As the world’s most populous country, China should have the potential to become the world’s most profitable music market, yet it is far away from that—China was the 12th largest market in 2016, with $202 million in revenue compared to the US’s No.1 ranking of $5.3 billion. But there are important differences in the way music is consumed that may give China a business edge. Led by internet firms like Tencent, China has adjusted to the digital future of music more quickly, with a whopping 96% of music revenue from digital releases and 75% of that number coming from streaming sales.
China has been involved in Africa for decades, with total investments reaching $3.5 trillion by the end of 2015, nearly seven times the 2007 amount. Over 10,000 Chinese firms are operating there, handling 12% of Africa’s industrial production. Now, in addition to the traditional large construction projects, Chinese firms are also getting involved in retail markets like smartphone and home appliances. As China’s momentum in Africa has picked up, so too has the need to expand beyond economic involvement. A key event happened in July 2017, when China dispatched military personnel to set up its first overseas base in Djibouti, the small but strategically-placed country on the Gulf of Aden.
Like its whole economy, China’s auto market grew at breakneck pace in the 2000s, and while it is slowing down, it still contains enormous potential in terms of both raw sales and innovation as China shifts toward electric. The Chinese government is actively promoting new-energy vehicles, offering subsidies that amount to about 23% of the price of a vehicle. And consumers, many of whom no longer consider car ownership as a status symbol, are more willing to buy electric cars. Yet despite favorable policies and growing market demand, there are challenges ahead: lack of power stations, fragmented manufacturing of power batteries and insufficient innovation.
When talking about the Chinese wine market, most Westerners think of baijiu, a strong alcoholic beverage made from grain. But young Chinese have now developed their taste for various non-Chinese wines—red, white and sparkling—and wine can be found at parties, banquets and even dinners serving strongly-flavored Chinese foods, such as hotpot. Claudia Masüger, a businesswoman from Switzerland who has been importing wines to China for over a decade, says the Chinese are becoming more sophisticated in their taste for wine, caring not just for wines, but for pairing food with the right variety of wine. Furthermore, the market for western wine in China is even larger than imagined.
Chinese tech giant Tencent surpassed Facebook in market value this November, and is the first Asian company worth more than $500 million. Unlike Facebook, which earns 97% of its revenue from advertising, online advertising only represents 16.9% of Tencent’s revenue, according to the company’s Q3 2017 report–lagging behind domestic competitors like Alibaba in terms of ads gain. Determined now to gain a larger slice of the digital advertising market, Tencent focuses on improving targeting and algorithms to intensify ads on its ubiquitous platform WeChat while not undermining the user experience, as well as leveraging opportunities in the company’s other products and services, including mobile games.
BGI, China’s biggest genetics company, offers genetic testing services around the world and did an IPO on the Shenzhen Stock Exchange in 2017. In 2016, the company recorded revenues of RMB 1.7 billion ($261 million), with a net profit of RMB 350 million ($54 million)–an increase of 28% over the previous year. However, in a country prone to market hype, there are those who view BGI’s dramatic stock performance with a dash of skepticism: The market valuation of BGI is high, mainly because there is room to imagine future developments in the genomics industry. BGI’s future success will hinge on its ability to lead the technology change, and that is no small challenge.
What does it mean to have a mind? What is the nature of intelligence? Such questions have motivated Brian Christian, a computer scientist who holds a philosophy degree. He has been studying the gaps and overlaps between humans and machines, and investigated dehumanized communication as a result of increasing machine interactions in his bestseller The Most Human Human. In his second book, Algorithms to Live By, co-authored with cognitive scientist Tom Griffiths, he says that computer science actually gives us a way of thinking in new terms about what it means to be rational.
Are smartphones making us smarter? Bosses are especially concerned about this at the workplace because people check their phones as often as 150 times a day–meaning we may be distracted more than 50% of the time at work and have lower productivity. However, our devices are good for relationship building, and having a good friend at work tends to extend an employee’s stay at a job. In addition, smartphone use helps ensure that the workday never really ends and work time can extend into evenings and weekends. This could be both good and bad news because long hours can translate into lower productivity and, eventually, illness.
In the summer of 2017, MSCI finally agreed to include China mainland stocks in its global benchmark equities indices. The decision means Chinese stocks will become a must-have part of many investor’s portfolios. Indeed, it’s a big opportunity for foreign investors, but the risk management is tricky in many regards. For one thing, speculative mom-pop retail investors have been dominating the Chinese stock market and for another, the state-owned firms have intervened in the trading market to a worrying degree. How will the market change and what can investors expect from this volatile yet promising market?
How do big multinational companies innovate? According to Kapil Kane, Director of Innovation at Intel China, there are three ways: partnership, acquisition and in-house development. The problem with the last of these is that in-house R&D laboratories may be good at invention but not at innovation—that is, finding new uses for, or making improvements to, existing products and processes. Kane aims to fix this at Intel China with his Ideas2Reality (I2R), a startup program nested inside Intel’s China operation that encourages employees to submit ideas, which are vetted, incubated and accelerated using the same principles used by leading Silicon Valley accelerators like Y Combinator.
