Apple Loses One

China Market Research Group logo

Apple lost a copyright challenge in China when a local leather goods company that sells a brand of iPhone accessories called IPHONE was able to keep it.  While this sends a cautionary message to brands entering the country there is more than the obvious to be learned.

The obvious: Clearly when entering China you must have your trademarks in order – that is both your native English mark and your Mandarin mark.  And if there is a natural transliteration of your name, that too should be protected.  Example:  Michael Jordan was stung by a local Chinese company that called itself Qiaodan.

On the positive side, Chinese consumers have become quite savvy about authenticity.  They want the real thing and quickly see through the pretender.

“The good news is that intellectual property protection is getting much better from a legal standpoint and the courts in China usually rule the right way now. The big problem is actually enforcement and we’ll see that improve as the legal system becomes more robust. Most of the intellectual property claims being made in Chinese courts now are coming from Chinese firms trying to protect their own intellectual property and this is going to go a long way toward cleaning up the market, it will just take time,” said Benjamin Cavender, principal at China Market Research Group.

Cavender adds, “I think fears over having trademarks or intellectual property ripped off are probably overblown,”    Source: WWD, Fairchild Fashion Media.

China Music Corp is Looking for Money in the US

Chinese Music Corp

Tencent, one of China’s big three – others being Baidu and Alibaba – is an investor in China Music Corp (CMC), a music streaming service that has announced an IPO in the US.  They have hired Goldman Sachs and Morgan Stanley to manage the process set for later in 2016.  It is estimated the IPO will bring in between $300 million and $600 millio

All of the big three own streaming services.  In addition to its position in CMC, Tencent owns QQ Music, which is similar to Spotify.  China Music Corp. owns two services, Kugou and Kuwo, both are among the most popular in China’s crowded market for streaming services.  All of this a bet on the future:  Chinese streamers see relatively little revenue at this time.  The bet is on hundreds of millions of consumers and their smartphones.

The Wall Street Journal article said, “Global music streaming revenue grew 45.2% in 2015, accounting for more than 40% of the world’s digital music sales, according to a report by the International Federation of the Phonographic Industry.”  Source: wsj.com

The Lure of the West

Chinese Students

Like most things, Chinese universities can be graded on a bell curve.  Most are merely competent, some are awful while only a few are very good at educating their students.  Add to that a college entrance exam that is, by any standard, a mind-challenging, pressure cooker and many Chinese high schoolers want out.  More and more they are coming to the US where the same bell curve exists, but the quality of education overall  is better and intellectual freedom is unmatched.  Whether they stay in the West or go back home, these students will contribute to more open future.

Words from one of our own, Feifei Chen, who came here to get a masters degree and has contributed to mPoint’s success, “I came to the US because it provides the most advanced education system and allows people to have better insights into the world…life here gives me confidence and belief in myself…I do not think I could achieve this if I chose to stay in my hometown after graduation.”    Source: Wall Street Journal; mPoint

Alibaba’s Strategic Perspective

Alibaba logo3

Joe Tsai, Alibaba Group Executive Vice Chairman, recently offered insight into the strategic thinking at Alibaba.  He outlined three groups of businesses that make up the company’s “balanced portfolio.”

Core Cash Flow – This is the retail business through the company’s online malls, Tmall and Taobao.  Tsai said that Alibaba saw a “41% year-on-year revenue growth in China retail marketplaces for the quarter, with high and sustainable operating margins.”

Emerging Traction – This sector includes AliCloud, which saw a 175 percent year-on-year growth for the quarter and mobile internet services, which grew 50% in the same period.  Mobile search and mobile operating systems are seen as having great future potential.

Long-Term Strategic Bets – Profits from the first two business centers provide funding for the third.  Here Tsai points to digital entertainment, local services and international expansion as the company’s bets on the future.

