China posted its first overall quarterly current account deficit in 17 years in the second quarter of 2018 as growth in imports continues to outpace exports. Meanwhile, the value of Chinese domestic bonds held by overseas institutions has increased 68% in the past year and that means nearly 6% of Chinese government bonds are now held by foreign investors. Domestically, the number of lawsuits related to online music streaming in China leaped from 20 in 2014 to 535 in 2016 as providers try to enforce exclusive deals with artists. Find out the most important and interesting news here in the China Data section.
The World Bank estimates that up to 77% of jobs in China could be made redundant by machines in the long term. Investing in robots will become more attractive for manufacturers. The Chinese government also pledges to make China a “world factory” of robots. But real changes are much slower. Reports say that large numbers of workers are still used on production lines doing repetitive tasks such as scrubbing speaker systems with toothbrushes. Despite the fact that China’s labor costs are six times higher than 10 years ago, workers are often still cheaper than robots in short term.
For many years, China’s emerging companies, especially those in the internet sector, have relied on foreign capital. Alibaba and Tencent were nurtured by overseas venture capital, and were eventually listed abroad. These two companies have today become world-class giants. The market value of Alibaba was $495 billion as of late May, while Tencent’s valuation was $605 billion. This puts them among the world’s top 10 most valuable companies. The success of China’s leading tech companies is an understandable source of pride to many in China. But for China’s policymakers, a question presents itself: why do so many outstanding Chinese companies end up going public overseas?
Public companies are becoming rarer these days. In the US, for example, the overall number of listed firms has fallen by almost half since 2000. Global M&A could be one reason for this, because being a big firm is very important for many industries and getting internal growth is more difficult than associating with a big company. Meanwhile, stricter rules for public offerings also discourages IPOs these days and the rise of active investors has made venture capital big enough to support unicorns. How will corporate ownership evolve from here? What impact will this trend leave on the economy and society?
The rise of e-commerce has long been touted as a threat to shopping malls and bricks-and-mortar stores, with consumers preferring the ease and convenience of shopping online. But while e-commerce has made serious inroads into certain goods and services, sectors such as fresh food remain stubbornly resistant, even in China, one of the most eager adopters of e-commerce in the world. The country’s internet giants are moving toward a new model, what Alibaba Chairman Jack Ma calls “New Retail” — an integration of online with the offline world that e-commerce was supposed to cannibalize.
China played a surprisingly prominent role in debates surrounding the UK’s 2016 referendum on leaving the EU. For leading “Leavers”, Brexit was a chance for Britain to free itself from a stifling Brussels bureaucracy and build stronger trade relations with upcoming powers like China. But those expecting a blossoming in China-UK relations after Brexit might be disappointed, says Leslie Young, Professor of Economics at CKGSB. Professor Young, who received a doctorate in mathematics from Oxford University in 1971, at the age of 20, and who is now a recognized authority in international economics, explains how Chinese business is likely to be affected by Brexit.
Yuval Ben-Sadeh keeps things simple. For the Chairman of the Israel Chamber of Commerce in China (IsCham), business is business, rules are rules and everything else is just talk. Why waste time arguing about Chinese policy toward foreign businesses when you could be spending that time working out how you’re going to adapt to it?
People love video games. They feel relaxed and entertained in the virtual world. However, there is a trend towards games that are practical and serious—games that are used to teach and train for certain skills. Soldiers, surgeons, securities traders and workers in many other professions train with specialized games. The Brookings Institution estimates that the US military alone spends more than $6 billion a year on video games. “Serious games allow a safe way of rehearsing actions and learning about their consequences as well as transferring previously learned knowledge in as efficient and effective a way as possible,” says computing expert Dr. Andreas Oikonomou.
More domestic brands appearing on store shelves may indicate that the golden days for foreign brands are slipping away. “Made in China” was once considered a sign of cheapness and low-quality, but the belief now has changed. Chinese consumers now think that Chinese brands are equal to, or even exceed, foreign brands. As buyer confidence grows and domestic quality improves, what can multinational brands do to regain ascendancy?
China is now home to many of the world’s largest and most dynamic private companies. But apart from a few exceptions such as Alibaba’s Jack Ma, little is known outside China about the intrepid entrepreneurs who built these business empires, often against astonishing odds. Professor Peter Cappelli at The Wharton School, University of Pennsylvania and author of Fortune Makers: The Leaders Creating China’s Great Global Companies, is trying to change that.
