Chinese people love to try new technologies. Over the past year, virtual reality exploded across the country, attracting attention as well as investment from people who see a potential wave of the future: Analysts predict that China’s VR market will be worth $8.5 billion by 2020. But the real-world business of VR, which surged largely on the back of heavy investment, is less solid than it could be. Some people expect the technology to bring revolutionary changes to many industries like gaming, films and shopping but currently a huge portion of the VR market is still for video games and the business model is not yet solidly defined.
On the surface, digital publishing would seem to be at an early stage in China. Observers say that traditional publishers are not pushing e-editions of their books very hard, and until recently, the government, which is still the industry’s dominant shareholder, has not put its weight behind the format. Look more closely, however, it’s clear that a new publishing ecosystem is already taking shape in China, but it’s not the Amazon co-prosperity sphere model. Instead, digital publishing platforms are becoming the dominant channel for young writers.
Debt is a ticking-time bomb for the Chinese economy. In the past three years central government stopped local governments from financing through investment vehicles and set a cap for the issuance of bonds. But new forms of debt continue to be formed. Local officials appear not to care about borrowing more, as long as the money can be used in projects that may translate to political achievements. And with those achievements, officials will be promoted to a higher level–as will the debt burden. A more worrisome thought will be: can those additional government debts and investments support China’s long-term growth?
The rise of e-books and reading on digital devices has changed every part on the publishing production chain, affecting everyone from the editors, to the designers, to the marketing and sales people. Editors are spending more time on acquiring books and less time working on manuscripts. Designers become more flexible and strategic: they need to make sure a book won’t be ignored by skimmers who only glance at thumbnails on websites, and must ensure that texts are well-laid-out for reading on many kinds of mobile devices. But they’re not who need to change most. It’s the marketing and sales people who face an ever-more-challenging job.
Optimism for Chinese firms over the next six months still holds, but the corporate financing environment is getting difficult and the corporate inventory is increasing, according to the CKGSB Business Conditions Index, which registered 61.5 in February, a slight increase on January’s mark of 59.8. For CKGSBʼs sample of successful businesses operating in China, corporate sales index fell slightly from 82.7 to 80.5, while profits rose from 67.0 to 72.2, both are well above the confidence threshold of 50. Yet the other two sub-indices—corporate financing and in inventory—are below 50.
Over the past two years, the Big Five publisher’s share of the e-book market on Amazon has dropped from 43% to roughly 23%. Publishers Weekly’s Apple iBook Bestseller list also includes self-published authors: on the Feb. 17 list, three of the top ten best sellers were self-published. As these numbers suggest, digitalization is not just changing which books reach the market, but how they are put together. For writers, choosing independent publication is no longer the shameful last resort it once was, and for average writers, this path raises the odds of success from nil to slim.
Over the past year, the housing price in many Chinese cities has doubled. The property industry, which contributed to the economy’s growth, is now ‘hijacking’ China’s economic growth model. Instead of investing in real businesses, individuals and companies are betting on increasing property prices. In this interview, Professor Xu Chenggang talks about the government’s role in real estate regulation, the major challenges of pushing reforms in China and how state-owned enterprises and local governments should roll out these reforms.
After incredible growth in recent years, e-commerce in China seems to be slowing down. One reason behind this is the high penetration rate. By 2016, 62% people in Tier 3 and 4 cities were shopping online, while the number in Tier 1 and 2 cities stood at 89%. On the other hand, consumers in China have also changed over time, now the middle class are shifting their money from cheap products to premium services and goods where experience and recognition ties take priority. So does it mean online retail will go gloomy and physical stores may return to the spotlight?
China’s economic growth over the past few decades has impressed the world. But the world’s second largest economy now faces a difficult transformation: from relying on exports and investments to developing domestic demand. That’s not easy. Government-led stimulus is only a temporary solution and only looked reasonable in the first few years after the recent global financial crisis. In fact, the main problem facing the Chinese economy has been the weak demand in domestic market which manifested clearly in 2006, and became more obvious when growth slowed down.
Digitalization has changed book reading, book production and book marketing, and it may ultimately even change the nature of books. Amazon’s Kindle e-reader sold out in 5.5 hours after it was first released in November 2007 and remained out of stock until April 2008. All over the world, a similar shift has been underway—slower in markets where bookstores and book sales are regulated, such as France and Germany; faster in more open markets, such as China, where more than 2 million digital book titles are now available and nearly half of all books sold are sold online. Yet surprisingly, most book buyers still end up with print books.
China’s home loan market reached $539 billion in the first nine months of 2016, more than double the same period in 2015. Based on figures from Ehomeday, Shanghai’s second-hand home price index rose by 27.82% year-on-year on October 2016. In Q4 2016, the skyrocketing home prices slowed across the country due to tighter government restrictions, but nevertheless, 2016 witnessed an astonishing 19% overall increase in home prices. In this edition of China Data, we bring you the latest numbers from China related to state-owned enterprises reform, China’s export slowdown, outbound tourism, Dalian Wanda’s new studio complex and more.