Although China views space exploration as important for bolstering national prestige and influence, boosting national defense, and promoting domestic industries and economic realignment, the country’s space program is still far behind the United States. It has fast caught up fast with other nations, however. China aims to send a rover to Mars and launch a manned space station by 2020, and is also testing the ability of astronauts to stay on the moon for extended periods. And while the government increases its efforts, private companies are also joining to make a presence in space exploration.
Companies are dying fast these days. In the 1950s, the average age of a company on the Standard & Poor’s 500 index was 60 years, now it is less than 20. But International Business Machines (IBM), known as “Big Blue”, seems to be an exception. Over the past few decades, it has managed to keep up as others were dying and has successfully transformed itself. Now it has become a provider of cognitive solutions and cloud services. How has such a giant company managed to transform? Gill Zhou, chief marketing officer of IBM China, offers an answer in this interview with CKGSB Knowledge.
On April 1st, 2017, the Chinese government announced the formation of a new special economic and development zone: the Xiong’an New Area. About 60 miles southwest of Beijing, in Hebei province, the area will combine the now relatively rural counties of Rongcheng, Anxin and Xiong. With an expected investment of $583 billion over the next 20 years in infrastructure alone, Xiong’an is set to transform from a largely agricultural and low-tech manufacturing region, into a high-tech, environmentally sustainable modern metropolis. It will also, according to the plan, alleviate some population pressures from Beijing while serving as a destination for some administrative departments, logistics bases and other government offices.
Click to download the CKGSB Knowledge Fall 2017 Issue, No.27 The Fall 2017 issue of CKGSB Knowledge is out! It has articles and interviews like: COVER STORY: State-owned Reform: China’s massive state sector is going through massive reforms COMMENTARY: A Confucian Renaissance: China’s success has some asking whether the Middle Kingdom is ready to lead the world—it may not be, but […]
The sharing economy exploded in China this year, with companies for all kinds of shareable objects taking part in this new business model. While there are businesses familiar to Westerners—shared offices, cars and rides—there are also ideas that seem a little kooky, such as shared basketballs and umbrellas. Although some call it innovative, many realize these companies are just “rental 2.0” companies, assisted by digital technology. As the concept reaches fever pitch, however, it is also facing a reality check, especially as many firms, ballooned by venture capital funds, start to show signs of failing.
For the past few years, China has been pursuing a new and ambitious state-owned enterprise (SOE) reform program. SEOs are huge in terms of size, yet they only provide 16% of jobs, less than a third of national economic output, and a return on assets of only 2.9%. Hugely inefficient, debt-ridden and responsible for most of China’s ballooning corporate debt, SOEs are a drag on an economy that Beijing wants to transition—unlike past efforts which is about privatization, but just the opposite—from investment and export-driven to services and consumption-driven.
Many developing nations see China as a champion and as an investor. Western countries wish to see China shoulder a greater share of the burden of global leadership, and a growing number of Chinese citizens want China to reclaim its ancient role of international dominance. But is China ready to “lead the world?” Has it reached the stage where it can set the international tone, take the central role on global issues and provide preeminent guidance toward the future? To many the answer might be “yes”, but as the foundations of the powerhouse economy are actually weaker than they seem, that assessment may be premature.
Interesting and important China related facts you should care about—from China’s service sector growth to the drastic increase of e-sports players and their audience. You may also care about the country’s new fusion reactor setting a new record in July, and that international sewage and water treatment companies are set to chase big opportunities because the central government has pledged to lay 126,000 kilometers of new sewage pipes by 2020, enough to circle the globe three times. Plus, unknown to most, the Middle Kingdom has quietly grown into a cannabis superpower with half of the world’s legal cannabis cultivation, which is used in textiles and pharmaceuticals.
For foreigners, doing business in China is tempting but challenging. Aside from all the difficulties of language, culture and social conventions, the most difficult challenge is understanding local laws and regulations in order to proactively protect your company’s operations and assets. Dan Harris, an attorney at his Seattle-based law firm Harris Bricken, has been helping clients navigate China’s legal landscape for almost 15 years. Since 2006, he has co-authored the China Law Blog, which delivers practical knowledge of Chinese law as it impacts on business. In this interview, Harris discusses legal issues important to companies doing business in China, including compliance, corruption and IP protection.
China led the world technologically in the early 15th century, yet Europe surpassed it overnight. How did this come about? Maverick economist Deirdre McCloskey offers an answer in her work. Although in her youth she fell under the sway of socialist economists, she brings an iconoclasts’ view to her subject believing it is wrong to limit the achievements of humanity to academic theories concerned solely with maximization of utility. Her latest book, Bourgeois Equality, is the concluding volume in a trilogy that seeks to explain “The Bourgeois Era,” which she believes laid the basis for the material and spiritual wealth enjoy by the modern world.