China has banned borderless cryptocurrencies like bitcoin, but it is a move the country may come to regret. Until recently, China was the world’s largest market for virtual currency and digital currencies trading and China’s ban on Bitcoin came abruptly. Some experts think Beijing’s intention is to regulate the market, not hobble it—but the crackdown may last for a while. The future for cryptocurrencies in China is unclear, because the Chinese government is also backing the underlying blockchain technology. Will cryptocurrencies come to light again?
Over the past five years, the business model of China’s clothing industry has been unraveling. For decades, China’s vast apparel industry competed mainly on price. But with labor, land and raw materials costs rising, environmental regulations tightening and competition becoming ever fiercer, even many of China’s best-known brands have struggled. There has been one exception: HLA. The Jiangsu Province-based menswear label has grown stronger even as competitors shuttered hundreds of outlets. In this interview, Li Lode, Professor of Operations Management at CKGSB and Professor Emeritus at Yale University, explains how HLA’s success has been made possible by smart strategic decisions.
Becoming a movie star isn’t attractive anymore. For many young netizens in China, online stardom is the ultimate dream, not only because online celebrities now earn even more than A-list movie stars, but also they are able to influence hundreds and thousands of people just by go livestreaming, sharing beauty tips and fashion trends and posting their own selfies. Consumer brands and clients are chasing after these online celebrities. Reports say the online celebrity economy by some calculations is worth more than the country’s domestic film industry. How to become an online star? How do they make money? What’s behind the rise of “wanghong culture”?
Few in the expat business community can rival Patrick Horgan’s depth and range of experience in the Chinese market. Since first coming to China as a volunteer in 1989, Horgan’s career has spanned business, diplomacy and cultural relations. Since 2011, he has been Regional Director of Northeast Asia for Rolls-Royce. As he tells CKGSB Knowledge, he believes China’s development ambitions make this an exciting time to be at the British manufacturing giant. China now has about 2,800 aircraft while in the US the number is 7,000 and there is a massive opportunity for international air framers and engine providers.
Central and Eastern Europe faces a tough balancing act as it looks toward China for investment and growth. Launched first in 2012, the “16+1” Cooperation Framework includes 16 countries in Central, Eastern, and Southeastern Europe. As a key part of the Chinese transcontinental economic and geopolitical vision, the heavily invested “16+1” becomes a perfect solution to some Central and Eastern Europe countries facing economic crisis. This closer tie with China, however, has made EU rattled. How to balance the relationship with EU and China becomes a head-scratching problem for many.
The first wave of Chinese entrepreneurs are now in their 70s and 80s and it’s time to hand over the family business to their children. But in many cases it may not happen. With greater opportunities and a more international worldview, the younger generation has their own plans. Will this lead China to a business succession crisis?
Few people have had the opportunity to watch the rise of video games as an economic and cultural force as closely as Jordan Mechner, who began making video games while in high school in the 1970s. He had his first hit, Karateka, in 1984 while he was still in college, and later went on to create the Prince of Persia franchise, which to date has sold over 20 million copies. In a wide-ranging interview over Skype from his office in Montpellier, France, Mechner, who is also a successful screenwriter and graphic novelist, talked about the evolution of game design and where games might head next.
Few people outside China will have heard of Bytedance, the Beijing-based software startup that creates fiendishly addictive content apps using world-leading artificial intelligence technology. However, more than 200 million people in China—or over one in four of the country’s mobile users—use Bytedance’s products every day, and now the company has ambitions to hook the rest of the world on its apps too. Huge traffic brings customized contents to Bytedance users, which is the magic code for its success. But copyright lawsuits and competition from the BAT companies are just two of the challenges Bytedance faces.
Forget e-commerce. In today’s China, the smartest businesses are moving the digital revolution into the offline world as the boundaries between online and offline become increasingly blurred. The integration of information technology into our daily lives is allowing companies to apply advanced big data techniques to transform a range of industries previously considered relatively impervious to digital disruption. For businesses across nearly every sector, the key to future success now lies in three areas: data, smart systems and the sharing economy.
As Donald Trump signed the memorandum proposing the introduction of tariffs on $50 billion of Chinese imports on March 22, 2018, the president of the United States quipped, “This is the first of many.” He didn’t go back on his words. No one seems to be a winner, but the trade war goes on and the entire world is paying close attention. Although both sides express willingness to have talks, can the trade war be stopped? What’s the future for US-China relations?