. Chinese firms have bought stakes in Manchester City and Birmingham City, and have expressed interest in Liverpool. Some $2.7-billion has been spent by Chinese acquirers on foreign clubs in the past two years alone.

 

 

So what is so appealing about Midlands clubs? Well, clearly it’s not success on the field. Only West Brom is in the English Premier League and it was the 1960s when they last won any trophies. It`s about the football culture.

 

 

Whilst coaches can be hired from abroad, national team players cannot. Money dose not buy results. Football isn’t built from the top down. You start with children barely able to walk and teach them the culture of football. For many Chinese parents of single children, the path to success lies not on the field but in the classroom. Educators view sport as a distraction and it is this culture that the sport will have to confront.

 

 

China is turning attention to its youth. It has drafted a 50-point “Chinese football reform and development program” which wants kids playing soccer in 50,000 schools by 2025. It is preparing thousands of local trainers and hiring hundreds of foreign coaches.

 

 

The Chinese team currently sit bottom of its group but there are enough games to turn it around and still qualify. This is of huge importance given the stated aim of Chinese Premier Mr Xi, to be a global football superpower by 2050. 

 

 

Demographic gold: changes for the countr...

Demographic gold: changes for the country’s growth model

A new breed of workers is emerging in China, and this time it’s all about quality – not quantity.

 

 

For decades, China’s economic growth has been underpinned by a ‘demographic dividend’ in the form of an ample supply of labour. Today, this growth model is very much under threat. Wages are rising and there are labour shortages, largely the result of China’s decades-long one-child policy.

 

 

Many countries have experienced declining birth rates as their economies have developed, but the speed and magnitude of China’s demographic transition are unprecedented in world history. The UK took about 200 years to complete its demographic transition to low birth rates, and the US took 140 years; in contrast, China’s transition took only about 30-40 years. China has had the biggest surge in college-educated people in human history.

 

 

When China announced it was ending its one-child policy last year, in response to an ageing population, it was headline news around the world. But the truth is its ageing population problem already poses a threat to future growth and we think, relaxing the one-child policy is unlikely to have much impact on reversing the trend. Instead, future growth in China is likely to come from the educated population currently emerging.

 

 

China has had the biggest surge in college or university-educated people in human history. In 2010 only 3.9 per cent of its working population had a degree, compared with an average of 29.6 per cent in OECD countries. By 2015, the number of higher education graduates reached 7 million, almost eight times the figure in 1999, and up from 1 million in 2000.

 

 

Moving to high-end manufacturing

By 2030, estimates suggest more than a quarter (27 per cent) of China’s workforce will have a college degree, similar to the level in Germany, France and the UK. With the world’s biggest pool of educated labour – around 220 million by 2030 – China will be well positioned to compete in high-end manufacturing (such as aerospace and new energy) and modern services (such as finance & the creative industries), opening up vast potential for future growth. The surge in supply of skilled labour should support future growth in China. Standing in the way, however, are the country’s socioeconomic structures, which were designed to suit China’s old demographic profile.

 

 

An industrial upgrade is urgently needed to provide the fast-growing population of skilled workers with sufficient job opportunities. According to a study by Peking University, 49 per cent of college graduates in 2014 chose working in the government sector as their first option, partly because of the lack of opportunities in the private sector. A disproportionate number of China’s manufacturing firms still use old technologies suited to unskilled workers.

 

 

New growth model

Adopting skill-intensive technologies would allow companies to take advantage of the increasingly educated workforce and move to higher-end manufacturing, which generates wider profit margins and, importantly, jobs for the increasing number of new graduates.

 

 

There are widespread doubts about whether China can maintain high growth in the coming decades, especially against the backdrop of extreme bearishness globally. China is becoming less competitive in low-skilled manufacturing but a growth model of higher-end manufacturing will give the country its competitive edge in the next decade. And when you think about what China achieved with its unskilled workforce, imagine what its skilled workforce will deliver.

 

 

How Can China Develop & Sustain a Prospe...

How Can China Develop & Sustain a Prosperous Creative Sector?

By Kiran Patel for China Brain.

