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The Ultra-Wealthy Chinese Youth Redefine Their Perception of Luxury.

The Ultra-Wealthy Chinese Youth Redefine Their Perception of Luxury.

The privileged youth of China now perceive luxury in a more nuanced manner. The ultra-wealthy under the age of 40 approach wealth management, investment, and heritage preservation differently from their predecessors.

 

hina's growing wealth is a topic frequently discussed, often associated with a booming economy, a rapidly expanding middle class, and an increasing number of billionaires. According to the latest Global Wealth Report for 2023, China ranks second in terms of Ultra-High-Net-Worth Individuals (UHNWI), defined as those with assets exceeding $100 million, making up 10.5% of global millionaires, totaling 32 910 ultra-rich individuals by the end of 2023.

 

 

However, it's the rise of the new ultra-rich Chinese generation, also known as Fu er Dai (富二代: 富Fu = rich; 二代er Dai = second generation), that's garnering attention. "Compared to luxury consumers in Europe or the United States, the Chinese are much younger. In fact, 80% of Chinese luxury clientele are under 45 years old, whereas in the United States, consumers under 45 make up about 30% of the luxury clientele, and this proportion is even lower in Europe," explains Oscar Sand, CEO of L'Atelier Peony by OSCAR, an expert in luxury marketing and the Chinese market. According to a jointly published report by China Merchants Bank and Bain & Company on private wealth in China in 2021, 42% of High-Net-Worth Individuals (HNWI) with assets exceeding 10 million RMB, approximately $1.4 million, are under 40. China is home to 5.2 million "wealthy families" with assets of 6 million RMB, of which 2.11 million have assets of 10 million RMB, and 138 000 exceed 100 million RMB in wealth. According to the Hurun China Wealth Report 2022, these families will pass on 19 trillion RMB ($2.64 trillion) to the next generation over the next ten years. Currently, their total wealth stands at 164 trillion RMB, with 40%, or 67 trillion RMB, attributed to them.

 

The "Fu er Dai" are products of a globalized world

 

The previous generation of ultra-rich Chinese often accumulated wealth through traditional businesses and manufacturing, but the new generation is different. The "Fu er Dai" are products of a globalized world, influenced by technology and digitalization, and they have grown up seeing China rise as a global economic powerhouse. Many have been educated abroad, in prestigious universities, and are often bilingual or trilingual, with a global perspective on business and culture. Their approach to wealth management, investment, and heritage preservation is distinct from that of their parents. According to Oscar, "The older generation is more interested in real estate and tangible assets, but the younger generation no longer sees real estate as the most reliable investment for wealth generation; they are turning to new means and technologies." Young, ambitious, and born in the digital age, these consumers represent a new era of wealth and prosperity.

 

In the face of unprecedented abundance and opportunities, what are the aspirations, preferences, and investment strategies of this new generation of wealthy Chinese?

 

In China, the era of 'Experiential Capital' is now dominant

They approach the concept of luxury in a way that goes beyond mere material possessions. Luxury is a multidimensional experience beyond five-star hotels and designer brands; it encompasses a superior quality of life, spiritual well-being, and positive social and environmental impact. Haonan Chen, a student at Glion Institute of Higher Education and an entrepreneur and investor in his spare time, shares," For me, wealth is not just material pleasure, but also self-recognition, self-satisfaction... and fulfilling my social responsibility." Wealth is perceived not only as financial capital but also as ''experiential capital.'' They often associate wealth with self-fulfillment and a balance between personal and professional life. Wilson Wong, CEO of CBWells Group, explains, "Wealth is all the value in the world that I can absorb in my lifetime. Of course, I value material possessions, but I value experiences even more. I consider myself a person rich in experiences.

 

As for luxury, it has evolved to become a more inclusive and personal concept. Luxury can mean acquiring branded goods and unique experiences like luxury travel or private dinners with Michelin-starred chefs. It can also involve investments in contemporary art, enriching life experiences such as stays in exotic destinations, an appreciation for contemporary art, or pursuing sustainable investments. Haonan invests heavily in contemporary art and places great importance on travel and experience: "I take sabbatical years to explore life and enrich it with limitless possibilities. For example, I plan trips around the world to discover different lives and connect with myself. My passions are travel and staying in different hotels. When I do, I usually stay in a city for about two weeks to immerse myself in the culture, art, and cuisine. A positive approach to life brings me happiness."

 

While some gravitate towards a lived luxury, others preserve the collector's and material aspects while integrating the experience. "I am a big collector of wines and cigars," says Wilson. "I currently own more than 50,000 bottles of wine in my personal collection, some dating back to 1727!"

 

The concept of legacy is evolving

Ultimately, for some, luxury is closely tied to sustainability and ethics, reflecting their personal values. In an interview, Li (name changed to protect anonymity) emphasizes the importance of sustainability and legacy for the new generation: "In China, we are very attached to our descendants; people want to pass something on to their children. For my parents' generation, it was about real estate, money, or tangible assets. I don't think those are the most important things for my generation. Sometimes, I devote myself to something, and I like to think it will leave a legacy or have lasting value for our society." Luxury is thus redefined as a complex mix of personal choices, cultural experiences, and global responsibilities.

 

Chinese culture and family traditions undoubtedly influence the new generation of ultra-rich Chinese who perceive and interact with luxury. Historically, Chinese culture has valued frugality, family, and education as central aspects of life. However, with China's rapid economic ascent and increased exposure to global influences, these affluent young individuals are developing a hybrid perspective on luxury that incorporates both traditional values and modern aspirations. "Due to our culture, because we are a collective culture society, our social norms are of great importance and influence our consumer behavior significantly," adds Oscar. "That's why we used to pay much more attention to the value of things than self-expression or personal preferences in the past. But everything is evolving and changing. The younger generation includes more consumers who aspire to a certain form of well-being and attach more importance to experiences that align with their aspirations."

 

Influenced by a global education, the new generation has redefined luxury as a quest for self-fulfillment and social responsibility rather than mere ostentation. While deeply rooted in traditional Chinese culture and values, these "Fu er Dai" are products of rapid globalization, international education, and constant exposure to diverse cultural influences. This redefinition of luxury is a trend that offers opportunities for brands and businesses ready to understand and respond to these shifts. The impact of international education on this privileged youth promises to reveal even more unexpected facets of the profound changes occurring among the ultra-rich today.

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By Fanny Tang for The Luxury Tribune

 

 


 

 

Hurun Largest Foreign & HK/Macao/Taiwan...

Hurun Largest Foreign & HK/Macao/Taiwan Companies in China 2022.
The Hurun Research Institute released the Hurun Largest Foreign & HK/Macao/Taiwan Companies in China 2022, a list of those 100 foreign & HK/Macao/Taiwan companies with the greatest contribution to China's economy, based on their sales and the number of employees in China. This is the second year of the list.
 
 
 
Between them, the 100 Hurun Largest Foreign & HK/Macao/Taiwan Companies in China had sales of US$1tn in China last year, equivalent to 7% of China's annual GDP, with an average annual sales of US&10.6bn per company. They had just under 3 million employees in China, with an average of 30,000 employees per company. 59% are direct-to-consumer and 41% are B2B businesses. 81% sold physical products and 19% sold software or services. The automobile, consumer goods, healthcare and consumer electronics sectors led the list, accounting for nearly half of the top 100. The average age of the 100 companies is 92, and they have a history with China of 55 years on average.
 
 
These 100 foreign & HK/Macao/Taiwan companies have made a significant contribution to the China economy, with sales last year totaling US$1tn in China, equivalent to 7% of China's GDP. They had just under 3 million employees in China. In particular, the four major industries - automobiles, consumer goods, healthcare and consumer electronics - contributed the most. Europe (44%) and the US (36%) continue to dominate the list with 80% of the companies listed. The sector composition is relatively steady but with notable movements in chemicals (+2 companies), semiconductors (+2), healthcare (-2), and consumer (-2).
 
