Archive | May, 2014

China’s brand conundrum

28 May

Yet another world’s top brands list came out last week, with Google and Apple the top two brands respectively. Several Chinese companies are on the BrandZ Global Top 100 list, which is good. But what can’t be ignored is most people outside of China have probably never heard of them, since none of them are truly globally renowned. This isn’t a new problem nor is it a mystery. The Chinese government, companies, and the public are mostly aware of this problem, with the government pushing for Chinese brands to go global and firms spending more on research and development. Why does it still exist? Copying and counterfeit goods (not to mention fake stores and hotels) is probably the first thing that a lot of people think of, but a closed business environment, and rigid corporate and educational system are also big factors.

In a way, it’s not all bad because for a lot of Chinese firms, China itself is the world. A home market with the world’s biggest population and a restricted business environment, one that has barriers to foreign companies, make for a hugely profitable climate, especially if one is a state or state-backed firm. Yet is this the right way to go? Especially when Chinese firms don’t fare well when going up against foreign competitors, even on home turf.
Banks also favor lending to large firms, which are often state-owned such as mobile telecom operators (China Mobile, China Unicom) and airlines for example, thus allowing them to maintain monopolies. Even the banks themselves (ICBC, Agricultural Bank, Bank of China) are all state-owned (there is one major private bank in the whole country).
And benefiting from limited foreign (and perhaps superior) competition and closed business environment at home is actually a hindrance when competing overseas, which is why success in China for Taiwan companies doesn’t equate to global success.

Besides political and business culture, another big danger is social culture. This leads to complacency and the lack of urgency and desire to innovate or be creative, both due to a culture of copying and of doing whatever is profitable rather than take risks.

From the Guardian article (2nd link above):
We get these endless things from the government saying there should be more innovation and brand building,” says Paul French, chief China market strategist at market research firm Mintel. “But there isn’t anything behind it. The problem is that no one really wants to invest in innovative design. It’s very market-led. So if reports come to the stores that red shirts are selling, they’ll tell their in-house designers to design more red shirts. This means the designers don’t get a chance to do anything.”

There are Chinese brands of course. While some, like Lenovo, were obtained through acquisition, others like Huawei, Haier (home appliances), and Xiaomi (smartphones) are truly homegrown. Chinese tech giants Alibaba, Sina and Tencent dominate local Internet fields like social media, search and e-commerce, and in the case of the latter’s Wechat app, is making an attempt to get into overseas markets. Even so, it’ll be a long, hard journey for Chinese brands to become as well known as Japanese or even South Korean ones.

China’s multiple languages

26 May

China has a multitude of languages and dialects besides Mandarin, with Cantonese and Shanghainese being the more well-known ones. However, the hardest language seems to be Wenzhounese, which is spoken in Wenzhou, a city in Zhejiang Province. So difficult, it’s been deemed a “devil language” and has even been mistaken as Korean, by a Korean
I’ve heard Zhejiang people speak before, and I swear it sounded a bit like Korean. It’s good to know my ears weren’t tricking me as I was probably overhearing Wenzhounese then. Amazingly, the writer of the second article, a Wenzhounese, says that people in Wenzhou, which together with its surrounding areas have a population 9 million, sometimes can’t even understand each other clearly.
And of course, other cities in Zhejiang also have dialects, which is similar to Shanghainese in a way, being part of the Wu group. I’ve even read that Zhejiang, due to its mountainous and coastal terrain, is said to have a different dialect in every village and district.

Wenzhou is famous for its intrepid entrepreneurs, though they have been going through some hard times, as well as where a tragic high-speed train crash happened in 2011.

China in Africa

23 May

There was a time during the past decade when African nations were very keen on investment from China. Now, though the trade and investment has continued to grow, some of this keenness has turned into skepticism. Africans have become more aware of the negative aspects as well as positive and have become more vocal, to the point where patronizing warnings from Western countries like the US are not really needed. These negative aspects include not heeding local laws and regulations, especially concerning the environment, using Chinese labor instead of locals, doing official and business deals that involve bribes and little transparency, and engaging in projects that don’t really benefit the local people and leave countries heavily indebted. This isn’t to say that Western corporations aren’t guilty of some of the same things as well in their dealings in Africa.