 

Background

Driven by the 13th Five Year Plan, Germany’s Industrial blueprint of Industry 4.0 and the government policies of Made in China 2025 and Internet Plus, China is embarking on an exciting journey into the New Industrial Revolution. The 4th Industrial Revolution in China will be driven by policies of innovation, consumerism and efficiency while at the same time maximizing transition towards high-tech, high-yield and low pollutant initiatives. Industry 4.0, Made in China 2025, Internet Plus and the creation of an Internet of Things (“IOT”) have become the key economic triggers of China’s long-term economic strategy. In defining the evolution from ‘Made in China’, to ‘Designed in China’, ‘creativity’ and ‘Innovation’ are the buzz words of President Xi’s administration. When examining China’s potential to develop and sustain a creative innovative economy, it is important to take a step back from the pre-conceived notion of cheap ‘Made in China’ knock-offs and occasionally maligned Intellectual Property (“IP”) practices. From the 4 Great Inventions of yesteryear fast-forwarding to present day innovative and practical mobile shared economy applications such as DidiDaChe, Alibaba’s incredible service integration of E-Commerce, Logistics and Financial Services and integrated ecosystem m-commerce and social media platforms such as WeChat, China certainly possesses a culture of continual innovation and execution.

 

 

With China expected to exceed well over 700million netizens by the end of 2016 and exhibiting phenomenal potential for further growth and penetration, the possibilities for creative sector growth are vast. In addition, possessing a burgeoning Urban Middle Class with growing disposable incomes that have risen to around 27,000 CNY per annum on average according to the National Bureau of Statistics and an incredible appetite for technology and innovation both in terms of products and services among consumers, China is ready to embark on its second economic miracle, with creativity and innovation forming the bedrock. However with such rapid development and exciting opportunities for China and businesses operating within the scope of the key focus areas of the new economic policies of the Xi Jinping and Li Keqiang administration come two caveats.

 

 

Firstly, how can China develop and sustain a society that encourages creativity and innovation to thrive and thus, drive forward a long-term and ultimately sustainable innovation economic vision?

 

 

Secondly, what role if any can innovative Foreign Invested Enterprises (“FIEs”) play in this transition and does the business environment allow for success in the market?

 

 

This article will examine the key drivers towards how China can successfully develop its creative economy and transform it into that of an innovative world leading one, to match its GDP and global economic strength, while also showcasing the key areas of opportunity for FIEs.

 

 

Part I: Building a Platform for Success

Why Evolve?

China’s previous growth model which was tremendously successful is starting to decline due to a weakening demand for exports particularly in the US and Europe, overcapacity and high-levels of pollution. Faced with these key challenges, China has embaked on a journey of economic reform directly linked to innovation policies as the stimulant for sustainable economic growth. The 13th Five Year Plan through its 5 Key Tenets of ‘Innovation’, ‘Coordination’, ‘Green Growth’, ‘Opening Up’ and ‘Inclusive Development’ has laid the blueprint for delivering this new economic vision.

 

 

China’s Current Global Innovation Index Ranking

Currently, according to The Global Innovation Index (16th September, 2016), China while having consolidated its position as the 2nd largest economy in the world ranks 29th in the world behind Slovenia, Malta, Estonia and the Czech Republic. China does not rank amongst the Top 3 Innovation performers in South East Asia (which are ranked in order; Singapore, Hong Kong and the Republic of Korea).

 

 

Fig 1 - Global Innovation Index (Sept 2015) Innovation Quality (Source: The Economist)

 

 

Fig 2: Global Innovation Index, (Sept 2015) Middle Income Countries (Source: The Economist)

 

 

Ranking is based on 3 key criteria: Average rating of top three universities, Number of patents filed per unit of GDP, Cited articles as % of published articles.

 

 

In the ‘Innovation Quality’ category, while China leads the ‘Middle Income Innovation Quality’ category by some distance ahead of Brazil and India taking into account the average ranking of the Top 3 universities, number of patents filed per unit of GDP and cited articles as percentage of published articles, China still ranks far behind ‘High Income Nations’ (Ranked in order: USA, UK and Japan). In a perfectly geared innovative world, China according to the research conducted within The Global Innovation Index would be a global pillar of Human Capital and Research due to the excellent performance of pupils in literary and numeracy skills. The findings of The Global Innovation Index report conclude that in order to successful enact the transition to a creative and innovative economy; China is progressing forward to achieve its undoubted potential.

 

 

Creative Industries in China: The Opportunities

Creative sector industries can be defined as per the visual below. China possesses a rich culture to act as the creative economy catalyst and has significant potential for growth across these highlighted areas, therefore illustrating the great economic benefit that development of a creative economy can hold as China embraces further economic reform.

