Why China Can Dominate Next-Generation Manufacturing

In a recent article in the Washington Post, “Why China won’t own next generation manufacturing,” the author Vivek Wadhwa discusses China’s new 10-year plan, called “Made in China 2025.” The plan aims to modernize China’s manufacturing with advanced technologies such as robotics, 3-D printing, cloud computing, and big data.

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China has committed $150 billion to this gigantic modernization scheme. “But no matter how much money it spends,” Mr. Wadhwa writes, “China simply can’t win with next-generation manufacturing.”

The reason? Chinese robots are poor quality, Wadhwa argues, and they cannot be more productive than American robots. And most importantly, the Chinese workforce lacks the skills to perform in an advanced manufacturing setting.

But I would not write off China’s ability to advance its technologies as well as its workforce so quickly. There are signs that Chinese industries are catching up with, and in some cases, even exceeding the West. Continue reading

A Native’s Homage to Hangzhou, The G20 Host

Twenty-eight years ago, I would never have imagined that the President of the United States and other world leaders would visit my hometown, Hangzhou, and discuss important matters that will affect humanity’s future.

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The Hangzhou I left behind was a backwater town, with narrow alleys and rundown dwellings. There was only one department store, Liberalization Department Store, one decent hotel, Hangzhou Hotel (now renamed as Shangri-La). Many people still wore Mao suite. Most rode bicycles to work and for daily chores. The only automobiles on the streets were dusty buses, which ran sparsely between hours and were almost never on time.

Yes, there was West Lake, and people said it was beautiful. To my unappreciative eye, however, it was a dead lake. The stillness of the lake seemed lifeless to me. I was yearning to see oceans. I grew up hearing people say that “above there is heaven, and below there is Hangzhou.” But I was desperate to leave the “paradise on earth.”

….

Now one of the wealthiest cities in the country, Hangzhou has 9 million inhabitants. Most of them are members of the new middle class, who have seen their life dramatically improved over the past decades.

When President Barack Obama arrives in Hangzhou on Saturday, he will not see a backwater town. Instead, he will see a bustling modern metropolis nestled in lush hills.

….

I finally understand why people say Hangzhou is a “paradise on earth.” Now that I have seen the oceans, visited the Lincoln Memorial, and watched Martin Luther King’s “I Have a Dream” speech many times, and looking from the other side of the Pacific, I can truly appreciate Hangzhou’s beauty.

(Read the full article on Forbes).

Three Innovative Ways to Reach Chinese Consumers

The Chinese super app WeChat is not only a superior social media tool (as I wrote here), it is also at the forefront of mobile e-commerce innovation that the West has never seen.

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As of this writing, WeChat has over 800 million users (yes, it seems that WeChat’s user base is growing by the minute). Better yet, its users are super active. An average user checks into the app 10 times a day. They are practically living on WeChat.

This has created a tremendous opportunity for brands to reach consumers. Reports indicate that brands in the fashion, watches, and jewelry categories receive an average of 7,000 views per WeChat post.

WeChat offers platforms for brands to engage in interactive and one-to-one communication, driving online-to-offline activities and encouraging loyalty. WeChat’s payment system allows brands to sell directly to consumers seamlessly. Its true potential has yet to be tapped. Continue reading

Apple: A Trend Follower in China?

It was not too long ago that Apple’s iPhone was a status symbol among young Chinese middle class consumers. They would stand in a long line before the launch of a new iPhone and spend a month’s salary just to own one.

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This has changed. According to a Financial Times article, Chinese consumers no longer buy into the hype they once did in iPhone. These days, Apple looks like “a trend follower” and is struggling to “keep itself interesting” in China.

Apple has continued losing ground as China’s smartphone market becomes increasingly competitive. iPhone sales dropped 32 percent in the second quarter, and the Silicon Valley company fell to fifth place behind Huawei and other unknown brands such as Oppo and Vivo, according to research from International Data Corp (IDC) Continue reading

It’s Time for Facebook to Copy WeChat

Many in the West have long disdained Chinese firms as copycats. Some believe that no innovation from China can be called original. Baidu looks like Google, they argue, Alibaba is a version of Amazon, and Tencent imitates Facebook.

Wrong. In the example of Tencent’s WeChat, the Chinese social media platform, Western equivalents such as Facebook Messenger, What’s App, or Twitter look hopelessly inferior.

Hand holding smart phone with abstract glowing lines concept

As I wrote two years ago, there is nothing like WeChat in the West. A super app, as some call it, WeChat is a mobile messaging board offering free video calls, group chat, and many fun features such as a shake function to link contacts with other users. Now it boasts 700 million users. Each user has a personal QR code that serves as a digital ID. Over half of users have linked their bank accounts to its mobile payment system. They can shop, hail a ride or book a hotel – right there while they are chatting with friends.

At an event in Shanghai last year, Elaine Chow, communication manager of the global digital consultancy Razorfish, demonstrated how she went about her day without her wallet. Continue reading

Will China Become the World’s Innovation Hotbed?

I am honored to be invited to speak at the Economist Innovation Summit in Hong Kong on Sept. 6, 2016.

InnovationSummitThe Summit gathers entrepreneurs, venture capitalists, and industry luminaries to examine how Chinese firms have evolved from copycats to innovators, and what impact they will have on the rest of the world.