 

The key take-aways from the list are:
 

  • Total sales among the top 100 FIEs in China reached $1 trillion in 2021 or the equivalent to 7% of China's GDP.

 

  • 59% of companies sell direct to consumer with 41% selling to business. 81% sell physical goods with 19% selling software or services.

 

  • Hon Hai Precision (Foxconn) maintains first place on the list with revenue of over $100 billion. VW and Apple sit in second and third respectively. VW sold 3.3 million vehicles in 2021 while Apple holds a 25% market share for phones in China. The highest-ranking British company is HSBC which sits in sixth place.

 

  • In terms of how many companies make the list, the UK sits in joint second place with Japan on 14 companies with the US way out in front at 36 companies.

 

  • 44 of the top 100 are from Europe (and yes, the UK is included in this number).

 

  • The average number of employees among the top 100 FIEs in China is 30,000 with close to 3 million in total.

 

  • Automotive sits top of the sector chart with 16 companies followed by consumer (12) and healthcare (12).

 

  • The sectors with the highest number of new additions are chemicals (+2) and, perhaps surprisingly, semiconductors (+2). The sectors which saw the biggest drops were consumer (-2) and healthcare (-2).

 

  • The companies to make the top 100 which entered China most recently are Tesla (2012), AMD (2004), Qualcomm (2004), JLR (2004), Tokyo Electron (2002), and Uniqlo (2002). AMD, Qualcomm, and Tokyo Electron all sit within the semiconductor sector.

 

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Source: Hurun.net

 

Snapshot of China’s Pet Food Industr...

Snapshot of China’s Pet Food Industry.

China's pet food industry is developing rapidly. Staple food account for 75% of the pet food market. With the continuous expansion of the market size of the pet-related industry and the upgrading of consumers' scientific pet-keeping ideas, both the brands and categories of the staple food industry are upgrading. Based on product forms and functions, the staple food for pets has four development stages and it's now in stage 2.0 in China.

 

Penetration rates of families with pets and pet food affect the market size of the pet food industry. The pet food market in China has reached 133.7 billion yuan, of which cat food market and dog food market reached 52.7 billion yuan and 66.7 billion yuan, respectively . It is expected that by 2025 the pet food market size will reach around 241.7 billion yuan.

 

Due to the adjustment of dog management regulations, the pandemic prevention and control methods as well as other objective factors, the number of dogs is expected to experience negative growth in 2021. Since cats can be kept at home, they have a growth rate than dogs . The monthly spending on cats is also than that on dogs, and the gap is expected to be larger and larger.

 

Thanks to their constantly improving product power,  brand power, and supply channels, Chinese domestic companies are increasingly competitive. iResearch has found the key elements for Chinese brands' fast growth and analyzed the outstanding companies.

 

Due to their production area, channel strategy, R&D investment and leading categories, overseas brands have their unique product advantages. Thanks to their historical accumulation and long-term deep cultivation of the Chinese market, foreign brands have formed brand power to carry out international operations.

 

Pet Food Investment Views
 
 

Foreign brands have developed for a long time in the Chinese market and Chinese domestic brands are catching up.

 

Market Size and Forecast of the Pet Food Industry in China 

 

 

The Chinese pet food industry is developing quickly.

Chinese people are increasingly willing to keep pets. More and more Chinese are regarding pets as their family members, friends, and partners.

 

In 2021 39.1% of families in the first and second-tier cities have pets. The number of pets has increased.

 

As the staple food for pets is developing from stage 2.0, pet food, to stage 3.0, natural food, pet owners are increasingly willing to buy pet food. With rising awareness and changing market stages, more money is spent on pet food. The rising number of pets, together with the increasing pet food consumption amount, contributes to the growth of the pet food market.

 

Market Size and Forecast of the Pet Food Industry in China 

 

 

The popularization of scientific pet keeping drives the development of the nourishment market

As more pet owners learn to keep pets in a scientific way, they have a deeper understanding of the nutrition needed by their pets. They gradually learn about and accept nourishment, which is a daily consumer good. The nourishment can satisfy pets' daily nutritional needs while preventing diseases. The CAGR of the nourishment market is expected to be 22% from 2021 to 2025, while the CAGR of the pet food market will be only 16% during the same period of time. The penetration of nourishment is expected to keep growing and its market size will hit 34.8 billion yuan in 2025.

 

The CAGR of the pet snack market is expected to be lower than that of the nourishment market. Without clear product classification standards and diverse product forms, pet snack, which is consumer discretionary, is easy to be replaced by staple food and nourishment. It is expected that the CAGR of the pet snack market from 2021 to 2025 will be 6% and the pet snack market size will hit 21.8 billion yuan in 2025.

 

Brands in the Pet Food Industry

 

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Source: IResearch Global

 


 

 

Case Study: Uniqlo’s Success in China

Case Study: Uniqlo’s Success in China

Uniqlo can teach luxury brands a thing or two. Not only did the Japanese casualwear company overcome strong headwinds from the closing of operations in Russia and the weakening of Japan’s currency, but it also outclassed more established rivals and local players. 

 

The reactive risk management approach embraced by most retailers has forced many of them out of business during the pandemic. But in a market that has brought Everlane, Selected, and Urban Outfitters to their knees and canceled a giant like H&M, Uniqlo has continued to win over the young, trendy Generation Z and connect with new consumer segments.

 

 

Breaking into the Chinese fast fashion market is especially challenging for global brands. Such clothes continue to be widely available in the domestic market and homegrown direct-to-consumer e-commerce outfits like Shein have become behemoths by leveraging social media and manufacturing disposable, trendy, and cost-friendly clothing. Nevertheless, Uniqlo has appealed to consumers’ sensibilities and emotions and won the local market.

 

Currently, it operates a staggering 869 doors in China and, counter to the global trend of shop closures, the Japanese retailer has launched an aggressive store expansion plan in the country. Only this month, Uniqlo plans to inaugurate 20 new brick-and-mortars, covering Yunnan, Sichuan, Anhui, Zhejiang, and other provinces. Uniqlo will also inaugurate its first new footprints in Shengzhou, Yueqing, and Yongkang in Zhejiang, Huainan in Anhui, and Jingmen in Hubei. Two additional Shanghai stores will be opened on June 24.

 

Why does Uniqlo prosper while other fast fashion brands fail? Here’s what luxury can learn from the Japanese titan and how it works wonders in the mainland.

 

 

Vertical integration

Geopolitical conflicts and COVID have disrupted access to supply chains and served an important lesson on the importance of vertical integration. While outsourcing raw materials and moving manufacturing to workshops and ateliers in emerging markets, several brands have opened themselves up to substantial risks — reputational crisis, delays, cancellations, increased costs, and so on. Conversely, a luxury label like Hermès which is vertically integrated (having in-house tanneries, production sites, and its own crocodile ranches in Australia) has shown little wear from the pandemic.

 

In the most literal sense, Uniqlo is a vertically integrated organization having full control of supply chain processes. This gives Uniqlo a competitive advantage over its rivals, as it can reduce the per-unit cost and achieve greater quality control. Elsewhere, all the R&D processes and innovations are kept in-house; thus, Uniqlo can trademark its technical fabrics.

 

 

Prioritizing technology over retail

Tadashi Yanai, founder and chief executive of Fast Retailing, which owns Uniqlo, has said in the past, “Uniqlo is not a fashion company, it’s a technology company.” Similar to how Chow Tai Fook is more than a jewelry company, Uniqlo uses advanced technology including AI and blockchain to make the shopping experience seamless

 

Instead of manufacturing low-priced, trendy clothes like Shein or knock-offs of famous designer garments like Zara and H&M, Uniqlo offers technical garments with universal appeal. In the past, the group has developed branded sustainable, high-tech performance fabrics like HeatTech, AIRism, 3D Knit, UV Cut, and LifeWear.