 

 

The Key Elements for Building a Prosperous & Sustainable Creative Sector

Navigating the transition from a manufacturing economy to a knowledge economy is the key goal of China’s economic shift however development of a prosperous and sustainable creative sector driven by world-class innovation and entrepreneurship is a fundamental component of this process.

 

 

The Oxford dictionary defines creativity as “The use of imagination or original ideas to create something; inventiveness. Bringing into existence! Giving rise to, being imaginative and creative.”

 

 

Creativity is the essence of effective business, whether through creative product and service innovation or generation of creative solutions around a negotiation table. All industry sectors and industries require creativity and innovation at some stage.

 

 

The following elements are the key areas that constitute a prosperous and sustainable creative sector:

  • Education
  • Culture
  • Representation
  • Sector Diversity
  • International Mind-set

 

 

Education

From grass-roots education to professional practice in the real world, education forms the backbone for the evolution of a creative sector. Creativity and kinaesthetic activities should stand on equal footing with literacy and arithmetic in order to drive forward the creation of innovative thinking within China’s creative leaders and innovators of tomorrow. Successful creative economies such as the UK and US have achieved a balance between these three key areas. China’s education system is largely traditionalist, however the education sector is seeing patterns of reform and an increase in demand for extra-curricular creative activities and it will be of interest to view how government policy on education evolves.

 

 

Culture

Culture is the heartbeat of a creative and innovative society and this is an area that holds great potential for China. With a rich history and culture, the opportunities for China to showcase it are immense. Creation of Creative Industry Clusters in Beijing such as 798, Shangdi, Tech Parks such as the Zhongguancun Science & Technology Park and events such as Beijing Design Week are vehicles to leverage creativity and innovation as forces of economic growth.

 

 

Representation

A sustainable creative sector in order to thrive requires strong representation and networks through government vehicles both internally and externally.

 

 

Sector Diversity

Sector Diversity is brought about through creation of a multidisciplinary diverse creative industries sector that promotes cross-fertilisation of people across a wide range of expertise and skill areas as illustrated in the table below.

 

 

International Mind-set

The 2008 Olympics and 2010 World Expo in Shanghai created a two way transformation of perceptions as to how China viewed the West but perhaps more significantly, how the Western World viewed China. These key events also significantly enacted a mind-set shift throughout Chinese society. As Chinese enterprise continues to expand and diversify its reach into new markets and industries and developing new innovative technologies to export, an international mind-set has become an increasingly important characteristic for creative talent. Alibaba’s successful brand expansion into new creative industries and international growth can in part be attributed to Jack Ma’s ability to communicate and engage with the international business community, exuding that precious creative commodity of soft power.

 

 

Can China’s IP Protection Environment Incubate Creativity?

IP is a common buzzword but it is an idea that is the result of a creative process that when registered, transforms into an asset that can be exual Property protection environment can be argued as having obstructed the growth of domestic innovation which has an impact on both Chinese and Foreign Invested Enterprises. With China’s focus shifting towards innovative economic drivers, both Foreign and Chinese firms will require stronger protection of their IP. The signs are encouraging however. There is greater flow of IP in China both from domestic and from foreign invested enterprises than ever before.

 

 

Fig 3 below shows the rapid rise in the filing of utility, design and invention patents between; 2002 – 2012

 

 

Patents Issued by China, 2002-2012

In 2015, 1.1 million patent applications were filed, up 18.7 percent year on year, according to figures from the State Intellectual Property Office (SIPO). About 359,000 invention patents were authorized, 263,000 of which were granted to domestic applicants, 100,000 more than in 2014. SIPO figures also indicate that in 2015, 60.5% of invention patents went to Chinese enterprises, demonstrating a 4.1% increase. With Innovation being one of the 5 key tenets of the 13th Five Year Plan, authorities have rolled out favourable policies to support high-tech companies and encourage investment into research and development, which to date have been successful.

