CHINAwatch

New Zealand To Ban Chinese App TikTok On Government Devices After Ban In UK & U.S

Live TV panel discussion on Mirrow NOW (Times Now Group) of India on 17 March 2023

Why the world needs China

Keynote presentation by Cyrus Janssen, an American digital entrepreneur living in China, at Thompson River University, Canada, on 21 November, 2020. For those who think that (a) "There is no freedom in China" (b) "There is no safety in China" (3) "China is the biggest threat to democracy" (4) "China is trying to take over the world", the video clip may be an eye-opener. 

The above also resonates with my earlier piece on World Strategic Insights - The New China Scare - Why America Shouldn’t Panic About Its Latest Challenger

China's Greater Bay Area embraces fintech and supports Macao's bid to become China's offshore RMB-denominated NASDAQ

A speech (in Chinese) of 12 October, 2019 by the Party Secretary of Guangdong's Provincial Financial Supervision Bureau reveals the extent of economic and technological transformation of the dynamic Greater Bay Area. Of note is the rise of fintech and the support of Macao's bid to become China's offshore NASDA. 

Following are the salient points - 

(1) Guangdong's traditional strength lies in its 500 "specialization townships" producing special products for the entire world, e.g. Guzhen produces 80% of the world's lighting products; Xiaolan 70% of the world's lock cylinders; Xintang, 70% of the world's jeans etc;

(2) Transsion Holdings' best-selling smart phones account for 48% of Africa's entire market;

(3) Now the province is advancing towards Innovation and High Technology, including finance applications; 

(4) Regardless of quality, filed patent applications in 2017 reached 176,000, 16 times New York, 8 times Tokyo, and 5 times San Francisco;

(5) Blockchain technology enables accumulated commercial credits for SMEs to obtain bank credits on strength of secured orders without collaterals;

(6) Guangdong's 600 listed companies represent only 1.3% of the province's 45,000 national-level high-and-new technology enterprises. The sky is the limit for IPO's. A tailored-made application has been submitted to Beijing to promote Macao as China's offshore RMB-denominated NASDAG; 

(7) A Guangzhou Futures Exchange is expected by year-end, embracing Green Bonds in light of EU's  mandated requirements for Green Belt and Road Projects; 

(8) The Greater Bay Area has a population of 77 million, among the world's youngest population with per capita GDP of US$20,000, within the range for advanced countries, a dynamo amongst consumer markets worldwide, driven by 5G and short video clips; 

(9) Fintech is embraced in cross-border finance. A three-year-old WeBank has reached RMB 3 trillion in loan books, with 150 million subscribers. 70% are blue-collar workers, 37% without any credit records. Average loan amount RMB 8,000 and average interest only RMB 100 for 90% of the loans. Loans below RMB 300,000 are approved on the same day. Driven by blockchain, the Bank has 2,000 staff - half are technologists;

(10) With nearly 100,000 technologists, Ping An Technology owns 1,700 world fintech patents, including world's No. 1 position in Voiceprint Recognition, Facial Recognition, Machine Reading Comprehension, AI Music Composition etc, ahead of the U.S.

 

China at 70 has much to celebrate, but its biggest challenges lie ahead

Cary Huang's column of 29 September in the South China Morning Post gives an up-to-date catalogue of China's impressive achievements under the Communist Party of China. In just seven decades, what would have taken the West centuries, a poverty-stricken, internationally weak, and backward Chinese nation has been turned into an economic and geopolitical powerhouse, a leading engine of global growth projecting influence across continents and oceans. A video clip From Ashes to Prosperity shows what breathtaking transformation the nation has undergone since the ravages wrought by the Japanese invasion. 

Huang mentions that "per capita GDP rose from just US$200 in 1979 – when 80 per cent of Chinese lived in absolute poverty in rural areas – to around US$10,000 last year, firmly in middle-income territory." This is singularly instructive, as China seems to have successfully escaped the much-hyped "middle-income trap". 