 

Time and time again, technology is used to monitor production and transform supply chain management. For instance, last spring, Uniqlo announced it would bring an automated-warehouse network into China. In addition the company has experimented with tech-enabled kiosks and emphasized in-store tech like UMood: a wearable technology which suggests garments according to the consumer’s frame of mind.

 

Collaboration and personalization

Uniqlo has embraced celebrity collaborations and brand partnerships without failing into the influencer trap and constantly chasing the latest A-lister. So far it has released successful collaborative collections with Marni, Theory, JW Anderson, Ines de la Fressange Paris, and Mame Kurogouch. These design collaborations open Uniqlo to new demographics and markets, while also boosting the brand’s profile.

 

Through partnerships with brand ambassadors and advocates, Uniqlo has promoted the values of the label while engaging its audience in a credible, trustworthy way. That tennis sensation Roger Federer and three-time Olympic medalist snowboarder and Olympic skateboarder Ayumu Hirano vouch for Uniqlo is a testament to its market value and success. 

 

 

As well as commissioning clever tie-ups, Uniqlo creates memorable and immersive shopping experiences for fans: from the UTme! customization program, to leveraging data to engage customers at all touchpoints and provide personalized in-store experiences. Ultimately, the chatbot that offers personalized recommendations and the Google-powered voice assistant connected to “Uniqlo IQ” are features that help Uniqlo understand its customer base and design hyper-personalized marketing campaigns.

 

Steering clear of political controversies

Ultimately, it is walking a clever tightrope. While H&M and Nike faced backlash for their comments on Xinjiang cotton, Uniqlo avoided controversy by steering clear of politics. Despite pressure from the U.S., the Japanese firm refused to take a stand or prove its loyalty to the West. Uniqlo’s “sales continued to grow following the cotton incident, jumping 17 percent in 2021 and securing it as the biggest fast fashion brand in China,” says Bloomberg.

 

Tadashi Yanai reinforced the ethos of independence and authenticity by stating in an interview with Nikkei, “the U.S. approach is to force companies to show their allegiance. I wanted to show that I won’t play that game.” The stance is refreshing. Luxury brands need to learn how to become proactive businesses, ones that manage crises before they happen rather than after the damage has been done.

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Source: Jing Daily

 


 

 

The rise of C-beauty: How Chinese consum...

The rise of C-beauty: How Chinese consumers are driving beauty innovation

China’s beauty industry has undergone years of rapid growth and even managed to rebound strongly from the pandemic. It’s now the second largest beauty market in the world – after the US – and the fastest growing. Younger and savvier Chinese consumers are pushing beauty brands to innovate and show a willingness to embrace domestic brands over foreign competitors. C-beauty has attracted increasing buzz over social media – but what is it, and what do marketers need to know?

 

 

What is C-beauty?

If you work in the beauty industry, or simply love anything beauty related, you’ll be familiar with the terms K-beauty and J-beauty. With holy grail products such as Korean sheet masks and Japanese lightweight sun protection, both Korean and Japanese beauty brands have established cult followings around the world.

 

In recent years, Chinese beauty or C-beauty has attracted more attention. The signature C-beauty look – sharp eyebrows, lined eyes, royal red lips and a porcelain complexion – is more power woman than J-beauty and K-beauty’s doll-like looks – and has been gaining traction across social media.

 

China’s beauty market is still dominated by foreign brands, since Chinese consumer behaviour has traditionally been heavily influenced by Western, Japanese and Korean cultures. This is especially true in the larger Chinese cities – often called Tier 1 and Tier 2 cities. But the beauty market is dynamic, and home-grown Chinese brands – which have an edge over foreign brands in understanding consumer needs and local nuances – are increasing their market share.

 

How competitive is the Chinese beauty market?

China’s beauty market is crowded and competitive – the battle among international giants from Europe, the US and Asia is fierce. International brands are still dominant, but local leaders are quickly catching up, with new brands popping up continuously.

 

In the past, international brands have relied on Chinese tourism for a big percentage of their sales, particularly in Asia. More recently, a direct shift into the massive, growing Chinese market is a key business goal for many beauty brands.

 

What’s driving the growth of C-beauty?

Younger Chinese consumers are embracing Chinese brands:
Gen Z Chinese consumers are increasingly interested in traditional Chinese culture and style. This is sometimes referred to as ‘Guochao’ (国潮), which loosely translated means ‘national trend’. For earlier generations, the moniker ‘made in China’ sometimes held negative connotations. For newer generations – who have witnessed the rise of China as a global economic powerhouse, boosting their quality of life and wealth – ‘created in China’ is a source of pride. Younger Chinese consumers are often looking for ways to identify with their Chinese roots in a world dominated by Western aesthetics. They are a large spending group in China and are helping to drive the rise of C-beauty.

 

The power of social media:
Social media is accelerating the Guochao trend. Chinese beauty influencers – sometimes referred to as key opinion leaders or KOLs – often build a community by sharing their daily beauty routines on Weibo (the broad Chinese equivalent of Twitter), Xiaohongshu (a popular e-commerce social media platform), and via live-streaming broadcasts on various social platforms. Opinion leaders are usually paid to promote certain products and are influential amongst younger people. They play an important role in product education – e.g. explaining the importance of skincare, how to use certain products, make-up techniques and so on.

 

E-commerce has levelled the playing field:
Online channels have allowed upcoming homegrown brands – which can lack the financial resources to secure shelf space in traditional outlets – to sell beauty products directly to customers across the country. In 2010, online sales represented about 3.1% of cosmetics sales in China. By 2019, they represented 33.6% of cosmetic and skincare sales, while sales through traditional brick-and-mortar channels have continued to decline. The pandemic has accelerated this trend.

 

Chinese men are embracing skincare:
Influenced by Korean pop culture or K-pop, younger Chinese men are embracing skincare in a way their fathers did not, and some show a willingness to experiment with make-up. The rate of men learning how to apply cosmetics is growing twice as fast as women, and the growth of male skincare purchases has overtaken female purchases. Despite an uptick in the segment, international players have been slow to target male beauty customers, allowing niche and C-beauty brands to capitalise on these opportunities. According to Mintel, China’s male beauty sector should grow by around 50% ($2.8 billion) by 2025.

 

Premiumisation:
Premiumisation has been a key consumer trend across categories in China in recent years, driven by rising incomes and the growth of the middle class. Gen Z and Millennial consumers are more open to online research and discovery, trying out new brands, and trading up when they can. Affluent younger consumers increasingly have sophisticated skincare regimes with more steps than in the past (often to counter the effects of significant pollution in Chinese cities). They are also interested in anti-ageing products that tend to be more expensive, as well as beauty gadgets and technology, such as the Foreo range which has been successful in China.

 

What platforms are most relevant for beauty brands in China?

China is the world’s largest social media market and has a different social media landscape to the West. Almost all Western social platforms – Facebook, Twitter, YouTube etc – are banned in China. China has its own platforms – some of the most relevant to beauty include:

 

 

Douyin:
A short video app owned by China’s tech giant Bytedance. The app allows users to create, edit and share videos as well as livestreams, usually set to background music. Douyin’s international name is TikTok, which looks the same as Douyin. However, the two are not identical, despite Bytedance’s efforts to brand it as such – for example, most Douyin videos are narrated by a computerised voice, whereas TikTok videos are narrated by their creator.

 

WeChat:
A multi-purpose instant messaging, social media and mobile payment app developed by Tencent and released in 2011. In 2018, it became the world’s largest standalone mobile app, with over 1 billion active monthly users. The app offers numerous functions, from making payments to booking flights and hotels. One key feature is called ‘mini-programs’ which are apps within WeChat.

 

Xiahongshu:
Xiahongshu – loosely, ‘Little Red Book’ in Chinese – is a social media and e-commerce platform which has been compared to Instagram. It’s also China’s most trusted social shopping platform, with over 100 million users – mostly young women – who use it to discover health and beauty products, fashion and luxury brands.

