China Challenges

Marketers Are Learning to Use Microblog Sina Weibo in China

AdAge Global says:

A handful of companies are already figuring out how to use Sina Weibo well, including sportswear brands Nike, Li Ning and Adidas, French skincare and cosmetic companies such as L'Oreal and Estee Lauder, Chinese-made Herborist, and U.S.-based Benefit Cosmetics. Successful advertisers on Sina Weibo post daily updates beyond their own brand and product offerings and talk about lifestyle issues and trends.

Starbucks is the "clear leader," Mr. Chew said. "They were one of the first to go into location-based [marketing], one of the first to go into weibo. Not only do they bring out lots of coupons and deals which fans love, but they ask interesting questions, they thank and reward fans, so it's a genuine two-way relationship and their tone and manner are very much like your friendly neighborhood cafe vs. a brand talking to a mass of consumers."

"More and more" luxury brands such as LVMH, Burberry and Swarovski have turned to Sina's microblogging service too, especially to tweet alongside offline events, said Hong Kong-based Gallie Ng, a Sina Corp. assistant manager of marketing and PR. (Sina Weibo didn't participate in the "Thoughtful China" video show, but Ms. Ng responded to questions later by email). "They can leverage this platform as a channel to deliver the most-updated information and events coming up to their followers [and] share instant updates and joy with users who cannot attend."

Lenovo, for instance, has set up both its own corporate account and a separate customer service account on Sina Weibo, she said. And Enterprise Weibo lets companies create Facebook-like fan pages that include photo albums and video, and provides tools to analyze fans' data and behavior, she said.

Read more: http://adage.com/article/global-news/marketers-learning-microblog-sina-weibo-china/230074/

 

Chinese Women Keep Shopping Despite the Gloom

Shaun Rein says:

My company interviewed 500 consumers in five cities last month. We found consumer confidence to be at the lowest point since the start of the financial crisis in 2008 with dissatisfaction largely stemming from inflation. 

However, there is a silver lining. Women consumers in China are still willing to spend, but how and what they spend on is changing dramatically. Western brand managers need to understand these changes and adjust their product selections as well as marketing messages or else they will make mistakes and end up retreating from the market as Best Buy and Barbie did.

Instead of cutting back on spending, we found the vast majority of women - perhaps surprisingly given the overall gloom - were spending more. However, they were seeking value more than ever before in their purchases.

The shift towards value rather than price sensitivity bodes extremely well for brands with premium and luxury positioning like Nike and Cartier. For instance, the vast majority of women said that instead of buying bright colored blouses that could only be worn once in a while, they were buying shoes, wallets and jewelry they could wear every day.

Read more: http://www.cnbc.com/id/44665617/

How to Argue With a Protectionist

Stan Abrams writes at China Hearsay:

Daniel Mitchell, writing at Forbes, poses eight questions to protectionists. This is great stuff by and large, although I can’t sign off on all eight of these questions. Mitchell’s arguments are a reminder to me how difficult it is being a liberal free trader. Unfortunately many of my fellow free trade enthusiasts turn out to be libertarian types whose opinions on other issues make me very uncomfortable.

Let’s have a quick look.

Question 1: Do you think politicians and bureaucrats should be able to tell you what you’re allowed to buy?

This has obvious appeal to the libertarian set as it poses the issue in terms of personal freedom. These are the same people in the U.S. who passionately believe that their ability to purchase incandescent light bulbs is something akin to a God-given right.

Nevertheless, Mitchell’s question is a good one in terms of imports versus domestic products. Unless there is a good reason (e.g. product safety), I don’t think the government should get in the way of that purchasing decision. All else being equal, therefore, why should the government force us to buy a domestic product just to make a domestic producer happy?

Question 2: If trade barriers between nations are good, then shouldn’t we have trade barriers between states? Or cities?

Read more: http://www.chinahearsay.com/how-to-argue-with-a-protectionist/

Will China Help Europe?

At Asia Times Online, Pepe Escobar writes:

As for China, ask not what Beijing could do to Europe; ask what Europe has done to Beijing. Well, not much. The bombing by the North Atlantic Treaty Organization (NATO) of Libya into democracy translated into massive losses for China, including the lightning repatriation of over 36,000 Chinese workers, and cancellation of dozens of contracts. Not to mention that NATO's war was fundamentally opposed by the BRICS - and the "NATO rebels" in Libya have already threatened to sideline Brazilian, Chinese and Russian companies from the fresh Libyan loot.

What Beijing really wants can be gleaned from what top adviser to China's central bank Li Daokui said at the recent World Economic Forum in Dalian, "The incremental parts of our foreign reserve holdings should be invested in physical assets."

Translation; "We would like to buy stakes in Boeing, Intel and Apple, and maybe we should invest in these types of companies in a proactive way." Daokui said there is an astonishing "$10 trillion" waiting to be invested in the US; over the collective dead body of the Republican party, one might add.

