Financial institutions: earning on data - Shaun Rein

Shaun Rein

Online financial institutions like Alibaba's Ant Financial and Tencent are developing new business models, where they make money on the giant amount of data they collect. Financial authorities are stepping in, for the right reasons, says business analyst Shaun Rein to the China Daily.

The China Daily:

Ant Financial and Tencent, which according to iResearch make up the lion's share of China's 22.7 trillion ($3.4 trillion) mobile payment market, have just completed a weeklong battle in which they dished out generous incentives to lure users to their payment systems. 

Ant said in a statement that it will comply with the requirements of the central bank. Tencent said it will cooperate with regulators and other relevant parties to build a justified, fair and source-sharing platform for a nonbank payment network. 

"Online payments generate a significant amount of data that payment firms can use to their benefit," said Shaun Rein, managing director of China Market Research Group. 

"The government should really step up to limit their power and ensure financial security."

More in the China Daily.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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The fast-growing housing market of Wuxi - Rupert Hoogewerf

Rupert Hoogewerf

Traditionally Shanghai, Beijing and Guangzhou were benchmark cities when looking at the housing market in China. But when you want to know where global wealth is growing fastest, you might have to look at a few unfamiliar names, including Wuxi, overtaking Hong Kong as the most expensive city, says Rupert Hoogewerf, chief researcher of the latest Hurun Report, according to the South China Morning Post.

The South China Morning Post:

Complied by research house Hurun Report, the study highlights growth in global home prices in the 12 months to June 30, with 42 of the 50 cities under the spotlight from 12 countries it examined, being hit with price rises of more that 10 per cent in the period.

The five cities to suffer the fastest growing prices were Toronto, Reykjavík, Wuxi, Hong Kong and Zhengzhou, the provincial capital of Henan Province. 

Six Chinese cities were named in top 10, while that total of 21 makes the country the most listed, followed by the US (Seattle, Orlando, Dallas, Denver, New York, Sacramento and Miami), Germany (Berlin, Hanover, Stuttgart, Frankfurt, Munich and Hamburg), Canada (Toronto, Hamilton, Victoria and Vancouver), Australia (Melbourne, Sydney and Canberra), Ireland and New Zealand with 2 cities each... 

Maybe surprisingly, the eastern Chinese city of Wuxi – around 140 kilometres or a 2-hour drive, west of Shanghai – overtook Hong Kong, recently dubbed “the world’s most expensive housing market”, to become the Chinese city so see the highest growth in home prices, as it is much less known than other major population centres such as Beijing and Shanghai.. 

Wuxi, in the southern Chinese province of Jiangsu, borders two other large cities, Changzhou to the west and Suzhou to the east, and saw a 22. 9 per cent rise in prices in the period, exceeding Hong Kong’s 20.8 per cent rise, according to Hurun Report, which is best-known for its rankings of the richest people in China. 

The other four Chinese cities in top 10 are Zhengzhou, the capital of east-central China’s Henan province (+20.2 per cent), Changsha in Hunan province (+18.5 per cent), Guangzhou (+17.9 per cent) in Guangdong province and Shijiazhuang (+16.1 per cent) in Hebei. 

“Global asset allocation is one of the biggest trends now for China’s high-net-worth individuals, led by real estate,” said Rupert Hoogewerf, chairman and chief researcher of Hurun Report. 

Jinan, Hefei, Wuhan, Xiamen, Hangzhou, Xi’an, Fuzhou, Nanjing, Tianjin, Nanning, Chongqing, Beijing, Qingdao, Nanchang and Shanghai are those ranked outside the top 10 but also among the top 50, said the report.

More in the South China Morning Post.

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Outbound deals: small is beautiful - Ben Cavender

Ben Cavender

China's financial authorities are cracking down on outbound deals, but not all deals are off-limits, says business analyst Ben Cavender. Especially smaller deals seem to avoid political scrutiny, he tells CNBC.

CNBC:

So far this year, about 70 percent of China's outbound deals have been valued at $1 billion or less, according to Dealogic data. Experts said they expect the trend of smaller acquisitions to continue. 

That's because with larger acquisitions, "you start getting questions on national security ... and overall stability and growth of the Chinese economy, so there's a lot more scrutiny over large, marquee deals," said Benjamin Cavender, principal at consulting firm China Market Research. 

But "when you're talking about small, medium enterprises, there's a little less pressure — the government doesn't see that as having any way to shape the economy, or cause issues with policy," he said.

More at CNBC.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch fons.tuinstra@china-speakers-bureau.comor fill in our speakers' request form.

