As the Chinese economy shifts from exports and investment toward domestic consumption, the country is counting on the middle class to drive consumption levels higher. A good reason to be optimistic is that the growing middle class club, with more millennials, is getting more comfortable with borrowing. Yet it is also a worrying phenomenon because the amount of consumer debt keeps climbing. Meanwhile, the red-hot property market has always been a heavy burden on Chinese households and has been getting even heavier in recent years. Will China’s middle class be derailed? Should we worry about the finances of Chinese middle class?
In the eyes of insiders, if you are not talking about “AI and Finance,” then you risk being left behind–just as stubborn holdouts in another era were stranded when they failed to accept the Internet. Traditionally, finance has had two core functions: to lower transaction costs and to improve asset pricing. The use of the Internet has undermined the first by enabling more direct transactions, and AI is now disrupting the second by improving the speed and accuracy of asset pricing. Threatened by this are services like asset allocation, investment advisory and insurance pricing, which affects not only banks, but also investment and insurance firms.
Economic changes and government policies are driving millions of China’s migrant workers away from the wealthy coastal regions back to the less developed western regions. The trend is a clear sign that a fundamental change to China’s economy is in progress, as a growth model that lifted more than half a billion people out of poverty starts to slow. From the early 1990s onwards, China’s double-digit GDP growth was fueled largely by the cheap labor provided by people leaving their farms in China’s poorer inland provinces to find work in the factories springing up along the coast. Now this has changed.
Imagine a city where commuters are chauffeured to work by self-driving cars and artificial intelligence systems control every power plant, traffic light and light bulb, making road accidents, power cuts and even traffic jams a thing of the past. Thanks to 5G, the latest protocol for mobile communications, this vision may be realized soon. The world’s leading telecoms companies are already testing the next generation of wireless internet and the first 5G services could be rolled out in 2019. China and the US are locked in a furious battle for control of this and the winner will gain a big economic advantage for years to come.
One of the world’s most high-profile China experts, Shaun Rein made his name by highlighting new trends in the Chinese economy years before the Western media caught on. In 2012, his first book, The End of Cheap China, highlighted that China’s low-cost manufacturing miracle was coming to an end. Two years later, he correctly predicted the rise of a new generation of innovation-led Chinese companies in The End of Copycat China. In his third book, The War for China’s Wallet, he tells us that it has never been more critical for brands to understand the Chinese market.
Decades of breakneck development in China have taken a terrible toll on the air, water, and soil. The good news is that the government has started a massive anti-pollution campaign, investing at least $477 billion in environmental protection and shutting down thousands of factories. While many are being driven out of business by the campaign, it’s also creating new opportunities for green technology companies and pushing manufacturing companies to upgrade. And although a government-led campaign, further clean-up efforts can be made by private companies as local governments search for clean solutions.
What makes Chinese consumers tick? That’s the question Chris Reitermann, CEO of Ogilvy China, has been puzzling over for the last two decades. Reitermann began his career at advertising giant Ogilvy & Mather in the 1990s, moving to Beijing in 2000 to set up the digital agency OgilvyInteractive. Since then, he has risen to head up the company’s entire operations in China. In this interview, he discusses the dramatic changes that have taken place in Chinese advertising during his time here, why China has much to learn from India on running a great campaign, and what the industry may look like by 2027.
It’s a comeback story worthy of a Hollywood blockbuster. Three years ago, China’s once all-powerful liquor maker Kweichow Moutai looked to be on the ropes. President Xi Jinping’s anti-corruption campaign had dealt a vicious blow to the country’s most famous spirit brand—for years a staple on every government banquet table—and the company’s profits and share price had taken a hammering. By January 2014, Moutai’s shares were worth just over RMB 119 ($18.31) per share—a fall of 50% in 14 months. With no end to the crackdown in sight, some questioned whether the legendary distiller would ever recover.
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.