Just at the beginning of May, China’s premier made a 4-nation visit to Africa where he announced $12 billion in aid for African countries. ChinaFile discussed how China is doing, noting that while it’s doing good in terms of business, surging to over $200 billion in 2013, winning the “hearts and imaginations” of normal Africans is another. Also, some African governments are able to strengthen and enrich themselves greatly from their relationships with China; not surprising given China has no qualms about the leaders of nations it does business with.

Murky murder cases, and Sunflower aftermath

12 May

Strange and disturbing events happen in China a lot but this one is especially so- basically people have been charged and imprisoned for murders only for the supposed victims to appear years later, alive and well. It’d be one thing if it happened once, but there’ve been several instances, and it’s an indication of big flaws with the justice system and police behavior. Forced confessions, the use of torture during interrogations, the detaining and threatening of a convict’s mother and brother, ignored petitions, and the acceptance of sketchy evidence without verification are some of the ugly events that took place with in cases.

Taiwan’s “Sunflower Movement” got a lot of attention with its 3-week long occupation of the legislature in March, during which it succeeded in getting a cross-strait services act to be halted and earned a lot of public support. However, things haven’t been as smooth ever since, with fragmentation and radicalization. Growing awareness and interest in politics and democracy have a result, which isn’t such a bad thing if it succeeds in making more Taiwanese care.

China’s monumental economic woes

10 May

China’s economy is going through a rough period and there are signs of major troubles with key sectors such as property and finance. There’ve been a lot of dismal numbers, such as economic growth in the first quarter of this year having slipped to 7.4 percent, the lowest in 18 months. Yet it’s not numbers that’s worrying but fundamental problems with the economy.

Quartz.com has this article that likens the current problematic state of China’s economy with Japan’s two decades ago, right before Japan suffered a property crash, and consequently went into an economic decline and stagnation that it still hasn’t really recovered from over two decades later.

China’s leaders aren’t foolish, which is why this current leadership has been pushing the message of reform for a long time now. More reform is definitely needed, tough measures need to be taken (for instance letting sketchy companies go bankrupt rather than bail them out), and problems should be tackled rather than swept aside or allowed to continue (the Quartz.com article above talks about this).

The biggest problem is property, which is a major part of the nation’s economy, providing the majority of local government revenue and taking up the majority of bank lending. For a long time, there’s been talk of a property bubble and there’re fears it’s right around the corner. In the first quarter of this year (Jan-Mar), property sales are falling significantly, even in first-tier cities like Beijing, to the point that some developers are offering big discounts on new homes. The vice-chair of a major developer was caught making some dire remarks about this. There are too many homes and offices being built, with seemingly every single mainland city and town in a construction boom in the past decade, prices are sky-high, home sales are lagging, and developers are having problems with cash flow, especially as banks have tightened lending.

Problems with the property market lead to problems elsewhere, which brings us to shadow banking, which refers to non-bank lenders such as trusts, leasing companies and money-market funds, with even state-owned enterprises and shipbuilding companies getting into the act (see the article above). These companies often lend to smaller property developers and other companies that find it hard to get credit from banks. As regulators have focused more attention on shadow banking, the sector has evolved as well, which is not necessarily totally bad, but the issue is if the expansion is going too fast and too out of control.
On the other hand, this article tries to argue it’s not so bad since a shadow banking crash won’t affect real banks and that these banks can easily cover bad loans with their profits in the event of a shadow banking crisis. It’s a bit optimistic in my opinion, as the writers seem to assume the best and ignore serious ramifications, such as saying that if a shadow banking crisis occurs, this will benefit banks since savers will move money back to banks without considering that savers may not necessarily have their savings intact if shadow banking suffers a huge crisis, or playing down the effects on raw material exporting nations if Chinese imports drop (frankly the article’s arguments seem very flimsy).
More convincing is this article which says the failure of shadow banking is a ticking time bomb, and will be very bad. Shadow bank lending has been used to finance many projects and developments that are failing or going out of business, such as the $100 billion industrial project and eco-city featured in the piece that has been all but abandoned.