At his latest address at the United Nations, President Trump suggested that as the world's second largest economy, China is already an advanced country. It cannot pretend to remain a developing nation, thereby gaming the international trading system. Huang's observation is timely that "China is still neither an advanced nor a developed country. Nor can it properly be described as a rich nation. It is a developing giant on the world stage." His assertion is supported by China's GDP per capita below the worldwide average of US$11,570, not to mention backwardness in many other metrics, including the environment and institutions. 

This helps to debunk popular Sinophobia that China is a global superpower threatening to impose an authoritarian model on the rest of the world. "To be a true superpower, a country must wield global influence in many, varied spheres: in economics, in science and technology, in military matters and in soft power." In economics, China perhaps scores an A. But the country still lags far behind the United States in global military capabilities and behind many Western advanced countries, big and small, in scientific breakthroughs. "China has just three Nobel Prizes; one for science, one for literature and one for peace (the last of which was awarded against Beijing’s will)," Huang observes. 

Above all, "Today, every single nation to have joined the 36-member Organisation for Economic Co-operation and Development (OECD) has been not only a market economy, but also a free democracy." Despite its dramatic ascendancy, China's massive deficit of soft power stands in the way of its achievement of great power status. No matter how well China may excel in other fields, and how more influential China becomes globally, this deficit in soft power of universal appeal is likely to remain a stumbling block along the nation's ambitious trajectory. 

The concentration of power under President Xi may be necessary to combat corrupt interests and political detractors in order to steer the nation on course to realize the China Dream of becoming a fully developed nation by 2049, the hundredth anniversary of the Communist Party of China. However, with the rapid rise of a university-educated middle class, the goal's realization is likely to depend on a willingness to embrace modernity in governance – democracy, freedom and the rule of law.  

China connects the world: Creation of a Sino-centric or more inclusive world order?

PowerPoint presentation to the British Business Association of Macao (BBAM) at Hotel St. Regis, Macao on 6th June, 2019.

Download China connects the world - Creation of a Sino-centric or more inclusive world order 

What can we expect in China in 2018?

An in-depth, across-the-board Mckinsey report dated December 2017 by director emeritus and senior external adviser Gordon Orr offers the following insights - 

International expansion 

• Focus on Manufacturing 2025 sectors and Internet-enabled strategic businesses, such as artificial intelligence (AI) and the Internet of Things, including computers, aviation, and automotive to wealth management, healthcare, tourism, education, gaming.
• With political push-back in the United States, Brazil, Japan, UK, Israel and Scandinavia show signs of increasing interests. 
• Belt and Road projects -  more scrutiny, potential delays but also more projects under way. Focus more on what business opportunities would result than on gaining a slice of the construction work.
• China to grow global soft-power by investing more in Confucius Institutes at universities, in international media projection on traditional TV and online,  and through overseas development-aid (e.g. largest recipient Cuba). 

Domestic centralisation & control

• From punishment of irregularities to much clearer and complete set of regulations on wealth management, insurance and online financial services, minimising regulatory arbitrage. 
• All online payments now have to pass through a central government clearing house,to monitor who is passing money to whom.
• Data-protection and cybersecurity laws to become clearer.
• A National Supervision Commission will oversee inspections of all government departments, institutions, and SOEs, including traditional heavy industries such as coal, steel, and chemicals. 
• Popular online payments to render cash obsolete in China by 2020. Smart cities using AI on government, business, and individual data already at scale.  Requiring real-name usage of the Internet allows oversight of online behaviour. 
• Facial-recognition technology has progressed to the level that Tencent can work with public security bureaus to identify children stolen from their families, even years after the event, by projecting how facial characteristics will evolve and picking them out on CCTV in public areas or online. 

Domestic industry tipping point

• China has out-performed France, US, and Japan in both supply and demand of Electric and Near Electric Vehicles. Regulation focuses on share of new-energy vehicles versus traditional combustion-engine vehicles. Shortfall requires carbon credits. Another focuses on fuel efficiency of cars sold. 
• All part of government’s ambition to dominate the global electric-vehicle (EV) market by 2030. 
• More than $50 billion subsidies for the industry by 2020.  Power-grid companies have installed nearly 200,000 charging stations. 
• BYD and CATL aggressively hiring talent from South Korea and the United States.Volkswagen has committed to a $10 billion-plus program to develop EVs in China. 