 

Bilibili:
Sometimes called B Station, Bilibili is a popular cultural community video website, known for sharing anime, comics and games. Gen Z and Millennials make up over 80% of the site’s user base. In recent years, the platform has become one of the biggest mainstream beauty marketing platforms by featuring vloggers’ make-up tips and tutorials, cosmetics testing and unboxing videos.

 

Alibaba:
Alibaba is China’s – and by some metrics, the world’s – largest online commerce company. Its three main sites are Tmall, Taobao and Alibaba.com. Alibaba.com is a B2B marketplace whereas Tmall’s focus is B2C, and Taobao is C2C. Taobao Live is a live stream e-commerce channel – see below for more details.

 

Tmall:
Formerly known as Taobao Mall, Tmall is an e-commerce platform for local Chinese and international businesses to sell brand-name goods to consumers in greater China. It’s also China’s leading e-commerce destination for beauty. However, brands should view Tmall as more than just a sales channel – it touches upon all parts of the customer journey, from awareness to interest to purchase and loyalty. As a result, as well as considering product, pricing and customer service, platform success requires a content and influencer strategy plus an ongoing media and marketing strategy.

 

Taobao Live:
Taobao Live is Alibaba’s live stream e-commerce channel. It’s divided into categories of interest such as food, travel, lifestyle, etc. China has witnessed the explosive development of live streaming e-commerce in recent years, especially since the pandemic. According to China’s Consumers Association, around 70% of Chinese consumers used Alibaba’s broadcast platform in 2020 to watch e-commerce live broadcast.

 

JD:
Tmall’s biggest competitor, with a similar platform and offering. JD stands for Jingdong and the platform was formerly known as 360buy.com. JD has a dedicated beauty division called JD Beauty.

 

Weibo:
A micro-blogging platform which has a ‘Mini-Shop’ function – i.e. e-commerce integration. This means beauty consumers can use it not only for research and discovery but also purchase. In 2020, Weibo made a concerted effort to turbo-charge its key-opinion-consumer network for beauty brands.

 

Notable Chinese beauty brands

Perfect Diary:
Founded in 2016, Perfect Diary is a make-up brand which targets women aged 20-35 with a relatively high spending power. It has online stores across the key Chinese platforms as well as dozens of offline stores in China. It is committed to developing cosmetic products suitable for Asian skin tones, and a common marketing theme is for people to express themselves using make-up.

 

 

Judydoll:
Judydoll entered the market in 2016 and quickly became successful, opening a Tmall store in 2018 which now has over 6 million fans. Judydoll is a leader in colour trends – one of its bestselling products resembles a watercolour paint palette. The brand is also known for offering affordable alternatives – aka dupes – for highly rated cult products.

 

 

Florasis:
Founded in 2017, Florasis creates make-up products with natural flower and herb essences, combining traditional Chinese style and culture with modern make-up technology.

 

 

8 tips for promoting beauty brands in China

Bear in mind the vastness of the country
China is a massive country – it has 65 cities with populations of over 1 million. Being big in China requires significant and sustained investment. For brands with smaller budgets, China’s sheer size means finding imaginative solutions to build brand awareness in the market. International brands tend to focus on bigger wealthy cities – this gives domestic brands an edge, as they can focus on lower tier cities which still make up a large proportion of the population.

 

Have a regional strategy
Given the size of the country, there are significant regional differences in consumer behaviour and preferences.  Ipsos and Sephora, the multinational beauty and personal care retailer, have some interesting research which shows how cosmetic and skincare preferences vary by Chinese region. The diversity of beauty preferences across the vast country means brands need to have a thoughtful regional strategy. A Local In-Market Expert can help with this.

 

Omnichannel is slightly different in China
Ensuring a seamless omnichannel approach is a big focus for Western brands, which often had established offline distribution channels in place before building an e-commerce offering. In China, it’s slightly different – online penetration is high, and many beauty players started online and have minimal offline distribution. An omnichannel approach is still relevant but for many brands, the emphasis is usually on succeeding in e-commerce first – since that is where the growth opportunity lies – then focusing on offline expansion.

 

Consumers are mindful of pollution
China’s air pollution means there is a push for skincare that helps combat so-called ‘polluaging’. Believers in traditional Chinese medicine consider wellness and beauty to be inextricably linked. Products which go beyond beautifying the skin, and help it become more resilient against environmental stressors and pollution do well.

 

Tap into the hunger for local storytelling
To compete with savvy, emerging Guochao labels, brands must dig deep into local Chinese culture to appeal to younger generations’ desire to connect with their roots. This needs to be executed authentically and sensitively – a Local In-Market Expert can guide you.

 

Identify the right mix of KOLs and influencers
Chinese beauty consumers are heavily influenced by key opinion leaders, from big names like Austin Li Jiaqi (known as ‘the Lipstick King’) to micro-influencers that might have less than 5,000 followers but are still considered trusted voices. Savvy brands use celebrity KOLs in conjunction with their celebrity ambassadors to drive audience engagement and create viral social moments. Using KOLs during key sales periods is critical.

 

Livestreaming is essential in China
For beauty brands, livestreaming has become a vital sales channel as well as a vehicle for product education and launches. To maximise livestream performance, brands incentivise audiences to join and purchase early in the livestream with special deals and use tactics like giveaways with purchases or exclusive deals for customers who pre-order. Product demos, swatches and answering consumer questions are also important elements in developing an audience. The choice of host is key – top tier livestream KOLs like Austin Li and Viya draw millions of viewers and can make or break brands within the Chinese market.

 

Understand key dates and milestones in the retail calendar
As with any market, it’s important to understand the key dates most relevant to e-commerce. For Chinese beauty, these include Chinese New Year, 11:11 (Single’s Day – where singletons celebrate their single status, often with gifts to themselves), 12:12 (a shopping festival in December), plus several dates loosely analogous to Valentine’s Day. These are key sales events, and beauty brands capitalise on them with promotions, special events, limited products, discounts and special offers.

 

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Source: Oban International

 

 


 

 

China business outlook 2022: towards...

China business outlook 2022: towards domestic consumption for sustainable economic growth.

Exports will continue to drive China’s economy for the rest of the year as the domestic market remains sluggish, according to analysts.

 

Chinese leaders have indicated for many years that they want to move away from exports as the main source of growth and toward domestic consumption for sustainable economic growth, said Mattie Bekink, China director at the Economist Intelligence Corporate Network. 

 

“But that’s certainly not what’s happened during the pandemic. So China’s economic recovery has largely been dependent upon on return to its old export driven model, while consumption has really lagged,”

 

“In 2020, for example, net exports contributed the largest share of Chinese GDP growth since 1997 and consumption is not even recovered yet to its pre-Covid trend, according to China’s National Bureau of Statistics,” Bekink said.

 

 

Despite global disruptions of supply chains during the pandemic, China’s trade surplus rose to $676.43 billion in 2021— up from $523.99 billion in 2020, and the highest on record going back to 1950, according to official data from Wind information.“Exports will still continue to be a very important growth driver for the Chinese economy in 2022.”

 

Last week, China’s central bank cut its benchmark lending rates again amid rising concerns of slowdown in the economy, and reduced the one-year loan prime rate as well as the five-year LPR. Loan prime rates affect the lending rates for corporate and household loans in the country.

 

The world’s second largest economy grew 8.1% in 2021 as industrial production rose steadily through the end of the year, according to official data from China’s National Bureau of Statistics released Monday. GDP in the fourth quarter rose 4% from a year ago, faster than analysts expected.

 

“China’s economy is almost running on two tracks. The export-based economy actually is fine, but the domestic economy is quite soft,” Steve Cochrane, chief Asia-Pacific economist at Moody’s Analytics, told CNBC’s “Squawk Box Asia” on Wednesday.

 

Lackluster spending in China

Still, domestic demand will continue to be a drag on the economy due to China’s zero-Covid policy, which has prompted multiple travel restrictions within the country including the lockdown of Xi’an city in late December. Official data from Monday showed that retail sales missed expectations and grew by 1.7% in December from a year ago. 