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The uptick in spending on real estate, Tesla and Baijiu - Rupert Hoogewerf

Rupert Hoogewerf

The China's luxury Consumer Price Index (CPI) rose 3.6% on a yearly basis in 2017, both based on more wealthy Chinese, and an uptick in the money they spend. Chief researcher of the Hurun China rich list Rupert Hoogewerf says expenditure on real estate, Tesla and Baijiu going up, he tells in Asia Times.

Asia Times:

The Luxury Consumer Price Index, released by Hurun each year, aims to measure the price changes for a predetermined basket of goods and services purchased by China's high-net-worth individuals (HNWI). The index covers the consumption activities of wealthy Chinese in the following 11 categories: real estate, health, education, luxury tourism, weddings, watches & jewelry, accessories & beauty products, cruises & private jets, lifestyle, liquor & cigarettes, and automobiles. 

The 2017 index, which gauges prices from June 2016 to June 2017, was calculated based on a basket of 116 high-end goods and services, 20% of them imported. The issue marks the 11th edition of the index. 

The depreciation of the Chinese yuan against major global currencies over the past year has been the main reason for the decreasing purchasing power of China's rich population with respect to buying luxury property worldwide and high-end imported goods. 

Based on Hurun's estimates, there were nearly 1.34 million HNWIs in mainland #China by May 2016, while the number of individuals with over a billion yuan of wealth was close to 89,000. Over the past year, this population has borne the brunt of the price spike in the areas of luxury property, liquor, lifestyle and travel. 

'What impresses me most, this year, is how much the price of real estate, baijiu (a traditional Chinese liquor) and Tesla has increased,'said Rupert Hoogewerf, chairman and chief researcher of the institute, 'completely lifting up the luxury CPI.' 

For affluent Chinese buyers, the price of luxury property has gone up 16.6% since last year. Domestically, a villa in China's southwestern city Chengdu spiked 56.5%, followed by properties in Hainan (a rising tourism city) and Shanghai. Housing prices in overseas cities such as Vancouver, San Francisco, Los Angeles and New York also jumped.

More in Asia Times.

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

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New strict regulations for infant formula - Mark Schaub

Mark Schaub

China has released new rules for infant formula milk powder, one of the most-discussed products after massive domestic scandals and waves of foreign imports, both legally and illegally. Shanghai-based lawyer Mark Schaub discusses at Lexology the impact, as domestic and foreign formulas are now treated equally, and it is going to be more complicated.

Mark Schaub:

The registration procedures for infant formula outlined by the Registration Measures were based upon the PRC drug management system and accordingly the registration procedures for infant formula are complicated and time-consuming. The registration procedure for infant formula has several stages, namely acceptance, review and evaluation, on-site verification, sampling inspection, determination and issuance of decision. 

In addition it should be noted that each stage has a time limit and these time limits can be complicated to determine. At most the procedure will take 170 working days to finish registration commencing from acceptance until issuance. This period does not include collection of supplementary documents required by the CFDA. 

However, it should be noted that the Registration Measures do not provide clear guidance as to how to proceed with on-site verification and sampling inspections for imported formula products and verification periods. 

The Registration Measures provide detailed provisions aimed at avoiding false advertising and causing confusion amongst consumers in respect of  the products including:

• Prohibited to use ambiguous terms such as “imported milk source”, “ecologic pasture”, “imported raw materials”. The applicant is required to clearly identify the source of the product;
• Prohibited from  explicitly or implicitly expressing that there is a health care function;
• Prohibited from including functional expressions, implicitly or explicitly, that the products may increase intelligence, build up resistance, increase immunity or protect the intestine;
• Prohibited from using misleading or negative expression(s) (i.e. “no additives”);

As the Registration Measures would become effective on October 1, 2016, as such, unless the laws stipulated otherwise, the infant formula milk powder manufactured in and imported to China via the trade in goods would subject to this Registration Measures sooner. 

It is important to note the complexity and time limits in respect of registration it is recommended that both domestic or foreign manufacturing enterprises engaging in production of infant formula milk powder to start preparing for and initiating registration procedures as quickly as possible. 

Time is ticking – it should be noted that PRC Ministry of Finance regulations[2] require that registration requirements for infant formula will come into force on January 1, 2018. Accordingly, although there is still time for companies to register but the clock is ticking.  

Brands relying strongly upon the cross-border ecommerce channel should start registration preparations immediately. It is likely that supervisory requirements and procedures for formula products which have not been imported to China via general trade will become more complex and subject to more scrutiny.