Finally, Tsai puts China’s internet market in perspective by noting that of the 688 million internet users, 620 million get to the internet via mobile device.  And the coup de grace is that 75% of those users are under 40 years old.  That spells a big consumer future.  Source: Alizila

Another Milestone Crossed

Carrier Data -April 2016

There are now more than 900 million mobile subscriptions in China. At least 200 million (guesstimate) of those subscriptions are not unique because users have multiple phones or other form factors such as iPads. April saw 16.7 million new smartphone subscribers down from the average of over 20-million per month over the last twelve months. At this point smartphone penetration among the consumer class in China is essentially universal. Sources: China Mobile, China Unicom, China Telecom

Chinese Consumers Remain Positive

Consumer Sentiment Apr-16

Whatever the Chinese government is doing to stabilize its economy is working for Chinese consumers.  After the positive lurch in March, Consumer Sentiment maintained its very positive position in April in spite of a slight adjustment.  The measure remains well above the 13-month average of 114.  Consumer Sentiment continues to provide a view into retail strength and consumer spending that stands in contrast to the story markets have told over the last half year.   Source; Westpac MNI China Consumer Sentiment

Raising the Stakes for Intellectual Property Rights in China

Intellectual Property

Intellectual property activity in China is through the roof in the three key areas watched by the World Intellectual Property Organization.  This is a very good thing for the rest of the world.  While some say that the number of patents and such are irrelevant because it is the strength and the commercial importance of the mark that really matters and, they go on, China’s patents, for example, are not as strong as those from other countries.  It is not quantity, its quality that matters.

Our view is that the numbers are important because they put skin-in the-game for Chinese entrepreneurs.  If they have something to lose by infringement, they will gain respect for the IP rights of others and, in doing so, will make business in China that much more trustworthy – a good thing all around.  Source: World Intellectual Property Organization

Family Planning in China

Mother and Child

Sixty percent of the 14,290 career women surveyed in China by the job recruiter Zhaopin.com don’t want to have a second child in spite of changing government rules regarding family size.   Of the 29% of women in the survey who have not yet had a child, 20% of them do not want a child.  The reasons for this reticence sound familiar.  Most cited cost, but close behind was the time and energy required in raising a child and those reasons were followed by career risks, childbirth pain and little faith in their marriages.

Senior consultant at Zhaopin, Wang Yixin, said that “most career women think it is impossible to live solely on their husbands’ paychecks,” which goes to the cost concern.  Wang adds, “Other reasons involve their own ambitions. They fear that if they stop working, they will become isolated from a dynamic society and lose their career prospects.”  Source: CCTV-America.com

2015 Census Implies Pressure on the Chinese Economy

China Census

According to China’s latest census the population no longer rounds down to 1.3 billion people, instead it now rounds up to 1.4 billion people.  That is because the population increased by 34 million people in the last five years to 1.373,490,000.

The data show two trends.  First, the older population increased dramatically, which puts pressure on the pension system, and second, during the same five-year period, the urban population increased by 6.2% to 767.5 million, now 55.9% of the whole.  The latter shows government urbanization policies continue to work, but that urbanization may be peaking.

The implications for consumer sector growth are unchanged.  The 2.8% decline in the working population is relatively insignificant.  All these hundreds of millions of city-dwelling, family-building folks have to buy stuff.  Source: South China Morning Post

Zuckerberg’s Long Game in China

Facebook logo

Mark Zuckerberg’s charm offensive in China may be paying off.  At the end of April, a Chinese court ruled for Facebook in a copyright challenge by a local company.  The Zhongshan Pearl River company registered the name “face book” in 2014.  The real Facebook sued in spite of being barred from the country, yet the court came back with a ruling that said Zhongshan Pearl River had “’violated moral principles’ with ‘obvious intention to duplicate and copy from another high-profile trademark.’”

Speculation: This ruling may mean that Facebook is making inroads in China and/or it could mean that China’s legal system is willing to do more in supporting intellectual property rights.  Both are positive.  Source: BBC.com