 

 

Part II: Opportunities for Foreign Invested Enterprises in China’s Creative Economy

The development of the Creative Economy as a powerful economic driver has opened up a number of opportunities for FIEs across a number of sectors. The below section highlights these potential growth areas:

 

 

Music, Film & TV

Since the Chinese State Council took the decision to open up commercialisation of the creative sector in 2009, particular focus has been made on the film and television industry, publishing and distribution, printing, advertising, entertainment, cultural exhibitions and digital content. Since the promulgation of the “Cultural Industry Revitalisation Plan” in 2009, China has sought to exercise controlled growth specifically concerning the television industry whereby restrictions have been placed on the export of TV programmes and formats in order to ensure that Chinese broadcasters remain competitive. With the new economic policy direction of China through the 13th Five Year Plan, Made in China 2025 and Internet Plus, funding has been allocated to developing key innovation sectors including entertainment, live music, animation and digital games, TV, film production and distribution, publishing, cultural exhibitions and internet media. Education institutions have established research centres and regional governments have set up city specific plans for developing the creative economy.

 

 

Fashion Design & Retail

China’s growing middle income consumer demographic has created a demand for global fashion brands to continue retail expansion into China. Alongside this, boutique ateliers and independent designers also have an opportunity to export product and sell to a thriving new market. With the changing lifestyles and habits of China’s ‘Middle Income Consumers’ transitioning from being traditionally brand led to quality led, a different approach is needed in order to successfully achieve market penetration. According to a recent study by McKinsey, China’s Middle Income Consumer demographic has seen their disposable income rise to between GBP 6,000 to GBP 23,000 per year in 2015, making this segment an important consideration for FIEs in this sector. In addition, the much-discussed '80后' (post-1980s) demographic in China consists of the 240 million people born between 1980 and 1990. With unprecedented access to technology, consumer goods and social media, understanding what drives their buying decisions is also of great importance. Chinese companies have yet to successfully enter the premium market and foreign companies still dominate the skincare, premium car, sports apparel and fashion sectors, illustrating that FIEs maintain a very competitive proposition for China.

 

 

E-Commerce & M-Commerce

It has been estimated that by 2018, China will surpass the United States as the largest market for cross border e-commerce. Approximately 88.9% of Chinese users access the Internet from smartphones. With the growing use of internet and smartphone technology to make purchases, companies should look towards strategically leveraging the largest e-commerce market in the world. It has been predicted that China’s e-commerce market will reach GBP 3 Trillion by 2020. This is larger than that of the US, UK, Japan, Germany and France combined. This is not restricted to 1st tier cities. Tier 2 cities according to a Jan 2016 survey by The Economist Corporate Network and Admaster have overtaken Tier 1 cities in terms of purchases made on mobile devices. Member companies in the retail sector particularly should pay close attention to leveraging a localized and optimised website, social media, CRM tools and digital advertising to engage the market. Foreign brand-based companies should either focus on developing their own sites to increase traffic or establish relationships with Chinese e-commerce platforms such as JD, Taobao and T-Mall.

 

 

Professional Services (Legal, Financial, Marketing & PR Agency Services)

The Professional Services sector is extremely diverse and carries substantial opportunity for FIEs to prosper within China’s creative economic boom. The demand for financial and legal services will remain buoyant in light of the growing need for protection of IP and patents, which form the backbone of a sustainable creative economy. Aligned with this, we have seen growing M&A activity in the sector as China continues to reach outbound and diversify its investment portfolio into successful global creative sector enterprises. This facilitates the need for financial consulting and accountancy services in tandem with legal services. As Chinese companies continue to expand overseas and integrate more with the wider global economy, effective communications, PR and brand management, as well as the necessary soft skills, will only grow. FIEs therefore operating in this area of professional consultancy services are therefore strongly positioned to enable Chinese businesses to innovate and grow beyond borders.

 

 

Architecture

With the population ratio of Chinese living in cities expected to hit 60% by 2020, development of infrastructure will remain firmly on the government’s agenda. Coupled with this, the 13th Five Year Plan directive of ‘Green Growth’ will ensure that foreign architects and consultancy firms will remain competitive, especially concerning Smart City and Sponge City initiatives. In February 2016, the State Council released a new set of directives focused on the promotion of environmentally friendly urbanization. This will create opportunities for foreign architects and urban planners to export experience and best practice for utilization of green space, creation of mixed use developments, preservation of historical buildings and energy efficient initiatives. Beijing will also host the 2022 Winter Olympic Games, thus maintaining market opportunity for foreign invested architecture firms with a world class pedigree and track record in sports facility and related infrastructure developments.