More at Lexology.

Mark Schaub is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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After English and Mandarin, Singapore turns to Chinese dialects - Ian Johnson

Ian Johnson

Singapore's directive government has long focused language training on English and later Mandarin, for commercial reasons. But journalist Ian Johnson notes at the New York Times that traditional Chinese dialects, including Hokkien, are making their comeback, allowing families to talk to each other and understand their past.

The New York Times:

“Singapore used to be like a linguistic tropical rain forest — overgrown, and a bit chaotic but very vibrant and thriving,” said Tan Dan Feng, a language historian in Singapore. “Now, after decades of pruning and cutting, it’s a garden focused on cash crops: learn English or Mandarin to get ahead and the rest is useless, so we cut it down.” 

This linguistic repression, and the consequences for multigenerational families, has led to a widespread sense of resentment — and now a softening in the government’s policy. 

For the first time since the late 1970s, a television series was recently broadcast in Hokkien, which in the 1970s was the first language of about 40 percent of Singaporeans. Many young people are also beginning to study dialects on their own, hoping to reconnect with their past, or their grandparents.

More in the New York Times.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Women: key spenders on China's Single's Day: Shaun Rein

China single's day (28 August) triggered off a range of commercial activities. Business analyst Shaun Rein looks on AFP at the industries focusing on this attractive target group. Women play a key role in consumer spending, he says.

AFP:

A range of businesses are targeting singles, including travel, dining, online video games, online video streaming, sports apparels and cosmetics, according to Shaun Rein, founder of China Market Research Group and author of the book The War for China's Wallet... 

The high-earning urban female population is a major economic player. 

Online flower retailer Reflower says almost 80 per cent of weekly orders come from female customers, with more than half buying flowers to "comfort themselves". 

"Females who are single especially spend most of their paycheck. Males tend to save more because they want to buy a house later on," Rein told AFP. 

"It's really being empowered by women, because they are the most optimistic consumers, they tend to have higher paying jobs than men, and they tend to spend more."... 

"In urban areas especially, parents are saying to their girls 'don't settle'. Only marry if you want to marry, only have kids if you want to have kids," Rein said, adding that the phenomenon is signalling social progress. 

"I view that as showing female empowerment... I think it's a very healthy shift, showing more male-female gender equality than ever before."

More at AFP.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Risk and opportunities of the bitcoin - Mark Schaub

Chinese authorities have started to regulate the usage of the bitcoin. That is not necessarily a bad thing, writes Shanghai-based lawyer Mark Schaub at the website of his law firm. "Regulation should be seen as an opportunity, too. More stringent rules translate to lower investment risk and increased legitimacy."

Mark Schaub:

The opportunities with Bitcoin remain ample, as is demonstrated by its sustained growth. (Some of the most optimistic commentators have stated the value will rise above 6,000 USD.[18]) This is occurring alongside the continuous creation of new and derived cryptocurrencies, as was recently demonstrated by Bitcoin’s hard fork, which created ‘Bitcoin Cash’. Moreover, developers are continuing to find novel uses for blockchain technology as a whole. 

Regulation should be seen as an opportunity, too. More stringent rules translate to lower investment risk and increased legitimacy. Investors in cryptocurrencies, particularly ICO tokens, will likely be afforded some level of legal protection on their investment in certain jurisdictions. Start-ups, too, stand to gain from regulation as a means to build trust amongst an increasingly skeptical pool of investors. Indeed, the perceived legitimacy of the blockchain system as a whole seems to be on the rise, earning clout with institutions as large as the Bank of England, which signed up to participate in the Hyperledger project in March.[19] 

Regulation should also be seen as a way to stabilize the extreme volatility of the currency by making it harder for speculators to instantaneously purchase and liquidate Bitcoin on a whim. This will also open the door to more risk-averse investors. 

On top of these, there are opportunities specific to China, which looks poised to continue its role as a global hub for Bitcoin. Between Hong Kong and the mainland, it hosts some of the world’s most established Bitcoin exchanges[20] as well as significant infrastructure for Bitcoin mining, which generates 70% of the world’s Bitcoins.[21] Moreover, the trend of China-based cryptocurrency startups is only going to increase, as the government continues to incentivise a burgeoning ‘Silicon Valley in China’.[22] Recommendations have also been made by PBOC officials to foster a ‘regulatory sandbox’ for blockchain innovation. That is, an ICO-inclusive market with minimal intervention bounded by some basic regulations such as Singapore-style KYC rules.[23]

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Cryptocurrencies continue to bring a variety of risks to investors. The sheer variety of potential uses for blockchain technology is a double-edged sword. Increasingly, businesses are turning to blockchain as a panacea to a variety of database issues, or as a part of a marketing strategy to appear more modern. In reality, blockchain technology is a system with high energy costs and a narrow scope of uses.[24] Lacking the need for a single database with multiple writers and no trusted intermediary, many companies are better off employing a traditional relational database. Investors should beware of start-ups touting the use of blockchain where, in fact, it adds cost and does not increase efficiency. 