In China, while state-owned enterprises dominate the monopoly industries like petroleum and telecom, the country’s private economy is still the major source for growth in production, employment and exports. Private companies are very sensitive to market changes: When profit margins shrink, they will jump out quickly. Expectations are low while the Chinese economy is under the ‘New Normal’, but the government is still concerned about private investment stagnation. The top economic agency has created a work team to look into the problem and made 60 proposals to solve the slow-down issue. But will top-down methods work?
Most of us have heard that the secrets of our lives are hidden in our genes. As the technology advances, genetic tests have become common in certain situations, such as prenatal tests and medical treatment. Also, from genetic test results, professionals can read things like your personality, talent and health risks. Many Chinese companies, though with no intention of becoming “fortune tellers”, are luring people to do genetic tests and offer easy-to-read talent results–and public demand is running high. Startups are receiving millions in funds for making this technology accessible to ordinary people. But is the model of selling cheap genetic testing services sustainable? And are these tests accurate?
Over the past two decades, China’s urban population growth has been higher than in the rest Asia or the world as a whole. Young people are migrating to cities, leaving the elderly and children back home on the farm. So as manufacturing and urban life took off, catapulting China to world-power status, rural China and farming lagged behind. Roughly 86% of farms in China were only 1.6 acres, a tiny fraction of the size of the average 441-acre US industrialized farm and most of the work on these small farms is done by hand by an increasingly elderly population of farmers who now average over 50 years old. But that is starting to change.
In our increasingly fast-paced world, there is no room for companies to be complacent. To survive in the competitive marketplace long term, constant product innovation is a basic necessity. However, nearly three-quarters of new products either fall far short of their targets, or fail entirely. Not only that, businesses have become tolerant of this high failure rate to the point where it is treated as a given risk. But Georg Tacke, CEO of the global management and consulting firm Simon-Kucher & Partners, disagrees with this assumption and thinks the failing might be the result of a homegrown issue—from the initial design to end marketing.
China is exporting its high-speed rail to the world. In Turkey, China helped link the capital, Ankara, with the largest city, Istanbul. In Indonesia, construction on the Jakarta-Bandung high-speed railway line will begin this year. In 2016, the government also announced that it will build a high-speed railway to connect Singapore with the Malaysian capital of Kuala Lumpur. Domestically speaking, China has secured the leading position. Its network, already more than 20,000 km and still growing, is longer than the rest of the world’s high-speed rail tracks combined. Now China is targeting the overseas market for economic and political reasons.
Business has changed, specifically the relationship between management and employees. Once upon a time, companies offered careers—long-term, stable employment wherein the employee filled a narrowly-defined role. In past generations, it was common to spend an entire working lifetime at a single company, but now most millennials are ‘less loyal’ to employers, they go where their talents are valued. Edward E. Lawler III, Distinguished Professor of Business at the University of Southern California, expounds on the new model, which he terms “talent management”, a new paradigm focuses on the critical needs of a business, and finding the right people that can fulfill them.
Bitcoin, a virtual currency traded online, was not invented in China, yet China is where 80% of the virtual “coins” are minted and 90% of the transactions are made. Currently, the global bitcoin market amounts to some $14.5 billion, roughly the same amount of money as Apple’s European back taxes. If the virtual currency’s popularity continues to grow, decisions made by Chinese investors and regulators may determine whether bitcoin fades to a historical footnote, like Napster or the eight-track tape, or becomes the silicon cornerstone of a new global financial order. A combination of factors thrust China into this decisive role.
On the morning of June 24, 2016, China woke up to witness an unexpected drama unfolding half a world away. The previous day, millions of UK citizens had voted on whether the UK should remain in the European Union, and all opinion polls, betting and market expectations pointed firmly towards ‘Remain.’ But as the early results came in, the startling prospect of Brexit became a reality. Some people think “Brexit has indeed diminished Beijing’s hopes of treating the UK as a strong advocate for China in the EU”, and there are another voices like “The Chinese… have other ways to penetrate the EU market, for example [through] Greece,” and in a sense they are both right. How will China and the UK’s “Golden Relationship” play out in the Post-Brexit era?
China strives to be a consumer-based economy, so it isn’t surprising that advertising spending has risen by leaps and bounds over the past few years, especially as people become more affluent and are expecting tailored ads. However, the ad spend is also changing to reflect the times. Mobile spending has risen ten-folds in the past three years, while print spending is slowly dropping off. Outdoor ads see consistent growth, while online advertising in 2015 was not as popular as it was in 2014. More changes are sure to come along as the digital disruption continues.