 

 

Cultural Arts, Leisure & Entertainment

The emergency of a thriving creative industry in China has led to a boom in the cultural arts driven by growing scale of economy and professionalism. The role of foreign enterprises to play in this area is particularly strong commercially and politically with plenty of political capital to be gained through ‘soft power swaps’. The export of cultural initiatives such as museum exhibitions, performing arts and literature, Film & TV and sport remain powerful opportunities for foreign invested enterprises to leverage in tandem with the opportunity to not only succeed commercially, but significantly also build cultural bridges with China.

 

 

Computer Science Technologies

Made in China 2025 and Internet Plus will integrate both industry and Information Technology to form an Industrial Internet. This will open up further opportunities for FIEs in the creative economy for export of automation software in manufacturing and construction. IOT evolution in the Internet Economy will lead to demand for big data and digital marketing services, cloud computing, shared economy and a number of online consumer services. 

 

 

The growth potential of the ‘Industrial Internet’ through linking manufacturing with IOT technologies is strong. In order to make this possible, the Government will be launching fiscal and tax policies to help these industries grow and therefore enabling a sustainable environment for both domestic and foreign invested FIEs to evolve within the Internet Economy.

 

 

In terms of leisure services, digital publishing, internet gaming, software and mobile application development also remain strong opportunities for FIEs focusing on partnership through the creative economy.

 

 

Summary

Looking ahead, these are exciting times for the Chinese Creative Sector and for the foreseeable future FIEs still have in important role to play in the development of the creative economy across a variety of sectors as outlined. In order to move further up the creativity value chain and enable construction of a sustainable creative economy, China is seeking creative partners from abroad through which to deliver upon its need to innovate while at the same time building up its own competencies domestically.

 

 

As the 2nd largest economy in the world, with a final ranking of 29th in the 2015 Global Innovation Index, there is therefore substantial potential for continued growth in the creative sector and for FIEs to add value.

 

 

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Kiran Patel has been living in China since 2004 and is currently the Marketing & Communications Director of LehmanBrown International Accountants, a China focused accounting, taxation and business advisory firm. He is also an elected Executive Committee Board member of the British Chamber of Commerce in China.

China’s rebalancing spells changes...

China’s rebalancing spells changes for African trade.

The impact of structural reforms in China coupled with the fall in commodity prices are now being felt in global markets, especially so in resource-rich African economies. Sub-Saharan African economies in particular have been overly reliant on Chinese resource demand for their economic performance. Over the past 15 years, China has become Africa’s largest trading partner and an interdependence or “growth coupling” has become very evident.

 

 

This slowing demand can be seen over the last two years in terms of the value of African commodity exports, amplified by the fall in global commodity prices. In the first quarter of 2015, the value of crude oil imports from Africa was 50% less than it was in Q1 of 2014. In addition, iron ore imports contracted 55% in value terms, while copper imports from the continent slid 39%.

 

 

Nonetheless, China continues to be a key driver of global economic growth, and the recalibrations in its economic makeup will certainly test the resilience of its economy, as well as redefine the commercial relationship and terms of engagement of this Asian giant with key commercial and trading partners, including the African continent.

 

 

Which African countries will be impacted the hardest?

In 2015, almost 80% of China’s crude oil imports from Africa came from Angola, Republic of Congo, Sudan and South Sudan – with Angolan exports making up 61%. Crude oil exports from Equatorial Guinea and Nigeria account for 5% and 3% respectively.

 

 

In iron ore, 95% of Chinese imports from Africa came from three countries – South Africa (62%), Sierra Leone (21%) and Mauritania (12%). Around 73% of South Africa’s total global iron ore exports were absorbed by China, illustrating the country’s exposure to a Chinese slowdown.

 

 

And in copper, 87% of Chinese imports from Africa originated from Zambia and the Democratic Republic of Congo (DRC), with a further 7% from South Africa. Roughly 40% of Zambia’s total copper exports were absorbed by China, 42% for the DRC, and near 60% for South Africa.

 

 

Despite slowing growth, the Chinese government and private companies will continue their long-term strategic geopolitical relationships and investments across the continent. China is invested in African nations for the long term especially in relation to infrasturcture construction.

 

 

Whilst a sizable funding commitment was announced at the sixth Forum on China-Africa Cooperation (FOCAC) to create a US$10bn China-Africa industrial capacity cooperation fund to support investments into value-adding sectors including manufacturing, hi-tech, agriculture, energy and infrastructure by Chinese firms in Africa. It is evident that African nations must rebalance their economies as China dose and a new growth model must be found in the near term. African businesses will need to refocus their value proposition for doing business given China’s own internal recalibration.

 

 

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