Furthermore, companies looking to maintain environmentally-friendly policies should also be aware of the significant energy costs of maintaining a blockchain system, as well as increasing public awareness of it. 

The volatility of Bitcoin and other, smaller cryptocurrencies continues to be a risk. Even with regulation, the digital nature of cryptocurrencies means they will also be more liquid than physical currencies or ‘real’ assets. 

Also, the new rules concerning Bitcoin stand to limit its uses. One focus of regulation, particularly in the Unites States, appears to be cryptocurrency products that seek to incorporate elements of traditional financial assets. These include the DAO token, which aimed to be a cryptocurrency venture capital fund, as well as the attempt by Winklevoss Capital to list an Exchange Traded Fund on the NYSE that tracked the price of Bitcoin, which was blocked by the SEC. Investors should be wary of these. 

Considering risks unique to China, some commentators have suggested that the newly-created ‘Bitcoin Cash’ is an attempt to create a Chinese version of Bitcoin. The larger block sizes of Bitcoin Cash pose a significant advantage to industrial-scale mining operations. Indeed, Jihan Wu, the creator of Bitcoin Cash is also the manufacturer of the ‘AntMiner’ mining device. At any rate, a pivot by the Chinese market to Bitcoin Cash may result in the loss of a significant driving factor for the growth of Bitcoin. 

Moreover, Bitcoin in China remains largely unregulated, at least for the time being. The nearly-catastrophic move by Huobi and OKCoin to invest idle client funds into wealth management products should be closely considered as an example of the potential losses to be incurred in the Chinese Bitcoin market. 

Regulation in China has started, however, and will continue. This poses risks for investors. For instance, Bitcoin was once seen as a potential “golden ticket” to bypass China’s increasingly harsh capital controls on getting money out of the country.[25] Following the PBOC investigation earlier this year, using Bitcoin as a means of repatriating funds will be throttled, at best. Users and investors in China must consider the very high possibility of the PBOC imposing further regulations on cryptocurrencies, both expected and otherwise. Financial laws in China are strict, and penalties are harsh. Another factor that may affect Bitcoin investors is further restriction on Bitcoin trading that may be imposed by the Chinese regulators. During the NPC & CPPCC in 2017, Mr. Zhou Xuedong, the Director of Business Administration of PBOC, proposed a bill for establishing a negative list with respect to the business activities that should not be conducted by a Bitcoin trading platform.[26] Furthermore, the Legal Affairs Office of the State Council issued the draft regulation on the penalty of illegal fund-raising activities, stating in its Article 15 that the department dealing with illegal fundraising shall conduct an illegal fundraising administrative investigation when any such acts are found and explicitly mentioning virtual currencies in this draft regulation. As such, there is the risk that issuing or trading in Bitcoins (particularly relevant to the ICO market) may be deemed and sanctioned as illegal fundraising.

More at the China Law Insight.

Mark Schaub is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more fintech experts to deal with your China risk? Do check out this list.

Attracting mobile-first users is a different ball game - William Bao Bean

William Bao Bean

What internet companies coming to China forget is that the user base is completely mobile. They have always done all their online stuff on mobile devices, says managing director William Bao Bean. of accelerator VC firm SOSV at MOX Demo Batch Day 3, writes E27.

E27:

“Consumers whose first experience is with the mobile phone. They are different than the rest of us, they have different needs, different requirements and the monetise differently. We help [the startups] with their services and the most important thing is we help with user acquisition,” Bean said during the event.

More at E27.

William Bao Bean is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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The blurring online lines between personal and business - Shaun Rein

Shaun Rein

Communication in China has changed into a completely different ball game, most Western visitors fail to get. Especially the blurring line between personal and business communication is key to understand, says business analyst Shaun Rein at Knowledge CKGSB. For example for recruiting.

Knowledge CKGSB:

“Younger Chinese especially are more connected online, especially through mobile phones, than their western counterparts. The result is younger Chinese spend more time networking in general and networking to find jobs via mobile devices than Americans and Europeans,” says Shaun Rein, author of the upcoming book The War for China’s Wallet and managing director of the China Market Research Group (CMR). 