Daokui also said that only after "the US Treasury market stabilizes" would China be willing to "liquidate more of our holdings of Treasuries".

The operational word here is "liquidate" - not "diversify". That is, Beijing really wants to get rid of all those US dollars.

Read more: http://www.atimes.com/atimes/Global_Economy/MI21Dj04.html

Subprime crisis sweeps Wenzhou as bankrupt bosses flee

Shanghai Daily reports:

THE east China city of Wenzhou is battling its own subprime crisis after seven local business owners fled recently, leaving thousands of employees in a state of shock and enormous unpaid loans in hundreds of millions of yuan.

Most of the runaway bosses who have disappeared since September 12 are in the manufacturing industry, according to today's National Business Daily. Each of them had borrowed hundreds of millions of yuan from banks and private creditors.

Subprime lending in Wenzhou, the cradle of China's private economy, has been booming since the country tightened its money supply late last year to curb soaring inflation. State-owned banks are ordered to stick to a mandatory loan-to-deposit ratio and are reluctant to offer loans to small firms like those in Wenzhou over default risks.

The closed door to bank borrowing has forced some business owners to turn to private lenders, mostly illegal, despite the higher costs of their loans.

But when their business failed to perform as expected and it became obvious that the bankrupt business owners would not be able to pay their debts, some decided to flee.

To read more: http://www.shanghaidaily.com/nsp/Business/2011/09/23/Subprime%2Bcrisis%2Bsweeps%2BWenzhou%2Bas%2Bbankrupt%2Bbosses%2Bflee/

Inflation in China - Perception versus Reality

The WSJ says:

“Why is there such a big gap between peoples’ perception of high inflation and the relatively low numbers for changes in consumer prices reported by the NBS?”

The answer from Pang Xiaolin of the NBS: Everyone’s consumption basket is different, so some people will see prices rising faster than the average recorded by the CPI. People also buy food in different places, and might see prices rising sharply in their neck of the woods when prices elsewhere rise only more modestly.

Read more: http://blogs.wsj.com/chinarealtime/2011/09/20/chinas-national-bureau-of-statistics-eats-its-vegetables-and-buys-them-too/

Spoiled Brats in China Running Amok: Not A Rich/Poor Issue

China Hearsay says:

Parents in China operate from the beginning from a weak position. Because of the One Child Policy, kids know from the outset that the entire family is devoted to the child’s well being and success, sometimes forking out half of the family income on rug rat-related costs. Admittedly, that narrow focus can lead parents to place burdensome and unrealistic expectations on a child, transforming the kid into a stressed-out library troll by the age of 12. However, the same situation can also result in pampered, self-important brats with a mammoth sense of self-importance. Note that the two situations are not mutually exclusive.

The important thing to remember here is that “spoiled” does not necessarily mean wealthy. I was at a cheap noodle shop the other day. At the table next to me was a grandfather type with cloth shoes and a wardrobe that went out of style in the 70s. He was accompanied by his grandson, who had a serious case of ants-in-the-pants and couldn’t sit still. Instead of either telling the kid to sit down and shut up or removing him from the premises, grandpa decided to let the kid do whatever he wanted, which included running up and down the aisles, shouting at the top of his lungs.

Most of the patrons were amused, laughing politely. Or at least they pretended to be amused. I have a feeling that some of them wished the kid would go the f&@( away and let them eat in silence, but because of the “Cult of the Child,” it isn’t polite to express that opinion. (By the way, the Cult of the Child is not a China phenomenon.)

That screaming little bastard I saw in the noodle shop is not wealthy, and I doubt he will have access to this country’s better educational institutions. It is unlikely that he will grow up to own multiple houses, play golf, and drive around in expensive foreign cars. Consequently, we will not in the future be reading about him jumping out of an Audi and stabbing someone.

Read more:

America, Meet China: An Education Comparison

OnlineUniversityRankings.com has collected a set data comparing the two countries in the classroom. See it here: http://www.onlineuniversityrankings.com/america-meet-china/

IKEA in Shanghai clamps down on Match-makers

China Daily says:

SHANGHAI - What started out as a "match-making corner" with free hot coffee at IKEA has gone cold.

So many people have been gathering at the Swedish furniture giant's store in Shanghai that the retailer has had to set up a separate area for those who come just for free java and a chat.

"It's sheer discrimination against us to separate us from the other customers," said a 65-year-old man who refused to be named.

He did confess, though, that the aim of his regular IKEA visit is not for shopping, but making friends.

"I never buy anything here, because things are too expensive," he said.

A group of mid-aged and elderly people - sometimes as many as over 500 - gather every Tuesday and Thursday afternoon in the restaurant where they can enjoy free coffee with an IKEA membership, which can be easily obtained with their identification cards.