 

“Given the zero-Covid policy and the difficulty in terms of traveling tourism, even spending over the upcoming holiday season is going to be quite weak,” Cochrane added.

 

With consumer sentiment uncertain and hiring still soft, China is expected to continue its policy easing measures to boost the domestic economy.

 

“This is why the PBOC has been front loading on monetary policy easing, including policy rate cuts well as net injection of medium to long-term liquidity,” said Zeng, referring to the People’s Bank of China’s recent surprise move to cut its loan rates.China’s central bank cut the borrowing cost of medium-term loans for the first time since April 2020. It also cut the seven-day reverse repurchase rate, another lending measure. The PBOC also injected another 200 billion yuan ($31.5 billion) of medium-term cash into the banking system.

 

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Source: CNBC

Aldi integrating into neighbourhoods...

Aldi integrating into neighbourhoods.

Aldi has become the latest overseas supermarket operator to open stores in China, the 8th was recently opened in Shanghai,  but the German company faces a battle to win over customers in a fragmented market in which foreign operators have traditionally struggled: Tesco and Spain’s Dia abandoned operations in the country and Germany’s Metro is selling its China unit. Walmart and Carrefour have struggled to gain more than a single-digit market share.

 

 

Overseas companies have been hampered by remote decision making and difficulties adapting to Chinese shoppers’ preference for making regular small purchases of fresh vegetables to cook at home rather than weekly shops, according to analysts. However Aldi is taking a different approach, opting for smaller, smarter retail stores that are equipped with WeChat technology and offer speedy delivery options. The small size lets ALDI integrate the store deep in neighbourhoods and communities while offering around 1,000 products ranging from Ready-to-Eat meals to body care products.  It plans to launch over 100 of these stores going forward.

 

 

Where WeChat Fits In

Aldi’s scan-and-go WeChat mini-program indicates its commitment to creating a localized Chinese shopping experience, negating the need for checkouts. Home delivery is offered within a 3km range. They take a page out of Alibaba's smart Hema/Freshippo stores:  smaller, more centrally-located supermarkets selling quality imported grocery items. It is estimated that e-commerce sales account for 60% of total sales at Freshippo, indicating that all the money invested in smart retail technology is worth it.

 

 

Tmall Global as a Launchpad

Aldi first tested the China market in April 2017 by launching a flagship store on Tmall Global – what many to consider to be a brand’s official presence in China.

 

 

Tmall Global sells imported cross-border e-commerce items that don’t have to be formally imported in China, skipping over lengthy product registration and approval processes. Aldi sells cheap, high-quality private-label items such as dried apricots, Knoppers chocolate wafers, and Farmdale milk powder.

 

 

But what's more is that Aldi opened a sourcing office in Hong Kong long ago in 2015, enabling it to build out a robust supply chain for its Asia operations (including Australia). This means that it has been preparing for the China market for quite some time. Aldi's Tmall store gave it a channel to test new products and customers' reaction to them, without having to export them in bulk and incur inventory risk.

 

 

The three main channels through which customers can buy Aldi products: offline retail, WeChat delivery, and Tmall.

 

  • Offline retail gives customers the chance to discover and try new products in the store, which is important for categories such as fresh groceries.

 

 

  • The delivery services give customers the option of ordering food when they don't feel like going to the store, or if they forgot to purchase an item, or even if they just don't feel like carrying all those heavy groceries home.

 

 

  • And lastly, Tmall Global gives customers the option of purchasing imported cross-border e-commerce items that may be more difficult to find in offline retail stores in China. For Aldi, it also gives management the ability to test new products online and customers' reaction to them before exporting them in bulk to China.


 

Why Hasn’t Apple Pay Replicated Alipa...

Why Hasn’t Apple Pay Replicated Alipay’s Success?

Even before Covid-19, mobile payment platforms were experiencing a boom in the U.S. and China. Apple Pay (U.S.) and Alipay (China) have radically changed the way people transact, offering secure, contactless payment options through mobile phones. Though both platforms are growing, Alipay is outperforming its U.S. peer: As of late 2019, Bain & Company found that only 9% of American consumers had adopted Apple Pay while 81% of Chinese consumers used Alipay. Given the size difference between the two countries, the difference between the number of Alipay users in China and Apple Pay users in the U.S. is staggeringly large. What are some of the factors driving this stark contrast?

 

 

Based on our extensive financial services industry experience and work with platform companies, we found two key strategic drivers for successful platform adoption: 1) Create value for all parties and 2) Monetize the ecosystem, not just the product. So far, Apple Pay has only marginally accomplished the first while Alipay has mastered both. Other platform leaders can learn from their examples.

 

 

Apple Pay focused on the consumer.

The Steve Jobs-driven culture of focusing relentlessly on customer experience was core to Apple’s development of Apple Pay, which launched in 2014. The premise was simple: Apple Pay relied on encrypted near-field communication (NFC) signals from point of sale devices that would allow users to pay with their iPhones instead of a credit card. Apple Pay seemed to offer a genuinely futuristic consumer experience that was secure, seamless, and fast: NFC technology is extremely quick, and consumers can use their fingerprint to authenticate the transaction, significantly reducing fraud. But for the average U.S. consumer, paying with Apple Pay only saved a few seconds during in-store transactions and thus was only marginally more convenient than paying with a debit or credit card.

 

 

Apple was less focused on mutually beneficial partnerships with banks and merchants. Assuming customers would adopt their platform quickly, Apple attempted to monetize it from the very beginning and charged banks and issuers around 0.15% per transaction for Apple Pay — on top of regular credit card processing fees, which range from 1.15% + $0.05 to 3.15% + $0.10 per transaction. This meant that there was little incentive to adopt the new technology — especially given implementation costs for new NFC-equipped point of sale terminals, which could cost between $1,000 and $2,000 when accounting for necessary software and training for employees. Around the time of Apple Pay’s launch, only around 10% of all point of sale terminals were NFC enabled, and the cost challenge to merchants and limited benefit to consumers hampered adoption.

 

 

In 2019, five years after its launch, Apple Pay’s domestic growth remained slow: Only around 6% of people who could use Apple Pay at a physical point of sale were doing so, despite the fact that almost all point-of-sale terminals that are shipped in North America today are NFC enabled. There’s good reason to believe the number of users has grown significantly during the pandemic, but it would require years of exponential growth in adoption to even begin to match Alipay’s dominance in China.

 

   

 

Alipay focused on creating value for all parties, not just for consumers.

Alipay, which was spun off from Alibaba in 2011 and became Ant Financial (now Ant Group) in 2014, grew from a consumer need for a trusted, verified way to pay for goods purchased from parent company Alibaba’s massive e-commerce sites. Alipay was the solution, but the strategy behind it went beyond payments.

 

 

Alipay charges around a 0.6% transaction fee to merchants to process a transaction, roughly half of the fee for processing local credit cards. While the fee is more expensive than allowing customers to use cash, merchants could often expect a lift in sales that came from accepting Alipay. Further, for merchants, the implementation cost to accept Alipay in stores is extremely low, as Alipay doesn’t rely on NFC or any specialized point-of-sale system, but relies on QR codes, which require little more than a camera and an internet connection to make a purchase.

 

 

Alipay took a different approach to creating value and monetizing the platform than Apple Pay. It shared many types of consumer insights with merchants, so they could offer new services to clients and launch accurate promotions for free. Ant Group worked with merchants and consumers who used Alipay to improve security protection and reduce losses, helping merchants make more money and decrease their risk. Small to medium-sized businesses flocked to Alipay to capture new business with minimal investment. From 2014 to 2018, the number of merchants that accepted Alipay went from approximately 1 million to 30 million, meaning roughly 70% of all merchants in China accepted the platform.