In some lines of work, this is already having consequences. Take recruitment: for Jeida Boussenina, recruitment manager for INS Global Consulting in Shanghai, recruiting still includes the occasional trade show visit, but these days, most of her work involves various kinds of online chatting. “I don’t even call people anymore,” she says. 

In her daily search, Boussenina visits a number of sites, including LinkedIn, Chitu (Red Rabbit), 51job, Liepin, and most of all, WeChat, 900-pound gorilla of Chinese social networks. WeChat is one of the world’s largest social media platforms. Over 938 million people belong to WeChat, 90% of whom are Chinese. Founded in 2010 by Tencent, the Chinese tech giant, WeChat has a significance... 

“Chinese people are really suspicious, really protective of their privacy…. In China, you build trust before doing any business with Chinese people. If they don’t trust you, they don’t do business with you. If they don’t like you, they don’t do business with you,” she explains. Boussenina’s approach isn’t unusual, according to Rein. “This shift to online has completely changed how companies need to recruit – they need to spend a larger proportion of recruiting budgets online. It has also impacted the executive search community – they have had to adopt online networking and reach out to candidates,” he says. 

Another aspect of Chinese culture that is being reflected online is a preference for mixing business with pleasure. “WeChat is a show window of both personal and professional life for many people,” says Ma Lin, a Chinese translator now living in Germany. 

“The lines are definitely blurred in China between business and personal when it comes to social media and networking,” agrees Rein. Even WeChat was originally just a platform that made it easier for friends to communicate but later evolved to the point where it is also a payment channel and a tool for business communication. “In China, you can never just be all pleasure or all work – everything is intermingled,” he adds.

More at Knowledge CKGSB.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. Are you looking for more experts on e-commerce at the China Speakers Bureau? Do check out this list.

Bike sharing: catching on - Paul Gillis

Paul Gillis

Bike sharing has met mixed reactions in China, including Beida professor Paul Gillis, who wondered earlier this year whether the investments made business sense, while they are already expanding internationally. The business case still has to be proven, Paul Gillis now admits on North Carolina Public Radio, but bike sharing has changed his urban life for the better.

North Carolina Public Radio:

This concept, dockless bike sharing, has exploded in China over the past two years. 

“Now, there are literally millions of these bicycles on the streets in China. And it has really transformed the urban living experience,” said Paul Gillis, a business professor at Peking University in Beijing. He says for short trips, for that last mile going from the train station to his office, he grabs a bike. 

“It’s much easier than trying to hail a car. The bad part has been that the literally millions of bicycles that are now in China litter the streets. And the sidewalks have become so crowded with these bicycles that it’s hard to walk around.” 

Despite being poorly regulated there, Gillis says bike sharing in China has been a huge positive overall: It’s easier to get around, and there’s less traffic and pollution in Beijing. “I think it’s one of the things that has changed my life in China for the better more than anything in the last 20 years that I’ve been there,” Gillis said.

More at North Carolina Public Radio.

Paul Gillis is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on managing your China risk? Do check out this list.   

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Crack-down on pyramid schemes hits MLM-firms - Mark Schaub

Mark Schaub

Foreign multi-level marketing (MLM) firms like Herbalife, Nu Skin and Usana Health Sciences got into trouble as Chinese authorities turned in a 3-month campaign against domestic illegal pyramid schemes. Shanghai-based lawyer Mark Schaub explains the background at the China Law Insight.

Mark Schaub:

The Campaign was triggered by very public gatherings by protesters against Shan Xin Hui (a Chinese pyramid scheme) in July. These protests were held in the heart of the nation’s capital coupled which heightened interest on the part of the authorities. 

Media outrage had also been building due to a number of separate cases in which college graduates died in suspicious pyramid scheme related circumstances. In addition there had also been a material uptick in unscrupulous MLM organizations collecting membership fees for organizations that provided no benefit or sold non-existent products. 

Shan Xin Hui, which means “kindhearted exchange”, was established by Tianming Zhang in 2013 in Shenzhen and had been promoting itself as a “patriotic charity” organization that strives to “help the poor and achieve common wealth”. Shan Xin Hui, through its online investment platform, offers investment returns (said to be 10% – 30%) to individuals who “make donations” to the organization. 

The organization upholds its charitable (albeit unlikely) slogan of “lower returns for the rich, higher returns for the poor” by offering lower investment returns on larger donations and higher investment returns on smaller donations made by individual investors. None of Shan Xin Hui’s business makes much sense or is true. 