According to the participants, the so-called "match-making corner" has existed for at least two years.

IKEA posted a notice in the restaurant two weeks ago saying that the group has caused trouble for the operation of the restaurant.

According to the notice, the group occupies seats for a long time, preventing other customers from sitting down. They also talk loudly and sometimes quarrel or fight, which disturbs the other customers.

Read more: http://www.chinadaily.com.cn/china/2011-09/17/content_13724537.htm

Apple's Future in China

Frank Yu writes in the China Economic Review:

I predict that China will be Apple’s primary emerging market as the company releases new affordable products targeting China’s growing middle class. Cheaper “nano” versions of iPads and iPhones seem likely in the future. While it hasn’t generated the same buzz as mobile devices, the new Apple MacBook Air seems to be designed with the Chinese consumer in mind. Light, small, powerful and affordable with the entry level version selling at around US$1,000, the smallest version can even fit into a woman’s handbag.

The coming year will be critical for Apple. Some joke that the authoritarian rule of Steve Jobs over the Apple eco-system makes Beijing seem laissez-faire in comparison. However, given the growing conservative sentiment of the Chinese regulatory watchdogs, that’s a good thing for Apple. But Steve Jobs is looking to retire, and Apple is preparing to release the next generation of its OSX operating system. How both changes will play out remains to be seen, but if it sticks with its current China playbook, Apple will be able to keep cashing in on its solid groundwork for the foreseeable future.

Read more: http://www.chinaeconomicreview.com/en/content/pax-applonia

Why Wealthy Chinese Are Fleeing China

Shaun Rein says:

My firm interviewed 36 Chinese worth more than 100 million yuan who have already migrated or are thinking about it. None reported government interference into legitimate business operations as one of the top five reasons for taking foreign passports. In fact, over 90 percent who took foreign passports kept businesses in China and remained in the country over eight months a year. That hardly sounds like businessmen fearful about limited business operations and the government.

The two main reasons wealthy Chinese took foreign passports were for education and health care reasons. Having foreign passports made it easier to secure visas to seek medical care. 

Some families reported wanting to send children to international schools in China, an option off limits to Chinese passport holders. China’s weak education system made some families want to send kids abroad to study.

Read more: http://www.cnbc.com/id/44481201

How American Colleges Can Better Serve Chinese Applicants

Tim Hathaway writes:

The ethical debate over whether to use paid agents to recruit students abroad has polarized college admissions officials in the United States. No one disputes that the best interest of students must be protected, but their voices are conspicuously absent from the discussion.

For a Chinese-language newspaper, I recently did a report on the use of such agents in China. A study done at Iowa State University and published in the Journal of College Admission suggests that most Chinese undergraduates enrolled at American colleges had relied on intermediaries to help them navigate the admissions process. Through dozens of interviews with agents, students, and experts, it became clear to me why that is. A tremendous disconnect exists between Chinese students and American universities.

Read more: http://chronicle.com/article/How-American-Colleges-Can/128861/?sid=gn&utm_source=gn&utm_medium=en

Top of Chinese wealthy's wish list? To leave China

MSNBC reports:

BEIJING — Chinese millionaire Su builds skyscrapers in Beijing and is one of the people powering China's economy on its path to becoming the world's biggest. He sits at the top of a country — economy booming, influence spreading, military swelling — widely expected to dominate the 21st century. Yet the property developer shares something surprising with many newly rich in China: he's looking forward to the day he can leave.

Su's reasons: He wants to protect his assets, he has to watch what he says in China and wants a second child, something against the law for many Chinese.

The millionaire spoke to The Associated Press on condition that only his surname was used because of fears of government reprisals that could damage his business. China's richest are increasingly investing abroad to get a foreign passport, to make international business and travel easier but also to give them a way out of China.

Read more: http://today.msnbc.msn.com/id/44422237/ns/business-world_business/

China Daily versus MNCs

Stan Abrams writes:

Take for example an article from last month in China Daily, entitled “Multinational firms’ tricks.” The title speaks for itself, and the article, which is not limited to the food sector, goes after P&G, ConocoPhillips, KFC, Unilever, and Adidas.

Have these companies done anything wrong? Perhaps (particularly with respect to ConocoPhillips), although I would respectfully suggest that P&G’s “complicated refunding process” and KFC’s use of powdered (as opposed to liquid) soy milk pale in comparison to the type of poison food scandals we’ve grown accustomed to.

Even worse was the inclusion of Adidas in that list. The reference in the article was to the Greenpeace report on NPE, a toxic chemical. The report named quite a few multinational companies (or their local partners) that are discharging the chemical into the environment, including Chinese sportswear giant Li Ning. Although they were accused of the same lax standards by Greenpeace, somehow China Daily saw fit to include the name of Adidas in its article but not Li Ning. Curious.