 

 

As Alipay grew, Ant Group was also able to use the data to build new partnerships and offer new services, which they monetized. Trillions of dollars of transactions flow through Alipay versus billions on Apple Pay. Based on the payment data that Ant Group receives, the company can offer a host of high-margin products to both consumers and merchants. For young and lower-class consumers, Ant Group offers credit cards and wealth management services. For small to medium-sized merchants, Ant offers small, short-term loans. These products are not traditionally available to these segments and are hugely valuable. The success of these products has prompted Ant Group’s valuation to go from $75 billion in 2016 to $200 billion just four years later.

 

 

What aspiring platform leaders can learn.

To be sure, there are caveats to the story. First, there are important differences between the U.S. and Chinese mobile payments space. Among them, China is jumping from cash to mobile payments while the U.S. is transitioning from credit cards to contactless payments, which include mobile payments and “tap to pay” credit and debit cards. The mobile internet also evolved much more rapidly in China than the U.S., and mobile payments were a logical part of that evolution. Additionally, the Chinese economy has grown very rapidly, giving Chinese payments players — including Alipay’s main competitor, WeChat Pay — strong tailwinds.

 

 

Consumer preferences are also changing. Prior to Covid-19, many U.S. consumers and merchants were concerned with speed, convenience and security when transacting. Now, these same parties are focused on health and safety and are adopting contactless payments in greater numbers. In this context, Apple Pay has emerged as a solution to a different problem than the one it originally meant to solve.

 

 

This shift in preferences, already clearly underway, may require that payment companies think about value differently than before. The lesson for platform leaders, therefore, has two parts. First, leaders must provide value for all parties on the platform by addressing high-priority pain points, which may change over time. Second, platform leaders must monetize the ecosystem and not just the product, ensuring that they do not burden customers on one side of platform and hamper overall adoption in the process. By learning from mobile payments and considering the strategic drivers of adoption, platform leaders in other industries can ensure they are thought of as more Alipay than Apple Pay.

 

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Source: Harvard Business Review: Ian Gross, Kristofer “Kriffy” Perez and Bee-Lian Quah

Confucianism, consumerism and the pursui...

Confucianism, consumerism and the pursuit of wealth in a changing China.
Studying and understanding how ancient China viewed consumerism and the pursuit of wealth through the lens of Confucian thought and traditions, and how they impacted modern Chinese society, helps develop a deeper understanding of modern China.
 
 

In 2017 at the 19th National Congress meeting for the Chinese Communist Party, Xi Jing Pin recognized the influences of his vision for China, saying: the party has been guided by Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory.1  Based on the words and deeds of Xi, Zhang Jucheng, an academic from Yunnan University in Kunming, Yunnan Province, reinforces Xi’s views saying Marx, Mao and Confucius have been Xi’s greatest influences.2  Zhang believes Xi stresses the need to strictly enforce the party’s discipline, safeguard the unity of the party and the authority of the Central Committee, and ensure the unity of thought and action of the whole Communist Party. 

 

 

 Xi has popularized his own “China Dream” (中国梦, zhongguo meng).  In comparison with the stereotypical “American Dream,” which usually focuses primarily on the prosperity and happiness of the individual, “China Dream” refers to Xi’s vision for achieving rejuvenation of the Chinese nation as a whole.  Xi’s” dream” includes sustainable development, economic and political reform, encouraging entrepreneurial spirit and the pursuit of individuals dreams, but done with Chinese characteristics and rooted in traditional Confucian beliefs.

 

 

The Chinese Communist Party held a committee meeting in 2014 to discuss how to govern and develop socialism with Chinese characteristics going forward.  Xi was quoted: “We must realize the Chinese dream of the great rejuvenation of the Chinese nation, deepen reform, improve and develop the socialist system with Chinese characteristics in an all-round way, and improve the party's ability and level of governance…. we must strengthen and improve the centralization of power, and have a unified, powerful Party Central Committee.”

 

 

In Xi’s 2014 speech, centralization of power and the unification of thought were main themes.  However, these Maoist and traditional Chinese philosophies were amended with Xi’s Deng-like approach to the free-market.  Included in his proposal was the broadening of personal property and basic human political rights as long as they do not infringe on the interests of the party.

 

 

Here we see a fusion of multiple philosophies in how Xi envisions the modernization of China can be most effectively executed while maintaining central power and a Chinese version of modern socialism.  Where the U.S. political system may lack the ability to maintain political direction owing to shifts in the executive branch’s power (typically every 4-8 years), Xi and the Communist Party find strength in China’s unity and their long-term political vision and capabilities.  This may continue to be a central theme in the persistent difficulty to come to mutually beneficial Sino-U.S. relations.

 

 

In January 2019, Xi introduced an app called Xuexi Qiangguo (学习强国, studying a great nation).  With feelings of Mao-like nostalgia, Xi’s campaign to encourage the masses to study “Xi Jinping thought” on mobile devices was compared to Mao’s “Little Red Book” in unifying political and philosophical consensus in China.

 

 

China’s economic growth and modernization.

Since the reform and opening up of the Chinese economy and Xi’s rise to power over the past decade, China has explored several ways to boost growth through un-organic methods, including the use of state-owned enterprises (SOEs), manipulation of the global financial markets4, and injecting large amounts of debt into their economy to finance projects such as infrastructure, real estate, and other centrally organized investments.  Considering the Chinese economy’s current non-financial sector debt is 254 percent of its’ GDP (U.S. ratio is roughly 1 to 1), the Chinese economy may be excessively searching for economic growth.  Some macroeconomists believe China may be living beyond their means by financing investments like the “One Belt, One Road Initiative” and other infrastructure expansions with excessive amounts debt.6  As a result of these initiatives, people in China have more money in their pockets than ever before in history, which has led to unprecedented levels of consumption.

 

 

These examples pose the question of whether or not Confucian fundamentals like the dao (the morally upright way) and traditional Chinese views towards the pursuit of profit are still relevant in a modern era, or if these values are being shelved for the time being, in pursuit of economic development, progress, and the pursuit of modernization.

 

 

Confucianism and the pursuit of wealth in a changing China.

Although Confucianism, which is often considered the foundation of philosophical thought and development for China, there has always been disagreement on how these values should be implemented.  We see in the Zhou and Han dynasties that Confucius is unclear on his views towards the individual’s pursuit of profits.  Historians Sima Qian and Ban Gu try to clarify but do so in criticism of each other.  In modern history, Mao, Deng, and Xi all agree that the unification of China and a strong central power is important to the leadership of China.  However, there is disagreement on how the country should pursue economic and consumption growth.  It is evident that these discussions are as relevant today as they were 2,000 years ago and are worth our efforts trying to understand.

 

 

Looking forward, based on the literature and individuals we have examined, Xi’s political and economic philosophies include characteristics from a wide range of sources, including Confucius, Deng and Mao.  Although there is no doubt China’s leadership over the past century has used many traditional Chinese ideas in developing their modern ideology, the current economic policies pursued by the Communist Party of China are likely more in line with Sima Qian and Deng Xiaoping’s style of open markets and less similar to Ban Gu or Mao Zedong.  In this way, from an economic perspective, China has gradually strayed away from a pure Confucian philosophy.  However, the ideas of centralization of power and the unity of China still remain.

 

 

To conclude, a well-rounded perspective on the connection between Confucianism and the pursuit of wealth in a changing China helps one better analyze and understand recent developments in China.  Furthermore, these understandings will give readers a more comprehensive perspective on recent developments such as China’s response to the Covid-19 pandemic, the recent rise of stock market prices in China despite the lingering economic effects of Covid-19 and slowing economic growth.  The truth as to what extent traditional Confucian virtues should be prioritized over the pursuit of economic growth and profit is unknown, but the answer will likely reside in the health of the Chinese economy and the longevity of the Chinese Communist Party in the coming years.

 

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By Jackson Venjohn, Chinainsight.info

 

How the internet is changing rural China...

How the internet is changing rural China.