Unlike legitimate direct sales companies, where bona-fide goods or services are sold, Shan Xin Hui seems to be a Ponzi scheme which marketed “investments” with unsustainable returns... 

As outlined above the Chinese crackdown does not focus on international MLM companies in China that generally operate legal direct selling businesses or operate via cross-border e-commerce. However, this has not stopped these international MLM companies being impacted by the crackdown. There have been sharp falls in share prices and also potential downgrading of credit ratings. 

The Campaign is clearly focusing on illegal activities by Chinese criminal gangs engaging in violence, kidnapping and other activities that even the most vociferous US network marketing critic would not suggest are common practices. 

Accordingly, at present it seems that the international MLM companies will be more affected by overseas media than by the authorities within China. However, crackdowns in China can expand in scope or take different paths so vigilance and caution is still recommended. The actions currently undertaken by the Chinese authorities may put international network marketing companies on notice as to the types of actions they may face if they attract unwarranted attention. 

One possible action they may need to contend with include the arrest of founders and top management – however, it should be stressed that to date this has been very much directed at fraudulent or cult-like pyramid schemes. Another notable feature has been the targeting of online media as the authorities are able to shut down websites and social media channels – which can severely impact day to day operations. 

At present most international MLM companies operating in China would be best advised to maintain a low profile at present. This means no press releases, no public statements but rather be calm and just sit out the storm. Communications to affiliates or the market may be misinterpreted and may not calm but rather attract attention. In these uncertain times international MLM companies should ensure that their business model is compliant and ensure a robust compliance model is in place in order to deal with any non-compliant practices or affiliate actions that may attract the attention of the authorities. 

If possible, direct selling companies with entities in China should also consider obtaining a legal direct selling license. Up until 2016, the PRC government issued limited direct selling licenses but in the last year there has been a significant increase in the issuance of such licenses. Such licenses are expensive (requiring a large registered capital as well as providing for a consumer protection fund) and are limited to certain categories of products but on the positive side they provide a layer of legitimacy and protection. 

The greatest risk for most direct selling companies operating in China is of rogue affiliates falsely promoting the business or engaging in illegal activities. As such, ensuring compliance of affiliates as well as being able to distance the company from rogue organizations is key to long-term and sustainable success in China. 

With tighter regulations in relation to cross-border e-commerce and tightening scrutiny over customs, many international MLM companies operating via the cross-border e-commerce model may also face additional issues, including products being stopped at customs and fulfillment issues in respect of customers.

More at China Law Insight.

Mark Schaub is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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More state control over the economy - Arthur Kroeber

Arthur Kroeber

As China's autumn meeting on decisions for the next five year looms, private capital has clearly brought to heel and is deployed to support the state economy, says economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® to the South China Morning Post. "State enterprises are guaranteed a “dominant” role in the economy,” Kroeber said.

The South China Morning Post:

The current drive aims to reinforce state control over the biggest companies not only by bringing private capital into the fold, but also to indoctrinate private entrepreneurs with the Communist Party’s dictated way of investments, analysts said. 

“Private sector firms have been given clear “rules of the road” about how to deploy their capital – less leveraged investments in speculative overseas assets; more equity support for domestic SOEs,” said Arthur Kroeber, co-founder of the China-focused research service Dragonomics in Beijing. 

Look no further than in the recent case of state-owned China United Network Communications Group (CUNC), whose restructuring is backed by investments from the country’s most high-flying tech entrepreneurs including Jack Ma and Pony Ma. Announcement of the plan has pushed shares of its Hong Kong listed entity, China Unicom to a two-year high... 

 “It is important to be clear we are not talking about the resurgence of a large-scale privatisation agenda here (regarding the latest SOE reform)...the ultimate policy direction is clearly stated in the Third Plenum decision – state enterprises are guaranteed a “dominant” role in the economy,” Kroeber said...

One sure factor is, private entrepreneurs are directing their investments into sectors that the party deems important, over acquiring assets abroad. 

As such, it was announced on Monday that a group of state and private companies will invest a total of 6.9 billion yuan (US$1.04 billion) in COFCO Capital, a subsidiary of state-run agribusiness COFCO Group. 

“The government is quite serious about a “deleveraging” agenda which involves SOEs reducing their debt/equity ratios, not by reducing debt, but by increasing equity. And here is quite a lot of capital in the private sector that can be put to use in repairing SOE balance sheets,” Kroeber said.

