Steady Smartphone Subscriber Growth

Carrier Data - March 2016

The conversion from feature phone to 3G/4G continues at a steady rate.  It has been around 3% per month through the first quarter with a run rate between 24 and 27 million new subscribers per month, well above the 19.5 million average over the last 12 months.  China Telecom has changed its reporting to reflect its corporate focus on 4G conversion.  Our calculations compensate for that change.  Sources: China Mobile, China Unicom, China Telecom

China’s Entrepreneurial Class is Younger

HSBC logo

Contrasts between Western entrepreneurs and those in China are informing.  According to a survey of entrepreneurs worldwide by HSBC Bank, 44% of Chinese entrepreneurs were under the age of 35, which compares with the global number of 30%.

Another contrast is the way success is measured.  In China success is measured by the size of the business created while in the West it is more likely measured by accumulated personal wealth.  The West develops serial entrepreneurs who start a business, grow them and sell them only to start a new business.

Even among family businesses, there is a difference in patterns.  One third of entrepreneurs in Mainland China, Hong Kong and Singapore have stayed in their family’s business compared to 15% in the West. Source: HSBC

Mobile Stands Tall at Alibaba

Alibaba Mobile

The latest data aggregated by China Skinny explains why we spend so much time writing about Alibaba.  Between Tmall and Taobao, the company’s two selling platforms, there are 407 million active users, defined as people who bought at least one time in the last year.  The astonishing number is that 96.6% of them are mobile shoppers.  By comparison Amazon has 304 million users and an estimated 74% are mobile purchasers.  Sources: China Skinny; Internet Retailer

Follow the Money

Buzz-Salon

A recent New York Times article described the declining audience for news-based websites such as BuzzFeed and Salon.  The reason given was the audience move to apps and to social media.  Naturally, as the audience drops advertising dollars follow.   Morgan Stanley analyst, Brian Nowak, noted that $.85 of every advertising dollar spend online went to Google and Facebook in the first quarter of 2016 – effectively squeezing out others.

Interestingly, China is already where the US is going, but with their own versions of search and social media, Baidu and WeChat.  In China, where smartphones are ubiquitous, apps already own the world, which may be the natural order of things.

The US is getting there a little later because it had to outgrown its legacy technology where China did not.  As to the domination of their native search and social media, Chinese media players are helped by the government encouraged absence of both Google and Facebook.  And it’s likely that they won’t be available in China for some time, at least not in a direct way – Mark Zuckerberg’s efforts aside.  Source: New York Times

Six of Ten Market Leaders are Market Driven

BrandZ Top 10

The mix of market-driven and state-owned businesses in the top 10 brands are divided 6-4 in favor of the market-driven. The value breakout is essentially the same with 61.8% coming from the market-driven side. The vast majority of revenue for nine of the ten companies is generated domestically. Only Huawei derives 62% revenue from outside the country.  Source: Millward Brown

Apps are Preferred for Purchasing

Google China Logo

According to a report from Google China, consumers prefer using mobile apps over mobile web for purchasing.  They find them easier to use, they trust their security more and they like that many resellers offer coupons not offered on websites.  As many as 81% of shoppers prefer apps, although 40% of them went to the mobile website before purchasing to get fuller product information,.  A note to app developers – including more product info might keep people in the game.

A separate study by TNS Global says Chinese mobile consumers spent an average of 30-minutes a day on their mobile shopping habit.  Source: Internet Retailer

Sounds Like a Nick Cage Movie: Gone in 18 Seconds

Luxury Auto Sales

Last month Maserati launched a store on Alibaba’s Tmall.  The offering was the pre-sell of 100 Maserati SUV Levantes at $154,774 each for delivery in July.  They sold out in 18 seconds.  Consequence:  The company is adding 500 more of the SUVs for pre-sale.  All of this runs contrary to the country’s economic decline and the government’s anti-bling drive, which has caused a decline in sales of most other luxury car brands.  According to data from China Automobile Trading overall imported car sales dropped 25% in 2015.  Note: Porsche was the exception with positive growth of 24%.  Source: Irish Times

Selling Products Over the Wall is Limiting

Online Sales Growth

With a total market from online sales of nearly $600 billion, the opportunity for direct selling of goods to Chinese consumers is impressive.  One-third of all those sales go through the top 500 online resellers in China.  That list includes 102 that reside outside China’s borders.  Given that only 3.6% of sales are cross-border, there is much room for growth with the right strategy.  Limited sales across borders results because relatively few Chinese can reach the internet’s outside world.  They tend to be a wealthier more urban population than the mass.  Reaching the mass is more likely by partnering with resellers inside China.  Source: Internet Retailer

Positivity Injected into China’s Industrial Sector

Manufacturing Index - March16

Yesterday’s blog showed a turnaround for the industrial sector, a gain after seven months of decline.  Today we see confirmation in the Caixin Manufacturer’s Index.  This is the highest mark for the Index in 13-months.  Though not yet across the 50 line, the positive vector is encouraging.  Detail in the accompanying commentary said, “Output and total new business both expanded slightly while employment continued to fall solidly. Companies signaled renewed inflationary pressures as both input costs and prices charged rose for the first time since July 2014.”  Source: Trading Economics

Industrial Sector Turnaround

Industrial Profits

After seven months of decline, the Chinese industrial sector saw a 4.8% year-over-year increase for January and February of 2016.  Contributing factors were increases in housing investment, oil processing, electrical machinery and food sectors.  Housing investment grew 3% in the first couple months of 2016 compared to a 1% increase for all of 2015.   Source: Reuters; National Bureau of Statistics