Pharmaceuticals 

• China Food and Drug Administration has streamlined drug approvals. More than 35 major new launches (mostly MNCs) in 2017 (only five in 2016). More than 300 drugs added to the National Reimbursement Drug List. 
• Billions of dollars of private-equity and venture-capital funding supplemented by innovation by Chinese companies such as Baidu, Ping An, and Tencent, using AI and big data–based innovations, working with local government and hospitals. MNCs e.g. Bristol-Myers Squibb, launched China’s first outcomes-based insurance program for hepatitis C in partnership with Shanghai Pharma and Huatai.

Steel, Cement and Coal

• More effective regulation of output volumes, of days of production, of pollution output, and of capital investment will genuinely reduce output. State-owned enterprises to be further consolidated, their surplus capital given as dividends to the state pension funds (which hold 10% of their shares). 
• Remaining, hopefully large-scale higher-quality companies could see a virtuous cycle of less capacity, fewer competitors, a more orderly market, higher prices, higher profits, higher dividends, and happier owners. Exports will still be used as a release valve, causing disruption in markets that remain open to Chinese steel imports.

Pensions and Asset Management 

• Establishment of  Financial Stability and Development Committee in 2017 will see shadow banking, wealth-management products, and online microlending curtailed. 
• Consolidation and reconcentration of assets is possible.
• Trillions of dollars of assets will be looking for return in new areas, potentially rapidly expanding the $1.7 trillion public mutual-fund market. China’s fund-management sector already doing extremely well; first half of 2017, net margins greater than 30%. 

E-sports, not soccer

• Soccer entrepreneurs are realizing that it is much easier to buy a soccer team than to run it successfully. In contrast, China’s e-sports players are driving the global industry. With more than 1,000 professional e-sports players in China, top 20 each earned more than $1 million in competition prize money. Sponsorships add much more. Revenues rising well over 25% annually. 

In-bound investment

• Invitations issued to current and potential foreign investors, urging them to come with lists of bottlenecks that could be removed to speed up new investment. Opening-up announcements led by the financial sector allow foreign companies to undertake new activities in free-trade zones.

Greater Bay Area

• Comprising Guangzhou, Shenzhen, and Hong Kong—along with other cities— a total population of 70 million, with GDP per capita of more than $20,000
• Headquarters of many of China’s most innovative start-ups and scale enterprises. A world-leading combination of hardware and software capabilities, and great depth of international financial resources. High demand for high-skilled blue- and white-collar workers. Shift into more value added, more automated manufacturing sectors.
• The region’s population grew faster in 2000 to 2010 than any single province.  Median age five years below the northeast, giving it almost ten workers per pensioner. Local governments working hard to retain migrants permanently, making it easier for their children to register in local schools and to join local social insurance schemes.

Consumer wealth

• Inflation rising slightly and real disposable incomes rising 8 percent nationwide. Consumer spending continue to grow in high single digits, backed by very strong levels of consumer confidence (with wide regional variations).
• Spending will grow on health-related areas such as healthier foods, exercise activities, and medical expenses (for themselves and for elderly relatives).
• Increasingly, consumption growth will be driven by generation born in the 1990s with no experience of recession  and more balanced aspirations between achievement and enjoyment. 
• Property not as attractive in 2017, with only single-digit price rises nationwide. Divergence across regions becoming ever wider. With  government restricting access to mortgages and pushing the development of the rental market, more stable prices may become the norm.
• Individuals picking their own stocks to buy, and investing in active fund managers. Outbound investment through official channels into international stocks and bond markets. More funds flowing to private equity and venture capital. 