More at the South China Morning Post.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Brexit and capital control do not deter investments into UK - Sam Crispin

Sam Crispin

Chinese investors are still flocking into the Royal Albert Docks in London, says property consultant Sam Crispin in the South China Morning Post. Doomsday scenario's with rigid capital control from Beijing and the Brexit is not stopping those investments.

The South China Morning Post:

Firms from China, Taiwan, Hong Kong and India have acquired or reserved 60 per cent of total office space, or 33,388 square metres, in the first phase of the Royal Albert Dock project, Sam Crispin, chief executive officer of ABP’s Hong Kong sales unit told the South China Morning Post. 

Costing £1.7 billion (US$2.2 billion), the revival of the 137-year-old dock in East London, seen as the city’s third financial and business district, aims to attract Chinese and other Asian firms looking to expand into Europe. ABP, founded in 2003, is a privately held Chinese developer of economic zones, including the Royal Albert Docks project. 

Beijing’s crackdown on capital outflows and debt-fuelled overseas acquisitions by aggressive conglomerates has not deterred companies interested in moving into Royal Albert Dock, said Crispin, who led PwC’s urbanisation team and real estate business advisory services before joining ABP this year. 

“The concern is where Chinese banks have been lending to fund overseas acquisition, whether that’s a risky thing to do or not, and how future acquisitions will be funded in what’s perceived to be a less risky way,” he said.

The latest State Council directive issued on Friday restricting Chinese overseas investments in property, hotels and sports clubs is likely to have limited impact on the project, Crispin said on Monday, as ABP primarily targets “companies that already have operations in Hong Kong and other Asian countries” and hopes “to attract owner occupiers.” 

Unlike landmark buyers such as sauce maker Lee Kum Kee, which bought London’s “Walkie Talkie” tower in July, potential and existing Chinese buyers of ABP’s project are mostly smaller firms, financed in a less risky way and making “smaller investments that are below the radar” of Beijing, Crispin said.

More at the South China Morning Post. 

Sam Crispin is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more outbound investment experts at the China Speakers Bureau? Do check out this list.  

Money laundering in China - Sara Hsu

Sara Hsu

Around 100 billion US dollar leaves China illegally each year, estimates financial analyst Sara Hsu. Only last year 380 banks were busted for money laundering. She discusses at CGTN what the government does to prevent those illegal transactions.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more financial analysts at the China Speakers Bureau? Do check out this list.

Analyzing China firms: a tough job - Ben Cavender

Ben Cavender

A favorite hobby among analysts and journalists is comparing Chinese companies with American or European competitors. Alibaba has little in common with Amazon. The differences are often larger than the similarities, says business analyst Ben Cavender. And getting into the China market is certainly not easy, he adds at the BBC.

The BBC:

Investors have shown unbridled enthusiasm for Alibaba this year. The company's shares were up 5% on the results, and they are up 81% this year. While these numbers seem almost unbelievable by US or European standards, some analysts think there's still plenty of room for growth. 

"That's the challenge evaluating these companies because the market dynamics are so different than in the US and Europe," said Ben Cavender, from China Market Research Group. 

He says e-commerce still only accounts for about 15% of the total retail market in China, so there's still plenty of untapped potential... 

And while Amazon has a presence in China, it hasn't made huge inroads. 

"They don't have the funding, they don't have the brand recognition. They don't have the product that people want at the end of the day," said Mr Cavender. 

On its home turf, Alibaba might be more worried about Walmart, which has a significant bricks-and-mortar presence, and has also formed an alliance with Alibaba's local rival JD.com. South East Asia, with its rapidly expanding middle class, is shaping up as the next battleground for global e-commerce giants. "All of these players are looking at where the emerging spending growth is coming from," said Mr Cavender. Amazon Prime has dipped its toes into South East Asia by setting up shop in Singapore. Alibaba has opted for a different route by partnering with established local players.

More at the BBC. Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. Do you need more strategic experts from the China Speakers Bureau? Do check out this list.  

The first fallout of the CUP censorship – Ian Johnson

Ian Johnson

The decision by the Cambridge University Press to bow to Chinese censorship and block over 300 articles on its China site has shocked the academic world. Journalist Ian Johnson, author of The Souls of China: The Return of Religion After Mao, reports on the issue for the New York Times and tested from Beijing what he could no longer get.

Ian Johnson:

Until now, foreign academic presses were largely immune to this sort of censorship. In recent years, the websites of most foreign news organizations have been blocked in China, as have social media sites, including Facebook, Twitter and YouTube, and the search engine Google. 