The development of the internet as an information super-highway can be compared to the impact of road building in past times. National road networks allowed people to travel to see friends, do business and receive supplies. They were accessible to all who could reach them, if in different ways. Today, they offer a form of conspicuous consumption, where those fortunate to have a luxury automobile can whisk along in style, yet the humble ox cart, the bicycle and even walkers could make use of those roads.

 

 

In a similar way, the internet, with ever-faster speeds, can be used by those sporting the latest, lightest laptop and 5G folding tablets as well as by those with a basic smartphone or access to a computer in a library. What matters is that the infrastructure exists to bring internet connectivity to all parts of the country. Thus, people living in poor and remote parts of the country have access to markets, to a means of earning a living and to goods and services. Advanced technology companies have been crucial in interacting with the internet, providing previously unavailable opportunities through their e-commerce platforms and distribution networks.

 

 

These technology opportunities include potential drone deliveries and 3D printing of items. Alibaba, the biggest e-commerce company in China, has seen rural e-commerce develop rapidly in recent years, as exemplified by the sharp increase in the number of "Taobao Villages", mostly concentrated in moderately developed provinces with a track record of high levels of private entrepreneurship.

 

 

Increasingly, e-commerce is paying greater attention to rural areas. This is a strong model as income generated from activities in rural areas, with products shipped to urban areas, in turn enables access to goods that were previously beyond local incomes or difficult to obtain. As an example, the Chinese online food delivery and ticketing service provider Meituan Dianping has leveraged its platform to work with local governments, farmers, produce suppliers and restaurants to buy highland barley from the Tibetan Plateau and then turn it into food that gets promoted online. The internet has started to level up not just earning opportunities and access to goods, but also access to education, training and healthcare online. Rural and lower income urban areas have struggled for easy access to schools and medical clinics, but online courses are increasingly available and medical information and consultations can be provided virtually.

 

 

The online rural population in 2019 was estimated at 225 million, representing over 25 percent of all netizens in China. Over 700 million people in China enjoy watching livestreams or short videos on apps like TikTok, with a rising number tuning in to watch people living rustic and culturally fascinating lives in China's lower-tier towns and cities. Some rural participants have become online stars, livestreaming stories and videos as well as even comfortably selling rural produce online, a practice known as "daihuo" or "sneaking goods", one supported by the additional infrastructure of regional distribution centers and delivery services. Xinjiang Uyghur autonomous region is a good example of using e-commerce to boost the local economy, with farmers introducing their cotton, walnut and rice products to the rest of China.

 

 

The Chinese government is continuing to play a key role. President Xi has formally encouraged online services to have an increasing impact on reducing poverty and unequal access. "Broadband China" and "Internet Plus" are initiatives launched by the authorities in recent years. The role out of the 5G network is the latest opportunity for strong and reliable connectivity.

 

 

There are further plans, released jointly by the Office of the Central Cyberspace Affairs Commission and the National Development and Reform Commission, to extend the role of the internet and big data in poverty reduction. Twenty-one major tasks have been identified, including the expansion of internet access, piloting more e-commerce projects in rural areas, expanding internet-based healthcare and even encouraging more internet companies to take part directly in poverty alleviation efforts. The government has instructed local officials to construct numerous signal towers and lay miles of fiber-optic cables in an effort to ensure 99 percent of rural areas have internet access by the end of 2020.

 

 

As of October 2019, more than 98 percent of China's administrative villages had been connected with fiber-optic networks and 4G networks, and 99 percent of the impoverished villages had been linked with broadband internet services. The internet has clearly not only boosted the sales of agricultural products, but also profoundly changed the lives of poor people.

 

 

To provide quality online education to children, in 2018, the Chinese government announced a boost to internet speeds in all rural schools. As an example, there are more than a thousand rural schools in Gansu province that have less than five enrolled students. Thanks to high-bandwidth internet technology, almost all classrooms in remote parts of China's countryside are now connected and accessing supplementary learning.

 

 

The internet is not just directly reducing rural poverty. It is also helping to create jobs for hundreds of thousands across China by enabling the growth of mega businesses like Alibaba and Tencent. In addition, the China Academy of Information and Communications Technology (CAICT) estimates that 5G will create more than 8 million jobs by 2030. Thus, the whole economy is boosted, making it possible to devote extra resources to rural development. This trend will continue.

 

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Source: Colin Speakman, economist and an international educator with CAPA

Chi­na’s Mo­bile Pay­ments Mar...

Chi­na’s Mo­bile Pay­ments Mar­ket, simply upwards.
China is steadily marching toward a cashless society, enabled by Alibaba’s Alipay and Tencent’s WeChat Pay. Those two leading payment systems have introduced QR code-backed payments into the daily habits of consumers. Proximity mobile payments are now ubiquitous for purchases in apparel stores to supermarkets to convenience stores.
 
 

How many people in China use proximity mobile payments?

Proximity mobile payment users in China grew by 10.0% in 2019 to reach 577.4 million (by far the largest in the world). While 81.1% of smartphone users use proximity mobile payments, penetration is much lower (49.6%) among the overall population, meaning this market still has room for further growth.

 

 

What are the leading proximity mobile payment service providers in China?

Alipay, owned by Alibaba affiliate Ant Fi­nan­cial’s Ali­pay con­tin­ues to re­main the lead­ing force in Chi­nese mo­bile pay­ments, with a 54.5% mar­ket share, whilst Ten­cent comes in sec­ond on the back of its WeChat Pay plat­form, with a mar­ket share of 39.5%
 
 

Why are proximity mobile payments so popular in China?

Two primary factors have led to consumers in China embracing mobile payments; 1) China is a mobile-first market, meaning most internet users’ first device was a mobile phone; 2) Credit card ownership was low when mobile options Alipay and WeChat Pay were first introduced.

 

 

What are the opportunities for more adoption of proximity mobile payments?

It is worth noting that even in China, the mobile payments revolution is far from complete. Importantly, rural China has yet to join the digital transformation. A 2016 study found that 46 percent of respondents in northwest rural China had a smartphone, but that only 11 percent of respondents had tried mobile financial services. While these numbers are improving, Alipay and WeChat Pay will need to adapt their approaches if they are to have success in rural areas. The challenges to convert those groups to switch to a mobile payment system will require consumer education, product adoption and infrastructure investment.
 
 
 
Effect of the new digital e-RMB
 
The Chinese government has been testing out its new government-backed digital currency as a pilot program in Shenzhen, Suzhou, Chengdu, and Xiong’an. The e-RMB represents a digital yuan that is backed by the government and is stored in a digital wallet instead of a bank account and will be competing with other digital currencies already used in China
 
 
One of the reasons for this new digital currency push could be a chance for the government to oversee and have greater oversight on mobile app purchases & transactions. Chinese government also does not want monopolization of digital currencies by tech giants. Last year, People’s Bank of China Governor Yi Gang said: “Those big tech companies bring to us a lot of challenges and financial risks … You see: In this game, winners take all, so monopolies are a challenge.”


 

Whisky Galore! The growth of Scotch...

Whisky Galore! The growth of Scotch Whisky in China

Whisky is a rapidly growing segment of the higher-end spirits market in China. Demand continues to increase among the urbanized and high-income consumers, especially young adults. The Chinese perceive whisky as a dynamic, international and sophisticated drink. According to Diageo more than 200 whisky bars opened throughout China in 2018. China is an important emerging market for the Scotch whisky industry. From 2000 to 2018, the value of direct exports to China has grown from under £10 million (US$12.5 million) to around £76 million (US$95.5 million) in 2019. The lowered tariff of 5% from 10% was a further boost to the industry, which was already benefiting from soaring sales.

 

 

Significantly in 2018, China renewed its trademark protection for Scotch whisky, valid until 2028. This is to protect the category from local counterfeit products (since 2008, the Scotch Whisky Association (SWA) has fought more than 100 trademarks cases). The SWA remains confident that Scotch whisky would be given special recognition in the Chinese market as a product of Scotland. The protection means that any bottle of spirit sold in China labelled "Scotch whisky", or bearing a Chinese translation with the same meaning, must have been produced in Scotland using methods that distillers have perfected over centuries.