Social priorities

• Pollution - More than 30 cities, mainly across northern China, have committed to reduce particulate matter (PM) 2.5 density by 15 to 40 % over the winter. Heavy polluters are being closed for the season, some given money to upgrade their pollution-reduction equipment.Older vehicles are being restricted from cities, and alternate-day license-plate limits imposed. Natural-gas supplies are being extended into surrounding rural areas to substitute for coal burning. A good start, at least in Beijing, with PM 2.5 down 30 percent for October and November.
• Anti-poverty - As part of becoming a “moderately prosperous country” by 2020, the government is seeking to eliminate all areas of absolute poverty. In part, through transfers from the center. More will come from directing businesses, both state owned and private to establish operations locally to employ people from the poorest areas.

Conclusion

• A year of slightly slower growth, with wider variations across provinces and cities than ever, driven by increased consumer spending skewed to wealthier cities and higher government social spending. This will be weighed back by lower property and infrastructure spending. Net exports remain the largest uncertainty. Subject to United States vagaries, a year of very positive developments in many sectors, framed by an environment of tighter and more centralized regulation and control.

Download Mckinsey - China 2018  

New Era Socialism with Chinese Characteristics - What does it mean?

I expounded on the whys and wherefores of President Xi's New Era Socialism with Chinese Characteristics announced at the Communist Party 19th Party Congress at a Live TV interview  in Izmir on TRT, Turkey's national television channel, in the evening of 25 October. I was attending an official banquet hosted by the City Mayor, a sponsor of the Aegean Forum, where I spoke on China's Belt and Road Initiative: Opportunities for the Aegean Region

China's Belt and Road Initiative: Opportunities for the Aegean Region

My PowerPoint presentation at the international Aegean Economic Forum on 26 October, 2017.

At the Forum, I highlighted key messages of President Xi's 30,000-word Speech at the 19th Party Congress, the nation's existential threats and epochal opportunities, the makings of the Belt and Road Initiative, and ways to leverage it for the benefit of the Aegean Region.

Download OBOR Economic Opportunities for Aegean Region

Download AEGEAN FORUM invitation

Download Aegean Forum Program

The Aegean Forum is a new conference series organized by the Özgencil Organization. For over 16 years, they organize the prestigious annual Forum Istanbul which are supported by the highest levels of the Turkish government, including Deputy Prime Minister. I was a sponsored Speaker at the Forum Istanbul for five years in a roll. See my last Forum Istanbul PowerPoint presentation in 2015 on Turkish-China Relations: New Silk Road in a Changing World. 

How China connects the world

Part Two of a 4-part special presentation to the top management of an European Union enterprise.

Download How China connects the world  

 

 

The Chinese consumer in 2030

In a November 2016 report on the rise of the Chinese consumer, the Economist Intelligence Unit (EIU) offers the following findings -

• Private consumption is now the main driver of economic growth in China. It will grow in real terms by 5.5% a year on average in 2016-30 – boosting its share of the overall economy to nearly 50%. Incremental growth over the next 15 years is expected to exceed the current level of consumer expenditure in the EU.

• Nearly 35% of the population, or around 480m consumers, will meet definitions of upper middle-income and high-income by 2030. That represents a sharp increase on the 10% (132m) at present. They will have a personal disposable income of at least US$10,000 and will alter the consumer landscape in China.

• Income will become more dispersed, rather than concentrated in first-tier cities on the eastern coast. Major interior cities, such as Changsha, Chengdu, Chongqing and Wuhan are set to see sizeable leaps, with each having at least 2m high-income consumers by 2030. Nevertheless, smaller cities and those undergoing industrial restructuring risk being left behind, suggesting that high levels of income inequality will persist.

• Around 30% of the spending by the average Chinese consumer is still allocated to food, compared with only 15% in South Korea. As income levels rise, consumers will look to upgrade consumption habits and switch to more expensive and premium brands. This will play out in the automotive, tourism and financial services sectors.

As for What is driving the Chinese consumer,, a Mckinsey Report of April, 2016 notes that there are distinctive shifts from products to services, from mass products to premium brands (including loyalty to top international brands), from mere goods to lifestyle, health and well-being, from Online to O2O (Online-to-Offline), from in-store shopping to associated leisure experience on-site such as restaurants and cinemas, and from individual to joint family leisure activities.