Reuters ran an article earlier this week about the problem, which led off with this:

Major Western firms are under increasing scrutiny from China’s state media, facing exposes and fiery criticism over hot issues like food safety, and made easy targets by their high profiles and lack of political protection.

How is this campaign proceeding? I took a look at today’s offerings from China Daily and quickly found the following:

Nike admits to false advertising

Foreign brands accused of cheating

Again, I’m not suggesting that these stories are inaccurate. The point is that even relatively minor infractions by multinationals over here always run the risk of being latched onto by the press, which is often on the lookout for “MNCs behaving badly” stories.

Read more: http://www.chinahearsay.com/china-attempts-ugly-friend-gambit/

Who buys from China?

The Quality Inspection Tips blog says:

When I read articles from American newspapers, it seems like the USA buy most of China’s exports. Wrong!

European countries purchase about as much from China as the US, and then there is the rest of the world–this last category is the one that receives most of China’s exports. And its share is growing!

Mike Bellamy explains this trend in Chinese Exporters and New Markets:

In the past 15 years, if there was a China sourcing play to be made by fortune 500 companies, the move was done long ago. All of the big American companies and most of the medium sized companies have found their suppliers in China and have settled into a stable relationship. But the big and medium sized companies in developing countries — in places like Latin America and former Soviet states — are just now getting around to jumping on the China sourcing bandwagon.

Well, not only are these countries late to the outsourcing game, but their economies are often growing much faster. I heard many stories about Russians or Brazilians who are eager to spend their cash.

Read more: http://www.qualityinspection.org/

Workers in China and India Most Likely to Play Hooky

The WSJ reports:

Among all the possible explanations for why China and India have experienced explosive economic growth in recent years, worker dedication doesn’t appear to be one of them.

According to a new Harris International survey on worker absences, workers in China and India – the world’s second and 10^th largest economies, respectively – are the most likely to take bogus sick days.

The survey, conducted on behalf of Massachusetts-based workforce management firm Kronos, found Chinese workers were the most likely to play hooky, with 71% admitting they had called in sick despite not actually being sick. India came in second with 62% of workers copping to the lie.

France finished last (or first?) with 16% while the U.S. (52%) and U.K. (43%) finished in the middle.

Read more: http://blogs.wsj.com/chinarealtime/2011/09/02/workers-in-china-and-india-most-likely-to-play-hooky/

Apple Cited as Adding to Pollution in China

NY Times reports:

SHANGHAI — A Chinese environmental group has singled out Apple for criticism, accusing the company’s Chinese suppliers of discharging polluted waste and toxic metals into surrounding communities and threatening public health.

The group, the Institute of Public and Environmental Affairs in Beijing, released a 46-page report Wednesday documenting what it said was pollution from the dozens of “suspected” Apple suppliers throughout China.

The report, which the group said was based on visits to many of the factories’ regions, said that factories that the group suspected were Apple suppliers often “fail to properly dispose of hazardous waste” and that 27 of the suppliers had been found to have environmental problems.

Read more: http://www.nytimes.com/2011/09/02/technology/apple-suppliers-causing-environmental-problems-chinese-group-says.html?nl=todaysheadlines&emc=globasasa26

Marketing to China's Youth: Fitting In and Standing Out

Knowledge at Wharton says:

“The kids in China now can decide what they want,” says Qiaowei Shen, a Wharton marketing professor who was born in Hangzhou and educated in Beijing before moving to the U.S. “When I was young, you would accept what your parents chose for you. We weren’t rich. There wasn’t a lot of money to spend.” Today, youth are more focused on their own needs, and “more than ever before want to define themselves in a different way," she says. "They want to be unique…. I think there’s an awakening sense of self.”

That awakening has been most apparent in Beijing, Shanghai and China's other big cities, as young urban shopaholics tote Prada, Gucci, Hermes and other top-end labels, "to show their social status [and] wealth and to impress others," says Shaun Rein, founder and managing director of China Market Research Group (CMRG), a market intelligence firm in Shanghai, and author of a forthcoming book, The End of Cheap China.

He cites CMRG research involving 5,000 consumers in 15 Chinese cities, which found that consumers under the age of 28 "had zero savings." The reason? "They are so optimistic about their futures that they are willing to spend everything they earn on clothes and consumer electronics. [The survey respondents said they] expected 10% to 20% annual salary increases so that they are spending completely [for purposes of] enjoying themselves." A lot of that optimism, he adds, has helped drive up the number of credit cards in circulation in China, from 13.5 million in 2005 to 240 million last year. "That is why you often see Chinese secretaries making US$800 a month buying US$1,000 Gucci bags," says Rein.

Read more: http://www.knowledgeatwharton.com.cn/index.cfm?fa=article&articleid=2442&languageid=1