“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.”

China’s Triple Wins: The New Silk Roads

I recently came across an interesting article by Financial Times, China’s Great Game: Road to a New Empire. It describes China’s new Silk Road program – “a modern version of the ancient trade route,” and how it has become China’s signature foreign policy initiative under President Xi Jinping.

NewSilkRoadThe New Silk Road program consists two routes, known as “One Belt, One Road” (see the map). The land route is called “the Silk Road Economic Belt,” linking central Asia, Russia and Europe. The sea route has an odd name: “the 21st Century Maritime Silk Road,” and goes through the western Pacific and the Indian Ocean. Thus, “One Belt, One Road.”

If successful, the New Silk Roads could be the largest economic development scheme on the face of the earth. The Financial Times article compares it to the US-led Marshall Plan after WWII:

If the sum total of China’s commitments are taken at face value, the new Silk Road is set to become the largest programme of economic diplomacy since the US-led Marshall Plan for postwar reconstruction in Europe, covering dozens of countries with a total population of over 3bn people.

Indeed, if successful, the New Silk Road program will be triple wins for China. Continue reading

America’s Self-inflicted Defeat in AIIB

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.
AIIB

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

3 Trends of New Asian Consumers

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.

Will China Lead Innovation In Mobile Social Commerce?

Social commerce is a novel term in the US, and many people are not familiar with it. Some think it refers to those annoying ads on Facebook. According to Wikipedia, social commerce is the use of social networks in the context of e-commerce transactions.

In China, social commerce has taken up a life of its own and become the backbone of e-commerce.

While the “Ice Bucket Challenge” has gone viral on Facebook, Chinese consumers use social media in a much more thoughtful way. Instead of posting some silly videos and pictures, they turn to social media to solve real life problems, to seek advice from friends and opinion leaders, and to decide what products to buy or not to buy.

Read the full article on Forbes.

The Rise of the New Global Middle Class

The global middle class will explode in the next fifteen years, growing from 1.8 billion in 2009 to 4.9 billion in 2030. About 66 percent will be in Asia Pacific, compared to only 7 percent in North America and 14 percent in Europe. New Asian Pacific consumers will wield nearly 60 percent of total purchasing power, double that of North America and Europe combined. This is a significant shift in economic power from West to East that hasn’t been seen in the last 300 years. Its impacts could dwarf the Industrial Revolution.

China and India will make the biggest waves in this surge of the new global middle class. In 2009, these two Asian countries comprised just over 5 percent of global middle class consumption; in 15 years, their share of global middle class consumption will increase to 41 percent or more.

What do you make of this? Comments are welcome.

SAIC Taking Wrong Approach to Build Its Brands

China’s number 1 auto maker, Shanghai Automotive Industry Corp. (SAIC), is setting up a venture capital firm in Silicon Valley to tap advanced technology for its automobile brands back home. As Rose Yu writes in the WSJ’s China Real Time blog:

Chinese car companies, including SAIC, could do with all the help they can get, as the majority of Chinese consumers prefer foreign-branded cars. Chinese domestic brands’ market share in the country’s passenger-vehicle market fell to 36.5% in May from 39.4% in the year-earlier period, the ninth-consecutive month of decline, according to data from a government-backed industry group.

“Building a brand is an arduous job,” said Chen Hong, Chairman of SAIC Motors. “Chinese car makers must go upscale, otherwise the situation will be worse.

“In terms of sales, SAIC is a big car company. But when it comes to core technologies, we are far from strong enough,” said Mr. Chen, who became chairman in May. “Silicon Valley houses a number of emerging-technology companies. Having a footprint there will help improve our innovation ability.”

But how could “having a footprint in Silicon Valley” help improve their innovation ability? It’s not like breathing the Silicon Valley air will automatically make a company more innovative. Money isn’t only the way to acquire new technologies. The best innovations happen where the problems need to be solved. SAIC doesn’t need to look farther than China to find these.

The 1990 Institute: China’s Growing Global Impact

I was honored to speak at The 1990 Institute’s Teachers Workshop on Monday in San Mateo, California. The two-day workshop, titled China’s Growing Global Impact, was designed to help high school teachers understand what’s happening in China and prepare our students for a future that will be very different from their parents’.

My presentation, of course, is on the subject of the rise of China’s middle class. Here are the slides I presented at the workshop:

The 1990 Institute is an organization that fosters better understanding between the U.S. and China. Other people on the panel include Dr. Tom Gold, professor of sociology of UK Berkeley, Dr. Mark Henderson, program head of Environmental Studies at Mills College, and John Kamm from Dui Hua Foundation. It was a real honor to be in such a distinguished company.

What You Can Learn from Burger King’s Missteps

Eight years after Burger King first entered the China market in 2005, the world’s second largest burger chain restaurant has only 63 restaurants in the country, falling far short of its own plan of opening 250 to 300 restaurants by 2012.

Many analysts pointed to Burger King’s uphill battle with its competitors. Both Yum! Brands and McDonald’s entered China much earlier and both have established significant presence in the country. Yum! China has more than 4,000 KFCs and 750 Pizza Huts, in addition to its China-based units East Dawning and Little Sheep. McDonald’s China division has more than 1,500 locations.

However, there is plenty of demand for more than two big American restaurant chains in China’s $29 billion fast food market, thanks to a growing Chinese middle class. Here are a few things Burger King can do to catch up:

Myth that Chinese Don’t Eat Beef

Burger King has failed to play up the advantages of its traditional beef dishes. Instead, it added chicken burgers, believing Chinese prefer chicken to beef. The reason many Chinese consume more pork and chicken is because they are more affordable and readily available. Chinese farmers typically raise pigs and chickens to sell in the market, while cows are used mainly for farming.

The truth is that Chinese consumers consider beef a quality meat because it has less fat. Continue reading