Meanwhile, overcapacity is a big problem in heavy industry, as sectors ranging from steel to cement to solar panels have too many companies that produce too much that can’t be sold or exported. The government has issued orders such as shutting down old and poorly performing plants (setting targets such as reducing steel production capacity by 27 million metric tons) and limiting the number of new plants.

China is still a place of great opportunity and potential in fields like e-commerce and tourism. But its economic problems are vast and deep, and overcoming these will be painful.

Alibaba and its savvy founder

9 May

Chinese Internet and e-commerce giant Alibaba might be set to have an IPO in the US, which some think could raise as much as $16 billion, more than Facebook’s IPO. However, it’ll likely still focus on its home market in China, where there’s a lot of potential to exploit. The company was founded by Jack Ma (Ma Yun), a former English teacher from Zhejiang, who grew the company from humble origins into a tech behemoth that dominates business-to-business and business-to-consumer transactions in China. What’s more remarkable is that Ma has little tech knowledge, though he seems to have more than made up for that with business savvy, good initiative, and some ruthlessness. Alibaba’s sales volume in 2013 was $248 billion, more than that of Amazon and eBay combined!

Alibaba’s main business is its original site, which bears the company’s name, that allows companies to sell products to other companies. Then there’s Taobao, a site where individuals and small businesses can sell their goods; Tmall, which allows local and international brands like Apple and Nike to set up virtual stores;  and Alipay, a digital payment service.

Comedy in China

7 May

This decent Atlantic story checks out if stand-up comedy can grow in popularity in China, where cultural differences, lack of familiarity and censorship (yes, even of comedy) hinder the full appreciation of this art. Da Shan, or Canadian Mark Roswell, one of China’s most famous expats who has performed in traditional xiansheng or crosstalk, and Joe Wong, a Chinese who actually gained fame for his nerdish comedy while living in the US, are among the few trying to get things rolling by putting on comedy shows. Things sometimes don’t work well when Western humor gets translated into and performed in Chinese, but there are younger Chinese who seem to like it. The authorities still loom menacingly in the background, figuratively speaking, as Chinese comedian Mia Li says about rules for performing, “you just put on shows until you get arrested.”  And as amusing as that might sound, that’s not a joke.

China’s number one, or is it?

7 May

China might have already surpassed the US as the world’s largest economy according to a UN effort to calculate spending power in 199 countries. But according to the Atlantic’s James Fallows, that doesn’t mean a thing. And he’s right. All it mainly does is make China number one on paper, but in reality, its GDP per capita remains low, many people earn very little, home prices have surged out of reach for many young people, and it has a range of big problems (regional inequality, rural poverty, and widespread air, ground and water pollution etc) that will cost much to fix. 
As Fallows writes, “But the differences not captured by such figures -freedom to or restrictions on travel within a country, who can and cannot go to school, the still unfolding effects of mass urbanization, the nature and availability of health-care systems, above all the country’s environmental catastrophe- are also part of any serious attempt to understand how “rich” or “poor” China is.”
Besides Fallows, there are other intelligent observers like these people who temper and describe the not-so-impressive ramifications of China’s hypothetical surpassing of the US.

And Fallows is also right when he pours scorn on other media outlets that attempt to hype up China based on this statistical bonanza with headlines proclaiming China’s century has begun. It’s a particular peeve of mine. Over the years, there’ve been all kinds of articles and books that portray China as a superpower and this is China’s time, but a lot of it is empty hype based on enormous statistics.

Younger people in Beijing are relying more on their parents to buy homes. This isn’t surprising, given the high costs of homes, the salaries that most people get, and that young people don’t save much. I’d even be willing to wager that this is true for much of the mainland, Hong Kong and Taiwan.

Acer and Asus’ middle-ground tablet problem

5 May

Two of Taiwan’s main tech brands Acer and Asus are in a quandary in the tablet wars, due to competing with mighty Samsung and Lenovo on one front, and with white-box brands on another front. This makes them firmly mid-level brands, which isn’t exactly a bad thing. These companies do come out with new products from time to time – netbooks, tablet with a detachable keyboard, and combo phone-tablets. However they don’t have the marketing muscle or desire as larger rivals like the aforementioned Samsung.