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.
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.
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.
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?
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.
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 […]
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.