 

 

Quality Brands

Rather than compete on price at the lower end of the market, distilleries and sellers prefer to focus on educating the Chinese consumers on the different types of whiskies and Premium brands. The high prices of Scotch whisky speak of prestige and quality that the brand-conscious consumers of China like. Whiskies sold in China typically cost around 300 RMB - 550RMB (US$45-US$85) per bottle. Target customers are the younger, upper-middle class with a hankering for heritage luxury brands.

 

 

Popular Brands of Scotch Whisky in China

Top Blended brands: Chivas Regal, Johnnie Walker Red/Black, Ballantine’s Finest & Dewer’s  

Top Malt brands: The Macallan, Glenmorangie, Glenfiddich

 

 

And the major Groups in China

Edrington

Edrington is one of the biggest exporters of Scotch whisky to China. In 2003, the company decided to open a representative office in the country to better cater to its growing customers. The Shanghai office also serves as Edrington’s headquarter for its markets in the Asia Pacific region, including Taiwan, Hong Kong, Korea, Japan, Australia and New Zealand. Part of its portfolio are brands like The Macallan, The Famous Grouse, Highland Park and The Glenrothes.

 

 

Loch Lomond Group

In 2017, the Loch Lomond Group secured a major distribution deal with one of China’s food and beverage giants, COFCO. The partnership was part of the distillery’s bid to expand its reach in the country. The Loch Lomond Group is one of Scotland’s oldest whisky producers. Its full range of whiskies, which include Loch Lomond, Glen Scotia and Littlemill, are currently available throughout China.

 

 

Speyside Distillery

Speyside Distillery recently signed a distribution deal with Luzhou Laojiao International Development to increase the production of its single malt whisky. This is expected to see an output of 1 million liters in a year to meet the surging demand for Scotch whisky in the region. Luzhou Laojiao also distributes the distillery’s Spey and Beinn Dubh brands in duty-free outlets across China.

 

 

William Grant and Sons

In 2005, William Grant & Sons set up a distribution and marketing base in Shanghai to tap further into the country’s growing market of malt whisky drinkers. Two of its brands, Glenfiddich and The Balvenie, remain popular among Chinese consumers. The portfolio of the family-owned distillery also includes Girvan, Kininvie and blended whisky brands like Grant’s and Monkey Shoulder.

 

 

Diageo

British multinational alcoholic beverages company Diageo is one of the biggest producers of Scotch whisky, controlling one-third of the total production. Aside from its world popular Johnnie Walker blends, it owns other brands like Lagavulin, Mortlach and Talisker. In 2019, Diageo reported that its organic net sales in China increased by 20%, helped by strong demand for Scotch whisky.

 

 

 

Pernod Ricard

Pernod Ricard, the French alcohol giant, owns a number of distilleries in Scotland. The company, alongside Diageo, controls around 55% of the Scotch whisky market. Some of its massive portfolio includes Chivas Regal blended whiskies, Glenlivet and Aberlour. Pernod Ricard has been aggressively expanding its portfolio in China, recently introducing a new Chivas range, the Chivas Extra 12.

Huawei Goes All-In on Computing Power...

Huawei Goes All-In on Computing Power To Rival Google, Amazon

By Xue YueJie, Sixth Tone

Huawei, the world’s largest supplier of telecom equipment and a polarizing pioneer of 5G technology, is now gearing up to compete in the field of cloud computing against tech giants like Amazon, Google, Tencent, and Alibaba.

 

 

At Huawei Connect 2019, the company’s annual flagship event that kicked off Wednesday, Huawei underlined its commitment to advancing computing power by announcing several breakthroughs — including what it calls “the world’s fastest AI training cluster,” the Atlas 900, a network of 1,024 of Huawei’s own Ascend-brand AI processors — and pledging $1.5 billion to attract developers to its computing platforms.

 



“When most people think Huawei, they think connections,” said Ken Hu, Huawei’s deputy chairman, in his keynote kickstarting the three-day event. “But our work doesn't stop at connectivity. If our goal is to build an intelligent world, both connections and computing are key.”

 

 

Cloud computing is the use of a network of remote servers to store, manage, and process data, rather than a local server or a personal computer. Commercial cloud computing services make these vast pools of computing power accessible to developers for a wide range of purposes, including data analysis and storage.

 

 

Although it is a global leader in the telecommunications industry, Huawei is a relative newcomer to cloud computing, having entered the field just two years ago with the establishment of a dedicated cloud business unit. Since then, the company has charged ahead at full speed. At last year’s Huawei Connect, the company’s rotating chairman, Eric Xu, announced Huawei's first AI strategy, with a focus on research and making powerful, cost-effective computing resources for a range of devices and platforms. In August, the company announced the Ascend 910 — the world’s fastest AI chip — as well as a new AI computing framework called MindSpore.

 

 

Huawei’s interest in new networked computing technologies is understandable given its AI ambitions. According to Moore’s law, traditional processor speeds should double every 18 to 24 months. The extreme computing needs of AI algorithms mean the industry operates on a much faster timeline. A 2018 report from San Francisco-based AI research firm OpenAI found that over the past seven years, the computing needs of cutting-edge AI algorithms have doubled roughly every 3.5 months. “Since we’re reaching the limits of Moore’s law, if the industry wants to provide a steady and abundant supply of affordable computing power, we need to make breakthroughs in processor architecture,” Hu said.

 



Citing data from research and advisory firm Gartner, Hu said the global computing market is projected to be worth more than $2 trillion by 2023. He also estimated that in five years, AI computing will account for more than 80% of all computing power used around the world, and said the company will invest heavily in new processor architecture targeting a wide range of devices, including its Ascend line and Kirin-brand mobile chipsets.

 

 

The latest fruit of this strategy, the Atlas 900, is designed to boost the company’s cloud computing efforts. An AI training cluster, it consists of a collection of many individual computers, called nodes, which are then connected to provide greater computational power. Compared to a single device, clusters provide faster processing speeds, more storage, and are more reliable.

 

 

According to Huawei, the company trained the Atlas 900 in the ResNet-50 architecture — a deep neural network for image recognition that is often used as a benchmark to measure deep learning processing speed — in just 59.8 seconds, 10 seconds faster than the previous world record. Hu said the company hopes the Atlas 900 will be a game-changer for computing, opening up new possibilities in scientific research and business innovation.

 

 

Hu also said Huawei plans to invest an additional $1.5 billion to beef up its developer platform, which will be expanded to accommodate 5 million developers worldwide. On Thursday, the company, which is under increasing scrutiny internationally for its supposed links to the government, announced its Mate 30 line of smartphones — the first to be released outside China without Google’s proprietary apps after the United States added Huawei to a trade blacklist in May.

 

 

Globally, the cloud computing industry is dominated by Amazon, Microsoft, and Google, which controlled a combined 57% of the cloud computing market in 2018, according to research firm Canalys. The next biggest player, Alibaba, had just 4% of the global market. Data from market intelligence firm IDC put Huawei's share of China’s domestic cloud computing market at 5.2% in the first quarter of 2019, leaving the company fifth behind Alibaba, Tencent, China Telecom, and Amazon.

 

 

“Best case, Huawei entering the computing industry could help boost healthy competition, pushing top players like Nvidia and Google to step up their game,” Zhang Heng, a tech analyst and lecturer at Chongqing University of Posts and Telecommunications, told Sixth Tone.

 

 

But the fact that Huawei’s servers and data centers are located on the Chinese mainland limits Huawei’s appeal in overseas markets, Zhang noted, and this could pose a challenge to the company’s global ambitions.

 

 

In the domestic market, however, Huawei remains formidable. “China’s market is still very big,” Zhang said. “And due to Huawei’s high cost-effectiveness and market standing, local governments, universities, research institutes, and price-sensitive enterprises could be the first batch to consider making the switch to Huawei.”

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