But because of their small readership, and high subscription costs (one China Quarterly article costs more than $20), academic journals were not targeted. 

The new measures seem in line with announcements made by President Xi Jinping in February 2016 that all media content on any platform must come under the Communist Party’s “guidance.” 

“The same rules apply to any foreign content, academic or otherwise, that is accessible within China,” said David Bandurski, the co-director of the China Media Project and a fellow at the Robert Bosch Academy in Berlin. “Given Xi Jinping’s determination to rein in dissenting views in the information space, foreign publishers are misleading themselves if they believe they can escape pressure like that facing China Quarterly.” 

Searching for the word “Tiananmen” at the journal’s main page yields 50 results, with the top two relating to the “Tiananmen Papers,” a 2001 compilation of secret documents that is widely considered essential for understanding the events of 1989. Other top hits include an assessment of China’s universities in the aftermath of the student-led movement, and the effect of the crackdown on relations with Taiwan. 

Performing the same search within China, however, yields only five hits, either tangential mentions or urban-planning articles about the square. 

The block appears to go beyond Cambridge University Press’s website to include searches through third-party databases, including JSTOR, a digital library that academics around the world use to perform full-text searches of nearly 2,000 journals, including China Quarterly. 

As of Friday night, it was unclear whether all JSTOR access was now blocked in China.

After news of the censorship spread, academics inside and outside China expressed alarm.

More in the New York Times.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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More academic censorship likely - Victor Shih

Victor Shih

The move by the Cambridge University Press to censor over 300 articles from its China website is most likely only the beginning of more government-led curtailing, says associate professor Victor Shih, author of Factions and Finance in China: Elite Conflict and Inflation to Reuters. Shih himself had two article published at the site.

Reuters:

Many foreign universities have nonetheless rushed to establish partnerships with China to try to tap its growing demand for Western-style education. Critics fear the universities may be compromising academic freedoms to gain access to the China market. 

Victor Shih, an associate professor of political economy at the University of California San Diego, who has had two articles published in the China Quarterly, said he expected more censorship to come. 

"I think it's the first move among many that are still to come as China tries to completely censor all kinds of media content. But I think moves like this shoot themselves in the foot."

More at Reuters.

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Buddhism and freedom in prostitution - Zhang Lijia

Zhang Lijia

Author Zhang Lijia of Lotus: A Novel on prostitution in China discusses Buddhism, freedom and fun as part of the background for her book with Radii China. “Without the inhibition of writing in my mother tongue, I can take an adventure in my adopted language” .

RadiiChina:

Like the lead character Lotus, my grandma was a Buddhist prostitute. I found it fascinating that [a] high percentage [of] working girls have faiths of some sort. I believe religion plays a role of ritualized cleansing, something to make themselves feel cleaner and better. It is driven by survival. Religion plays a different role in Bing’s life. He starts to take an interest in religion as he is going through his first existential crisis. In other words, he is looking for the meaning of life. [They have] different levels of needs. 

How does the concept of freedom influence your writing, especially in contemporary China? 

Art/literature and freedom are synonymous. I think one of the many reasons that the Chinese literary scene is not as vibrant as it should be is due to censorship, as well as writers’ self-censorship. I suffered from this censorship. Some twenty years ago, upon the invitation of a Chinese publisher, I wrote a book about the Western image of Chairman Mao while I was living in the UK. But the book failed to pass censorship. So I made the decision to write in English, so that I can freely express myself. By writing in English, I also gained unexpected literary freedom: without the inhibition of writing in my mother tongue, I can take an adventure in my adopted language. Besides, writing is the space where a writer can feel most free. 

In your book, you show that a lot of these women actually chose to go into the profession where I think a lot of us think sex workers are “raped, dumped by husbands, or tricked by human traffickers.” The other available professions to these migrant workers, like working in a factory or a restaurant, are grueling and low-paid. Why did you decide to show that a lot of these women actually chose to get into sex work as opposed to the traditional narrative that it’s more forced on vulnerable women? 

My extensive research shows that the vast majority of sex workers enter the trade on their free will, but are often obliged by some unfortunate circumstances: having been abandoned by their husbands, having lost their jobs; having some family members seriously ill; or falling for the wrong men. Yes, there’s the temptation of money. Generally, to turn tricks is one of the few or only option they have. I hope the stories I described reflected the reality. By the way, for upper-class prostitutes, it is often a question of lifestyle choice. 

More in RadiiChina.

Zhang Lijia is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers' request form.

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