Two Wall Street Journal articles caught my eye this morning: The Future of China’s Economy: Yuppies and Women Fuel China’s Fitness Craze. Both discuss the spending power of the Chinese middle class.
In the first article, author Laurie Burkitt wrote that China’s economy will be relying heavily on “yuppies” – young urban professionals:
According to a new study from the consultancy the Boston Consulting Group and Alibaba’s Aliresearch, richer, younger and tech-savvier Chinese will be the main drivers of growth in the country’s consumer economy going forward. Affluent consumers, shoppers under the age of 35 and Internet surfers will push China’s consumer market up to $6.5 trillion in sales by 2020.
This projection is based on GDP growth at only 5.5% (compared to nearly 7% currently). I am not surprised. For years, I have been saying that the rise of the Chinese middle class is the biggest story of our time. Continue reading
The New York Times has a fascinating article about the birth of the China-led Asia Infrastructure Investment Bank (AIIB), and how Washington’s lack of leadership and bad judgment resulted in its humiliating defeat.
Apparently, China first lobbied the U. S. to join the AIIB in 2014 when the bank was still a concept. But a skeptical Washington worried “that China will use the bank to set the global economic agenda on its own terms.”
The Treasury secretary, Jacob J. Lew, the person who would normally be in charge of a matter like this, did not even call for a meeting to discuss whether the United States should consider joining or not. In addition, the administration sought to discourage its allies from joining, and advised G-7 countries that “the United States wanted a united front.”
However, America’s most steadfast ally, the United Kingdom, ignored the American request. The British government only gave Washington 24 hours’ notice after deciding to join the bank this March. Other US allies rushed in. This was an embarrassing diplomatic defeat for the United States. Continue reading
The U.S.-China relationship will be in focus as China’s president Xi Jinping comes to the United States for his first state visit this week. The relationship has shown some worrisome signs in recent years – with tensions over the South China Sea, cyber attacks, and other old and new issues.
At his 2013 meeting with President Obama in California, President Xi Jinping called for a “new kind of major-power relationship,” meaning that the rising power and the established power can cooperate to create a new international order rather than engaging in a dangerous rivalry.
This is a promising concept and the right path for the U.S.-China relationship. However, the two countries’ significant differences in ideologies and worldviews prevent them from seeing eye-to-eye.
To understand these differences, Continue reading
A recent NYTimes article “Can the U.S. and China Get Along?” by Orville Schell, a longtime China observer and director of the Center of U.S.-China Relations at Asia Society, is an interesting read.
The author lists a range of old and new challenges in dealing with China, from Taiwan, to human rights, to disputes in the South China Sea, to cyberattacks, and more. At the center of these problems is China’s new leader Xi Jinping’s increasing assertiveness. He has called for a “China Dream” to restore China’s pre-eminence in the world with a focus on prosperity, national unity, and greater global influence.
That is a departure from what America had hoped for: with economic reforms and social exchanges, China will eventually become a country of “greater openness and constitutionalism.” In another words, it will become more like America. Now, America finds it’s hard to deal with a country that has a very different political system, history, and values.
What are the solutions moving forward? Letting the US-China relationship fall into an abyss like the US-Russia relationship is not an option. Schell proposes a number of hard choices that America must make Continue reading
My latest article on Forbes Why Amazon Should Fear Alibaba has generated some debate. The premise of the article is that Alibaba is more focused on helping small businesses because its success depends critically on its sellers’ successes. Amazon is less so because it is a giant retailer itself, and small businesses account for only 40 % of its sales (versus 100 % on Alibaba’s Tmall). The article points out some practices by Amazon that hurt small businesses.
One person posted the following comment:
As a retired small business owner, I really like the model that she presents as Alibaba’s “ecosystem”. I think she is right, once this service comes to America, small businesses will flock to it. Small business in America is tired of being bullied by massive corporations that have consumed modern marketing and hold them hostage. The $25,000 up front deposit is nothing if Alibaba can deliver on and keeps its promises. Amazon on the other hand is dangerous to work with and rather than becoming a marketing partner, becomes a predatory competitor.
Another reader obviously didn’t agree, and commented:
Alibaba’s heralded stab at the U.S. market, 11 Main St., was rubber knife, sold off less than a year later with other U.S. assets acquired pre-IPO. Tmall is a huge ecosystem of brutal competition where the top stores that spend big on marketing reap big rewards, and the bottom 60% suck wind… Better yet, try to get ahold of a forthcoming, transparent, English-speaking service rep at Alibaba to answer your questions. Tmall is a great channel, but no silver bullet for small western businesses, by any means.
I welcome this kind of debate. The sparks of truth come forth only after the clash of different ideas. Amazon is a very innovative company although it may have fallen short in serving small businesses. Alibaba, on the other hand, has a lot of work to do in order to win over Western small businesses.
Please comment more!
Recently, I attended the Razorfish Global event “China: 10 Years Ahead” in Shanghai, and had the honor to speak there. It was one-of-kind event, designed to help Western companies learn about innovations in China’s social media and e-commerce sectors.
Below are some highlight pictures:
Speaking with Vincent Digonnet, Chief Growth and Transformation Officer of Razorfish International, Tracy Zhang, President of Financial Times China on how Western businesses can transform themselves with the innovations from the East.
The rooftop of Shook Restaurant on the Bund with a spectacular view of Pudong
Mingling with attendees from Europe, U.S., and India.
In the coming weeks, I will have a series of articles about what I have learned at the event. Stay tuned!
Today is the Chinese Lunar New Year – the year of sheep, ram, or goat. Why? Because in Chinese, there is no distinction between sheep, ram, and goat – they are the same word: Yang (?). I wish everyone a very happy and prosperous year of the Yang!
The New Year begets a new beginning. I have just started a new newsletter. Here is the first issue. Hope you enjoy reading it! Your comments are most welcome!
Asian consumers will account for about 60 percent of global purchasing power. In my latest article on Forbes, I discuss three trends of new Asian consumers: their youth, their proficiency with mobile technologies, and their innate sense of what constitutes good value for their money.
Here is a summery of the article:
Asian consumers are significantly younger than their Western counterparts. In China, those born after 1980 are becoming mainstream consumers. India’s demographics are more compelling. In 2014, India’s median age was 27, compared to 38 in the US and 46 in Germany.
Asians are more adept with mobile devices than with personal computers. Therefore, mobile commerce is more advanced and widespread in Asia Pacific than the West. For example, in 2013, 55 percent of consumers in China had used mobile payments, compared to only 19 percent in the US.
Lastly, Asian consumers are value seekers, much more so than their Western counterparts. They have an innate sense for the value of any product and service they consume. Whether they are shopping for luxury goods or penny-pinching for a bargain, they want to get the most for their money.
Read the full article on Forbes.
I was honored to appear on CNN to discuss the Chinese middle class and what it means to global business. Here is a clip of the show:
The show was filmed at the CNN studio in Hong Kong on September 1st. Other panelists were Jeff Waters, partner of Boston Consulting Group, and Professor Xiao Geng of Fung Global Institute.
I am glad that mainstream media have started to pay attention to this subject. As I have said for the last five years, the rise of the China’s middle class is the biggest story of our time because of its profound impact!