A couple of years ago, I wrote an article Why China Will Lead Innovation in Social and Mobile Commerce. Clearly, Chinese firms are innovating in many other fields as well. An Economist article indicates that:

In fields from gene editing to big-data analytics to 5G mobile telephony, Chinese experts are now among the world’s best. Sunway TaihuLight (pictured), a supercomputer made using only local computer chips, is five times as fast as the best American rival…. WeChat, a social-media and payments platform with 700m monthly active users, is more useful and fun than Facebook, Twitter and WhatsApp put together.

Continue reading

600 Million Consumers, 3 Emerging Trends

The Chinese economy may have slowed down, but Chinese consumers haven’t. In 2015, consumer spending increased approximately 13 percent, compared to less than 7 percent growth in GDP.

HK_consumer2_450A recent McKinsey report indicates that Chinese consumers have remained confident despite the economy slowing down. Among the 10,000 individuals surveyed by McKinsey, 55 percent expected their incomes would increase significantly over the next five years, compared to just 32 percent of consumers in the United States and 30 percent in the United Kingdom believed so.

The Chinese middle class now represents one-half of China’s population. Although they are new consumers, they are maturing and modernizing rapidly. Three characteristics are emerging: Continue reading

“The Chinese Dream Is to Leave China”

When I wrote my book The Chinese Dream eight years ago, I observed an extreme optimism and anxiety among the newly-bred middle class in China.

middle class mediocreAt that time, although many were anxious, there was still a fair amount of optimism. Even a Pew Global Attitudes Survey said that more than two-thirds of Chinese expected their personal position to improve in the coming years.

Only a few years later, things have changed substantially. According to a New York Times article, middle class Chinese are anxious to move their money out of the country. Although the government has tightened the control on capital flight, people find ways to get around the restriction. The article indicates that in the last year and half, individuals and companies have moved about $1 trillion out of the country.

And, more people are trying to leave the country:

In fiscal 2014, 76,089 Chinese were awarded permanent residency status in the United States, up by 4,291 from the previous year. Of the 10,692 investment visas provided by the United States in the 2014 financial year, 9,128 went to Chinese nationals, up about 30 percent from the previous year. Meanwhile, 88 percent of Australian “significant investor visas” have been given to Chinese citizens.

More and more Chinese students are studying overseas and many of them are looking to stay abroad:

In the 2014-15 academic year, at least 304,040 Chinese students were studying in the United States, up about 110,000 from 2011-12.

The economic slowdown has certainly caused anxiety. But lack of confidence in one’s own country goes far beyond economic reasons. As I have said and written many times, without the rule of law, the Chinese middle class will never feel secure in China.

This reminded me of a conversation I had with a professor in China early this year. While attending the Stanford+Connects event in Shanghai, I shared a taxi with a Italian professor who leads the China program at Zhejiang University. Naturally, we had a discussion about China. When he learned I wrote a book called The Chinese Dream, he asked what is the Chinese Dream, and what’s the difference between the Chinese Dream and American Dream. Before I elaborated, he said something that took my breath away:

“I think the American Dream is that everyone wants to go to America; and the Chinese Dream is that everyone wants to leave China.”

Reports of the Chinese Economy’s Death Have Been Greatly Exaggerated

I was baffled by why some people think a 6.9% growth for a $10 trillion economy is such bad news. The headlines were occupied by China’s economic slowdown, and what a catastrophe it might bring to the world.

quote-Mark-Twain-the-reports-of-my-death-have-been-88406To me, slower growth is long expected. It means that the Chinese economy is maturing. Even when I interviewed people in China about 10 years ago, no one had any illusion that the Chinese economy would continue its breakneck speed forever. “At some point,” many told me, “the economy will slow down.”

Now we are at that “point.” I am actually surprised that the high growth period lasted as long as it did. Yes, the volatile stock market was nerve-racking. The industrial overcapacity and high level of debt are alarming. But the government still has tools to address these problems.

For example, the New Silk Roads, or “One Belt, One Road” program, can be a way to help absorb China’s overcapacity in construction and steel. American companies are jumping on the bandwagon. Continue reading

China’s Middle Class Has Become a Major Pillar of Its Economy

The Chinese middle class, now estimated at more than half a billion strong, has become a key driver for the country’s economy.

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The newly released data indicates that China’s retail sales grew more than 11 percent in 2015, despite economic slowdown. Consumer spending was one of the brightest spots in the Chinese economy, which is now $10 trillion in size, and registered a 6.9 percent growth last year.

A Bloomberg article, “Beyond the Headlines, Five Things to Watch in China’s GDP Report,” wrote:

Rapid income growth over the last decade has made Chinese consumers an increasingly powerful force, snapping up Apple iPhones, Tiffany diamonds and Toyota sedans.

Urban household incomes increased more than 8 percent, the new data shows. China also added 13 million jobs last year, exceeding the government target of 10 million, thanks to the booming service sector.

The unemployment rate was at 5.2 percent, about the same as the United States.

While investment in fixed assets slowed, the residential housing market is rebounding. The data also shows that “home-price recovery spread to more cities in December, especially smaller ones.”

All these indicate that the Chinese middle class is still growing, Continue reading